Shri. Dev Kumar Roy, Bangalore V. Assistant Commissioner Of Income Tax, Circle- 3(1)(1), Bangalore

ITA 2250/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9849 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 25-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Capital asset; Business income; Opportunity of being heard; Cost of acquisition; Capital Gains
• Section: 2(14); 195; 201; 48; 13; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI A K GARODIA , ACCOUNTANT MEMBER IT A NO. 2250/ BANG / 2019 ASSESSMENT YEAR: 2016 - 17 SHRI DEV KUMAR ROY, NO.44, REGENCY MARGOSA, KASTURBA ROAD CROSS, BANGALORE NORTH, BANGALORE 560 001. PAN: ANNPR 8181R VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3(1)(1) [FORMERLY ITO, WARD 3(1)(4), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI PADAMCHAND KHINCHA, CA RESPONDENT BY : SHRI SUNIL KUMAR AGARWAL, ADDL. CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 17 .12 .2019 DATE OF PRONOUNCEMENT : 03. 0 1 .20 20 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE OR DER DATED 27.9.2019 OF CIT(APPEALS)-3, BENGALURU, RELATING TO ASSESSMENT YEAR 2016-17. ITA NO. 2250/BANG/2019 PAGE 2 OF 17 2. THE ONLY ISSUE THAT NEEDS ADJUDICATION IN THIS A PPEAL IS AS TO WHETHER THE REVENUE AUTHORITIES WERE JUSTIFIED IN T AXING GAIN ON RELINQUISHMENT OF RIGHTS UNDER AN AGREEMENT TO PURC HASE UNDIVIDED SHARE OF LAND AND CONSTRUCTION AGREEMENT, AS INCOME UNDER THE HEAD INCOME FROM BUSINESS AS AGAINST THE CLAIM OF THE ASSESSEE THAT THE GAIN IN QUESTION WAS TO BE ASSESSED UNDER THE HAD CAPITAL GAIN. 3. THE ASSESSEE IS AN INDIVIDUAL. ONE M/S. BEAU J HELUM TRADERS & DEVELOPERS (P) LTD., [ HEREINAFTER REFERRED TO AS DEVELOPER ] WERE IN THE BUSINESS OF PROPERTY DEVELOPMENT/CONSTRUCTION. THE Y ENTERED INTO A REGISTERED JOINT DEVELOPMENT AGREEMENT DATED 9.11.2 009 WITH OWNERS OF PROPERTY BEARING MUNICIPAL DOOR NO.9/1, RESIDENCY R OAD, RICHMOND CIRCLE, BANGALORE, [ HEREINAFTER REFERRED TO AS PROPERTY ] FOR PUTTING UP CONSTRUCTIONS THEREON IN THE FORM OF OFFICE SPACE. THE DEVELOPER TOGETHER WITH THE OWNERS OF THE PROPERTY ENTERED INTO A REGI STERED AGREEMENT TO SELL DATED 2.5.2012 WHEREBY HE AGREED TO SELL 1746.30 SQ .FT. UNDIVIDED SHARE OF LAND OF PROPERTY FOR A CONSIDERATION OF RS.5 CRORES . THE ASSESSEE AND THE DEVELOPER ALSO AGREED THAT THE PURPOSE OF ACQUI RING THE UNDIVIDED SHARE OF LAND OF THE PROPERTY WAS TO APPOINT THE DE VELOPER TO CONSTRUCT AND DELIVER TO THE ASSESSEE BUILT UP AREA OF 11325 SQ.F T. IN THE 15 TH FLOOR OF THE BUILDING(NAMED AS 909 LAVELLE) THAT WAS PROPOSED TO BE CONSTRUCTED BY THE DEVELOPER OVER THE PROPERTY TOGETHER WITH 9 CAR PARKS (HEREINAFTER REFERRED TO AS BUILT UP AREA). THE ASSESSEE AND THE DEVELOPER ENTERED INTO AN CONSTRUCTION AGREEMENT ON THE VERY SAME DAY I.E., 2.5.2012 WHEREBY THE COST OF CONSTRUCTION OF THE BUILT UP AR EA WAS AGREED AT A SUM OF RS.13,25,13,750/-. THE ASSESSEE HAD PAID A SUM OF RS.3 CRORES AS ADVANCE UNDER THE AGREEMENT TO SELL UNDIVIDED SHARE OF LAND AND ANOTHER SUM OF RS. 2,64,54,130/- AS ADVANCE UNDER THE CONST RUCTION AGREEMENT. 4. THEREAFTER THE ASSESSEE MADE FURTHER PAYMENT OF RS.6,40,00,000 TO THE DEVELOPER IN THE FOLLOWING MANNER:- ITA NO. 2250/BANG/2019 PAGE 3 OF 17 2013-14 55,00,000 2013-14 20,00,000 2013-14 35,00,000 2013-14 35,00,000 2013-14 20,00,000 2014-15 1,50,00,000 2014-15 1,25,00,000 2014-15 60,00,000 2014-15 40,00,000 2014-15 1,00,00,000 5. THUS THE ASSESSEE HAD MADE PAYMENT OF RS.3 CRORE S + RS.2,47,54,130 + RS.6,40,00,000 IN ALL A SUM OF RS. 11,87,54,310 TO THE DEVELOPER TOWARDS COST OF ACQUIRING UNDIVIDED SHARE OF LAND OF THE PROPERTY AND THE BUILT UP SPACE IN THE PROPOSED DEVELOPMENT TO BE CARRIED OUT BY THE DEVELOPER. 6. ON 5.1.2016, THE ASSESSEE, OWNERS OF THE PROPERT Y AND THE DEVELOPER ENTERED INTO A MEMORANDUM OF UNDERSTANDIN G WHEREBY THE AGREEMENT TO SELL BETWEEN THE OWNERS OF THE PROPERT Y, DEVELOPER AND THE ASSESSEE DATED 2.5.2012 AND THE CONSTRUCTION AGREEM ENT DATED 2.5.2012 BETWEEN THE ASSESSEE AND THE DEVELOPER WERE CANCELL ED. THE ASSESSEE RECEIVED A SUM OF RS.13,87,54,130/- IN FULL AND FIN AL SETTLEMENT FROM THE DEVELOPER AND RELINQUISHED ALL HIS RIGHTS UNDER THE AGREEMENT TO SELL BETWEEN THE OWNERS OF THE PROPERTY, DEVELOPER AND T HE ASSESSEE DATED 2.5.2012 AND THE CONSTRUCTION AGREEMENT DATED 2.5.2 012 BETWEEN THE ASSESSEE AND THE DEVELOPER. THUS AGAINST THE SUM O F RS.11,87,545,310 PAID BY THE ASSESSEE TO THE DEVELOPER UNDER THE AFO RESAID TWO AGREEMENTS BOTH DATED 2.5.2012, THE ASSESSEE RECEIVED A SUM OF RS.13,87,54,130/-. THE ASSESSEE THUS RECEIVED A SUM OF RS.2 CRORES IN EXCESS OF WHAT HE PAID UNDER THE AFORESAID AGREEMENTS. ON 3.2.2016, A DEED OF CANCELLATION OF AGREEMENT TO SELL WAS EXECUTED AND DULY REGISTER ED WITH A VIEW TO NULLIFY ITA NO. 2250/BANG/2019 PAGE 4 OF 17 THE EFFECT OF THE REGISTERED AGREEMENT TO SELL UNDI VIDED SHARE OF LAND DATED 2.5.2012. 7. IN THE RETURN OF INCOME FILED FOR AY-2016-17, TH E ASSESSEE DECLARED THE GAIN ON SURRENDERING HIS RIGHTS UNDER AGREEMENT TO SELL BETWEEN THE OWNERS OF THE PROPERTY, DEVELOPER AND THE ASSESSEE DATED 2.5.2012 AND THE CONSTRUCTION AGREEMENT DATED 2.5.2012 BETWEEN T HE ASSESSEE AND THE DEVELOPER, AS GIVING RAISE TO LONG TERM CAPITAL GAI N (LTCG). THE COMPUTATION OF LTCG AS MADE BY THE ASSESSEE IN THE RETURN OF INCOME WAS AS FOLLOWS:- LONG TERM CAPITAL GAIN DATE OF ACQUISITION 02 MAY 12 DATE OF TRANSFER 05 JAN 16 SALE CONSIDERATION 13,87,54,130 ACQUISITION DETAILS FINANCIAL YEAR COST INDEX COST COST - 3002192 0*1081/852 201 2 - 13 3,00,21,920 3,80,91,192 COST - 24754130*1081/852 2012 - 13 2,47,54,130 3,14,07,529 TOTAL 6,94,98,721 IMPROVEME NT DETAILS COST 5500000*1081/939 2013 - 14 55,00,000 63,31,736 COST 20 00000*1081/939 2013 - 14 20,00,000 23,02,449 CO ST 3 500000*1081/939 2013 - 14 35,00,000 40,29,286 COST 3 500000*1081/939 2013 - 14 35,00,000 40,29,286 COST 20 00000*1081/939 2013 - 14 20,00,000 23,02,449 COST 150 00000*1081/ 1024 201 4 - 15 1,50,00,000 1,58,34,961 COST 1 2 5 00000*1081/ 1024 201 4 - 15 1,25,00,00 0 1,31,95,801 COST 6 0 00000*1081/ 1024 201 4 - 15 60,00,000 63,33,984 COST 4 0 00000*1081/ 1024 201 4 - 15 40,00,000 42,22,656 COST 1 25 00000*1081/ 1024 201 4 - 15 1,00,00,000 1,05,56,641 TOTAL 20,00,000 6,91,39,249 T AXABLE CAPITAL GAIN 35,00,000 1,16,160 8. ACCORDING TO THE AO, THE ASSESSEE DID NOT ACQUIR E THE UNDIVIDED SHARE OF LAND OR THE BUILT UP AREA AND THEREFORE TH ERE WAS NO CAPITAL ASSET THAT WAS TRANSFERRED BY THE ASSESSEE AND HENCE THE GAIN IN QUESTION CANNOT BE CONSIDERED AS CHARGEABLE TO TAX U/S.45 OF THE INCOME TAX ACT, 1961 (ACT) UNDER THE HEAD CAPITAL GAIN BUT HAD TO BE CONSIDERED AS ITA NO. 2250/BANG/2019 PAGE 5 OF 17 GIVING RISE TO INCOME CHARGEABLE TO TAX U/S.28 OF T HE ACT, UNDER THE HEAD INCOME FROM BUSINESS. 9. IN RESPONSE TO THE PROPOSAL OF THE AO, THE ASSES SEE VIDE ITS REPLY DATED 12.12.2018 SUBMITTED THAT THE ASSESSEE WAS NE ITHER A TRADER PURCHASING AND SELLING PROPERTIES NOR WAS HE CARRYI NG ON ANY REAL ESTATE BUSINESS. THE PURPOSE OF BARGAINING FOR PURCHASE O F THE UNDIVIDED SHARE OF THE PROPERTY AND THE BUILT UP AREA WAS AS AN INV ESTMENT TO LET OUT THE SAME AND EARN RENTAL INCOME. SINCE THERE WAS DELAY IN COMPLETION OF THE PROJECT AND THE PROPERTY WAS NOT FOUND SUITABLE TO THE NEEDS OF THE ASSESSEE DUE TO UNSATISFACTORY FACILITY PROVIDED IN THE PROJECT AND THE PROJECT NOT BEING IN COMPLIANCE WITH VASTHU SASTRA SPECIFICATIONS. THE AO HOWEVER WAS OF THE VIEW THAT NEITHER IN THE MOU DAT ED 5.1.2016 NOR IN THE CANCELLATION DEED DATED 5.1.2016 WAS THERE ANY MENT ION ABOUT THE REASONS FOR THE ASSESSEE NOT COMPLETING THE PROCESS OF ACQU IRING THE UNDIVIDED SHARE OF LAND OF THE PROPERTY AND THE BUILT UP AREA . THE AO PROCEEDED TO TREAT THE GAIN IN QUESTION OF RS.2 CRORES AS INCOME UNDER THE HEAD INCOME FROM BUSINESSS AND NOT INCOME UNDER THE HEAD CAPI TAL GAIN. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE AO: IT IS EVIDENT FROM THE SUBMISSION THAT ON ACCOUN T OF DELAY IN COMPLETION OF PROJECT AND THE PROJECT WAS NOT SU ITABLE TO HIS NEEDS AS IT HAD INTERNAL INCONSISTENCIES, HE WAS NO T SATISFACTORY AND DUE TO 'VASTHU REASONS' HE WAS ADVISED TO EXIT FROM THE INVESTMENT. TO EXIT FROM THE INVESTMENT, HE MIGHT H AVE DEMANDED COMPENSATION FROM THE BUILDER AND ON ACCOU NT OF SUCH MUTUAL CONSENT HE WAS PAID COMPENSATION OF RS. 2,00 ,00,000/- OVER AND ABOVE THE INVESTMENT MADE. IT WAS HIS DISP LEASURE ON THE CONSTRUCTION QUALITY, HE HAD SIGNED THE DEED OF CANCELLATION DATED: 03.02.2016 AND EXIT FROM THE CONSTRUCTION. T HE DEED OF CANCELLATION GIVEN BY THE ASSESSEE IS EXAMINED AND NOTICED THAT IT WAS REGISTERED IN SRO SHIVAJI NAGAR VIDE DOCUMENT N O. 5175/15- 16 DATED: 03.02.2016. IT DID NOT TALK ABOUT THE MOU DATED: 05.01.2016 ENTERED BETWEEN THE ASSESSEE AND THE BUI LDER (ONE ITA NO. 2250/BANG/2019 PAGE 6 OF 17 MONTH PRIOR TO THE DATE OF REGISTERED CANCELLATION DEED). THE DEED OF CANCELLATION WAS SILENT ABOUT THE MOU. THE DEED OF CANCELLATION MERELY TALKS ABOUT THE REGISTERED AGRE EMENT DATED: 02.05.2012 (CONSTRUCTION AGREEMENT) AND EXIT OF SRI DEV KUMAR ROY FROM THE TRANSACTION. THE MOU WAS AN OUT OF COU RT SETTLEMENT FOR A SUM OF RS. 13,87,54,130/- WHERE TH E ASSESSEE GOT A WINDFALL GAIN OF RS. 2,00,00,000/-. IN THIS TRANSACTION, THERE WAS NEITHER COST OF AC QUISITION NOR COST OF IMPROVEMENT TO CLAIM INDEXED COST OF AC QUISITION AND INDEXED COST OF IMPROVEMENT. UNDER NO CIRCUMSTANCES THIS TRANSACTION CAN BE CONSIDERED FOR LONG TERM CAPITAL GAIN. ACCORDINGLY, AS PROPOSED IN SHOWCAUSE NOTICE, THIS AMOUNT OF RS. 2,00,00,000/- IS ADDED UNDER THE HEAD BUSINESS AS ADVENTURE IN NATURE OF TRADE. 10. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED APPEAL BEFORE CIT(A). THE ASSESSEE SUBMITTED BEFORE CIT(A ) THAT UNDER SEC.45 OF THE ACT, ANY CAPITAL GAIN ARISING FROM TRANSFER OF A CAPITAL ASSET IS CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAIN. T HE ASSESSEE POINTED OUT THAT THE ACT DEFINES CAPITAL ASSET U/S.2(14) OF THE ACT TO MEAN PROPERTY OF ANY KIND HELD BY AN ASSESSEE. THERE ARE CERTAIN ITEMS EXCLUDED IN THE SAID DEFINITION AND NONE OF THOSE E XCLUSIONS ARE APPLICABLE IN THE CASE OF THE ASSESSEE. ACCORDING TO THE ASSE SSEE, THE RIGHTS ACQUIRED BY THE ASSESSEE UNDER THE AGREEMENT TO SEL L BETWEEN THE OWNERS OF THE PROPERTY, DEVELOPER AND THE ASSESSEE DATED 2 .5.2012 AND THE CONSTRUCTION AGREEMENT DATED 2.5.2012 BETWEEN THE A SSESSEE AND THE DEVELOPER, WAS A RIGHT TO ENFORCE THE AGREEMENT BY SPECIFIC PERFORMANCE AND OTHER REMEDIES AND THAT RIGHT WHICH IS IN THE N ATURE OF A CAPITAL ASSET WAS RELINQUISHED AND THEREFORE THE GAIN ON SUCH REL INQUISHMENT HAS TO BE REGARDED ONLY AS GIVING RAISE TO CAPITAL GAIN NOT I NCOME FROM BUSINESS. 11. IN THIS REGARD THE ASSESSEE PLACED RELIANCE ON DECI SION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF H. ANIL KUMAR (2011) 242 CTR 537 (KARNATAKA) WHEREIN THE FACTS OF THE CASE WERE THAT, ASSESSEE HAD ENTERED ITA NO. 2250/BANG/2019 PAGE 7 OF 17 INTO AN AGREEMENT TO PURCHASE IMMOVABLE PROPERTY AN D PAID RS. 1,00,000 AS ADVANCE AMOUNT. HE FILED A SUIT FOR SPECIFIC PE RFORMANCE OF THE AGREEMENT OF SALE. THE ASSESSEE THEN WITHDREW THE SUIT FOR SPECIFIC PERFORMANCE IN LIEU OF A PAYMENT OF RS. 7,50,000. THE REVENUE HOWEVER BROUGHT TO TAX THE GAIN ON RELINQUISHMENT OF RIGHT UNDER THE AGREEMENT FOR SALE UNDER THE HEAD CAPITAL GAIN. ON APPEAL BY T HE ASSESSEE, THE HONBLE KARNATAKA HIGH COURT UPHELD THE ACTION OF T HE REVENUE AND HELD THAT THE WORD CAPITAL ASSET MEANS PROPERTY OF ANY KIND HELD BY THE ASSESSEE WHICH DOES NOT NECESSARILY BE CONFINED TO AN IMMOVABLE PROPERTY. SIMILARLY, WHEN THE WORD TRANSFER IN RE LATION TO A CAPITAL ASSET THOUGH INCLUDES SALE, EXCHANGE OR RELINQUISHMENT OF THE ASSET, THE SAID ASSET NEED NOT NECESSARILY BE AN IMMOVABLE PROPERTY . THE RIGHT TO OBTAIN A CONVEYANCE OF IMMOVABLE PROPERTY FALLS WITHIN THE E XPRESSION PROPERTY OF ANY KIND USED IN S. 2(14) AND CONSEQUENTLY IT IS A CAPITAL ASSET. IT IS BECAUSE THE EXPRESSION PROPERTY OF ANY KIND IS OF WIDE IMPORT. WHEN THIS EXPRESSION IS READ ALONG WITH THE EXPRESSION DEFINE D IN S. 2(47)(II) I.E., EXTINGUISHMENT OF ANY RIGHTS THEREIN, THE GIVING UP OF A RIGHT OF SPECIFIC PERFORMANCE BY THE ASSESSEE TO GET CONVEYANCE OF IM MOVABLE PROPERTY IN LIEU OF RECEIVING CONSIDERATION, RESULTS IN THE EXT INGUISHMENT OF THE RIGHT IN PROPERTY, THEREBY ATTRACTING THE RIGOR OF S. 2(14) R/W S. 2(47). GIVING UP OF A RIGHT TO CLAIM SPECIFIC PERFORMANCE BY CONVEYANCE I N RESPECT TO AN IMMOVABLE PROPERTY, AMOUNTS TO RELINQUISHMENT OF TH E CAPITAL ASSET. THEREFORE, THERE WAS A TRANSFER OF CAPITAL ASSET WI THIN THE MEANING OF THE ACT. THE PAYMENT OF CONSIDERATION UNDER THE AGREEME NT OF SALE, FOR TRANSFER OF A CAPITAL ASSET, IS THE COST OF ACQUISITION OF T HE CAPITAL ASSET. THEREFORE, IN LIEU OF GIVING UP THE SAID RIGHT, ANY AMOUNT REC EIVED, CONSTITUTES CAPITAL GAIN AND IT IS EXIGIBLE TO TAX. HOWEVER, AS IS CLEA R FROM S. 48, BEFORE THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS IS C OMPUTED, THE DEDUCTIONS SET OUT IN S. 48 HAS TO BE GIVEN TO THE ASSESSEE. IT IS ONLY THE AMOUNT THUS ARRIVED AT, AFTER SUCH DEDUCTIONS UNDER S. 48, WOULD BE THE ITA NO. 2250/BANG/2019 PAGE 8 OF 17 INCOME CHARGEABLE UNDER THE HEADING CAPITAL GAINS. THE HONBLE KARNATAKA HIGH COURT IN THE AFORESAID DECISION PLACED RELIANC E ON SIMILAR DECISIONS RENDERED BY SEVERAL HONBLE HIGH COURTS IN THE CASE OF CIT VS. TATA SERVICES LTD. (1980) 122 ITR 594 (BOM), CIT VS. VIJAY FLEXIBLE CONTAINERS (1990) 186 ITR 693 (BOM), CIT VS. ABBASBHOY A. DEHGAMWALLA & ORS. (1992) 195 ITR 28 (BOM), RUSTOM SPINNERS LTD. VS. CIT (1992) 198 ITR 351 (GUJ), CIT VS. SMT. LAXMIDEVI RATANI & ORS. (2008) 296 ITR 363 (MP) AND CIT VS. J. DALMIA (1984) 149 ITR 215 (DE L). 12. THE ASSESSEE ALSO CONTENDED THAT THE SINGLE OR ISOLATED TRANSACTION OF RELINQUISHMENT OF RIGHT UNDER AN AGREEMENT TO AC QUIRE IMMOVABLE PROPERTY CANNOT BE REGARDED AS ADVENTURE IN THE NAT URE OF TRADE. IN THIS REGARD THE ASSESSEE POINTED OUT BEFORE CIT(A) THAT IT HAD NEVER INDULGED IN ANY TRANSACTIONS IN THE PAST AND THE INTENTION AT T HE TIME OF ACQUISITION OF THE PROPERTY IN QUESTION WAS TO EARN RENTAL INCOME ONLY. THE ASSESSEE SUBMITTED THAT HE OWNED A PROPERTY IN UNITED KINGDO M AND THE RENTAL INCOME FROM THE SAME IS OFFERED TO TAX UNDER THE HE AD INCOME FROM HOUSE PROPERTY AND ANOTHER PROPERTY AT BANGALORE AND INCO ME FROM THE SAME IS ALSO OFFERED TO TAX UNDER THE HEAD INCOME FROM HOUS E PROPERTY. 13. THE CIT(A) HOWEVER CONFIRMED THE ORDER OF THE A O FOR THE FOLLOWING REASONS:- 4.2 THE SUBMISSIONS OF THE APPELLANT HAVE DULY BEE N CONSIDERED. THE ONLY ISSUE WHICH NEEDS TO BE EXAMIN ED IS WHETHER THE TRANSACTION HAD RESULTED INTO INCOME WH ICH COULD BE TAXED AS CAPITAL GAINS OR AS ADVENTURE IN NATURE OF TRADE. A PERUSAL OF AGREEMENT TO SELL DATED 02.05.2012 DOES NOT THRO UGH MUCH LIGHT ON THE INTENTION OF PURCHASING THE SAID IMMOV ABLE PROPERTY. HOWEVER THE MOU DT 05.01.2016 AND DEED OF CANCELLAT ION OF CONSTRUCTION AGREEMENT DT 03.02.2016 DO REVEAL THE INTENTION WITH WHICH THE APPELLANT HAD ENTERED INTO THIS TRANSACTI ON. THE RELEVANT CLAUSE OF THE MOU IS REPRODUCED AS FOLLOWS: ITA NO. 2250/BANG/2019 PAGE 9 OF 17 '2. THE CONSIDERATION OF RS. 13,87,54,130/- SHALL B E PAID WITHIN A PERIOD OF 15 MONTHS FORM THE DATE OF THIS MOU. 3. FOR THE PAYMENT OF THE ABOVE AMOUNT OF RS. 13,87.54,130/- THE PURCHASER SHALL BE ENTITLED TO A N INTEREST OF 6% PER ANNUM, PAYABLE QUARTERLY BY THE SELLER/DEVELOPER.' 4.3 THE RELEVANT CLAUSE OF THE DEED OF CANCELLATION OF THE CONSTRUCTION AGREEMENT IS REPRODUCED AS FOLLOWS: '2. SUBSEQUENT TO THE CANCELLATION OF THE AFORESA ID CONSTRUCTION AGREEMENT MENTIONED SUPRA THE AGREEMENT HOLDER HEREIN, HAS REQUESTED THE DEVELOPER/PROMOTER TO CONVERT THE ALL THE AMOUNTS PAID TILL THIS DAY, TOW ARDS PART SALE CONSIDERATION FOR THE PURCHASE OF SAID SCHEDUL E B PROPERTY UNDER THE CONSTRUCTION AGREEMENT ON 02.05.2012, INTO A BUSINESS LOAN IN FAVOUR OF THE DEVELOPER/PROMOTER FOR THEIR BUSINESS USAGE.' 4.4 A PERUSAL OF THE ABOVE CLAUSES SHOWS THAT THE A PPELLANT HAD NOT RECEIVED BACK THE SALE CONSIDERATION OF RS. 13,87,54,130/- IMMEDIATELY BUT THE APPELLANT HAD AGREED TO TREAT T HE SAME AS A BUSINESS LOAN IN FAVOR OF THE DEVELOPER/PROMOTER FO R THEIR BUSINESS USAGE AND THE APPELLANT WAS ENTITLED FOR I NTEREST AT THE RATE OF 6% PER ANNUM ON THE SAID AMOUNT. THIS ASPEC T THROWS LIGHT ON THE INTENTION OF THE APPELLANT THAT HE HAD ENTERED INTO TRANSACTION NOT WITH THE PURPOSE OF OWNING A PROPER TY AND THEN EARNING RENTAL FROM THE SAME BUT THE PURPOSE WAS TO ENTER INTO A BUSINESS TRANSACTION WITH THE BUILDER AND EARN PROF ITS FROM SUCH TRANSACTION. HOWEVER THE TRANSACTION HAD BEEN GIVEN A COLOR OF SURRENDER OF RIGHTS IN A CAPITAL ASSET SO AS TO HAV E THE ADVANTAGE OF PAYING ALMOST NEGLIGIBLE TAXES ON THE GAINS ARIS ING OUT OF SUCH TRANSACTIONS. THE TRANSACTION IS THUS IN FACT A BUS INESS TRANSACTION AND THE SAME HAD RIGHTLY BEEN TREATED BY THE AO AS ADVENTURE IN NATURE OF TRADE. THE DECISIONS RELIED UPON BY THE A PPELLANT ARE FOUND TO BE RENDERED ON DIFFERENT FACTS AND AS SUCH THE SAME ARE NOT RELEVANT. ,CONSIDERING ABOVE THE GROUNDS OF APP EAL OF THE APPELLANT ARE DISMISSED. 14. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE AS SESSEE IS IN APPEAL BEFORE THE TRIBUNAL. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED ITA NO. 2250/BANG/2019 PAGE 10 OF 17 COUNSEL FOR THE ASSESSEE WHO APART FROM REITERATING SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES ALSO PLACED RELIANCE ON DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF PR.CIT VS. BHANUPRASAD D.TRIVEDI (HUF) (2017) 87 TAXMANN.COM 137(GUJ.) SLP DISMISSED BY HO NBLE SUPREME COURT REPORTED IN (2018) 95 TAXMANN.COM 19 (SC) WHEREIN IT WAS HELD THAT TO DECIDE THE QUESTION WHETHER INCOME FROM SALE OF SHARES HAS TO BE ASSESSED AS INCOME FROM BUSINESS OR CAPITAL GAIN , THE INTENTION AT THE TIME OF PURCHASE IS VERY MATERIAL. THE LEARNED COU NSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD NO INTENTION OF DOI NG ANY BUSINESS AND EARN INCOME AT THE TIME WHEN HE BARGAINED TO PURCHA SE THE PROPERTY IN QUESTION AND THEREFORE THE GAIN IN QUESTION HAS TO BE REGARDED ONLY AS INCOME CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GA IN. HE ALSO HIGHLIGHTED THE FACT THAT THE CIT(A) HAS SUSTAINED THE ORDER OF THE AO ON A DIFFERENT BASIS VIZ., ON THE BASIS THAT IN THE DEED OF CANCELLATION THERE WAS A CLAUSE THAT IF THE CONSIDERATION IS NOT PAID AS AGR EED THERE COULD BE INCIDENCE OF INTEREST PAYABLE ON THE UNPAID MONEY W HICH WILL BE TREATED AS BUSINESS LOAN BY THE ASSESSEE TO THE DEVELOPER. AC CORDING TO HIM, THIS CLAUSE WAS ONLY A DEFAULT CLAUSE FOR PROTECTING THE INTEREST OF THE ASSESSEE AND CANNOT GIVE THE TRANSACTION COLOUR OF AN ADVENT URE IN THE NATURE OF TRADE. 15. THE LEARNED DR REITERATED THE STAND OF THE REVE NUE THAT THERE WAS NO PROPERTY THAT WAS IN EXISTENCE WHEN THE ASSESSEE RELINQUISHED HIS RIGHTS UNDER THE AGREEMENTS TO SELL AND CONSTRUCTIO N AGREEMENT AND THAT DECISION RELIED UPON BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF H.ANIL KUMAR (SUPRA) WAS NOT RENDERED IN THE CONTEXT OF RELINQUISHMENT OF RIGHT UNDER AN AGREEMENT FOR SALE AND CONSTRUCTION AGREEMENT AND THEREFORE CANNOT BE APPLIED TO THE FACTS OF THE PRE SENT CASE. 16. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. SECTION 2(13) OF THE ACT DEFINES BUSINESS' AND IT READS AS UNDER : - ITA NO. 2250/BANG/2019 PAGE 11 OF 17 BUSINESS' INCLUDES ANY TRADE, COMMERCE OR MANUFACT URE OR ANY ADVENTURE OR CONCERN IN THE NATURE OF TRADE, COMMER CE OR MANUFACTURE. 17. UNDER THE ACT, THE TERM BUSINESS' HAS BEEN DEF INED IN AN INCLUSIVE MANNER AND NOT IN AN EXHAUSTIVE MANNER AS MAY BE SE EN FROM THE DEFINITION IN SECTION 2(13) WHICH DEFINES BUSINESS TO INCLUDE ANY TRADE, COMMERCE OR MANUFACTURE OR ANY ADVENTURE IN THE NAT URE OF TRADE, COMMERCE OR MANUFACTURE. LIKEWISE, PROFESSION HAS A LSO BEEN DEFINED IN SECTION 2(36) TO INCLUDE VOCATION. THUS THE DEFINIT IONS BEING INCLUSIVE IN NATURE, SHOULD BE CONSTRUED AS BEING EXTENSIVE AND NOT LIMITED IN SCOPE TO ONLY THAT WHICH IS SPECIFIED IN OR BY THE WORDS OF THE DEFINITION. THE DEFINITION OF BUSINESS INCLUDES WITHIN ITS SCOPE SP ECIFICALLY AND EXPLICITLY EVERY ADVENTURE IN THE NATURE OF TRADE, COMMERCE OR MANUFACTURE. EVEN AN ISOLATED TRANSACTION MAY CONSTITUTE AN ADVENTURE IN THE NATURE OF TRADE AND WOULD BE LIABLE TO BE CONSTRUED AS BUSINESS CARRIED ON. TO CONSTITUTE BUSINESS OR AN ADVENTURE IN THE NATURE OF TRADE IT IS NOT, THEREFORE, ESSENTIAL THAT IN EVERY CASE THERE MUST BE A SERIES OF TRANSA CTIONS ALL MOTIVATED BY COMMERCIAL AND PROFIT MAKING CONSIDERATIONS NOR IS IT ESSENTIAL THAT THE TRANSACTIONS MUST FRUCTIFY AND MATERIALISE IN EVERY CASE INTO A FULL FLEDGED BUSINESS THROUGH THE RUNNING OF AN ESTABLISHMENT FO R CARRYING ON BUSINESS OR INDUSTRY. 18. THE TRANSACTION OF SURRENDER OF RIGHTS IN AGREE MENT IN THE PRESENT CASE IS A SINGLE ISOLATED TRANSACTION AND WHETHER I T CAN BE REGARDED AS ADVENTURE IN THE NATURE OF TRADE SO AS TO CHARACTER IZE THE INCOME RECEIVED ON SURRENDER OF RIGHTS UNDER AN AGREEMENT AS GIVING RAISE TO INCOME FROM BUSINESS IS THE QUESTION FOR OUR DETERMINATION. I N THE CASE OF G. VENKATASWAMI NAIDU (SUPRA) , THE HONBLE SUPREME COURT EXPLAINED AS TO WHEN A SINGLE OF ISOLATED TRANSACTION CAN BE REGARD ED AS AN ADVENTURE IN THE NATURE OF TRADE IN THE FOLLOWING WORDS:- ITA NO. 2250/BANG/2019 PAGE 12 OF 17 'IT IS IMPOSSIBLE TO EVOLVE ANY FORMULA WHICH CAN B E APPLIED IN DETERMINING THE CHARACTER OF ISOLATED TRANSACTION W HICH COME BEFORE THE COURTS IN TAX PROCEEDINGS. IT WOULD BESI DES BE INEXPEDIENT TO MAKE ANY ATTEMPT TO EVOLVE SUCH A RU LE OR FORMULA. GENERALLY SPEAKING, IT WOULD NOT BE DIFFICULT TO DE CIDE WHETHER A GIVEN TRANSACTION IS AN ADVENTURE IN THE NATURE OF TRADE OR NOT. IT IS THE CASES ON THE BORDER LINE THAT CAUSE DIFFICULTY. IF A PERSON INVESTS MONEY IN LAND INTENDING TO HOLD IT, ENJOYS ITS INCOME FOR SOME TIME, AND THEN SELLS IT AT A PROFIT, IT WOULD BE A CLEAR CASE OF CAPITAL ACCRETION AND NOT PROFIT DERIVED FROM AN AD VENTURE IN THE NATURE OF TRADE. CASES OF REALISATION OF INVESTMENT S CONSISTING OF PURCHASE AND RESALE, THOUGH PROFITABLE ARE CLEARLY OUTSIDE THE DOMAIN OF ADVENTURES IN THE NATURE OF TRADE. IN DEC IDING THE CHARACTER OF SUCH TRANSACTIONS SEVERAL FACTORS ARE TREATED AS RELEVANT. WAS THE PURCHASER A TRADER AND WERE THE P URCHASE OF THE COMMODITY AND ITS RESALE ALLIED TO HIS USUAL TRADE OR BUSINESS OR INCIDENTAL TO IT ? AFFIRMATIVE ANSWERS TO THESE QUE STIONS MAY FURNISH RELEVANT DATA FOR DETERMINING THE CHARACTER OF THE TRANSACTION. WHAT IS THE NATURE OF THE COMMODITY PU RCHASED AND RESOLD AND IN WHAT QUANTITY WAS IT PURCHASED AND RE SOLD? IF THE COMMODITY PURCHASED IS GENERALLY THE SUBJECT-MATTER OF TRADE, AND IF IT IS PURCHASED IN VERY LARGE QUANTITIES, IT WOULD TEND TO ELIMINATE THE POSSIBILITY OF INVESTMENT FOR PERSONA L USE, POSSESSION OR ENJOYMENT. DID THE PURCHASER BY ANY A CT SUBSEQUENT TO THE PURCHASE IMPROVE THE QUALITY OF T HE COMMODITY PURCHASED AND THEREBY MADE IT MORE READILY RESALEAB LE ? WHAT WERE THE INCIDENTS ASSOCIATED WITH THE PURCHASE AND RESALE? WERE THEY SIMILAR TO THE OPERATIONS USUALLY ASSOCIATED W ITH TRADE OR BUSINESS? ARE THE TRANSACTIONS OF PURCHASE AND SALE REPEATED ? IN REGARD TO THE PURCHASE OF THE COMMODITY AND ITS SUB SEQUENT POSSESSION BY THE PURCHASER, DOES THE ELEMENT OF PR IDE OF POSSESSION COME INTO PICTURE? A PERSON MAY PURCHASE A PIECE OF ART, HOLD IT FOR SOME TIME AND IF A PROFITABLE OFFE R IS RECEIVED MAY SELL IT. DURING THE TIME THAT THE PURCHASER HAD ITS POSSESSION HE MAY BE ABLE TO CLAIM PRIDE OF POSSESSION AND AESTHE TIC SATISFACTION; AND IF SUCH A CLAIM IS UPHELD THAT WO ULD BE A FACTOR AGAINST THE CONTENTION THAT THE TRANSACTION IS IN T HE NATURE OF TRADE. THESE AND OTHER CONSIDERATIONS ARE SET OUT AND DISC USSED IN JUDICIAL DECISIONS WHICH DEAL WITH THE CHARACTER OF TRANSACTIONS ALLEGED TO BE IN THE NATURE OF TRADE. IN CONSIDERIN G THESE DECISIONS IT WOULD BE NECESSARY TO REMEMBER THAT THEY DO NOT PURPORT TO LAY ITA NO. 2250/BANG/2019 PAGE 13 OF 17 DOWN ANY GENERAL OR UNIVERSAL TEST. THE PRESENCE OF ALL THE RELEVANT CIRCUMSTANCES MENTIONED IN ANY OF THEM MAY HELP THE COURT TO DRAW A SIMILAR INFERENCE ; BUT IT IS NOT A MATTER OF MERELY COUNTING THE NUMBER OF FACTS AND CIRCUMSTANCES PRO AND CON ; WHAT IS IMPORTANT TO CONSIDER IS THEIR DISTINCTIVE CHARACTER. IN EACH CASE, IT IS THE TOTAL EFFECT OF ALL RELEVANT FACTOR S AND CIRCUMSTANCES THAT DETERMINES THE CHARACTER OF THE TRANSACTION; A ND SO, THOUGH WE MAY ATTEMPT TO DERIVE SOME ASSISTANCE FROM DECIS IONS BEARING ON THIS POINT, WE CANNOT SEEK TO DEDUCE ANY RULE FR OM THEM AND MECHANICALLY APPLY IT TO THE FACTS BEFORE US. IN TH IS CONNECTION IT WOULD BE RELEVANT TO REFER TO ANOTHER TEST WHICH IS SOMETIMES APPLIED IN DETERMINING THE CHARACTER OF THE TRANSAC TION. WAS THE PURCHASE MADE WITH THE INTENTION TO RESELL IT AT A PROFIT? IT IS OFTEN SAID THAT A TRANSACTION OF PURCHASE FOLLOWED BY RES ALE CAN EITHER BE AN INVESTMENT OR AN ADVENTURE IN THE NATURE OF T RADE. THERE IS NO MIDDLE COURSE AND NO HALF-WAY HOUSE. THIS STATEM ENT MAY BE BROADLY TRUE ; AND SO SOME JUDICIAL DECISIONS APPLY THE TEST OF THE INITIAL INTENTION TO RESELL IN DISTINGUISHING ADVEN TURES IN THE NATURE OF TRADE FROM TRANSACTIONS OF INVESTMENT. EVEN IN T HE APPLICATION OF THIS TEST, DISTINCTION WILL HAVE TO BE MADE BETW EEN INITIAL INTENTION TO RESELL AT A PROFIT WHICH IS PRESENT BU T NOT DOMINANT OR SOLE; IN OTHER WORDS, CASES DO OFTEN ARISE WHERE TH E PURCHASER MAY BE WILLING AND MAY INTEND TO SELL THE PROPERTY PURCHASED AT PROFIT, BUT HE WOULD ALSO INTEND AND BE WILLING TO HOLD AND ENJOY IT IF A REALLY HIGH PRICE IS NOT OFFERED. THE INTEN TION TO RESELL MAY IN SUCH CASES BE COUPLED WITH THE INTENTION TO HOLD THE PROPERTY. CASES MAY, HOWEVER, ARISE WHERE THE PURCHASE HAS BE EN MADE SOLELY AND EXCLUSIVELY WITH THE INTENTION TO RESELL AT A PROFIT AND THE PURCHASER HAS NO INTENTION OF HOLDING THE PROPE RTY FOR HIMSELF OR OTHERWISE ENJOYING OR USING IT. THE PRESENCE OF SUCH AN INTENTION IS NO DOUBT A RELEVANT FACTOR AND UNLESS IT IS OFFSET BY THE PRESENCE OF OTHER FACTORS IT WOULD RAISE A STRONG P RESUMPTION THAT THE TRANSACTION IS AN ADVENTURE IN THE NATURE OF TR ADE. EVEN SO, THE PRESUMPTION IS NOT CONCLUSIVE ; AND IT IS CONCEIVABLE THAT, ON CONSIDERING ALL THE FACTS AND CIRCUMSTANCE S IN THE CASE, THE COURT MAY, DESPITE THE SAID INITIAL INTENTION, BE INCLINED TO HOLD THAT THE TRANSACTION WAS NOT AN ADVENTURE IN T HE NATURE OF TRADE. WE THUS COME BACK TO THE SAME POSITION AND T HAT IS THAT THE DECISION ABOUT THE CHARACTER OF A TRANSACTION IN TH E CONTEXT CANNOT BE BASED SOLELY ON THE APPLICATION OF ANY ABSTRACT RULE, PRINCIPLE ITA NO. 2250/BANG/2019 PAGE 14 OF 17 OR TEST AND MUST IN EVERY CASE DEPEND UPON ALL THE RELEVANT FACTS AND CIRCUMSTANCES.' 19. THE ABOVE TESTS LAID DOWN BY THE HONBLE SUPREM E COURT STILL HOLD GOOD IN DECIDING CASES WHERE THE QUESTION ARISES FO R CONSIDERATION AS TO WHETHER A SINGLE OR ISOLATED TRANSACTION CAN BE REG ARDED AS AN ADVENTURE IN THE NATURE OF TRADE SO AS TO CHARACTERIZE THE IN COME AS BUSINESS INCOME. 20. IN THE PRESENT CASE WHAT WE FIND IS THAT AS PER THE CONSTRUCTION AGREEMENT BETWEEN ASSESSEE AND THE DEVELOPER, THE C ONSTRUCTION HAS TO BE COMPLETED WITHIN A PERIOD OF 36 MONTHS WITH A GR ACE PERIOD OF 6 MONTHS. THE CONSTRUCTION AGREEMENT IS DATED 2.5.2012. AGRE EMENTS FOR SALE OF UNDIVIDED SHARE OF LAND IS ALSO DATED 2.5.2012. TH E MOU BY WHICH THE DEVELOPER AND THE ASSESSEE AGREED TO TREAT THE AGRE EMENTS FOR SALE DATED 2.5.2012 AND THE CONSTRUCTION AGREEMENT DATED 2.5.2 012 IS DATED 5.1.2016. THE MOU IS SILENT AS TO THE REASON WHY T HE ASSESSEE WANTS TO RELINQUISH HIS RIGHTS UNDER THE AGREEMENTS FOR SALE OF UNDIVIDED SHARE OF LAND AND THE CONSTRUCTION AGREEMENT. THE ASSESSEE IN HIS LETTER TO THE AO DATED 18.12.2018 HAS SUBMITTED THAT HE WANTED TO RE SCIND THE AGREEMENT WITH THE DEVELOPER FOR THE REASON THAT THE PROJECT WAS GETTING DELAYED AND NOT SUITABLE TO NEEDS OF ASSESSEE, CERTAIN INTERNAL INCONSISTENCIES, FACILITIES PROVIDED AND PROPOSED TO BE PROVIDED WAS NOT SATISF ACTORY AND BOUND TO CAUSE INCONVENIENCE TO TENANTS AND THERE WERE SOME VASTHU ISSUES ALSO. THE STAND TAKEN BY THE ASSESSEE WAS NOT DISBELIEVED BY THE AO AND HE PROCEEDED TO HOLD THAT THE MOU DATED 5.1.2016 WHERE BY THE ASSESSEE AND THE DEVELOPER AGREED TO RESCIND THE AGREEMENT H AS NOT BEEN REFERRED TO IN THE SUBSEQUENT REGISTERED CANCELLATION DEED D ATED 3.2.2016. AS WE HAVE ALREADY OBSERVED THERE IS NO REFERENCE TO THE MOU DATED 5.1.2016 NOR IS THERE ANY REFERENCE TO THE REASON AS TO WHY THE ASSESSEE AND THE DEVELOPER SEEK TO ENTER INTO A CANCELLATION AGREEME NT. NEVERTHELESS, THE FACT REMAINS THAT THE PLEA OF THE ASSESSEE IN THIS REGARD HAS NOT BEEN ITA NO. 2250/BANG/2019 PAGE 15 OF 17 DOUBTED BY THE REVENUE AUTHORITIES. THE CIT(A) PRO CEEDED ON THE BASIS OF A TERM IN THE CANCELLATION DEED WHICH PROVIDED FOR COMMERCIAL RATE OF INTEREST. FROM EXISTENCE OF SUCH A TERM IN THE DEF AULT CLAUSE IT CANNOT BE SAID THAT THE ASSESSEE ENTERED INTO AN ADVENTURE IN THE NATURE OF TRADE IN THE MATTER OF PURCHASE OF UNDIVIDED SHARE OF LAND O F THE PROPERTY AND ACQUIRING BUILT UP AREA IN A PROPOSED OFFICE COMPLE X. THE ASSESSEE IS NOT IN THE BUSINESS OF DEALING IN REAL ESTATE. THE ASS ESSEES CLAIM THAT THERE ARE NO INSTANCES OF SIMILAR TRANSACTION IN THE PAST IS NOT DISPUTED OR CONTRADICTED BY ANY MATERIAL BROUGHT ON RECORD. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, INTENTION AT THE TIME OF ACQUISITION OF THE PROPERTY WILL BE A GUIDING FACTOR. THERE IS NO MATE RIAL BROUGHT ON RECORD TO SHOW WHAT THE INTENTION OF THE ASSESSEE WAS AT THE TIME WHEN HE ACQUIRED THE PROPERTY. THE ASSESSEE CLAIMS THAT HIS INTENTIO N WAS TO HOLD THE PROPERTY AS INVESTMENTS AND TO EARN RENTAL INCOME. THE REVENUE SAYS THE CIRCUMSTANCES SHOW THAT THE INTENTION WAS TO INDULG E IN AN ADVENTURE IN THE NATURE OF TRADE. ONE OF THE TEST LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF G. VENKATASWAMI NAIDU (SUPRA) IS TO SEE WHETHER THE ASSESSEE AS A PURCHASER WAS A TRADER AND WERE THE P URCHASE OF THE COMMODITY AND ITS RESALE ALLIED TO HIS USUAL TRADE OR BUSINESS OR INCIDENTAL TO IT ? 21. THE ANSWER TO THE ABOVE QUESTION IS IN THE NEGA TIVE IN THE PRESENT CASE, AS THE ASSESSEE WAS NOT A TRADER IN ACQUIRING RIGHTS UNDER AN AGREEMENT AND RELINQUISHING THE SAME. ANOTHER TEST LAID DOWN BY THE HONBLE SUPREME COURT IN THE DECISION OF G. VENKATASWAMI NAIDU (SUPRA) IS TO SEE AS TO, WHAT IS THE NATURE OF THE COMMODIT Y PURCHASED AND RESOLD AND IN WHAT QUANTITY WAS IT PURCHASED AND RESOLD? I F THE COMMODITY PURCHASED IS GENERALLY THE SUBJECT-MATTER OF TRADE, AND IF IT IS PURCHASED IN VERY LARGE QUANTITIES, IT WOULD TEND TO ELIMINATE T HE POSSIBILITY OF INVESTMENT FOR PERSONAL USE, POSSESSION OR ENJOYMENT. DID THE PURCHASER BY ANY ACT ITA NO. 2250/BANG/2019 PAGE 16 OF 17 SUBSEQUENT TO THE PURCHASE IMPROVE THE QUALITY OF T HE COMMODITY PURCHASED AND THEREBY MADE IT MORE READILY RESALEAB LE ? APPLYING THE AFORESAID TEST, WE ARE OF THE VIEW THAT RELINQUISHM ENT OF RIGHTS UNDER AN AGREEMENT TO ACQUIRE PROPERTY IS NOT A COMMONLY SUB JECT MATTER OF TRADE. WE ARE OF THE VIEW THAT NO OTHER FACTS OR CIRCUMSTA NCES ARE BROUGHT ON RECORD TO SHOW THAT THE ASSESSEE INDULGED IN AN ADV ENTURE IN THE NATURE OF TRADE WHEN HE RELINQUISHED HIS RIGHTS UNDER AN AGRE EMENT. 22. THEREFORE THE RIGHT ACQUIRED UNDER THE AGREEMEN T BY THE ASSESSEE HAS TO BE REGARDED AS CAPITAL ASSET. THE DECISIO N OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF H. ANILKUMAR (SUPRA) SUPPORTS THE PLEA OF THE ASSESSEE. THE HONBLE HIGH COURT IN THE SAI D DECISION HELD THAT THE RIGHT TO OBTAIN A CONVEYANCE OF IMMOVABLE PROPERTY FALLS WITHIN THE EXPRESSION PROPERTY OF ANY KIND USED IN S. 2(14) AND CONSEQUENTLY IT IS A CAPITAL ASSET. IT IS BECAUSE THE EXPRESSION PROPER TY OF ANY KIND IS OF WIDE IMPORT. THE HONBLE COURT HELD THAT WHEN THIS EXPRE SSION IS READ ALONG WITH THE EXPRESSION DEFINED IN S. 2(47)(II) I.E., EXTIN GUISHMENT OF ANY RIGHTS THEREIN, THE GIVING UP OF A RIGHT OF SPECIFIC PERF ORMANCE BY THE ASSESSEE TO GET CONVEYANCE OF IMMOVABLE PROPERTY IN LIEU OF REC EIVING CONSIDERATION, RESULTS IN THE EXTINGUISHMENT OF THE RIGHT IN PROPE RTY, THEREBY ATTRACTING THE RIGOR OF S. 2(14) R.W.S. 2(47). GIVING UP OF A RIGH T TO CLAIM SPECIFIC PERFORMANCE BY CONVEYANCE IN RESPECT TO AN IMMOVABL E PROPERTY, AMOUNTS TO RELINQUISHMENT OF THE CAPITAL ASSET. THEREFORE, THERE WAS A TRANSFER OF CAPITAL ASSET WITHIN THE MEANING OF THE ACT. THE PA YMENT OF CONSIDERATION UNDER THE AGREEMENT OF SALE, FOR TRANSFER OF A CAPI TAL ASSET, IS THE COST OF ACQUISITION OF THE CAPITAL ASSET. THEREFORE, IN LIE U OF GIVING UP THE SAID RIGHT, ANY AMOUNT RECEIVED, CONSTITUTES CAPITAL GAIN AND I T IS EXIGIBLE TO TAX. HOWEVER, AS IS CLEAR FROM S. 48, BEFORE THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS IS COMPUTED, THE DEDUCTIONS SET OUT IN S. 48 HAS TO BE GIVEN TO THE ASSESSEE. IT IS ONLY THE AMOUNT THUS A RRIVED AT, AFTER SUCH ITA NO. 2250/BANG/2019 PAGE 17 OF 17 DEDUCTIONS UNDER S. 48, WOULD BE THE INCOME CHARGEA BLE UNDER THE HEADING CAPITAL GAINS. 23. TAKING INTO CONSIDERATION THE FACTS AND CIRCUMS TANCES OF THE PRESENT CASE, WE ARE OF THE VIEW THAT INCOME FROM RELINQUIS HING RIGHTS UNDER AN AGREEMENT SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM CAPITAL GAINS. WE HOLD ACCORDINGLY. WE HOWEVER FIND THAT THE AO/C IT(A) HAVE NOT EXAMINED THE CLAIM OF THE ASSESSEE UNDER THE HEAD CAPITAL GAIN IN ACCORDANCE WITH THE PROVISIONS OF SEC.48 OF THE ACT . WE THEREFORE REMAND THE QUESTION OF COMPUTATION OF CAPITAL GAIN TO THE AO AFTER DUE OPPORTUNITY OF BEING HEARD AFFORDED TO THE ASSESSEE. THE APPEA L OF THE ASSESSEE IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURP OSES. 24. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 3 RD DAY OF JANUARY, 2020. SD/- ( A K GARODIA ) SD/- ( N V VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 3 RD JANUARY, 2020. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(E) 5. DR, ITAT, BANGALORE. 6. GUARD FIL E BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.