TaxTMI 
TaxTMI 
TaxTMI 
2020 (6) TMI 209
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng officer without affording reasonable opportunity of being heard and in violation of principle of natural justice. The order be therefore quashed and variations to the returned income be deleted. 1.2 The assessing officer had made erroneous observations in body of the assessment order. The observations and conclusion on part of the assessing officer are unilateral and completely ignoring the facts. The observations and conclusion be quashed and each and every variation in consequence thereof be quashed. 2.0 The CIT(A) erred in upholding that the transaction in respect of purchase and sale of Metro House was an adventure in nature of trade. The Commissioner of Income tax (Appeals) further erred in upholding that Rs. 2783879/- was profit chargeable to tax u/s 28. The Commissioner of Income tax (Appeals) further erred in upholding that the appellant was not entitled to capital loss of Rs. 2591351/-computed by the appellant. 2.1 The appellant submits that there was no adventure in the nature of trade and the building known as Metro House was a capital asset. The appellant submits that it be so held now. The appellant submits that Metro House was held as a capital asset and gain....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g to Rs. 25,91,351/- . 6. The assessee claims that it had purchased the above said premises along with other three companies in an auction on 24-07-1991 in equal share. The three companies had amalgamated into M/s Metrochem Industries Limited. Later on the said premises had been demolished and the construction of a four storied building started. The assessee to use the building for commercial purpose obtained a permission from the Ahmedabad Municipal Corporation on dated 21-03-2000. The amount of expenditure incurred in construction of building had been shared with M/s Metrochem Industries Limited in the ration of 1:3.The assessee further claims that it had continuously incurred the expenditure in the construction of such building from 1994-95 to 2004-05. The details of the expenditure incurred by the assessee are available on page no 3 of AO order. 7. The assessee also claims that the intention behind the construction of building was to start corporate office in the said building but eventually the said building was not economically viable to run as corporate house. Therefore, it was decided to sell such building. 8. As such the building was held as capital assets viz a viz th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....I have considered the facts of the case, assessment order and appellant's submission. Appellant along with its associate concerned purchased a residential bungalow in auction to construct the same in a commercial premise. The old residential bungalow was demolished and new construction was carried out. As mentioned by the assessing officer in para-12 that permission of the demolition of residential bungalow and the construction of the commercial building was granted by Ahmadabad municipal Corporation on 21st of March 2000. All these activities and the spending of money on construction activities right up to financial year 2004-05 show that appellant has not sold any capital asset but created another asset which were sold after completion at profit. Purchasing old bungalow, demolishing the same and constructing commercial building having basement, ground and two floors are not simply transfer of capital asset but an organized activity to construct a commercial complex to be sold for profit. Assessing officer discussed all the arguments of the appellant and rebutted a!! of them. In view of this the same are not repeated here. However in brief following facts go against the appell....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the appellant is not borne out of its own records, the same cannot be accepted. 5- Intention has to reflect in balance sheet or financial statements but the same has not been reflected as construction of own office building therefore appellant's argument in this regard cannot be accepted. 6- Assessing officer discharged the onus that appellant was carrying on organised activity of construction resulting in a commercial complex with basement, ground and two floors. These cannot be treated as improvement of capital asset which itself was demolished for the commercial construction carried on by the appellant. 7- The appellant's argument that the property was held for more than 10 years and therefore it cannot be adventure in the nature of trade is not justified. Many real estate projects take years before they are complete therefore it cannot be said that more number of years will take out the transaction out of business head. 8- The assessing officer provided several opportunities to the appellant as mentioned in the assessment order however appellant chose not to comply. Even during appeal hearings several opportunities were given right from August 2009 but no co....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as fixed assets. v. The assessee held such property for very long period/time. 19. On perusal of the order of the authorities below, we note that the entire thrust of the Revenue for holding the transaction for the sale of the property as in the nature of trade was based on the fact that the assessee has been incurring expenses on continuous basis for the development of the land purchased in the auction over certain period of time which is akin to the activity of the builders of the property. Accordingly, the Revenue concluded that the assessee was engaged in the activity of the business and accordingly such income was to be taxed under the head of business and profession. Admittedly, the assessee had been incurring expenses on the development of the land purchased by it in the auction but that does not establish the fact that the assessee was carrying out any activity in the nature of trade. 20. There are certain aspects requiring the consideration before arriving at the conclusion whether the assessee is carrying out any activity in the nature of trade. Such aspects can be enumerated as under: i. The intention of the assessee at the time of acquisition of the land. ii. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bench to make endeavour to pronounce the order within 60 days from the conclusion of the hearing. However the period of 60 days can be extended under exceptional circumstances but the same should not ordinarily be further extended beyond another 30 days. In simple words the total time available to the Bench is of 90 days upon the conclusion of the hearing. 26. However, during the prevailing circumstances where the entire world is facing the unprecedented challenge of Covid 2019 outbreak, resulting the lockdown in the country, the orders though substantially prepared but could not be pronounced for the unavoidable reasons within the maximum period of 90 days. In such circumstances we find that the Hon'ble Mumbai Tribunal in the case of JSW Limited Vs Deputy Commissioner of Income Tax in ITA No. 6103/MUM/2018 vide order dated 14-5-2020 extended the time for pronouncing the order within 90 days of time by observing as under: 9. Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon'ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an "ordinary" period. 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of O....