Itxa/1/2013 Of Commissioner Of Income Tax- 18 v. M/S. Preeti Enterprises

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1 OF 2013 … Commissioner of Income Tax-18v/s.M/s.Preeti Enterprises ...Appellant ...Respondent … Mr.A.R.Malhotra with Mr.N.A.Kazi and Ms.Padma Divekar for the Appellant.Ms.Beena Pillai for the Respondent. ... P.C. CORAM : S.C.DHARMADHIKARI & A.A. SAYED, JJ. DATED : 12 DECEMBER 2014 This Appeal of the Revenue challenges the order passed by the Tribunal on 30 May 2012 in Income Tax Appeal No.6214/Mum/2010. The Assessment Year is 2007-08. 2. The only point, which was argued before the Tribunal and reiterated before us, is that the Commissioner of Income Tax (Appeals) has erred in law in directing the Assessing Officer to treat the income of Rs.5,71,03,487/- as income from Long Term Capital Gain in stead of business income. 2/4 itxa-1-13.doc 3.The return of income was filed disclosing Rs.5,87,13,380/- and it was selected for scrutiny. A detailed questionnaire was dispatched with the statutory notice, to which the Assessee responded. It was noted by the Assessing Officer that the Assessee has sold the property at Khetwadi, 10[th] Cross Lane, Mumbai and profit from sale of this property was shown as “Long Term Capital Gain”. 4.The Assessing Officer held that the partnership firm of husband and wife was constituted for the purpose of doing business as Builder & Developer. If the Assessee was only investing in the property, then, there was no occasion to set up such a partnership firm and if in the meanwhile and upon setting it up it was discovered that it was not viable, steps should have been taken to amend the partnership deed and particularly with regard to scope of the partnership business. In addition to this, when this property at Khetwadi, Mumbai was acquired in 1997, the Assessee made several applications seeking clearances and permissions from the Government Authorities so as to develop and construct upon the property, this would run counter and rather negate the position that the property was held as investment. itxa-1-13.doc 5.Both the Commissioner and the Tribunal have found that the reliance placed by the Revenue on the judgment of the Hon'ble Supreme Court in the case of Rajputana Textile Agencies Ltd. v/s. CIT (1961) 42 ITR 743 was misplaced. The present case would denote that partnership firm of husband and wife undertook only one project and completed it only after more than eight years. They did not have any business. They realized that developing the property cannot be their business. Though they have acquired the property in Mumbai and Khetwadi in 1997, they could not do anything beyond making some applications. There were sitting tenants and 72 in number on the property. They waited for another nine years and ultimately disposed of this property in 2006. If the business was of Builder and Developer, it was inconceivable in a city like Mumbai, where the prices of the lands are sky rocketing, that the Builders and Developers will not do any business, even after they have set up a firm of Builder and Developer. The period of nine years coupled with the fact that barring one project nothing more was undertaken, leave alone, completed by the firm, that both the Commissioner and the Tribunal reached this conclusion that the property was acquired for dealing in real estate investment. In such circumstances, we do not find that the Tribunal committed any error itxa-1-13.doc itxa-1-13.doc of law apparent on the face of the record. Its order cannot be termed as a perverse either. The reliance placed by Mr.Malhotra on the judgment of the Hon'ble Supreme Court in the case of Rajputana Textile (Agencies) Ltd. is misplaced. Apart from the fact that the Hon'ble Supreme Court was dealing with a business in shares, what it discovered and on facts is that the transaction of purchase of sale of shares of about 13 lakhs shares was of a commercial nature and held to be adventure in the nature of trade. In such circumstances, the conclusions have been recorded. We do not see any assistance from such conclusions to the present set of facts and circumstances, they have been already noted above. In such circumstances, this Appeal does not raise any substantial question of law. Finding of fact cannot be termed as perverse or vitiated by any error law apparent on the face of the record. Consequently, the Appeal fails and is dismissed. No order as to costs. . (A.A. SAYED, J.) (S.C.DHARMADHIKARI,J.)