TaxTMI 
TaxTMI 
2019 (1) TMI 1330
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....g 133 Kanal, 14 Maria which is about 17 acres to Mapsko Builders(P) Ltd., New Delhi for Rs. 128 crores. The said land was purchased in the year April, 2005. 3. The Ld. AO required the assessee as to why the income shown under the long term capital gain should not be treated as business income as done by the AO in the assessment year 2009-10, as assessee company is in the business of real estate. In response, the assessee submitted that it had acquired certain lands in different batches in Gurgaon, which were held as fixed assets and these lands was not acquired as stock in trade. This fact was duly disclosed in its balance sheet as fixed assets. Further, the land was held by the assessee for a considerable period of time. Assessee also relied upon various judgments wherein it was held that if assessee has maintained two portfolios, viz., investment portfolio, then it has to be treated as capital asset; and second as a trading portfolio, comprising of stockin- trade then same has to be treated as trading asset. The Ld. AO rejected the assessee's contention and observed that Assessee Company had deposited the fee for grant of licence for development of group housing on land measurin....
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....old. There was loss on sale of land of Rs. 23,33,205/- in the, AY 2008-09. In the AY 2009-10 there was further purchase and sale of land. Profit on sale of land of Rs. 55,91,82,736/- was shown in the AY 2009-10. The appellant company has also entered into the sale agreement for land with developer in the year under consideration and has received advance against this. The appellant has entered into a development agreement with M/s. Vatika for the development of its land where M/s. Vatika Ltd. is the developer and the appellant company's only benefit is, "That upon 'the approval of lay-out plant of the colony, only the owner will be free to sell any developed area falling under Owner's allocation without any interference on the part of the developer." The role of the appellant company is to provide land and all other work related to project is to be done by the Developer only. 5.3. From the above, it is evident that there were continuous transactions of purchase and sales of land. The purchase and sale of land in the case of appellant is not an isolated transaction and the manner of dealing with the land purchased stamp the transaction as a trading venture. The appellant al....
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....hat assessee all throughout has been showing land as an investment right from the assessment year 2006-07 till this year. The land in question was purchased in assessment year 2006-07 and was shown as fixed assets. In that year assessment was made u/s 143(3), wherein such treatment of the land in question was accepted as business assets. Thereafter, part of this land was sold in assessment year 2008- 09 wherein the assessee has declared long term capital gain and in which has not been disturbed by the department. Here in this case both AO and Ld. CIT (A) have referred to the similar treatment done by the AO in the assessment year 2009-10. However, in the that year the Tribunal had dealt and discussed this issue in detail and took note of judgments relied upon the AO and Ld. CIT (A). The relevant observation and the finding of the Tribunal in this regard reads as under:- "18. The main issue which arises for consideration is as to whether the land held by the assessee was being held as a capital asset or not. There is no dispute to the fact that this land was purchased in the year 2005-06. There also does not appear to be any dispute that no activity has been carried on, on this la....
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....n trade. Even for the sake of an argument it is assumed that by entering into an agreement in respect of another land with a developer, that land has become a part of the business, and then this will not change the nature and character of this land held as capital asset which has been sold and on which capital gain has been earned. In fact as rightly contended by the Learned AR that section 45(2) of the Income Tax Act do permit an assessee to convert an asset held as stock in trade of a business carried on by him. It may be relevant to refer to the provisions of Section 45(2) which reads as under.- "45(2) Notwithstanding anything contained in sub-section (I), the profits or gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business carried on by him shall be chargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him and, for the purposes of section '48, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result ....
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....ome arising on sale of capital assets will become business income. The main object may be to carry on the business of real estate business but that will not debar such a company from holding an asset as capital asset. If the company holds the land as, a capital income arising on sale of such capital asset will be chargeable to tax under the head capital gain and not as business income in view of the specific mandate of section 45(1) of the Income Tax Act. In this regard it may be relevant to refer to section 45(1) which reads as under:- "45.(1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H, be chargeable to income-tax under 'the head "Capital gains", and shall be deemed to be the income of the previous year in which the transfer took place. " 24. As per the above provision, gain arising from transfet of a capital asset is to be taxed under the head capital gain. Further section 2(14) defines 'capital asset' as under:- "2(14) "capital asset" means- (a) property of any kind held by an assessee, whether or not connected wit....
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....ports the contention of the assessee. The fact that assessee has declared capital loss in the preceding year also cannot be ignored. No doubt principles of res judicata are not applicable to income tax proceedings but the intent and nature of the asset held can be judged from these facts. The nature of asset held as capital asset in the preceding year and accepted as such will not change to stock in trade in the next year merely because the gain arising on sale of stock in trade will be chargeable at the rate of 30 per cent as against 20 per cent chargeable on capital gain. The learned DR could not controvert the fact that in the preceding year such loss has been assessed as capital loss. 26. The law even permits person carrying on the business in particular nature or trade such person to make investment and hold similar type of asset as capital asset. In the case of CIT vs. Gopal Purohit 336 ITR 287 (Born) an issue has arisen whereby the assessee was trading in shares and was holding certain shares as .investment. The Hon'ble Bombay Court has held-that - ' "The first set of transactions involved investment in shares. The second set of transactions involved dealing in s....
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....n question on 27th Jan.'1996 and held the same for seven years before selling them. Though the object incorporated in its memorandum of association states that the assessee can deal in shares, there was no such regular activity. A taxpayer can have two portfolios i.e., an investment portfolio comprising of securities which are to be treated as capital assets and a trading portfolio comprising of stock-in-trade which are to be treated as trading assets. Shares in question were held by the assessee as investment. Therefore) sale thereof gave rise to capital gains and not business income" 30. In the present case the appellant company has acquired the land in the year 2005-06 as a capital asset. It has accounted for the same as capital asset. It has continued to hold the same as a capital asset. It has not converted that capital asset. It has not converted that capital asset to stock-in-trade. There are no multiple transactions.. It has declared the capital loss in the preceding year. Considering all these facts and taking into consideration all the above facts and circumstances we are of the view that the income arising from the sale of the land held as a capital asset is to b....
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.... estate, that would not prevent the Assessee from holding the land in question as a capital asset. Therefore the income generated through the sale of land would be chargeable to tax under the head capital gains and not as business income. 5. Having heard Mr. Dileep Shivpuri, learned Senior Standing Counsel for the Revenue and having examined the orders of the AO, CIT(A) and the impugned order of the ITAT, the Court is not persuaded to agree with the Revenue's submission that the impugned order of the ITAT is perverse. 6. In the facts and circumstances of the present case, no substantial question of law arises for consideration. The appeal is dismissed." 10. Thus, when same issue on similar set of facts and reasoning has been decided in favour of the assessee by the Tribunal which has also been upheld by the Hon'ble Delhi High Court, then this issue becomes a binding judicial precedent and no contrary view can be taken in this year. Moreover when in all the years, the assessee has been showing the land which is in dispute as a part of fixed assets which stood accepted year after year as an investment / fixed assets, then sale of such land will only give rise to capital gain....