DCIT 24(3), MUMBAI V. SHREE SHREEMAL BUILDERS, MUMBAI

ITA 4294/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84206 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 22-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 26-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Capital asset; Business income; Revenue expenditure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI , BEFORE : SHRI I.P.BANSAL, JM & SHRI R.C.SHARMA , A M ITA NO. 4294 / MUM/20 1 1 ( ASSESSMENT YEAR : 200 8 - 200 9 ) DCIT - 24(3), MUMBAI VS. M/S SHREE SHREEMAL BUILDERS, SHREE SHREEMAL HOUSE, GOREGAON (W), MUMBAI - 400 090 PAN/GIR NO. : A BBFS 1075 L ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : SHRI LOVE KUMAR /ASSESSEE BY : SHRI VIMAL PUNMIYA DATE OF HEARING : 22 ND OCT . 201 4 DATE OF PRONOUNCEMENT : 14 TH NOV. 201 4 O R D E R PER R.C.SHARMA ( A .M.) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) , DATED 28 - 3 - 2011 FOR ASSESSMENT YEAR 2008 - 0 9 , IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE I.T. ACT, WHEREIN FOLLOWING GROUNDS H AVE BEEN TAKEN : - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN HOLDING THE SURPLUS AMOUNT OF RS.3,03, 11, 697/ - ON SALE OF PROPERTY UNDER THE HEAD INCOME FROM CAPITAL GAIN AS AGAINST ASSESSED BY AO UNDER THE HEAD IN COME FROM BUSINESS AND ALLOWING DEDUCTION TO THE TUNE OF RS.50 LACS U/S.54EC OF I.T. ACT BY IGNORING THE FACT THAT THE RENTAL INCOME REALIZED FROM THE IMPUGNED ASSET HAS BEEN OFFERED TO TAX UNDER THE HEAD BUSINESS INCOME IN EARLIER YEARS BY THE ASSESSEE AND CLAIMED VARIOUS EXPENSES AGAINST IT. 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE GROUNDS BE SET ASIDE AND MATTER MAY BE DECIDED ACCORDING TO LAW. ITA NO. 4294 /1 1 2 2 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE HAS SOLD ONE OF ITS BUILDING WHICH WAS ACQUIRED IN THE YEAR 1978 AND OFFERED CAPITAL GAINS THEREON. HOWEVER, THE AO WAS OF THE VIEW THAT PROFIT EARNED ON SALE OF BUILDING WAS IN THE NATURE OF BUSINESS INCOME IN VIEW OF THE FACT THAT ASSESSEE WAS ENGAGED I N THE BUSINESS OF DEVELOPMENT OF REAL ESTATE AND RENTAL INCOME THEREON WAS OFFERED AS BUSINESS INCOME . BY THE IMPUGNED ORDER, CIT(A) AFTER CONSIDERING VARIOUS JUDICIAL PRONOUNCEMENTS AND APPLYING THE SAME TO THE FACTS OF THE CASE REACHED TO THE CONCLUSION THAT PROPERTY SO SOLD WAS CAPITAL ASSET HELD BY THE ASSESSEE SINCE 1986. THE CIT(A) FURTHER OBSERVED THAT THIS PROPERTY WAS NOT TREATED BY THE ASSESSEE AS STOCK IN TRADE IN THE BALANCE SHEET IN ANY OF THE EARLIER YEARS NOR IN THE YEAR UNDER CONSIDERATION. ACCORDINGLY, THE CIT(A) ALLOWED ASSESSEES CLAIM OF LONG TERM CAPITAL GAIN S . A FTER GIVING BENEFIT OF INDEXATION AND INVESTMENT MADE IN CAPITAL GAINS BONDS U/S.54EC, CIT(A) ALLOWED ASSESSEES CLAIM OF CAPITAL GAINS AFTER HAVING THE FOLLOWING OBSERVATIONS: - 2.3 I HAVE GONE THROUGH THE CONTENTS OF THE IMPUGNED ASSESSMENT ORDER AS WELL AS ARGUMENTS & SUBMISSIONS OF LD. AUTHORIZED REPRESENTATIVE OF THE APPELLANT ALONG WITH MATERIAL AVAILABLE ON RECORD. I FIND THAT THE ASSESSING OFFICER HAS TREATED THE TRANSACT ION OF SALE OF SUKANRAJ CENTRE TO BE A BUSINESS TRANSACTION ON THE BASIS OF THE PRESUMPTION THAT THIS PROPERTY HAS BEEN SHOWN AS BUSINESS ASSET IN THE BALANCE SHEET AS AT 31ST OF MARCH 2008. IN MY OPINION, THE FACT CANNOT BE ASCERTAINED BY MERELY LOOKI NG AT THE DESCRIPTION' IN THE BALANCE - SHEET FOR THE IMPUGNED' ASSET AS AT 31ST OF MARCH 2008 AS TO WHETHER THE IMPUGNED ASSET I S A STOCK - IN - TRADE OR AN INVESTMENT. I HAVE GONE THROUGH THE BALANCE - SHEETS OF MANY EARLIER YEARS AND FOUND THAT THE IMPUGNED ASS ET HAS BEEN SHOWN IN THE BALANCE - SHEET UNDER THE CAPTION 'SUNDRY LAND ASSET' AND IT HAS NEVER BEEN SHOWN AS STOCK - IN - TRADE SINCE 1986, IT HAS ALSO NOT SHOWN AS STOCK - IN - TRAD E' IN THE BALANCE - SHEET AS AT 31 ST OF MARCH. ,2008. I AM ALSO OF THE CONSIDERED OPI NION THAT' THE PERSON WHO IS IN THE BUSINESS OF C ONSTRUCTION AND DEVELOPMENT, IS NOT BARRED BY ANY PROVISIONS OF I. T. ACT 1961 TO KEEP A FEW PROPERTIES AS THE ASSET TO FETCH INCOME BY WAY' OF OTHER' THAN THE SALE THEREOF ITA NO. 4294 /1 1 3 BY EXPLOITING THE PROPERTY FROM YEAR TO YEAR SINCE LONG. THUS, I FIND FORCE IN THE ARGUMENTS & SUBMISSIONS OF THE LD. AUTHORIZED REPRESENTATIVE THAT THE IMPUGNED. PROPERTY WHICH WAS BEING EXPLOITED FROM YEAR T O YEAR TO FETCH THE RENTAL I NCOME, NO MATTER I T WAS TAXED AS 'BUSINESS INCOME' OR 'INCOME FROM OTHER SOURCES' OR 'INCOME FROM HOUSE PROPERTY', REMAINS A CAPITAL ASSET IN THE HANDS OF THE APPELLANT TO GENERATE THE DISCLOSED CAPITAL GAINS ON THE TRANSACTION OF SALE OF THE IMPUGNED PROPERTY THAT CANNOT BE TAXED A S 'BUSINESS INCOME'. I A LSO FIND THE RELIANCE OF THE APPELLANT PLACED ON VARIOUS CASE LAWS TO BE APPROPRIATE IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE AND APPLICABLE WHEREIN THE IMPUGNED P R OPERTY HAS NOT BEEN SHOWN AS STOCK - IN - TRADE. MERELY BECAUSE THE INTEREST PAID ON B ORROWED FUNDS ATTRIBUTABLE TO THE IMPUGNED PROPERTY IS CAPITALIZED TO ENHANCE THE VALUE OF THE ASSET AND RENTAL INCOME BEING ASSESSED AS 'BUSINESS INCOME' CANNOT CONCLUSIVELY PROVE THE IMPUGNED ASSET TO BE DEEMED AS STOCK - IN - TRADE. RATHER, IT IS OTHER WAY ROUND. HAD THE INTEREST ON BORROWED FUNDS ATTRIBUTABLE TO THE IMPUGNED ASSET NOT BEEN CAPITALIZED, THE ADVERSE IN FERENCE COULD HAVE BEEN DRAWN AS IN THAT CASE, THE SAME INTEREST COULD HAVE BEEN CHARGED AS REVENUE EXPENSE IN HIS REGULAR COURSE OF BUSINESS. BUT IT IS NOT THE CASE EITHER OF THE APPELLANT OR THE ASSESSING OFFICER. THEREFORE, I DO NOT FIND ANY JUSTIFICATION IN REJECTING THE APPELLANT'S CLAIM TO TREAT THE TRANSACTION OF SALE OF THE IMPUGNED PROPERTY TO GENERATE 'BUSINESS INCOME' AND NOT 'CAPITAL GAINS'. HENCE, IN VIEW OF ABOVE DISCUSSION, THE ASSESSING OFFICER IS DIRECTED TO ACCEPT THE DISCLOSED CAPITAL G AINS ON. THIS TRANSACTION AS THERE IS NO DISPUTE IN THE FIGURES AND ACCORDINGLY ALLOW THE BENEFIT U/S 54EC OF THE I . T . ACT 19 61. THE APPEAL IS A LLOWED ON 1 ST & 2ND GROUND, BOTH OF THE APPEAL. 3 . AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. LEARNED DR RELIED ON THE ORDER OF AO AND CONTENDED THAT SINCE ASSESSEE WAS A DEVELOPER AND BUILDER, THE PROPERTY SO ACQU IRED AND SOLD BY THE ASSESSEE HAD CONSTITUTED STOCK - IN - TRADE, THEREFORE, THE AO WAS CORRECT IN HOLDING THE PROFIT ON ITS SALE AS BUSINESS INCOME IN PLACE OF CAPITAL GAINS. 5 . IT WAS ARGUED BY LEARNED AR THAT EVEN THOUGH ASSESSEE ENGAGED IN THE BUSINESS OF CONSTRUCTION, BUT IT WAS ALSO HOLDING PROPERTIES AS INVESTMENT. AS PER LEARNED AR ASSESSEE HAS SOLD SUCH PROPERTY DURING THE YEAR AND AFTER CLAIMING BENEFIT OF INDEXATION AND INVESTMENT IN CAPITAL BONDS OFFERED THE INCOME UNDER THE HEAD CAPITAL GAINS. AS PER LEARNED ITA NO. 4294 /1 1 4 AR THERE WAS NO MUCH ACTIVITY IN BUSINESS OF DEVELOPMENT AND CONSTRUCTION SINCE LAST 10 - 15 YEARS AND FOR THIS PURPOSE, OUR ATTENTION WAS INVITED TO THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF THE ASSESSEE FOR THE EARLIER ASSESSMENT YEARS. AS PER LEARNED AR ASSESSEE WAS HOLDING SOME PROPERTIES WHIC H WAS NOT FOR THE PURPOSE OF RESALE OR CONSTRUCTION OF BUILDING THEREON BUT FOR THE PURPOSE OF EARNING FUTURE BENEFITS. IN SUPPORT OF THE PROPOSITION THAT EVEN THOUGH ASSESSEE WAS IN THE BUSINESS OF BUILDER, CERTAIN PROPERTIES HELD AS INVESTMENT WAS LIABLE TO BE TREATED AS CAPITAL ASSET AND PROFIT ARISING ON THEIR SALE IS LIABLE TO BE TAXED AS CAPITAL GAIN , L EARNED AR RELIED ON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF JANKI RAM BHADUR RAM VS. CIT, 57 ITR 21(SC) , SHASHI KUMAR AGRAWAL, 131 TAXMANN.COM 823 (ALL . HC) , SOHAN KHAN AND MOHAN KHAN, 304 ITR 194 (RAJASTHAN HC) . LEARNED AR ALSO RELIED ON THE PROPOSITION LAID DOWN BY ITAT MUMBAI BENCH IN THE CASE OF GOPAL PUROHIT, 29 SOT 117(MUM) , W HEREIN IT WAS HELD THAT ASSESSEE CAN HOLD IN SHARES AS INVESTMENT AS WELL AS IN STOCK - IN - TRADE. THE SHARES HELD AS INVESTMENT ARE LIABLE TO CAPITAL GAIN TAX, WHEREAS SHARES HELD AS STOCK - IN - TRADE ARE LIABLE TO BE TAXED UNDER THE HEAD BUSINESS INCOME ON THE IR SALE. THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL WAS AFFIRMED BY THE HONBLE BOMBAY HIGH COURT AND THE SLP FILED BY THE DEPARTMENT BEFORE THE HON BLE SUPREME COURT WAS ALSO DISMISSED. LEARNED AR ALSO RELIED ON THE DECISION OF THE HON BLE MADRAS HI GH COURT IN THE CASE OF NSS INVESTMENT, 277 ITR 149 AND CIT VS.GULMOHAR FINANCE LTD., ORDER DATED 18 - 2 - 2008 (DELHI HIGH COURT) . IN SUPPORT OF THE PROPOSITION THAT A N ASSESSEE CAN HOLD AN ASSET AS ITA NO. 4294 /1 1 5 INVESTMENT AS WELL AS STOCK IN TRADE, RELIANCE WAS PLACED ON FOLLOWING JUDICIAL PRONOUNCEMENTS : - A) GOPAL ROHIT VS. JCIT (2009) 29 SOT 117 (MUM) B) SHANTILAL M. JAIN V~. ACIT(2012 144 TTJ (MUM) 718 C) CIT VS. GULMOHAR FINANCE LTD. D) VESTA INVESTMENT AND TRADING CO. (P) LTD. AND ORS V/ S ACIT . E) CIT.VS. N.S. S. INVESTMENT P LTD (200~) 277 ITR 149 (MAD.) J) MOTLLAL OSWAL VS. CIT ITA T MUMBAI G ' BENCH G) CIT VS. SAHARA INDIA HOUSING CORPORATION. LTD. H) CIT VS. H.B. STOCK HOLDINGS LTD. I) BOARD CIRCULAR NO.4 DATED JUNE 15(2007) 291 ITR 384 ) 6 . WITH REGARD TO THE CONTENTION THAT INTEREST ON LOAN WHICH WAS CAPITALIZED TO THE ASSET ACCOUNT AND NOT CLAIMED AS REVENUE EXPENDITURE ARE LIABLE TO BE ADDED , L EARNED AR RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CHALLAPALI SUGAR LTD., 38 ITR 167 , HON BLE MADRAS HIGH COURT IN THE CASE OF R AJAGOPALA RAO, 125 TAXMANN 148 , CIT VS. MITHLESH KUMARI, 92 ITR 9 (DELHI HC) , ACIT VS. K.S.GUPTA, 119 ITR 372 (ANDHRA PRADESH HIGH COURT) , CIT VS. SHRI HARIRAM HOTELS (P) LTD., 325 ITR 336 (KARNATAKA HIGH COURT) , CIT VS. SETTLEMENT COMMISSION, 322 ITR 578 (KERALA HIGH COURT) AND CIT VS. MAITHREYI PAI, 152 247 (KARNATAKA HIGH COURT) . 7 . WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAD ALSO DELIBERATED ON THE JUDIC IAL PRONOUNCEMENTS REFERRED BY THE LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY THE LEARNED AR AND DR DURING THE COURSE OF HEARING BEFORE US, IN THE CONTEXT OF FACTUAL MATRIX OF INSTANT CASE. FROM THE RECORD, WE FOUND THAT ASSESSEE HA S ACQUIRED PROPERTY NAMELY, SUKANRAJ CENTRE IN THE YEAR 1978. SINCE 1978, PROPERTY WAS SHOWN UNDER THE HEAD LAND ASSET . THE INTEREST PAID ON THE FUNDS BORROWED FOR ITA NO. 4294 /1 1 6 ACQUISITION OF PROPERTY WAS ALSO CAPITALIZED BY THE ASSESSEE IN ALL THE YEARS TILL THE Y EAR OF SALE I.E. 2008. SUCH INTEREST EXPENSES WAS NOT CLAIMED IN THE PROFIT AND LOSS ACCOUNT IN ANY OF THE YEARS AND SAME WAS FORMING PART OF THE COST OF IMPROVEMENT OF PROPERTY. DURING THE YEAR UNDER CONSIDERATION ASSESSEE SOLD THE SAID PROPERTY AND DECLA RED CAPITAL GAIN OF RS. 1,46,51,978/ - . HOWEVER, THE AO DID NOT ACCEPT ASSESSEES CLAIM AND TREATED GAIN SO EARNED AS PROFIT FROM BUSINESS AND PROFESSION. THE MAIN OBJECTION OF THE AO WAS THAT ASSESSEE WAS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF REAL ESTAT E , T HEREFORE, PROPERTY SO ACQUIRED WAS FORMING PART OF ASSESSEES STOCK - IN - TRADE. THE AO ALSO OBSERVED THAT ASSESSEE HAD SHOWN RENTAL INCOME FROM THE PROPERTY UNDER BUSINESS HEAD IN EARLIER YEARS. WE FOUND THAT SAID PROPERTY WAS ACQUIRED AND HELD BY ASSESS EE FO R 30 YEARS, WHICH IS SUFFICIENT TO ESTABLISH THAT PROPERTY WAS CAPITAL ASSET ONLY AND NOT ACQUIRED FOR SALE IN THE NORMAL COURSE OF BUSINESS. WHILE ACQUIRING THE PROPERTY ASSESSEE WAS HAVING LONG TERM PROSPECTIVE, WHICH IS EVIDENT FROM SCHEDULE IN WHI CH IT WAS SHOWN AS LAND ASSET AND NOT AS LAND STOCK. THE VERY NATURE OF TRANSACTION I.E. WH ETHER TRADING OR INVESTMENT IS DECIDED AT THE TIME OF ACQUISITION OF PROPERTY. THE TREATMENT GIVEN BY THE ASSESSEE IN THE BOOKS OF ACCOUNT IS ONE OF THE MOST IMP ORTANT FACTORS THAT DETERMINES THE NATURE OF ASSETS AS TO WHETHER INVESTMENT OR STOCK - IN - TRADE . FROM THE VERY YEAR OF ITS ACQUISITION I.E. 1978 ASSESSEE HAS CONSISTENTLY SHOWN THE PROPERTY AS INVESTMENT RATHER THAN AS STOCK - IN - TRADE. HONBLE SUPREME CO URT IN THE CASE OF K.C.THAPPAR VS. CIT, 82 ITR 899 HAS H ELD THAT A PARTICULAR ASSET OWNED AS INVESTMENT IN THE BOOKS AS WELL AS BALANCE SHEET, IS ONE OF THE MOST RELEVANT FACTOR EVEN THOUGH NOT CONCLUSIVE TO HOLD THAT ASSETS WERE HELD ITA NO. 4294 /1 1 7 BY ASSESSEE AS INVEST MENT. WE HAD VERIFIED THE BALANCE SHEET OF ASSESSEE FOR EARLIER YEARS STARTING FROM 1978 AS WELL AS PROFIT AND LOSS ACCOUNT AND FOUND THAT THIS PROPERTY WAS SHOWN CONSISTENTLY AS INVESTMENT AND INTEREST PAID ON THE LOAN TAKEN FOR ITS ACQUISITION WAS ALWAYS CAPITALIZED AND NOT CLAIMED AS REVENUE EXPENDITURE IN ANY OF THE YEARS BY DEBITING ITS PROFIT AND LOSS ACCOUNT. IT IS ALSO PERTINENT TO NOTE THAT MERE PRESENCE OF PROFIT MOTIVE DOES NOT LEAD TO THE CONCLUSION THAT TRANSACTION HAD BEEN ENTERED AS AN ADVENT URE IN THE NATURE OF TRADE. ALSO PROFIT MOTIVE WOULD NOT DISTINGUISH A TRANSACTION OF INVESTMENT OR A TRADING TRANSACTION BECAUSE EVEN IN THE CASE OF INVESTMENT THERE MAY BE MOTIVE THAT AN ASSESSEE SHOULD BE ABLE TO SALE SUCH INVESTMENT AT PREMIUM AS HELD BY HONBLE DELHI HIGH COURT IN THE CASE OF DINESH KUMAR, 2 SOT 126 . MERE ASSESSEE BEING INVOLVED IN BUSINESS OF REAL ESTATE DEVELOPMENT WILL NOT DEBAR ASSESSEE TO HOLD SOME OF THE PROPERTY AS INVESTMENT INSOFAR AS SAME ARE TREATED IN THE BOOKS OF ACCOUNTS ALSO AS INVESTMENT NOT MEANT FOR RESALE IN THE REGULAR COURSE OF BUSINESS. IT IS ALSO EVIDENT FROM ITS AUDITED ACCOUNTS THAT THERE WAS NO MUCH ACTIVITY IN BUSINESS OF DEVELOPMENT AND CONSTRUCTION SINCE LAST 10 - 12 YEARS. MERELY BECAUSE RENTAL INCOME EARNED ON THE SAID PROPERTY WAS SHOWN AS BUSINESS INCOME , THE PROPERTY SO HELD AS INVESTMENT CANNOT BE TREATED AS A STOCK - IN - TRADE OF THE BUSINESS IGNORING THE FACT THAT REAL ESTATE BUSINESS IS SEPARATE FROM RENTAL INCOME. CLAIM OF RENTAL INCOME AS BUSINESS I NCOME WILL NOT CHANGE THE CHARACTER OF PROPERTY SO HELD AS CAPITAL INVESTMENT ON WHICH ASSESSEE HAS EARNED THE RENTAL INCOME. THE INTENTION OF THE ASSESSEE SINCE BEGINNING WAS ONLY TO HOLD THE CAPITAL ASSET FOR THE PURPOSE OF EXPLOITING THE SAME AND EARNIN G REGULAR INCOME ITA NO. 4294 /1 1 8 FROM IT. THE FACT THAT THE PROPERTY WAS SOLD AFTER 30 YEARS OF ITS ACQUISITION , ITSELF IS SUFFICIENT TO ESTABLISH THAT ASSET WAS CAPITAL ASSET ONLY. IT IS ALSO NOT IN DISPUTE THAT ASSESSEE HAD NEVER TREATED THE SAID PROPERTY AS STOCK - IN - TR ADE, WHICH IS EVIDENT FROM THE BALANCE SHEET S OF ASSESSEE, WHEREIN THIS PROPERTY WAS SHOWN UNDER THE HEAD SUNDRY LAND ASSETS. THE HON BLE DELHI HIGH COURT IN THE CASE OF HITASHI ESTATE LTD., 178 TAXMAN 2011 , HELD THAT EVEN A CAPITAL ASSET WRONGLY SHOWN A S STOCK AND CERTAIN EXPENDITURE ALSO CLAIM IN EARLIER YEAR DOES NOT CONVERT THE CAPITAL ASSET INTO STOCK IN TRADE. 8 . THE AO HAS ALSO OBSERVED THAT ANY ASSET PURCHASED WITH BORROWED FUNDS WILL AMOUNT TO BUSINESS ASSET AND RESULTANT INCOME HAS TO BE TAXED AS BUSINESS INCOME. WE DO NOT FIND ANY MERIT IN THIS OBSERVATION OF THE AO, INSOFAR AS INVESTMENT IN CAPITAL ASSET CAN BE UNDERTAKEN EITHER BY OWN FUNDS OR BY BORROWED FUNDS. THERE IS NO BAR NOTIFIED BY ANY LAW OR JUDICIAL PRONOUNCEMENTS OR CBDT CIRCULAR , WHICH SUPPORT S THE CONTENTION OF THE AO THAT CAPITAL ASSET ACQUIRED WITH THE BORROWED FUNDS WILL BE TAXED AS BUSINESS INCOME. 9 . THE APPREHENSION OF THE AO TO THE EFFECT THAT ASSESSEE HAS ACQUIRED THE PROPERTY WITH THE INTENTION OF THE DEVELOPMENT, HOWEVER , IN THE PRESENT CASE, THE ASSESSEE HAS NOT UNDERTAKEN ANY DEVELOPMENT IN THE SAID PROPERTY. THE PROPERTY PURCHASED WAS KEPT AS IT IS FOR 30 YEARS AND SOLD THEREAFTER. IT IS SUFFICIENT TO SHOW THAT ASSET IS CAPITAL IN NATURE. 10 . HONBLE SUPREME COURT IN THE CASE OF CIT VS. RAJASTHAN MINES LTD., 78 ITR 45 , OBSERVED AS UNDER : - THE FACT THAT THE ASSESSEE SOLD PROPERTY PURCHASED BY IT FOR PROFIT IS NOT DECISIVE IN FINDING OUT WHETHER THE SALE WAS EFFECTED IN THE COURSE OF THE BUSINESS OF THE ASSESSEE. FROM THE FACT THAT THE ITA NO. 4294 /1 1 9 ASSESSEE COULD NOT UNDERTAKE LARGE - SCALE AND PROFITABLE MINING IN THE AREA WHICH WAS IN ITS POSSESSION, NO INFERENCE MAY BE DRAWN THAT LANDS WERE ACQUIRED WITH A VIEW TO SELL LATER ON, NOR THE CIRCUMSTANCE THAT THE PROPERTIES WERE SO LD VERY SOON AFTER THEY WERE PURCHASED AFFORDS ANY BASIS FOR THE CONCLUSION THAT THE SALE IN QUESTION WAS EFFECTED IN THE COURSE OF THE BUSINESS. THE PRIMARY FACTS FOUND EITHER INDIVIDUALLY OR COLLECTIVELY COULD NOT HAVE AFFORDED A BASIS FOR ARRIVING AT T HE CONCLUSION TH AT THE TRANSACTION IN QUESTION WAS AN ADVENTURE IN TRADE . 11 . IT IS ALSO NOT IN DISPUTE IN THE PRESENT CASE THAT DEPARTMENT ITSELF HAS ACCEPTED ASSESSEES CLAIM OF LAND ASSET INSOFAR AS NONE OF THE EARLIER YEARS, THE AO HAS OBJECTED THE T REATMENT OF SAID PROPERTY AS LAND ASSET IN THE NATURE OF CAPITAL INVESTMENT. 12 . WITH REGARD TO ASSESEES CLAIM FOR EXEMPTION U/S.54EC, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A), INSOFAR AS AFTER GIVING CATEGORICAL FINDING THE CIT(A) HAS OBSERV ED THAT ASSESSEE HAS SOLD THE LONG TERM CAPITAL ASSET WHICH IS HELD FOR INVESTMENT PURPOSE. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ACE BUILDERS, 144 TAXMANN 855 , OBSERVED THAT EXEMPTION U/S.54EC IS ALLOWABLE ON ASSET WHERE IT IS DEPRECIABLE O R NON - DEPRECIABLE ASSET, THEREFORE, EXEMPTION AVAILABLE TO DEPRECIABLE ASSET U/S.54EC CANNOT BE DENIED BY REFERRING TO FICTION CREATED UNDER SECTION 50 OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT GAIN ON SALE OF CAPITAL ASSET SUKANRAJ CENTER HAVE RIGHTLY BEEN TREATED AS CAPITAL GAIN BY CIT(A) AFTER GIVING DETAILED FINDING AT PARA 2.3 OF HIS ORDER, WHICH HAS NOT BEEN CONTROVERTED BY LEARNED DR BY BRINGING ANY POSITIVE MATERIAL ON RECORD. 13 . IN SUPPORT OF THE PROPOSITION THAT LONG TERM CAPI TAL ASSET IS ELIGIBLE FOR CLAIM OF EXEMPTION U/S.54EC, RELIANCE CAN BE PLACED ON THE FOLLOWING DECISION S : - I) CIT VS. ASSAM PETROLEUM INDUSTRIES (P) LTD. 2003 131 TAXMANN 699 (GAU) , ITA NO. 4294 /1 1 10 II) CIT VS. ACE BUILDERS PVT. LTD. 2005 144 TAXMANN 855 (BOM) III) CIT VS . LEGAL HEIRS OF LATE MRS. S.R.PANDIT, ITA NO.144/2007, DATED 30 - 08 - 2005 IN VIEW OF THE ABOVE, THE CIT(A) HAS RIGHTLY ALLOWED THE APPEAL OF THE ASSESSEE AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AVAILABLE ON RECORD AND APPLYING THE JUDICIA L PRONOUNCEMENTS AS CITED BY LEARNED AR AND ALSO QUOTED BY AO IN HIS ORDER. 14 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 / 1 1 / 201 4 . / 1 1 / 2014 SD/ - SD/ - ( ) ( I.P.BANSAL ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 14 / 1 1 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//