I.T.As. Nos. 1828/KB and 2090/KB of 1995-96, decided on 6th July, 2002. VS I.T.As. Nos. 1828/KB and 2090/KB of 1995-96, decided on 6th July, 2002., 2002 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 3000 (2002)

Income Tax Ordinance (XXXI of 1979)‑‑‑

--S. 27‑‑‑Capital gain‑‑‑Assessee was a retired Government servant and was allotted a plot for construction of flats‑‑‑Plot was sold out and proceeds from such sale of plot were claimed exempt under S.27 of the Income Tax Ordinance, 1979 as capital gain‑‑First Appellate Authority found that the assessee had purchased the plot with the intention of going into business of housing project which could not materialize for various reasons including lack of finance and old age‑‑Contention. of the assessee that this was a solitary transaction was not accepted as he was found to be dealing in real estate‑‑‑Gain was treated as a revenue gain‑‑ Assessing Officer was directed by the First Appellate Authority to accept the declared sale price in view of the fact that the same value had been accepted as declared by the purchaser of the same plot ‑‑‑ Validity ‑‑‑held, what had to be seen in a transaction of this type was the intention of the assessee at the time of acquisition of the property‑‑‑Admittedly, the assessee had been allotted this plot for the construction of flats and it was not the claim of the assessee that he intended to use all such flats for his personal need‑‑‑Intention thus was to sell the flats at a profit‑‑‑First Appellate Authority rightly directed the Assessing Officer to accept the declared sale price as the same had been accepted in the case of the purchaser of .the same property‑‑‑Department could not make a discriminatory treatment in respect of the same transaction between the two parties‑‑‑Appeals were dismissed and order of the First Appellate Authority was maintained by the Tribunal.

Samina Shaukat Ayub's case AIR 1932 TC 138; 1984 PTD (Trib.) 127; 1975 PTD (Trib.) 6 and 1991 PTD (Trib.) 786 ref.

Bakht Zaman, D.R. for Appellant.

Mazharul Hassan for Respondent.

Date of hearing: 29th June, 2002.

ORDER

INAM ELLAHI SHEIKH (CHAIRMAN). ‑‑‑These two cross appeals arise out of an order dated 27‑2‑1996 recorded by learned Commissioner of Income‑tax (Appeals), Zone‑VI, Karachi in the case of an individual assessees.

2. The relevant facts in brief are that the assessee is a retired Government servant and he was allotted a plot for construction of flats on 17‑3‑1987 measuring 4886.67 sq. yds. For a consideration of Rs.391,364. Subsequently, the assessee disposed of this plot for a declared value of Rs.1,971,000. The sale agreement was said to have been made some time in May, 1991 whereas the actual transfer of the plot was made on 1‑9‑1991. The assessee declared a net profit of Rs.1,450,000 in the exempt column of the return of income whereas no other income was declared. The Assessing Officer did not accept the claim of exemption after rejecting the contentions that this was not a transaction in the nature of business and that the capital gain was exempt under section 27 of the Income Tax Ordinance, 1979 (hereinafter called the 1979 Ordinance).

3. The declared sale value was also not accepted and the same was adopted at Rs.9,733,340, at the rate of Rs.2,310 per sq. yd. As a result, total income was assessed at Rs.9;341,976, after deducting, the declared purchase price. The First Appellate Authority after discussing the facts of the case and the arguments of the assessee, held that the assessee had purchased the plot with the intention of going into business of housing project which could not materialize for various reasons including the Jack of finance and old age. The contention of this being a solitary transaction was not accepted as the assessee was found to be dealing in real estates. Hence the gain was treated as a revenue gain. The Assessing Officer was, however, also directed to accept the declared sale price in view of the fact that the same value had been accepted as declared by the purchaser of the same plot.

4. The main argument of the learned counsel for the assessee is that the gain derived by the assessee from the sale of plot was not income within the meaning in the Income Tax Ordinance. It was submitted that this is a solitary transaction and the gain should be treated as casual income. The alternative plea is that this gain could be a capital gain which is exempt under section 27 of the 1979 Ordinance. The learned counsel for the assessee cited the following case‑law:

(i) AIR 1932 TC 138, as cited in the case of Samina Shaukat Ayub.

(ii) 1984 PTD (Trib.) 127.

(iii) 1975 PTD (Trib.) 6.

(iv) 1991 PTD (Trib.) 786.

5. The learned counsel for the assessee also objected to the observations of the learned Commissioner of Income‑tax (Appeal) on pages 7 and 10. The learned D.R., on the other hand, opposed the assessee's appeal for the same reasons as recorded in the assessment order and also supported the departmental appeal for the same reasons within the meaning in the Income Tax Ordinance. It was submitted that this is a solitary transaction and the gain should be treated as casual income. The alternative plea is that this gain. could be a capital gain which is exempt under section 27 of the 1979 Ordinance. The learned counsel for the assessee cited the following case‑law:

(i) AIR 1932 TC 138, as cited in the case of Samina Shaukat Ayub.

(ii) 1984 PTD (Trib.) 127.

(iii) 1975 PTD(Trib.) 6.

(iv) 1991 PTD (Trib.) 786.

5. The learned counsel for the assessee also objected to the observations of the learned Commissioner of Income‑tax (Appeals) on pages 7 and 10. The learned D.R., on the other hand, opposed the assessee's appeal for the same reasons as recorded in the assessment order and also supported the departmental appeal for the same reasons.

6. We have considered the submissions of both the parties. During the course of arguments, it transpired that in the immediately preceding year, the Assessing Officer 'had made the assessment of the same transaction and the matter came up to the Tribunal. While deciding the assessee's appeal bearing I.T.A. No.1783/KB of 1992‑93 pertaining to assessment year 1991‑92, the Tribunal held that the transaction did not take place in that year and that it should be assessed when the transaction of the sale is complete. As already said above, the transfer deed had been executed on 1‑9‑1991 and there is no dispute between the parties that this transaction can be considered in the year under consideration perusal of such order of the Tribunal also shows that the, working as an estate commission agent. On page 10 of the impugned order, the learned Commissioner of Income‑tax (Appeals,) has observed that the income under consideration forms part of the over‑all business of the assessee of dealing in real estate on his own account and account of others. The learned counsel for the assessee has also objected to the observation of learned Commissioner of Income‑tax (Appeals) on page 7 of the impugned order which reads as follows:‑‑

"In1988 PTD (Trib.) it was held that Solitary Transaction was not taxable‑‑Intention as on the date of purchase has to be seen in order to see that a transaction was adventure which the assessee only incidentally derived profit on account of inflation in the price, was not an adventure. It was also held:

" ---------- Criterion is the intention of the purchaser at the time of the purchase and not at the time of the sale. Mere fact that the price of a thing has increased and the seller has earned profit out of its sale cannot necessarily be called an adventure.

If the venture was one consisting simply of on isolated purchase of some article against an expected rise in price and a subsequent sale it might be impossible to say that the venture was in the nature of trade, because the only trade in the nature of which it could participate would be the trade of a dealer in such articles, and a single, transaction falls as far short of constituting a dealer's trade , as the appearance of a single swallow does of a making a summer."

7. However, the learned counsel for the assessee could not elaborate as to what was the grievance caused to the assessee from such observations. This appears to be simply a narration of the findings in a decision of the Tribunal reported as 1988 PTD 354. The learned counsel for the assessee did not, have the orders relied upon as already noted above. Hence he could not establish the relevance of such case‑law to the facts of the case. In any case, what has to be seen in a transaction of this type is the intention of the assessee at the time of acquisition of the property. Admittedly, the assessee had been allotted this plot for the construction of flats and it is not the claim of the assessee that he intended to use all such flats for his personal needs. Obviously, the intention was to sell the flats at a profit. The learned Commissioner of Income‑tax (Appeals) has passed a detailed and well‑reasoned order and the learned counsel for the assessee is unable to displace the same. Similarly, we find that the learned Commissioner of Income‑tax, (Appeals) has rightly directed the Assessing Officer to accept the declared sale price as the same has been accepted in the case of the purchaser of the same property. The Department could not make a discriminatory treatment in respect of the same transaction between the two parties. Hence both the cross appeals are dismissed and the order of the learned Commissioner of Income‑tax (Appeals) is maintained.

C.M.A./M.A.K./442/Tax (Trib.) Appeals dismissed.