Commissioner Of Income Tax-Iv vs Edward Keventer (Successors) ...
2015 Latest Caselaw 6097 Del

$~11

        THE HIGH COURT OF DELHI AT NEW DELHI
%                                      Judgment delivered on: 20.08.2015
+       ITA 489/2014

COMMISSIONER OF INCOME TAX-IV                                  ... Appellant

                                        versus

EDWARD KEVENTER (SUCCESSORS)
PRIVATE LIMITED                                                ... Respondent

Advocates who appeared in this case:
For the Appellant            : Mr Kamal Sawhney and Mr Raghaven Singh
For the Respondent           : Ms Kavita Jha and Ms Mehak Gupta



CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE SANJEEV SACHDEVA

                             JUDGMENT

BADAR DURREZ AHMED, J (ORAL)

1. This appeal by the Revenue under Section 260A of the Income-tax

Act, 1961 is directed against the order of the Income-tax Appellate

Tribunal dated 18.11.2013 in ITA No.1242/Del/2011 pertaining to the

assessment year 2006-2007.

2. The only point urged by the learned counsel for the Revenue before

us was with regard to the decision of the Tribunal that the transfer of the

two properties to Mr Niranjan Koirala and Ms Sheila Aggarwal was

wrongly concluded by the Tribunal to result in capital gains and not

income from business.

3. The facts of the case are that the assessee had purchased leasehold

rights in a large parcel of land in 1952 with the object of dairy farming

and for production of milk. That venture never took off because the

requisite permission for the same was not given by the New Delhi

Municipal Council. On 02.03.1989, the assessee entered into an MOU

(Memorandum of Understanding) with Balarpur Industries Limited and

Dalmia Promoters for developing a portion of the said land. According to

the learned counsel for the Revenue, the two properties which are sold to

Mr Niranjan Koirala and Ms Sheila Aggarwal, respectively, were also

part of the Memorandum of Understanding. However, according to the

learned counsel for the assessee, both these properties, which are the

subject matter of the present appeal, were excluded from the

Memorandum of Understanding for development of the properties.

Anyhow, the said Memorandum of Understanding was cancelled on

08.06.2005 and the development of land, as proposed under the

Memorandum of Understanding, did not take place. Prior to the

cancellation of the Memorandum of Understanding, on 27.05.2005, two

Agreements to Sell were entered into between the assessee and

Mr Niranjan Koirala on the one hand and the assessee and Ms Sheila

Aggarwal on the other in respect of the said two properties. Mr Koirala

and Ms Aggarwal were both occupying those properties. The property

agreed to be sold to Mr Koirala comprised of land of 2715 sq. yds. upon

which a residential bungalow and an outhouse were constructed. The

property, which was transferred to Ms Aggarwal, comprised of 9090 sq.

yds upon which a residential bungalow and an outhouse were

constructed. The property transferred to Mr Niranjan Koirala carried a

sale consideration of Rs.10.51 crores and the sale consideration in respect

of the transfer to Ms Sheila Aggarwal was Rs 35.1 crores.

4. The only issue, that is raised before us, is whether the said

transactions of transfer of properties to Mr Koirala and Ms Aggarwal, has

resulted in capital gains or business income in the hands of the assessee.

The Assessing Officer, by virtue of the assessment order dated

31.12.2008, held that the transaction resulted in business income and not

in capital gains. The assessee preferred an appeal before the

Commissioner of Income-tax (Appeals). By an order dated 22.12.2010,

the CIT (A) reversed the findings of the Assessing Officer. The CIT(A),

after examining the case law, which was presented before him, and also

facts of the case, came to the conclusion that the intention of the assessee,

at the time of purchase of the property in 1952 was to establish a dairy

farm in which it would produce milk. The said property was held as an

asset and shown as a fixed asset in the books of the assessee from 1952

onwards. The CIT (A) also observed that no contrary fact had been

brought on record by the Assessing Officer and that successive

assessments from the date of purchase of the land accepted the treatment

of the asset as a fixed asset in the books of the assessee. The CIT (A)

also observed that there had been no sale or purchase of land by the

assessee throughout all these years from 1952 except for the two

transactions, which are subject matter of the present appeal. The CIT (A)

held that the original intention of the assessee in purchasing the property

was clear which was to hold it as a fixed asset. Finally, the CIT (A)

concluded that he had no hesitation in holding that the two residential

bungalows sold on 27.05.2005 to the existing occupiers of the same by

the assessee, would result only in long term capital gain and not in any

income under the head of business.

5. The Revenue, being aggrieved by these findings of the

Commissioner of Income-tax (Appeals), preferred an appeal before the

Income-tax Appellate Tribunal, which confirmed the findings of the CIT

(A), by virtue of the impugned order dated 18.11.2013.

6. We have heard the learned counsel for the parties and have

examined the records of the case. The decision of the Bombay High

Court in the case of CIT v. V.A.Trivedi : 172 ITR 95 (Bom.) was placed

before us. In that decision, it has been observed that it is not possible to

evolve a single test or formula which can be applied in determining

whether the transaction was an adventure in the nature of trade. It was

also noted that in the case of purchase and sale of land, generally

speaking, the original intention of the party in purchasing the property,

the magnitude of the transaction of purchase, the nature of the property,

the length of its ownership and holding, the conduct and subsequent

dealing of the assessee in respect of the property, the manner of its

disposal and the frequency and multiplicity of transactions, afford

valuable guides in determining whether the assessee is carrying on a

trading activity and whether a particular transaction should be stamped

with the character of a trading adventure.

7. We are in agreement with these observations of the Bombay High

Court. We may also point out that in a Division Bench decision of this

Court in the case of CIT v. Dr Indu Bala Chhabra : (2003) 132 Taxman

(Delhi), this Court observed that the question of distinction between a

capital sale and an adventure in the nature of trade can be drawn out in

respect of a particular transaction but it cannot be so determined solely on

the application of an abstract rule, principle or test, and would depend on

all the facts and circumstances of the case. Importantly, the Division

Bench held that the finding as to whether the transaction in question was

or was not an adventure in the nature of trade was purely one of fact. The

Division Bench held that unless and until there was any perversity in the

order warranting interference by this court, the findings of fact returned

by the Tribunal would have to be accepted and no question of law, much

less a substantial question of law would arise for consideration of this

Court.

8. Having gone through the facts of the present case, we are of the

view that the Tribunal, as a final fact finding authority has confirmed the

findings of fact returned by the CIT (A). While doing so, it did not look

at any solitary fact to determine as to whether the transactions in question

resulted in capital gains or in business income. Several factors were

considered, which included the intention of the assessee in purchasing the

property, the length of time the property was kept by the assessee (which

in this case is more than fifty years), the lack of any transactions of sale

or purchase of property throughout this period of time etc. The

CIT (A) as also the Tribunal have examined the case in the correct

perspective and after examining all the factors, which would go into

determining the question as to whether the transactions resulted in capital

gains or income from business, have arrived at concurrent findings of

fact. No perversity in the findings has been pointed out. Therefore, no

question of law arises for our consideration much less a substantial

question of law.

The appeal is dismissed.

BADAR DURREZ AHMED, J

SANJEEV SACHDEVA, J

AUGUST 20, 2015 'sn'