JUDGMENT : 1. The Court: This appeal by the Revenue is against an order of the Income Tax Appellate “C” Bench passed on 29th April, 2015 dismissing the Revenue’s appeal in relation to assessment of the assessee for three assessment years, being 2003-04, 2004-05 and 2006-07. Assailing the Tribunal’s decision, argument has been made on behalf of the Revenue before us mainly on three counts. The assessee had undertaken development of its immovable property on the basis of an agreement executed on 28th January 1994 and question has arisen in course of assessment as to whether such developmental activities would constitute adventure in the nature of trade or not and profit from sale of flats constructed on such property would be treated as business income or it would be income from capital gains. This issue arises in respect of all the three assessment years. The second point, which arises in relation to the assessment years 2004-05 and 2006-07 is on the aspect of treatment of certain loans obtained by the assessee from another incorporated company, Rungta Engineering Co. Pvt. Ltd. Both the assessee and the said engineering company at the material time had a common shareholder, S.N. Rungta. He held more than 20% equity share capital in the assessee and also more than 10% equity share capital in Rungta Engineering Company. In this perspective, the Revenue wants to treat certain sums reflected in the books of the assessee as loan from Rungta Engineering as “deemed dividend” under Section 2(22)(e) of the Income Tax Act, 1961. The third point arises for the assessment year 2006-07, and relates to treatment of loss of Rs.25,30,396/- arising from purchase and sale of shares suffered by the assessee in the corresponding financial year over trading in shares of one M/S. Sharang Viniyog Ltd. In the assessment order, such loss has been referred to as loss on “Penny Stock”. The assessing officer had disallowed the claim of Rs. 25,30,396/- made by the assessee for treating the said sum as trading loss, finding the purchase and sale of shares in that company to be a colourable device to evade tax. The assessing officer had directed the same to be added to the total income of the assessee. The assessing officer’s findings on all three counts were reversed by the Commissioner of Income Tax in appeal, and findings of the Commissioner were sustained by the Tribunal. 2. The assessing officer had directed the same to be added to the total income of the assessee. The assessing officer’s findings on all three counts were reversed by the Commissioner of Income Tax in appeal, and findings of the Commissioner were sustained by the Tribunal. 2. Substantial argument has been advanced before us on the point as to whether the assessee’s immovable property which was developed by it through another developer upon executing an agreement would constitute adventure in the nature of trade or income derived from such development would come for assessment as Long Term Capital gain. The immovable property with which this appeal is concerned is situated at 206, A.J.C. Bose Road, Kolkata. Admitted position is that the assessee had been holding the immovable property since the year 1965. In that year the said property was purchased by the assessee for a sum of Rs.3,17,000/-. The assessee had entered into the agreement dated 28th January 1994 in relation to that property with another company, The Right Address Ltd.(TRAL). The said development agreement was followed by a supplementary agreement dated 19th February, 1997 and a Memorandum of Understanding of 18th September, 2002. 3. The arrangement between the assessee and TRAL was that a new structure was to come up in place of the subsisting one at the cost of the developer and the assessee was to get 49.29% of the developed property along with undivided share of land in the same proportion, the rest going to the developer, though initially the agreement was that the assessee’s allocation would be 59% of the Floor Area Ratio to be sanctioned by the municipal authorities. The assessing officer, treated the gain on transactions from sale of flats as business income. The Revenue’s stand, as argued by Mr. Chaudhury, learned counsel is that such development arrangement was an adventure in the nature of trade and the immovable property for the relevant assessment years ought to be treated as stock in trade as it had changed its character subsequent to execution of the development agreement. Mr. Chaudhury has sought to strengthen his argument on this point by referring to existence of the expression property in corporate name of the assessee, Rungta Properties Pvt. Ltd. and its Memorandum of Association. One of the objects of the assessee contained in the Memorandum of Association indicates that the assessee could engage in development of immovable property. Mr. Mr. Chaudhury has sought to strengthen his argument on this point by referring to existence of the expression property in corporate name of the assessee, Rungta Properties Pvt. Ltd. and its Memorandum of Association. One of the objects of the assessee contained in the Memorandum of Association indicates that the assessee could engage in development of immovable property. Mr. Chaudhury has defended the assessment orders in which the assessing officer had found the transactions to be adventure in the nature of trade and directed treating the profit therefrom as taxable business income. He has referred to the judgment of the Supreme court in the case of G. Venkataswami Naidu & Co. vs- Commissioner of Income Tax [ (1959) 35 ITR 594 ] a decision which the assessee has also relied on in support of his submissions on this point. Mr. Chaudhury has further argued that no wealth tax was paid in respect of the property, from which factor he wants us to deduce that the same was to be treated as stock-in-trade. He has stressed on the fact that the property had undergone substantial change. We find from the decision of the Tribunal in connection with appeal of the Revenue for the assessment year 2004-05 that the assessee had shown capital gains of Rs.5,06,280/- on sale of fixed assets but the assessing officer treated the gain on the transaction of Rs.6,30,74,240/-. 4. Mr. Khaitan, learned Senior Counsel appearing on behalf of the assessee, on the other hand submits that the question raised on this issue required determination of factual issues and the Tribunal as well as the Commissioner of Income Tax, being the fact finding bodies, had rightly come to the conclusion that income derived from the aforesaid transactions ought to be treated as long term capital gains. His contention is that this was gain from improvement of the assessee’s property which the assessee held since 1965 and had all along shown in its books as fixed assets. He sought to highlight the fact that the assessee did not itself develop the property and there was no finding on the part of the assessing officer that the assessee was involved in the business of real estate at any point of time. 5. He sought to highlight the fact that the assessee did not itself develop the property and there was no finding on the part of the assessing officer that the assessee was involved in the business of real estate at any point of time. 5. The question as to whether profits from a transaction of such nature would come within the ambit of capital gains or income from business was examined by the Supreme Court in the case of G. Venkataswami Naidu & Co. vs. CIT [ (1959) 35 ITR 594 (SC)]. In this judgment , certain factors were stipulated by the Supreme court to be relevant for determining this question which would appear from the following passages of the judgment :- “As we have already observed it is impossible to evolve any formula which can be applied in determining the character of isolated transactions which come before the courts in tax proceedings. It would besides be inexpedient to make any attempt to evolve such a rule or formula. Generally speaking, it would not be difficult to decide whether a given transaction is an adventure in the nature of trade or not. It is the cases on the border line that cause difficulty. (i) If a person invests money in land intending to hold it, enjoys its income for some time, and then sells it at a profit, it would be a clear case of capital accretion of realisation of investments consisting of purchase and resale, though profitable, are clearly outside the domain of adventures in the nature of trade. In deciding the character of such transactions several factors are treated as relevant. (ii) Was the purchaser a trader and were the purchase of the commodity and its resale allied to his usual trade or business or incidental to it? Affirmative answers to these questions may furnish relevant data for determining the character of the transaction. (iii) What is the nature of the commodity purchased and resold and in what quantity was it purchased and resold? If the commodity purchased is generally the subject matter of trade, and if it is purchased in very large quantities, it would tend to eliminate the possibility of investment for personal use, possession or enjoyment. (iv) Did the purchaser by any act subsequent to the purchase improve the quality of the commodity purchased and thereby made it more readily resalable? If the commodity purchased is generally the subject matter of trade, and if it is purchased in very large quantities, it would tend to eliminate the possibility of investment for personal use, possession or enjoyment. (iv) Did the purchaser by any act subsequent to the purchase improve the quality of the commodity purchased and thereby made it more readily resalable? What were the incidents associated with the purchase and resale? Were they similar to the operations usually associated with trade or business? Are the transactions of purchase and sale repeated? (v) In regard to the purchase of the commodity and its subsequent possession by the purchaser, does the element of pride of possession come into the picture? A person may purchase a piece of art, hold it for some time and if a profitable offer is received may sell it. During the time that the purchaser had its possession he may be able to claim pride of possession and aesthetic satisfaction; and if such a claim is upheld that would be a factor against the contention that the transaction is in the nature of trade. These and other considerations are set out and discussed in judicial decisions which deal with the character of transactions alleged to be in the nature of trade. In considering these decisions it would be necessary to remember that they do not purport to lay down any general or universal test. The presence of all the relevant circumstances mentioned in any of them may help the court to draw a similar inference; but it is not a matter of merely counting the number of facts and circumstances pro and con; what is important to consider is their distinctive character. In each case, it is the total effect of all relevant factors and circumstances that determines the character of the transaction; and so, though we may attempt to derive some assistance from decisions bearing on this point, we cannot seek to deduce any rule from them and mechanically apply it to the facts before us. In this connection it would be relevant to refer to another test which is sometimes applied in determining the character of the transaction. Was the purchase made with the intention to resell it at a profit? It is often said that a transaction of purchase followed by resale can either be an investment or an adventure in the nature of trade. Was the purchase made with the intention to resell it at a profit? It is often said that a transaction of purchase followed by resale can either be an investment or an adventure in the nature of trade. There is no middle course and no half-way house. This statement may be broadly true; and so some judicial decisions apply the test of the initial intention to resell in distinguishing adventures in the nature of trade from transactions of investment. Even in the application of this test distinction will have to be made between initial intention to resell at a profit which is present but not dominant or sole; in other words, cases do often arise where the purchaser may be willing and may intend to sell the property purchased at profit, but he would also intend and be willing to hold and enjoy it if a really high price is not offered. The intention to resell may in such cases be coupled with the intention to hold the property. Cases may, however, arise where the purchase has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding the property for himself or otherwise enjoying or using it. The presence of such an intention I no doubt a relevant factor and unless it is offset by the presence of other factors it would raise a strong presumption that the transaction is an adventure in the nature of trade. Even so, the presumption is not conclusive; and it is conceivable that, on considering all the facts and circumstances in the case, the court may, despite the said initial intention, be inclined to hold that the transaction was not an adventure in the nature of trade.” 6. The other authorities on which Mr. Khaitan has relied on are:- (i) CIT vs. P.K.N. Co. Ltd. (1966) 60 ITR 375 (SC); (ii) An unreported judgment dated 17th November, 2015 of the High court of Delhi in ITA 299/03 [Shanti Banerjee (deceased) vs. Deputy CIT]; (iii) CIT vs. Razia Sulaiman (ITA No. 412 of 2007) decided by the Karnataka High Court on 19th October 2011. (iv) CIT vs. Sohan Khan (2008) 304 ITR 194 (Raj); (v) CIT vs. Mohakampur Ice and cold Storage (2006) 281 ITR 354 (ALL). (vi) CIT vs. R.V. Gupta (2002) 258 ITR 261 (Del); In addition, Mr. (iv) CIT vs. Sohan Khan (2008) 304 ITR 194 (Raj); (v) CIT vs. Mohakampur Ice and cold Storage (2006) 281 ITR 354 (ALL). (vi) CIT vs. R.V. Gupta (2002) 258 ITR 261 (Del); In addition, Mr. Khaitan has brought to our attention an order dated 30th March, 2009 of the ITAT Bench “I” Mumbai in ITA No. 721/M/05 and ITA No. 4630/M/05 (CIT vs. Dhootapapeshwar Ltd), which the Tribunal had relied upon in its decision which is under appeal before us. 7. We have considered the ratios of these authorities and in our opinion, the transactions which the assessee had entered into could not come within the ambit of adventure in the nature of trade. We accept the submission of Mr. Khaitan that determination of that question involves enquiry into facts and requires analysis of the agreement or arrangement between the assessee and the developing company. Other factors which Mr. Khaitan wants us to consider are that the assessee caused improvement upon the property and retained substantial portion of it for self-use. The assessee’s arrangement with the developer was not a joint venture agreement and there was no profit or loss sharing arrangement. The ratio of the decision in the case of P.M. Mohammed Meerakhan [(1969) 73 ITR 375 (SC)] cited by the Revenue does not apply on facts to the case of the assessee. There was clear intention of the assessee in that case to undertake business venture and on that basis the immovable property was treated to be stock-in-trade. In the cases of R.V. Gupta (supra), Mohakampur Ice and Cold Storage (supra), intention to resell the immovable assets was considered to be a major factor to determine a question of this nature, and the length of time the property was held by the assessee was also considered by the Court in each case to deal with the questions raised in those cases. On that yardstick, the Commissioner and the Tribunal rightly decided the issue in favour of the assessee in this appeal. In Razia Sulaiman (supra), the fact that the assessee was not in the business of selling of sites or flats weighed in favour of the assessee. On that yardstick, the Commissioner and the Tribunal rightly decided the issue in favour of the assessee in this appeal. In Razia Sulaiman (supra), the fact that the assessee was not in the business of selling of sites or flats weighed in favour of the assessee. In the cases Sohan Khan (supra) and Shanti Banerjee (supra) the same factors were applied to reject Revenue’s contention that development of immovable properties with aid of a builder and income generated from sale of flats of the developed property per se would not render such income to be taxable as business income. So far as assessee in this appeal is concerned, no material has been brought to our notice that it had carried on the business of property development. In the absence of any evidence that the assessee undertook the business of property development, the object clause in the memorandum cannot be treated to be determining factor to conclude that this was part of the assessee’s regular business. On the same reasoning, reference to property in corporate name of the assessee cannot make the assessee a property development company. The Tribunal as well as the Commissioner of Income Tax have concurrently found that gain of the assessee from the transactions of sale of flats did not constitute adventure in the nature of trade. The orders of the assessing officer on the same point for the two other assessment years were also dismissed by the Commissioner and the Tribunal. We do not find any perversity in such finding and hence confirm such finding. 8. The next point on which argument has been advanced before us is on deemed dividend. The factual basis of in this appeal in relation to “deemed dividend” originates from a sum of Rs.22,09,808/- which was shown in the books of the assessee for the financial year 2003-04 as loan advanced to Rungta Engineering Company Private Limited. The engineering company had paid Rs.25,00,000 within the same financial year to the assessee. At the end of the same financial year, there was a debit balance so far as the engineering company is concerned in the books of the assessee. In this appeal, however, we are concerned with a sum of Rs.2,37,450/- on which the assessing officer has sought to charge income tax treating the same as deemed dividend in the hands of the assessee. In this appeal, however, we are concerned with a sum of Rs.2,37,450/- on which the assessing officer has sought to charge income tax treating the same as deemed dividend in the hands of the assessee. It appears that the assessing officer had taken the differential between the sums received as loan by the assessee and paid back to the engineering company, being Rs.3,30,192/- and treated the said sum as loan taken by the assessee from the engineering company. In the books of the engineering company, accumulated reserves and surplus on account of profits of the business had been shown to be Rs.2,37,450/-. This is the reason as to why the said sum was sought to be taxed as deemed dividend by the assessing officer. 9. Mr. Khaitan, has taken us through the provisions Section 2(22)(e) of the Act to contend that deemed dividend, if at all, is to be charged to income tax at the hands of the common shareholder but not at the hands of the recipient of money unless the recipient is also the shareholder of the company from whom the amount has been received. It is not in dispute that S.N. Rungta is a common shareholder in both the companies and his holding exceeds 20% equity share capital in the assessee and more than 10% equity capital in the engineering company. To that extent, applicability of Section 2(22)(e) is not altogether precluded but the question here is whether this amount can be taxed at the hands of the assessee as deemed dividend. Mr. Khaitan has referred to a decision of a Coordinate Bench of this Court in ITAT No. 74 of 2013 (Commissioner of Income Tax, Kol. – III Vs. M/s. Baljit Securities Pvt. Limited) decided on 24th June, 2013. In this judgment, it has been held by the Coordinate Bench that the definition of dividend has been enlarged by a legal fiction but in a situation of this nature, it would be the common shareholder who is to be taxed and not the recipient company. There are two other authorities, of the Bombay High Court in the case of Commissioner of Income Tax Vs. Universal Medicare Pvt. Ltd. reported in (2010) 324 ITR 263 (Bom.) and of the Delhi High Court in the case of Commissioner of Income Tax Vs. Ankitech Pvt. Ltd. [(2012) 340 ITR 14 (Delhi)] laying down this proposition or principle of Law. Universal Medicare Pvt. Ltd. reported in (2010) 324 ITR 263 (Bom.) and of the Delhi High Court in the case of Commissioner of Income Tax Vs. Ankitech Pvt. Ltd. [(2012) 340 ITR 14 (Delhi)] laying down this proposition or principle of Law. 10. Mr. Khaitan submits that three situations are conceived in Section 2(22)(e) of the Act to expand the meaning of the term “Dividend” beyond what is normally understood. These are:- (i) Any payment by a company by way of advance or loan to a shareholder (holding not less than 10% shares); or (ii) to any concern in which such shareholder is a member, or (iii) any payment on behalf of or for the individual benefit of any such shareholder. He has also cited before us the analysis of this provision made in the case of Universal Medicare Pvt. Ltd. (supra) and has contended, referring to his own break-up analysis made in respect of the above referred provision that both in the second and third situations payment is deemed to have been made to the shareholder, though in the second situation payment is made to a concern of which such shareholder is a member and in the third case, the payment is made either on behalf of or for the individual benefit of a shareholder. From this analysis, Mr. Khaitan wants us to hold that the payment in this case is to be treated as payment to the shareholder, if at all. When payment has been made to anyone which comes within the second and third categories such payment shall be deemed to have been made to the shareholder and the payment shall take the character of “deemed dividend”. The person liable in such situations would be the shareholder and not the person or entity to whom the money may has actually been paid in the second and the third situations. On this point also we do not find any error committed by the Commissioner or the Tribunal to warrant our interference. 11. On the last point, the Tribunal held that the Assessing Officer had not brought on records any material to show that the transactions in shares of the company involved were false or fictitious. It is finding of the assessing officer that the scrips of this company was executed by a broker through cross deals and the broker was suspended for some time. It is finding of the assessing officer that the scrips of this company was executed by a broker through cross deals and the broker was suspended for some time. It is assessee’s contention on the other that even though there are allegations against the broker, but for that reason alone the assessee cannot be held liable. On this point the Tribunal held – “As a matter of fact the AO doubted the integrity of the broker or the manner in which the broker operation as per the statement of one of the directors of the broker firm and also AO observed that assessee had not furnished any explanation in respect of the intention of showing trading of shares only in three penny stocks. AO relied the loss of Rs. 25,30, 396/- only on the basis of information submitted by the Stock fictitious. AO has also not doubted the genuineness of the documents placed on record by the assessee. AO’s observation and conclusion are merely based on the information representative. Therefore on such basis no disallowance can be made and accordingly we find no infirmity in the order of ld. CIT (A), who has rightly allowed the claim of assessee. Thus ground No. 1 of the revenue is dismissed.” 12. We agree with the reasoning of the Tribunal on this point also. We do not find any reason to interfere with the impugned order. The suggested questions, in our opinion do not raise any substantial question of law. The appeal is accordingly dismissed.