ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), DEHRADUN, SUBHASH ROAD, DEHRADUN V. AMBEY ASSOCIATES, RAJPUR ROAD, DEHRADUN

ITA 68/DDN/2023

AI Insights

The case revolves around the taxation classification of income derived from the sale of part of a property located at 99 Rajpur Road, Dehradun, owned by Ambey Associates, a partnership firm engaged in real estate development. The firm sold part of the property, which had shops constructed on it, and declared the income as 'Long Term Capital Gain'. However, the Assessing Officer reclassified this income as 'Business Income', leading to an appeal by the firm. The CIT(A) ruled in favor of the firm, classifying the income as capital gains, a decision which the Revenue challenged in the Tribunal. The Tribunal upheld the CIT(A)'s decision, emphasizing the consistent treatment of the property in the assessee's books and previous assessments.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 298800 (ITAT-DEHRADUN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Other Referred Cases: CIT vs. Associated Industrial Development Company Ltd., 82 ITR 586
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMAR PAL SINGH; THROUGH VC
• Assessee Lawyers: RAJIV SAHNI; CHARTERED ACCOUNTANT
• Keywords: Business income; Rule of consistency; Capital Gains
• Section: 143(3); 48

Judgement Text

"आयकर अपीलीय अिधकरण देहराद ून पीठ “डीबी”, देहराद ून ŵी िवकास अव̾थी, Ɋाियक सद˟ एवं ŵी अवधेश क ुमार िमŵा, लेखाकार सद˟ क े समƗ IN THE INCOME TAX APPELLATE TRIBUNAL DEHRADUN BENCH “DB”, DEHRADUN (THROUGH VIRTUAL HEARING) BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER आअसं.68/देहराद ून/2023(िन.व. 2015-16) ITA No.68/DDN/2023 (A.Y.2015-16) Assistant Commissioner of Income Tax, Circle-1(1)(1), Income Tax Office, 13-A, Subhash Road, Dehradun, Uttarakhand 248001 ...... अपीलाथᱮ/Appellant बनाम Vs. Ambey Associates, 69/1, Rajpur Road, Dehradun, Uttarakhand 2480001 PAN: AAOFA-2828-C ..... ᮧितवादी/Respondent अपीलाथŎ Ȫारा/ Appellant by : Shri Amar Pal Singh, Sr. DR (Through VC) ŮितवादीȪारा/Respondent by : Shri Rajiv Sahni, Chartered Accountant सुनवाई कᳱ ितिथ/ Date of hearing : 11/02/2025 घोषणा कᳱ ितिथ/ Date of pronouncement : : 21/02/2025 आदेश/ORDER PER VIKAS AWASTHY, JM: This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as 'the CIT(A)') dated 29.07.2023, for assessment year 2015-16. 2. The solitary issue raised by the Revenue in appeal is with respect to income from sale of part of property No.99, Rajpur Road, Dehradun. The assessee has 2 ITA NO.68/DDN/2023 (A.Y.2015-16) offered gain on sale of land under the head ‘Capital Gains’, whereas, the Revenue intends to tax the gain under the head ‘Profits from business and Profession’. 3. The facts of the case as emanating from records are: The assessee is a partnership firm and is engaged in the business of real estate development. The assessee was having land/property no.99 Rajpur Road, Dehradun. The assessee had acquired said land in Financial Year 2008-09 and since the date of acquisition had shown land in the books as capital investments. During the period relevant to assessment year under appeal, the assessee had sold part of land on which shops were constructed and had offered the gain on sale of land as Long Term Capital Gain. The Assessing Officer in assessment proceedings re-characterized capital gain as business income and made addition of Rs.13,90,79,150/- under the head ‘Income from Business and Profession’. Aggrieved by the assessment order dated 28.12.2017, the assessee filed appeal before the CIT(A). The CIT(A) decided the issue in favour of the assessee and held that sale of part of property bearing no. 99, Rajpur Road, Dehradun is liable to be taxed as Capital Gain. Hence, present appeal by the Revenue. 4. Shri Amar Pal Singh, representing the department vehemently supporting findings of the AO submitted that the assessee is a builder. The assessee constructed shops on land at 99, Rajpur Road, Dehradun and sold the shops. The activity of plotting, construction of shops and sale thereof, is an adventure in the nature of trade, hence, any gain on sale of such shops is liable to be taxed under the head, Income from Business and Profession. He further referred to the observations of AO in para 5.1 of the assessment order, wherein extracts from the partnership deed dated 07.06.2006 are reproduced. He pointed that the nature of 3 ITA NO.68/DDN/2023 (A.Y.2015-16) business as mentioned in partnership deed is, Business of real estate, builders, construction of shopping malls, multiplexes, restaurants, hotel, etc. Hence, activity carried out by the assessee of construction and sale of shops is purely business activity. He further submitted that it is a well settled law that entries in the books of account does not determined true nature of the activities. He asserted that the CIT(A) has erred in placing too much reliance on the books of assessee to determine nature of transaction. The CIT(A) has accepted contention of the assessee without looking at facts evident from the records. 5. Per contra, Shri Rajiv Sahni appearing on behalf of the assessee submits that the assessee had acquired land in Financial Year 2008-09 and right from the beginning intention of the assessee was to hold the land as capital investment. In support of his submissions, he referred to Balance Sheet as on 31.03.2009 at page no. 34 of the paper book, wherein Land is reflected under the head Fixed Assets and not stock in trade. The ld. AR further pointed that right from the beginning land shown in Balance Sheets of the assessee as Fixed Assets and the same was has been accepted by the AO. He further submitted that on said land shops were constructed and were let out till the time they were not sold. The rental income from letting out of the shops was offered to tax under the head Income from House Property by the assessee. The ld. AR contended that the assessee is not engaged in the business of purchase and sale of shops. The sale of shops is a onetime event. He pointed that even in subsequent assessment year i.e. AY 2017- 18, the assessee had sold some shops and offered gain on sale of shops as Long Term Capital Gain. The same was accepted by the AO. To support his contention; he referred to assessment order dated 09.12.2019 passed u/s. 143(3) of the Act 4 ITA NO.68/DDN/2023 (A.Y.2015-16) for AY 2017-18 at page no. 51 to 65 of the paper book. The ld. AR of the assessee further placed reliance on Board Circular No.4/2007 dated 15.06.2007 to submit that the assessee can have two separate portfolios i.e. investment portfolio and trading portfolio. The Revenue recognizes income under investment portfolio as capital gains and income in trading portfolio, comprising of stock in trade as ‘Business Income’. To further buttress his argument, he placed reliance on the decision of the Hon'ble Supreme Court of India in the case of CIT vs. Associated Industrial Development Company Ltd., 82 ITR 586. 6. We have heard the submissions made by rival sides and have examined the orders of authorities below. The short issue in present appeal by the Revenue is, Whether the income earned by the assessee from sale of shops which are part of property situated at 99 Rajpur Road, Dehradun is taxable under the head ‘Capital Gains’ or ‘Business of Income’. 7. The assessee has offered gain on sale of shops as Long Term Capital Gain, whereas, the AO has re-characterized gain on sale of shops as Business Income. It is an undisputed fact that the assessee had acquired property at 99, Rajpur Road, Dehradun during Financial Year 2008-09 and since then the assessee has held the same as investment. This fact is evident from Balance Sheets for the Financial Year ended on 31.03.2009, 31.03.2010, 31.03.2011, 31.03.2012 and the income tax returns placed on record by the assessee for corresponding assessment years at pages 34 to 48 of the paper book. This fact has not been controverted by the Revenue. 5 ITA NO.68/DDN/2023 (A.Y.2015-16) 8. Further, the ld. AR of the assessee has pointed that the assessee had sold some shops during the period relevant to AY 2017-18 and had offered gain on sale of said shops as Long Term Capital Gain in the return of income. The AO while making assessment u/s. 143(3) of the Act examined the issue in detail and accepted the gain on sale of shops as Long Term Capital Gain. Once, the Revenue has accepted the property as investment and sale of part of such property as Long Term Capital Gain the principle of consistency demands that when there is no change in the nature of holding of the property in impugned assessment year, the gain on sale of part of such property cannot be re-characterized as ‘Business Income’. 9. Thus, in facts of the case and documents on record, we find no infirmity in the impugned order, hence, the same is upheld and appeal of the Revenue is dismissed being devoid of any merit. Order pronounced in the open court on Friday the 21st day of February, 2025. Sd/- Sd/- (AVDHESH KUMAR MISHRA) (VIKAS AWASTHY) लेखाकार सद᭭य/ACCOUNTANT MEMBER ᭠याियक सद᭭य/JUDICIAL MEMBER िदʟी / Delhi, ᳰदनांक/Dated 21/02/2025 NV/- 6 ITA NO.68/DDN/2023 (A.Y.2015-16) ᮧितिलिप अᮕेिषतCopy of the Order forwarded to : 1. अपीलाथᱮ/The Appellant , 2. ᮧितवादी/ The Respondent. 3. The PCIT/CIT(A) 4. िवभागीय ᮧितिनिध, आय.अपी.अिध.,देहराद ून /DR, ITAT,Dehradun 5. गाडᭅ फाइल/Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Dehradun "