Vaijanti Jain Vs ITO (ITAT Delhi)
ITAT Delhi held that property sold is to be taxed under Capital gain as the property was held for considerable longer period of time and assessee is not engaged into systemic real estate business activity.
Facts- The case of the assessee was selected for scrutiny assessment. The Assessing Officer (“AO”) observed that the assessee had claimed capital gain out of sale of the properties. However, looking to the facts, same ought to have been treated as income from business.
Aggrieved by the action of Assessing Authority, the assessee carried the matter before Ld.CIT(A), who after considering the submissions, sustained the addition and dismissed the appeal of the assessee.
Aggrieved against the order of Ld.CIT(A), the assessee preferred appeal before this Tribunal.
Conclusion- Considering the fact that the properties in quantum were held for considerable longer period of time, it is not the case where the properties have been sold within a short span of time after their acquisition. Coupled with the fact that the assessee is not engaged into any systematic real estate business activity. I therefore, respectfully following the binding precedents as cited by the Ld. Counsel for the assessee hold that the authorities below erred in treating the transaction as real estate business transaction under the facts and circumstances of the present case. I therefore, hereby direct the AO to delete the impugned addition. Thus, grounds raised by the assessee are allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeal filed by the assessee for the assessment year 2013- 14 is directed against the order of Ld. CIT(A)-14, New Delhi dated 18.12.2018. The assessee has raised following grounds of appeal:-
1. “On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad, both in the eye of law and on the facts.
2. On the facts and circumstances of the case, Id. CIT(A) has erred both on facts and in law, in confirming the action of A.O. in holding the capital gain arising on sale of investment by the assessee to be income assessable under the head ‘business and profession’.
3. That the above said has been held despite the fact that the properties, which were sold, were being held by the assessee as investment and there was no intention to deal in those as her business.
4. Without prejudice to the above, Id. CIT(A) has erred both on facts and in law, in confirming the action of the A.O. in computing the gain on sale of properties at Rs. 46,29,992/- as against Rs.3,91,539/- declared by the assessee.
5. The appellant craves leave to add, amend or alter any of the grounds of appeal.”
5. The only dispute in this case is related to the treatment of surplus fund out of the sale of properties whether it should be the business income as treated by the Assessing Authority or the capital gain as claimed by the
BRIEF FACTS OF THE CASE
3. Facts giving rise to the present appeal are that the assessee e-filed return of income declaring total income of Rs.3,55,190/- on 3 1.03.2015 for the year under consideration. The case was selected for scrutiny assessment. The Assessing Officer (“AO”) observed that the assessee had claimed capital gain out of sale of the properties. However, looking to the facts, same ought to have been treated as income from business. The AO after considering the material available on record, computed the business income as under:-
“Looking to the facts of the case it is clearly established that the assessee is during business of real estates and wrongly claimed the short term capital gain and long term gain in the computation of income annexed with the return of the income for the assessment year 2013-14.
Perusal of title deed in respect of assessee for properly bearing No E-4/ 14 was purchased for a sum of Rs. 71, 76,000/- which comprises of ground floor, first floor and second floor alongwith roof title. Assessee has claimed to sold third floor in this property which shows that assessee has constructed four floors after demolition of old building. Thus cost of purchase has to be divided in four parts. Hence cost of purchase is taken at Rs. 17,94,000/-( 71,76,000 /4 ) instead of Rs. 47,84,000/- as claimed by the assessee.
As regards property C-339, Saraswati Vihar, the same was purchased for a sum of Rs.91,35,000/- in which assessee is having 1/3rd share only. Thus cost of purchase for assessee comes to Rs.30,45,000/-. This property comprises of ground floor and first floor. Assessee has claimed to sold second floor in this property which shows that assessee has constructed four floors after demolition of old building. Thus cost of purchase has to be divided in four parts. Hence cost of purchase is taken at Rs 7,61,259/- ( 30,45,000 /4 ) instead of Rs. 14,59,000/- as claimed by the assessee.
After considering the facts as putforth above, the income from sale of properties is worked out as under:
