TaxTMI 
TaxTMI 
2020 (1) TMI 252
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....nstruction. They entered into a registered Joint Development Agreement dated 9.11.2009 with owners of property bearing Municipal Door No.9/1, Residency Road, Richmond Circle, Bangalore, [hereinafter referred to as "property"] for putting up constructions thereon in the form of office space. The Developer together with the owners of the property entered into a registered Agreement to sell dated 2.5.2012 whereby he agreed to sell 1746.30 Sq.ft. undivided share of land of property for a consideration of Rs. 5 Crores. The Assessee and the Developer also agreed that the purpose of acquiring the undivided share of land of the property was to appoint the developer to construct and deliver to the Assessee built up area of 11325 Sq.ft. in the 15th floor of the building(named as "909 Lavelle") that was proposed to be constructed by the Developer over the property together with 9 car parks (hereinafter referred to as "built up area"). The Assessee and the developer entered into an construction agreement on the very same day i.e., 2.5.2012 whereby the cost of construction of the built up area was agreed at a sum of Rs. 13,25,13,750/-. The Assessee had paid a sum of Rs. 3 crores as advance unde....
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.... Date of transfer 05 Jan 16 Sale consideration 13,87,54,130 Acquisition details Financial Year Cost Index Cost Cost-30021920*1081/852 2012-13 3,00,21,920 3,80,91,192 Cost-24754130*1081/852 2012-13 2,47,54,130 3,14,07,529 Total 6,94,98,721 Improvement details Cost 5500000*1081/939 2013-14 55,00,000 63,31,736 Cost 2000000*1081/939 2013-14 20,00,000 23,02,449 Cost 3500000*1081/939 2013-14 35,00,000 40,29,286 Cost 3500000*1081/939 2013-14 35,00,000 40,29,286 Cost 2000000*1081/939 2013-14 20,00,000 23,02,449 Cost 15000000*1081/1024 2014-15 1,50,00,000 1,58,34,961 Cost 12500000*1081/1024 2014-15 1,25,00,000 1,31,95,801 Cost 6000000*1081/1024 2014-15 60,00,000 63,33,984 Cost 4000000*1081/1024 2014-15 40,00,000 42,22,656 Cost 12500000*1081/1024 2014-15 1,00,00,000 1,05,56,641 Total 20,00,000 6,91,39,249 Taxable Capital gain 35,00,000 1,16,160 8. According to the AO, the Assessee did not acquire the undivided share of land or the built up area and therefore there w....
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....of cancellation was silent about the MOU. The deed of cancellation merely talks about the registered agreement dated: 02.05.2012 (construction agreement) and exit of Sri Dev Kumar Roy from the transaction. The MOU was an out of court settlement for a sum of Rs. 13,87,54,130/- where the assessee got a windfall gain of Rs. 2,00,00,000/-. In this transaction, there was neither cost of acquisition nor cost of improvement to claim indexed cost of acquisition and indexed cost of improvement. Under no circumstances this transaction can be considered for long term capital gain. Accordingly, as proposed in showcause notice, this amount of Rs. 2,00,00,000/- is added under the head business as adventure in nature of trade." 10. Aggrieved by the order of the AO, the Assessee preferred appeal before CIT(A). The Assessee submitted before CIT(A) that under Sec.45 of the Act, any capital gain arising from transfer of a capital asset is chargeable to tax under the head "Capital Gain". The Assessee pointed out that the Act defines "Capital Asset" u/s.2(14) of the Act to mean "property of any kind held by an Assessee". There are certain items excluded in the said definition and none of those exc....
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.... there was a transfer of capital asset within the meaning of the Act. The payment of consideration under the agreement of sale, for transfer of a capital asset, is the cost of acquisition of the capital asset. Therefore, in lieu of giving up the said right, any amount received, constitutes capital gain and it is exigible to tax. However, as is clear from s. 48, before the income chargeable under the head capital gains is computed, the deductions set out in s. 48 has to be given to the assessee. It is only the amount thus arrived at, after such deductions under s. 48, would be the income chargeable under the heading capital gains. The Hon'ble Karnataka High Court in the aforesaid decision placed reliance on similar decisions rendered by several Hon'ble High Courts in the case of CIT vs. Tata Services Ltd. (1980) 122 ITR 594 (Bom), CIT vs. Vijay Flexible Containers (1990) 186 ITR 693 (Bom), CIT vs. Abbasbhoy A. Dehgamwalla & Ors. (1992) 195 ITR 28 (Bom), Rustom Spinners Ltd. vs. CIT (1992) 198 ITR 351 (Guj), CIT vs. Smt. Laxmidevi Ratani & Ors. (2008) 296 ITR 363 (MP) and CIT vs. J. Dalmia (1984) 149 ITR 215 (Del). 12. The Assessee also contended that the single or isolated transact....
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....business usage and the appellant was entitled for interest at the rate of 6% per annum on the said amount. This aspect throws light on the intention of the appellant that he had entered into transaction not with the purpose of owning a property and then earning rental from the same but the purpose was to enter into a business transaction with the builder and earn profits from such transaction. However the transaction had been given a color of surrender of rights in a capital asset so as to have the advantage of paying almost negligible taxes on the gains arising out of such transactions. The transaction is thus in fact a business transaction and the same had rightly been treated by the AO as adventure in nature of trade. The decisions relied upon by the appellant are found to be rendered on different facts and as such the same are not relevant. ,Considering above the grounds of appeal of the appellant are dismissed." 14. Aggrieved by the order of CIT(Appeals), the Assessee is in appeal before the Tribunal. We have heard the submissions of the learned counsel for the Assessee who apart from reiterating submissions made before the revenue authorities also placed reliance on decision....
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.... the definitions being inclusive in nature, should be construed as being extensive and not limited in scope to only that which is specified in or by the words of the definition. The definition of business includes within its scope specifically and explicitly every adventure in the nature of trade, commerce or manufacture. Even an isolated transaction may constitute an adventure in the nature of trade and would be liable to be construed as business carried on. To constitute business or an adventure in the nature of trade it is not, therefore, essential that in every case there must be a series of transactions all motivated by commercial and profit making considerations nor is it essential that the transactions must fructify and materialise in every case into a full fledged business through the running of an establishment for carrying on business or industry. 18. The transaction of surrender of rights in agreement in the present case is a single isolated transaction and whether it can be regarded as Adventure in the nature of trade so as to characterize the income received on surrender of rights under an agreement as giving raise to "Income from Business" is the question for our det....
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.... pride of possession and aesthetic satisfaction; and if such a claim is upheld that would be a factor against the contention that the transaction is in the nature of trade. These and other considerations are set out and discussed in judicial decisions which deal with the character of transactions alleged to be in the nature of trade. In considering these decisions it would be necessary to remember that they do not purport to lay down any general or universal test. The presence of all the relevant circumstances mentioned in any of them may help the Court to draw a similar inference ; but it is not a matter of merely counting the number of facts and circumstances pro and con ; what is important to consider is their distinctive character. In each case, it is the total effect of all relevant factors and circumstances that determines the character of the transaction; and so, though we may attempt to derive some assistance from decisions bearing on this point, we cannot seek to deduce any rule from them and mechanically apply it to the facts before us. In this connection it would be relevant to refer to another test which is sometimes applied in determining the character of the transac....
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....a period of 36 months with a grace period of 6 months. The Construction Agreement is dated 2.5.2012. Agreements for sale of undivided share of land is also dated 2.5.2012. The MOU by which the developer and the Assessee agreed to treat the Agreements for sale dated 2.5.2012 and the Construction Agreement dated 2.5.2012 is dated 5.1.2016. The MOU is silent as to the reason why the Assessee wants to relinquish his rights under the Agreements for sale of undivided share of land and the Construction Agreement. The Assessee in his letter to the AO dated 18.12.2018 has submitted that he wanted to rescind the agreement with the developer for the reason that the project was getting delayed and not suitable to needs of Assessee, certain internal inconsistencies, facilities provided and proposed to be provided was not satisfactory and bound to cause inconvenience to tenants and there were some vasthu issues also. The stand taken by the Assessee was not disbelieved by the AO and he proceeded to hold that the MOU dated 5.1.2016 whereby the Assessee and the Developer agreed to rescind the agreement has not been referred to in the subsequent registered cancellation deed dated 3.2.2016. As we h....
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....hereby made it more readily resaleable ? Applying the aforesaid test, we are of the view that relinquishment of rights under an Agreement to acquire property is not a commonly subject matter of trade. We are of the view that no other facts or circumstances are brought on record to show that the Assessee indulged in an Adventure in the nature of trade when he relinquished his rights under an agreement. 22. Therefore the right acquired under the Agreement by the Assessee has to be regarded as "Capital Asset". The decision of the Hon'ble Karnataka High Court in the case of H. AnilKumar (supra) supports the plea of the Assessee. The Hon'ble High Court in the said decision held that the right to obtain a conveyance of immovable property falls within the expression 'property of any kind' used in s. 2(14) and consequently it is a capital asset. It is because the expression 'property of any kind' is of wide import. The Hon'ble Court held that when this expression is read along with the expression defined in s. 2(47)(ii) i.e., 'extinguishment of any rights therein', the giving up of a right of specific performance by the assessee to get conveyance of immovable property in lieu of receivin....