1. Titled appeal has been preferred at the instance of taxpayer, calling in question the impugned order of the learned CIR(A), Zone-II, Lahore, dated 4-3-2011. The appellant contested the order of the CIR(A) on the following grounds:--
(1) That the order of the Commissioner Appeals-II is unjustified and bad in law in setting aside/remanding back the order of Additional Commissioner of Income Tax/Taxation Officer, Audit-II, Audit Division-I, RTO, Lahore, in respect of partial taxability of capital gain because:-- The said order of Taxation Officer was unjustified, bad in law and was contrary to facts and circumstances of the case for which plausible documentary evidences and strong legal basis were provided and were available.
2. In the said order the Taxation Officer acted in arbitrary, illegal and uninformed manner and treated part of capital gain as revenue gain without having definite information about the legal and factual basis of partial taxability of capital gain under consideration; While framing the assessm ent he acted on the basis of his estimate, .gossip, personal whims or surmises which he cannot do while framing assessment under section 122 (5).
(2) That the order of the Commissioner Appeals-II is unjustified and bad in law in setting aside/remanding back the order of Additional Commissioner of Income Tax/Taxation Officer; Audit-II, Audit Division-I, RTO, Lahore, because he himself agreed with all the contentions of AR but instead of deleting the impugned order he set aside the same.
(3) That the order of Additional Commissioner of Income Tax/ Taxation Officer, was unjustified and bad in law because he ignored following important provisions and case-law while framing the assessm ent:-- Regulation 50 of the Fourth Schedule Federal Legislative List Articles 7(4) of Constitution of Pakistan in respect of exemption of capital gains on sale of immovable property, Section 37(5)(d) of the Income Tax Ordinance, 2001, which excludes immovable property from definition of capital assets, and Various decisions of Income Tax Appellate Tribunal and superior courts in respect of exemption of capital gains arising on sale of immovable properties such as 1990 PTD (Trib.) 671; 1988 PTD (Trib.)
3. 354; PLD 1990 SC 399; 1990 PTD 155 (SC. Pak.); 2006 PTD 1422 (SC Pak); 1989 PTD (Trib.) 460; 1984 PTD (Trib.) 127; 1994 PTD (Trib.) 1034; 2007 PTD 82 (SC Pak.); 1991 PTD (Trib.) 786 and 2008 PTD 226 (Trib.).
4. He miss-constructed the provisions of law and principles laid down by ITAT and superior courts in respect of exemption of capital gains and proceeded in illegal and arbitrary manner in taxing a part of exempt capital gain. His order is totally against the aforesaid legal and judicial framework and does not have support of even a single case-law of superior courts and the evidence available on file.
2. The facts of the case as argued by the learned counsel of the appellant are that the taxpayer is a private limited company deriving income from construction and development projects, incorporated to launch a project named as "Lakeview Project" in November 2003. The project consisted of commissioning of five star hotels, gold courses and construction of houses. Total project cost as anticipated in feasibility report was Rs.2 Billion, including cost of 2579 Kanals of land required for the project. The said project cost was to be financed by bank financing of Rs.One billion and the remaining amount from sponsors equity. The appellant-company obtained loan of Rs.200 million in November 2003 from Saudi Pak Bank Limited, in addition to initial capital investment of Rs.230 million by two other sponsors and started purchasing land for project. Within one year, the company purchased 739 kanals of land in sector Phularwan at a cost of Rs.79,250,00. The appellant also paid advances of Rs.288,417,676/- for purchase of 631 kanals of land in sector Mandiawala (adjacent to Phularwan) and Phularwan up till June 30, 2005. During the course of land acquisition, the company faced severe financial crisis due to various reasons such 'as refusal of additional project loan of Rs.300 million and consortium loan of Rs.500 million from bank, exit of major shareholders in June, 2005 which caused financial burden of Rs.89.9 Million on existing shareholders, substantial increase in land prices in vicinity due to land acquisition by DHA for its projects, dockage of Rs.300 million paid as advance against purchase of land for which the company had considerably delayed balance payment and feared confiscation of these amounts, slump in real estate market, pressure from banks for payment of existing principal amount of Rs.200 million and mark up of Rs.80 million etc. the company struggled a lot to cope with these crisis but failed due to aforesaid reasons and having no other realistic alternative to avoid bankruptcy and huge financial losses in addition to existing losses of Rs.60 million managed to sell the land to DHA in August 2007 who was purchasing land in vicinity for its projects.
5. The appellant-company sold its owned land of 739 kanals for Rs.553,200,000 after holding it for three and half years and a capital gain of Rs.470 million accrued on the said transaction. Moreover, the appellant, in collaboration with original land owners, also sold 631 kanals of land for Rs.473,325,000 to DHA which was in its possession against advance payments and thus recovered its blocked money paid as advance for purchase of land. No gain or loss was arisen on this sale transaction. The appellant went into the process of voluntary liquidation and filed notice under section 117(1) of the Income Tax Ordinance, 2001, intimating discontinuation of business accompanied by return of income and audited accounts. The aforesaid capital gain of Rs.470 million was claimed as exempt capital gain in the said return of income for tax year 2008 the case was selected for audit under section 177 of the Ordinance, for the tax year 2008 to ascertain the legality of the claim of exemption of capital gain. The assessing officer examined the claim of exemption of capital gain and accepted it to the extent of Rs.284,410,780 as taxable gain on the plea that since 39% of the total required land of A 2579 kanals for the project was to be used for housing scheme, therefore, the same proportion of the gain on sale of actually purchased land of 739 kanals is to be taxed as trading gain. He also estimated 5% commission income of Rs.23,666,250 on sale of 631 kanals of land which was under possession of company against advance payments and was sold by the company on no profit no loss basis. In addition to above, he also rejected the claim of expenses of Rs.14,813,894 and made addition in the taxable income for the year.
6. Being aggrieved with this treatment, the taxpayer filed appeal before the learned CIR(A) who deleted the addition made in respect of claim of expenses at Rs.14,813,894 and the addition regarding estimation of commission income at Rs.23,666,250, however, despite agreeing with the contention of the learned AR on the taxability of capital gain, remanded back the matter to Taxation Officer with certain directions. Now, the appellant against the setting aside of order by the learned CIR(A), on the issue of taxability of gain on sale of immovable property has filed this appeal before this Tribunal.
3. The learned AR agitated against the order under section 122(5) and argued that capital gain under consideration is exempt from income as per Regulation 50 of Fourth Schedule, Federal Legislative List Article 7(4) of Constitution of Islamic Republic of Pakistan, section 37(5C) of the Income Tax Ordinance, 2001, and ratio settled by the Tribunal and Hon'ble High Courts on the issue of exemption of gains arising on sale of immovable property. He contended that intention at the time of purchase of land was to use it for "Lakeview Project" which included construction of hotel and gold courses and construction of houses. According to him, the assessing officer admitted this fact on the basis of duly certified feasibility study and layout plans/maps of the project which he has obtained directly from bank. According to the learned AR, since intention at the time of purchase was not to engage in any trade activity of land, therefore, entire capital gain is exempt in accordance with the settled ratio by the superior courts. He has contended that the order has been passed without any definite legal or factual information of any trade activity involved in impugned transaction and the entire order is based on assumption, premise and suppositions regarding core issue of the case despite the fact that relevant factual documentary evidences were available in file which were not appreciated and evaluated properly while framing the assessment.
7. The learned AR referred various judgments of this Tribunal as well as the Hon'ble Superior Courts cited as 1990 PTD (Trib.) 671; 1988 PTD (Trib.) 354; PLD 1990 SC 399; 1990 PTD 155 (SC Pak); 2006 PTD 1422 (SC Pak); 1989 PTD (Trib.) 460; 1984 PTD (Trib.) 127; 1994 PTD (Trib.) 1034; 2007 PTD 82 (SC Pak); 1991 PTD (Trib.) 786; 2008 PTD (Trib.) 226. He has argued with reference to aforesaid case-law of superior courts that certain facts such as the transaction under consideration was an isolated transaction of capital gain the entire life of company which had no history of dealing in sale and purchase of land in past: has contended that the land was sold after a considerable period of 4 years without any value addition under severe financial crisis which are very important factors in determining that the gain on sale of land in the impugned transaction is exempt capital gain. He gave reference to various compelling reasons and circumstances, which were duly accepted by the Assessing Officer on the basis of plausible documentary evidences, due to which company had to sell the land which can be summarized as follows:--
(i) Despite utmost efforts, the company was refused additional financing by the banks, which aggravated the financial crisis of the company.
(ii) Mian Amir Mehmood, who initially owned 50% of the. Shares left the company in June, 2005, causing additional financial burden of Rs.89.9 million on existing shareholders and tremendous financial gap between project cost and means of financing.
(iii) Company blocked a huge sum of Rs.300 million in advance payments against land and could not get the deals finalized in time due to paucity of funds. This situation led to increase probability of confiscation of advance money.
(iv) DHA entered in the real estate market of the vicinity, destroying the last hope of revival of the company due to increase in land prices and availability of land.. Moreover, real estate market went into a deep plunge in early 2007 which rendered the project absolutely non-feasible.
(v) Bank started pressing for the repayment of already availed finances due to liquidity crisis and non-operational condition of company. Moreover, company also suffered a huge loss on account of mark up at the Rs.80 Million, which aggravated the impeding financial crisis.
8. He has argued that taxpayer appellant could only purchase 739 kanals of land at Mauza Phularwan in its name out of 2579 kanals of total required land for project as per feasibility study arid has sold 739 kanals of land in inevitable and financially compelling circumstances resulting in capital gain of Rs.470 million. According to him these facts have been accepted by the Taxation Officer in his order on the basis of plausible documentary evidences. The Taxation Officer while framing the assessm ent failed to appreciate the fact ascertainable from layout plan that 739 kanal of land at Mauza Phularwan was purchased only for Hotel and Golf courses which constitutes a capital asset and gain on sale of this land is a capital gain as per his own conclusion. Moreover, it is also an undeniable fact that the appellant could not purchase any land for housing colony due to financial crisis. The theory formulated by Taxation Officer for calculating proportionate gain on land purchased for construction of houses as taxable would only qualify for consideration if taxpayer had purchased entire land of 2579 kanals for the project and earned gain on its sale. In this case, the appellant could only purchase 28% of total required land and estimation of taxable gain against the land which has never been purchased by the taxpayer is legally unjust and unwarranted.
9. The learned Counsel agitated that the assumption of the Taxation Officer that since 1019 kanals of the total required land of the project was to be used for housing scheme, therefore, same proportion of the gain on sale of actually purchased land of 739 kanals is to be taxed is unjustified, based on support less assumptions and without any definite information.
10. Last contention implored by the learned AR Was that even if the land at Mauza Phularwan was purchased for construction of houses which, according to him, is not a fact, the company could not construct a single house and sell it in ordinary course of business to earn revenue gain. The land remained unutilized and was sold after a considerable period. It was never used as raw material for any finished product but remained cultivated till the date of its sale. Placing reliance on the decision of this Tribunal cited as 1988 PTD 354, he has contended that in that case where land was purchased for plotting but was sold in undeveloped form in compelling circumstances, it was held by this Tribunal that consequent gain is exempt capital gain.
4. The learned DR on the other hand supporting the impugned orders of the officers below has pleased for maintaining the impugned order being in consonance with the law. It was contended by the learned DR that Taxation Officer has rightly passed order by partly taxing the gain on sale of immovable .property and his treatment is in accordance with law.
5. We have considered the rival arguments. The arguments of the learned AR on the issue of taxability of gain on sale of land, appear to be quite emphatic and convincing on both legal and factual planes. Capital gain on sale of immovable property is exempt from tax due to specific exemption contained in Regulation 50 of Fourth Schedule Federal Legislative List Article 7(4) of the Constitution of Pakistan. Immovable property has been excluded from the definition of capital asset by virtue of section 37(5C) of the Income Tax Ordinance, 2001 to make it in line with the Constitution of Pakistan. In this regard, the learned Counsel representing the appellant has referred the reported decisions which has been mentioned in the above paras of the order and are further discussed in detail as under: - 1990 PTD (Trib.) 671 In this case, assessee who was a private limited company carrying on business of construction of buildings, buying and selling lands and buildings. Company purchased a plot of land to construct a hotel on the plot. Application was submitted with a bank for obtaining loan which was declined by the bank. Due to shortage of required funds for the construction of hotel assessee company sold the plot and gain was shown as capital gain in the balance sheet. Income tax Officer stated in his notice that clause 2 of the memorandum and articles of association of the company provided dealings in land as one of the objects and as such the transaction of sale of plot amounted to venture in the nature of trade and profits earned therefrom were taxable as revenue receipt. In this case the Tribunal decided that Memorandum of Article of Association of company cannot determine the commercial nature- of the transaction. Dealing in land in this case is not venture in the nature of trade and profit earned being capital gain by the company is not liable to tax. If the transaction is solitary/isolated as in this case then decision of this issue mainly depends on the intention of the assessee company at the time of purchase. Department must establish with facts that at the time of purchase of land the intention of the tax payer was to sell it in same shape and condition and it is the main test on which decision was to be based.
11. 1988 PTD (Trib.) 354 In this case, the assessee was a Co-operative housing Society. It purchased Land for selling to its members after making plots. After significant period the land was sold to LDA and the consequent gain was declared as exempt capital gain. Income-tax Officer treated the difference of purchase and sale price as business profit and taxed the same. In this case, the Tribunal held that in solitary transaction of sale of property intention as on the date of purchase has to be seen in order to see that a transaction was adventure in the nature of trade. It is evident that at the time of the purchase of the land by the assessee, the sole intention was to develop it and to ultimately sell it to its members. But afterwards it could not do so and had to sell the land to LDA. Transaction in which the assessee only incidentally derived profit on account of inflation in the price, was not an adventure in the nature of trade and the income derived by assessee was casual and non- recurring in nature is a Capital gain. Land in question is not stock in trade because it was never used for said purpose, amount received by assessee in lieu of such land was capital gain and thus not taxable under Income-tax Ordinance, 1979 due to exemption in Constitution of Pakistan. The land owned by the society with an object to sell it to the members, can be called stock-in-trade but the transaction or sale entered with the LDA had never been intended by the assessee at the time of the purchase of the land and the profit which was incidentally derived by the society was casual in nature as it was not in the ordinary course of business of the society. It was merely an increase of price of land realized on the sale of plot of land. It may also be pointed out that in case of any solitary transaction like this the burden is heavily on the department to prove that such a transaction was adventure in the nature of, trade.
12. PLD 1990 SC 399 = 1990 PTD 155 In this case, taxpayer was incorporated as a private limited company by the members with the main object to acquire the immovable properties and derive income there-from by letting these out on rent or otherwise developing the property. Secondary clause of Memorandum of association of the company allows sale of immovable properties but not as a regular business. Returns for the last ten years were filed by the tax payer. Income tax officer acted under section 65 of the Ordinance and amounts accrued from the sale of properties during this period were treated as taxable income. It was held by the court that the gain under question is a capital gain and not liable to income tax because all the properties were sold after a considerable time to realize accretion in value of properties and Revenue could not establish that intention of the company at the time of acquisition of properties was to sell these to earn trading gains.
13. 1992 SCMR 250 = 1992 PTD 1 (SC of Pakistan)
14. In this case, the taxpayer was a private limited company which owned agricultural land. It sold the said land to ministry of defence and received compensation against the said sale. Capital gains in this case were declared exempt from tax due to exemption in Item 50 of the Federal Legislative List, Part I, Fourth Schedule of the Constitution of Pakistan, 1973 and section 27 of the Income Tax Ordinance as regards capital gains on immovable property. It was further declared that;
(1) Immovable property cannot be included in the ambit of capital gains for the purposes of computation of capital gains.
(2) Capital gains on immovable property are beyond the taxing powers of the federation.
15. 2008 PTD (Trib.) 226 In this case, the appellant, a company, was engaged in the business of sale/purchase and letting out the properties: It purchased with sole intention of establishment of industrial unit i.e. weaving unit and in this regard it did his best but could not achieve desired target. Land was sold by the assessee for a consideration of Rs.4,679,144. However, the Assessing Officer/ DCIT treated the said transaction to be the adventure in the nature of trade, which was subjected to tax. In this case, the Tribunal held that:--
(1) Transaction undertaken by the assessee-company was not an adventure in the nature of trade as the facts fully established beyond any shadow of doubt that at the time of purchase the assessee had no intention of sale.
(2) Land in question was purchased as agricultural land and at the time of acquisition/purchase there was no intention to sell and earn profit thereon; neither assessee was engaged in business of purchase and sale of plot estate in the past; business was contemplated only after 11 years from the date of purchase of said property; in the entire history of the case the agricultural plot of land was declared as a capital asset and not even once as stock in trade and department never disputed such proposition in any of the past years.
16. 2007 PTD 82 (H.C. of Pakistan)
17. In this case, the taxpayer sold commercial plot purchased many years ago for investment purposes. Gain from sale of plot considered by Revenue to be adventure in nature of trade as business income assessable under section 22 of Income Tax Ordinance, 1979. It was held by the court that
(1) Revenue had not brought on record any material to show that at the time of purchase of plot, intention of assessee was to achieve revenue gains. Such intention must be deduced from facts and circumstances of each case. Mere change of investment would not amount to adventure in nature of trade.
(2) In determining nature of transaction, regard had to be made to nature of property, Length of its, ownership and holding; actual conduct of assessee in respect thereof and other factors including absence of evidence of any trading activity of speculative nature. If disputed transaction was considered to be revenue gain, then provisions of section 2(11) of Income Tax Ordinance, 1979 read with section 22 thereof would be attracted.
(3) Gain on sale of immovable property is outside purview of section 27 of Income Tax Ordinance, 1979, as for purposes of capital gain, immovable property was excluded from definition of "capital gain".
18. 2006 PTD 1422 (H.C. of Pakistan)
19. In this case, the taxpayer, an individual, converted agricultural land into small plots and disposed them of by sale without declaring income in his return of income tax but however, it was declared in wealth tax statement. Taxation officer taxed the gain being venture in the nature of trade. It was held that the gain under consideration is exempt capital gain because intention at the time of purchase was not to earn profits by selling it in the shape of plots and the land was sold after considerable period. The transaction being solitary one in the life of tax payer cannot be termed as venture in the nature of trade.
20. 1975 PTD (Trib.) 6 Tax payer purchased plot of land by a manufacturing concern for setting up installation of a sewing machine factory. Health department refused permission for installation of factory. Entire money spent on purchase was blocked up. The assessee tried to sale the land but could not find ready purchaser. As an alternative, he disposed of land in piecemeal in order to retrieve and recoup investment. Department taxed the gain as revenue gain by giving reason that transaction was motivated to earn profits. In this case learned ITAT decided that
(1) Disposal of land in such circumstances could not be treated as adventure in nature of trade or business.
(2) To bring case within extended definition of "business" by way of adventure in nature of trade, intentions at time of acquisition are necessary elements. Moreover, frequency of similar transaction is also important to judge the intention purchaser at the time of purchase.
(3) In this case it is mere realization of blocked money and gain arising in the transaction is a capital gain which is not taxable.
21. 1984 PTD (Trib.) 127 The assessee purchased plot of land with intention to construct cinema house and also obtained loan to purchase the plot. He could not construct cinema house because of failure to obtain "no objection certificate", in spite of genuine efforts for the said purpose. He then sold plot of land to third party and liquidated loan taken from Bank for purchase of plot. Tax officer treated the gain arising on sale as revenue gain and taxed the same. In this case the Tribunal decided that;
(1) Dealing in land in this case is not venture in the nature of trade and profit earned being capital gain by the company is not liable to tax.
(2) If the transaction is solitary/isolated as in this case then decision of this issue mainly depends on the intention of the assessee company at the time of purchase. Onus to prove that isolated transaction constitutes an adventure in the nature of trade shall be on the Department.
(3) Resale of plot under circumstances could be to liquidate loan taken from Bank for purchase of plot and also to take profit. Intention of assessee at time of purchase could not to be taken as to earn profits by reselling it was not venture in nature of trade and profits earned by assessee were not liable to tax.
22. 1994 PTD (Trib.) 1034 In this case, the assessee was a private limited company engaged in hotel business.' Property was purchased for construction of hotel. Assessee prepared detailed feasibility studies and applied for loan but the request for loan was refused by bank. Property was disposed of by the assessee and gain on sale of land was claimed as exempt under the head capital gain. Income Tax officer as well as CIT(A) treated the gain from sale of property as taxable and made addition in the income of assessee. In this case Tribunal decided that Memorandum of Article of Association of company cannot determine the commercial nature of the transaction. If the transaction is solitary/isolated as in this case then decision of this issue mainly depends on the intention of the assessee company at the time of purchase. Department must establish with facts that at the time of purchase of land the intention of the tax payer was to sell. Dealing in land in this - case is not venture in the nature of trade and profit earned being capital gain by the company is not liable to tax.
23. 989 PTD (Trib.) 460 In this case, the assessee had purchased agricultural land in 1965. Land remained under' cultivation upto 1980. Land came within the Municipal limits. Assessee sold the entire land in the form of plots through registered sale deed and claimed the consequent capital gain as exempt from tax. Income Tax Ordinance treated the transaction as adventure in the nature of trade because the land was sub-divided into plots and sold. He also laid emphasis on the intention of the assessee for earning profits as the said land was not sold for agricultural purposes rather the sale was for residential and construction purposes. CIT appeal up held the decision of ITO but this Tribunal did not approve the decision of CIR (A) and held that;
(1) Dealing in land in this case is not venture in the nature of trade and profit earned being capital gain by the company is not liable to tax.
(2) If the transaction is solitary/isolated as in this case then decision of this issue mainly depends on the intention of the assessee company at the time of purchase. Onus to prove that isolated transaction constitutes an adventure in the nature of trade shall be on the Department who could riot establishing the same.
24. 1991 PTD (Trib.) 786 In this case, the assessee, a doctor by profession working as Executive Director of a hospital and deriving income from salary applied for allotment of commercial plot which was allotted to him 30-9-1981 on the terms that the plot in question was meant for, construction of five-story building for commercial purposes and for clinic and residential apartments. Assessee, at the time of allotment of plot expected that Industrial Development Bank or some other financial institution would advance loans to help him complete the construction of clinic and in spite of his best efforts when no loan granting agency considered his request favorably and Development Authority pressed for the completion of construction by issuance of show-cause notice to him for the cancellation of plot and fixed the deadline as 30-6-1986, the assessee reached a point of exasperation and disposed of the plot on 14-7-1986. Income Tax Ordinance treated the transaction as adventure in the nature of trade and taxed the same by giving reason that assessee did not have sufficient funds for the proposed hospital and plaza. He also stated that the intention of assessee was to resell the land at the time of purchase. In this case, the Tribunal held that
(1) Assessee had not made any improvement in the plot to make it more attractive and readily resalable and was sold in the same position in which it was allotted to him and that too not in bits and pieces but in one transaction.
(2) Assessee had never entered into any business in the past and his salary was the sole source of his income as a doctor and salaried employee.
(3) Sale of plot in question was a solitary transaction of property so sale of plot did not fall in his line of profession as a doctor and salaried person.
(4) Assessee was a doctor by profession and purchase and sale of the property were not allied to his usual vocation or profession or any activity incidental thereto.
(5) Purchase and sale of the plot was thus not in the nature of trade or business so as to fall within the definition of "business" as contained in section 2(ii) of the Ordinance. Surplus realized on the sale of plot by the assessee could not, therefore, be branded as an adventure in the nature of trade as sale of the plot by assessee was for special reasons.
(6) Capital gain, if any, earned on the sale of immovable property was not taxable by virtue of the Constitution and relevant provisions of Income Tax Ordinance.
6. From the criterion set out by this Tribunal and the Hon'ble Higher Courts as discussed above, following principles on the issue emerge;
(1) Intention at the time of purchase of land is very important. If land was purchased with a sole intention to execute a project, for example hotel, plaza, cinema, construction project etc; but afterward, it could not materialize its intention and had to sell the land in inevitable and compelling circumstances then the consequent gain is an exempt Capital gain.
(2) That, in case of solitary transaction of gain arising on immovable property heavy burden lies on the revenue to establish that the impugned transaction in fact was a business and receipts out of it business receipts.
(3) If immovable property is sold after considerable period then this fact is undeniable supportive evidence that the resulting gain is capital gain.
(4) If company has no history of dealing in sale and purchase transactions of land in past and this is an isolated transaction entered into without having other realistic business alternative destined to avoid this transaction then the resulting gain is capital gain.
(5) If Immovable property is sold in same condition as it was when it was purchased. This means that no value addition or improvement in quality of the said property was made for the purpose of selling it. In this case, realization of accretion in value of immovable property is capital gain.
(6) If the land is sold in compelling circumstances and the intention at the time of sale is to realize blocked money then gain arising in the transaction is a capital gain which is not B taxable.
7. In view of what has been stated above and on applying these principles to the facts of this case, we are persuaded that the impugned transaction of sale of land fulfills all the above principles for exemption of capital gain. We do not find any reason warranting observation as to difference between the facts of this case and the cases discussed above. It is a readily ascertainable fact from assessm ent order that intention of the taxpayer/appellant at the time of purchase of land was to use it for commissioning a project named as "Lake View Project". Further, it also appears an undisputed proposition that tax payer could not materialize its intention to start the project and had to sell the land in inventible and financially compelling circumstances resulting in capital gain on the said sale. The transaction in question being a solitary one, a heavy burden laid on the Revenue to establish the same to be in the nature of a business. The Revenue instead of discharging its burden attempted to cash on some events of very insignificant nature to hold against the Tax payer. Moreover, other important facts such as company had no history of dealing in sale and purchase of land in past, land was sold after a considerable period of 4 years without any value addition, land was sold under severe financial crisis are also undeniable evidences that the gain on sale of land in the impugned transaction is exempt capital gain. We also find force in the contention made by the learned counsel of the appellant that company could only purchase 28% of total required land of 2579 kanals and could not purchase any land for housing project. The theory of calculating proportionate gain on land purchased for construction of houses as taxable would have only been convincing if tax payer had purchased entire land of 2579 Kanals for the project and earned gain on its sale. The taxation officer could not bring plausible evidence, whatsoever, on record suggesting that land purchased by tax payer was partly meant for construction of houses or whether the tax payer has actually purchased any land for housing colony or not and has earned gain on its sale. The assumption of the taxation officer that since 1019 kanals of the total required land of the project was to be used for housing scheme, therefore, same proportion of the gain on sale of actually purchased land of 739 kanals is to be taxed is arbitrary, unjustified., based on support less assumptions and without any 'definite information which is basic prerequisites for passing order, under section 122(5). In the absence of any definite information as regards the intended use of land actually purchased by tax payer, apportionment of gain by whimsically assuming that purchased land was to be partly used for houses is neither pragmatic nor justified.
25. In the light of the discussion supra and case-law referred above, the order of the Taxation Officer/Additional Commissioner under section 122(5) to the extent of the above referred issue is cancelled. Consequently, the impugned order of the learned CIR(A) setting aside the order for fresh consideration is vacated.
26. The appeal filed by the taxpayer is succeeded.