IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 28TH DAY OF FEBRUARY 2020 PRESENT HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE RAVI V.HOSMANI I.T.A. NO.457 OF 2010 BETWEEN: 1. COMMISSIONER OF INCOME-TAX C.R. BUILDING, QUEENS ROAD BANGALORE. 2. DY. COMMISSIONER OF INCOME-TAX CIRCLE-1(1), C.R. BUILDING QUEENS ROAD, BANGALORE. ... APPELLANTS (By Sri. K.V. ARAVIND, ADV.) AND: THIRUMALA VENKATESHWARA ESTATE AND AGENCIES NO.911, BARTON CENTRE NO.84, M.G. ROAD, BANGALORE. ... RESPONDENT (By Smt. S.R. ANURADHA, ADV.) --- THIS I.T.A IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 28-7-2010 PASSED IN ITA NO.553/BANG/2010, FOR ASSESSMENT YEAR 2006-07, PRAYING TO FORMULATE SUBSTANTAIL QUESTIONS OF LAW 2 STATED THERIEN. ALLOW APPEAL AND SET ASIDE ORDERS PASSED BY ITAT, BANGALORE IN ITA NO.553/BANG/2010 DATED 28-7-2010 AND CONFIRM ORDER OF APPELLATE COMMISSIONER CONFIRMING ORDER PASSED BY DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), BANGALORE IN INTEREST OF JUSTICE AND EQUITY. THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED FOLLOWING: JUDGMENT In this appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act , for short) which has been filed by revenue issue which arises for consideration is whether income from sale of property should be assess under head of business or capital gains. appeal was admitted by Bench of this Court vide order dated 12.11.2011 on following substantial questions of law: Whether order of Income Tax Appellate Tribunal holding that amount of `6,00,00,000/- (Rupees Six Crores) received by assessee on sale of building bearing No.16/1, Museum road, Bangalore, is long term capital gains and not business income 3 as held by Assessing Officer and Appellate Authority is justified on facts and circumstances of case and law? 2. Facts leading to filing of this appeal briefly stated are that assesses filed return of income for Assessment Year 2006-07 on 31.10.2006 and declared income of Rs.37,10,085/-. case was selected for scrutiny and notices under Section 143(2) and 142(1) were issued to assessee on 21.07.2007 and 13.08.2008 respectively. Assessing Officer by order dated 30.12.2008 inter alia held that immovable property situate at 16/1, Museum Road, Bangalore, was held as stock in trade and assessee itself was engaged in business of construction of Multi Storied Building. Assessing Officer bought amount of Rs.6 Crores under head business income on substantive basis. Being aggrieved, assessee filed appeal. However, Commissioner of Income Tax (Appeals) by impugned order dated 01.03.2010 4 upheld order passed by Assessing Officer. assessee thereupon filed appeal before Income Tax Appellate Tribunal. Income Tax Appellate Tribunal vide order dated 28.07.2010 inter alia held that said property was shown as capital assets in books of account of assessee and rental income of property in question was brought to tax under head income from house property and no depreciation was claimed in respect of said property. Accordingly, it was held that income from sale of property would be under head long term capital gains. Accordingly, appeal filed by assessee was allowed. Being aggrieved, assessee has filed this appeal. 3. Learned counsel for revenue submitted that assessee is in business of purchasing land and putting up commercial buildings thereon and therefore, same does not fall within head income from house property. It is further submitted that income 5 of assessee was to carry on business of letting out commercial property and carrying out complex commercial activity and getting rental income therefrom, which is evident from Clause 3 of partnership dated 07.02.1996, therefore, Tribunal grossly erred in treating income from property as capital gains. In support of his submissions, learned counsel has placed reliance on Division bench decision of this court in COMMISSIONER OF INCOME-TAX-III VS. VELANKANI INFORMATION SYSTEMS (P.) LTD. IN ITA APPAEL NOS.374 & 375/2011 AND 273 TO 276 OF 2012 DECIDED ON 02.04.2013. 4. On other hand, learned counsel for assessee has submitted that whether income from sale of property should be assessed as under head of business or capital gains is question of fact. It is further submitted that on meticulous appreciation of material available on record, Income Tax Appellate Tribunal has recorded finding that property was 6 held as capital asset and therefore, same cannot be treated as stock in trade. In support of his submissions, learned counsel has placed reliance on division bench decision of this court in D.R.PUTTANNA SONS PVT. LTD. VS. COMMISSIONER OF INCOME-TAX , 1986 SCC ONLINE KAR 386. 5. We have considered submissions made on both sides and have perused record. Except last nine years, property which comprises land and building was let out by assessee for long period. assessee had earned income by way of rent and rental income so received by assessee was offered for taxation as income from house property. assessee has shown property in question as capital asset in its balance sheet. Tribunal has further found that there is no material on record to hold that aforesaid property was converted by assessee as item of stock in trade. On other hand, said property was treated as capital asset. It has further 7 been held that merely because assessee is engaged in construction business is not ground that land and building should be treated as part of stock in trade. It is also pertinent to note that assessee has not claimed any depreciation in any of Assessment Years while offering rental income as house property income. Thus, income from sale of property has been treated as long term capital gain. aforesaid finding of fact is based on meticulous appreciation of evidence on record and in substance is finding of fact. In view of preceding analysis. substantial questions of law framed by this court is answered against revenue and in favour of assessee. In result, appeal fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE SS Commissioner of Income-tax, Bangalore / Dy. Commissioner of Income-tax Circle-1(1), Bangalore v. Thirumala Venkateshwara Estate and Agencie