M/S. SHAH & CHHEDA REALTY, MUMBAI V. THE ACIT CIR 21(2),

ITA 7209/MUM/2007

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88294 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Assessee
• Bench Allotted: J
• Next Hearing Date: 20-10-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 03-12-2007
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Capital asset; Business income; Business expenditure; Cost of acquisition
• Section: 143(3); 28

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO. 7209/M/2007 ( ASSESSMENT YEAR : 2004 - 2005 ) ./I.T.A. NO. 3295/M/2010 ( ASSESSMENT YEAR : 2005 - 2006 ) M/S. SHAH & CHHEDA REALTY, 230/12, PATEL HOUSE, OPP. KOLIWADA STATION, SION (E), MUMBAI 400 022. / VS. ACIT, CIRCLE 21(2), MUMBAI. ./ PAN : AAGFS8841M ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI HARI S. RAHEJA, AR / RESPONDENT BY : SHRI AKHILENDRA YADAV, DR / DATE OF HEARING : 02.02.2015 / DATE OF PRONOUNCEMENT : 13 .02.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION. THESE TWO APPEALS ARE FILED BY THE ASSESSEE INVOLVING THE ASSESSMENT YEARS 2004 - 05 AND 2005 - 06. SINCE, THE ISSUES RAISED IN BOTH THE APPEALS ARE IDENTICAL, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE AND GROUND WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS OF THIS ORDER. ITA NO.7209/M/2007 ( AY 2004 - 2005) 2. THIS APPEAL FILED BY THE ASSESSEE ON 3.12.2007 IS AGAINST THE ORDER OF THE CIT (A) - XXI, MUMBAI DATED 20.9.2007. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. THE CIT (A) HAS ERRED IN CONFIRMING ADDITION OF RS. 51,617/ - BEING 50% OF THE OFFICE EXPENSES OF RS. 1,03,233/ - BY WAY OF CAPITALIZING 50% OF THE OFFICE EXPENSES PROPORTIONATELY TO STOCK - IN - TRADE, WORK - IN - PROGRESS AND PLOT AT PANVEL. THE APPELLANT FIRM HUMBLY SUBMITS THAT THE ENTIRE EXPENSES OF RS. 51, 617/ - BEING 50% OF THE OFFICE EXPENSES OF RS. 1,03,233/ - ARE THE DAY TO DAY INDIRECT BUSINESS EXPENSES TO ADMINISTRATE AND MANAGE ITS BUSINESS. 2 AS THE APPELLANT FIRM HAS ALREADY CAPITALIZED ALL THE DIRECT EXPENSES TO THE RESPECTIVE PROJECT, THE INDIRECT OFFICE EXPENSES NOT BEING ATTRIBUTABLE TO ANY SPECIFIC PROJECT AND ARE GENERAL IN NATURE, MAY PLEASE BE ALLOWED AS BUSINESS EXPENSES IN FULL. 2. THE CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF LONG TERM CAPITAL GAIN ON SALE OF PLOT AT PANVEL BY TRE ATING THE CAPITAL APPRECIATION THEREON AS BUSINESS INCOME. THE APPELLANT FIRM HUMBLY SUBMITS THAT THE FIRM HAD PURCHASED THE OPEN PLOT AT PANVEL ON 18.10.1999 FROM CIDCO FOR RS. 27,24,131/ - . SINCE THEN THE SAID PLOT WAS HELD AS INVESTMENT & IT HAS NOT CAR RIED OUT ANY CONSTRUCTION OR DEVELOPMENT ACTIVITIES THEREON, TILL IT WAS SOLD ON 2.1.2004. THUS, THE MOTIVE OF PURCHASE OF THE SAID PLOT WAS TO HOLD IT AS INVESTMENT FOR CAPITAL APPRECIATION AS BUSINESS INCOME IS UNJUSTIFIED & HENCE THE APPELLANTS CLAIM O F LONG TERM CAPITAL GAIN MAY PLEASE BE ALLOWED. 3. THE CIT (A) HAS ERRED IN DISMISSING THE APPELLANTS CONTENTION THAT THE OPEN PLOT AT PANVEL PURCHASED ON 18.10.1999 FROM CIDCO & SOLD 2.1.2004 IS LONG TERM CAPITAL ASSETS, ON THE GROUND THAT THE PLOT IS TR EATED AS BUSINESS ASSETS AND HENCE THIS ISSUE IS NOT RELEVANT. THE APPELLANT FIRM HUMBLY SUBMITS TH A T THE LD ASSESSING OFFICER HAS HELD IN HIS ASSESSMENT ORDER THAT IF THE PLOT AT PANVEL IS TREATED AS CAPITAL ASSETS, THE SAME IS SHORT TERM ASSETS BECAUSE T HE LEASE AGREEMENT IS EXECUTED ON 30.1.2003 & THE SAME WAS SOLD ON 2.1.2004 AND THEREFORE, IT IS SHORT TERM CAPITAL ASSETS. THE APPELLANT FIRM HUMBLY SUBMITS THAT THE PLOT WAS ALLOTTED ON 18.10.1999 & THE ENTIRE PURCHASE COST OF RS. 27,24,131/ - WAS PAID TO CIDCO IN MARCH 2000 AND THUS IT HELD AND OWNED THE PLOT SINCE MARCH 2000. THEREFORE, THE SAID PLOT WAS LONG TERM CAPITAL ASSETS. THE APPELLANT HUMBLY REQUESTS YOUR GOOD HONOUR TO TREAT THE SAID PLOT AT PANVEL AS LONG TERM CAPITAL ASSETS & CAPITAL APPRECIA TION THEREON MAY PLEASE BE ASSESSED AS LONG TERM CAPITAL GAIN. 3. BRIEFL Y STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE EARNED INCOME FROM BUSINESS OF REAL ESTATE , CAPITAL GAINS AND INCOME FROM HOUSE PROPERTY. ASSESSEE FILED THE RETURN OF INCO ME DECLARING THE TOTAL INCOME OF RS. 22,81,669/ - . ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AND THE ASSESSED INCOME WAS DETERMINED AT RS. 29,17,600/ - . IN THE ASSESSMENT, ASSESSING OFFICER TREATED THE CAPITAL GAINS E A R N E D ON TRANSFER OF PL O T OF LAND AT PLOT NO.20, SECTOR 16E, PANVEL AS A BUSINESS TRANSACTION AND THE RELEVANT GAINS WERE TREATED AS BUSINESS INCOME OF THE ASSESSEE WHICH IS THE SUBJECT MATTER OF ADJUDICATION BEFORE US VIDE GROUND NO S .2 AND 3 OF THE PRESENT APPEAL. OTHERWISE, ASSESSEE CLAIMED EARNING OF LONG TERM CAPITAL GAINS ON THE SALE OF THE SAID PROPERTY. BRIEF FACTS RELATING TO THE SAID TRANSACTION ARE THAT THE SAID PLOT OF LAND WAS PURCHASED BY THE ASSESSEE IN MARCH 1999 FOR A SUM OF RS. 27,24,131/ - (RS. 27,68,478/ - AS MENTIONED IN PARA 5 OF THE ASSESSMENT ORDER ) AND THE SAME WAS SOLD FOR RS. 50 LAKHS TO NEEL PROPERTIES. ASSESSING OFFICER EXAMINED THIS TRANSACTION OF PURCHASE AND SALE OF THE SAID PLOT NO.20 AND HELD THE SAME CONSTITUTES BUSINESS TRAN SACTION. FOR THIS PROPOSITION, ASSESSING OFFICER TRACED VARIOUS FACTS OF THE ASSESSEE AS WELL AS THE HISTORY AND 3 UTILIZATION OF THE LAND AND HELD THAT THE ASSESSEE PURCHASED 6 PLOTS OF LANDS AT VARIOUS TIMES AND THE DETAILS OF THESE PURCHASES ARE NARRATED AS UNDER: SL NO PARTICULAR S OF LAND YEAR OF PURCHASE PURCHASE COST UTILIZATION REMARK 1 LAND AT SANPADA, MAHAVIR SHOPPE, PLOT NO.36, SECTOR 6, SANPADA, NAVI MUMBAI FY 1996 - 97 2601566/ - CONSTRUCTION WORK STARTED IN FY 1997 - 98 & AMOUNT SPENT ON CONSTRUCTION OF RS. 5,50,000/ - IS SHOWN AS WORK IN PROGRESS AT SANPADA. THE FIRM HAS DEVELOPED A SMALL COMMERCIAL BUILDING CONSISTING OF 8 SHOPS AS MAHAVIR SHOPPE. THE PROFIT S ON SALE OF THE SHOPS ARE OFFERED TO TAX AS BUSINESS PROFIT IN THE YEAR OF SALE OF SUCH SHOPS. AS ON 31.3.2004, THE SAID PROJECT IS COMPLETED AND THE UNSOLD SHOPS ARE SHOWN AS STOCK IN TRADE. THE FIRM HAS CARRIED OUT CONSTRUCTION WORK IMMEDIATELY ON POSSESSION OF LAND AS THE INTENTION TO PURCH ASE THE LAND WAS TO CONSTRUCT AND SELL T HE SHOPS. THEREFORE, THIS LAND IS TREATED AS BUSINESS ASSET. 2 PLOT NO.19, SECTOR 16E, PANVEL FY 1999 - 2000 2733721 NO AMOUNT WAS SPENT TOWARDS DESIGNING AND DRAWING OF PLANS CONSTRUCTION OR ANY DEVELOPMENT WORK WHATSOEVER. DURING FY 2001 - 2002, THE PLOT IS SOLD AS IT IS AND THE PROFIT THEREON IS OFFERED TO TAX AS SHORT TERM CAPITAL GAIN ON SALE OF PLOT. AS THE CAPITAL GAIN WAS SHORT TERM, THE ENTIRE PROFIT ON SALE OF PLOT IS OFFERED TO TAX AT REGULAR TAX RATE OF 35% PLUS SURCHARGE AT 2%. 3. PLOT NO.20, S ECTOR 16E, PANVEL MARCH, 1999 2724131 NO AMOUNT WAS SPENT TOWARDS DESIGNING AND DRAWING OF PLANS, CONSTRUCTION OR ANY DEVELOPMENT WORK WHATSOEVER. THIS PLOT IS SOLD ON 2.1.2004 (AY 2004 - 05) AS IT IS WITHOUT ANY DEVELOPMENT, BETTERMENT, BETTER OF CONSTRUCT ION THEREON. THE PROFIT ON SALE OF THE SAID PLOT IS OFFERED TO AS LONG TERM CAPITAL GAIN. AS THE INTENTION OF THE FIRM IS TO HOLD IT S INVESTMENT AND TO EARN LONG TERM CAPITAL APPRECIATION, THE FIRM DID NOT SPEND ANY MONEY ON ITS DEVELOPMENT OR CONSTRUCTI ON. THE FIRM DID NOT HOLD THE SAID PLOT AS BUSINESS ASSET BUT AS CAPITAL ASSET (INVESTMENT). AS THE PERIOD OF HOLDING WAS MORE THAN 36 MONTHS, THE GAIN ON SALE OF THE LAND IS OFFERED TO TAX AS LONG TERM CAPITAL GAIN AND THE FIRM HAS PAID THE LONG TERM CA PITAL GAIN TAX OF 20% PLUS SURCHARGE AT 2.5% 4 PLOT NO.21, SECTOR 16E, PANVEL FY 1999 - 2000 3325204 NO AMOUNT WAS SPENT TOWARDS DESIGNING AND DRAWING OF PLANS, CONSTRUCTION OR ANY DEVELOPMENT WORK WHATSOEVER. THE INTENTION OF THE FIRM IS TO HOLD IT AS INVESTMENT / CAPITAL ASSET FOR LONG TERM CAPITAL APPRECIATION. THIS PLOT IS STILL OWNED AND HELD BY THE FIRM AS INVESTMENT AS ON 31.3.2004. THE SAID LAND IS SHOWN AS INVESTMENT IN THE BALANCE SHEET AS ON 31.3.2004. 5. LAND AT VASHI PLOT NO.197, SECTOR 28 , VASHI FY 2002 - 2003 2289000 THIS PLOT WAS PURCHASED WITH AN INTENTION TO CONSTRUCTION RESIDENTIAL COMPLEX THEREON. THE FIRM HAS STARTED CONSTRUCTION WORK AND SPENT SUBSTANTIAL AMOUNT FOR CONSTRUCTION. THE PROFIT ON SALE OF FLATS OF THIS PROJECT IS OFFER ED TO TAX AS BUSINESS INCOME IN THE YEAR OF SALE OF FLATS. THIS LAND WAS PURCHASED WITH AN INTENTION TO DEVELOP AND CONSTRUCT. ACCORDINGLY THE FIRM HAS CONSTRUCTED RESIDENTIAL COMPLEX. THE PROFIT ON SALE OF FLATS IS OFFERED TO TAX AS BUSINESS INCOME. 6 PLOT NO.45, FY 2002 - 03 5386035 THIS PLOT WAS PURCHASED WITH AN INTENTION TO DEVELOP COMMERCIAL AS THE PROJECT IS UNDER CONSTRUCTION 4 SECTOR 13, URAN PHATA NERUL (E), NAVI MUMBAI CAPITAL ASSET AND TO EARN INCOME THERE FROM BY WAY OF RENT. THE FIRM DID NOT HAVE ANY INTENTION TO SELL ANY SHOPS / OFFICES IN THIS PROJECT AND THEREFORE, HAS NOT SOLD OR RECEIVED ANY ADVANCE AGAINST SALE ON THE SAID PROJECT. THIS PROJECT IS INCOMPLETE AND IS THEREFORE SHOWN AS CAPITAL WORK IN PROGRESS. AND IS NOT FOR SALE, IT IS S HOWN AS CAPITAL W.I.P. THE INCOME FROM THIS PROJECT BY WAS OF RENT WILL BE OFFERED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN THE YEAR IN WHICH SUCH RENT INCOME IS EARNED FROM THE SAID CAPITAL ASSET. 4. ASSESSING OFFICER CONCLUDED IN PARA 7 OF HIS ORDER THAT THAT THE ASSESSEE CONDUCTED HIS BUSINESS SYSTEMATICALLY AND PURCHASED THE PLOTS AND SAME CONSTITUTES BUSINESS ACTIVITY DESPITE THE ENTRIES IN THE BOOKS OF ACCOUNTS AND CLAIMS IN THE RETURN OF INCOME. ASSESSING OFFICER CONSIDERED VARIOUS SUBMISSIONS MADE BY THE ASSESSEE AND HELD VIDE PARA 11 OF THE ASSESSMENT ORDER THAT THE NATURE OF BUSINESS OF THE ASSESSEE INVOLVING THE IMPUGNED TRANSACTIONS AS BUSINESS TRANSACTIONS. FURTHER, HE HELD THAT THE MOTIVE OF PURCHASE OF THE SAID PLOTS IS TO EARN PROFITS BY WAY OF RESALE WHICH IS A BUSINESS CHARACTER. FURTHER ALSO, HE HELD THAT OUT OF SIX TRANSACTIONS 3 OF THEM INVOLVED SALE TRANSACTIONS AT A DIFFERENT POINT OF TIME AND THE SAME AMOUNTS T O BUYING AND SELLING OF THE PLOTS IN A SYSTEMATIC AND ORGANIZED MANNER. HE ALSO HELD THE ACCOUNTING TREATMENT RELIED UPON BY THE ASSESSEE IS ONLY A WHITE WASH. HE ALSO DISMISSED THE ASSESSEES CLAIM OF OCCASIONAL TRANSACTIONS IN ISOLATED CASES. THUS, HE CONCLUDED THAT THE TR ANSACTIONS IN QUESTION ARE PART OF THE BUSINESS DEALS OF THE ASSESSEE ACCORDINGLY THE CLAIM OF THE ASSESSEE (LONG TERM CAPITAL GAINS) HAS TO BE REJECTED. WITHOUT PREJUDICE, THE ASSESSEES CLAIM OF LONG TERM CAPITAL GAINS WAS ALSO REJECTED HOLDING THAT THE IMPUGNED TRANSACTIONS SHOULD BE CONSIDERED AS SHORT TERM CAPITAL GAINS CONSIDERING THE DATE OF AGREEMENT I.E., 2.1.2003 AND NOT THE LETTER OF ALLOTMENT OF LAND BY THE CIDCO ON 29.12.1999. HE ACCORDINGLY HELD THAT THE IMPUGNED TRANSACTIONS YIELDS ONLY SH ORT TERM CAPITAL GAINS AND NOT THE LONG TERM CAPITAL GAINS AS CLAIMED BY THE ASSESSEE. AGGRIEVED WITH THE SAME ASSESSEE IS IN APPEAL BEFORE THE CIT (A). 5. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, ASSESSEE MADE WRITTEN SUBMISSIONS AND RELIED ON VARIOUS DECISIONS AND THE CONTENTS OF PARA 3 AND 4 WITH ITS SUB - PARAS ARE RELEVANT IN THIS REGARD. IN PARA 4.5, CIT (A) DISCUSSED THE 5 CRITERIA MENTIONED IN THE CIRCULAR OF THE CBDT. THE BOARD, ISSUED INSTRUCTION NO.1827 DATED 31.8.1981 TO THE O FFICERS FOR DISTINGUISHING THE SHARE TRANSACTIONS TO BE CATEGORIZED AS INVESTMENTS OR STOCK - IN - TRADE. CIT (A) STATED THAT THE CIDCO, THE ORIGINAL ALLOTTER OF THE LAND TO THE ASSESSEE , SOLD THE LAND TO THE ASSESSEE FOR THE PURPOSE OF BUSINESS ACTIVITIES NO T FOR HOLDING AS A LONG TERM INVESTMENT FOR RESELL AT PREMIUM IN FUTURE. IF IT WAS FOR THE PURPOSE OF INVESTMENT, THE ASSESSEE WOULD NOT HAVE BEEN ALLOTTED THE SAID PLOTS OF LANDS IN THE FIRST PHASE. THE CIDCO ACCEPTED THE ASSESSEE TO DEVELOP THE SAME WH EREAS THE ASSESSEE CLAIMS THE SAME AS AN INVESTMENT ACTIVITY. CIT (A) CONCLUDED THAT THE ORIGINAL INTENTION OF THE ASSESSEE IN BUYING THE LAND IS ONLY TO DEVELOP AND NOT TO RESELL. EXAMINING THE BOOKS OF ACCOUNTS I.E., BALANCE SHEET FOR THE FY ENDING WIT H MARCH 2000 TO 2004, THE CIT (A) CONCLUDED THAT THE ASSET WAS NOT CATEGORIZED AS INVESTMENT FOR STOCK - IN - TRADE TILL FY ENDING WITH MARCH 2003. THE ASSET WAS SOLD IN JANUARY 2004 TO M/S. NEEL PROPERTY, THEREFORE, THE ASSET IS NO LONGER IN THE BALANCE SHEE T FOR THE ASSESSEE ENDING IN MARCH 2004. CIT (A) HELD THAT THE GAINS RECEIVED BY THE ASSESSEE ON SALE OF THE SAID PLOT NO.20 CONSTITUTE A TRADING RECEIPT. CIT (A) DISTINGUISHED IN PARA 4.8 AND 4.9, THE DECISIONS RELIED UPON BY THE ASSESSEE AND HELD IN P ARA 4.10 THAT ASSESSING OFFICER WAS CORRECT IN HOLDING THAT THE IMPUGNED TRANSACTIONS AS BUSINESS TRANSACTIONS RATHER THAN SHORT TERM CAPITAL GAINS. ON THE ISSUES RELATING TO THE CONCLUSIONS OF THE ASSESSING OFFICER, WITHOUT PREJUDICE, CIT (A) UPHELD THE VIEW OF THE ASSESSING OFFICER AND HELD THAT THE GAINS IN QUESTION IS OF THE SHORT TERM IN NATURE. THE CONTENTS OF PARA 5.6 ARE RELEVANT IN THIS REGARD. AGGRIEVED WITH THE CONCLUSIONS OF THE CIT (A), ASSESSEE FILED THE PRESENT APPEAL BEFORE US. 6. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE SAID ORDER OF THE REVENUE AND MENTIONED THAT THE CIT (A)S ORDER IS REQUIRED TO BE REVERSED. LD COUNSEL FOR THE ASSESSEE EXPLAINED THE FACTS NARRATED ABOVE BY RELYING ON T HE SAID ORDERS OF THE REVENUE AS WELL AS THE VARIOUS PAGES OF THE PAPER BOOK PLACED BEFORE US. ESSENTIALLY, HIS ARGUMENTS REVOLVE AROUND (I) THE INTENTION OF THE ASSESSEE; (II) THE ENTRIES IN THE BOOKS OF ACCOUNTS; (III) ABSENCE OF ANY BORROWED FUNDS ETC. THE RELEVANT DISCUSSION IS ALREADY GIVEN IN THE PARAS ABOVE. 6 7. ON THE OTHER HAND, LD DR HEAVILY RELIED ON THE ORDER OF THE CIT (A) AND THE ASSESSING OFFICER. 8. WE HAVE HEARD BOTH THE PARTIES ON THE ISSUE DISCUSSED ABOVE QUA THE GROUND NO.2 OF THE INSTA NT APPEAL AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES WITH THE HELP OF THE PAPER BOOK FILED BEFORE US. THERE IS NO DISPUTE ON THE FACTS SPECIFIED ABOVE. THE ONLY ISSUE TO BE ADJUDICATED BY US IS IF THE IMPUGNED TRANSACTION OF SALE OF PLOT NO.20 ACQU IRED FROM CIDCO CONSTITUTES A BUSINESS ASSET OR THE INVESTMENT ASSET. SO FAR AS THE PLOT NO.20 IS CONCERNED, THE SAME HAS NOT CATEGORIZED AS A LONG TERM CAPITAL ASSET IN THE BOOKS OF ACCOUNTS TILL MARCH 2003. PRIOR TO THAT THEY WERE SHOWN IN THE LOANS AN D ADVANCES IN THE BALANCE SHEET. IT IS ALSO A FACT THAT THE ASSET WAS BEING HELD BY THE ASSESSEE WITH THE INTENTION TO RESELL FOR A PREMIUM IN THE LATER TIMES. THE FINAL ENTRY IN THE BOOKS OF ACCOUNT AS ON MARCH 2003 IS THE RELEVANT ENTRY WHICH IS RELIED HEAVILY BY THE ASSESSEE. IN OUR OPINION, CONSIDERING THE FACT THAT THE SAID ASSET IS SUBSEQUENTLY SOLD IN THE ACCOUNTING YEAR 2003 - 2004 WHICH CANNOT BE CONCLUSIVELY HELD THAT THE INTENTION OF THE ASSESSEE IS TO H ELD THE SAME AS AN INVESTMENT. THERE ARE NUMBER OF DECISIONS TO CONCLUDE THAT THE EARNINGS OUT OF TRANSACTIONS INVOLVING RESELL OF ASSET CONSTITUTE BUSINESS INCOME. IN THIS REGARD, AS MENTIONED IN THE COURT REGARDING THE INTENTION OF THE RESALE, WE FIND IT RELEVANT TO MENTION THE FINDING OF TH E TRIBUNAL IN THE CASE OF WHAM INVESTMENTS P LTD VS. DCIT VIDE I.T.A. NO. 8531/M/2010, WHEREIN ONE OF US (AM) IS A PARTY TO THE ORDER. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE RELEVANT PORTION FROM PARA 10 OF THE SAID ORDER OF THE TRIBUNAL (SUPRA) IS REPRODUCED AS FOLLOWS. 10. .IT IS OUR FINDING OF FACT THAT THE ASSESSEE PURCHASED THE SHARES FROM SHRI RAKESH TALWAR ONLY TO SELL THE SAME TO M/S. HENKEL FOR HIGHER PRICE AND EARNED PROFITS. THEREFORE, ON THE CRITERIA I.E., BORROWED FUNDS, INSIDE INFORMATION, PURCHASE ONLY TO RESALE THEM TO M/S. HENKEL, EARNED HUGE PROFITS IN THE TRANSACTIONS, IT IS LOGICAL CONCLUSION THAT THE ASSESSEE HAS NOT PURCHASED THE IMPUGNED SHARES FOR HOLDING THEM AS LONG TERM / SHORT TERM INVESTMENTS FOR A LONGER PERIOD FOR THE REASONS OF EARNING DIVIDEND OR FOR CAPITAL APPRECIATION . THERE ARE NO DETAILS ABOUT THE EARNING OF DIVIDEND BY THE ASSESSEE FROM CACPL IN THIS PERIOD OF HOLDING OF 16 MONTHS (JULY 2004 TO NOVEMBER 2005). THE OBJECTIONS OF THE ASSESSEE WHICH AR E LISTED ON PAGE 16 (PARA 3.2) ARE NOT CONCLUSIVE SO FAR AS THE ABSENCE OF BUSINESS MOTIVE IN THE IMPUGNED TRANSACTIONS. 9. THUS, THE PLOT NO.20 PURCHASED FROM CIDCO IS FOR DEVELOPMENT OF RESIDENTIAL FLATS BUT THE SAME IS HELD AS A LONG TERM CAPITAL INVESTMENT FOR THE PURPOSE OF RESELL FOR EARNING PROFITS WITH PREMIUM AND THEREFORE, THE BUSINESS MOTIVE IS EVIDENT. THEREFORE, THE PLOT NO.20 CONSTITUTES A BUSINESS ASSET. CONSIDERING THESE FACTORS OF 7 THE PRESENT CASE, WE ARE OF THE OPINION THAT THE ORDE R OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NOS.2 AND 3 RAISED BY THE ASSESSEE ARE DISMISSED. 10. GROUND NO.1 RELATES TO UPHOLDING THE DISALLOWANCE OF RS. 51,617/ - OUT OF OFFICE AND ADMINISTRATIVE EXPENSES. BRINGING OUR ATTENTION TO PAGE 1 OF THE PAPER BOOK, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ASSESSEE CLAIMED INDIRECT EXPENSES OF RS. 2,21,814/ - AS ALLOWABLE EXPENDITURE. CONSIDERING THE ABSENCE OF NEXUS OF THIS EXPENDITURE TO THE TRANS ACTIONS MENTIONED ABOVE AND OTHER BUSINESS PROJECTS, ASSESSING OFFICER DISALLOWED 50% OF THE CLAIM. DURING THE FIRST APPELLATE PROCEEDINGS, ASSESSEE DEMONSTRATED QUA THE ADMINISTRATIVE EXPENSES (RS. 79,364/ - ) AND EXHIBITION EXPENSES (RS. 39,217/ - ) THE COM MERCIAL EXPEDIENCY AND SUBMITTED THAT THE SAME SHOULD EXCLUDED AND SUCCEEDED IN THE FIRST APPELLATE PROCEEDINGS. HOWEVER, CIT (A) RESTRICTED 50% TO BALANCE OF THE CLAIM. BEFORE US, LD COUNSEL FOR THE ASSESSEE RELIED ON THE ENTRIES IN THE BOOKS OF ACCOUN TS. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. AFTER HEARING BOTH THE PARTIES, WE FIND, THE ORDER OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NO.1 RAISED BY THE ASSESSEE IS DISMISSED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ITA NO.3295/M/2010 (AY 2005 - 06) 12 . THIS APPEAL FILED BY THE ASSESSEE ON 27.4.2010 IS AGAINST THE ORDER OF THE CIT (A) - 32, MUMBAI DATED 10.3.2010 FOR THE ASSESSMENT YEAR 2005 - 06. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING CONCISE GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF TREATING THE GAIN ON SALE OF PANVEL PLOT AS BUSINESS INCOME. 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) OUGHT TO HAVE ALLOWED THE CLAIM OF APPELLANT THAT THE GAIN ON THE SALE OF PANVEL PLOT AS LONG TERM CAPITAL GAIN. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF RS. 55,337/ - OUT OF OFFICE AND ADMINISTRATIVE EXPENSES. 13. IN THIS APPEAL, ASSESSEE RAISED THE SIMILAR GROUNDS TO THAT OF THE GROUNDS RAISED FOR THE AY 2004 - 05. THE FACTS ARE SAME AND THE ONLY DIFFERENCE IS PLOT NO.21, WHICH WAS PURCHASED IN THE FY 1999 - 2000 AND THE SAME WAS SOLD IN THE YEAR UNDER 8 CONSIDERATION AND EARNED CAPITAL GAINS OF RS. 72,91,792/ - . ASSESSING OFFICER TREATED THE SAME AS A BUSI NESS TRANSACTION FOR THE IDENTICAL REASONS GIVEN IN CONNECTION WITH THE SALE PLOT NO.2, WHICH IS THE SUBJECT MATTER OF GROUND NOS.2 AND 3 OF THE APPEAL FOR THE AY 2004 - 05. THUS, THE CORRECT HEAD OF INCOME AND THE BUSINESS NATURE OF THE ASSET IS THE AREA OF DISPUTE BEFORE THE CIT (A). THE ARGUMENTS OF THE PARTIES ARE IDENTICAL TO THAT OF THE ONES MADE WHILE DISCUSSING THE APPEAL FOR THE AY 2004 - 05. AFTER CONSIDERING THE SAID ARGUMENTS AND THE RELEVANT MATERIAL PLACED BEFORE US, WE HAVE HELD THAT THE ASSESS EE IS ENGAGED IN THE TRADING OF PLOTS OF LAND PURCHASED FROM THE CIDCO. WE HAVE GIVEN A DETAILED REASONING AND CONSIDERED THE ASSESSEES MOTIVE OF THE RESALE FOR PROFIT WITH PREMIUM AND THE LANDS NEVER FOR THE DEVELOPMENT OF RESIDENTIAL HOUSES BY THE ASSE SSEE. CONSIDERING THE ANALOGY OF THE FACTS AND THE ARGUMENTS GIVEN ABOVE, WE ARE OF THE OPINION THAT THE IMPUGNED TRANSACTIONS OF SALE OF PLOT NO.21 CONSTITUTE BUSINESS TRANSACTION. ACCORDINGLY, GROUND NOS.1 AND 2 RAISED BY THE ASSESSEE ARE DISMISSED. 1 4. GROUND NO.3 IS SIMILAR TO THAT OF THE GROUND NO.1 RAISED BY THE ASSESSEE FOR THE AY 2004 - 05 AND THE ONLY DIFFERENCE IS IN FIGURES. SINCE, THE ISSUE RAISED IN GROUND NO.1 OF THE APPEAL FOR THE AY 2004 - 05 IS IDENTICAL TO THAT OF THE INSTANT GROUND NO.3, THEREFORE, THE ADJUDICATION GIVEN THEREIN BY US SQUARELY APPLIES TO THE INSTANT GROUND TOO. CONSIDERING THE SAME, GROUND NO.3 RAISED BY THE ASSESSEE IS DISMISSED. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 3 T H FEBRUARY , 2015. S D / - S D / - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 1 3 .2 .2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 9 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI