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March, 14th 2013

%                                      Judgment delivered on: 07.03.2013

+       ITA 569/2012

COMMISSIONER OF INCOME TAX, DELHI                              ... Appellant


DELHI APARTMENTS PVT LTD                                       ... Respondent
Advocates who appeared in this case:

For the Appellant     : Mr N. P. Sahni with Mr Ruchesh Sinha
For the Respondent    : Mr A. Sharma with Mr Manu K. Giri




1.      This appeal by the revenue under Section 260A of the Income Tax
Act, 1961 is directed against the order dated 23.12.2011 passed by the
Income Tax Appellate Tribunal in ITA 2320/Del/2010 in respect of the
assessment year 2006-07.

2.      Essentially, the revenue has proposed the following questions as
substantial questions of law:-

ITA 569/2012                                                         Page 1 of 6
        "(1) Whether on the facts and circumstances of case,
        the Income Tax Appellate Tribunal was correct in law in
        deleting the addition of ` 16,93,42,000/- by holding that
        the advance received of by the assessee for the sale of
        lands 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 in
        deleting the addition of ` 3,07,82,342/- by holding that
        profits from the sale of lands is not taxable under the
        head profits and gains of business or profession vis-à-vis
        capital gain taken by the Assessing Officer?"

3.      Insofar as the first proposed question is concerned, we find that
certain properties were purchased between 08.02.2005 and 25.08.2005.
The total purchase price of these properties, which were situated in
village Kapashera, came to ` 1,06,58,000/-. This land was sold in its
entirety to one A.B. Tower Private Limited for a consideration of Rs 18
crores by virtue of a sale deed dated 04.09.2006, which falls in the
succeeding year. However, an advance had been received of ` 5 crores
during the year under consideration, i.e., the financial year ending
31.03.2006. The Assessing officer regarded the receipt of advance as
finalization of the transaction and subjected the entire consideration
amount of ` 18 crores (minus the cost price) to tax in this assessment
year, i.e., assessment year 2006-07.

ITA 569/2012                                                         Page 2 of 6
4.      Consequently, the Assessing Officer made an addition of
` 16,93,42,000/- on this account. The said addition was deleted by the

Commissioner of Income Tax (Appeals) and the deletion was confirmed
by the Tribunal by virtue of the impugned order. The Tribunal came to
the conclusion that there was no agreement to sell between the parties in
the year in question and the only document which pertained to the
transfer of property was the sale deed dated 04.09.2006 which was
executed in the subsequent year. The Tribunal further held that there was
no 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 of
advance which had been received by the assessee and no transaction
stood concluded in the year in question. Consequently, the Tribunal
confirmed the deletion of said addition of ` 16,93,42,000/-.

5.      Having heard the counsel for the parties, we are in agreement with
the stand and approach adopted by the Tribunal. There was no evidence
of any confirmed transaction in the year in question.          As such, the
addition could not have been made on the ground that the transaction had
been concluded. We may also point out that in the subsequent year, the
entire 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. No
        agreement has been signed in this year. The possession

ITA 569/2012                                                      Page 3 of 6
        has also not been delivered in this year. The twin
        conditions of execution of written agreement and
        handing over of the possession have to be
        cumulatively satisfied in order to bring the case
        within the ambit of section 2(47)(v) read with
        section 53A of the Transfer of Property Act. None of
        these conditions are satisfied. Therefore, it is held
        that the property has not been transferred in this year.
        It has also not been sold in this year. Since the
        transaction of transfer has not taken place in this
        year, nothing can be brought to tax as business
        income in this year. In this view of the matter, the
        money received is only an advance, which will get
        taxed as and when the transaction actually takes
        place. This happened in the immediately
        succeeding year. Thus, ground no. 2 is dismissed."

Therefore, no question of law arises for our consideration insofar as this
issue is concerned.

6.      As regards the second proposed question, the facts are that the
respondent/ assessee had purchased the land in question sometime in
1994-96. Since then, the respondent/ assessee had shown the said land in
its balance sheet as a fixed asset. The same had been consistently shown
as such by the respondent/ assessee in all the years including the
assessment year 2006-07. Two portions out of the said land were sold in
the year in question. The respondent/ assessee had claimed that the sale
proceeds were not part of its business income but, being sales of its fixed
assets resulted in long term capital gain of ` 3,07,82,342/-.               The
Assessing Officer did not agree with this and taxed the entire amount as
part of the assessee's business income. Consequently, the Assessing

ITA 569/2012                                                       Page 4 of 6
Officer made an addition of the said sum of ` 3,07,82,342/- by holding it
as profit on sale of land which was taxable under the head `profits and
gains of business or profession' and not by way of capital gains. The
Commissioner of Income Tax (Appeals) deleted the said addition and the
said deletion has been confirmed by the Tribunal by virtue of the
impugned order.

7.      The Tribunal considered the arguments raised on behalf of the
parties and after examining the case law on the subject, observed that an
assessee could hold lands either for business or as an investment and
there was no bar on an assessee in undertaking, along with his business of
sale-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 as
well as an investor in land simultaneously, depending on what his
intention was and how he treated the asset in question. The Tribunal
returned a finding that in the present case, the land was purchased and
was shown as an asset in the balance sheet and that the land had also been
used for agricultural purposes. It also noted the fact that the land had
been held for a long period of time, the same having been purchased in
1994-96. The Tribunal was also conscious of the fact that there was no
evidence that borrowed capital had been used for the purchase. All these
circumstances, led the Tribunal to the inference that the land was held as
an asset and, therefore, the assessee had appropriately offered it for
taxation under the head `capital gains'. We do not find any perversity in
these findings and, therefore, there is no cause for interference with the

ITA 569/2012                                                    Page 5 of 6
same. No substantial question of law arises for our consideration even in
respect 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, 2013

ITA 569/2012                                                   Page 6 of 6
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