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2022 (8) TMI 1430
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....er. 3. The hearing of the appeal was conducted after issue of proper notice to both the parties. 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 par....
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....ppeal recalled to decide the ground no. 1, 2 & 3 which was not decided by the earlier order dated 21.05.2018 and the decision of the bench on the 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 Terran....
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....n total two flats in the same city were bought by the assessee in F.Y. 2007-08 and sold by the assessee during the previous year. (c) The volume of sale of flats by the assessee during the previous year was Rs. 3,13,12,513/- 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....
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....ested with an intention to let out the property to earn rent, however, he had to sell the flats in view of the change of scenario due to global recession which led to delay in completion of flats/apartments that were booked in FY 2007-08 for a period of more than six years and it was not possible for the Appellant to have the registry 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 th....
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....tion in Delhi NCR (which includes Gurgaon) witnessed 22% rise in 2013 as compared to 2012, according to a report by Colliers International. 6.17 In view of the above facts, it is evident that the argument taken by the appellant of global recession in real estate market does not hold good. Therefore, there was no reason for the assessee to sell the property as against the stated intention of renting 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....
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.... b) Assessee visit to India is very minimal (55 days in Past 5 years). c) Capital assets being allotment/booking rights in flat/apartment was held for considerable period of time (more than 5 years) before their transfer/assignment in favour of prospective buyer. d) The transfer/assignment of rights in years under-consideration was effected during year under consideration on account of delay in constructions and other relevant factors prevalent at that 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 ac....
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....n against Assessee as relevant factor to allege the transaction as business rather than investment as it is the intention at the time of purchase of investment which is most relevant factor to decide whether the transaction is adventure in the nature of trade or Investment Transaction. 10. In support of the contentions placed on records, Assessee further would like to place its reliance on the various judgments placed on records via case compilation submitted on 26.11.2019 including the CBDT Circular 6/2016 dated 29.02.2016. 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 Appellan....
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....of income filed by the assessee originally at Rs. 3,00,675/-. Thus, in fact on the view of the department the loss is much at higher the amount than what has been claimed by the assessee. 17. In addition, the ld. AR of the assessee relied upon the circular issued by the CBDT vide its No. 6/2016 [ F.No.225/12/2016-ITA-III dated 29.02.2016. The relevant extract is as under:- "Sub-section (14) of section 2 of the Income-tax Act, 1961 ('Act') defines the term "capital asset" to include property of any kind held by an assessee, whether, or not 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 he....
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....on itself is questionable, such as bogus claims of Long Term Capital Gain/Short Term Capital Loss or any other sham transactions. 5. It is reiterated that the above principles have been formulated with the sole objective of reducing litigation and maintaining consistency in approach on the issue of treatment of income derived from transfer of shares and securities. All the relevant provisions of the act shall continue to apply on the transactions involving transfer of shares and securities." 18. Our attention is also drawn to the certificate issued by the ld. AO u/s. 197 of the Act on 08.08.2018 &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 asse....
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....ave property for enduring benefit either to have the rental income or to have the capital appreciation over the period of time. For this intention he has added her wife's name in all the investment which he made, this also support the contention of the investment not an adventure in the nature of trade. Had the intention of the assessee is to enter into an adventure in the nature of trade he might have done the transaction in his name only and as he is employed at such level, he could get the loan sanctioned his name only but he preferred it to have the time as also co-owner of the property based on his intention 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 circumstan....
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....as given the lower deduction certificate on two instances. d) CBDT's circular which state that once the stand taken by the assessee in a particular Assessment Year, shall remain applicable in subsequent year also and the taxpayers shall not be allowed to adopt a different / contrary stand in this regard in the subsequent years. The ld AR further submitted that this circular is issued by the CBDT to avoid litigation which the department should not use to create litigations. The ld. AR for the assessee stated that the new plea amounts to a flip flop as it is diagonally opposite to what was taken subsequently and in fact it supports 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 th....
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....hen confronted with a suit that is identical to or substantially the same as an earlier/periods one, to by applying this principle to preserve the effect of the earlier judgement. The justification for applying this doctrine lies in the desire to promote efficiency and fairness and reduce unnecessary litigation. Even the CBDT's instruction is on the same line to reduce the litigation is not considered by the lower authorities where there is not substantial question of leakage of revenue as it is evident from the appeal effect order placed on record. 24. For a defendant, this doctrine enables him by relying in the absence of any change in the underlying 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; (i....
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.... This view was unequivocally also upheld by the Supreme Court in the case of Instalment Supply (P.) Ltd. v. Union of India [1962] AIR (SC) 53 whereby the general rule is to make this doctrine inapplicable for tax matters as the findings/opinions recorded by either an Assessing or even an Adjudicating authority have no binding effect on even the same issue in subsequent years. The views of the Supreme Court in the case of Instalment Supply Ltd (referred above) were very soon thereafter clarified and amplified in the case of Amalgamated Coalfields v. Janapada Sabha [AIR 1964 SC 1013] with the following remarks:- "In considering this question, it may be necessary to distinguish between decision on questions 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 a....
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....sp; The Revenue should not be allowed to flip-flop on the issue 25 Based on the above findings that the assessee contention based on the similar fact income is considered as capital gain and revenue failed sustenance their action that why the contrary view should be adopted in the year under consideration when the department has on the same very assessee's case on same fact accepted the income as income under the head capital gain and even revenue also failed to substantiate that with the view and as they substantiate there is a substantial revenue leakage too. 26. In view of the above findings of facts we see no reasons that the revenue should disturb the income offered by the assessee and in terms of this observation the ground No. 1, 2 & 3 raised by the assessee is allowed. 27. In effect, the appeal 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. ....
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.... transaction of selling right in flats by the appellant was adventure in the nature of trade and constructing the same was business of the appellant. 3. Under the facts & circumstances of the case and in law, the Ld. CIT (Appeals) has erred in treating the rights in flats of appellant as stock in trade instead of capital assets and not accepting loss of Rs. 5,28,01,317/-. 4. Under the facts & circumstances of the case and in law, the Ld. CIT(A) has erred in disallowing capital loss claimed and carried forward by the appellant as per its return of income. 5. Under the facts and circumstances of the case and in law, Ld. CIT (Appeals) has erred in maintaining the interest liability u/s 234B of the Income Tax Act, 1961. 6. The appellant craves to alter, amend and modify any grounds of appeal." 31. The ld. AR of the assessee stated that Ground no. 1 is not 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 th....
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....issed Order pronounced in the open court on 17/08/2022. ============= Document 1Traceback (most recent call last): File "C:\inetpub\vhosts\taxmanagementindia.com\httpdocs\python_image_text_project\google\direct_extract_text.py", line 19, in from google_doc_api import process_single_document File "C:\inetpub\vhosts\taxmanagementindia.com\httpdocs\python_image_text_project\google\google_doc_api.py", line 345 elif mime_type in ["image/gif"]: IndentationError: expected an indented block after 'if' statement on line 341 Document 2 2. 3. Pratish Manilal Modi (HUF) Assistant v. purchase gives him sufficient profit. This alone would take it out of the definition of adventure in the nature of trade and the solitary instance of sale alone cannot characterise the transaction as an adventure in the nature of trade. 6.8 We also note that the case law relied on by the Ч Ld. CIT(A) has not considered the CBDT Circular No.6/2016 dated 29.02.2016. Therefore we are of reluctant to rely on the judgment relied upon by the Income-tax, Circle- Ld. CIT(A). Commissioner 2, [2019] Jamnagar In view of above, we hold tha....
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....r 15 sale consideration is to be taxed as capital gain or the sale transaction is to be treated to be an "adventure in the nature of trade", things cannot be put in any strait jacket formula, and it is dependent upon the facts and circumstances of each case to be decided on the basis of relevant considerations. One of most significant considerations would be the regularity of transaction of purchase and sale. Mere fact that there was a series of transactions of sale only, by selling the part of the whole land, purchased in one go, or purchased once upon a time, in piecemeal, would not render the activity of sale to be an 'adventure in the nature of trade"" & Mohan Khan v. CIT [2008] 304 ITR 194 (RAJ.) Commissioner of Income-tax v. R.V. Gupta [2002] 124 TAXMAN 191 (DELHI) Dealing with the expression 'adventure in the nature of trade' in Raja Bahadur Kamakhya Narain Singh v. CIT [1970] 77 ITR 253, the Apex Court observed that if the transaction is in the ordinary line of the assessee's business, there would hardly be any difficulty in concluding that it is a trading transaction. But where it is not....
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....e assessee approached the Commissioner builder for constructing the flats on the portion Income-tax apart from the already constructed portion, would 236 not make the transaction an 'adventure in the 573 nature of trade.' All that the assessee had received v. of [2016] Taxman (Delhi) from the sale of the flats was a residential flat and Rs. 4 lakhs in cash as a result of the agreement entered into with the builder. As explained by this Court in Shanti Banerjee v. Dy. CIT [IT Appeal No. 299 of 2003, dated 17-11-2015] where the construction and sale of the flats did not change the character of the asset and there was no material to 30 Document 5 9. Income-tax Officer, Ward 21(2)(4) v. Sitaram show that the assessee ever had the intention to exploit the plot as a commercial venture, the transaction could not be characterized as 'an adventure in the nature of trade' leading to the resultant receipt as business income in her hand." or In the sales agreement, the right of the assessee as owner has been duly recognized. In the assessment order, the Assessing Officer prima facie took the Chamaria ....
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....sment Years also and the taxpayers shall not be allowed to adopt a different/contrary stand in this regard in subsequent years; (c) In all other cases, the nature of transaction (i.e. whether the same is in the nature of capital gain or business income) shall continue to be decided keeping in view the aforesaid Circulars issued by the CBDT. The substantive issue in the present appeal is whether gains arising on sale of plot/land by the assessee in the relevant assessment year is required to be taxed under the head 'capital gains' as offered by the assessee or is to be treated as 'business income' of the assessee. The issue is essentially factual in nature and depends on the facts and circumstances prevalent in a given case. It is the case of the assessee that plot/land was acquired/purchased over several years and held as capital asset in the nature of investment. Notably, what is relevant to determine the issue is to enquire into the intention at the time of acquisition of asset and not when the asset is proposed to be sold. The revenue has not alleged any real substantive and systematic course of activi....
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....ention was to carry on an adventure in the nature of business, the profit can be taxed, otherwise not. In other words, the question is whether the assessee purchased the share in a commercial spirit with a view to make profit by trading in them..... 6. Considering the aforesaid dictum vis-a-vis the findings given, it is clear that the intention of ST Document 8 14. Goutham Constructions Co. Income-tax v. Officer, Ward - assessee was not to carry on business; it was clearly a case of investments, which were made. Findings of CIT(A) and ITAT are based on facts which cannot be said to be perverse, rather appear to be correct and in accordance with the aforesaid decision of the Apex Court. Thus, we find that no substantial question of law arises in the appeal.' " 38. From the facts and circumstances of the case, as narrated before us, it is important to note that what was the intention of the assessees at the time of acquiring the land or interval action by the 4(2), Hyderabad assessee between the period from purchase and [2013] 39 sale of the land and the relevant taxmann.com 181 improvement/devel....