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V N Devadoss Huf, Chennai vs Acit, Ncc-10(1), Chennai on 28 March, 2019 cites

Raj Kumar Goyal, Bharatpur vs Acit, Bharatpur on 16 January, 2018

The companies which had joined as partners (a) and (b) are renowned real estate and property development companies and the other partner Mr. Devadoss is the promoter of those companies. As per the partnership deed, the main object of the firm is to carry on the business of real estate development, property development, builders, civil contractors, buyers, sellers, developers of land into housing plots/sites. The partners have introduced their land worth ₹.4.54 crores (being land in Melpakkam village) as capital contribution. As per clause 2 of the partnership deed, the partners are required to make capital contribution to the firm for its business requirement. On sale of property as detailed above, the assessee has taxed the profit on sale of land under income from long term capital gains after indexation and paid due tax. However, the Assessing Officer treated the profit on sale of land as business income instead of capital gains, which was confirmed by the ld. CIT(A). Against the reliance of CBDT Circular No. 4/2007 dated 15.06.2007, the ld. CIT(A) was of the opinion that the same was issued specifically in the context of investments in securities and cannot be applicable to the facts of the current case. According to the ld. CIT(A), even if one tried to apply the above circular, as relied by the assessee by quoting the 6 I.T.A. Nos.3358 & 3359/Chny/2018 decision of ITAT, Pune in the case of Shri Krishna Kumar K. Goyal, Shri Vinit K. Goyal v. ACIT in I.T.A. Nos. 1299 & 1300/PN/2012, the facts appreciated in that case was entirely different from the facts of the current case. In that case, as per the ld. CIT(A), for many years, the land was shown in the balance sheet as 'Personal asset', as a part of investments and other land held as stock-in-trade were separately disclosed in the balance sheet as well as in profit and loss account as 'business assets' and such position was also accepted in the past years even in scrutiny assessment finalized by the Assessing Officer. The ld. CIT(A) also noted the fact that in that case the land was held for a fairly long period of 9 to 10 years before being sold and there was no trading activity. Therefore, the ld. CIT(A) was of the opinion that the CBDT circular as well as case law relied as above, had no application to the facts of the present case. At this juncture, we need to have a look on circular No. 6/2016 dated 29.02.2016, where the CBDT has clarified at (b) of para 3 as under:
Income Tax Appellate Tribunal - Jaipur Cites 12 - Cited by 2 - Full Document

Commissioner Of Income Tax (Central) vs Vama Sundari Investments (Delhi) Pvt. ... on 26 October, 2016

12. In para No. 2.5 of the assessment order the Assessing Officer stated that the assessee has developed the land into plots and sold and in coming to the conclusion that the activity is an adventure in the nature of trade. However, there was no credible material brought on record to say that the activity of the assessee was an adventure in the nature of trade since the assessee has not claimed any expenditure towards development of the property before sale of the land. Merely obtaining CMDA approval cannot be held that the assessee has carried out development activity on the land in question before sale because, the purchase M/s. VGN Enterprises Pvt. Ltd. has subsequently sold the developed plots to the ultimate buyer after development of the raw lands purchase from the assessee. Further, we find that the ld. CIT(A) has not distinguished the case law relied on by the assessee in assessee's own case for the assessment year 2003-04 as well as the decision of the Pune Bench, referred above. Under the above facts and circumstances, we set aside the orders of the lower authorities and hold that the income from sale of the land should be treated as 'Capital Gains'.
Supreme Court - Daily Orders Cites 0 - Cited by 6 - Full Document
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