By Sri K v. Aravind, Advocate

IN THE HIGH COURT OF KARNATAKA AT BENGALURU ON THE 2 DAY OF JANUARY, 2019 BEFORE. THE HON'BLE MR. JUSTICE RAVI MALIMATH AND THE HON’BLE MR. JUSTICE MOHAMMAD NAW AZINCOME TAX APPEAL NO.152 OF 2018 BEI|WEEN 1.THE PR. COMMISSIONER OF INCOME-TAX |CENTRAL CIRCLE,C. R. BUILDING, QUEEN'S ROAD,BENGALURU-560 OOL.CENTRAL CIRCLE,C. R. BUILDING, QUEEN'S ROAD,BENGALURU-560 OOL. 2.THE DEPUTY COMMISSIONER OF INCOME TAXCENTRAL CIRCLE - 1(4), ©CENTRAL CIRCLE - 1(4), © C, R. BUILDING, QUEENS ROAD,BENGALURU-560 OO1.BENGALURU-560 OO1. _. APPELLANTS (BY SRI K. V. ARAVIND, ADVOCATE) AND" SMT. CHAMUNDESWARINO./9, CASTLE STREET,ASHOKNAGAR,BENGALURU-560 045,PAN: AALPC 6900A., ... RESPONDENT (BY SRI N. MANOHAR, ADVOCATE) THIS|INCOMETAXAPPEAL|ISFILEDUNDER|SECTION 260-A OF THE INCOME-TAX ACT 1961, ARISING|OUT OF ORDER DATED 05/07/2017 PASSED IN ITA.NO.829/BANG/2016, FOR THE ASSESSMENT YEAR 200/72008.PRAYING TOFORMULATETHE|SUBSTANTIAL|QUESTIONS OF LAW AND ALLOW THE APPEAL AND SET|ASIDE THE ORDERS PASSED BY THE INCOME TAX.APPELLAIETRIBUNAL,BENGALURUIN|LIANO.829/BANG/2016 DATED 05/07/2017 AND CONFIRM|THE|ORDER.OF|THE|APPELLATECOMMISSIONER|CONFIRMING $THE ORDER PASSED BY THE DEPUTYCOMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(4),|BENGALURU AND TO PASS SUCH OTHER SUITABLE|ORDERS AS THIS HON BLE COURT DEEMS FIT TO GRANT.IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE.INTEREST OF JUSTICE AND EQUITY. OK OOK THIS INCOME TAX APPEAL COMING ON FOR ORDERSTHIS|DAY,RAVI.MALIMATHJ,DELIVEREDTHE|FOLLOWING: JUDGMENT Tne assessee is an individual who filed nis return ofincome under Section-153C of the Income tax Act,(nereinafter referred to as /I.T. Act’) declaring a total)income of Rs.15,12,240/-. An assessment order underSection-143(3), read with Section-—153-C of the I.T. Act WaScompletedDyassessingtnetota|incomeatRs.80,55,940/-. The assessed income included ‘short-term.capital gain’ of Rs.55,27,190/- and ‘long-term capital gain’of Rs.22,/9,296/-. 2).On a verification made by the Revenue AuditParty (RAP), it was observed that the income from the}business of construction of building and sale of apartments.were treated as capital gains instead of Dusiness income.under the head ‘profit and gains of business andprofession. Hence, an order under Section-263 of I.T. Act)was passed and in consequence thereof, the assessingautnority passed an order under Section-143(3), read with Section-263 of the I.T. Act, bringing an amount ofRs./78,06,486/- under tne head ‘profits and gains ofbusiness or profession’. Aggrieved by the said order, theassessee preferred an appeal before the Tribunal, which.was allowed. Questioning the order of the Tribunal, the)present appeal is filed by the Revenue. ‘3.Sri.K.V.Aravind, learned counsel appearing forthe appellants contends that the order of the Tribunal is)erroneous. [nat the test to adetermine whnhetner an incowould be considered as ‘capital gains’ or ‘income arising|out of business or profession’, would arise where apurchase of a property has been made solely and.exclusively with an intention to resell the same at a profitand the purchaser had no intention of holding the property|for himself or otherwise enjoying or using it and therefore|there would be a strong presumption that the transaction|is an adventure in the nature of trade, even though the)said presumption could be rebutted by the other facts andcircumstances of the case. 4Sri.N.Manohar, learned counsel appearing forthe respondent disputes tne said contention. 5.Heard learned counsels. 6.Tne assessee was an employee with SyndicateBank. He purchased a land measuring 2800 sq.ft., in the) year 2001. He put up a construction of 12 apartments, outof which 8 apartments were sold and 4 apartments were.retained for himself. The profits made out of sale of 8apartments were offered as ‘short-term capital gains’ and)the profits made on sale of the land was offered as ‘long-term capital gains’, after claiming exemption to an extent.of Rs.22,50,171/-. 4Sri.N.Manohar, learned counsel appearing forthe respondent disputes tne said contention. 5.Heard learned counsels. 6.Tne assessee was an employee with SyndicateBank. He purchased a land measuring 2800 sq.ft., in the) year 2001. He put up a construction of 12 apartments, outof which 8 apartments were sold and 4 apartments were.retained for himself. The profits made out of sale of 8apartments were offered as ‘short-term capital gains’ and)the profits made on sale of the land was offered as ‘long-term capital gains’, after claiming exemption to an extent.of Rs.22,50,171/-. /.The Tribunal on considering the material on.record, was of the view that since the assessee sold the)flats for profit in the subsequent period, the said)transaction does not tantamount to adventure In tne.nature of trade. When the assessee invests money in a.property with an intention to nold it or enjoys the property|and sells it for profit thereafter, then it is a case of capital appreciation and the profit derived there from is taxableunder the head ‘capital gains’. Therefore, the judgment oftheHon'bleSupremeCourtIntheCaSe Of|G.VENKATASWAMY NAIDU VS. CO. VS. COMMISSIONER.OF INCOME TAX, reported in 35 ITR 594, was followed. 8.On considering the reasons assigned by tneTribunal, we do not find any substantial question of law)that arises for consideration in this appeal. The reasoningof the Tribunal is based on the judgment of the Hon bileSupreme Court referred to SUPId. Even on facts, there wasno material on record for the Commissioner of Income Tax|(Appeals) to hold that the assessee had purchased the)property with an intention of reselling the same for profit. Tnere is no material on record to trigger such a contention.|Hence, there is no substantial question of law that arise forconsideration in this appeal. Q.For the aforesaid reasons, we are of theconsidered view tnat there is no merit in this appeal.|Consequently, the appeal is dismissed. | Sd/- | JUDGE JJ Sd/-| JUDGE |