KAKB Developers, CHENNAI V. ITO, NCW 3 (4), CHENNAI

ITA 3254/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4196 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 20-04-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 29-11-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NANDA KUMAR
• Assessee Lawyers: N C PRABHAKAR
• Keywords: Capital asset; Business income

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . ' # , $ #% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . / ITA NO. 3254/MDS/2016 / ASSESSMENT YEAR : 2012-13 KAKB DEVELOPERS , 10 & 11, DR. RADHAKRISHNAN SALAI, CHENNAI CITY CENTRE, 4 TH FLOOR, MYLAPORE, CHENNAI 600 004. PAN AASFM3707C ( /APPELLANT) V. THE INCOME-TAX OFFICER NOW 3(4), CORPORATE RANGE 5, CHENNAI - 34. (/ RESPONDENT) . /ITA NO. 3255/MDS/2016 / ASSESSMENT YEAR : 2012-13 MEGA CITY DEVELOPMENT CORPORATION , 10 & 11, DR. RADHAKRISHNAN SALAI, CHENNAI CITY CENTRE, 4 TH FLOOR, MYLAPORE, CHENNAI 600 004. PAN AAKFM7436Q ( /APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME-TAX (OSD), CORPORATE RANGE 5, CHENNAI - 34. (/ RESPONDENT) ASSESSEES BY : SHRI N.C. PRABHAKAR, ADVOCATE DEPARTMENT BY : SHRI NANDAKUMAR, JCIT / DATE OF HEARING : 20.04.2017 ! / DATE OF PRONOUNCEMENT : 21.06.2017 - - ITA 3254 & 3255/MDS/16 2 & / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE TWO APPEALS BY DIFFERENT ASSESSEES ARE DIR ECTED AGAINST DIFFERENT ORDERS OF THE COMMISSIONER OF INC OME- TAX(APPEALS) FOR THE ASSESSMENT YEAR 2012-13. SI NCE, THE ISSUE IN BOTH THE APPEALS IS COMMON, THESE ARE CLUB BED TOGETHER, HEARD TOGETHER AND DISPOSED OF BY THIS CO MMON ORDER. 2. THE COMMON ISSUE IN THESE TWO APPEALS IS WITH R EGARD TO GAIN ARISE OUT OF SALE OF LANDED PROPERTY IS TO BE CONSIDERED AS INCOME UNDER THE HEAD CAPITAL GAINS OR BUSINESS INCOME. 3. FOR THE BREVITY, WE CONSIDER THE FACTS NARRATED IN ITA NO.3254/MDS/2016.TTHE FACTS OF THE CASE ARE THAT TH E ASSESSEE FILED ITS RETURN OF INCOME ELECTRONICALLY FOR THE R ELEVANT ASSESSMENT YEAR ON 29.3.2014 DECLARING A TOTAL INCO ME OF 19,60,93,871/- AND SUBSEQUENTLY THE RETURN WAS SELE CTED FOR SCRUTINY AND A NOTICE U/S.143(2) OF THE ACT WAS SER VED ON THE ASSESSEE ON 22.9.2014. - - ITA 3254 & 3255/MDS/16 3 3.1 THE ASSESSEE IS ENGAGED IN BUYING AND SELLING O F LANDS. THE ASSESSEE PURCHASED THE LANDS AND THE ASSESSMENT YEAR 2011-12 WAS ITS FIRST YEAR OF BUSINESS OPERATION AN D IT WAS THE INVESTMENTS MADE BY THE ASSESSEE IN LAND. DURING THE FINANCIAL YEAR 2011-12, THE ASSESSEE SOLD THESE LANDS FOR GRO SS CONSIDERATION AMOUNTING TO A SUM OF 20,19,53,770/- AND DEDUCTED THE ORIGINAL COST OF INVESTMENT OF 28,80,675/- AND NET CONSIDERATION AMOUNTING TO 19,90,73,095/- WHICH HAS BEEN CREDITED IN THE PROFIT AND LOSS ACCOUNT. ACCORDING TO ASSESSEE, SINCE, THE ASSESSEE OWNS THESE LANDS AS INVESTMENT, THE GAIN ARISING OUT OF THIS TO B E CONSIDERED AS A LONG TERM CAPITAL GAINS. HOWEVER, THIS CLAIM WAS R EJECTED BY THE AO IGNORING THE ASSESSEES CONTENTION THAT THE PROPERT Y HAS BEEN HELD BY THE ASSESSEE AS LONG TERM ASSET AND SI NCE THE ASSESSEE HAS CONTINUOUSLY AND CONSISTENTLY BEEN PURCHASING THE LAND AND MADE IT AS LAYOUT ON DIVISI ON OF LAND INTO PLOTS, HENCE THE LEARNED ASSESSING OFFICE R CAME TO A CONCLUSION THAT THE SALE OF LAND IS LIABLE TO BE TREATED AS BUSINESS ACTIVITY OF THE ASSESSEE AND THE INCOM E THERE FROM IS TREATED AS INCOME FROM PROFITS AND GAINS O F THE - - ITA 3254 & 3255/MDS/16 4 BUSINESS AND TAXED ACCORDINGLY. THE AO TREATED TH E PURCHASE OF LANDS AS BUSINESS ASSET AND IGNORED IT AS LONG TERM INVESTMENT BY THE FIRM AND TREATED THE ENTIRE INCOME AS BUSINESS INCOME. THEREFORE, THE ASSESSEE FILED A LETTER ON 17.3.2015 STATING THAT THE NATURE OF THE BUSINES S OF THE FIRM IS INVESTMENT IN LANDS AND DEVELOPMENT OF L ANDS AND TO CARRY ON BUSINESS OF REAL ESTATE. THE AO BASED ON THE OBJECT CLAUSE OF THE PARTNERSHIP DEED CAME TO TH E CONCLUSION THAT THE ASSESSEE CARRIED ON THE BUSINES S AND CHARGED THE INCOME UNDER THE HEAD PROFITS AND GAIN S OF THE BUSINESS. BEFORE THE LOWER AUTHORITIES, THE ASS ESSEE RELIED ON THE DECISION OF THE TRIBUNAL, HYDERABAD B ENCH IN THE CASE OF DCIT V. M/S. MAHESHWARI PLAZA RESORTS L TD., 2015 (4) TMI 98 ITAT HYDERABAD TO SUPPORTS HIS VIEW . 3.3 THE AO HAS ALSO DISALLOWED AN AMOUNT OF 18,75,100/- TOWARDS PROFESSIONAL CHARGES DUE TO THE REASON THAT NO TDS CERTIFICATES HAS BEEN PRODUCED B Y THE ASSESSEE AS EVIDENCE OF TAX NOT BEING DEDUCTED ON T HE PROFESSIONAL CHARGES. ACCORDING TO THE ASSESSEE, T HE ASSESSEE IN FACT, DEDUCTED THE TAX AND PAID TO THE CREDIT OF - - ITA 3254 & 3255/MDS/16 5 THE CENTRAL GOVERNMENT.THEREFORE, THE ASSESSEE CONTENDED THAT THE INCOME ON ACCOUNT OF TRANSFER OF LAND HAS BEEN CHARGED UNDER CAPITAL GAINS AND THE QUESTI ON OF COMPUTATION OF INCOME UNDER BUSINESS OR PROFESSION DOES NOT ARISE. HOWEVER, THE AO REJECTED THE CLAIM OF A SSESSEE. AGGRIEVED BY THE ORDER OF LD. ASSESSING OFFICER, TH E ASSESSEE CARRIED THE APPEAL BEFORE THE LD. LEARNED COMMISSIONER OF INCOME TAX(A). ON APPEAL, THE LD. LEARNED COMMISSIONER OF INCOME TAX(A) CONFIRMED THE ORDER OF A.O. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE US, THE LD. AR SUBMITTED THAT THE ASSESSE E IS A PARTNERSHIP FIRM, CONSISTING OF 2 PERSONS AND THEY HELD THE LAND AS CAPITAL ASSET IN THEIR NAME AND BROUGHT IN AS CAPITAL INTO THE PARTNERSHIP FIRM AND IT WAS SHOWN AS A FIXED A SSET AND SUBSEQUENTLY, WHEN THE SALE TOOK PLACE, IT OFFERED THE SAME UNDER THE HEAD CAPITAL GAINS. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE HAS BEEN CONSISTENTLY SHOWING THIS LAN D AS A FIXED ASSET FROM NUMBER OF YEARS AND DUE TO THE THEN PRE VAILING MARKET CONDITIONS, COULD NOT SELL THE LAND IMMEDIAT ELY BUT SOLD IT - - ITA 3254 & 3255/MDS/16 6 IN THE ASSESSMENT YEAR UNDER CONSIERATION AND OFFER ED THE SAME FOR INCOME UNDER THE HEAD CAPITAL GAINS. THE LD . AR SUBMITTED THAT WHEN THE LAND HAD BEEN SUBJECTED TO DEVELOPMEN T AND PLOTTING IT OUT FOR SALE, THE AO OPINED THAT THIS C ONSTITUTES A BUSINESS ACTIVITY AS THE OBJECT OF THE PARTNERSHIP FIRM WAS TO SELL THE LANDS. AT THIS JUNCTURE, ACCORDING TO THE LD. AR, IT IS PERTINENT TO NOTE THAT WHEN THE LANDS WERE BROUGHT IN AS CAP ITAL, THERE WAS NO PURCHASE OF LAND AND ONLY THE SALE OF LAND T OOK PLACE. THE AO TREATED THE SALE OF LAND AS BUSINESS INCOME ON THE GROUND THAT WHEN DEVELOPMENT ACTIVITY TOOK PLACE, I T IS A SUFFICIENT GROUND FOR TREATING THE SAME AS BUSINES S INCOME. FURTHER, THE LD. AR SUBMITTED THAT YEAR AFTER YEAR WHEN THE LAND WAS SHOWN AS FIXED ASSET IN THE BALANCE SHEET AND WHEN THERE IS CONSISTENCY THAT IS FOLLOWED BY THE ASSESSEE, WH ICH ITSELF IS A SUFFICIENT GROUND TO PROVE THAT THE INCOME OFFERED UNDER THE HEAD CAPITAL GAINS GETS JUSTIFIED. TO SUPPORT HIS VIE W, HE RELIED ON THE DECISIONS OF THE HYDERABAD BENCH IN THE CASE OF DCI T V. MAHESHWARI PLAZA AND RESORTS LTD. CITED SUPRA, WHER EIN IT WAS HELD THAT CONSISTENCY IS A VIRTUE TO BE FOLLOWED B OTH THE BY THE ASSESSEE AND THE REVENUE. THE LD. AR ALSO SUBMIT TED THAT - - ITA 3254 & 3255/MDS/16 7 WHILE RENDERING THIS DECISION, THE BENCH FOLLOWED T HE APEX COURT JUDGMENT IN THE CASE OF RADHASWAMY SATSANG, 1991 (1 1) TMI 2 (SC). 4.1 FURTHER, THE LD. AR CONTENDED THAT DURING THE C OURSE OF APPELLATE PROCEEDINGS, IT WAS BROUGHT TO THE NOTICE OF THE FIRST APPELLATE AUTHORITY THAT BALANCE SHEET WAS PREPARED ONLY TO ARRIVE AT THE FINANCIAL POSITION OF THE ASSESSEE AN D AFTER ARRIVING AT THE PROFIT OR LOSS, THE SAME BEING DIVIDED AMONG ST THE PARTNERS IN THEIR RESPECTIVE PROFIT SHARING RATIO AS PER THE PARTNERSHIP DEED WHICH DOES NOT HAVE ANY BEARING ON THE TOTAL INCOME , SINCE, THE ASSESSEE OFFERED THE INCOME UNDER THE HEAD CAPITAL GAINS. THE LD. AR FURTHER CONTENDED THAT NO OTHER PURCHASE OF LAND HAD TAKEN PLACE AND WHAT WAS ORIGINALLY BROUGHT IN AS C APITAL BY THE PARTNERS IN THE FORM OF LAND IS BEING SOLD. THEREF ORE, THE LD. AR SUBMITTED THAT THE LOWER AUTHORITIES ARE NOT JUSTIF IED IN DISMISSING THE CASE OF THE ASSESSEE. 5. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORD ER OF THE CIT(APPEALS). - - ITA 3254 & 3255/MDS/16 8 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ISSUE AS TO WHETHER INCOME THAT IS REALISED FRO M THE SALE OF LAND IS CHARGEABLE TO INCOME-TAX AS CAP ITAL GAINS OR, OTHERWISE, AS INCOME FROM BUSINESS. THIS HAS BEEN T HE SUBJECT- MATTER OF A CONSIDERABLE AMOUNT OF JUDICIAL PRECEDE NT. IN JANKI RAM BAHADUR RAM V. CIT [1965] 57 ITR 21 (SC) THE SU PREME COURT LAID DOWN THE FOLLOWING GUIDELINES (HEAD-NOTE ) : ' IF A TRANSACTION IS RELATED TO THE BUSINESS WHICH I S NORMALLY CARRIED ON BY THE ASSESSEE, THOUGH NOT DIRECTLY PART OF IT, AN INTENTION TO LAUNCH UPON AN ADVENTURE IN THE NATURE OF TRADE MAY READILY BE INFERRED. A SIMILAR INFERENCE WOULD ARISE WHERE A C OMMODITY IS PUR CHASED AND SUB-DIVIDED, ALTERED, TREATED, OR REPAIR ED AND SOLD, OR IS CONVERTED INTO A DIFFERENT COMMODITY AND SOLD. MAGN ITUDE OF THE TRANSACTION OF PURCHASE, THE NATURE OF THE COMMODIT Y, SUBSEQUENT DEALINGS AND THE MANNER OF DISPOSAL MAY BE SUCH THA T THE TRANSACTION MAY BE STAMPED WITH A CHARACTER OF A TR ADING VENTURE. BUT A TRANSACTION OF PURCHASE OF LAND CANNOT BE ASS UMED WITHOUT MORE TO BE A VENTURE IN THE NATURE OF TRADE.' 7. IN G. VENKATASWAMI NAIDU AND CO. V. CIT [1959] 35 ITR 594 (SC), THE SUPREME COURT NOTED THAT SEVERAL FACT ORS ASSUMED RELEVANCE INCLUDING (I) WHETHER THE PURCHAS ER WAS A - - ITA 3254 & 3255/MDS/16 9 TRADER AND THE PURCHASE OF THE COMMODITY AND ITS RE SALE WERE ALLIED TO HIS USUAL TRADE OR BUSINESS OR INCIDENTAL TO IT ; (II) THE NATURE AND EXTENT OF THE TRANSACTION INVOLVED IN TH E PURCHASE AND SALE; (III) ACTS SUBSEQUENT TO THE PURCHASE FOR THE IMPROVEMENT OF THE QUALITY OF THE SUBJECT-MATTER ; (IV) ANY ACT PRIOR TO THE PURCHASE SHOWING A DESIGN OR PURPOSE, THE INCIDENTS ASSOCIATED WITH THE PURCHASE AND RESALE A ND THE SIMILARITY OF THE TRANSACTION TO OPERATIONS USUALLY ASSOCIATED WITH TRADE OR BUSINESS ; (V) THE REPETITION OF THE TRANSACTION ; AND (VI) THE ELEMENT OF PRIDE OF POSSESSION. 8. IN CIT V. V. A. TRIVEDI [1988] 172 ITR 95 (BOM ) A DIVISION BENCH OF THIS COURT, WHILE HOLDING THAT NO SINGLE T EST OR FORMULA CAN BE APPLIED IN DETERMINING WHETHER A TRANSACTION INVOLVING PURCHASE AND SALE OF LAND IS AN ADVENTURE IN THE NA TURE OF TRADE OBSERVED THAT GENERALLY SPEAKING, THE ORIGINAL INTE NTION OF THE PARTY IN PURCHASING THE PROPERTY, THE MAGNITUDE OF THE TRANSACTION OF PURCHASE, THE NATURE OF THE PROPERTY , THE LENGTH OF ITS OWNERSHIP AND HOLDING, THE CONDUCT AND SUBSEQUE NT DEALINGS OF THE ASSESSEE IN RESPECT OF THE PROPERTY , THE MANNER - - ITA 3254 & 3255/MDS/16 10 OF ITS DISPOSAL AND THE FREQUENCY AND MULTIPLICITY OF TRANSACTIONS AFFORDED VALUABLE GUIDES IN DETERMINING WHETHER THE ASSESSEE WAS CARRYING ON A TRADING ACTIVITY AND WHETHER A PA RTICULAR TRANSACTION SHOULD BE STAMPED WITH THE CHARACTER OF A TRADING ADVENTURE. 9. IN CIT V. DR. INDU BALA CHHABRA [2002] 258 ITR 111 (DELHI), A DIVISION BENCH OF THE DELHI HIGH COURT D EALT WITH A CASE WHERE THE ASSESSEE WHO DERIVED HER INCOME FROM THE MEDICAL PROFESSION HAD ACQUIRED CERTAIN PROPERTIES AS AN ASSET FOR CONSTRUCTING A NURSING HOME. SUBSEQUENTLY, AFTE R A LAPS OF TIME, THE ASSESSEE CARRIED OUT CONSTRUCTION ON THE PROPERTY. THE TRIBUNAL HAD NOTED THAT AFTER MAKING THE PURCHA SE, THE ASSESSEE HAD DISPOSED OF THE PROPERTY NEARLY TWENTY YEARS THEREAFTER. NO PRUDENT PERSON, THE TRIBUNAL HELD, W OULD HAVE WAITED FOR SUCH A LONG PERIOD OF TIME IF IT WAS A B USINESS PROPOSITION. THE GAIN RESULTING FROM THE SALE TRANS ACTION WAS TREATED AS CAPITAL GAINS AND NOT AS INCOME ARISING OUT OF AN ADVENTURE IN THE NATURE OF TRADE. THE DIVISION BENC H OF THE DELHI HIGH COURT, RELYING, INTER ALIA, UPON THE JUD GMENT OF THE - - ITA 3254 & 3255/MDS/16 11 SUPREME COURT IN G. VENKATASWAMI NAIDU (SUPRA), AFF IRMED THE VIEW OF THE TRIBUNAL. SIMILARLY, IN A DECISION OF T HE PUNJAB AND HARYANA HIGH COURT IN CIT V. SUSHILA DEVI JAIN [200 3] 259 ITR 671 (P&H), THE ASSESSEE HAD ACQUIRED CERTAIN PROPER TY UNDER THE WILL OF HER HUSBAND. THE PROPERTY CONSISTED OF A LARGE TRACT OF LAND WHICH WAS SOLD OUT IN PART. THE HIGH COURT HELD THAT THE RELEVANT TEST WAS TO FIND OUT THE INTENTION OF THE ASSESSEE AT THE TIME OF THE PURCHASE OF THE LAND. THE ASSESSEE HAD NEVER PURCHASED HER LAND SINCE IT HAD DEVOLVED ON HER THR OUGH TESTAMENTARY SUCCESSION. THE LAND WAS SOLD IN PARTS BECAUSE THE HUGE AREA COULD NOT BE SOLD IN ONE TRANSACTION AND SUCH AN ACTIVITY WAS HELD NOT TO AMOUNT TO TRADE OR BUSINES S WITHIN THE MEANING OF THE ACT. 10. ADVERTING TO THE FACTS OF THE PRESENT CASE, TH E ASSESSEE PURCHASED THE LONG TRACK OF LAND AND MADE IT AS PLO TS. AS PER THE OBJECT CLAUSE OF PARTNERSHIP DEED, THE BUSINESS OF THE ASSESSEE TO DEVELOP THE CONTINUOUS LAND BROUGHT IN BY THE PA RTNERS OF THE FIRM AS THEIR CAPITAL INTO PLOT AND CONSTRUCTED RES IDENTIAL PREMISES ON THE SAID LAND. THE GIST OF THE PARTNERSHIP DEED IS AS UNDER:- - - ITA 3254 & 3255/MDS/16 12 6. IT CAN BE SEEN FROM THE PARTNERSHIP DEED THAT PARTNERS HAVE HELD THE LANDS OF AROUND 20.510 ACRES SITUATED AN KARANAT VILLAGE AND BROUGHT THE SAME INTO THE FIRM AS THEIR CAPITAL AND BOOKED IN THE ACCOUNTS OF THE FIR M, AT THE ORIGINAL COST PRICE OF THE! LAND TO THE PARTNERS. O NCE THE LANDS WERE BROUGHT INTO THE FIRM, IT WOULD BE 4 TRA DING ASSET OF THE PARTNERSHIP FIRM, EVEN IF IT IS SHOWN AS FIXED ASSETS IN THE BALANCE SHEET, SINCE THE FIRM IS CON STITUTED ONLY WITH AN INTENTION TO DEVELOP THE CONTIGUOUS LA NDS HELD IN THE HANDS OF THE PARTNERS INTO PLOT AND CON STRUCT RESIDENTIAL APARTMENTS ETC. FURTHER, ONCE THE PARTN ERS BROUGHT IN THE LANDS INTO THE FIRM AS CAPITAL, THE LAND LOSES ITS IDENTITY AS FIXED ASSETS AND IT WILL BECO ME THE STOCK-IN-TRADE OF THE FIRM DUE TO ITS NATURE OF TRA DE, 7. FURTHER, THE ASSESSEE HAD ENTERED INTO AN AGREEM ENT WITH M/S.ETA STARK, PROPERTY DEVELOPERS LTD.; CHENN AL, FOR THE DEVELOPMENT OF THE SCHEDULE PROPERTY INTO RESIDENTIAL LAYOUTS/APPROVED PLOTS/VILLAS AND FOR O BTAINING - - ITA 3254 & 3255/MDS/16 13 NECESSARY PERMISSION/APPROVAL FROM DTCP. THE GIST O F THE AGREEMENT IS AS UNDER: 1. THAT THE PARTIES HEREBY ENTERED INTO THIS AGREE MENT FOR THE PURPOSE OF DEVELOPING SCHEDULE PROPERTY INTO RESIDENTIAL LAYOUTS/APPROVED PLOTS/VILLAS BY OBTAIN ING NECESSARY PERMISSIONS/APPROVAL FROM DTCP. 2. THAT THE FIRST PARTY HEREBY AUTHORISE AND APPOIN T THE SECOND PARTY AS THE DEVELOPER FOR THE RESIDENTIAL L AYOUT TO BE DEVELOPED IN THE SCHEDULE PROPERTY..... 12. THAT THE PARTIES SHALL MUTUALLY DECIDE THE NAME OF THE PROJECT AS ETA THE GOOD LIFE / WINGHAVEN GARDEN 11. IN THE INSTANT CASE, THE ASSESSEE HAD DEVELOPE D THE LANDS INTO PLOTS AND SOLD THE SAME TO VARIOUS PARTIES, NOT AS A SINGLE UNIT, SHOWS THAT THE ASSESSEE HAS DEALT WITH THE IMPUGNED LANDS AS STOCK-IN- TRADE OF THE BUSINESS, ONLY WITH AN INTENTION EARN PROFIT. THE ASSESSES ACTIVITY SQUARELY COVERS THE JUDGEMENT OF THE HONBL SUPREME COURT AS CITED ABOVE ON THE REASON THAT THE TRANSACTION IS - - ITA 3254 & 3255/MDS/16 14 RELATED TO THE BUSINESS, WHICH IS NORMALLY CARRIED ON BY THE ASSESSEE, THOUGH NOT DIRECTLY; PART OF IT, AN INTENTION TO E ARN UPON AN ADVENTURE IN THE NATURE OF TRADE MAY READILY BE INFERRED. 12. IN VIEW OF THE ABOVE, THE ASSESSEES CONTENTI ON THAT THE LANDS HAD BEEN SHOWN IN THE BALANCE SHEET AS FIXED ASSET S AND THEREFORE THE SALE PROCEEDS ON THE SALE OF THE LANDS HAD BEEN COMPUTED AND OFFERED UNDER CAPITAL GAINS, HAS NOT BEEN ACCEPTED AND THE SALE PROCEEDS ON THE SALE OF THE LANDS BY THE FIRM IS TR EATED AS BUSINESS INCOME. 13. FURTHER, THE ASSESSEE NOT ABLE TO SHOW THAT TH E FINDINGS OF THE LOWER AUTHORITIES HAS BASED ON NO EVIDENCE OR WHETH ER MISDIRECTED ITSELF IN LAW. CONSIDERING THE TOTALITY OF THE FAC TS OF THE CASE AND THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE, IT I S NOT POSSIBLE TO HOLD THAT THE ASSESSEE IS TREATED THE LAND AS INVES TMENTS. IN OTHER WORDS, THOUGH IT IS PRESUMED, IT WAS TREATED AS INV ESTMENTS IT DOES NOT ALTERNATE THE NATURE OF THE ACTIVITIES CARRIED OUT BY THE ASSESSEE. IT IS ONLY THE BUSINESS ACTIVITY IN LAND AND GAINS ARISING OUT OF THE SALE OF SUCH LAND TO BY MAKING PLOTS IS NOTHING BUT ADVE NTURE NATURE OF - - ITA 3254 & 3255/MDS/16 15 TRADE AND INCOME THERE FROM TO BE CONSIDERED AS PRO FIT FROM BUSINESS ONLY IN TERM SOF SEC.28 OF THE ACT. ACCORDINGLY, W E ARE COMPLETELY AGREEMENT WITH THE FINDINGS OF LD.CIT(A) ON THIS IS SUE AND THE APPEAL FILED BY THE ASSESSEE IS REJECTED. 14. SINCE THE SAME PRINCIPLE APPLIES TO OTHER APPE AL IN ITA NO.3255/MDS./2016, THIS APPEAL IS ALSO DISMISSED. 15. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED ON 21 ST JUNE, 2017. SD/- SD/- ( '. $ ) ( % & ' ' ) (G. PAVAN KUMAR) (CHANDRA POOJARI) 8 9: /JUDICIAL MEMBER ; 9:/ACCOUNTANT MEMBER %;8 /CHENNAI, B9 /DATED, THE 21 ST JUNE, 2017. K S SUNDARAM 9;C DE F;E / COPY TO: 1 . / APPELLANT 3. G () / CIT(A) 5. EHI J / DR 2. / RESPONDENT 4. G / CIT 6. IK L / GF , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . ' # , $ #% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . / ITA NO. 3254/MDS/2016 / ASSESSMENT YEAR : 2012-13 KAKB DEVELOPERS , 10 & 11, DR. RADHAKRISHNAN SALAI, CHENNAI CITY CENTRE, 4 TH FLOOR, MYLAPORE, CHENNAI 600 004. PAN AASFM3707C ( /APPELLANT) V. THE INCOME-TAX OFFICER NOW 3(4), CORPORATE RANGE 5, CHENNAI - 34. (/ RESPONDENT) . /ITA NO. 3255/MDS/2016 / ASSESSMENT YEAR : 2012-13 MEGA CITY DEVELOPMENT CORPORATION , 10 & 11, DR. RADHAKRISHNAN SALAI, CHENNAI CITY CENTRE, 4 TH FLOOR, MYLAPORE, CHENNAI 600 004. PAN AAKFM7436Q ( /APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME-TAX (OSD), CORPORATE RANGE 5, CHENNAI - 34. (/ RESPONDENT) ASSESSEES BY : SHRI N.C. PRABHAKAR, ADVOCATE DEPARTMENT BY : SHRI NANDAKUMAR, JCIT / DATE OF HEARING : 20.04.2017 ! / DATE OF PRONOUNCEMENT : 21.06.2017 - - ITA 3254 & 3255/MDS/16 2 & / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE TWO APPEALS BY DIFFERENT ASSESSEES ARE DIR ECTED AGAINST DIFFERENT ORDERS OF THE COMMISSIONER OF INC OME- TAX(APPEALS) FOR THE ASSESSMENT YEAR 2012-13. SI NCE, THE ISSUE IN BOTH THE APPEALS IS COMMON, THESE ARE CLUB BED TOGETHER, HEARD TOGETHER AND DISPOSED OF BY THIS CO MMON ORDER. 2. THE COMMON ISSUE IN THESE TWO APPEALS IS WITH R EGARD TO GAIN ARISE OUT OF SALE OF LANDED PROPERTY IS TO BE CONSIDERED AS INCOME UNDER THE HEAD CAPITAL GAINS OR BUSINESS INCOME. 3. FOR THE BREVITY, WE CONSIDER THE FACTS NARRATED IN ITA NO.3254/MDS/2016.TTHE FACTS OF THE CASE ARE THAT TH E ASSESSEE FILED ITS RETURN OF INCOME ELECTRONICALLY FOR THE R ELEVANT ASSESSMENT YEAR ON 29.3.2014 DECLARING A TOTAL INCO ME OF 19,60,93,871/- AND SUBSEQUENTLY THE RETURN WAS SELE CTED FOR SCRUTINY AND A NOTICE U/S.143(2) OF THE ACT WAS SER VED ON THE ASSESSEE ON 22.9.2014. - - ITA 3254 & 3255/MDS/16 3 3.1 THE ASSESSEE IS ENGAGED IN BUYING AND SELLING O F LANDS. THE ASSESSEE PURCHASED THE LANDS AND THE ASSESSMENT YEAR 2011-12 WAS ITS FIRST YEAR OF BUSINESS OPERATION AN D IT WAS THE INVESTMENTS MADE BY THE ASSESSEE IN LAND. DURING THE FINANCIAL YEAR 2011-12, THE ASSESSEE SOLD THESE LANDS FOR GRO SS CONSIDERATION AMOUNTING TO A SUM OF 20,19,53,770/- AND DEDUCTED THE ORIGINAL COST OF INVESTMENT OF 28,80,675/- AND NET CONSIDERATION AMOUNTING TO 19,90,73,095/- WHICH HAS BEEN CREDITED IN THE PROFIT AND LOSS ACCOUNT. ACCORDING TO ASSESSEE, SINCE, THE ASSESSEE OWNS THESE LANDS AS INVESTMENT, THE GAIN ARISING OUT OF THIS TO B E CONSIDERED AS A LONG TERM CAPITAL GAINS. HOWEVER, THIS CLAIM WAS R EJECTED BY THE AO IGNORING THE ASSESSEES CONTENTION THAT THE PROPERT Y HAS BEEN HELD BY THE ASSESSEE AS LONG TERM ASSET AND SI NCE THE ASSESSEE HAS CONTINUOUSLY AND CONSISTENTLY BEEN PURCHASING THE LAND AND MADE IT AS LAYOUT ON DIVISI ON OF LAND INTO PLOTS, HENCE THE LEARNED ASSESSING OFFICE R CAME TO A CONCLUSION THAT THE SALE OF LAND IS LIABLE TO BE TREATED AS BUSINESS ACTIVITY OF THE ASSESSEE AND THE INCOM E THERE FROM IS TREATED AS INCOME FROM PROFITS AND GAINS O F THE - - ITA 3254 & 3255/MDS/16 4 BUSINESS AND TAXED ACCORDINGLY. THE AO TREATED TH E PURCHASE OF LANDS AS BUSINESS ASSET AND IGNORED IT AS LONG TERM INVESTMENT BY THE FIRM AND TREATED THE ENTIRE INCOME AS BUSINESS INCOME. THEREFORE, THE ASSESSEE FILED A LETTER ON 17.3.2015 STATING THAT THE NATURE OF THE BUSINES S OF THE FIRM IS INVESTMENT IN LANDS AND DEVELOPMENT OF L ANDS AND TO CARRY ON BUSINESS OF REAL ESTATE. THE AO BASED ON THE OBJECT CLAUSE OF THE PARTNERSHIP DEED CAME TO TH E CONCLUSION THAT THE ASSESSEE CARRIED ON THE BUSINES S AND CHARGED THE INCOME UNDER THE HEAD PROFITS AND GAIN S OF THE BUSINESS. BEFORE THE LOWER AUTHORITIES, THE ASS ESSEE RELIED ON THE DECISION OF THE TRIBUNAL, HYDERABAD B ENCH IN THE CASE OF DCIT V. M/S. MAHESHWARI PLAZA RESORTS L TD., 2015 (4) TMI 98 ITAT HYDERABAD TO SUPPORTS HIS VIEW . 3.3 THE AO HAS ALSO DISALLOWED AN AMOUNT OF 18,75,100/- TOWARDS PROFESSIONAL CHARGES DUE TO THE REASON THAT NO TDS CERTIFICATES HAS BEEN PRODUCED B Y THE ASSESSEE AS EVIDENCE OF TAX NOT BEING DEDUCTED ON T HE PROFESSIONAL CHARGES. ACCORDING TO THE ASSESSEE, T HE ASSESSEE IN FACT, DEDUCTED THE TAX AND PAID TO THE CREDIT OF - - ITA 3254 & 3255/MDS/16 5 THE CENTRAL GOVERNMENT.THEREFORE, THE ASSESSEE CONTENDED THAT THE INCOME ON ACCOUNT OF TRANSFER OF LAND HAS BEEN CHARGED UNDER CAPITAL GAINS AND THE QUESTI ON OF COMPUTATION OF INCOME UNDER BUSINESS OR PROFESSION DOES NOT ARISE. HOWEVER, THE AO REJECTED THE CLAIM OF A SSESSEE. AGGRIEVED BY THE ORDER OF LD. ASSESSING OFFICER, TH E ASSESSEE CARRIED THE APPEAL BEFORE THE LD. LEARNED COMMISSIONER OF INCOME TAX(A). ON APPEAL, THE LD. LEARNED COMMISSIONER OF INCOME TAX(A) CONFIRMED THE ORDER OF A.O. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE US, THE LD. AR SUBMITTED THAT THE ASSESSE E IS A PARTNERSHIP FIRM, CONSISTING OF 2 PERSONS AND THEY HELD THE LAND AS CAPITAL ASSET IN THEIR NAME AND BROUGHT IN AS CAPITAL INTO THE PARTNERSHIP FIRM AND IT WAS SHOWN AS A FIXED A SSET AND SUBSEQUENTLY, WHEN THE SALE TOOK PLACE, IT OFFERED THE SAME UNDER THE HEAD CAPITAL GAINS. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE HAS BEEN CONSISTENTLY SHOWING THIS LAN D AS A FIXED ASSET FROM NUMBER OF YEARS AND DUE TO THE THEN PRE VAILING MARKET CONDITIONS, COULD NOT SELL THE LAND IMMEDIAT ELY BUT SOLD IT - - ITA 3254 & 3255/MDS/16 6 IN THE ASSESSMENT YEAR UNDER CONSIERATION AND OFFER ED THE SAME FOR INCOME UNDER THE HEAD CAPITAL GAINS. THE LD . AR SUBMITTED THAT WHEN THE LAND HAD BEEN SUBJECTED TO DEVELOPMEN T AND PLOTTING IT OUT FOR SALE, THE AO OPINED THAT THIS C ONSTITUTES A BUSINESS ACTIVITY AS THE OBJECT OF THE PARTNERSHIP FIRM WAS TO SELL THE LANDS. AT THIS JUNCTURE, ACCORDING TO THE LD. AR, IT IS PERTINENT TO NOTE THAT WHEN THE LANDS WERE BROUGHT IN AS CAP ITAL, THERE WAS NO PURCHASE OF LAND AND ONLY THE SALE OF LAND T OOK PLACE. THE AO TREATED THE SALE OF LAND AS BUSINESS INCOME ON THE GROUND THAT WHEN DEVELOPMENT ACTIVITY TOOK PLACE, I T IS A SUFFICIENT GROUND FOR TREATING THE SAME AS BUSINES S INCOME. FURTHER, THE LD. AR SUBMITTED THAT YEAR AFTER YEAR WHEN THE LAND WAS SHOWN AS FIXED ASSET IN THE BALANCE SHEET AND WHEN THERE IS CONSISTENCY THAT IS FOLLOWED BY THE ASSESSEE, WH ICH ITSELF IS A SUFFICIENT GROUND TO PROVE THAT THE INCOME OFFERED UNDER THE HEAD CAPITAL GAINS GETS JUSTIFIED. TO SUPPORT HIS VIE W, HE RELIED ON THE DECISIONS OF THE HYDERABAD BENCH IN THE CASE OF DCI T V. MAHESHWARI PLAZA AND RESORTS LTD. CITED SUPRA, WHER EIN IT WAS HELD THAT CONSISTENCY IS A VIRTUE TO BE FOLLOWED B OTH THE BY THE ASSESSEE AND THE REVENUE. THE LD. AR ALSO SUBMIT TED THAT - - ITA 3254 & 3255/MDS/16 7 WHILE RENDERING THIS DECISION, THE BENCH FOLLOWED T HE APEX COURT JUDGMENT IN THE CASE OF RADHASWAMY SATSANG, 1991 (1 1) TMI 2 (SC). 4.1 FURTHER, THE LD. AR CONTENDED THAT DURING THE C OURSE OF APPELLATE PROCEEDINGS, IT WAS BROUGHT TO THE NOTICE OF THE FIRST APPELLATE AUTHORITY THAT BALANCE SHEET WAS PREPARED ONLY TO ARRIVE AT THE FINANCIAL POSITION OF THE ASSESSEE AN D AFTER ARRIVING AT THE PROFIT OR LOSS, THE SAME BEING DIVIDED AMONG ST THE PARTNERS IN THEIR RESPECTIVE PROFIT SHARING RATIO AS PER THE PARTNERSHIP DEED WHICH DOES NOT HAVE ANY BEARING ON THE TOTAL INCOME , SINCE, THE ASSESSEE OFFERED THE INCOME UNDER THE HEAD CAPITAL GAINS. THE LD. AR FURTHER CONTENDED THAT NO OTHER PURCHASE OF LAND HAD TAKEN PLACE AND WHAT WAS ORIGINALLY BROUGHT IN AS C APITAL BY THE PARTNERS IN THE FORM OF LAND IS BEING SOLD. THEREF ORE, THE LD. AR SUBMITTED THAT THE LOWER AUTHORITIES ARE NOT JUSTIF IED IN DISMISSING THE CASE OF THE ASSESSEE. 5. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORD ER OF THE CIT(APPEALS). - - ITA 3254 & 3255/MDS/16 8 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ISSUE AS TO WHETHER INCOME THAT IS REALISED FRO M THE SALE OF LAND IS CHARGEABLE TO INCOME-TAX AS CAP ITAL GAINS OR, OTHERWISE, AS INCOME FROM BUSINESS. THIS HAS BEEN T HE SUBJECT- MATTER OF A CONSIDERABLE AMOUNT OF JUDICIAL PRECEDE NT. IN JANKI RAM BAHADUR RAM V. CIT [1965] 57 ITR 21 (SC) THE SU PREME COURT LAID DOWN THE FOLLOWING GUIDELINES (HEAD-NOTE ) : ' IF A TRANSACTION IS RELATED TO THE BUSINESS WHICH I S NORMALLY CARRIED ON BY THE ASSESSEE, THOUGH NOT DIRECTLY PART OF IT, AN INTENTION TO LAUNCH UPON AN ADVENTURE IN THE NATURE OF TRADE MAY READILY BE INFERRED. A SIMILAR INFERENCE WOULD ARISE WHERE A C OMMODITY IS PUR CHASED AND SUB-DIVIDED, ALTERED, TREATED, OR REPAIR ED AND SOLD, OR IS CONVERTED INTO A DIFFERENT COMMODITY AND SOLD. MAGN ITUDE OF THE TRANSACTION OF PURCHASE, THE NATURE OF THE COMMODIT Y, SUBSEQUENT DEALINGS AND THE MANNER OF DISPOSAL MAY BE SUCH THA T THE TRANSACTION MAY BE STAMPED WITH A CHARACTER OF A TR ADING VENTURE. BUT A TRANSACTION OF PURCHASE OF LAND CANNOT BE ASS UMED WITHOUT MORE TO BE A VENTURE IN THE NATURE OF TRADE.' 7. IN G. VENKATASWAMI NAIDU AND CO. V. CIT [1959] 35 ITR 594 (SC), THE SUPREME COURT NOTED THAT SEVERAL FACT ORS ASSUMED RELEVANCE INCLUDING (I) WHETHER THE PURCHAS ER WAS A - - ITA 3254 & 3255/MDS/16 9 TRADER AND THE PURCHASE OF THE COMMODITY AND ITS RE SALE WERE ALLIED TO HIS USUAL TRADE OR BUSINESS OR INCIDENTAL TO IT ; (II) THE NATURE AND EXTENT OF THE TRANSACTION INVOLVED IN TH E PURCHASE AND SALE; (III) ACTS SUBSEQUENT TO THE PURCHASE FOR THE IMPROVEMENT OF THE QUALITY OF THE SUBJECT-MATTER ; (IV) ANY ACT PRIOR TO THE PURCHASE SHOWING A DESIGN OR PURPOSE, THE INCIDENTS ASSOCIATED WITH THE PURCHASE AND RESALE A ND THE SIMILARITY OF THE TRANSACTION TO OPERATIONS USUALLY ASSOCIATED WITH TRADE OR BUSINESS ; (V) THE REPETITION OF THE TRANSACTION ; AND (VI) THE ELEMENT OF PRIDE OF POSSESSION. 8. IN CIT V. V. A. TRIVEDI [1988] 172 ITR 95 (BOM ) A DIVISION BENCH OF THIS COURT, WHILE HOLDING THAT NO SINGLE T EST OR FORMULA CAN BE APPLIED IN DETERMINING WHETHER A TRANSACTION INVOLVING PURCHASE AND SALE OF LAND IS AN ADVENTURE IN THE NA TURE OF TRADE OBSERVED THAT GENERALLY SPEAKING, THE ORIGINAL INTE NTION OF THE PARTY IN PURCHASING THE PROPERTY, THE MAGNITUDE OF THE TRANSACTION OF PURCHASE, THE NATURE OF THE PROPERTY , THE LENGTH OF ITS OWNERSHIP AND HOLDING, THE CONDUCT AND SUBSEQUE NT DEALINGS OF THE ASSESSEE IN RESPECT OF THE PROPERTY , THE MANNER - - ITA 3254 & 3255/MDS/16 10 OF ITS DISPOSAL AND THE FREQUENCY AND MULTIPLICITY OF TRANSACTIONS AFFORDED VALUABLE GUIDES IN DETERMINING WHETHER THE ASSESSEE WAS CARRYING ON A TRADING ACTIVITY AND WHETHER A PA RTICULAR TRANSACTION SHOULD BE STAMPED WITH THE CHARACTER OF A TRADING ADVENTURE. 9. IN CIT V. DR. INDU BALA CHHABRA [2002] 258 ITR 111 (DELHI), A DIVISION BENCH OF THE DELHI HIGH COURT D EALT WITH A CASE WHERE THE ASSESSEE WHO DERIVED HER INCOME FROM THE MEDICAL PROFESSION HAD ACQUIRED CERTAIN PROPERTIES AS AN ASSET FOR CONSTRUCTING A NURSING HOME. SUBSEQUENTLY, AFTE R A LAPS OF TIME, THE ASSESSEE CARRIED OUT CONSTRUCTION ON THE PROPERTY. THE TRIBUNAL HAD NOTED THAT AFTER MAKING THE PURCHA SE, THE ASSESSEE HAD DISPOSED OF THE PROPERTY NEARLY TWENTY YEARS THEREAFTER. NO PRUDENT PERSON, THE TRIBUNAL HELD, W OULD HAVE WAITED FOR SUCH A LONG PERIOD OF TIME IF IT WAS A B USINESS PROPOSITION. THE GAIN RESULTING FROM THE SALE TRANS ACTION WAS TREATED AS CAPITAL GAINS AND NOT AS INCOME ARISING OUT OF AN ADVENTURE IN THE NATURE OF TRADE. THE DIVISION BENC H OF THE DELHI HIGH COURT, RELYING, INTER ALIA, UPON THE JUD GMENT OF THE - - ITA 3254 & 3255/MDS/16 11 SUPREME COURT IN G. VENKATASWAMI NAIDU (SUPRA), AFF IRMED THE VIEW OF THE TRIBUNAL. SIMILARLY, IN A DECISION OF T HE PUNJAB AND HARYANA HIGH COURT IN CIT V. SUSHILA DEVI JAIN [200 3] 259 ITR 671 (P&H), THE ASSESSEE HAD ACQUIRED CERTAIN PROPER TY UNDER THE WILL OF HER HUSBAND. THE PROPERTY CONSISTED OF A LARGE TRACT OF LAND WHICH WAS SOLD OUT IN PART. THE HIGH COURT HELD THAT THE RELEVANT TEST WAS TO FIND OUT THE INTENTION OF THE ASSESSEE AT THE TIME OF THE PURCHASE OF THE LAND. THE ASSESSEE HAD NEVER PURCHASED HER LAND SINCE IT HAD DEVOLVED ON HER THR OUGH TESTAMENTARY SUCCESSION. THE LAND WAS SOLD IN PARTS BECAUSE THE HUGE AREA COULD NOT BE SOLD IN ONE TRANSACTION AND SUCH AN ACTIVITY WAS HELD NOT TO AMOUNT TO TRADE OR BUSINES S WITHIN THE MEANING OF THE ACT. 10. ADVERTING TO THE FACTS OF THE PRESENT CASE, TH E ASSESSEE PURCHASED THE LONG TRACK OF LAND AND MADE IT AS PLO TS. AS PER THE OBJECT CLAUSE OF PARTNERSHIP DEED, THE BUSINESS OF THE ASSESSEE TO DEVELOP THE CONTINUOUS LAND BROUGHT IN BY THE PA RTNERS OF THE FIRM AS THEIR CAPITAL INTO PLOT AND CONSTRUCTED RES IDENTIAL PREMISES ON THE SAID LAND. THE GIST OF THE PARTNERSHIP DEED IS AS UNDER:- - - ITA 3254 & 3255/MDS/16 12 6. IT CAN BE SEEN FROM THE PARTNERSHIP DEED THAT PARTNERS HAVE HELD THE LANDS OF AROUND 20.510 ACRES SITUATED AN KARANAT VILLAGE AND BROUGHT THE SAME INTO THE FIRM AS THEIR CAPITAL AND BOOKED IN THE ACCOUNTS OF THE FIR M, AT THE ORIGINAL COST PRICE OF THE! LAND TO THE PARTNERS. O NCE THE LANDS WERE BROUGHT INTO THE FIRM, IT WOULD BE 4 TRA DING ASSET OF THE PARTNERSHIP FIRM, EVEN IF IT IS SHOWN AS FIXED ASSETS IN THE BALANCE SHEET, SINCE THE FIRM IS CON STITUTED ONLY WITH AN INTENTION TO DEVELOP THE CONTIGUOUS LA NDS HELD IN THE HANDS OF THE PARTNERS INTO PLOT AND CON STRUCT RESIDENTIAL APARTMENTS ETC. FURTHER, ONCE THE PARTN ERS BROUGHT IN THE LANDS INTO THE FIRM AS CAPITAL, THE LAND LOSES ITS IDENTITY AS FIXED ASSETS AND IT WILL BECO ME THE STOCK-IN-TRADE OF THE FIRM DUE TO ITS NATURE OF TRA DE, 7. FURTHER, THE ASSESSEE HAD ENTERED INTO AN AGREEM ENT WITH M/S.ETA STARK, PROPERTY DEVELOPERS LTD.; CHENN AL, FOR THE DEVELOPMENT OF THE SCHEDULE PROPERTY INTO RESIDENTIAL LAYOUTS/APPROVED PLOTS/VILLAS AND FOR O BTAINING - - ITA 3254 & 3255/MDS/16 13 NECESSARY PERMISSION/APPROVAL FROM DTCP. THE GIST O F THE AGREEMENT IS AS UNDER: 1. THAT THE PARTIES HEREBY ENTERED INTO THIS AGREE MENT FOR THE PURPOSE OF DEVELOPING SCHEDULE PROPERTY INTO RESIDENTIAL LAYOUTS/APPROVED PLOTS/VILLAS BY OBTAIN ING NECESSARY PERMISSIONS/APPROVAL FROM DTCP. 2. THAT THE FIRST PARTY HEREBY AUTHORISE AND APPOIN T THE SECOND PARTY AS THE DEVELOPER FOR THE RESIDENTIAL L AYOUT TO BE DEVELOPED IN THE SCHEDULE PROPERTY..... 12. THAT THE PARTIES SHALL MUTUALLY DECIDE THE NAME OF THE PROJECT AS ETA THE GOOD LIFE / WINGHAVEN GARDEN 11. IN THE INSTANT CASE, THE ASSESSEE HAD DEVELOPE D THE LANDS INTO PLOTS AND SOLD THE SAME TO VARIOUS PARTIES, NOT AS A SINGLE UNIT, SHOWS THAT THE ASSESSEE HAS DEALT WITH THE IMPUGNED LANDS AS STOCK-IN- TRADE OF THE BUSINESS, ONLY WITH AN INTENTION EARN PROFIT. THE ASSESSES ACTIVITY SQUARELY COVERS THE JUDGEMENT OF THE HONBL SUPREME COURT AS CITED ABOVE ON THE REASON THAT THE TRANSACTION IS - - ITA 3254 & 3255/MDS/16 14 RELATED TO THE BUSINESS, WHICH IS NORMALLY CARRIED ON BY THE ASSESSEE, THOUGH NOT DIRECTLY; PART OF IT, AN INTENTION TO E ARN UPON AN ADVENTURE IN THE NATURE OF TRADE MAY READILY BE INFERRED. 12. IN VIEW OF THE ABOVE, THE ASSESSEES CONTENTI ON THAT THE LANDS HAD BEEN SHOWN IN THE BALANCE SHEET AS FIXED ASSET S AND THEREFORE THE SALE PROCEEDS ON THE SALE OF THE LANDS HAD BEEN COMPUTED AND OFFERED UNDER CAPITAL GAINS, HAS NOT BEEN ACCEPTED AND THE SALE PROCEEDS ON THE SALE OF THE LANDS BY THE FIRM IS TR EATED AS BUSINESS INCOME. 13. FURTHER, THE ASSESSEE NOT ABLE TO SHOW THAT TH E FINDINGS OF THE LOWER AUTHORITIES HAS BASED ON NO EVIDENCE OR WHETH ER MISDIRECTED ITSELF IN LAW. CONSIDERING THE TOTALITY OF THE FAC TS OF THE CASE AND THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE, IT I S NOT POSSIBLE TO HOLD THAT THE ASSESSEE IS TREATED THE LAND AS INVES TMENTS. IN OTHER WORDS, THOUGH IT IS PRESUMED, IT WAS TREATED AS INV ESTMENTS IT DOES NOT ALTERNATE THE NATURE OF THE ACTIVITIES CARRIED OUT BY THE ASSESSEE. IT IS ONLY THE BUSINESS ACTIVITY IN LAND AND GAINS ARISING OUT OF THE SALE OF SUCH LAND TO BY MAKING PLOTS IS NOTHING BUT ADVE NTURE NATURE OF - - ITA 3254 & 3255/MDS/16 15 TRADE AND INCOME THERE FROM TO BE CONSIDERED AS PRO FIT FROM BUSINESS ONLY IN TERM SOF SEC.28 OF THE ACT. ACCORDINGLY, W E ARE COMPLETELY AGREEMENT WITH THE FINDINGS OF LD.CIT(A) ON THIS IS SUE AND THE APPEAL FILED BY THE ASSESSEE IS REJECTED. 14. SINCE THE SAME PRINCIPLE APPLIES TO OTHER APPE AL IN ITA NO.3255/MDS./2016, THIS APPEAL IS ALSO DISMISSED. 15. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED ON 21 ST JUNE, 2017. SD/- SD/- ( '. $ ) ( % & ' ' ) (G. PAVAN KUMAR) (CHANDRA POOJARI) 8 9: /JUDICIAL MEMBER ; 9:/ACCOUNTANT MEMBER %;8 /CHENNAI, B9 /DATED, THE 21 ST JUNE, 2017. K S SUNDARAM 9;C DE F;E / COPY TO: 1 . / APPELLANT 3. G () / CIT(A) 5. EHI J / DR 2. / RESPONDENT 4. G / CIT 6. IK L / GF