Commissioner Of Income Tax, Delhi v. Delhi Apartments Pvt Ltdadvocates Who Appeared In This Case

THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on: 07.03.2013 +ITA 569/2012 COMMISSIONER OF INCOME TAX, DELHI ... Appellant versus DELHI APARTMENTS PVT LTDAdvocates who appeared in this case: ... Respondent For the Appellant: Mr N. P. Sahni with Mr Ruchesh SinhaFor the Respondent: Mr A. Sharma with Mr Manu K. Giri CORAM:-HON’BLE MR JUSTICE BADAR DURREZ AHMEDHON’BLE MR JUSTICE R.V.EASWAR JUDGMENT BADAR DURREZ AHMED, J (ORAL) 1.This appeal by the revenue under Section 260A of the Income TaxAct, 1961 is directed against the order dated 23.12.2011 passed by theIncome Tax Appellate Tribunal in ITA 2320/Del/2010 in respect of theassessment year 2006-07. 2.Essentially, the revenue has proposed the following questions assubstantial questions of law:- “(1)Whether on the facts and circumstances of case,the Income Tax Appellate Tribunal was correct in law indeleting the addition of ` 16,93,42,000/- by holding thatthe advance received of by the assessee for the sale oflands is not taxable in the instant assessment year? (2)Whether on the facts and circumstances of case,the Income Tax Appellate Tribunal was correct in law indeleting the addition of ` 3,07,82,342/- by holding thatprofits from the sale of lands is not taxable under thehead profits and gains of business or profession vis-à-viscapital gain taken by the Assessing Officer?” 3.Insofar as the first proposed question is concerned, we find thatcertain properties were purchased between 08.02.2005 and 25.08.2005.The total purchase price of these properties, which were situated invillage Kapashera, came to ` 1,06,58,000/-. This land was sold in itsentirety to one A.B. Tower Private Limited for a consideration of Rs 18crores by virtue of a sale deed dated 04.09.2006, which falls in thesucceeding year. However, an advance had been received of ` 5 croresduring the year under consideration, i.e., the financial year ending31.03.2006.The Assessing officer regarded the receipt of advance asfinalization of the transaction and subjected the entire considerationamount of ` 18 crores (minus the cost price) to tax in this assessmentyear, i.e., assessment year 2006-07. 4.Consequently,theAssessingOfficermadeanadditionof` 16,93,42,000/- on this account. The said addition was deleted by theCommissioner of Income Tax (Appeals) and the deletion was confirmedby the Tribunal by virtue of the impugned order. The Tribunal came tothe conclusion that there was no agreement to sell between the parties inthe year in question and the only document which pertained to thetransfer of property was the sale deed dated 04.09.2006 which wasexecuted in the subsequent year. The Tribunal further held that there wasno transfer of possession in the year in question. In these circumstances,the Tribunal felt that the sum of ` 5 crores was only a receipt by ofadvance which had been received by the assessee and no transactionstood concluded in the year in question. Consequently, the Tribunalconfirmed the deletion of said addition of ` 16,93,42,000/-. 5.Having heard the counsel for the parties, we are in agreement withthe stand and approach adopted by the Tribunal. There was no evidenceof any confirmed transaction in the year in question.As such, theaddition could not have been made on the ground that the transaction hadbeen concluded. We may also point out that in the subsequent year, theentire amount has been offered for taxation and has been subjected to tax.The Tribunal concluded its discussion on this aspect as under:- “The facts of this case are clearly distinguishable. Noagreement has been signed in this year. The possession 5.Having heard the counsel for the parties, we are in agreement withthe stand and approach adopted by the Tribunal. There was no evidenceof any confirmed transaction in the year in question.As such, theaddition could not have been made on the ground that the transaction hadbeen concluded. We may also point out that in the subsequent year, theentire amount has been offered for taxation and has been subjected to tax.The Tribunal concluded its discussion on this aspect as under:- “The facts of this case are clearly distinguishable. Noagreement has been signed in this year. The possession has also not been delivered in this year. The twinconditions of execution of written agreement andhandingoverofthepossessionhavetobecumulatively satisfied in order to bring the casewithin the ambit of section 2(47)(v) read withsection 53A of the Transfer of Property Act. None ofthese conditions are satisfied. Therefore, it is heldthat the property has not been transferred in this year.It has also not been sold in this year. Since thetransaction of transfer has not taken place in thisyear, nothing can be brought to tax as businessincome in this year. In this view of the matter, themoney received is only an advance, which will gettaxed as and when the transaction actually takesplace.Thishappenedintheimmediatelysucceeding year. Thus, ground no. 2 is dismissed.” Therefore, no question of law arises for our consideration insofar as thisissue is concerned. 6.As regards the second proposed question, the facts are that therespondent/ assessee had purchased the land in question sometime in1994-96. Since then, the respondent/ assessee had shown the said land inits balance sheet as a fixed asset. The same had been consistently shownas such by the respondent/ assessee in all the years including theassessment year 2006-07. Two portions out of the said land were sold inthe year in question. The respondent/ assessee had claimed that the saleproceeds were not part of its business income but, being sales of its fixedassets resulted in long term capital gain of ` 3,07,82,342/-.TheAssessing Officer did not agree with this and taxed the entire amount aspart of the assessee’s business income.Consequently, the Assessing Officer made an addition of the said sum of ` 3,07,82,342/- by holding itas profit on sale of land which was taxable under the head ‘profits andgains of business or profession’ and not by way of capital gains.TheCommissioner of Income Tax (Appeals) deleted the said addition and thesaid deletion has been confirmed by the Tribunal by virtue of theimpugned order. 7.The Tribunal considered the arguments raised on behalf of theparties and after examining the case law on the subject, observed that anassessee could hold lands either for business or as an investment andthere was no bar on an assessee in undertaking, along with his business ofsale-purchase of land, also an investment in land. In these circumstances,the Tribunal held that the assessee could very well be a trader in land aswell as an investor in land simultaneously, depending on what hisintention was and how he treated the asset in question.The Tribunalreturned a finding that in the present case, the land was purchased andwas shown as an asset in the balance sheet and that the land had also beenused for agricultural purposes. It also noted the fact that the land hadbeen held for a long period of time, the same having been purchased in1994-96. The Tribunal was also conscious of the fact that there was noevidence that borrowed capital had been used for the purchase. All thesecircumstances, led the Tribunal to the inference that the land was held asan asset and, therefore, the assessee had appropriately offered it fortaxation under the head ‘capital gains’. We do not find any perversity inthese findings and, therefore, there is no cause for interference with the same. No substantial question of law arises for our consideration even inrespect of this proposed issue. No other aspect was argued before us.The appeal is dismissed. BADAR DURREZ AHMED, J R.V.EASWAR, J MARCH 07, 2013SR