TaxTMI 
TaxTMI 
2024 (1) TMI 657
X X X X Extracts X X X X
X X X X Extracts X X X X
....s shown Long Term Capital Gain of Rs. 1,37,97,873/- and claimed Rs. 75,16,000/- as deduction u/s. 54F of the Act and remaining Rs. 62,81,873/- for taxation under the head LTCG. On further verification, it was noticed that the assessee along with other seven co-owners had purchased the immovable property on 02-01-2006 for a total consideration of Rs. 6,00,000/- in which assessee's share was 18%. The assessee along with the very same seven co-owners established a Partnership Firm on 15-03-2010 in the name and style of M/s. Ashirvad Infrastructure with the same shareholding as that in the land purchased by the assessee with the seven co-owners. It is thereafter the same set of co-owners entered into Development Agreement dated 30-11-2011 with M/s. Ashirvad Infrastructure to develop the lands for construction into 18 Bungalows. The AO found that the chain of facts clearly proved that the land was purchased only for business purpose by developing it as a commercial project, therefore Ld. A.O. issued a show cause notice dated 20-11-2017 as to why not to treat the capital gains offered by the assessee has to be treated as his "business income" and also deny claim of deduction u/s. 54F of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tive, intention and interest of the assessee which is a business activity. 3.2. Further even in the hands of the Partnership firm namely M/s. Ashirwad Infrastructure, no taxes was paid by the Firm and what was the consideration received from the firm towards the land was apportioned by the assessee in the disguise of exemption u/s. 54F of the Act. Thus the Ld. A.O. held that it is apparent the partnership firm was constituted to divert the profits of the trade and relying upon Hon'ble Supreme Court judgment in CIT Vs. Durga Prasad More (82 ITR 540) wherein it is held that the taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances, to find out the reality of the recitals made in those documents. The genuineness could validly be tested on the ground or principle of preponderance of human probabilities, which could thus form a valid ground or parameter for determining the genuineness of the transaction. Accordingly treated the capital gain as the "business income" of the assessee and also denied the exemption u/s. 54F of the Act. 4. Aggrieved against the same, the asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d sold 17 bungalows (approx 80% of the scheme) during AY 2015-16. Hence, it is apparent that the firm was constituted to divert the profits of this trade, which the partners were expecting ii) no tax was offered either by the appellant by claiming exemption u/s.54F nor the partnership firm of M/s. Ashirwad Infrastructure. If land owners could have done this project in their individual capacity, they should have been liable for higher tax and will not have been eligible for claiming exemption u/s 54F of the Income Tax Act. In the instant case, the appellant has claimed major part of the profit exempt u/s 54F of the act thus evading the legitimate taxes due on the profit. The same activity has been found in all the other co-owners of the land parcel. iii) it is noticed that the appellant is treating the land as "Stock in Trade" up to the date of development agreement, since there were no valuation and actual cost of acquisition of the land was Rs. 6.00 Lakh, the appellant was not liable for any wealth tax. However, the moment, the appellant entered into development agreement with his own partnership firm i.e. M/s Ashirwad Infrastructure, the value of appellant part of the land be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e that In the decision reported in G. Venkataswami Naidu's case & Co.'s case 35 ITR 594, the Apex Court pointed out that the question as to whether the transaction was an adventure in the nature of trade is a mixed question of law and fact, it held that when Section 2(4) of the 1922 Act referred to an adventure in the nature of trade, it clearly suggested that the transaction in question cannot properly be regarded as trade or business. It was allied to transactions that constituted trade or business, but may not be trade or business itself. In other words, it is characterized by some of the essential features that make up trade or business but not only by all of them. Thus, even an isolated transaction can satisfy the description of an adventure in the nature of trade, provided, at least some of the essential features of trade are present in the isolated or single transaction. The Supreme Court pointed out that ultimately, it is the intention with which the person deals in the particular transaction, would be the decisive factor. The Supreme Court held that relevant facts and circumstances actually determines the character of the transaction. Thus, in deciding the characte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n after the date of development agreement, it establishes the fact that the appellant has treated the immovable property as "Stock-in Trade". The Hon'ble Supreme Court in the case of Commissioner of Income Tax, West Vs. Durga Prasad More 82 ITR 540 observed the often quoted following relevant observation: "It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals If all that an asses see who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee is in appeal before us raising the following Grounds of Appeal: 1.1 The order passed u/s.250 on 26-11-2018 by CITIA)-3. A'bad upholding the profit arising on sale of land as business income instead of capital gain of Rs. 1,65,87,950/- and disallowance of exemption u/s 54F of Rs. 75,16,000/- is wholly illegal and unlawful. 1.2 The La. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned addition. 2.1 The Ld. CIT(A) has grievously erred in law and on facts in confirming profit arising on sale of land as business income instead of capital gain of Rs. 1,65,87,950/- and disallowance of exemption u/s 54F of Rs. 75,16,000/-. 2.2 That in the facts and circumstances of the case as well as in law the Ld. CIT(A) ought not to have upheld profit arising on sale of land as business income instead of capital gain Rs. 1,65,87,950/- and disallowance of exemption u/s. 54F of Rs. 75,16,000/-. 2.3 The observations made and conclusion reached by both the lower authorities to hold the transaction as adventure in nature of trade are not admitted by the appell....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 7. Per contra, the Ld. Sr. D.R. Ms. Soumya Pandey Jain appearing for the Revenue supported the order passed by the Lower Authorities which are the concurrent findings arrived by the Revenue need not be disturbed. The Ld. D.R. further submitted that there was no assessment for the earlier assessment year 2014- 15 wherein the assessee offered proportionate capital gain on the very same property but no claim of deduction u/s. 54F of the Act. Further in other Partners cases namely Champaben Natvarlal Patel and Natvarlal M. Patel where the cases were reopened u/s. 148 on the very same issue of capital gain versus business income, wherein Mr. Natvarlal M. Patel availed Vivad Se Vishwas Scheme and settled the issue. Thus considering the entire facts of the case and the conclusion arrived by the Ld. A.O. as "business income" does not require any interference and denial of exemption u/s. 54F of the Act is valid in law. Therefore requested to dismiss the appeal filed by the assessee. 8. We have given our thoughtful consideration and perused the materials available on record including the Paper Book and Synopsis filed by the assessee. The Assessing Officer after detailed verification found ....