T.R. Sood, Accountant Member - These are cross-appeals by the Revenue and assessee and, therefore, they were heard together and are being disposed of by this common order.

ITA No. 4573/Mum./2008 (Revenue’s appeal)

2. In this appeal Revenue has raised the following grounds :

"1.The learned CIT(A) erred in treating the receipt of Rs. 71,63,36,000 received on transfer of land as non-taxable without appreciating the fact that the assessee is not the "residuary legatee" of late Shri E.F. Dinshaw and the control, management and ownership of the properties consisting of the estate of Shri E.F. Dinshaw vests totally with the assessee.

2.The learned CIT(A) ought to have treated the receipts either as short-term capital gain or adventure in the nature of trade."

3. Brief facts of the case are that assessee is an individual and had filed his return of income declaring salary income as well as income from other sources. During assessment proceedings, it was noticed that in the capital account accompanying the return a sum of Rs. 71,63,36,000 was credited. This amount consisted of a sum of Rs. 44.5 crores on account of receipt by way of Government of India bonds and the balance sum of Rs. 27,13,36,000 through bank transfer. On enquiry, assessee explained the circumstances under which the capital account came to be credited which are as under :

4. (1) One Mr. Edulji Framroze Dinshaw (for short ‘EFD’) a resident of USA executed his will on 4th Feb., 1970. This will was registered in the Court of County of New York, United States of America. EFD expired on 14th March, 1970. Through this will all the movable properties situated anywhere and immovable properties situated in India were bequeathed to Mrs. Bachoobai Wornozow (for short ‘BW’), who was a sister of the deceased. Mrs. BW was also appointed as executrix of the will and was also the beneficiary of the EFD’s estates. The immovable properties situated in India were to be settled in the trust and the trustees were required to collect receipt of rents and income from such properties which were to be applied for the benefit of BW during her lifetime. After the death of BW, the principal of the trust fund along with the income accrued thereon was to be given to "The Salavation Army New York and American Proprietary For the Prevention of Cruelty to the Animals New York" (for short ‘two American Charities’) equally. BW was also made as a residuary legatee.

5. Mrs. BW obtained a probate of the will of Mr. EFD and appointed Mr. Jehangir Behram Dubhash as an administrator of the estate of the deceased EFD and this appointment was confirmed by the Hon’ble Bombay High Court and letters of administration were issued accordingly on 12th Nov., 1971. Mr. Jehangir Behram Dubhash later on requested to be released as the administrator of the estates of EFD. In his place Mr. Nusli Neville Wadia i.e., assessee, was appointed as the administrator and his appointment was also confirmed by the Hon’ble Bombay High Court on 21st Dec., 1972 and the properties of the estates were vested in him as an administrator.

6. In the year 1995, the administrator entered into agreements with some real estate development companies for developing the immovable properties of the estates. In these agreements, BW also signed as confirming party. The developers were required to develop the properties after removing the encroachments etc. The estate was to receive 12 per cent of the gross sale proceeds. Pursuant to these agreements, the estate started receiving certain advances from purchasers of the constructed units and in some cases the final proceeds were also received. The estate filed income-tax as well as wealth-tax returns on the income on transfer of proportionate interest in the immovable properties. Originally these receipts were assessed as business receipts but when the matter was taken up to the Tribunal, the income was charged as capital gains in the hands of the estate of EFD.

7. In the year 2000, the administrator filed