Delhi High Court
Commissioner Of Income-Tax vs Dr. Indu Bala Chhabra on 10 July, 2002
Equivalent citations: [2002]258ITR111(DELHI)
Author: D.K. Jain
Bench: D.K. Jain, Sharda Aggarwal
JUDGMENT D.K. Jain, J.
1. This is an appeal under Section 260A of the Income-tax Act, 1961 (in short "the Act"), from the order passed by the Income-tax Appellate Tribunal, Delhi Bench "B", New Delhi (in short "the Tribunal"), on January 31, 2002, in I. T. A. No. 91/Delhi of 1995, pertaining to the assessment year 1991-92.
2. The background facts, in brief, are :
The respondent, hereinafter referred to as the assessed, derives income from medical profession. In her return for the relevant assessment year she declared an income of Rs. 1,14,330 as income from profession. During the course of assessment proceedings, the Assessing Officer noticed that during the previous year the assessed had received a sum of Rs. 26,32,000 on the sale of some shops and flats but had not declared any capital gains on the plea that the sale consideration had been deposited in the specified capital gains bank account in terms of Section 54(2) of the Act. Rejecting the stand of the assessed that the property was residential and the entire sale proceeds having been deposited in the specified account, no capital gain was exigible to tax, the Assessing Officer held that the amount received by the assessed on the sale of the shops was to be charged to tax under Section 45(2) of the Act, as the assessed had converted the capital assets (the shops and flats) into stock-in-trade and the same were sold in the relevant previous year. Estimating the market value of the shops, converted into stock-in-trade, at Rs. 32 lakhs, the Assessing Officer computed income on this account at Rs. 32,00,000.
3. Aggrieved, the assessed preferred appeal to the Commissioner of Income-tax (Appeals), who held that neither the Assessing Officer was justified in invoking Section 45(2) of the Act nor the claim of the assessed under Section 54F of the Act was tenable. The Commissioner, however, held that the construction of shops and the flats by the assessed was an adventure in the nature of trade and thus income from the sale of the shops was to be taxed as profits and gains of business, which was computed at Rs. 22,85,820.
4. Not being satisfied with the relief granted by the first appellate authority, the assessed preferred further appeal to the Tribunal. The Tribunal accepted the stand of the assessed by observing as follows :
"On the facts of the case, we have to categorically hold that the initial intention of the assessed was to hold the property as an asset for constructing a nursing home but subsequently after waiting for a period of three years and carrying out the construction for a period of three to four years, the assessed proceeded to dispose of a major part of the property in the assessment year 1991-92 and as stated before us the remaining shops were sold in 1999-2000. In other words, there is a substantial gap between the date of purchase, commencement of construction, sale of part of the property as also the sale of the remaining part thereof. In other words, after making the purchase in June, 1980, it took the assessed a good period of 19-20 years to dispose of the property and in case it was to be a business proposition then no prudent person would have waited for such a long period to dispose of a property and we, therefore, come to the conclusion that the surplus resulting from the sale has to be treated as capital gains and not arising from an 'adventure in the nature of trade' as held by the Commissioner of Income-tax (Appeals)."
Hence the present appeal by the Revenue.
5. We have heard Mr. J.R. Goel, learned senior standing counsel for the Revenue. It is vehemently submitted by learned counsel that the conduct of the assessed shows that right from the stage when the assessed had acquired the property, her intention was to exploit the same as a commercial venture, otherwise there was no point in constructing a number of shops and flats thereon. It is asserted that the varying stand of the assessed in first declaring it to be residential and then as a commercial property clearly indicates that the property was not acquired for self use as residence or nursing home but to resell it for profit. It is urged that the Tribunal's conclusion that the transaction in question is to be treated as capital gains is vitiated as it ignores vital circumstances brought on record by the Revenue, thus, giving rise to a substantial question of law.
We are unable to persuade ourselves to agree with learned counsel for the Revenue.
6. The question of distinction between a capital sale and an adventure in the nature of trade came up for consideration before the Supreme Court in G. Venkataswami Naidu and Co. v. CIT [1959] 35 ITR 594, wherein it was observed that the character of a transaction cannot be determined solely on the application of an abstract rule, principle or test but must depend upon all the facts and circumstances of the case. Ultimately, it is a matter of first impression with the court whether a particular transaction is in the nature of trade or not. It was said that a single plunge may be enough provided it is shown to the satisfaction of the court that the plunge is made in the waters of the trade, but mere purchase/sale of shares--if that is all that is involved in the plunge--may fall short of anything in the nature of trade. Whether it is in the nature of trade will depend on the facts and circumstances.
7. Dealing with the expression "adventure in the nature of trade" in Raja Bahadur Kamakhya Narain Singh v. CIT [1970] 77 ITR 253, the apex court said that if the transaction is in the ordinary line of the assessed s business, there would hardly be any difficulty in concluding that it was a trading transaction. But where it is not, the facts must be properly assessed to discover whether it was in the nature of trade. Similar views have been expressed by the Supreme Court in CIT v. Sutlej Cotton Mills Supply Agency Ltd, [1975] 100 ITR 706.
8. It is clear from the aforenoted pronouncements that there cannot be an abstract rule or principle which could be applied to determine the character of the transaction. It would depend upon all the facts and circumstances of each case.
9. From the afore-extracted portion of the order of the Tribunal it is evident that while coming to the aforenoted conclusion, the Tribunal has approached the question in the right perspective and has taken into consideration all the relevant circumstances. Having applied the correct principles, the finding that the transaction in question was not an adventure in the nature of trade is purely one of fact. We do not find any perversity in the order warranting interference by this court. No question of law, much less a substantial question of law, arises from the order of the Tribunal.
10. The appeal is, accordingly, dismissed.