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Income Tax Appellate Tribunal, “E” Bench, Mumbai
Before: Shri B.R. Baskaran (AM)& Shri Pawan Singh (JM)
O R D E R Per B.R. Baskaran (AM) :-
The appeal filed by the assessee is directed against the order dated 30.9.2010 passed by the learned CIT(A)-30, Mumbai and it relates to A.Y. 2007-08. The only issue urged in this appeal is whether the learned CIT(A) was justified in holding the assessment of gain arising on sale of an immovable property as short term capital gains as against business income declared by the assessee.
We have heard the parties and perused the record. The assessee declared gain of ` 14.53 lakhs arising on sale of an immovable property as her business income. The case of the assessee was that she held the property as her Stock in trade. The Assessing Officer noticed that the assessee has declared sale consideration at ` 53 lakhs, whereas the market value for stamp duty purpose was shown at ` 87.47 lakhs. The Assessing Officer noticed that the assessee has not got his account audited u/s. 44AB of the Act, since the turnover has exceeded the prescribed limit. The Assessing Officer also noticed
2 Snehal Rakesh Saigal that the assessee was not regularly carrying on the business of purchase and sale of properties. Accordingly the Assessing Officer held that the immovable property was held by the assessee has his Capital asset and accordingly rejected the claim of “business transaction”. Accordingly he computed capital gain on sale of immoveable property. Since the market value for stamp duty purpose was determined at ` 87.47 lakhs, the Assessing Officer computed the capital gain by adopting the amount of ` 87.47 lakhs as sale consideration u/s. 50C of the Act. The learned CIT(A) also confirmed the same and hence the assessee has filed this appeal before us.
At the time of hearing learned AR submitted that the assessee has been declaring purchase of property as her stock-in-trade since A.Y. 2005-06. Learned AR further submitted that the assessee has purchased some more properties also and they have also been shown as stock in trade. Accordingly, learned AR submitted that the assessee’s intention from the beginning was to hold the immovable property as her stock in trade and hence profit arising out of sale of impugned property should be assessed as business income only. He further submitted that the provisions of section 50C shall apply only in respect of capital asset and hence the same cannot be applied if the income is computed under business head. Learned AR placed his reliance on the decision rendered by Hon'ble Supreme Court in the case of G. Venkataswami Naidu & Co. (1959) 35 ITR 594 and submitted that a solitary transaction can also be treated as a business transaction. He further submitted that Hon'ble Madras High Court has also expressed an identical view in the case of Allu Arvind Babu (350 ITR 387).
On the contrary learned Departmental Representative strongly supported the order passed by the learned CIT(A).
Having heard the rival submissions, we are of the view that there is merit in the submissions made by learned AR. The intention of the assessee at the time of purchase of the assessee with regard to its character is one of the 3 Snehal Rakesh Saigal major criteria to determine the nature of the asset. The question as to whether the assessee intended to hold the same as “stock in trade” or “closing stock” at the time of purchase may be gathered from surrounding circumstances and the conduct of the assessee. A perusal of the return of income filed by the assessee since A.Y. 2005-06 would show that the assessee has been declaring the impugned property as her stock in trade. Further, the opening and closing stock values have been routed through profit and loss account in A.Y.2006-07 & 2007-08. We also notice that the assessee has also included certain other property also in Stock in trade. We also notice that the returns of income for AY 2005-06 and 2006-07 were filed on 31.3.2007 and the return of income for the year under consideration has been filed on 27-04-2009. The time gap between the dates of filing of returns of income also strengthens the case of the assessee that she intended to hold the asset as her stock in trade. Thus we notice that the assessee had intended to hold these assets as her stock in trade since the date of its purchase. In the cases relied upon by Ld A.R, it has been held that even solitary transactions of purchase and sale can be taken as business transaction.
We noticed that the Assessing Officer did not accept the contention of the assessee only for the reason that the provisions of section 50C shall be applicable if the property is held as capital asset. In our view, the same may not be a right reason to disbelieve the claim of the assessee. As stated earlier, the conduct of the assessee and the surrounding circumstances have to be examined to determine the intention of the assessee and the character of the asset. Similarly, we are of the view that the violation of section 44AB, if any, may attract the relevant penal provisions and the same cannot be a ground to disbelieve the claim of the assessee that she has intended to hold the asset as her business asset.
In view of the above, we are unable to agree with the view expressed by the Assessing Officer and the learned CIT(A). Accordingly, we set aside the order passed by the learned CIT(A) and direct the Assessing Officer to assess
4 Snehal Rakesh Saigal the profit arising on sale of impugned immovable property as business income of the assessee as returned by her.
In the result, the appeal filed by the assessee is allowed.
Order has been pronounced in the Court on 5.4.2017.