Case Law Details
Haresh Khiamal Nanwani Vs ACIT (ITAT Mumbai)
The issue under consideration is whether ACIT is correct in treating the sale of investments in immovable properties as a business activity rather than considering it as capital gains, in spite of the appellant holding the flats for more than 36 months.
Assessee state that, he had shown that property under the head “Investments” in his Financial Statements. Further every year assessee offered the rental income from those flats under the head Income from house property. Further, the assessee, after selling these flats has not acquired any additional flats by re-investing the sale proceeds of these sold flats. If the assessee was a dealer, then the assessee would have invested the sale proceeds of those sold flats as a working capital in acquiring the additional flats and the same additional flats could have been sold later on and this cycle could have been repeated again and again.
The principle underlying the distinction between a capital sale and an adventure in the nature of trade were examined by the Hon’ble Supreme Court in Venkataswami Naidu & Co (G) v. CIT (1959) 35 ITR 594(SC), where it was held that the character of a transaction cannot be determined solely on the application of any abstract rule, principle or test but must depend upon all the facts and circumstances of the case. If the assessee, even at the time of acquisition had a clear intention to resell it, that would be material but not a decisive consideration. On the totality of the facts and circumstances of the case, we are inclined to agree with the treatment given by the assessee in his return of income as gains/loss from sale of such flats under the head ‘Capital Gains’. In the result, the order passed by the Ld. CIT(A) is set aside and the appeal filed by the assessee is allowed.
FULL TEXT OF THE ITAT JUDGEMENT
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