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7. Master Jai Doulat Advani (Minor) 6% Nil

8. Master Lalit Doulat Advani (Minor) 5 % Nil

9. Baby Gitanjali Gul Advani (Minor) 5% Nil

10. Baby Sangita Gul Advani (Minor) 5 % Nil

11. Master Prakash Parpati Advani (Minor) 5% Nil     100%   100%

2. This firm purchased on 29-3-1973, a property named Petit hall comprising of constructed bungalows and outhouses on land admeasuring 33,339 sq. mtrs., situated at Nos. 66 and 67, Civil Lines, Haveli, Pune, for a sum of Rs.18,15,260. This property was purchased by the assessee-firm with the view to develop the plot as a builder. However, on account of a variety of reasons there was very little further activity on this plot of land. Inspecting Assessment Commissioner (Acquisition) initiated proceedings for acquisition of this plot of land under Chapter XX-A of the Income Tax Act by notification under section 269D of the Act on 1 1-7-1974. On 17-2-1976, the Urban Land (Ceiling & Regulation) Act came into force in the State of Maharashtra. The assessee-firm submitted statement under section 6(1) of ULC Act on 12-8-1976. In this statement the assessee-firm mentioned that apart from income-tax acquisition proceedings, there was also PMT (Pune Municipal Transport) reservation on the plot of land. The assessee further mentioned in this statement that the land also stood mortgaged with the erstwhile vendors for securing the unpaid balance of the purchase price which stood at Rs. 9,07,630 at that time. The assessee-firm however claimed exemption under section 20(1)(a) and 20(1)(b) of ULCA and also declared that the entire land was desired to be retained. At about the same time, the assessee also made declaration for exemption under section 21(1) of ULCA. The assessee-firm filed the returns of income for assessment years 1974-75 to 1976-77 (year ending 31-12-1973 to 31-12-1975) and also obtained registration of the firm under Income Tax Act. Returns of income were not filed thereafter, presumably on account of absence of any activity. According to the assessee, after ULC Act came into force in Maharashtra, several disputes arose amongst the partners including civil suit filed by one of the partners Shri N.M. Gidwani and criminal complaints filed by other partners. In the meantime, the competent authority for Pune made on 28-3-1978, order under section 8(4) of the ULCA of 1976 "declaring the entire plot, land as vacant land and also rejecting the claim of the assessee-firm that each one of the 15 partners was entitled to hold land upto the ceiling limit of 1000 sq. mtrs. The competent authority however ordered that notification under section 10(3) of the Act vesting the excess land in the State Government should not be issued till the assessee's exemption applications under section 20 of the Act and declaration under section 21 of the Act were finally decided. The assessee along with the vendor of the plot filed an appeal against the order of the competent authority before the collector and appellate authority for Urban Agglomeration, Pune. The appellate authority passed order on 20-1-1979, dismissing the appeal filed by the assessee and vendor. Soon thereafter, the assessee's declaration under section 21(1) of ULCA and applications under section 20(1) of ULCA were also rejected by the orders passed by the respective authorities on 30-3-1979, 2-4-1979, and 5-4-1979. Final order was also passed on 8-4-1979, acquiring the plot of land with effect from, 15-5-1979. Aggrieved by these orders, the assessee filed writ petition in Bombay High Court, being special civil application No. 1225 of 1979. Thereupon Hon'ble High Court by its judgment dated 4-10-1988, set aside the competent authority's order dated 28-3-1978, the appellate order dated 28-1-1979, and notification under section 10 of ULCA, and remanded the proceedings to the competent authority to be kept pending till the hearing and final disposal of the applications under sections 20 and 21 of ULCA. Subsequently, the Hon'ble High Court passed another order on 2-11-1988, in continuation of previous order dated 4-10-1988, whereby it was directed that the competent authority should initially proceed to make the requisite declaration under section 8 of the ULCA and pass order under section 8(4) thereof. The applications under sections 20 and 21 should thereafter be taken up for consideration and determination. Thereafter, on 20-1-1995, Collector, Pune, made an order under section 126(4) of Maharashtra Regional & Town Planning Act, 1966, notifying that the following lands were needed for the public purpose of Pune Municipal Transport (bus parking, bus stand and bus station :

(iii) The frequency of similar transactions was reduced to the minimum only because of the ULC Act and the alleged internal squabbles amongst the partners.
(iv) There was an initial supplementary work done on the plot on account of which a bungalow was demolished and the assessee had also claimed that plans for construction activity was submitted to the corporation for approval. Also the balance sheet showed that deposits were collected from the purchasers in the initial period. Again, the only hindrance was the ULC Act and the proposed PMT reservations.
(v) The eagerness with which the partners faced the litigations and the constraints brought about by the ULC Act and the PMT shows their intention to maximise their returns by holding on to the property inspite of ULC restrictions. They could dispose off land except the surplus land under the ULC Act and this Act did not prevent them from conducting business. They could have utilised the full FSI.
(vi) The lack of intention to dissolve the firm as per statutory provisions inspite of so-called internal disputes. The aggrieved partner could have retired from the firm and the whole asset could have been distributed amongst the partners.
(iii) The accounting entries also show the intention of the assessee-firm. in holding the Petit Hall land as stock-in-trade. The asset was a trading asset and there was no evidence to show that the character of the property changed from a trading asset to a capital asset. Also legally, as mentioned in foregoing paragraphs, the nature of the asset remained the same till it was sold in 1996.
(iv) Merely because ULC Act prohibited the assessee from constructing flats thereon for the weaker section did not change the basic character of the land from a business asset into a capital asset. The total holdings of the assessee were 33,339 sq. mtrs, out of which only 5,009 sq. mtrs., were declared as surplus under the ULC Act, without affecting the total FSI available, The assessee could, therefore, deal with the land which was not declared as excess and could conduct business. There was no restriction in this respect. Also the subsequent ease with which the purchaser could purchase the land from the firm and start construction activity after 1996 on the land shows that the provision of the ULC Act did not prohibit the assessee from carrying out construction activity or even sell the land which is within the limits prescribed under the ULC Act subject to the satisfaction of the provisions of the Act.