LAT SMT. SAROJ BANSAL,DEHRADUN vs. ITO, WARD-2(3), DEHRADUN

This is an appeal by the assessee against order dated

06.03.2018 passed by learned Commissioner of Income Tax

(Appeals) [hereinafter referred to as the learned CIT(A)], Dehradun,

pertaining to assessment year 2013-14.

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whether the learned CIT(A) was justified in upholding the action of

learned Assessing Officer in treating the gains received on sale of

property by assessee as business income as against capital gains

reported by the assessee. The inter-connected issue involved therein

is as to whether the assessee is eligible for claim of deduction under

section 54F of the Act in respect of reinvestment made in residential

property.

available on record. The assessee is an individual engaged in the

business of commission agent of real estate. The return of income

for the assessment year 2013-14 was belatedly filed by the assessee

on 07.02.2014 declaring income of Rs.8,90,130/-, which includes

capital gain of Rs.6,88,777/-, after claiming deduction of

Rs.80,91,127/- under section 54F of the Act in respect of

reinvestment of capital gains in another residential property.

various properties commencing from assessment year 2008-09 to

assessment year 2011-12. It is also not in dispute that the assessee

ITA No. 3941/Del/2018 AY: 2013-14

had sold one of the properties in assessment year 2011-12 and

assessment year 2012-13. According to learned AR, the assessee

had only invested in the property in the capacity of investor for the

purpose of earning capital appreciation thereon. The intention of

the assessee at the time of purchase of properties in the capacity of

investor has also been accepted by learned Assessing Officer in

page 4 of his order. Hence, learned AR argued that the Assessing

Officer erred in treating that the assessee by splitting the land into

various plots and thereafter selling the same to different persons

would only constitute adventure in the nature of trade carried on by

the assessee, thereby losing the status of being an investor. Hence,

according to Assessing Officer, the resultant gain on sale of those

properties would only be income from business and not income

from capital gains. Consequently, learned Assessing Officer had

also denied the claim of deduction under section 54F of the Act in

respect of reinvestment made in new house property. This action of

learned Assessing Officer was upheld by learned CIT(A).

ITA No. 3941/Del/2018 AY: 2013-14

assessee with regard to the purchase and sale of the properties,

which could be understood from the following table:

F.Y. A.Y. Purchases Sale Remark 2007-08 2008-09 6,02,400 In the Balance Sheet these immovable properties have been shown as Fixed Assets along with other prior owned properties. Assessment u/s 147/143(3) of the Income Tax Act, 1961 was completed by the same Assessing officer on 21.03.2016. Wherein above immovable properties were taken as Fixed Assets..

Copy of assessment order and Balance Sheet as on 31.03.2008 is placed on record.

Thereby it is clear and accepted that immovable property purchased is not stock in trade. 2008-09 2009-10 4,85,255 In the Balance Sheet these immovable properties have been shown as Fixed Assets along with other prior owned properties. Balance Sheet as on 31.03.2009 is placed on record.

Thereby it is clear that immovable property purchased is not stock in trade. 2009-10 2010-11 21,85,000 In the Balance Sheet these immovable properties have been shown as Fixed Assets along with other prior owned properties. Return of income was submitted on 04.01.2012.

Copy of acknowledgement of return filed and Balance Sheet as on 31.03.2010 are placed on record.

Thereby it is clear and accepted that immovable property purchased is not stock in trade.

In the Balance Sheet these immovable properties have 2010-11 2011-12 32,10,250 been shown as Fixed Assets along with other prior owned properties. Assessment u/s 147/143(3) of the Income Tax Act, 1961 was completed by the same Assessing officer on 21.03.2016, wherein, above immovable properties were taken as Fixed Assets.

ITA No. 3941/Del/2018 AY: 2013-14

Copy of the assessment order and the Balance Sheet as on 31.03.2011 are placed on record. Thereby it is clear and accepted that immovable properties purchased were not stock in trade. 2011-12 2012-13 54,52,150 Gain on Sale of immovable properties was shown as Income from Capital Gain in the return of income filed on 29.03.2013. Copy of Computation of income and acknowledgement of return filed are placed on record.

been showing the property purchased as fixed assets in her

statement of assets and liabilities account, which goes to prove that

she would like to remain as an investor and never wanted to exploit

the said property commercially by using it for business purposes.

Hence, according to AR, there was no intention of the assessee to

earn any short-term gains from the said property by engaging

herself in the adventure of any trade.

has divided its lands into several plots and had sold those plots to

several parties. The assessee has also sold the property in

assessment year 2011-12 and similarly in assessment year 2012-

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herself as a business women to exploit commercially the properties

owned by her as an adventure in the nature of trade in order to

earn business income.

learned DR and by the lower authorities for the following reasons:-

i. We find that the assessee had bought the properties from

financial year 2008-09 till assessment year 2010-11 in the

capacity of investor, which has been accepted by learned

Assessing Officer. Part of these assets were sold by the

assessee in assessment years 2011-12 and 2012-13.

ii. The capital gains arising out of such sale has duly been

disclosed by the assessee in assessment year 2011-12 and

accepted as such by the revenue, though u/s 143(1) of the

Act.

iii. For the purpose of arriving at the capital gains in respect of

sale of property in assessment year 2012-13, we find that the

assessee had indeed considered the sale price as determined

by the Stamp Valuation Authority in terms of section 50C of

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the Act as the actual sale consideration was less than the

circle rate. This clearly shows the intention of the assessee

that she always wanted to remain only as an investor and

never intended to carry on any business on the property.

iv. We find, learned Assessing Officer had also accepted the very

same sale consideration disclosed by the assessee in terms of

section 50C of the Act, even though, he has sought to treat the

gains arising from the sale of property as business income. In

this regard, it is pertinent to note that when a business asset

is sold (i.e. immovable property held as stock in trade), the

learned Assessing Officer could substitute stamp duty value as

against the actual sale consideration in terms of section 43CA

of the Act, if the actual sale consideration is less than the

circle rate. But the provisions of section 43CA of the Act was

introduced in the Statute only w.e.f. 01.04.2014 and

applicable from assessment year 2014-15 onwards only and

cannot be applied to earlier assessment years. Hence, the

learned Assessing Officer was not justified in accepting the

gain as business income as against capital gain.

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v. One more excruciating fact which prove the intention of the

assessee to be an investor beyond any doubt is that the

assessee is only 50% co-owner of the property along with his

daughter-in-law, which is subjected to sale during the

assessment year 2012-13 i.e. the year under consideration. No

prudent person would buy property jointly for doing business.

This fact also goes to prove that the assessee, right from the

time of purchase till the sale of the property, had intended to

treat the property as capital asset and offer capital gains on its

sale.

vi. One more fact which goes in favour of the assessee is that if

the theory of learned Assessing Officer that the assessee is

doing business in the form of adventure in the nature of trade

vis-à-vis property is to be accepted, then the capital asset

which had been shown by the assessee as such, had to be first

converted into stock-in-trade. On the said conversion, it would

be liable for capital gains in terms of section 45(2) of the Act.

Admittedly, no such case was made out by the Revenue by

bringing to tax the capital gains at the time of conversion. In

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fact, the learned Assessing Officer, having accepted the fact

that the assessee bought the property only in the capacity of

an investor, had not even brought on record with cogent

evidence as to on which date the said capital asset got

converted into stock-in-trade, thereby, warranting levy of

capital gain tax under section 45(2) of the Act.

vii. As stated earlier, the assessee had sold the subject mentioned

property jointly with her daughter in law and the daughter in

law has offered capital gains of her 50% share in the property

in her return of income, which has been accepted by the

revenue. Hence, there is no reason for the Revenue to take a

divergent stand on the very same transaction qua the assessee

herein.

totality of the facts and circumstances of the case, we are of the

considered view that the gains arising on the sale of the property to

the assessee has to be taxed only as capital gains and not as

income from business. Consequently, the assessee would be eligible

ITA No. 3941/Del/2018 AY: 2013-14

for deduction under section 54F of the Act in respect of

reinvestment of capital gains made in the house property.

since there is no finding given by learned Assessing Officer in his

assessment order with regard to examination of quantum of

deduction under section 54F, we deem it fit and appropriate to

restore this issue only for the limited extent of allowability of the

claim of deduction under section 54F of the Act, vis-à-vis, its

quantum. Grounds raised by the assessee are disposed of subject to

above mentioned directions.

Order pronounced in Open Court on 23rd June, 2023

Sd/- Sd/- (SAKTIJIT DEY) (M. BALAGANESH) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 23/06/2023 RK/Sr.PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI (Dehradun Circuit Bench, Dehradun) 10