TaxTMI 
TaxTMI 
2023 (9) TMI 1532
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....long term capital gain as business income. 2. The learned CIT(A)-2 Baroda ought to have appreciated that the assessee has rightly claimed the long term capital gain on sale of plot of land." 3. The brief facts of the case are that the assessee filed his return of income under section 139(1) on 28.09.2014 declaring total income of Rs. 4,11,94,876/-. The case of the assessee was selected for framing scrutiny assessment under section 143(2) r.w.s. 143(3) of the 1961 Act. Statutory notices were issued from time to time, and the assessee participated in assessment proceedings. During the course of assessment proceedings, the AO observed that the assessee claimed to have earned long term capital gain of Rs. 3,20,56,598/- on sale of land bearing revenue survey no. 1915, City survey No. 1793/2, Final plot no. 112 of the proposed T.P. Scheme No. 63. This capital gain represents the sum of Rs. 3,33,54,750/- received by him after deducting the cost of acquisition of Rs. 12,98,152/-. The AO asked assessee to furnish necessary supporting documents including purchase and sale deeds, working of the indexed cost of acquisition etc.. The assessee submitted copies of purchase deed of imp....
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....the assessee of offering to tax as LTCG be not rejected. The contents of SCN are as reproduced as hereunder:- "2. On verification of the computation of total income filed, it came to notice that you claimed to have earned an amount to the extent of Rs. 3,20,56,598/-as long term capital gain on sale on plot of land bearing R. S. No. 1915, City survey No.1793/2, Final Plot no.112 of the proposed T.P. Scheme NO.63. As per the records, you have purchased the above plots of land vide purchase deed dated 01.09.2001 vide registration no.2463-13/14/2002 sub registrar, Vadodara 4, gorwa. You got the category of the above land converted from 'agriculture' to 'non-agriculture' vide collectors order no. S.R./4/2006-2007, No. land/D/Vashi/1355/2008 dated 27.05.2008 and taken the permission for construction by Vadodara Municipal corporation on 26.08.2008 which was revised on 23.07.2012. As per the Development agreement dated 08.04.2013 made by M/s. Mahendra Patel Builders private Limited with you, you have given the land to develop admeasuring to 4629 sq. which includes 4553 sq.mt as N.A. Land The above transaction was decided for sum of Rs. 6,66,20,500 +5,00,000/-= Rs. ....
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....erm capital gain of Rs. 3,20,56,598/- on the sale of plot of land bearing revenue survey Nos. 1915, City survey No. 1793/2, Final Plot no.112 of the proposed T.P Scheme No.63. This alleged capital gain represents the sum of Rs 3,33,54,750/- received by you after deducting the cost of acquisition of this plot of land Rs 12,98,152. 3. For the sake of brevity, the facts giving rise to this transaction, in a nutshell are as:- Date Fact 19.06.1992 You became the Managing Director of M/s Mahendera Patel Builders P. Ltd. 1.9.2001 You purchased the impugned agricultural land in your individual capacity jointly with your brother vide registration no. 2463-13/14/2002 registered by the sub registrar, Vadodara-4 On your application, the impugned agricultural land is ordered to be converted into Non Agricultural land vide collector's order no. S.R./4/2006-2007, No. land/D/Vashi/1355/2008 dated 27.05.2008 26.8.2008 You obtained the requisite permission of Vadodara Municipal Corporation for developing the land as a commercial property. Copy of the permission is annexed herewith as Annexure-A 23.07.2012 The permission obtained on 26-8-2008 is rev....
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....isions contained in S 28 of the Act providing for computation of Profits and gains of business or profession are quoted below verbatim- "The following income shall be chargeable to income-tax under the head "Profits and gains of business or profession" (i) the profits and gains of any business or profession which was carried on by the assessee at any time during the previous year; 8. The term business is further defined in S 2(13) of the Act. These are reproduced below verbatim "business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture; 9. Accordingly, the undersigned is of the opinion that your income of Rs 3,20,56,598/- against granting and/or transferring development right in respect of the impugned plot of land constitute your income from business or profession chargeable to Income- tax u/s 28 of the Act as against your claim of treating it as Long Term Capital Gains. 10. You are hereby given an opportunity to show cause as to why the aforesaid income be not included in your Total Income as Profits and Gains of business or profession. You may file your written re....
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....et and not as stock-in-trade. It was submitted that the assessee has income from salary, income from house property, interest income and during the year, the assessee has earned long term capital gains , and hence, no books of accounts have been maintained for earlier year assessment year 2013-14. It was submitted that the assessee received the full amount and possession was handed over and long term capital gains were declared in the return of income filed with the department. Thus, it was submitted that the intention was not to undertake business or commerce but to make investment and to make money from long term capital gains. As an alternative plea, it was submitted that if the income is to be treated as business income, then the expenditure incurred towards such business income should be allowed as deduction on same principles. The assessee relied upon the decision in the case of CIT v. Jalannagar Tea Estate Private Limited 45 ITR 626(Assam). The assessee submitted that he does not have his own business and has not shown as stock in trade. The assessee relied upon the decision in the case of ITO v. Sitaram Chamaria (2006) 6 SOT 594(Bom.) The assessee referred to the provisions....
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....permission from the Collector's order dated 27.05.2008 and taken the permission for construction by Vadodara Municipal Corporation on 26.08.2008 and got his layout map. Thus, the intention of the assessee was to maximize the gains arising from sale of land. The AO observed that the sale of the land by the assessee is not in one go but in a planned and organized way. The development agreement was executed with the company in which assessee himself is Managing Director, and the main activity of the said company is to develop building of complete construction or part thereof and other civil engineering work. The AO observed that as business practice , the directors of the company purchase the land in their name and later they do development agreement with the company in order to avoid paying taxes at a higher rate of 30%. The AO referred to the decision of Hon'ble Supreme Court in the case of CIT v. Sutlej Cotton Mills Supply Agency Ltd. (1975) 100 ITR 706(SC). The AO was of the view that it was adventure in the nature of trade. The contention of the assessee was rejected by the AO that land was acquired mainly for the purpose of getting capital appreciation. The AO observed that even....
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....stop at this stage, but further obtained requisite permission from Vadodara Municipal Corporation for development of land as a commercial property. As a matter of fact, the appellant has never used the land for agricultural purposes and hence it was a well-thought plan to buy a land and develop the same commercially and then sell for a commercially competitive price. The commercial exploitation of land is also reflected from the fact that the said land has been sold to appellant's own company on 08.04.2013 through a Development Agreement for a very high consideration of Rs. 6,71,29,500/- alongwith his co-owner, brother, though the cost of acquisition was only Rs. 4,68,550/-. Therefore, in view of the reasons mentioned above as also the reasons recorded by the Assessing Officer, the transaction of purchase and sale of land under consideration was nothing but an "adventure in the nature of trade." 4.2.1. It is worthwhile to mention here that the Hon'ble Supreme Court in the case of Raja J. Rameshwar Rao Vs. CIT, 42 ITR 179 (SC) has categorically held that when a person acquires land with a view to selling it later after developing the same, he is carrying an activity....
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....to HUF was sold after carving out plots and hence sale was treated as business activity. In the case of appellant also, no agricultural operations were carried out and that land was purchased with clear-cut intention to sell for profit after developing partially i.e. conversion and approval for commercial use. (c) ITO Vs. Sitaram Chamaria (2006) 6 SOT 594 (Bom.) In this case, the assessee along with his wife and son entered into a development Agreement with builder and transferred rights only. The development was done by builder only. However, in the case of appellant, conversion of agricultural land, approval for commercial exploitation etc. were done by the appellant himself. In view of the above distinguishable facts, the decisions relied upon by the Ld. Authorized Representative are of no help to the assessee-appellant. 4.2.4. The Ld. Authorized Representative has also raised an alternative argument that the expenses incurred on conversion of land and obtaining approval from Vadodara Municipal Corporation, should be allowed as deduction. In this regard, I find that neither at assessment stage nor at appellate stage, the appe....
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....tsang v. CIT, reported in (1992) 60 Taxman 248(SC). The reliance was also placed on decision of Hon'ble Supreme Court in the case of UOI v. Kaumidini Narayan Dalal & Ors. , reported in (2001) 249 ITR 219(SC). The reliance was also placed by ld. Counsel for the assessee on the order passed by ld. PCIT u/s 263 in the case of brother of the assessee namely Mr Bipinbhai Chaturbhai Patel. 5.2 The ld. CIT-DR relied upon the appellate order passed by ld. CIT(A). 6. We have considered rival contentions and perused the material on record including cited case laws. The return of income was filed by assessee on 28.09.2014 u/s 139(1), declaring income of Rs. 4,11,94,876/-. The assessee has ,inter-alia, declared income from salaries, income from house property, long term capital gains and interest income. The assessee is Managing Director of M/s Mahendra Patel Builders Private Limited. The case of the assessee was selected by Revenue for framing scrutiny assessment u/s. 143(2) read with Section 143(3) . Statutory notices were issued by the AO. The assessee participated in assessment proceedings. The assessee has sold land bearing revenue survey no. 1915, City survey No. 1793/2, Final plot....
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....ment to be brought to tax as long term capital gains, or the solitary asset held is a business asset wherein solitary transaction of transfer of an asset held as business asset shall be chargeable to tax as income under the head "Profits and Gains from Business of Profession" being adventure in the nature of trade, is a mixed question of fact and law . Thus, it is the intention of holding of the asset before being transferred, which is material and relevant, which requires investigation of facts. It is not necessary that there should be series of transactions in the nature of business, before the income is brought to tax as business income , as it is well settled that even one transaction in the nature of sale and purchase which is an adventure in the nature of trade is sufficient to classify income as business income. Reference is drawn to the decision of Hon'ble Supreme Court in the case of CIT v. Sutlej Mills Agency Limited (1975) 100 ITR 706(SC). In the instant case, it transpires that the assessee is Managing Director of the Company M/s Mahindra Patel Builders Private Limited, since 1992. The said company is engaged in building/construction activities, while the brother of the....