ITO, Ward 3(1), Pune V. Shri Rajesh S Kasat, Pune

ITA 1736/PUN/2013

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9815 (ITAT-PUNE)
• Duration Of Justice: 5 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-04-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 11-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL PATHAK
• Assessee Lawyers: MUKESH JHA
• Keywords: Capital asset; Business income; Salary income; Assessment record; Futures and options
• Section: 143(3); 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 1 736 /P U N/201 3 / ASSESSMENT YEAR : 20 09 - 10 THE INCOME TAX OFFICER , WARD 3 ( 1 ), PUNE . / APPELLANT VS. SHRI RAJESH S. KASAT 37/7, PRATHAM, PRABHAT ROAD, LANE NO.6, ERANDWANE . PUNE 411004 . / RESPONDENT PAN: A EAPK3449M . /CO NO. 62 /PUN/201 3 / ASSESSMENT YEAR : 20 09 - 10 (OUT OF ITA NO.1 736 /PUN/201 3 ) SHRI RAJESH S. KASAT 37/7, PRATHAM, PRABHAT ROAD, LANE NO.6, ERANDWANE. PUNE 411004 / CR OSS OBJECT OR PAN: AEAPK3449M VS. THE INCOME TAX OFFICER, WARD 3(1), PUNE . / RESPONDENT ASSESSEE BY : S /S HRI SUNIL PATHAK AND NIKHIL PATHAK RESPONDENT BY : SHRI MUKESH JHA / DATE OF HEARING : 2 5 . 0 7 .201 8 / DATE OF PRONOUNCEMENT: 24 . 0 9 .201 8 ITA NO. 1 736 /P U N/20 1 3 CO NO. 62 /PUN/201 3 SHRI RAJESH S KASAT 2 / ORDER PER SUSHMA CHOWLA, J M : THE APPEAL FILED BY REVENUE IS AGAINST ORDER OF CIT (A) - I I , PUNE , DATED 2 7 . 0 2 .20 1 3 RELATING TO ASSESSMENT YEAR 20 09 - 1 0 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . THE ASSESSEE FILED CROSS OBJECTIONS AGAINST THE APPEAL OF REVENUE. 2. THE APPEAL FILED BY REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE REVENUE IN ITA NO.1736/PUN/2013 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - (1) THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN HOLDING THAT THE INCOME EARNED ON SALE OF LAND AT BAVDHAN WAS BUSINESS I NCOME AS AGAINST SHORT TERM CAPITAL GAIN. (2) THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE TAX AUDIT REPO R T AND THE REFLECTION IN THE BALANCE SHEET DEPICTS THE INTENTION OF THE ASSESSEE AND NOT MERE BOOK ENT RY FOR THE CLASSIFICATION OF ASSET AS INVESTMENT AND NOT STOCK - IN - TRADE. (3) THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAD ALWAYS REFLECTED THE LAND IN QUESTION ALWAYS AS INVESTMENT IN BALANCE SH EET AND AFTER SALE OF LAND RECLASSI FIED THE LAND AS STOCK - IN - TRADE SO THAT HE CAN OFFER THE PROFITS ON ITS SALE AS BUSINESS INCOME WHICH HE CAN SET OFF AGAINST THE CARRIED FORWARD BUSINESS LOSSES. (4) THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED , IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAD PURCHASED THE LAND AS INVESTMENT AND NOT FOR THE PURPOSE OF DEVELOPMENT AS NO ACTIVITIES SUCH AS PLOTTING OF THE LAND OR ANY CHANGES IN THE STRUCTURE OF THE LAND WERE CARRIED OUT (5) THE LEARNED COMMISS IONER OF INCOME - TAX (APPEALS) ERRED IN NOT APPRECIATING THAT RIGHT TO OBTAIN A CONVEYANCE OF IMMOVABLE PROPERTY IS ITA NO. 1 736 /P U N/20 1 3 CO NO. 62 /PUN/201 3 SHRI RAJESH S KASAT 3 A CAPITAL ASSET AS HELD BY BOMBAY HIGH COURT IN THE CASE OF CIT VS. TATA SERVICES LTD., 122 ITR 594. (6) THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN DISTINGUISHING THE FACTS OF SHRI.GIRISH RATHI WITH THAT OF THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE MEMORANDUM OF UNDERSTANDING CLEARLY EXPRESSES THE TRANSFER OF RIGHT TO CONVEY FROM SHRI.GIRISH RATHI TO THE ASSESSEE AND N OT MERE INTEREST AND IN THE FINAL SALE DEED THE RIGHTS OF SHRI GIRISH RATHI AND THE ASSESSEE ARE AT PAR. (7) THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN NOT CONSIDERING THE FACT THAT THE INCOME FROM SALE OF LAND IN QUESTION HAD BEEN SHOWN AS SHORT TERM CAPITAL GAINS BY SHRI GIRISH RATHI, WITH WHOM ASSESSEE HAD ENTERED INTO AGREEMENT FOR PURCHASE OF LAND. 4. THE ASSESSEE IN CO NO.62/PUN/2013 HAS RAISED THE FOLLOWING GROUNDS OF OBJECTIONS: - THE FOLLOWING CROSS OBJECTIONS ARE TAKEN WITHOUT PRE JUDICE TO EACH OTHER - ON FACTS AND IN LAW, 1] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE INTEREST ON LOANS GIVEN WAS TAXABLE AS INCOME FROM OTHER SOURCES AND NOT AS INCOME FROM BUSINESS. 2] THE CIT(A) FAILED TO APPRECIATE THAT A . THE ASSESSEE HAD GIV EN LOANS TO ABOUT 20 PARTIES AND HAD TAKEN INTEREST BEARING LOANS FROM 11 PARTIES AND THIS ASPECT INDICATED THAT THE INCOME FROM INTEREST WAS OF THE NATURE OF BUSINESS INCOME. B . THE FINANCING BUSINESS ACTIVITY OF THE ASSESSEE DID NOT REQUIRE ANY LICENSE UND ER THE MONEY LENDING ACT AND THUS, THIS BUSINESS ACTIVITY WAS PERFECTLY LEGAL AND THE INCOME HAD TO BE ASSESSED UNDER THE HEAD 'INCOME FROM BUSINESS'. C . THE BUSINESS LOSS CARRIED FORWARD FROM THE EARLIER YEARS COULD BE SET OFF AGAINST THE INTEREST INCOME. 3] THE RESPONDENT SUBMITS THAT THE DECISION OF THE CIT(A) IN HOLDING THAT THE PROFITS FROM TRANSFER OF RIGHTS IN THE LANDS WERE TAXABLE AS BUSINESS INCOME AND NOT AS CAPITAL GAINS SHOULD BE CONFIRMED AND THE DEPARTMENTAL APPEAL SHOULD BE DISMISSED. 5. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN HOLDING THAT THE GAIN ARISING ON SALE OF LAND AT BAVDHAN WAS TO BE ASSESSED AS BUSINESS INCOME AND NOT AS SHORT TERM CAPITAL GAINS. THE CASE OF REVENUE IS THAT THE ASSESSEE HAD ALWAYS REFLECTED THE LAND IN QUESTION AS INVESTMENT IN ITS BALANCE SHEET AND AFTER SALE OF LAND HAD RE - CLASSIFIED THE SAME AS STOCK - IN - TRADE IN ITA NO. 1 736 /P U N/20 1 3 CO NO. 62 /PUN/201 3 SHRI RAJESH S KASAT 4 ORDER TO SHOW THE PROFITS ON ITS SALE AS BUSINESS INCOME WHICH COULD BE SET OFF AGAINST CARRY FORWARD BUSINESS LOSSES. 6. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME DECLARING NIL INCOME. THE CASE OF ASSESSEE WAS PICKED UP FOR SCRUTINY. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND COMMO DITIES. THE ASSESSEE WAS CARRYING OUT ITS BUSINESS ACTIVITIES THROUGH TWO CONCERNS, ONE RAJESH KASAT & CO. AND ANOTHER RAJESH KASAT. THE BUSINESS OF TRADING IN SHARES ON DELIVERY BASIS AND FUTURES AND OPTIONS WERE CARRIED OUT IN BOTH THE CONCERNS; HOWEVE R, THE BUSINESS OF TRADING IN COMMODITIES WAS CARRIED OUT IN RAJESH KASAT & CO. AND THE INCOME FROM THE SAME WAS SHOWN AS SPECULATIVE PROFIT. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SOLD LAND AND GAIN OF 2.83 CRORES WAS CLAIMED AS BUSINES S INCOME IN RAJESH KASAT & CO. THE ASSESSEE HAD SHOWN OTHER INCOME IN ITS HANDS AND HAD CLAIMED SET OFF OF CARRY FORWARD BUSINESS LOSS OF 3.48 CRORES AGAINST ITS GROSS TOTAL INCOME AND HAD OFFERED INCOME OF 6,172/ - IN ITS RETURN OF INCOME. THE ASSE SSING OFFICER OBSERVED THAT THE ASSESSEE HAD SET OFF CARRY FORWARD BUSINESS LOSS AGAINST SALARY INCOME, HOUSE PROPERTY INCOME AND INCOME FROM OTHER SOURCES, WHICH WAS NOT PERMISSIBLE UNDER SECTION 72 OF THE ACT. THE ASSESSEE WAS CONFRONTED WITH THE SHOW C AUSE NOTICE IN THIS REGARD AND HE POINTED OUT THAT INCOME FROM INTEREST WAS EARNED FROM VARIOUS PERSONS AND IT WAS INCIDENTAL TO THE BUSINESS OF ASSESSEE AND HENCE, THE CLAIM WAS CORRECT. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE ALONG WITH SH RI GIRISH M. RATHI AND OTHER LAND OWNERS HAD ENTERED INTO SALE AGREEMENT WITH THE BUILDER AND DEVELOPER IN RESPECT OF LAND AT SURVEY NO.268, BAVDHAN, PUNE ADMEASURING 1H 20R. SHRI GIRISH M. RATHI HAD PURCHASED THE LAND AREA OF 1H 43R, OUT OF WHICH LAND AR EA OF 46.5R WAS SOLD TO ITA NO. 1 736 /P U N/20 1 3 CO NO. 62 /PUN/201 3 SHRI RAJESH S KASAT 5 THE ASSESSEE. THE ASSESSEE IN TURN, SOLD 40R AND THE REMAINING SHARE OF 6.5R WAS WITH HIM. THE PROFIT EARNED ON THE SAID SALE OF LAND WAS COMPUTED AT 2,83,29,301/ - WHICH WAS CLAIMED AS BUSINESS INCOME AND THE SET OFF OF CARRY FORWARD SHARE TRADING BUSINESS LOSS WAS CLAIMED AGAINST IT. THE ASSESSING OFFICER NOTED THAT THE TAX AUDIT REPORT FOR A.Y. 2007 - 08 MENTIONS THE BUSINESS OF PURCHASE AND SALE OF TDR APART FROM THE SHARE TRADING BUSINESS OF THE ASSESSEE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHARE TRADING FOR LAST 20 YEARS AND THIS IS HIS ONLY BUSINESS ACTIVITIES AS EVIDENT FROM THE TAX AUDIT REPORT FOR AY 2008 - 09 AND 2009 - 10 ALSO WHICH MENTI ONS THE BUSINESS OF ASSESSEE AS TRADING IN SHARES AND COMMODITIES ONLY WITH THE REMARK THAT THERE IS NO CHANGE IN THE NATURE OF BUSINESS. FURTHER THE PURCHASE OF SHARE OF LAND AREA 46.5R FROM SHRI GIRISH RATHI WAS ALSO SHOWN AS INVESTMENT IN THE BALANCE S HEET OF M/S. RAJESH KASAT & CO. AS ON 31.03.2008. THE CLOSING STOCK OF RS.86,85,212/ - SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR FY 2007 - 08 AND BALANCE SHEET AS ON 31.03.2008 CONSIST OF ONLY SECURITIES AND NOT THE LAND THE TRANSACTION OF WHICH CLAIMED AS BU SINESS INCOME. THE ASSESSING OFFICER AFTER NOTING VARIOUS TERMS OF IRREVOCABLE POWER OF ATTORNEY OBSERVED THAT THE SAID TERMS CLEARLY SHOW THAT THE ASSESSEE HAD PURCHASED THE LAND AS INVESTMENT ONLY AND NOT FOR THE PURPOSE OF DEVELOPMENT. NO ACTIVITIES S UCH AS FURTHER PLOTTING OF LAND OR ANY CHANGES IN THE STRUCTURE OF THE LAND WERE CARRIED OUT AND IT WAS SOLD AS SUCH. THE ASSESSEE HAD DECLARED THE LAND AS INVESTMENT IN THE AUDITED BALANCE SHEET. THE ASSESSING OFFICER ALSO VERIFIED THE ASSESSMENT RECORD S OF SHRI GIRISH RATHI, WHO HAD SHOWN INCOME FROM SALE OF LAND AS SHORT TERM CAPITAL GAINS, EVEN AFTER TAKING THE DEVELOPMENT RIGHTS; BECAUSE THE DEVELOPMENT RIGHTS IN THE PLOT WAS TAKEN FOR RIGHT TO CONVEY AND THE SAME WAS EXERCISED WHILE SELLING THE LA ND TO THE ASSESSEE. THE ASSESSEE IN REPLY TO THE SHOW CAUSE NOTICE POINTED OUT THAT FROM THE BEGINNING, IT WAS PREPARING TWO ITA NO. 1 736 /P U N/20 1 3 CO NO. 62 /PUN/201 3 SHRI RAJESH S KASAT 6 BALANCE SHEETS; NAMELY, ONE FOR HIS BUSINESS ACTIVITY WHICH WAS CARRIED ON UNDER THE NAME AND STYLE RAJESH KASAT AND CO. AND ANOTH ER BALANCE SHEET IN HIS INDIVIDUAL CAPACITY. HOWEVER, WHILE OFFERING THE INCOME IN THE STATEMENT OF TOTAL INCOME, BOTH THE INCOMES WERE COMBINED AND OFFER ED FOR TAXATION. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD DONE BUSINESS OF SHARE TRADING UN DER RAJESH KASAT (INDIVIDUAL) ALSO. THE BALANCE SHEET OF BOTH THE CONCERNS HAD CLEAR DIVISION OF INVESTMENT AND BUSINESS ASSETS. THUS, THE CONTENTION OF ASSESSEE IN THIS REGARD WAS NOT ACCEPTED. FURTHER, CLAUSE 17 OF THE DEVELOPMENT AGREEMENT VERY CLEAR LY STATED THAT THE ASSESSEE AND SHRI GIRISH RATHI COULD NOT DEVELOP THE PROPERTY AND HENCE BOTH RELI NQUISHED THEIR RIGHT IN THE SAID PROPERTY. THE ASSESSEE SINCE WAS NEVER A BUILDER NOR DEVELOPER AND THE INVESTMENTS IN LAND WERE MADE WITHOUT MAKING ANY CH ANGES IN THE PHYSICAL STRUCTURE, THE ASSESSING OFFICER HELD THAT THE SAID GAIN IS TO BE ASSESSED AS INCOME FROM SHORT TERM CAPITAL GAINS. THE DECLARATION OF BALANCE LAND OF ASSESSEE IN CLOSING STOCK, AFTER THE SALE OF LAND WAS HELD TO BE AN AFTERTHOUGHT AND COULD NOT BE ACCEPTED. THE ASSESSEE ALSO MADE AN ALTERNATE PLEA THAT IT WAS ENGAGED IN MONEY LENDING BUSINESS AND THE SAID POOL OF INVESTMENT IN THE LAND WAS IN THE SAID BUSINESS, WHICH WAS NOT ACCEPTED BY THE ASSESSING OFFICER SINCE THE ASSESSEE HIM SELF HAD DECLARED INTEREST INCOME FROM OTHER SOURCES. THE PLEA OF ASSESSEE THAT INVESTMENT IN LAND WAS REGULAR BUSINESS ACTIVITY OF THE ASSESSEE WAS ALSO REJECTED SINCE NO SUCH REGULAR BUSINESS ACTIVITY FOUND PLACE IN BALANCE SHEET UNDER THE CLOSING STOCK NOR ANY MENTION IN THE TAX AUDIT REPORT. THE INCOME ON SALE OF LAND WAS ASSESSED AS SHORT TERM CAPITAL GAINS AND THE SET OFF OF CARRY FORWARD BUSINESS LOSS WAS NOT ALLOWED TO THE ASSESSEE. 7. THE CIT(A) VIDE PARA 3.5 FROM PAGE 20 ONWARDS AFTER NOTIN G VARIOUS CONTENTIONS OF ASSESSEE OBSERVED THAT FROM THE MATERIAL ON RECORD, IT WAS ITA NO. 1 736 /P U N/20 1 3 CO NO. 62 /PUN/201 3 SHRI RAJESH S KASAT 7 EVIDENT THAT THE ASSESSEE HAD ACQUIRED ONLY INTEREST IN THE DEVELOPMENT RIGHTS FROM SHRI RATHI AS A RESULT OF MOU AND THEREFORE, NO OWNERSHIP RIGHTS COULD HAVE BEEN CONFERR ED ON THE ASSESSEE, BECAUSE EVEN SHRI RATHI DID NOT HAVE THE SAID OWNERSHIP RIGHTS OF THE PROPERTY, THOUGH HE WAS ENTITLED TO DEVELOP AND ASSIGN THE SAID LAND. HE HAS GIVEN A FINDING THAT SHRI RATHI HAD ACQUIRED DEVELOPMENT RIGHTS IN THE LAND AND THE ASSE SSEE HAD ACQUIRED ONLY INTEREST IN THE DEVELOPMENT RIGHTS OF LAND AND THE OWNERSHIP RIGHTS O R RIGHT TO CONVEY REMAINED WITH THE LAND OWNER S AND NO SUCH RIGHTS OF OWNERSHIP OR RIGHT TO CONVEY OWNERSHIP OF PROPERTY WAS INVOLVED IN THE TRANSACTION BETWEEN THE LAND OWNERS AND SHRI RATHI AND THE ASSESSEE. THE CIT(A) FURTHER VIDE PARA 3.6 GAVE A FINDING THAT THE ASSESSING OFFICERS FINDINGS WERE NOT FACTUALLY CORRECT THAT THE ASSESSEE ALONG WITH SHRI RATHI HAD ENTERED INTO A SALE AGREEMENT SINCE THE SALE DEED EX ECUTED FOR THE SAID LAND ON 06.02.2009 WAS BETWEEN THE LAND OWNER AND OMEGA PREMISES PVT. LTD., WHERE SHRI RATHI AND ASSESSEE WERE ONLY CONSENTING PARTIES AND NOT ACTUAL SELLERS OF LAND, WHICH WAS EVIDENT FROM THE SALE DEED. THE CIT(A) ALSO OVERTURNED THE FINDING OF ASSESSING OFFICER THAT THE ASSESSEE HAD PURCHASED THE LAND THROUGH AGREEMENT AS INVESTMENT ONLY AND NOT FOR THE BUSINESS OF DEVELOPMENT. HE OBSERVED THAT ACTUALLY SHRI RATHI HAD ACQUIRED THE DEVELOPMENT RIGHTS AND AGREED TO TRANSFER ONLY INTER EST IN THE SAID DEVELOPMENT RIGHTS TO THE ASSESSEE, WHERE SHRI RATHI WAS NOT EVEN HAVING OWNERSHIP AND TITLE OF THE LAND, HENCE HE COULD NOT HAVE SOLD THE LAND. THEREFORE, WHEN THE ACTUAL SALE DEED WAS EXECUTED, SHRI RATHI AND ASSESSEE BECAME CONSENTING P ARTIES AND NOT THE SELLERS. HE THUS, OBSERVED THAT THUS THE ENTIRE ACT AT BEST CAN BE CATEGORIZED AS AN ADVENTURE IN NATURE OF TRADE AND THE INCOME ARISING OUT OF THE RELINQUISHMENT OF RIGHTS IS AN ACTIVITY OF BUSINESS. SO FAR AS THE REFERENCE TO THE TAX AUDIT REPORT FOR A.Y. 2009 - 10 BY THE ASSESSING OFFICER WHICH MENTIONED THE BUSINESS OF THE ITA NO. 1 736 /P U N/20 1 3 CO NO. 62 /PUN/201 3 SHRI RAJESH S KASAT 8 APPELLANT TO BE TRADING IN SHARES AND COMMODITY, THE CONTENTION RAISED BY THE APPELLANT THAT ACQUISITION OF DEVELOPMENT RIGHTS OF SOME AREA IS ALSO A COMMODITY LIKE TDR/FSI AS THE DEVELOPMENT RIGHT IS CALCULATED ON THE BASIS OF FSI AND THE ENTIRE ACTIVITY COULD BE DEFINED AS ADVENTURE IN NATURE OF TRADE. MOREOVER, THE AFORESAID TRANSACTION IS NOT THE ONLY TRANSACTION WHEREIN THE APPELLANT HAS EARNED INCOME BUT THE A PPELLANT HAS IN FACT ACQUIRED ABOUT 16 OTHER PROPERTIES SINCE A.Y. 2006 - 07 AND ALSO VENTURED IN THE BUSINESS OF ACQUISITION OF LAND AND SELLING IT INCLUDING TRADING IN TDR, FSI RELATING TO LAND. THE CIT(A) VIDE PARA 3.8 AT PAGE 23 ALSO NOTED THAT OUT OF I NTEREST IN THE DEVELOPMENT RIGHTS IN THE SAID LAND TO THE EXTENT OF 40R WAS SOLD BY THE ASSESSEE AND BALANCE 6.5R WAS SHOWN AS STOCK IN TRADE. THE ASSESSEE HAD EARNED PROFIT ARISING OUT OF SALE OF INTEREST IN DEVELOPMENT RIGHTS OF 2.83 CRORES, WHICH AS PER THE CIT(A), WAS RIGHTLY OFFERED AS BUSINESS INCOME BY THE ASSESSEE. HE REFERRED TO THE INCOME DECLARED BY THE ASSESSEE IN EARLIER YEAR I.E. 2007 - 08, WHEREIN TDRS WERE SOLD, ON WHICH PROFIT OF 1.33 CRORES AND COMMISSION ON TRA DING OF TDR WAS TAXED AS BUSINESS INCOME. THE CIT(A) FURTHER NOTED THAT THE ASSESSEE HAD PAID ADVANCES IN DIFFERENT YEARS AND THE ENTIRE INVESTMENT WAS APPEARING UNDER THE HEAD INVESTMENT IN THE BALANCE SHEET. HOWEVER, THE ASSESSING OFFICER IN EARLIE R YEARS HAD ACCEPTED THE SAID TRANSACTION AS BUSINESS INCOME EXCEPT FOR THE YEAR UNDER APPEAL, WHERE THE PROFIT ARISING ON SALE OF INTEREST IN DEVELOPMENT RIGHTS WAS TAKEN BY THE ASSESSING OFFICER TO BE INCOME FROM CAPITAL GAINS. HE FURTHER HELD THAT TH E WAY IN WHICH ENTRIES WERE MADE BY THE ASSESSEE IN BOOKS OF ACCOUNT WERE NOT DETERMINATIVE OF THE QUESTION WHETHER THE ASSESSEE HAD EARNED ANY PROFIT OR SUFFERED ANY LOSS, THE NATURE OF TRANSACTION HAD TO BE CONSIDERED. THE CIT(A) THUS, HELD THAT THE MOT IVE OF ASSESSEE IN PURCHASING INTEREST IN THE DEVELOPMENT RIGHTS WAS TO SELL THEM AT PROFIT OR JOINT DEVELOPMENT OF THE ITA NO. 1 736 /P U N/20 1 3 CO NO. 62 /PUN/201 3 SHRI RAJESH S KASAT 9 PROPERTY, WHICH ESTABLISHES THAT THE ASSESSEE WAS CARRYING ON THE BUSINESS SIMILAR TO THAT OF BUYING AND SELLING OF LAND OR BEING TRADER IN LAND. HE FURTHER HELD THAT IN ANY CASE, THE DEVELOPMENT RIGHTS ACQUIRED BY SHRI RATHI WERE NOT CAPITAL ASSET PERSE AS THE DEVELOPMENT RIGHTS WERE ALWAYS RELATING TO DEVELOPMENT OF PROPERTY I.E. ITS EXPLOITATION AND THESE RIGHTS WERE IN THE NATURE OF B USINESS ASSETS. HE FURTHER OBSERVED THAT THE DEVELOPMENT RIGHTS WOULD HAVE VALUE ONLY IF THE RIGHTS WERE UTILIZED AND DEVELOPMENT OF SCHEME UNDER CONSIDERATION TAKES PLACE. HE HELD THAT PRUDENT BUSINESSMAN WOULD ACQUIRE THE DEVELOPMENT RIGHTS JUST FOR AP PRECIATION, HENCE IT WAS NOT A CAPITAL ASSET. HE CONCLUDED BY SAYING THAT WHERE THE ASSESSEE ON THE OTHER HAND, HAD ACQUIRED INTEREST IN THE SAID DEVELOPMENT RIGHTS WHICH WERE ACQUIRED BY SHRI RATHI, THEN THE INTENTION BEHIND THE AFORESAID ACQUISITION OF DEVELOPMENT RIGHTS WAS TO EXPLOIT IT COMMERCIALLY AND THE GAIN ARISING THEREFROM IS TO BE ASSESSED AS BUSINESS INCOME. THE CIT(A) HELD THAT FROM THE MATERIAL ON RECORD AND IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, IT BECOMES APPARENT THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING, SALE AND PURCHASE OF INTEREST IN PROPERTIES, TDR, ETC. WHICH HAD BEEN CARRIED OUT SINCE ASSESSMENT YEAR 2006 - 07 AND CONTINUED THEREAFTER. HENCE, THE INCOME EARNED ON SALE OF INTEREST IN DEVELOPMENT RIGHTS I N LAND WAS TO BE ASSESSED AS BUSINESS INCOME AS AGAINST SHORT TERM CAPITAL GAINS HELD BY THE ASSESSING OFFICER AND CARRY FORWARD OF BUSINESS LOSS WAS TO BE SET OFF AGAINST THE SAID BUSINESS INCOME. 8. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT( A). 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT THE ASSESSEE HAD PURCHASED DEVELOPMENT RIGHTS IN LAND ADMEASURING 46.5R FROM ONE SHRI GIRISH M. RATHI. HE FURTHER POINTED OUT THAT SHRI GIRISH ITA NO. 1 736 /P U N/20 1 3 CO NO. 62 /PUN/201 3 SHRI RAJESH S KASAT 10 RATHI WAS THE POWER OF ATTORNEY HOLDER FOR THE DEVELOPMENT RIGHTS. THE ASSESSEE AND SHRI RATHI SOLD THEIR INDIVIDUAL SHARES, WHEREIN SHRI GIRISH RATHI HAD SHOWN THE GAIN AS INCOME FROM SHORT TERM CAPITAL GAINS. THE ASSESSEE HAD ACQUIRED THE RIGHTS THROUGH MOU DATED 01.04.2007 AND TH E TERMS OF MOU SUGGEST THAT THE ASSESSEE HAD PURCHASED SHARE IN THE LAND. HE REFERRED TO THE PROVISIONS OF SECTION 2(14) OF THE ACT AND POINTED OUT THAT IT REFERS TO PROPERTY OF ANY KIND AND STRESSED THAT RIGHT TO DEVELOP WAS ALSO A RIGHT IN THE SAID PROP ERTY. HE THUS, STATED THAT WHEN ANY GAIN ARISES WHICH IS IN CONNECTION WITH THE RIGHT IN PROPERTY, THEN THE SAME IS TO BE ASSESSED AS INCOME FROM CAPITAL GAINS AND NOT AS BUSINESS INCOME. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS: - I) CIT VS. VI JAY FLEXIBLE CONTAINERS (1990) 186 ITR 693 (BOM) II) M/S. SIMKA HOTELS AND RESORTS VS. DCIT & ANR VIDE W.P.(C) 4350/2012, C.M. APPL. 9016/2012, JUDGMENT DATED 17.01.2013 10. HE THEN REFERRED TO THE TERMS OF MOU PLACED AT PAGES 1 AND 2 OF PAPER BOOK AND D EED OF ASSIGNMENT DATED 15.04.2008 PLACED AT PAGES 6 TO 39 OF PAPER BOOK. HE STRESSED THAT ASSESSEE HAD ACQUIRED DEVELOPMENT RIGHTS BUT NO STEPS WERE TAKEN TO GET THE SANCTION OR PERMISSION TO CONSTRUCT. FURTHER, THE TRADING IN LAND WAS NOT BUSINESS OF T HE ASSESSEE. HOWEVER, BOTH THE ASSESSEE AND SHRI RATHI DECIDED TO SELL THE LAND, WHEREIN SHRI RATHI SHOWED IT AS CAPITAL GAINS. 11. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT INCOME FROM SALE AND PURCHASE OF PROPERTY WAS BEIN G SHOWN AS BUSINESS INCOME, WHEREIN IT WAS ASSESSEES BUSINESS TO DEAL IN PROPERTY OF ALL KIND S , SHARE S AND TDR /S . OUR ATTENTION WAS DRAWN TO COMPUTATION OF INCOME FOR ASSESSMENT YEARS 2007 - 08 AND 2008 - 09, PLACED AT PAGES 93 AND 100 RESPECTIVELY. HE PO INTED OUT THAT FROM YEAR TO YEAR PROFIT ON SALE OF PROPERTY ITA NO. 1 736 /P U N/20 1 3 CO NO. 62 /PUN/201 3 SHRI RAJESH S KASAT 11 WAS BEING ACCEPTED AS BUSINESS INCOME ; ONLY THIS YEAR THE SAME WAS NOT ACCEPTED AS THERE WAS BUSINESS LOSS WHICH WAS ADJUSTED AGAINST BUSINESS INCOME. HE STRESSED THAT THE ASSESSEE WAS NOT AN I NVESTOR IN LAND BUT HAD ONLY ENTERED INTO MOU WITH SHRI RATHI, WHEREIN HE HAD ONLY DEVELOPMENT RIGHTS. HE STRESSED THAT THE FACTS OF THE CASE SHOWED THAT THERE WAS INVESTMENT FOR SHORT PERIOD, WHERE THE ASSESSEE HAD SOLD THE DEVELOPMENT RIGHTS BY BECOMING CONSENTING PARTIES TO THE DEAL AND PART OF LAND WAS NOT SOLD BY THE ASSESSEE , WHICH WAS DECLARED AS STOCK IN TRADE. HE POINTED OUT THAT THE DECISIONS RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON QUESTION WHETHER THE ASSET COU LD BE CAPITAL ASSET OR NOT , BUT IT DOES NOT LA Y DOWN THAT THE ASSESSEE COULD NOT HOLD SUCH ASSETS AS BUSINESS ASSETS. HE PLACED RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN FORT PROPERTIES PVT. LTD. VS. CIT (1994) 208 ITR 232 (BOM), WHEREI N IT HAS BEEN HELD THAT ENTRIES IN THE BOOKS OF ACCOUNT WERE NOT DECISIVE. FURTHER, RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN DALMIA CEMENT LTD. VS. CIT (1976) 105 ITR 633 (SC) AND HE STRESSED THAT THE FACTS OF CASE HAVE T O BE CONSIDERED WHILE DECIDING THE ISSUE. HE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN G. VENKATASWAMI NAIDU & CO. VS. CIT (1959) 35 ITR 594 (SC). CROSS OBJECTION FILED BY ASSESSEE IS NOT PRESSED BY THE LEARNED AUTHORIZED REP RESENTATIVE FOR THE ASSESSEE. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL FILED BY THE REVENUE IS AGAINST TREATMENT OF GAIN ARISING ON SALE OF LAND AT BAVDHAN. THE ASSESSEE WAS CARRYING ON DIFFERENT BUSINESS ACTIVITIES I.E. HE WAS TRADING IN SHARES ON DELIVERY BASIS AND WAS ALSO INDULGING IN FUTURES AND OPTIONS. THE ASSESSEE WAS ALSO DEALING IN PROPERTIES OF ALL KINDS AND TDRS. THE ASSESSEE HAS BEEN DECLARING PROFIT ON ITA NO. 1 736 /P U N/20 1 3 CO NO. 62 /PUN/201 3 SHRI RAJESH S KASAT 12 SALE OF PROPERTY UN DER THE HEAD BUSINESS INCOME WHICH HAS BEEN ACCEPTED. DURING THE YEAR UNDER CONSIDERATION ALSO, THE ASSESSEE HAD DECLARED INCOME UNDER THE SAID HEAD AND HAD ADJUSTED THE GAIN ARISING THEREFROM AGAINST BROUGHT FORWARD BUSINESS LOSS OF ABOUT 3.42 CRORES . THE GAIN OFFERED BY THE ASSESSEE WAS 2.83 CRORES. THE ASSESSING OFFICER HAD TREATED THE SAME AS INCOME FROM SHORT TERM CAPITAL GAINS AND HAD DENIED SET OFF OF BUSINESS LOSS AGAINST SAID GAIN. HOWEVER, THE CIT(A) HAS ALLOWED THE CLAIM OF ASSESSEE. THE FACTS RELATING TO THE TRANSACTIONS WERE THAT ONCE SHRI GIRISH RATHI HAD ACQUIRED THE DEVELOPMENT RIGHTS IN A PLOT OF LAND AND FOR A PORTION OF SAID PROPERTY, SHRI RATHI ENTERED INTO AN AGREEMENT WITH THE ASSESSEE PARTING WITH HIS DEVELOPMENT RIGHTS IN THE SAID PORTION OF LAND. THE SAID PERSON SHRI RATHI AND THE ASSESSEE COULD NOT DEVELOP THE SAID LAND. THE PLOT OF LAND WAS SOLD ON 06.02.2009 BY THE LAND OWNERS TO OMEGA PREMISES PVT. LTD. AND IN THE SAID AGREEMENT, SHRI RATHI AND ASSESSEE WERE CONSENT ING PARTIES. THE ASSESSEE FOR PARTING WITH HIS DEVELOPMENT RIGHTS IN THE SAID LAND, HAD MADE GAIN OF 2.83 CRORES. 13. THE ISSUE WHICH IS RAISED BEFORE US IS THE ASSESSABILITY OF THE SAID GAIN. IT IS REITERATED THAT SHRI GIRISH M. RATHI HAD PURCHASED DEVELOPMENT RIGHTS FOR LAND AREA OF 1H 43R, WHEREAS THE ASSESSEE ACQUIRED THE DEVELOPMENT RIGHTS FOR 46.5 R, OUT OF WHICH HE SOLD 40R AND THE REMAINING AREA OF PLOT OF 6.5R WAS RETAINED BY THE ASSESSEE. THE SAID BALANCE PORTION HAS BEEN DECLARED BY THE ASSESSEE AS HIS STOCK - IN - TRADE. THE PLEA OF ASSESSEE BEFORE US IS THAT THE SAID INCOME IS TO BE ASSESSED AS BUSINESS INCOME IN THE HANDS OF ASSESSEE. 14. IN ORDER TO ADJUDICATE THE ISSUE, IT MAY BE NOTED THAT THE ASSESSEE HAD NOT ACQUIRED THE SAID PROP ERTY AS THE OWNER BUT HAS ONLY ACQUIRED DEVELOPMENT ITA NO. 1 736 /P U N/20 1 3 CO NO. 62 /PUN/201 3 SHRI RAJESH S KASAT 13 RIGHTS WHICH WERE PARTED WITH AND THE TRANSACTION IN QUESTION IS AN ADVENTURE IN NATURE OF TRADE AND THE INCOME ARISING THEREFROM I.E. RELINQUISHMENT OF RIGHTS CANNOT BE HELD TO BE SALE OF CAPITAL ASSET. THE ASSESSEE WAS ENGAGED IN TRADING OF SHARES AND COMMODITIES AND THE FINDING OF CIT(A) IN THIS REGARD IS THAT THE ASSESSEE HAD EARLIER ALSO TRADED IN TDRS/FSI, WHICH FINDING HAS NOT BEEN CONTROVERTED BY THE REVENUE. IN SUCH CIRCUMSTANCES, I T CANNOT BE SAID THAT THE ASSESSEE HAD EARNED INCOME FROM SALE OF CAPITAL ASSET AND THE GAIN ARISING THEREFROM WAS TO BE ASSESSED AS INCOME FROM SHORT TERM CAPITAL GAINS. WE FIND MERIT IN THE ORDER OF CIT(A) IN THIS REGARD WITH SPECIAL REFERENCE TO HIS FINDING IN PARA 3.5 ON PAGE 20 ONWARDS OF THE APPELLATE ORDER. THE PROFIT EARNED ON SALE OF INTEREST IN DEVELOPMENT RIGHTS IS TO BE ASSESSED AS INCOME FROM BUSINESS IN THE HANDS OF ASSESSEE. SIMILAR TRANSACTION HAS BEEN ACCEPTED TO BE IN THE NATURE OF BUSINESS INCOME IN EARLIER YEAR . ONE FACT WHICH WAS HELD AGAINST THE ASSESSEE WAS THE DECLARATION OF SAID PURCHASE OF DEVELOPMENT RIGHTS AS INVESTMENT IN BALANCE SHEET, BY THE ASSESSEE ITSELF. IT MAY BE POINTED OUT THAT MERELY BECAUSE IT WAS DECLARED AS INVESTMENT IN PRECEDING YEAR WOULD NOT CHANGE THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE FROM YEAR TO YEAR, WHERE HE WAS PURCHASING / SELLING TDRS/FSI FROM YEAR TO YEAR WHICH WAS ASSESSED AS BUSINESS INCOME IN THE HANDS OF ASSESSEE. IN THE YEAR U NDER CONSIDERATION, THE ASSESSEE HAS PARTED WITH DEVELOPMENT RIGHTS OF PORTION OF LAND, WHICH IN TURN, WAS ACQUIRED FROM A PERSON WHO WAS NOT THE OWNER OF PLOT OF LAND BUT ONLY HAD THE DEVELOPMENT RIGHTS. SUCH A TRANSACTION IS AT BEST, AN ADVENTURE IN THE NATURE OF TRADE AND GAIN, IF ANY, ARISING THEREFROM IS TO BE ASSESSED AS INCOME FROM BUSINESS. ACCORDINGLY, WE HOLD SO. RELIANCE PLACED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE DECISIONS IS NOT APPLICABLE TO THE ISSUE ITA NO. 1 736 /P U N/20 1 3 CO NO. 62 /PUN/201 3 SHRI RAJESH S KASAT 14 RAI SED. WHILE DECIDING AN ISSUE, FACTS OF THE CASE IN ENTIRETY HA D TO BE CONSIDERED. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THUS, DISMISSED. 15. THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED AS NOT PRESSED. 16 . IN THE RESULT, APPEAL OF REVENUE AND CROSS OBJECTIONS OF ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THIS 24 TH DAY OF SEPTEMBER , 201 8 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 24 TH SEPTEMBER , 201 8 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - I I , PUNE ; 4. THE CI T - I I , PUNE ; 5. 6. , , / DR B , ITAT, PUNE ; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE