2023 (3) TMI 1217

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....d the assessee had complete control over the entire venture from the start to the end." 2. The Ld.CIT (A) has erred in law and on facts in holding that the income earned by the sale of the property, Vision Hour'' is taxable under the head of Capital Gain and not under the head of income from Business or Profession without appreciating the fact that the entire chain of events shows that there was no intention of holding the property as investment from the very beginning but it was an adventure in nature and in the form of business activity." 3. The Ld.CIT (A) has erred in law and on facts in holding that the income earned by the sale of the property, Vision House', is taxable in A.Y. 2008-09 and not in A.Y. 2007-08 without appreciating the fact that the agreement to sale of the said property was made on 10th January, 2007 and part payment/consideration was also received in F. Y.2006-07, relevant to A. Y. 2007-08." 4. On the facts and circumstances of the case, the Ld.CIT (A) ought to have Upheld the order of the Assessing Officer. 5. It is, therefore, prayed that the order of the Ld. CIT (A) may be set aside and the order of the Assess....

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....to buyers. The assessing Officer held that the assessee AOP was the "real owner" of the aforesaid property and its members were not owners in reality and have no legally sustainable identity. The AO held that the members of the assessee AOP had merely acted on behalf of the assessee AOP and the actual title in the property was in the name of the assessee AOP only. The AO also held that the assessee AOP had complete control over the entire endeavour and actual day-to-day conduct of the business and the allotment of shares between its members had no sanctity in law. Accordingly, the taxability of the sale of the property arises in the hands of the assessee AOP. Further, the AO held that the entire chain of events showed that there was no intention of holding the property as investment from the very beginning, but it was an adventure in the form of business activity. Accordingly, in view of section 2(13) of the Act, the income from sale of such property is a "business income", taxable in the hands of the assessee AOP (and not capital gains in the hands of members of the assessee AOP, in proportion to their shareholding in the assessee AOP). Further, the AO held that the transaction wa....

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....he NTC and no further evidences were brought out by the A.O. to show that the actual owner is NTC not the members of the NTC." 6. With regard to the question of taxability of the income as business income or capital gain, the Ld. CIT(Appeals) held that from the events of buying land to the construction of property and finally sale of property, there is nothing which establishes that the intention of the assessee was not holding up the property as investment. Purchasing of land and construction of property by itself would not establish that the person concerned was indulging in trading activity. The ld. CIT(A) held that the AO has failed to establish by any positive evidence that the purchase and sale of property was with a view to make profits through trading transaction. The assessee is not in the activity of regularly purchasing and selling the properties and it is not organized business activity of the assessee. Accordingly, Ld. CIT(Appeals) held that income from sale of property should be taxed as capital gain and not business income. 7. With regard to the question of year of taxability, Ld. CIT(Appeals) observed that from a perusal of facts it is seen that the assessee h....

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....embers of the assessee AOP are also shown as "owners" of the property by the Registrar of Stamps, Gujarat. In the case of Monarch Citadel (P.) Ltd.[2014] 45 taxmann.com 477 (Karnataka), the Karnataka High Court held that where assessee-company owned a landed property and it had constructed a commercial building on said land and later on it allotted specific portion of building to shareholders and thereafter it leased entire building to a tenant and distributed rental amount/monthly rent after deducting tax and maintenance to shareholders proportionately, in given situation shareholders were owners of specific portion of building allotted to them and it could not be said that assessee deemed to have derived income from rental. In the case of Ranka Construction (P.) Ltd.[1995] 52 ITD 122 (Cochin)[19-09- 1994]the assessee-company constructed apartments on land purchased by it, receiving money for construction thereof from its members to whom apartments were allotted. The Members were in possession and enjoyment of flats and paid no rent to company. The ITAT held that assessee company could not be held to be owner of flats on ground that title to land remained with assessee and, hence,....

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....a long holding duration between which the assessee took possession of the property and the date when the land was finally sold after making construction thereon. The entire purchase was funded by the members of the AOP. No interest-bearing loan was taken for the purpose of purchase of said property and construction thereon. No change in land user of the property was affected in order sell the aforementioned property. It is not the case of the Department that when initially the assessee AOP purchased the land and took possession thereof on 19-01-1994, the buyers were identifiable and thus the whole purpose of purchase and subsequent construction was for the purpose of selling the same and not earning any rental income. Accordingly, in view of the facts and circumstances cited above, in our considered view, the said sale of property would be taxable as capital gains and not business income, and we find no infirmity in the order of ld. CIT(A). 11. The third issue for consideration is the year of taxability of the aforementioned property. We observe that in the instant case, both the registered sale deed as well as the possession of the property was transferred in the subsequent fin....