Shri Shantilal Soni, JODHPUR V. DCIT, JODHPUR

ITA 451/JODH/2009

• Counselvise Citation: 45123314 RSA 2009
• Duration Of Justice: 2 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 24-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G R KOKANI
• Assessee Lawyers: U C JAIN
• Keywords: Capital asset; Business income
• Section: 80C; 80G

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR (BEFORE SHRI R.K. GUPTA AND SHRI .N.L. KALR A ) ITA NOS.451/JU/2009 ASSESSMENT YEARS : 2006-07 PAN: AEPPS 3218 H SHRI SHANTI LAL SONI VS. THE DCIT JODHPUR CIRCLE- 3, JODHPUR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI U.C. JAIN DEPARTMENT BY: SHRI G.R. KOKANI DATE OF HEARING: 28-11-2011 DATE OF PRONOUNCEMENT: 30.11.2011. ORDER PER N.L. KALRA, AM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD.CIT(A), JODHPUR DATED 12-06-2009 FOR THE ASSESSMENT YEAR 2006-07. 2.1 THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN HOLDING LONG TERM CAPITAL GAIN ON SALE OF TWO PLOTS BEARING NO. 350 AND 351 SITUATED AT DILIP NAGAR, MANDORE IS TO BE TAXED UNDER THE HEAD INCOME FROM BUSINESS AS AGAINST PROFIT SHOWN UNDER THE HEAD INCOME FROM CAPITAL GAIN BY TH E ASSESSEE. 2.2 THE AO DURING THE COURSE OF ASSESSMENT PROCEEDI NGS NOTICED THAT THE ASSESSEE HAS SHOWN INCOME FROM SALE OF PLOTS OF LAND AS BUSINESS INCOME IN THE RETURN FILED FOR THE ASSESSMENT YEAR 2005-06 AND 2007-08. HOWEVER, FOR T HE YEAR UNDER CONSIDERATION , THE ASSESSEE HAS SHOWN PROFIT FROM SALE OF PLOTS UNDER THE HEAD INCOME FROM CAPITAL GAIN. 2 THE AO THEREFORE, REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY INCOME FROM SUCH SHORT TERM CAPITAL GAIN ON ACCOUNT OF SALE OF LAND BE NOT TREATED AS BUSINESS INCOME. 2.3 BEFORE THE AO, THE ASSESSEE SUBMITTED THAT PLOT NO. 350 AND 351 WERE PURCHASED ON 26-101993 FOR INVESTMENT PURPOSES AS LONG TERM C APITAL ASSET. PLOTS IN KHASRA NO. 614 AND 615 WERE PURCHASED AS LONG TERM CAPITAL ASSET A ND LOOKING TO THE SITUATION AND OTHER COMPELLING CIRCUMSTANCES, THESE WERE SOLD AND PROFI T THEREOF WAS SHOWN AS BUSINESS INCOME. THE PROFIT FROM SALE OF PLOTS WHICH WAS PUR CHASED IN 1993 CANOT BE CONSIDERED AS BUSINESS INCOME IN VIEW OF SECTION 2(29B) OF THE ACT. 2.4 THE AO IN HIS ORDER HAS REPRODUCED THE CHART TO SHOW THAT THE ASSESSEE IS INDULGING IN PURCHASE AND SALE OF PLOTS AND IT IS T HE BUSINESS ACTIVITY OF THE ASSESSEE OF SELLING THE PLOTS AFTER PURCHASE. THE DETAILS ARE A S UNDER:- S.NO. PLOT NO. DATE OF PURCHASE AMOUNT/ DATE OF SALE 1. VILLAGE MANDORE DISTT. JODHPUR KHASARA NO. 614. 6-01-1995 7-08-2004(DT. OF REGISTRY) 1,75,000 31-08-2005 2. PLOT NO. 6 BANSHI VIHAR VILLAGE CHAINPURA TEHSIL-JODHPUR. 28-07-2004 10,00,000 31-12-2005 3. KHASARA NO. 614 VILLAGE MANDORE 6-01-1995 7-08-2004(DT. OF REGISTRY) 1,75,000 31-08-2005 4. KHASARA NO.615 VILLAGE MANDORE 1-01-2002 3,50,000 30-08-2005 5. PLOT NO. 351 DILIP NAGAR MANDORE KHASARA NO. 1880 9-11-1993 1,90,000 9-12-2005 6. PLOT NO. 350 KHASARA NO. 1880 MANDORE 9-10-1990 9-11-1990(DT. OF REGISTRY) 1,90,000 12-12-2005 7. PLOT NO 22 KHASARA NO 614 MANDORE RADHA MADHAV NAGAR 6-01-1995 40,000 8-09-2005 8. PLOT NO 21 KHASARA NO 614 MANDORE RADHA MADHAV NAGAR 6-01-1995 41,000 22-08-2005 9. PLOT NO 18 KHASARA NO 614 MANDORE RADHA MADHAV NAGAR 6-01-1995 43,000 05-04-2005 3 THE AO FURTHER HELD THAT THE DECISION OF HON'BLE JURISDCTIONAL HIGH COURT IN THE CASE OF CIT VS SOHAN KHAN, 304 ITR 194 IS NOT APPLICABLE BE CAUSE IN THAT CASE THE LAND WAS ANCESTRAL AND THE PLOTS WERE SOLD WITHIN PERIOD OF LAST 5 TO 10 YEARS. THE AO WAS OF THE VIEW THAT PROBLEM SHOULD BE APPROACHED IN THE LIG HT OF THE INTENTION OF THE ASSESSEE. THE ASSESSEE WAS PURCHASING THE LAND FOR SELLING IT FOR PROFIT. THE AO HAS REFERRED TO VARIOUS DECISIONS IN WHICH IT HAS BEEN HELD THAT I NCOME IS TO BE TAXED UNDER PROPER HEAD IN SPITE OF THE FACT THAT THE ASSESSEE HAS RETUNED IT UNDER DIFFERENT HEADS.. 2.5 THE LD.CIT(A) AFTER CONSIDERING THE CONTENTIONS OF THE ASSESSEE UPHELD THE FINDING OF THE AO AFTER OBSERVING AS UNDER:- UPON CAREFUL CONSIDERATION OF THE FACTS MENTIONED IN THE ASSESSMENT ORDER AS ALSO THE SUBMISSION MADE BY THE APPELLANT, I FIND THAT THE BONE OF THE CONTENTION BETWEEN THE AS SESSING OFFICER AND THE APPELLANT IS REGARDING THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF THE PLOT. WHILE BOTH THE ASSESS ING OFFICER AND THE APPELLANT RIGHTLY CONTEND THAT THE INTENTION OF THE PURCHASER AT THE TIME OF PURCHASE OF THE PROPERTY IS THE MOST RE LEVANT FACTOR TO DETERMINE WHETHER SUCH ASSET IS CAPITAL ASSET FROM WHICH INCOME FROM CAPITAL GAIN ARISES OR IS STOCK IN TRADE FROM WHICH INCOME FROM BUSINESS SHALL ARISE UPON SALE. WHILE THE ASSE SSING OFFICER HAS ARRIVED AT A FINDING UPON CONSIDERATION OF RELEVANT FACTS AND CIRCUMSTANCES THAT THE ASSESSEE HAD FAILED TO ESTAB LISH ON THE BASIS OF RELEVANT MATERIAL AND EVIDENCES THAT IT HAD AN I NTENTION TO PURCHASE THE PROPERTY AS AN INVESTMENT AND NOT AS S TOCK IN TRADE AT THE TIME THE PROPERTY WAS PURCHASED THE APPELLANT A SSESSEE INSISTENCE BEFORE THE ASSESSING OFFICER AS ALSO DUR ING THE APPELLANT PROCEEDING WAS THAT IT HAD PURCHASED THE PLOT OF LA ND FOR THE PURPOSE OF CONSTRUCTING HIS OWN RESIDENTIAL HOUSE A ND THEREFORE 4 SUCH PURCHASE SHOULD BE TREATED AS INVESTMENT AND T HE PROPERTY PURCHASED BE TREATED AS CAPITAL ASSET. HOWEVER I FI ND THAT THE CONTENTION THAT THE TWO PLOTS OF LAND WERE PURCHASE D WITH THE INTENTION TO CONSTRUCT A RESIDENTIAL HOUSE WAS NEVE R DISCLOSED BEFORE THE ASSESSING OFFICER AND THEREFORE THE APPE LLANT CANNOT BE ALLOWED TO RAISE SUCH CONTENTION FOR THE FIRST TIME DURING THE APPELLATE PROCEEDING. YET FURTHER I FIND THAT ALTHO UGH IT HAS BEEN ASSERTED THAT THE TWO PLOTS OF LAND WERE PURCHASED WITH THE INTENTION TO CONSTRUCT RESIDENTIAL HOUSE BUT SUCH A SSERTION IS WITHOUT SUPPORT OF ANY EVIDENCE WHAT SO EVER. DURIN G THE APPELLATE PROCEEDING THE APPELLATE WAS SPECIFICALLY QUERIED W HETHER THE IMPUGNED PLOTS WERE SHOWN AS INVESTMENT IN THE BALA NCE SHEET FILED WITH THE IT RETURN THE APPELLANT IN HIS WRITT EN SUBMISSION DATED 29-42009, REFRAINING FROM DENYING THAT THE PU RCHASE OF THESE TWO PLOTS WERE SHOWN AS INVESTMENT IN THE BALANCE S HEET FILED WITH HIS INCOME TAX RETURN SOUGHT TO EXPLAIN THE REASON AS TO WHY IT WAS NOT SO. THUS IT IS ESTABLISHED AS ALSO POINTED OUT BY THE ASSESSING OFFICER THAT THESE TWO PLOTS OF LAND WERE NOT DELIN EATED OR SHOWN AS INVESTMENT IN THE ACCOUNTS OF THE ASSESSEE. THE PAS T AS WELL AS FUTURE ACTIVITIES OF THE ASSESSEE AS HAS BEEN POINT ED OUT BY THE ASSESSING OFFICER THAT REMAINS UNDENIED BY THE APPE LLANT AS WELL LEAD TO A STRONG LEGITIMATE PRESUMPTION THAT THE AS SESSEE WAS ENGAGED IN THE ACTIVITY OF TRADING IN THE PLOTS OF LAND. THIS COUPLED WITH THE FACT THAT THE PURCHASES OF THE IMPUGNED PL OTS WERE NOT ACCOUNTED FOR AS INVESTMENT IN THE BOOKS OF THE ASS ESSEE AND THEREFORE THERE IS NO BASIS FOR A LEGITIMATE INFERE NCE THAT THE PURCHASE OF THE IMPUGNED PLOTS WERE INVESTMENT UNCO NTROVERTIBLY ESTABLISHES THAT THESE TWO PLOTS WERE PURCHASED AS STOCK IN TRADE FOR TRADING PURPOSE AS CORRECTLY CONCLUDED BY THE ASSES SING OFFICER. 5 2.6 DURING THE COURSE OF PROCEEDINGS BEFORE US, T HE LD. AR HAS FILED THE WRITTEN SUBMISSIONS CONTAINING 06 PAGES. THE WRITTEN SUBMIS SIONS ARE REPRODUCED AS UNDER:- 1. THAT THE ASSESSEE IS AN INDIVIDUAL AND ASSESSE D TO INCOME TAX REGULARLY FOR LAST SEVERAL ASSESSMENT YEARS. 2. THAT THE ASSESSEES REGULAR SOURCE OF INCOME IS SAL ARY & INTEREST AND IN SOME YEARS BUSINESS INCOME WAS ALSO EARNED. 3. THAT THE ASSESSEE PURCHASED TWO ADJOINING PLOT NO 3 50 AND 351 MEASURING 2.87 BISWA AT DILIP NAGAR, MANDORE, KHASR A NO. 1880 ON 09/11/1993 FOR A CONSIDERATION OF RS. 39648/- AND H OLD THE SAME AS INVESTMENT. 4. THAT THE ASSESSEE PURCHASED AGRICULTURAL LAND MEASU RING 13 BISWA AT KHASRA NO. 614, MANDORE ON 16/01/1995 FOR A CONSIDE RATION OF RS. 36000/- AND HOLD THE SAME AS INVESTMENT. 5. THAT ON 01/01/2002 THE ASSESSEE PURCHASED ANOTHER A GRICULTURAL LAND SITUATED AT KHASRA NO 615 ADJOINING TO THE AGRICULT URAL LAND PURCHASED ON 16/01/195, AREA OF LAND PURCHASED ON 01/01/2002 WAS 1 BIGHA 2.5 BISWA AND TOTAL CONSIDERATION PAID WAS RS. 1,50,000 /-. THE LAND PURCHASED WITH THE INTENTION TO CONVERT THE LAND IN TO URBAN LAND AND DEVELOP THE LAND ALONG WITH THE LAND SITUATED AT KH ASRA NO 614. ASSESSEE PURCHASE THE LAND SITUATED AT KHASRA NO 61 5 WITH INTENTION TO DEVELOP AND WHEN THIS LAND PURCHASED IT WAS ALSO DE CIDED TO DEVELOP THE LAND SITUATED AT KHASRA NO 614. 6. THAT THE ASSESSEE DIVIDED TOTAL LAND OF KHASRA NO 6 14 AND 615 INTO SIXTEEN PLOTS AND DECLARED THE INCOME FROM SALE OF SUCH PLOTS AS BUSINESS INCOME IN THE AY 2005-06, 2006-07 AND 2007 -08. THE TRANSACTION OF PURCHASE OF AGRICULTURAL LAND IN KHA SRA NO 614 AND 615 6 WAS TO DEVELOP THE LAND, CONVERSION INTO ABADI LAND AND CONSTRUCTION OF ROAD AND DIVISION OF THE SAME IN PLOTS FOR RESIDENT IAL PURPOSE WAS AN ISOLATED TRANSACTION AND AS SUCH THE ASSESSEE TREAT ED THE SAME AS AN ADVENTURE IN THE NATURE OF TRADE AND DECLARED THE S URPLUS AS BUSINESS INCOME FOR THE RESPECTIVE YEARS IN WHICH THE PLOTS OUT OF THESE TWO KHASRA. THE ASSESSEE NEITHER BEFORE NOR AFTER THIS ISOLATED TRANSACTION OF PURCHASE OR SALE CARRIED OUT ANY OTHER ACTIVITY AS A REGULAR DEALER IN LAND BUSINESS. 7. THAT THE ASSESSEE DURING THE AY 2002-03 AND AY 2003 -04 WAS CARRYING THE BUSINESS OF TRADING OF EDIBLE OIL, GHE E AND AGARBATI IN THE NAME AND STYLE OF M/S MULTANMAL SHANTILAL SONI. 8. THAT NO BUSINESS INCOME WAS EARNED BY THE ASSESSEE DURING THE AY 2004-05 AND ONLY SOURCE OF INCOME WAS SALARY AND IN TEREST. 9. THAT THE ASSESSEE SOLD TWO PLOTS BEARING NO 350 AND 351 FOR A CONSIDERATION OF RS. 3,80,000/- DURING THE YEAR UND ER CONSIDERATION AND INVESTED A SUM OF RS. 3,00,000/- IN THE SPECIFI ED INVESTMENT U/S 54EC. 10. THAT THE RETURN FOR THE YEAR UNDER CONSIDERATION WA S FILED ON 17/07/2006 DECLARING TOTAL INCOME OF RS. 7,38,375/- UNDER DIFFERENT HEADS AS UNDER: SALARY SALARY FROM ASHOK KUMAR SHANTI LAL RS. 65,000/- BUSINESS INCOME PROFIT FROM SALE OF PLOTS SITUATED AT KHASRA NO 614 RS. 224129/- LONG TERM CAPITAL GAIN LTCG ON SALE OF PLOT NO 350 AND 351 RS. 139992/- LESS: EXEMPTION U/S 54EC RS. 139992/- RS. NIL SHORT TERM CAPITAL GAIN 7 STCG ON PLOT NO 6, BASNI BIHAR, CHENPURA, MANDORE RS. 5,26,158/- OTHER SOURCE INTEREST RS. 47,410/- INTEREST ON NABARD BOND RS. 678/- RS. 48,088/- GROSS TOTAL INCOME RS. 8,63,375/- DEDUCTION U/S 80G RS. 25,000/- DEDUCTION U/S 80C RS. 1,00,000/- RS. 1,25,000/- TOTAL INCOME RS. 7,38,375/- 11. THAT THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) WAS ISSUED ON 22/06/2007 AND ASSESSMENT ORDER WAS PASSE D ON 04/12/2008 ASSESSING TOTAL INCOME AT RS. 11,01,217/- COMPRISES AS UNDER: SALARY (AS DECLARED) RS. 65000/- INCOME FROM BUSINESS AS DECLARED RS. 2,24,129/- INCOME FROM CAPITAL GAIN TREATED AS BUSINESS INCOME RS. 7,07,260/- ON ACCOUNT OF DISALLOWANCE OF EXPENSES RS. 1,06,7 40/- RS. 10,38,129/- INCOME FROM OTHER SOURCE (AS DECLARED) RS. 48,088/- ADDITION ON ACCOUNT OF HOUSEHOLD EXP. RS. 75,0 00/- RS. 1,23,088/- GROSS TOTAL INCOME RS. 12,26,217/- LESS DEDUCTION RS. 1,25,000/- TOTAL INCOME RS. 11,01,217/- 12. THAT AGGRIEVED FROM THE ASSESSMENT ORDER PASSED BY LD. AO THE ASSESSEE FILED APPEAL TO CIT(A). 13. THAT THE LD. CIT(A) DELETE THE ADDITION MADE ON ACC OUNT OF DISALLOWANCE OF EXPENSE FOR RS. 1,06,740/- AND ADDI TION ON ACCOUNT OF HOUSEHOLD EXPENSE FOR RS. 75,000/- BUT UPHOLD THE A CTION OF ASSESSING OFFICER THAT THE PURCHASE AND SALE OF THE PLOTS 350 AND 351 AT DILIP NAGAR, MANDORE WAS BUSINESS TRANSACTION. 8 14. THAT AGGRIEVED FROM THE ORDER OF LD. CIT(A) ASSESSE E FILED PRESENT APPEAL. HAVING DISCUSSED THE FACTS IN BRIEF, I AM HEREWITH SUBMITTING MY WRITTEN SUBMISSIONS ON GROUNDS OF APPEAL RAISED IN THE MEMO OF PRESENT APPEAL: REGARDING GROUND NO. 1 AND 2 1. THAT LD. CIT(A) ERRONEOUSLY UPHOLD THE FINDING O F LD. AO THAT THE GAIN OF SALE OF PLOTS SITUATED AT 350-351, DILIP NA GAR, MANDORE IS TAXABLE AS BUSINESS INCOME AND NOT AS CAPITAL GAIN. THE AUT HORITIES BELOW FAILS TO CONSIDER THE FACT THAT THE TWO PLOTS WERE PURCHASED IN THE YEAR 1993 AND SALES WAS TAKE PLACE IN THE YEAR 2005 AND AS SUCH P LOTS WERE HELD BY THE ASSESSEE FOR CONSIDERABLE LONG PERIOD OF 12 YEARS. 2. THAT THE AUTHORITIES BELOW ALSO FAILS TO CONSIDE R THAT THE ASSESSEE WAS NOT CARRYING ON THE REGULAR BUSINESS ACTIVITY O F EITHER PURCHASE AND SALE OF LAND AS SUCH, NOR SALE AFTER DEVELOPMENT OF LAND . THE PORTION OF KHASRA NO 614 AND 615 WAS SOLD IN THE PERIOD OF THREE YEARS A ND AS SUCH THE LD. CIT(A) AND LD. AO WRONGLY PRESUMED THE ASSESSEE AS A DEALE R IN LAND, PARTICULARLY WHEN THE SALES OF PLOTS IN THREE YEARS WAS OUT OF K HASRA NO 614 AND 615 AND AN ISOLATED PROJECT. 3. THAT THE ASSESSEE PURCHASED THE PLOTS BEARING TH E NO 350 AND 351 AS BACK AS IN 1993 AND DURING THESE YEARS OR EARLIE R TO THIS DATE THERE WAS NO BUSINESS IN LAND DEALING AND THE PLOTS WERE PURCHAS E AS A CAPITAL ASSET WITH THE SOLE MOTIVE TO CONSTRUCT THE RESIDENTIAL HOUSE. 4. THAT THE AUTHORITIES BELOW FAIL TO ESTABLISH HO W THE INTENTION OF THE ASSESSEE WAS TO DEAL IN PLOTS TRADING BUSINESS WHEN THE PLOT NO 350 AND 351 WERE PURCHASED IN THE YEAR 1993. THE ISOLATE TRANSA CTION OF PURCHASE OF AGRICULTURAL LAND IN KHASRA NO 614 AND 615 TO DEVEL OP THE LAND, CONVERSION INTO ABADI LAND AND CONSTRUCTION OF ROAD AND DIVISI ON OF THE SAME IN PLOTS FOR RESIDENTIAL PURPOSE, IF IN ANY CASE CONSIDERED AS R EGULAR BUSINESS ACTIVITY AND 9 NOT AN ADVENTURE IN THE NATURE OF TRADE THEN ALSO I T CANNOT BE BASIS TO FIND OUT THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHA SE OF PLOT NO 350 AND 351 IN THE YEAR 1993. IT IS SET LEGAL POSITION THAT THE IN TENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF THE PARTICULAR ASSETS IS DECISI VE FACTOR TO DETERMINE THE TAXABILITY THE GAIN ARISE ON THE SALE OF ASSET. SUC H INTENTION AS SUBMITTED BY THE ASSESSEE IF NOT ACCEPTED MUST BE DEDUCED FROM T HE SURROUNDING CIRCUMSTANCE AT THE TIME OF PURCHASE OF ASSET AND N OT FROM THE SURROUNDING CIRCUMSTANCE AT THE TIME OF SALE OF ASSET. HERE IN THE CASE UNDER CONSIDERATION NO SURROUNDING CIRCUMSTANCE AT THE TIME OF PURCHASE OF PLOTS NO 350 AND 351 IN THE YEAR 1993 SUGGEST THAT THE PURCHASE OF SUCH PLOTS WERE ON BUSINESS ACCOUNT AND NOT ON CAPITAL ACCOUNT. 5. THAT IN THE CASE OF JANKI RAM BAHADUR RAM VS. C IT REPORTED IN 57 ITR 21 HONBLE SUPREME COURT HELD TH AT: 10. A LARGE NUMBER OF CASES WERE CITED AT THE BAR IN SUPPORT OF THE RESPECTIVE CONTENTIONS OF THE COMMISSIONER A ND THE ASSESSEE. PASSAGES FROM JUDGMENTS IN THE SAME CASE WERE OFTEN CITED CLAIMING SUPPORT FOR THE RESPECTIVE CONTENTIONS. NO USEFUL P URPOSE WOULD BE SERVED BY ENTERING UPON A DETAILED ANALYSIS AND REV IEW OF THE OBSERVATIONS MADE IN THE LIGHT OF THE RELEVANT FACT S, FOR NO SINGLE FACT HAS DECISIVE SIGNIFICANCE, AND THE QUESTION WHETHER A TRANSACTION IS AN ADVENTURE IN THE NATURE OF TRADE MUST DEPEND UPO N THE COLLECTIVE EFFECT OF ALL THE RELEVANT MATERIALS BROUGHT ON THE RECORD. BUT GENERAL CRITERIA INDICATING THAT CERTAIN FACTS HAVE DOMINAN T SIGNIFICANCE IN THE CONTEXT OF OTHER FACTS HAVE BEEN ADOPTED IN THE DEC IDED CASES. IF, FOR INSTANCE, A TRANSACTION IS RELATED TO THE BUSINESS WHICH IS NORMALLY CARRIED ON BY THE ASSESSEE, THOUGH NOT DIRECTLY PAR T 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 PURCHASED AND SUB-DIVIDED, ALTERED, TREATED OR REPA IRED AND SOLD, OR IS CONVERTED INTO A DIFFERENT COMMODITY AND THEN SO LD. MAGNITUDE OF THE TRANSACTION OF PURCHASE, THE NATURE OF THE COMM ODITY, SUBSEQUENT DEALINGS AND THE MANNER OF DISPOSAL MAY BE SUCH THA T THE TRANSACTION MAY BE STAMPED WITH THE CHARACTER OF A TRADING VENT URE : FOR INSTANCE, A MAN WHO PURCHASES A LARGE QUANTITY OF AEROPLANE L INEN AND SELLS IT IN DIFFERENT LOTS, AND, FOR THE PURPOSE OF SELLING STARTS AN ADVERTISING CAMPAIGN, RENTS OFFICES, ENGAGES AN ADVERTISING MAN AGER, A LINEN EXPERT AND A STAFF OF CLERKS, MAINTAINS ACCOUNT BOO KS NORMALLY USED BY A TRADER, AND PASSES RECEIPTS AND PAYMENTS IN CO NNECTION WITH THE 10 LINEN THROUGH A SEPARATE BANKING ACCOUNT : MARTIN V S. LOWRY (1926) 11 TAX CASES 297 : A PERSON WHO CARRIES ON A MONEY- LENDING BUSINESS PURCHASES VERY CHEAPLY A VAST QUANTITY OF TOILET PAPER AND WITHIN A SHORT TIME THEREAFTER SELLS THE WHOLE CONS IGNMENT AT A CONSIDERABLE PROFIT : RUTLEDGE VS. IRC (1929) 14 TA X CASES 490 : AND A PERSON, EVEN THOUGH HE HAS NO SPECIAL KNOWLEDGE O F THE TRADE IN WINES AND SPIRITS, PURCHASES A LARGE QUANTITY OF WH ISKY AND SELLS IT WITHOUT TAKING DELIVERY OF IT AT A CONSIDERABLE PRO FIT : IRC VS. FRASER (1942) 24 TAX CASES 498, MAY BE PRESUMED, HAVING RE GARD TO THE NATURE OF THE COMMODITY AND EXTENT OF THE TRANSACTI ON COUPLED WITH THE OTHER CIRCUMSTANCES, TO BE CARRYING ON AN ADVEN TURE IN THE NATURE OF TRADE. THESE ARE CASES OF COMMERCIAL COMMODITIES . BUT A TRANSACTION OF PURCHASE OF LAND CANNOT BE ASSUMED W ITHOUT MORE TO BE A VENTURE IN THE NATURE OF TRADE. A DIRECTOR OF A C OMPANY CARRYING ON THE BUSINESS OF WAREHOUSE MAN PURCHASING A NUMBER O F HOUSES WITH A VIEW TO RESALE, AND SELLING THEM AT A PROFIT SOME Y EARS AFTER THE PURCHASE : IRC VS. REINHOLD (1953) 34 TAX CASES 389 : A PERSON CARRYING ON BUSINESS IN VARIOUS LINES, INCLUDING AN ENGINEERING WORKS, PURCHASING LAND WHICH WAS UNDER REQUISITION BY THE GOVERNMENT, NEGOTIATING SALE THEREOF BEFORE THE LAND WAS DEREQU ISITIONED, AND SELLING IT AFTER THE LAND WAS RELEASED : SAROJ KUMA R MAJUMDAR VS. CIT (SUPRA) : AND A SYNDICATE FORMED TO ACQUIRE AN OPTI ON OVER A RUBBER ESTATE WITH A VIEW TO EARN PROFIT, AND FINDING THE ESTATE ACQUIRED TOO SMALL ACQUIRING ANOTHER ESTATE AND SELLING THE TWO ESTATES AT A PROFIT : LEEMING VS. JONES (1930) 15 TAX CASES 333, MAY NOT BE REGARDED AS COMMENCING A VENTURE IN THE NATURE OF TRADE. THESE ARE CASES IN WHICH THE COMMODITY PURCHASED AND SOLD IS NOT ORDIN ARILY COMMERCIAL, AND THE MANNER OF DEALING WITH THE COMM ODITY DOES NOT STAMP THE TRANSACTION AS A TRADING VENTURE. 6. THAT RELIANCE IS ALSO PLACED ON THE FOLLOWING J UDICIAL DECISIONS: 1. KARAN CHAND THAPER AND BROS. P. LTD. VS. CIT 82 ITR 899 (SC) 2. CIT VS. SOHAN KHAN 304 ITR 194 (RAJ) 3. GOPAL PUROHIT VS. JCIT 122 TTJ (MUM) 87 AFFIRMED IN CIT VS. GOPAL PUROHIT 34 DTR (BOM) 52, SLP ALSO STOOD REJECTED. 2.7 ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 11 2.8 WE HAVE HEARD BOTH THE PARTIES. IN ORDER TO ASC ERTAIN THE PROFIT ARISING FORM SALE OF THE ASSETS TO BE TAXED UNDER THE HEAD CAPITAL GAIN OR BUSINESS, ONE HAS TO CONSIDER THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE O F THE ASSETS.. IF THE INTENTION OF THE ASSESSEE IS TO ACQUIRE THE ASSETS FOR APPRECIATING THE INVESTMENT THEN THE PROFIT ARISING FROM SALE OF SUCH ASSETS IS CAPITAL GAIN. THE ASSES SEE CAN HAVE AN ASSET OF SAME NATURE AS INVESTMENT AS WELL AS STOCK IN TRADE. THIS IS PARTI CULARLY NOTICED IN THE CASE OF SHARES. IN THE INSTANT CASE, THESE PLOTS WERE PURCHASED IN 199 3 AND HAVE BEEN SOLD IN THE FINANCIAL YEAR 2005-06. THUS THE ASSET IS DIFFERENT FROM THE ASSET IN RESPECT OF WHICH THE PROFIT HAS ARISEN BY SELLING SUCH ASSET IN THE FORM OF PLOTS A ND THE ASSESSEE HIMSELF HAS SHOWN THE PROFIT FROM SUCH SALE OF PLOTS AS BUSINESS INCOME. THE FACT THAT THE ASSESSEE HAS SHOWN SUCH PROFIT AS BUSINESS INCOME WILL NOT EVENTUALLY LEAD TO SHOW THAT THE PROFIT FROM SALE OF EVERY PLOT IS TO BE TAXED UNDER THE HEAD BUSINES S INCOME. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS RAISED BORROWINGS FOR PURCHASING SUCH PLOTS. THE PERIOD OF HOLDING IS ALSO RELEVANT FOR DECIDING THE ISSUE AS TO WHETHER THE PROFIT ARISING FROM SALE OF THE ASSET IS CAPITAL GAIN OR BUSINESS. IT IS FURTHE R NOTICED THAT THE ASSESSEE HAS INCURRED THE EXPENSES FOR THE CONSTRUCTION OF BOUNDARY WALL AT P LOT NO. 350 AND 351 AT LAL SAGAR. THIS ALSO SHOWS THAT THE ASSESSEE HAS TREATED THE INVEST MENT IN THE PLOT FOR LONG TERM PURPOSES. WE HAVE ALSO GONE THROUGH THE CHART MENTIONED BY TH E AO AT PAGE 4 OF HIS ASSESSMENT ORDER AND THIS CHART SHOWS THAT THE ASSESSEE MADE I NVESTMENT IN THE YEAR 1990 TO 1995. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE WA S DOING THE REAL ESTATE BUSINESS IN THE YEAR 1993 TO 1995. IT IS NOWHERE MENTIONED THAT THE PLOTS SO SOLD WERE CONVERTED INTO STOCK IN TRADE DURING THE YEAR UNDER REFERENCE OR P RECEDING YEARS.. WE THEREFORE, FEEL THAT THE PROFIT FROM SALE OF PLOTS IS TO BE CONSIDERED U NDER THE HEAD CAPITAL GAIN LOOKING TO THE 12 INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE O F THE LAND AND THE PERIOD FOR WHICH ASSET HAS BEEN HELD. THE AO IS THEREFORE, DIRECTED TO TAX PROFITS FROM THE SALE OF THE PLOTS UNDER CONSIDERATION UNDER THE HEAD LONG TERM CAPITAL GAIN . 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.11.2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JODHPUR DATED: 30 /11/2011 MISHRA COPY TO: 1. SHRI SHANTI LAL JAIN, JODHPUR 2. THE ACIT CIRCLE-3, JODHPUR 3.THE LD. CIT (A) BY ORDER 4.THE CIT 5.THE D/R 6.THE GUARD FILE (ITA NO. 451/JU/09) A.R.. ITAT: JODHPUR