Ita/157/2011 Of Commissioner Of Income Tax (Central ) v. M/S.bagmane Developers Pvt Ltd

IN THER HIGH COURT OF KARNATAKA AT BENGALURU DATBD THIS THER O[rd]DAY OF NOVEMBER 2016. PRESENT THE HON'BLE MR. JUSTICE JAYANT PATEL AND THE HON’BLE MR. JUSTICE ARAVIND KUMAR ITA No.157/2011 c/w ITA No.145/2011, ITA No.146/2011, ITA No.183/2014,ITA No.349/2014 & ITA No.350/2014 IN ITA No.157/2011 BETWEEN: Ll.COMMISSIONER OF INCOMETAX (CENTRAL)TAX (CENTRAL) CHRNTRAL REVENUB BUILDINGS QUEENS ROAD BANGALORE 560 OO1.. iaTHER ASSISTANT COMMISSIONEROF INCOME TAX _CENTRAL CIRCLE 2(3)CR BUILDINGSOF INCOME TAX _CENTRAL CIRCLE 2(3)CR BUILDINGS BANGALORE. ... APPELLANTS. (By Sri K.V.ARAVIND a/w Smt. E I SANMATHI, ADVS.) AND: M/S. BAGMANE DEVELOPERSPVT LTD, LAKE VIEW BUILDINGNO.66/ 1-4, A BLOCK,/ FLOOR, BAGMANE TECHPARK, C V RAMN NAGAR PVT LTD, LAKE VIEW BUILDING BANGALORE, —. RESPONDENT (By Sri CHYTHANYAK K, ADV.) THIS ITA IS FILED UNDER SEC.260-A OF I1.T.ACT 1961ARISING OUT OF ORDER DATED 03/12/2010 PASSED IN|ITA NO.3882/BANG/2010 FOR THE ASSESSMENT YEAR2004-05, PRAYING THAT THIS HON'BLE COURT MAY BE.PLEASEDTO:1.RFORMULATETHERSUBSTANTIALOUESTIONS OF LAW STATED THEREIN. 2. SET ASIDE THE.COMMON APPELLATE ORDER DATED 03/12/2010 PASSEDBY THE ITAT, 'B’ BENCH, BANGALORE IN APPEALPROCEEDINGS ITA NO.382/BANG/2010, AS SOUGHT FOR|IN THIS APPEAL, IN THE INTEREST OF JUSTICE AND.EQUITY. IN ITA No.145/2011 BETWEEN: Ll.COMMISSIONER OF INCOMETAX (CENTRAL)CHRNTRAL REVENUE BUILDINGSQUEENS ROADBANGALORE-560 OO].TAX (CENTRAL)CHRNTRAL REVENUE BUILDINGSQUEENS ROADBANGALORE-560 OO]. iaTHE ASSISTANT COMMISSIONEROF INCOME TAX.CENTRAL CIRCLE 2(3)CR BUIDLINGSBANGALORE.|OF INCOME TAX.CENTRAL CIRCLE 2(3)CR BUIDLINGSBANGALORE.| _. APPELLANTS. (By Sri K.V.ARAVIND a/w Smt. E I SANMATHI, ADVS.) AND: M/S. BAGMANE DEVELOPERS |PVT LTD, LAKE VIEW BUILDING,NO.66/ 1-4, A BLOCK,/ FLOOR, BAGMANE TECHPARK, C V RAMAN NAGARBANGALORE —. RESPONDENT (By Sri K K CHYTHANYA, ADV.) THIS ITA IS FILED U/S.2600-A OF I.T.ACT, 1961ARISING OUT OF ORDER DATED 03/12/2010 PASSED IN|ITA NO.182/BANG/2010 FOR THE ASSESSMENT YEAR|2002-03, PRAYING THAT THIS HON'BLE COURT MAY BE.PLEASEDTO:1. RORMULATETHERSUBSTANTIALQUESTIONS OF LAW STATED THEREIN. 2. SET ASIDE THE.APPELLATE ORDER DATED 03/12/2010 PASSED BY THE|ITAT, Bo BENCH, BANGALORE, IN APPEAL PROCEEDINGS.ITA NO.182/BANG/2010, AS SOUGHT FOR IN THIS APPEAL,IN THE INTEREST OF JUSTICE AND EQUITY. IN ITA No.146/2011 BETWEEN: Ll.COMMISSIONER OF INCOMETAX (CENTRAL)CHRNTRAL REVENUE BUILDINGSQUEENS ROADBANGALORE-560 OO]TAX (CENTRAL)CHRNTRAL REVENUE BUILDINGSQUEENS ROADBANGALORE-560 OO] iaTHE ASSISTANT COMMISSIONEROF INCOME TAX.CENTRAL CIRCLE 2(3)C R BUIDLINGSBANGALORE.|OF INCOME TAX.CENTRAL CIRCLE 2(3)C R BUIDLINGSBANGALORE.| _. APPELLANTS. (By Sri K.V.ARAVIND a/w Smt. E I SANMATHI, ADVS.) AND: M/S. BAGMANE DEVELOPERSPVT. LTD. LAKE VIEW BUILDING,No.66/ 1-4, A BLOCK,/ FLOOR,BAGMANE TECH PARKCV RAMAN NAGARBANGALORE ... RESPONDENT (By Sri CHYTHANYAK K, ADV.) THIS ITA IS FILED U/S.2600-A OF I.T.ACT, 1961ARISING OUT OF ORDER DATED O3-12-2010 PASSED IN|ITA NO.383/BANG/2010, FOR THE ASSESSMENT YEAR|2005-2006, PRAYING THAT THIS HON BLE COURT MAY BE.PLEASEDTO:1. RORMULATETHERSUBSTANTIALQUESTIONS OF LAW STATED THEREIN. 2. SET ASIDE THE.COMMON APPELLATE ORDER DATED 03/12/2010 IN ITANO.383/BANG/2010 PASSED BY THE ITAT, ‘B’ BENCH,|BANGALORE, AS SOUGHT FOR IN THIS APPEAL, IN THE.INTEREST OF JUSTICE AND EQUITY. IN ITA No.183/2014 BETWEEN: M/S. BAGMANE DEVELOPERS |PVT. LTD. LAKE VIEW BUILDINGNO.66/ 1-4, A BLOCK/ FLOOR, BAGMANE TECH PARKC.V.RAMAN NAGARBANGALORE-560093.(REPRESENTED BY ITSMANAGING DIRECTORRAJA BAGMANE, AGKD ABOUT 53 YBARS 0/O.SRI CHANDRE GOWDA)_ _. APPELLANT (By Sri CHYTHANYA K K, ADV.) AND: THIS ITA IS FILED U/S.2600-A OF I.T.ACT, 1961ARISING OUT OF ORDER DATED O3-12-2010 PASSED IN|ITA NO.383/BANG/2010, FOR THE ASSESSMENT YEAR|2005-2006, PRAYING THAT THIS HON BLE COURT MAY BE.PLEASEDTO:1. RORMULATETHERSUBSTANTIALQUESTIONS OF LAW STATED THEREIN. 2. SET ASIDE THE.COMMON APPELLATE ORDER DATED 03/12/2010 IN ITANO.383/BANG/2010 PASSED BY THE ITAT, ‘B’ BENCH,|BANGALORE, AS SOUGHT FOR IN THIS APPEAL, IN THE.INTEREST OF JUSTICE AND EQUITY. IN ITA No.183/2014 BETWEEN: M/S. BAGMANE DEVELOPERS |PVT. LTD. LAKE VIEW BUILDINGNO.66/ 1-4, A BLOCK/ FLOOR, BAGMANE TECH PARKC.V.RAMAN NAGARBANGALORE-560093.(REPRESENTED BY ITSMANAGING DIRECTORRAJA BAGMANE, AGKD ABOUT 53 YBARS 0/O.SRI CHANDRE GOWDA)_ _. APPELLANT (By Sri CHYTHANYA K K, ADV.) AND: THER ASSISTANT COMMISSIONEROF INCOME TAX.CENTRAL CIRCLE -2(3)CR BUILDINGS QUEENS ROAD.BANGALORE -56000 1 ... RESPONDENT (By Sri K.V.ARAVIND a/w Smt. E I SANMATHI, ADVS.) THIS TTA IS FILED UNDER SEHKC.2600-A OF I.T. A1961, ARISING OUT OF ORDER DATED 03/12/2010|PASSED>INITA|NO.382/BANG/2010KORTHEASSESSMENT YEAR JOO4-05 PRAYING TO 1. FORMULATE|THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. 2..ALLOW THERE APPEAL AND SEI ASIDE THE I[IMPUGORDER (TO THE EXTENT PREJUDICIAL) OF THE INCOME|TAX|APPELLATETRIBUNAL|BBREARINITA|NOS.382/BANG/2010DATED|03/12/2010|KOR‘THKASSESSMENT YEAR JOO4-05. IN ITA No.349/2014 BETWEEN: M/S. BAGMANE DEVELOPERS PVT. LTD.LAKE VIEW BUILDING|NO.66/ 1-4, A BLOCK/ FLOOR, BAGMANE TECH PARKC.V.RAMAN NAGARBANGALORE-560 O93(REPRESENTED BY ITS DIRECTOR| D.V.RAMAKRISHNAAGKD ABOUT 43 YBARS9/O SRI VENKATARAMANAPPA) . APPKHLLAN (By Sri CHYTHANYA K K, ADV.) AND: THER ASSISTANT COMMISSIONEROF INCOME TAX.CENTRAL CIRCLE-2(3)CR BUILDINGS, QUEENS ROADBANGALORE -560 OO1. ... RESPONDENT (By Sri K.V.ARAVIND A/W Smt E I SANMATHI, ADVS.) THIS ITA IS FILED UNDER SEC.260-A OF I.T. ACT1961, ARISING OUT OF ORDER DATED 03/12/2010PASSED.INITA|NO.182/BANG/2010KOR|THERASSESSMENT YBAR 2002-03 PRAYING TO 1. FORMULATE|THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. 2..ALLOW THR APPBAL AND SEKBT ASIDE THR [IMPUGNORDER (TO THE EXTENT PREJUDICIAL) OF THE ITAT|BEARING ITA NO.182/BANG/2010 DATED 03/12/2010 FOR|THE ASSESSMENT YEAR 2002-03. IN ITA No.350/2014 BETWEEN: M/S. BAGMANE DEVELOPERSPVT. LTD. LAKE VIEW BUILDINGNO.66/ 1-4, A BLOCK/ FLOOR, BAGMANE TECH PARKC.V.RAMAN NAGAR|BANGALORE -560 093(REPRESENTED BY ITS DIRECTOR| D.V.RAMAKRISHNAAGKD ABOUT 43 YBARS9/O SRI.VENKATARAMANAPPA) . APPKHLLAN (By Sri CHYTHANYA K K, ADV.) AND: THE ASSISTANT COMMISSIONEROF INCOME TAX.CENTRAL CIRCLE-2(3)CR BUILDINGS, QUEENS ROADBANGALORE -560 OO] —. RESPONDENT (By Sri K.V.ARAVIND a/w Smt. E I SANMATHI, ADVS.) THIS TTA IS FILED UNDER SEHKC.2600-A OF I.T. A1961, ARISING OUT OF ORDER DATED 03/12/2010|PASSED>INITA|NO.383/BANG/2010KORTHEASSESSMENTYREAR2OQOOS5-20PRAYINGTO1.FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED ABOVE. 2. ALLOW THERE APPEAL AND SEI-ASIDETHE IMPUGED ORDER (TO THE EXTENT PREJUDICIAL) OF|THE.ITATBBKRARINITA|NOS.383/BNG/2010DATHBD03/12/2010 FOR THE ASSESSMENT YEAR 2005-06. THERESE [TAs COMING ON FOR FINAL HBARING THISDAY,JAYANT PATEL .J,DELIVBRED THR FOLLOWING: JUDGMENT As in all these appeals, as common questions ariseforconsideration,theyaltebeingconsideredsimultaneously. 2 |Various questions are raised, but in the facts and|circumstances of the case, we find that concise questioncan be formulated as under; “Whether in the facts and circumstances ofthe case, the Tribunal was right in law inallowing the assessee’s claim as regards saleof the land to be treated as ‘capital gain’instead of ‘business income’ even when theassessee had earlier claimed the sale of land|as part of ‘business income’ and claimeddeduction under Section 80 JA (4) of the.Income Tax Act while furnishing the returns—of the income under Section 139 (1) of theIncome Jax Act?” THERESE [TAs COMING ON FOR FINAL HBARING THISDAY,JAYANT PATEL .J,DELIVBRED THR FOLLOWING: JUDGMENT As in all these appeals, as common questions ariseforconsideration,theyaltebeingconsideredsimultaneously. 2 |Various questions are raised, but in the facts and|circumstances of the case, we find that concise questioncan be formulated as under; “Whether in the facts and circumstances ofthe case, the Tribunal was right in law inallowing the assessee’s claim as regards saleof the land to be treated as ‘capital gain’instead of ‘business income’ even when theassessee had earlier claimed the sale of land|as part of ‘business income’ and claimeddeduction under Section 80 JA (4) of the.Income Tax Act while furnishing the returns—of the income under Section 139 (1) of theIncome Jax Act?” 3.|Independent of the first question, the second.question as has been formulated by the Revenue is asunder: “Whether in the facts and circumstances otthe case, the Tribunal was right in law in allowing the assessee’s appeal as regards.loans advanced to the sister concerns byholding that the said loans were given forcommercialexpediencyeCVeTwhenhhodocument or any evidence relating to anysuch agreement was found during the course.oT search|andaSSCSSEEalsofailedTO substantiate such claim?” 4On the latter question, we may record that learned|counsel appearing for the Revenue has fairly concededthat the aforesaid question is already covered by thedecision ot this Court dated 14.10.2014 in ITANo.175/2014 against the Revenue. Hence, we find thatthe said question would no more hold for considerationin the present appeals, since it is already covered by thedecision of this Court against the Revenue and in favourof the assessee. 5The aforesaid would lead us to examine only the|first question, which is common in all the appeals. 6. The short facts of the case appears to be that the.assessee filed returns for the Assessment Year 2002-03. OT]31.10.2002.declaringthetotalincomeAT|Rs.14,67,913/-. Even for the subsequent AssessmentYears2003-04,2004-05and2005-06,respectiveincomes were declared, but the common basis in the)returns filed by the assessee was that the property ofland was shown as ‘stock-in-trade/inventory in therespective books of accounts and the income was sodeclared on the basis of the respective incomes soearned. There was search proceedings in the respect ofthe assessee in the month of September 2006 and,thereafter, notice under Section 153A of the Act was)issued to the assessee and the assessee during themonth of January 2007 filed revised returns declaringbusiness loss of Rs.1,09,77,033/- and business incomeand capital gain at Rs.96,97,511/-. The AssessingOfficer in the assessment proceedings found that thedifference shown out of the sale of property could not betermed as ‘capital gain’ and could be termed as only‘business income’ and ultimately based on the same,concluded the assessment proceedings by calculating theamount of tax payable with interest. The matter was carried in appeal before the CIT (Appeals). The CIT(Appeals) ultimately concurred with the view taken by.the Assessing Authority and dismissed the appeal of theassessee. In the further appeal to the Tribunal, theTribunal after considering the submissions made by both sides, observed at paragraphs 10 to 11.9.2 as under; “10. We have carefully considered the rivalsubmissions,meticulouslyperusedtherelevantrecords,Vari1ousjudicialpronouncements on which either party hadplaced their faith and also the voluminouspaper books in volumes I, II, HI & IV running.into hundreds of pages — group of cases].furnished by the Ld. AR during the course ofhearing proceedings. carried in appeal before the CIT (Appeals). The CIT(Appeals) ultimately concurred with the view taken by.the Assessing Authority and dismissed the appeal of theassessee. In the further appeal to the Tribunal, theTribunal after considering the submissions made by both sides, observed at paragraphs 10 to 11.9.2 as under; “10. We have carefully considered the rivalsubmissions,meticulouslyperusedtherelevantrecords,Vari1ousjudicialpronouncements on which either party hadplaced their faith and also the voluminouspaper books in volumes I, II, HI & IV running.into hundreds of pages — group of cases].furnished by the Ld. AR during the course ofhearing proceedings. 11.)For the!assessment years, 2002-03,2004-05 and 2005-06,thefirst groundbeing identical i.e., the AO had, tor thereasons set-out in the respective impugnedorders under dispute that the intention of theassessee in purchasing of the lands was to.develop and resell them at profits. Therefore,the assessee dealt with the lands as its stock-in-trade and not as investments. Havingregard to the total effect of the circumstancesas recorded in his impugned orders referredsupra, he held that the transactions of theassessee constitute|‘adventure in the nature.of trade’and was in the course of profit)making scheme. 11.1 However, the divergent views of theassessee were that it had acquired a vast land ad-measuring to the extent of 52 acres.in C.V.Raman Nagar from raja Bagmane wayback in 1996. During the year 2000, theassessee intended to set up STPI for which ithad approached the Union Government for itsapproval in July, 2002 and subsequently,oTPI came into being on the subject property. |According to the assessee, aiter having set up—the STPI and the assessee had no intention togo for further exploitation spree in the said.piece of land, the same was sold to threeparties with a specific condition to set upSoTPI/IT parks and the details of which are asbelow:| 11.2Further contention of the assesseewas that it had erroneously olfered thesurplus arising on the sale of the above pieceof land as “business income” in its originalreturns of income for the relevant assessmentyears under dispute. When the assesseecame to know of the flaws in its stand,correctivestepsWETEduly|takenand,accordingly, furnished the returns of income.for the respective assessment years underdispute, incidentally, in pursuance of notices—u/s.153A of the Act and offered the surplus—under the head ‘capital gains’. 11.3Brushing aside the contentions.put forth by the assessee, the AO went aheadin treating the surplus amounts so offered bythe assessee as ‘business income’and taxedaccordingly for the AYs under consideration. 11.4It could be seen that the subjectproperty was acquired by the assessee with a.sole intention of investment only and also.setting up of an unit for the softwarecompanies. To implement its intention ofoTPI Unit, it had set in motion way back in2000 itself. As put-forth by the assessee,_there was no scope for further expansion ofits units in the existing surplus land in its’possession, its intention of selling away its.surplus piece of land, the parties who were inthe wings came forward and, accordingly, theareas ad-measuring 2913060 sit, 304920 sitand 130680 sit were sold to EmbassyConstructions,Texas.InstrumentsandCognizant Technology Solutions during the.AYS2002-08,2004-05and2005-06|respectively. Incidentally, the latter two.companies were in the field of softwarebusiness.11.5The AO’s” perception that theassessee should have cultivated the land andbuild a building was rather untenable. TheASSECSSEECOM1pallWaSincorporated,according to the assessee, only for thepurchaseOT thesubjectpropertyas|investment. The assessee being in the line ofbusiness of real estate, developer and buildercould not have been expected, as attributedby the AO, to adorn as a _ progressivagriculturist to indulge in cultivation that too.in a land being situated in a prime and centreof the silicon city of Bangalore. As a matter of fact, the AO had himself conceded that theassessee did make improvements and allowedit to remain unutilized which amply proves—that the land in question was acquired by the.assessee as an investment. It did so provethat the agriculture land was originallyacquired and subsequently got converted into.a non-agricultural zone. Had the assessee—attempted to put to use the subject land forcultivation purposes as attributed by the AO,it would have contravened the conversion|provision which, in our view, the AO wouldnot have been unaware of it? It could also’been seen from the sequence of events thatthe assessee did construct Tech Park on the'subject property aiter obtaining due approvalfrom various Government agencies — Stateand Central. Sale of a piece of land from the.vast holding of total area of 52A was merely acoincident which cannot, by any stretch ofimagination, be constructed or categorized as_a regular feature (business) of the assessee.It was an un-denying fact that the assessee_did purchase the HMT property that too atthe fag end of March 2007 which, accordingto the assertion of the assessee, held by it forbarely six months before selling it away. This—cannot be categorized as a precedent ortaking a leaf out of it to jump into a haste.conclusion that the assessee had indulged inbuying and selling of lands as its business. 11.6Let us now turn our attention.towards the case laws on which the rival|parties have placed their faith to drive hometheir respective points. (i) In the case of CIT v. R.Ramaiah|reported in 146 ITR 39 (Kar) — relied on by the Revenue — the issue before the Hon’ble|Jurisdictional Court was, in brief, that erTheaSSCS SCCLUeCrbrothers.Theypurchased agricultural lands and used for the|same purpose and thereafter got the land|converted for non-agricultural purpose. The}assessees then converted the land ofbuildingsites‘' and started selling the sites year afteyear. Whether the finding of the Tribunal that|the surplus arising out of the sale of sites isonly a realization of capital and not an'adventure in the nature of trade or business 1s correct in law? No. The assesses did not sellany land in the condition in which they bought|it. They made convenient‘butlding sites and|soldthe same. They did not even dispose ofall the sites in one year. They went on selling|the sites year after year realizing more andmore profits. The fact that all the assessesStarted converting their lands into building|sitesalmostsimultaneouslyitself 1s|artindication of their intention to trade in the|lands as a_ venture. They made_ itcommercially more attractive by converting|and dividing into plots.The inevitableinference is that they had no intention tohold the lands as an investment.Theydealt with the lands as their stock-in-trade.” With due respects, we would like to|point out that those brothers purchasedagricultural lands and then converted theland otbuilding sitesafter conversion andésstarted selling the sites year aiter year. Theydid not sell any land in the condition inwhich they bought it as they made|building-71.-andsold the same. After dulyanalyzing the issue, the Hon’ble court ruledthat|“The inevitable inference is that they had no intention to hold the lands as aninvestment.’Whereas in the present case,the assessee did purchase the agriculturalland, converted it into non-agricultural and.went ahead with establishing of STPI Unit,but, did not precisely indulge in convertingthe subject property into building sites and.sold the same as in the case which was dealt|by the Hon’ble Court. We are, therefore, ofthe firm view that the stand of the Revenue in|taking sanctuary in the ruling of the Hon’bleCourt cited supra is misconceived and, put itgently,|misleading, had no intention to hold the lands as aninvestment.’Whereas in the present case,the assessee did purchase the agriculturalland, converted it into non-agricultural and.went ahead with establishing of STPI Unit,but, did not precisely indulge in convertingthe subject property into building sites and.sold the same as in the case which was dealt|by the Hon’ble Court. We are, therefore, ofthe firm view that the stand of the Revenue in|taking sanctuary in the ruling of the Hon’bleCourt cited supra is misconceived and, put itgently,|misleading, (1) In the case of Fort Properties Pvt...Ltd. V. CIT and CIT v. Fort Properties Pvt.Ltd. Reported in 208 ITR 232 (Bom), the.Hon'ble Court, aiter analyzing the issue —whether the purchase and sale of the Fortproperty by the assessee was a purchase and|sale of a capital asset or it was a business|transaction or an adventure in the nature oftrade —'ruled that — CWe have considered the rival submissions ofcounsel for the parties. The first question thatfalls for determination is whether the purchase|and sale of the Fort property by the assessee|was a purchase and sale of a capital asset orit was a business transaction or an adventurein the nature of trade. To decide thisquestion, it is necessary to note a few factual|findings of the Tribunal. Before the Tnbunal, it|was contended by the assessee that it hadacquired the above property from its holding|company as “stock-in-trade”. Reliance was|sought to be placed on the fact that in the|books of account of the assessee, it was|Shown as “stock-in-trade”. This contention of|the assessee was repelled by the Tribunal. Itwas held: Our|conclusion,therefore,1S|thatthesubsidiary company (assessee) acquired theproperty as a capital asset and sold it as such. ©No acceptable evidence has been produced toshow that the subsidiary company (assessee)by an overt act converted this capital assetinto stock-in-trade. Apart from the fact thatone can be a dealer in real estate in respect ofsome properties and may hold some other'properties as investment our conclusion in thts|CAaAS1S|thatthe|subsidiaryCOMPA?Ly(assessee) has not been a dealer in real estate|at all.” It was also observed: “ The mere fact that the|subsidiary company (assessee) showed it as|Stock-in-trade in its balance sheet and valued|it at Rs.57,50,000 on August 31, 1967, also|does not make any difference as it is only a|part of the scheme to avoid capital gains tax.Needless to mention, in matters like this onehas to take into account the cumulative effect|of all facts and circumstances and _ noindividual facts and circumstances by itself.” The above findings have been arrived at bythe Tribunal on a proper consideration of thefacts and circumstances of the case and the|evidence on record. No fault can be found|with the above finding of the Tribunal that inthe instant case, the acquisition of the propertyby the assessee was as a capital asset and it|did not form part of the stock-in-trade of the|assessee. This court, therefore, has to acceptthe same and it cannot go behind it. We also do not find any infirmity in _ thobservations of the Tribunal in regard to the|effect of the description of the above property|in the books of account of the assessee| COMLPDArLS|“stock-in-trade’”in|the.determination of the nature of the asset. It 1s|well-settled that the way in which entries aremade by an assessee in his books of accountis not determinative of the question whether|the asset was held as a capital asset or stock-in-trade. The assessee may, by making)entries which are not in conformity with the|facts of the case or proper accountancy|principles, conceal the real nature of the asset|or the transaction. Entries made by him,|therefore, cannot be regarded as conclusiveone way or the other. The true nature of the|transaction in each case has to be determined|on a consideration of the totality of the facts|and circumstances of that case. COMLPDArLS|“stock-in-trade’”in|the.determination of the nature of the asset. It 1s|well-settled that the way in which entries aremade by an assessee in his books of accountis not determinative of the question whether|the asset was held as a capital asset or stock-in-trade. The assessee may, by making)entries which are not in conformity with the|facts of the case or proper accountancy|principles, conceal the real nature of the asset|or the transaction. Entries made by him,|therefore, cannot be regarded as conclusiveone way or the other. The true nature of the|transaction in each case has to be determined|on a consideration of the totality of the facts|and circumstances of that case. It is, thus, clear that in the instant case theproperty in question was acquired by the|assessee from its holding company as a|capital asset and after its acquisition it was|not converted by the assessee as its stock-in-trade. In other words, it was retained by theassessee as a capital asset. 11.7WithregardTo theAO’s|observation that the assessee in its original|returns of income for the AYs under dispute,profits from sale of the plece of land were|offered for taxation under the head ‘business|income’, it was confronted by the assessee|that mere erroneous offering of surplus asbusiness income or the mere categorization as|inventories in the Balance Sheet cannot go to|Show that the intention of the assessee was to|resell the land. 11.8In this connection, we recall the)ruling of the Hon’ble highest judiciary of thelandin|theCAaASof|KedarnathJute|Manufacturing Co. Ltd.V. CIT (Central) Calcutta 82 ITR 363 (SC) wherein, the Hon'ble|Court was pleased to observe that — “We are wholly unable to appreciate the|Suggestion that if an assessee under some}misapprehension or mistake fails to make anentry in the books of account and although,|under the law, a deduction must be allowedby the Income-tax Officer, the assessee will|lose the right of claiming or will be debarredfrom being allowed that deduction. Whether the assessee is entitled to aparticular deduction or not will dependon the provision of law relating theretoand not on the view which the assesseemight take of his rights nor can theexistence or absence of entries in thebooks of account be decisive or conclusivein the matter... 11.9.1.From the facts presented beforeus it is evident that the Assessee Companyhad purchased land in C.V.Nagar from Raja.Bagmane extending to 952 acres tor thePUTPOSCEoT|settingupaSoftwareTechnological Park. It is pertinent to notethat if the property was intended to be onlysold then there was no necessity of it beingtransferredCO theAssesseeCompanyincurringUNnMNMecessaCost, sinceRajaBagmaneandassociates|aleholdingsubstantialinterest1n theAssesseeCompany. Therefore, the basic purpose forthe purchase of land by the Assessee—company could only be to develop a STPI.Aiter purchasing the Land way back in 1996.andcomplyingwithalltheinitial requirements, the Assessee Company made.an application to the State and CentralGovernment for grant of approval to set up a. 11.9.1.From the facts presented beforeus it is evident that the Assessee Companyhad purchased land in C.V.Nagar from Raja.Bagmane extending to 952 acres tor thePUTPOSCEoT|settingupaSoftwareTechnological Park. It is pertinent to notethat if the property was intended to be onlysold then there was no necessity of it beingtransferredCO theAssesseeCompanyincurringUNnMNMecessaCost, sinceRajaBagmaneandassociates|aleholdingsubstantialinterest1n theAssesseeCompany. Therefore, the basic purpose forthe purchase of land by the Assessee—company could only be to develop a STPI.Aiter purchasing the Land way back in 1996.andcomplyingwithalltheinitial requirements, the Assessee Company made.an application to the State and CentralGovernment for grant of approval to set up a. soitware Park during the year 2000. It is veryrelevant to note the nature of the project for itto be construe as a fixed assets/investment.to the company or stock-in-trade. Softwareparks are projects consisting of buildings for.office purposes set up in a specific locationwith prior approval of the State and CentralGovernmentinstalledwith|Vari1ousinfrastructures required for developing andtransmitting software. Normally, the takers—of the building space are multinationalcompanies. These multinational companies,seldom purchase real estate property inIndia, but only lease them out for theirrequirements. Only in stray cases, thesebuildings are sold. Therefore, the promoter ofa software park can generally view theseproject only tor the purpose of investment.and not stock in trade. The buildings and theinfrastructures created are leased out to’various clients, the maintenance of which islooked aiter by the promoter. In thesecircumstances, all the assets created in theproject including the land have to _ bnecessarily classified in the balance sheet oftheaSSCSSFCECOMmpa_»as|fixedassets/investments. In this given case, theassessee company has erred in disclosing theland earmarked for promoting software parkin the financial systems of stock-in-trade.This genuine mistake of the assessee in.recording the financial statements cannot be.seriously viewed in interpreting the provisionsof the IT Act. The subsequent conduct of theassessee in leasing out the buildings also.retlects the initial intention of the company to.hold|theseassets as|fixedassets /investments. 11.9.2)In an overall consideration|of tacts and circumstances of the issue as! deliberated upon in the foregoing paras and.also in conformity with the legal position citedSupra, we are of the considered view that theauthorities below were not justified1nholding that the surplus rising on sale of apiece of land as }business income’for theAYs 2002-03, 2004-05 and 2005-06.It is.ordered accordingly.” Under these circumstances, the present appeals|before this Court. [|It may be recorded that the Revenue has preferred|the appeals being ITA No.145/2011, ITA No.146/2011-and ITA No.197/2011 for the respective assessment.years, whereas the assessee has preferred appeals beingITANo.183/2014,ITANo.349/2014.andITANo.350/2014.. 8.|We have heard learned counsel Mr.K.V.Aravind|appearingfortheReVeEnNUandlearnedcounsel Mr.Chythanya appearing for the assessee in therespective appeals. OQ It was contended by learned counsel appearing for|the Revenue that, the fact that assessee treated theproperty of the land in the books of accounts as ‘stock- Under these circumstances, the present appeals|before this Court. [|It may be recorded that the Revenue has preferred|the appeals being ITA No.145/2011, ITA No.146/2011-and ITA No.197/2011 for the respective assessment.years, whereas the assessee has preferred appeals beingITANo.183/2014,ITANo.349/2014.andITANo.350/2014.. 8.|We have heard learned counsel Mr.K.V.Aravind|appearingfortheReVeEnNUandlearnedcounsel Mr.Chythanya appearing for the assessee in therespective appeals. OQ It was contended by learned counsel appearing for|the Revenue that, the fact that assessee treated theproperty of the land in the books of accounts as ‘stock- in-trade/inventory and the tact that the assesseeconsidered the difference as ‘business income’ and thatthe land was ‘stock-in-trade’ and filed returns as that ot‘business income’ are sufficient evidence to show that it.was, in reality, a ‘business income’. He submitted that it1Sonly|aitterthesearchproceedings whenthe|opportunity was available to the assessee, it has filedrevised returns and a contrary stand is made by showingthe land as ‘capital asset’ and the difference isconsidered as that of a ‘capital gain’. He submitted thatthe Assessing Officer as well as the CIT (Appeals) hadrightly negatived the claim of the assessee and it treatedthe income as that of ‘business income’ as per thereturns filed earlier i.e. prior to the search proceedingsand he, therefore, submitted that the Tribunal has not)properly considered the evidence on record and it oughtto have disallowed the claim of the assessee as that ot‘capital gain’ and ought to have confirmed the income asof ‘business income’ of the assessee. LQ.|Whereas,learnedcounsel fortheAaAsSESSEcontended that it is true that in the books of accounts,initially, the land was shown as ‘stock-in-trade’ and it is"also true that the returns were initially filed for businessincome. However, the assessee having realized itsmistake filed revised returns after the notice undersection 153A of the Act and had shown the ‘capital gain’for the purpose of taxable liability. He submitted that inthe assessment proceedings up to the stage of theTribunal, voluminous records were produced to showthat the property of the land was for all purposes can betreated as ‘capital asset’ and there were voluminouscircumstances to show that the income or the differenceout of sale of a portion of the land would only be termedas ‘capital gain’ and not the ‘business income’. Hesubmitted that the Tribunal, after undertaking theexercise of appreciation of the evidence and the materialon record, has accepted the explanation for the earlierreturn filed and the earlier entries in the books ofaccounts. Once the Tribunal, after undertaking theappreciation of the evidence, has recorded a finding of fact that the land can be termed as ‘capital asset’ andhas found that there was error committed on the part ofthe Assessing Authority in treating the income as‘business income’, this Court may not interfere with theorder passed by the Tribunal since the Tribunal is theultimate fact finding authority. He submitted that in thevarious decisions of the High Courts as well as of theApex Court, the parameters for treating the income as‘capital gain’ or ‘business income’ are provided. TheTribunal has undertaken such exercise and thereafter|was satisfied on the point that it was ‘capital gain’ andnot ‘business income’. He, therefore, submitted that.this Court may not interfere with the order passed by theTribunal. | 11.)However, in the appeals preferred by the assessee,learned counsel declared that if this Court is not to enterinto the finding of fact, possibly the appeals of theassessee would no more survive and the other questionwould no more arise for consideration in the present.appeals. 11.)However, in the appeals preferred by the assessee,learned counsel declared that if this Court is not to enterinto the finding of fact, possibly the appeals of theassessee would no more survive and the other questionwould no more arise for consideration in the present.appeals. 12.We may, at the outset, record that the scope of|judicial scrutiny in the appeal against the order of theTribunal is limited to the question of law and it is notavailable for up-setting the finding of facts, unless suchfinding is perverse to the record or the Tribunal hastaken a view which is impossible by applying normalprudence. 13.)We may also record that whether particular|property can be considered as a ‘stock-in-trade’ or a partof ‘inventory or whether it can be treated as capital assetthough a question may be touching to law but wouldessentially depend upon consideration of so manyfactual aspects germane to record the conclusion. Atthis stage, we may usefully refer to decision of theDivision Bench of High Court of Gujarat in case ofCOMMISSIONER OF INCOME TAX VS. REWASHANKER|A. KOTHARI' reported iniZO006}] 283 ITR 338 (GUUwherein the question arose for various tests on the basisof which a finding can be recorded as to whether theasset is a ‘stock-in-trade’ or an ‘inventory’ or a ‘capital asset’. In the said decision at paragraphs 9 to 11 it was observed thus: CQO.Upon.examinationoT the.atoresaidrecord,theTribunal|recorded that the assessee had given|an ettfective answer to the show-causenotice and thereafter, proceeded torecord the following findings: (1)There was a large time-gap)between the dates of acquisition of theshares and the sale thereof. (2)Thus, the intention to _ selcannot be inferred at the point of timeof the purchase. (3)That merely because the salehad resulted in a profit did not meanthat when the assessee purchased theshares, it was with an intention to sellthem ata profit. .!That an investor may sell theshares when he gets a good price for|the shares. !That the assessee had sharesin 25 to 30 companies and the valueof the total holding was. betweenRs.57,000 and Rs.63,000, which was.very small amount considering the|number of companies in which the|shares were held, thus, denoting that|the assessee was a small investor. (6)That number oft transactionsare not many every year and the|assessee could not be said to indulge| in several transactions of purchase|and sale every year. 10.The tests laid down by various|decisions of the Apex Court indicatethat, in each case, it is the total effectoT|allrelevant.factorsandcircumstancesthat|determinethe|character ot the transaction. Khach|case has to be determined on the totalimpression created on the mind of theCourtby allthefactsandcircumstancesdisclosed1nNaparticular case. One of the principaltests is whether the transaction is.relatedTO the businessnormallycarried on by an assessee. The natureof the commodity was made with the|intention to re-sell, if an enhancedprice could be obtained, that by itselfis not enough to infer that an assesseeis carrying on business. However,|though profit motive in entering into a|transaction is not decisive, if the facts.and circumstances indicate that the.purchase of the asset factor forinferring that the transaction was in|the nature of business. 11.|In the case ofPart MangaldasGirdhardas v. CIT 1977CTR (Guj.)647, after analyzing various decisionsof the Apex Court, this Court hasformulated certain tests to determine|as to whether an assessee can be said.to be carrying on business. | &!The first test is whether the'initial acquisition of the _ subjematter of transaction was with the.intention of dealing in the item, or' with a view to finding an investment. —If the transaction, since the inception,appears to be impressed with the|character of a commercial transaction|entered into with a view to earn profit,it would furnish a valuable guideline. @!The second test that is oftenapplied is as to why and how and for|what purpose the sale was effected|subsequently. 11.|In the case ofPart MangaldasGirdhardas v. CIT 1977CTR (Guj.)647, after analyzing various decisionsof the Apex Court, this Court hasformulated certain tests to determine|as to whether an assessee can be said.to be carrying on business. | &!The first test is whether the'initial acquisition of the _ subjematter of transaction was with the.intention of dealing in the item, or' with a view to finding an investment. —If the transaction, since the inception,appears to be impressed with the|character of a commercial transaction|entered into with a view to earn profit,it would furnish a valuable guideline. @!The second test that is oftenapplied is as to why and how and for|what purpose the sale was effected|subsequently. <!Thethirdtest,which1S.frequently applied, is as to how the|assessee dealt with the subject-matter|of transaction during the time the|asset was with the assessee. Has it!been treated as stock-in-trade or has.it been shown in the books of account|and balance sheet as an investment.This inquiry, though relevant, is not|conclusive. (d)The fourth test is as to how theassessee himself has returned the.income from such activities and how|the Department has dealt with the|same in the course of preceding and|succeeding assessments. This factor,|though not conclusive, can _ atiorgood and cogent evidence to judge thenature of transaction and would be a.relevant.circumstanceTO beconsidered in the absence of any|satisfactory explanation. | :!The fifth test, normally appliedin cases of partnership firms andcompanies, is whether the deed of|partnership or the memorandum of association, as the case may be,|authorizes such an activity. ?!The last but not the least,rather the most important test, is asto the volume, frequency, continuity|andregularityoT|transactionsoT|purchase and sale of the _ goodconcerned. In a case where there is |repetition and continuity, coupled|with the magnitude of the transaction,bearing reasonable proportion to the|strength of holding, then an inference|can readily be drawn that the activity|1S in the nature of business.” 14.|Aiter considering the aforesaid, if we _ furtheconsider the approach of Tribunal it appears thatTribunalin.abovereferred|reasoningandINOorparticularly at paragraph 11.9.1 and 11.9.2 has takeninto consideration the various aspects namely; %!TheaSSCSSEEpurchased|thelandinC.V.Nagar from Raja Bagmane admeasuringo2 acres for the purpose of setting up asoitware Technological Park; © %%!If the property was intended to be only sold.then there was no necessity of it beingtransferred to Assessee Company incurringunnecessary costs; %%%!Aiter the land was purchased wayback in.1996,theass€sseeCOM1pahhmadeapplications to the State and the CentralGovernment for grant of approval to set up a.soitware Park during the year 2000;1996,theass€sseeCOM1pahhmadeapplications to the State and the CentralGovernment for grant of approval to set up a.soitware Park during the year 2000; %F!soitware Park projects are consisting ofbuildings for office purposes is set up in aspecific location with prior approval of StateandCentralGovernmentinstalledwith|variousinfrastructuresrequiredfor.developing and transmitting the software;|buildings for office purposes is set up in aspecific location with prior approval of StateandCentralGovernmentinstalledwith|variousinfrastructuresrequiredfor.developing and transmitting the software;| F!The promoters of a Software Park can.generally view this project only for thepurpose of investment and not as stock-in-trade;generally view this project only for thepurpose of investment and not as stock-in-trade; F%!The buildings and infrastructures created areleased out to various clients, the maintenanceof which is looked aiter by the promoters.leased out to various clients, the maintenanceof which is looked aiter by the promoters. F!The promoters of a Software Park can.generally view this project only for thepurpose of investment and not as stock-in-trade;generally view this project only for thepurpose of investment and not as stock-in-trade; F%!The buildings and infrastructures created areleased out to various clients, the maintenanceof which is looked aiter by the promoters.leased out to various clients, the maintenanceof which is looked aiter by the promoters. 15.On the basis of aforesaid facts and circumstances,based on the factual scenario the Tribunal has recordedthe finding of fact that Assessee Company has erred indisclosing the land earmarked for promoting SoftwarePark in the financial system of stock-in-trade. The Tribunal has further tound that it is genuine mistake ofthe assessee in recording the financial statementscannot be seriously viewed in interpreting the provisionsot the Income Tax Act. Tribunal has also furtherrecorded that subsequent conduct of the assessee inleasing out the buildings also reflects the initial intentionof company to hold these assets as fixed assets /investments. | 16.|In our considered view, the aforesaid finding of factso recorded by the Tribunal cannot be termed asperverse to the record because learned counsel for therevenue has not been able to show or satisfy the Courtthat any of the aforesaid finding of fact is not supportedby the record or Tribunal has recorded such finding offact without there being any material on record. © 17.Applying the test of reasonable prudence, when|aforesaid facts and circumstances are apparent and ifthe Tribunal has taken the view that entries in the booksof accounts or statement given by the assessee to theproperty as stock-in-trade and not as fixed assets / investments / capital assets, could be said as genuinemistake or error, such view on the part of Tribunalcannot be said to be extacie unreasonable view or that§no person with reasonable prudence would take such aview. As such, we are of the considered opinion that aview on the basis of facts placed before the Tribunalcould be said as one possible view and not an impossibleview by applying the test of reasonable prudence. 18.|In view of the aforesaid reasons, when we have|found that finding recorded by Tribunal is not perverseto the record nor we have found that finding recorded orthe view taken by the Tribunal is not an impossible view,rest of the other aspects would fall in the arena ofappreciation and re-appreciation of the evidence and.thereaiter, may result in disturbing the finding of fact as"already recorded by the Tribunal but it is only for thematter of question of law, the jurisdiction of this Court inthe appeal under Section 260A can be invoked. 19.|In view of the above, we find that when on facts|Tribunal has recorded a considered finding, no question of law would arise for consideration but the question soformulated shall stand answered in favour of assesseeand against the revenue. 20.With these observations ITA Nos.1957/11, 145/11 &146/11 stands disposed of accordingly. However, so faras ITA Nos.183/14, 349/14 & 350/14 shall not survivein view of the aforesaid observations made by us andconclusion recorded along with declaration made onbehalf of the appellant. Hence, same shall also standdisposed of. MV/DR SD/-. JUDGE| SD/-.JUDGE|