TaxTMI 
TaxTMI 
TaxTMI 
2022 (8) TMI 1430
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....s. 4. For deciding these appeals, we taken IT(IT)A No. 02/JP/2018 for the A.Y. 2014-15 as lead case for wherein following grounds have been raised by the assessee: "1. Under the facts and circumstances of the case and in law, Ld. CIT (Appeals) has erred in upholding assessment order dated 26.12.2016 passed u/s 143(3) of the Act, which is perverse, arbitrary and bad in law. 2. Under the facts & circumstances of the case and in law, the Ld. CIT (Appeals) has erred in confirming addition of Rs. 1,30,16,030/ by upholding the conclusion of the Ld. AO that transaction of selling rights in flats by the Appellant was adventure in the nature of trade and construing the same as business of the Appellant. 3. Under the facts & circumstances of the case and in law, the Ld. CIT (Appeals) has erred in disallowing capital loss claimed and carried forward by the Appellant as per its return of income. 4. Under the facts & circumstances of the case and in law, without prejudice to the claim of the Appellant in aforesaid grounds, the Ld. CIT (Appeals) has erred in partially allowing interest expenditure incurred by the Appellant and not allowing the loss from alleged business while treatin....
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.... Ground no. 4 will remain as given in the said order. 7. Before proceeding further, pithily stated fact as culled out from the records is that the assessee is a non-resident Indian. He left India in 1986 as he employed outside India. The assessee is working with Spice Africa during the year consideration. The assessee filed his return on 28.07.2014 declaring total income of Rs. 17,54,580/- under the head interest income and loss under the head capital gain. The case was selected for scrutiny and accordingly notice u/s 143(2) on 21.09.2015 was issued and duly served upon the assessee by RPAD. 8. During the assessment proceeding, the ld. AO observed that assessee has shown Long Term Capital loss of Rs. 3,00,675/-. From the details provided by the assessee it was observed that the assessee sold his rights over two flats through sale agreement which were purchased through buyers agreement on 12.02.2008 M/s. Emaar MGF Land Limited as mentioned below: SN Particulars Date of Sale Sale consideration 1. L-302, Premier Terrances, Palm Drive, Gurgaon 02.04.2013 1,45,55,500/- 2. J-1105, Premier Terrances, Palm Drive, Gurgaon 10.06.2013 1,67,57,313/- 8.1 The ld. AO further observ....
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....2,513/- which is a substantial amount. (d) The purchase and sale of these flats was the only activity of the assessee. (e) The period of holding being very short, it was reasonable to presume that the purchase was made with an intention to resell. (f) The scale of activity was sustainable. (g) Assessee is not maintaining proper books of accounts which show the proper intention of assessee. (h) Assessee has not submitted any profit & loss account and balance sheet which show the nature of accounting in books of assessee." 8.3 In addition, the ld. AO has relied upon the various judicial pronouncement and also differentiated the decision cited by the assessee. Based on the findings given in the assessment order he has assessed the transaction of selling of two flats of Gurgaon during the year under consideration by the assessee as adventure in the nature of trade and taxed as business income for this transaction and consider the income of the assessee from this transactions as computed here in below :- SN Particulars Sale consideration Purchase cost Amount to be charged as business income 1. L-302, Premier Terrances, Palm Drive, Gurgaon 1,45,55,500/- 87,6....
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....ry made in his favour. However, the plea of the assessee does not hold good because on one hand, the assessee claimed that that he had to dispose of the DLF &Emaar property invested in 2007-08 in FY 2011-12 & 2012-13 due to global recession and delay in completion and on other hand, he made investment into flats with same builder DLF in 2011-12. (6) Motive. - The motive can be inferred from surrounding circumstances, in the absence of direct evidence of the seller's intentions. The fact of making investment after obtaining loan itself reflects that the investment is not purely with own funds but the assessee has leveraged loan and thereby has taken risk in making investment. The fresh investment made by the assessee in 2011-12 with DLF builder clearly highlights the fallacy of argument of the assessee because on one hand, the assessee claimed that he had to dispose of the DLF & Emaar property (invested in 2007-08) in FY 2011-12 & 2012-13 due to global recession and delay in completion and on other hand, he made investment into two flats with same builder (DLF) in 2011-12. Further, as discussed above, the assessee timed his sale to earn the maximum profit. Therefore, these activi....
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....ing out of the property on its completion. Hence, the ground of appeal is dismissed." 10. Being aggrieved from the order of the first appellate authority the assessee has preferred this appeal before us on the grounds extracted here in above in the initial paras. 11. During the hearing of this appeal the ld. AR for assessee submitted a brief of his contentions raised in support of his grounds which were contended before the lower authorities and on these issues written brief summary of arguments reads as under:- "1. The Appellant is a non-resident Indian since past several year as he left India in 1986 and he was employed outside India with Spice Africa during the years under consideration. Appellant has been regularly filing its return of income in India in status as Non-resident since past several years, in which income from investments, interest income and income from other sources are declared and taxes paid. 2. Assessee made investments in India from year 2007 with the object of capital appreciation and earning rental incomes, which were subsequently realized in years under consideration. The said investments were jointly held with his spouse, however, he was assessabl....
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....hat time. e) In the returns filed by Assessee for years under consideration as well as past years, Assessee has not claimed any business loss or interest expenditures incurred over the period for loans taken. f) Returns filed by the Assessee for past years being the years of acquisition of rights in flat has been accepted as such, wherein income in the form of interest income was not adjusted against any so-called business loss/expenditures g) Buyer's Agreement with Developer and Agreement to Sale has been executed by Assessee himself. h) There are no power of attorney transaction for purchase or sale of properties under consideration. i) Capital assets have been acquired through own funds as well as bank loan being home loan. j) Investments under consideration are jointly held by Assessee with his spouse, who is also a non-resident. k) There is no frequent trading in the allotment right in each year after their acquisition without prejudice to the fact that the said right is not in the nature of commodity which is traded in the market rather of the nature of Investment which is kept for long with an intent to hold for capital appreciation and earn regular ....
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....6. The Assessee also place reliance on judgment of the Hon'ble Bombay High Court in the case of Principal Commissioner Of Income Tax-19, Mumbai Versus Jogani and Dialani Land Developers and Builders[2020] 117 Taxman.com 140 (SC), wherein the Hon'ble Hight Court Of Bombay has held that "it is always open to an assessee to hold the same class of assets as investment and also as stock-in-trade. There is no bar in law for a person dealing in land to also have investment in land". In the said judgment even in case of the dealer in land, the transaction of investment in land was considered as investment and not trade, whereas in the case of the Appellant, where all class of assets are investment only, the department is not justified to dispute the same. Further reliance is placed on judgment of Hon'ble Bombay High Court in case of Principal Commissioner of Income-tax 17, Mumbai v. Hardik Bharat Patel [2018] 100 taxmann.com 410 (Bombay). In view of the above, considering the intention of the Assessee at the time of purchase, period of holding, full time employment outside India and other relevant factors as submitted above, it is established that acquisition and transfer of ....
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....ot connected with his business or profession, but does not include any stock-in-trade or personal assets subject to certain exceptions. As regards shares and other securities, the same can be held either as capital assets or stock-in-trade/trading assets or both. Determination of the character of a particular investment in shares or other securities, whether the same is in the nature, of a capital asset or stock-in-trade, is essentially a fact-specific determination and has led to a lot of uncertainty and litigation in the past. 2. Over the years, the courts have laid down different parameters to distinguish the shares held as investments from the shares held as stock- in-trade. The Central Board of Direct Taxes ('CBDT') has also, through Instruction No. 1827, dated August 31, 1989 and Circular No. 4 of 2007 dated June 15, 2007, summarized the said principles for guidance of the field formations. 3. Disputes, however, continue to exist on the application of these principles to the facts of an individual case since the taxpayers find it difficult to prove the intention in acquiring such shares/securities. In this background, while recognizing that no universal principa....
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....8.08.2018 &19.02.2021, where in the sale of property transaction considered as capital assets transaction on which the lower deduction claimed was considered as long-term capital gain has been allowed by the department on two occasions. 19. The ld. AR of the assessee further drawn our attention to a sanction letter of the Citibank dated 11.11.2011 to prove that the loan availed was housing loan and the intention was to use the assets as capital asset. 20. Au contraire, ld. DR appearing for revenue read various findings of the ld. AO and ld. CIT(A) and vehemently argued that the assessee has sold the flats in India, there cannot be a doubt that the income derived from the two flats sold by the assessee is chargeable to tax. The flats sold by the assessee cannot be charged under the head capital gain as these flats are not registered in their name and has been sold before the registration. Thus, the contention the income is in the nature of capital gain is incorrect. The intention of the assessee to hold these flats for earning rental income is also not correct. The volume of buying and selling, amount of heavy gain are to be seen and that itself proves intention and this gain is n....
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....on of investment as his retirement plan and assessee never changed his intention. The property is purchased with a home loan so that both the investment and enduring benefit of the property achieved out of the income that he earns outside India. The investment made in India by the assessee in 2007-08 is owned and continue to hold for more than five and ten years with that intention only to hold it for capital investment. Merely, the assessee realised the price more then what he has invested cannot be the criteria the decide the nature of investment, the purpose and circumstance evidence to support the contentions is also required to be looked into. b) Since, his intention was to stay in India and invested for long term and that is why he has even invested in the property which are under construction and even not registered in his name. The decision to sale the property before registration will not change the income arising out of the capital investment made by the assessee. The real purpose and intention of the assessee is not in the trade or adventure in the nature of trade/business as he wanted his family to be secured in a house in his origin country mother land. As regards th....
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....upports the stand taken in the year under consideration. The issue considered in the assessment is also required to be seen at the time issue of lower deduction certificate. According to him this is a ploy of the department to collect the higher tax on one score or the other is not permitted under the law and even the CBDT circular is very clear on the intention of the assessee and the department should not change their stand year to year for the same assessee and should try to follow the Board's circular in its letter and spirit. He has further stated that the property in question is a capital asset on which tax is chargeable as per law which is to seen based on the circular, purpose and circumstantial evidence. He also supports this argument based on the various cases laws. e) As per order of the ITAT if the interest is allowed as deduction the related business loss is much more then what is claimed as capital loss in the computation of income and thus by disturbing the result declared by the assessee revenue has no loss for the year under consideration and based on the circular of the CBDT and looking to the intention of the assessee to invest in the enduring benefit in the as....
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....ying facts or circumstances to obtain the same judgement as in an earlier case or in the subsequent year to be applied consistently. This doctrine is based on the following three Roman maxims which embody the combined result of the public policy [reflected in maxims (ii) and (iii) ]and private justice [expressed in the maxim (i)] and applies to all judicial proceedings whether civil or criminal: - (i) Nemo debetlisvaxari pro eadem causa -i.e. no person should be vexed annoyed, harassed or vexed two times for the same cause; (ii) Interest republicaeut sit finislitium - i.e., it is in the interest of the state that there should be an end of litigation; and (iii) Re judicata pro veritateoccipitur - i.e. the decision of the court should be adjudged as true 25. The following conditions need to be satisfied for the doctrine of Res- judicata to be applicable: - (i) There must be a final judgment; (ii) The judgment must be on the merits; (iii) The claims must be the same in the first and second suits; (iv) The parties in the second action must be the same as those in the first, or have been represented by a party to the prior action. This doctrine has widespread relev....
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....ions of law which directly and substantially arise in any dispute about the liability for a particular year, and questions of law which arise incidentally or in a collateral manner ... the effect of legal decisions establishing the law would be a different matter. If, for instance, the validity of a taxing statute is impeached by an assessee who is called upon to pay a tax for a particular year and the matter is taken to the High Court or brought before this Court and it is held that the taxing statute is valid, it may not be easy to hold that the decision on this basic and material issue would not operate as resjudicata against the assessee for a subsequent year". The Supreme Court in the a landmark decision on the issue in the case of Radhaswami Satsang v. CIT [1992] 60 Taxman 248/193 ITR 321 (SC) while holding that the principle of res-judicata does not apply to income-tax proceedings since each is an independent unit in itself made the following subtle, yet relevant remarks which signified some kind of a shift in approach:- "We are aware of the fact that strictly speaking resjudicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is d....
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....al filed by the assessee in ITA NO. 02/JP/2018 is allowed. 28. In the case of this assessee for assessment year 2012-13 Revenue's ground in IT(IT) A No. 04/JP/2018 "1. The CIT(A) erred in facts as well as in law in holding that interest cost of all the previous years can be clubbed together to arrive at the cost of opening stock for the year under consideration. 2. The CIT(A) failed to appreciate that interest cost is to be accounted for on accrual basis and once it was held that the assessee was involved in adventure in the nature of trade, profit or loss was to be determined for each year, separately in which interest accrued in that particular year only can be allowed an expenditure. 3. By holding that interest cost for all the previous years can be clubbed to arrive at cost of opening stock. CIT(A) defined the basis principles of accounting. 4. CIT(A) failed to appreciate that by aggregating previous years interest in the opening stock he, in a way allowed carried forward of losses in earlier years when the assessee had not filed return of income hence was not entitled for carried forward of losses. 5. CIT(A) failed to appreciate that ITAT order for A.Y. 2014-15 was....
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....ot pressed in this Co as ground being general in nature and would become academic on adjudication of ground no 2 & 3 and therefore same is not required any adjudication. The ground no. 2 raised by the assessee in this CO is squarely covered vide order in ITA no. 02/JP/2018. The bench has observed that the issues raised by the assessee in this cross objection No. 41/JP/2018 is equally similar on set of facts and grounds. Therefore, it is not imperative to repeat the facts and various grounds raised. Hence, the bench is in considered view that the decision taken by us in ITA No. 02/JP/2018 for the Assessment Year 2014-15 shall apply mutatis mutandis in the case of Shri Arun Nagar's Cross objection no. 41/JP/2018 for the Assessment Year 2012-13. The Ground no. 3 & 4 raised are consequential in nature to the Ground no. 2 and thus to be given effect accordingly in terms of Ground no. 2. In terms of this observation, the cross objection filed by the assessee in co No. 41/JP/2018 is allowed for assessment year 2012-13 32. The assessee has marched an appeal in IT(IT) A No. 12/JP/2019 for assessment year 2016-17, where in following grounds raised:- "1. Under the facts and circumstances ....