TaxTMI 
TaxTMI 
2022 (5) TMI 1214
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....terest expenses claimed. (iii) directing to allow set off of earlier year's brought forward business loss of Rs. l,24,283/- . 2. The appellant craves to add to, amend or alter the above grounds as may be deemed necessary. Relief claimed in appeal. The order of the CIT(A) on the above issue be set aside and that of the Assessing Officer be restored." 3. The brief facts of the case are that the assessee is an employee of Sun Pharmaceuticals Industries Limited (SPIL) and earned income from salary, income from business and income from other sources. SPIL was considering to acquire a piece of land adjacent to their factory in Halol and it requested the assessee to facilitate the transaction. Accordingly, the assessee purchased four pieces of land in Halol in AY 2008-09 for a consideration of Rs. 23,37,817/- and after converting them into one single land and converting its use from agricultural to non-agricultural, sold the land to Sun Pharmaceuticals Limited for a consideration of Rs. 36,50,001/- in AY 2009- 10. SPIL also arranged for loan to the assessee from M/s Quality Investments Pvt. Ltd., a group entity, to effectuate the above transactio....
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....0/- is taxed as Capital Gain allowing only purchase cost of land with Stamp duty payment and registration charges." 4. In appeal before Ld. CIT(A), the assessee submitted that whether income qualifies as 'business income' or 'capital gains' depends upon intention of the assessee at the time of purchase. In cases where land has been purchased solely with the intention of resale at a profit and the purchaser has no intention of holding the property for himself or otherwise using it or enjoying it, it would be a strong presumption that the transaction is an 'adventure in the nature of trade'. In the present set of facts, the transaction was entered with an intention to resell at a profit and hence income qualifies 'business income'. The assessee relied upon various case laws in support of his contention. The Ld. CIT(A) accepted assessee's contention and held that income qualifies as 'business income' and accordingly, provisions of section 50C cannot be applied. While allowing the assessee's appeal, the Ld. CIT(A) observed as under: "I have considered the facts of the case as well as the observation of the AO and the arguments put forth by the AR of the appellant, From the ....
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....e of possession etc. are missing in the purchase of these lands. Reliance is placed on following decisions of Supreme Court and various other High Courts ~ xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx -Since the transactions of sale of land is not a transaction of transfer of capital asset, the provisions of section SOC of the I.T.Act,1961 cannot be applied to it. This conclusion is supported by various case laws cited by the Appellant. In view of this, the action of the AO in adopting full value of consideration at Rs.4,39,29,600/-, being the jantri value of the property is hereby quashed, The AO is directed to adopt sale consideration at. Rs.36,50,001/- as recorded in the sale agreement. 5. Regarding interest expenditure of Rs. 4,26,000/- and set-off of loss of Rs. 1,24,283/- the Ld. CIT(A) allowed the relief to the assessee by holding as under: "I have considered the facts of the case as well as the observation of the AO and the arguments put forth by the AR of the appellant. Since the transactio....
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.... of SPIL (employer) and the terms of employment barred the assessee to engage in any independent business activities. The Ld. DR relied on observations made by the Ld. AO in the assessment order. The Ld. DR contended that provisions of section 50C squarely apply in the instant facts since the assessee was not engaged in any business of land broking. 7. In response, the Ld. Counsel for the assessee submitted that the assessee has engaged in a business transaction and therefore provisions of section 50C will not apply. The assessee bought 4 pieces of land, converted them from agricultural to non-agricultural and sold back the same to SPIL for a profit, which was duly reflected as business income in the return of income. The intention at the time of purchase of land was resale to SPIL i.e. to earn profits and hence the transaction qualifies as 'adventure in the nature of trade'. The assessee is a real estate broker and vide letter dated 15/09/2007 issued to the assessee by SPIL, he was engaged to carry out a business transaction by SPIL since assessee's firm was engaged in real estate broking. The Ld. Counsel for the assessee drew our attention to page 34 of the Paper-Book to show ....
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....he request of his employer vide letter dated 15/09/2007 in order facilitate purchase of land adjacent to their factory premises in Halol and has not engaged in any other independent activity of purchase and sale of land and nor has earned any commission income. The assessee is not a holder of a valid license for doing business of real estate agent or registered broker registered with the association of registered brokers. By merely showing the aforesaid pieces of land as stock-in-trade in own books does not substantiate that the assessee is real estate agent, when the totality of facts gives a different picture. The assessee's real estate business did not have a Firm Name, Proprietorship Name or business address, from where he has been conducting business after office hours. The assessee has not mentioned anything about his Firm name in the return of income nor is the Firm name mentioned in the letter dated 15/09/2007 addressed by SPIL to the assessee. Also, it is a commonly known facts that real estate agents normally earn 'commission' on purchase and sale of land and not 'business income' on sale of entire property, which again supports the view that the assessee is not a real es....
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....the nature of trade and so it was rightly taxed under the head "business". On appeal to the Supreme Court held that pieces of land were purchased with the sole intention of selling them to M/s Janardana Mills Ltd. and assessee did not have any intention to hold the land. Hence, the solitary transaction of purchase and sale of land was an 'adventure in the nature of trade'. The Hon'ble Supreme Court made the following observations: "The conduct of the appellant in regard to the plots subsequent to their purchase clearly showed that it was not interested in obtaining any return from them. No doubt the appellant sought to explain its purpose on the ground that it wanted to build tenements for the employees of the mills; but it had taken no steps in that behalf for the whole of the period during which the plots remained in its possession. Besides, it could not be assumed in the case of a firm like the appellant that the acquisition of the open plots could involve any pride of possession to the purchaser. It was really not one transaction of purchase and resale. It was a series of four transactions undertaken in pursuance of a scheme and it was after the appellant had consolida....
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.... owing to such concerted and planned transaction of purchase and sale of land had been rightly regarded as business activity by Assessing Officer. 10.3 The Kerala High Court in the case of N.A. Baby v. DCIT [2015] 62 taxmann.com 22 (Kerala) held that where assessee having purchased agricultural land, converted same into barren land and thereupon sold it within short period of purchase, said activity was to be regarded as adventure in nature of trade and, consequently, profit earned on sale of land was to be taxed as business income. 10.4 Now, in the facts of the present case, the assessee bought four plots of land, consolidated the same into a single plot, converted their use from agricultural to non-agricultural and sold the same to SPIL at a profit. It is evident from contents of letter dated 15-09-2007, that the intention at the time of purchase of land was to sell the same to SPIL at a profit, and assessee has no intention to hold the land as an investment or utilize for any other purpose. In our view, the case is directly covered by facts in the case of G. Venkataswami Naidu & Co. v. CIT 35 ITR 594 (SC) and also Pune ITAT in the case of Dilip Battu Karanjule v. ITO [2016....