DCIT 10(2), MUMBAI V. BOMBAY CONSTRUCTION & ENGG. CO., MUMBAI

ITA 7838/MUM/2010

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9168 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 16-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 12-11-2010
• Court: TRIBUNAL
• Assessee Lawyers: ON PROJECTS ON WHICH WA
• Keywords: Revenue expenditure; Capital expenditure
• Section: 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 7838/MUM/2010 ASSESSMENT YEAR: - 2006 - 07 THE ASSISTANT COMMISSIONER OF INCOME TAX 10(2), ROOM NO. 432, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. VS.` M/S BOMBAY CONSTRUCTION & ENGG. CO. PVT. LTD. 104, KRITIKA ANNEXE, MAIN SION TROMBAY ROAD, CHEMBUR, MUMBAI 400 071. PAN: - AAACB 9795 B APPELLANT RESPONDENT / IZR;FKHZ ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 25.08.2010 OF CIT ( A) FOR A.Y. 2006 - 07. THE REVENUE HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL: - 1. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) HAS ERRED IN HOLDING THAT THE PAYMENT OF RS. 21 LAKHS MADE TO SHRI. NITIN PURANDARE AND RS. 18 LAKHS MADE TO SHRI. SHAMIM AHMED HAD TO BE ALLOWED AS DEDUCTION U/S. 37(1) OF THE INCOME TAX ACT, 1961. 2. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, TH E LD.CIT(A) FAILED TO APPRECIATE THAT THE EXPENDITURE OF RS. 39 LAKHS WAS NOT EXPENDED BY THE ASSESSEE ON THE PROJECTS ON WHICH THE ASSESSEE WAS DECLARING INCOME UNDER THE 'PROJECT COMPLETION METHOD' FOR THE A.Y. 2006 - 07 AND THEY WERE EXPENDED TO PROCURE L AND FOR FUTURE PROJECTS AND HENCE WERE REVENUE BY SHRI JEETENDRA KUMAR ASSESSEE BY SHRI DEEPAK H. PADACHH DATE OF HEARING 16.03.2015 DATE OF PRONOUNCEMENT 25 .03.2015 M/S BOMBAY CONSTRUCTION & ENGG. CO. PVT. LTD. 2 | P A G E RIGHTLY TREATED AS A CAPITAL EXPENDITURE OUTLAY AND THE FAILURE TO RECOVER THE AMOUNTS ADVANCED HAD TO BE TREATED AS A LOSS OF CAPITAL AND NOT A REVENUE EXPENDITURE ALLOWABLE U/S. 37(1) OF THE I.T.ACT, 1961. 2. THE ASSESSEE COMPANY IS A BUILDER AND DEVELOPER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 39,00,000/ - UNDER THE HEAD SUNDRY BALANCE WRITTEN OFF. ON BEING QUESTIONED THE ASSESS EE STATED THAT THE ASSESSEE COMPANY HAD ADVANCED AN AMOUNT OF RS. 21 LAC TO MR. NITIN PURUNDARE AND RS. 18 LACS TO MR. SHAMIM AHMAD FOR PURCHASE OF LAND AND FURNISHED THE COPY OF MOU ENTERED INTO BY THE ASSESSEE WITH THESE TWO PARTIES. THE ASSESSING OFFICE R DISALLOWED THE CLAIM OF WRITTEN OFF SUNDRY BALANCE ON THE GROUND THAT THE ADVANCES WERE CAPITAL IN NATURE AS THE ADVANCES WERE MADE FOR THE LAND WHICH WERE NO T IN EXISTENCE. 3. ON APPEAL, THE C(T)A HAS ALLOWED THE CLAIM OF THE ASSESSEE BEING AN ALLOWA BLE BUSINESS LOSS AS THE SAME WAS ON REVENUE ACCOUNT AND LOSS SUFFERED BY THE ASSESSEE IN THE NORMAL COURSE OF BUSINESS. 4. WE HAVE HEARD THE LD. DR AS WELL AS LD. A R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. AUTHORIZED REPRESENTATIVE OF TH E ASSESSEE HAS SUBMITTED THAT THIS ISSUE IS COVERED BY THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. NEW DELHI HOTELS LTD 345 ITR 1. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT AND, THEREF ORE, THE ADVANCES GIVEN FOR PURCHASE OF LAND WAS AN EXPENDITURE ON REVENUE ACCOUNT AND WRITING OFF THE AMOUNT ON BEING BECOME IRRECOVERABLE IS AN ALLOWABLE BUSINESS LOSS U/S 37 OF THE INCOME TAX ACT. HE HAS RELIED UPON THE JUDGMENT OF HON'BLE SUPREME COUR T IN THE CASE OF CIT VS. MYSORE SUGAR CO. LTD. 46 ITR 649. M/S BOMBAY CONSTRUCTION & ENGG. CO. PVT. LTD. 3 | P A G E 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, WE NOTE THAT THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ADVANCES ARE CAPITAL IN NATURE . THE ASSESSING OFFICER HAS NOT GONE INTO THE ISSUE OF GENUINENESS OF CLAIM. THOUGH, THE ASSESSEE WAS HAVING AN AGREEMENT IN WHICH THE ADVANCES WERE GIVEN TO THE PARTIES FOR PURCHASE OF LAND, THEREFORE, THE SAID MOU WITH THE PARTIES IS AN ENFORCEABLE RIGHT WITH THE ASSESSEE FOR SEEKING SPECIFIC PERFORMANCE OF THE OBLIGATION ON THE OTHER PARTY. SINCE THE ASSESSING OFFICER HAS NOT GONE INTO THE OTHER ASPECTS OF THE ISSUE AND CONFINED ONLY TO THE ISSUE OF LOSS ON ACCOUNT OF CAPITAL OR REVENUE, THEREFORE, TH IS LIMITED ISSUE HAS BEEN RAISED BEFORE US BY THE REVENUE IN THIS APPEAL. WE NOTE THAT THERE IS NO DISPUTE THAT THE AMOUNT IN QUESTION WAS ADVANCED BY THE ASSESSEE FOR PURCHASE OF LAND WHICH WOULD BE GOING TO FORM PART OF STOCK IN TRADE OF TH E ASSESSEE BEING IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT. ACCORDINGLY, THE SAID ADVANCE BECOMING IRRECOVERABLE AND CONSEQUENTLY, WRITING OFF BY THE ASSESSEE IS A REVENUE LOSS AND AN ALLOWABLE CLAIM BEING BUSINESS LOSS OF THE ASSESSEE AS HELD BY HONBLE DELHI HIGH COURT IN THE CASE O F CIT VS. NEW DELHI HOTELS LTD (SUPRA) IN PARA 4 TO 7 AS UNDER: - 4. THE TRIBUNAL HAS ALLOWED THE AFORESAID LOSS UNDER SECTION 37 OF THE ACT, AFTER RECORDING THE FOLLOWING FINDINGS: - '15. WE HAVE CAREFULLY PERUSED THE PAPERS PLACED IN THE PAPER BOOK FILED BY THE ASSESSEE. THE AGREEMENT TO PURCHASE THE PROPERTY WAS MADE BY THE ASSESSEE WITH M/S. GULMOHAR ESTATE LTD., WHICH WAS DESIROUS OF BUILDING A DESIGNER HOUSE COMPLEX HAVING A NUMBE R OF DWELLING UNITS OF VARIOUS SIZES AND SPECIFICATIONS, COMMON FACILITIES, PROVISION OF PRIVATE ELECTRICITY AND WATER SUPPLIES, CLUB, SHOPPING CENTRE ETC. AND IN PURSUANCE THERETO THEY WERE BUILDING DWELLING UNITS OF DIFFERENT SIZES AND SPECIFICATIONS. TH E ASSESSEE WAS DESIROUS OF PURCHASING THE DWELLING UNITS BEING CONSTRUCTED M/S BOMBAY CONSTRUCTION & ENGG. CO. PVT. LTD. 4 | P A G E BY M/S. GULMOHAR ESTATE LTD. THE ASSESSEE ENTERED INTO SIMILAR TYPE OF THREE AGREEMENTS TO PURCHASE OF FOLLOWING PROPERTIES: - (I) PROPERTY MEASURING 700 SQUARE FEET FOR CONSIDERATIO N OF 11,47,500; (II) PROPERTY MEASURING OF 1960 SQUARE FEET FOR CONSIDERATION OF RS. 13,23,000/ - ; (III) PROPERTY MEASURING 2900 SQUARE FEET FOR RS. 19,57,500/ - . 16. THE ASSESSEE, THUS, AGREED TO PURCHASE THREE NUMBER OF DWELLING UNITS IN DESIGNER HOUSING C OMPLEX BEING CONSTRUCTED BY M/S. GULMOHAR ESTATE LTD. THE ASSESSEE IS NOT AN INDIVIDUAL SO THESE FLATS COULD BE CONSIDERED WITH INTENT TO USE THEM FOR OWN RESIDENTIAL PURPOSES. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS ALSO IN THE BUSINESS OF CONSTRUCTING AND DEVELOPING BUILDINGS. IN THE BALANCE SHEET AS ON 31.03.1989, 31.03.1990 AND THEREAFTER, THE ASSESSEE HAS BEEN SHOWING STOCK IN TRADE IN THE FORM OF LAND, AGRICULTURAL LAND, FLATS AND BASEMENT AND BUILDING UNDER CONSTRUCTION. THE ASSESSEE WAS, THUS, IN THE BUSINESS OF PURCHASING AND SALE OF REAL ESTATE AND IN THE CONSTRUCTION AND DEVELOPMENT OF PROPERTIES AND FLATS. THE ASSESSEE HAS ALSO RECEIVED ADVANCES FROM FLAT OWNERS AGAINST THE FLATS TO BE SOLD TO THEM, WHICH HAS BEEN SHOWN UNDER THE HEAD 'CURRENT LIABILITIES AND PROVISIONS'. THE AMOUNT OF RS. 44,28,000/ - RECEIVABLE FROM M/S. GULMOHAR ESTATE LTD. PAID TOWARDS PURCHASE OF FLATS WERE SHOWN UNDER THE HEAD 'LOANS AND ADVANCES' IN THE BALANCE SHEET AS ON 31.03.1991. THE AUDITED ACCOUNTS FOR THE YEAR UNDE R CONSIDERATION HAVE BEEN CAREFULLY PERUSED BY US. THE ASSESSEE HAS SHOWN RENT AND OTHER INCOME AT RS. 4,34,29,879.62, DETAILS OF WHICH ARE AS UNDER: - SCHEDULE - 7 AS ON 31.03.04 AS ON 31.03.03 RENT & OTHER INCOME RENT 9,660,581.00 14,195,194.00 INTEREST & DIVIDEND INCOME 9,104,009.45 7,381,696.59 CAR PARKING AND OTHER INCOME 1,883,354.95 1,664,238.00 SALE OF FLATS (HERITAGE CITY) 21,815,908.00 52,566,480.00 PROFIT ON SALE OF PLOT (HUDA) 966,026.22 -- 43,429,879.62 75,807,608.59 17. THE RENT AND OTHER INCOME HAS BEEN CREDITED IN THE PROFIT AND LOSS ACCOUNT. THE OPENING STOCK IN TRADE HAS BEEN SHOWN AT RS. 82,88,005/ - AND THE CLOSING STOCK AS ON 31.03.2004 HAS BEEN SHOWN AT RS. 79,35,987/ - . THE PROFIT FROM SALE OF FLATS (HERITAGE C ITY), HAS BEEN SHOWN UNDER THE HEAD 'PROFIT AND GAINS OF BUSINESS OR PROFESSION'. THE OBJECT OF THE COMPANY AS SEEN FROM THE MEMORANDUM OF ASSOCIATION OF THE COMPANY IS ALSO TO ACQUIRE BY PURCHASE, LEASE, EXCHANGE OR OTHERWISE, SALE OR OTHERWISE AND SELL I N AND DISPOSE OF LANDS, BUILDING, HERIDITAMENTS OF ANY TENURE OR M/S BOMBAY CONSTRUCTION & ENGG. CO. PVT. LTD. 5 | P A G E DESCRIPTION ETC. THE CLAUSE (3) OF THE MEMORANDUM OF ASSOCIATION IS RELEVANT IN THIS REGARD, WHICH HAS BEEN REPRODUCED AS UNDER: - '3(A) TO ACQUIRE BY PURCHASE, LEASE, EXCHANGE OR OTHERWISE AN D SELL OR OTHERWISE DEAL IN AND DISPOSE OF LANDS, BUILDINGS AND HERIDTAMENTS OF ANY TENURE OF DESCRIPTION AND ANY ESTATE OR INTEREST THEREIN OR ANY PART THEREOF OR ANY TENEMENTS THEREIN ON OWNERSHIP BASIS OR OTHERWISE AND ANY RIGHTS OVER OR CONNECTED WITH LANDS AND IN PARTICULAR BY LAYING OUT, DEVELOPING, OR ASSIST IN DEVELOPING AND PEREPARING LAND FOR BUILDING PURPOSES AND PREPARING BUILDING SITES BY PLANTING, PAVING, DRAWING AND BY CONSTRUCTING, RECONSTRUCTING PULLING DOWN, ALTERING, IMPROVING, DECORATING , FURNISHING AND MAINTAINING AND DEALING IN OFFICES, FLATS, SERVICE FLATS, HOUSES, BUNGALOWS, FACTORIES, WAREHOUSES, SHOPS, CINEMA HOUSES, BUNGALOWS, WORKS AND CONVENIENCES OF ALL KINDS AND BY CONSOLIDATING OR CONNECTING OR SUB - DIVIDING PROPERTIES AND BY L EASING, LETTING OR RENTING, SELLING AND OTHERWISE DISPOSING OF THE SAME ON SUCH TERMS AND CONDITIONS AS MAY BE THOUGH FIT. 3(B) TO UNDERTAKE BUILDING AND STRUCTURAL CONSTRUCTION WORKS OF ALL KINDS AND TO WORK AS BUILDERS, CONTRACTORS, SUB - CONTRACTORS, AND TO SUB - LET ALL OR ANY CONTRACTS FROM TIME TO TIME AND UPON SUCH TERMS AND CONDITIONS AS MAY BE THOUGHT EXPEDIENT. 3(C) TO CARRY ON THE BUSINESS AS ESTATE AGENTS FOR BUILDINGS, LAND AND OTHER PROPERTY AND TO ARRANGE OR UNDERTAKE THE SALE AND PURCHASE OF, ASSIST IN SELLING OR PURCHASING LANDS, BUILDINGS, AND OTHER PROPERTY WHETHER BELONGING TO THE COMPANY OR NOT AND TO LET ANY PORTION OF ANY PREMISES FOR RESIDENTIAL, TRADE OR BUSINESS PURPOSES, AND TO COLLECT RENTS, AND INCOMES AND TO SUPPLY TO TENANTS AND OCCUPIERS ALL CONVENIENCES, AMENITIES ETC.' 18. THE ASSESSEE COMPANY WAS THE PROMOTER AND DEVELOPER OF NEW DELHI HOUSE AND MERCANTILE HOUSE AT NEW DELHI. THE ASSESSEE IS ALSO THE PROMOTER AND DEVELOPER OF HERITAGE CITY AT GURGAON, IN RESPECT OF WHICH THE P ROFIT HAS BEEN SHOWN UNDER THE HEAD 'BUSINESS OR PROFESSION'. DURING THE YEAR 1990 - 91, THE ASSESSEE COMPANY ENTERED INTO AN AGREEMENT WITH M/S. GULMOHAR ESTATE LTD FOR THE PURCHASE OF THREE PROPERTIES AT GARDEN ESTATE, GURGAON FOR THE TOTAL CONSIDERATION O F RS. 44,28,000/ - AS PER THE AGREEMENT DATED 27.07.1990. THE ASSESSEE MADE THE TOTAL PAYMENT TO M/S GULMOHAR ESTATE LTD. IN THE YEAR 1990 - 91. INSPITE OF MAKING FULL PAYMENT, NO PHYSICAL POSSESSION WAS HANDED OVER BY THE PURCHASER TO THE ASSESSEE. SINCE NO PHYSICAL POSSESSION WAS RECEIVED BY THE ASSESSEE, THE PROPERTY PROPOSED TO BE PURCHASED BY THE ASSESSEE WERE NOT SHOWN AS STOCK IN TRADE IN THE BOOKS OF ASSESSEE AS PER THE NORMAL ACCOUNTING PRACTICE. THE ASSESSEE HAD DEBITED THE AMOUNT OF RS. 44,28,000/ - IN THE BOOKS OF ACCOUNT AND SHOWN UNDER THE HEAD 'LOANS AND ADVANCES'. THEREAFTER, IN THE YEAR 2003 - 04, M/S. GULMOHAR ESTAGE LTD. LOCKED THEIR OFFICES AND IT WAS FOUND THAT THE PROPERTY PURCHASED BY THE ASSESSEE WERE FRAUDULENTLY SOLD TO SOME OTHER PEOPLE ALSO. DISTRICT TOWN AND COUNTRY PLANNER, HARYANA GAVE A PUBLIC NOTICE CANCELING THE LICNECE OF GARDEN ESTATE OF M/S. GULMOHAR ESTATE LTD. THE ASSESSEE, THEREFORE, TAKEN A DECISION TO WRITE OFF THE ENTIRE AMOUNT AS BUSINESS LOSS. IT IS ALSO AN ADMITTED POSI TION THAT THE POSSESSION OF THE FATS M/S BOMBAY CONSTRUCTION & ENGG. CO. PVT. LTD. 6 | P A G E AGREED TO BE PURCHASED BY THE ASSESSEE WAS NOT GIVEN TO THE ASSESSEE AND, THUS, THE TRANSFER OF FLATS WITHIN THE MEANING OF INCOME TAX ACT WAS NOT COMPLETED. THEREFORE, IT IS A CASE WHERE AMOUNT WAS PAID IN ADVANCE FOR PURCHASE OF PROPERTY. THE ASSESSEE IS IN THE LINE OF BUSINESS OR REAL ESTATE AS DISCUSSED ABOVE. IT CAN, THEREFORE, BE REASONABLY BE PRESUMED OR A REASONABLE INFERENCE CAN BE DRAWN THAT THE ASSESSEE INTENDED TO PURCHASE THE PROPERTY IN THE COURSE OF ORIGIN AL BUSINESS CARRIED ON BY IT OR AT BEST IT CAN BE SAID THAT THE ASSESSEE PURCHASED THE PROPERTY FOR RESIDENCES OF ITS EMPLOYEES INCLUDING DIRECTORS. EVEN IF IT IS PRESUMED THAT THE ASSESSEE INTENDED TO PURCHASE THE THREE FLATS OF USE OF ITS EMPLOYEES AND D IRECTORS, THE AMOUNT SO ADVANCED TO M/S. GULMOHAR ESTATE PVT. LTD WOULD BE CONSIDERED TO BE MADE AS INCIDENTAL TO THE BUSINESS CARRIED ON BY THE ASSESSEE.' 5. LEARNED COUNSEL FOR THE REVENUE HAS SUBMITTED THAT IN THE END OF PARAGRAPH 18 THE TRIBUNAL HAS DRAWN AN ASSUMPTION WITHOUT ANY BASIS THAT THE INTENDED PURCHASE WAS IN THE COURSE OF BUSINESS OR AT BEST THE PURCHASE WAS FOR A RESIDENCE OF ITS EMPLOYEES, INCLUDING DIRECTORS. WE ARE NOT IMPRESSED BY THE AFORESAID CONTENTION. THE TRIBUNAL HAS REFERRED TO THE NATURE OF ACTIVITIES UNDERTAKEN BY THE RESPONDENT - ASSESSEE, I.E., THE ASSESSEE WAS A REAL ESTATE COMPANY AND WAS A CONTRACTOR. THE TRIBUNAL REFERRED TO THE MEMORANDUM OF ASSOCIATION AND MENTIONED OTHER TRANSACTIONS OF SALE/PURCHASE IN WHICH THE ASSESS EE HAD TREATED IMMOVABLE PROPERTIES AS STOCK - IN - TRADE. THE HISTORY FOR THE BUSINESS TRANSACTIONS UNDERTAKEN BY THE ASSESSEE HAVE BEEN KEPT IN MIND. NO DOUBT, THE ASSESSEE ALSO HAD RENTAL INCOME BUT THIS FACTUM ALONE DOES NOT SHOW AND ESTABLISH THAT THE PRO PERTIES, WHICH WERE BEING PURCHASED FROM M/S GULMOHAR ESTATE LIMITED, WERE TO BE TREATED AS INVESTMENT AND NOT FOR THE PURPOSE OF STOCK IN TRADE. THE TRIBUNAL THEREAFTER IN PARAGRAPHS 19 AND 20 HAS OBSERVED AS UNDER: - '19. THE LD. CIT(A) HAS REJECTED THE ASSESSEE'S CLAIM OF BUSINESS LOSS MERELY BY OBSERVING AS UNDER: - '6.3 IT MAY ALSO BE MENTIONED HERE THAT THE APPELLANT HAS NOT CLAIMED SUCH WRITTEN OFF AS BUSINESS LOSS EITHER IN THE RETURN OF INCOME FILED OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR APPELLATE PROCEEDINGS BEFORE ME THAT THE ADVANCE WAS MADE FOR THE PURCHASE OF STOCK - IN - TRADE OR THE AMOUNT WAS ADVANCED IN THE ORDINARY COURSE OF BUSINESS. IT IS ALSO OBSERVED FROM THE ASSESSMENT ORDER THAT APPELLANT HAS MADE INVESTMENT IN PROPERTIES AND H AS SHOWN LONG TERM CAPITAL GAIN ON SALE OF SUCH PROPERTY. IN VIEW OF THESE FACTS, APPELLANT'S CLAIM THAT HE AMOUNT WRITTEN OFF MAY BE TREATED AS BUSINESS LOSS IS ALSO REJECTED.' FROM THE SAID OBSERVATION OF THE LD. CIT(A), WE FIND THAT THE LD. CIT(A) WAS OF THE VIEW THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE THAT THE ADVANCE WAS MADE FOR THE PURPOSE OF STOCK IN TRADE OR THE AMOUNT WAS ADVANCED IN THE ORDINARY COURSE OF BUSINESS, WHICH IN OUR CONSIDERED OPINION, IS NOT CORRECT IN THE LIGHT OF THE SUBMISSIO NS OF THE ASSESSEE MADE BEFORE THE LD. M/S BOMBAY CONSTRUCTION & ENGG. CO. PVT. LTD. 7 | P A G E CIT(A), WHICH HAS BEEN REPRODUCED BY THE LD. CIT(A) IN HIS ORDER AT PARA 5 OF HIS ORDER. IN THE AFORESAID SUBMISSION MADE BEFORE THE LD. CIT(A), THE ASSESSEE CATEGORICALLY STATED THAT THE ASSESSEE WAS A CONSTRUCTION A ND REAL ESTATE COMPANY PROMOTED BY SHRI RAM PRASAD JI IN 1968, AND THE ASSESSEE IS PROMOTER AND DEVELOPER OF NEW DELHI HOUSE AND MERCANTILE HOUSE AT NEW DELHI AND HERITAGE CITY AT GURGAON. THE DETAILS ABOUT THE AGREEMENT MADE DURING 1990 - 91 WERE ALSO GIVEN TO THE LD. CIT(A). THE LD. CIT(A) HAS NOT STATED ANYTHING ADVERSE TO THE ASSESSEE'S CONTENTION TO THE FACT THAT THE ASSESSEE IS PROMOTER AND DEVELOPER OF NEW DELHI HOUSE AND MERCANTILE HOUSE OF NEW DELHI AND HERITAGE CITY AT GURGAON. THE ASSESSEE ALSO EXP LAINED BEFORE THE LD. CIT(A) THAT SINCE THE POSSESSION OF THE PROPOSED PROPERTY WAS NOT GIVEN TO THE ASSESSEE, THE PROPERTY COULD NOT BE SHOWN UNDER THE HEAD 'STOCK - IN - TRADE' BUT THE AMOUNT ADVANCED HAD TO BE SHOWN UNDER THE HEAD 'LOANS AND ADVANCES'. 20. ONE MORE REASON GIVEN BY THE A.O. AS WELL AS BY THE LD. CIT(A) TO REJECT THE ASSESSEE'S CLAIM THAT FROM THE ASSESSMENT ORDER, IT WAS OBSERVED THAT THE ASSESSEE MADE INVESTMENT IN PROPERTY AND HAS SHOWN LONG TERM CAPITAL GAIN ON SUCH PROPERTY. HOWEVER, THE ANSWER TO QUESTION WHETHER ANY PROPERTY PURCHASED BY THE ASSESSEE, WHO IS ALSO IN THE BUSINESS OF CONSTRUCTION AND SALE OF FLATS/PROPERTIES/HOUSING COMPLEX, IS ON INVESTMENT ACCOUNT OR ON TRADING ACCOUNT IS TO DETERMINED IN THE LIGHT OF THE INTENTION OF T HE ASSESSEE TO BE DECIDED UPON ON FACTS AND SURROUNDING CIRCUMSTANCES RELATING TO THE GIVEN PROPERTY IN QUESTION NO UNIFORM OR ABSTRACT TEST CAN BE APPLIED TO ALL THE TRANSACTIONS CARRIED ON BY ANY ASSESSEE. IT DEPENDS ON FACTS AND CIRCUMSTANCES OF ANY GIV EN TRANSACTION. WE, THEREFORE, HAVE TO DECIDE THE CONTROVERSY IN THE LIGHT OF THE FACTS RELATING TO THE PROPERTY IN QUESTION AND THE INTENTION OF THE ASSESSEE WITH REGARD TO THAT PROPERTY. IN THE LIGHT OF THE FACTS RELATING TO THE TRANSACTION IN QUESTION, WE HAVE ALREADY OBSERVED ABOVE THAT THE TRANSACTION TO PURCHASE PROPERTY FROM M/S. GULMOHAR ESTATE LTD. WAS RELATED OR INCIDENTAL TO THE ASSESSEE'S BUSINESS. AFTER TAKING INTO ACCOUNT THE INTENTION OF THE ASSESSEE, IT IS WELL SETTLED THAT IT IS THE INTENTI ON OF THE ASSESSEE WHICH WOULD MATTER IN DECIDING AS TO WHETHER THE PROPERTY PURCHASED WERE INTENDED FOR CARRYING ON BUSINESS OR TO HOLD IT AS AN INVESTMENT COUPLED WITH THE LINE OF THE BUSINESS CARRIED ON BY THE ASSESSEE. IN THE PRESENT CASE, AFTER CONSID ERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE'S INTENTION TO PURCHASE THREE FLATS IN HOUSING COMPLEX BY MAKING TOTAL PAYMENT IN ADVANCE WAS TO DO BUSINESS OF REAL ESTATE OR OTHERWISE TRANSACTION WAS UNDERTAKEN FOR THE PURPOSE OF BUSINESS ORDINARILY CARRIED ON BY THE ASSESSEE.' 6. THE AFORESAID REASONING GIVEN BY THE TRIBUNAL IS FACTUAL IN NATURE. IT CANNOT BE SAID THAT THE FINDINGS RECORDED BY THE TRIBUNAL ARE UNREASONABLE OR PERVERSE. 7. IN VIEW OF THE AFORESAID FACTUAL FINDINGS RECORDED BY THE TRIBUNAL, THE ANSWER TO THE QUESTION HAS TO BE IN AFFIRMATIVE, I.E. IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. M/S BOMBAY CONSTRUCTION & ENGG. CO. PVT. LTD. 8 | P A G E 6. FOLLOWING THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NEW DELHI HOTELS LTD (SUPRA ), WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE. 7 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED ORDER PRONOUCNED IN THE OPEN COURT ON THIS 25 TH DAY OF MARCH 2015 SD/ - SD/ - ( N.K. BILLAIYA ) (VIJAY PAL RAO) ( ACCOUNTANT MEMBER ) (JUDICIAL MEMBER ) MUMBAI DATED 25 .03.2015 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI