Sri.Gopalakrishna Iyer, Alappuzha V. The ITO, Calicut

CO 126/COCH/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9347 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 10-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: R KRISHNAN
• Keywords: Cost of acquisition
• Section: 143(3); 263

Judgement Text

1 ITA NO.676/COCH/2013 CO NO.126/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 676/COCH/2013 (ASSESSMENT YEAR 2009-10) ITO, WD.1(4) VS SHRI GOPALAKRISHNA IYER KOZHIKODE VENUGOPAL, KALPETTA WAYANAD PAN : ABPPV6309M (APPELLANT) (RESPONDENT) C.O.126/COCH/2013 (ARISING OUT OF I.T.A NO. 676/COCH/2013) (ASSESSMENT YEAR 2009-10) SHRI GOPALAKRISHNA IYER VS ITO, WD.1(4) VENUGOPAL, KALPETTA, WAYANAD KOZHIKODE (CROSS OBJECTOR) (RESPONDENT) REVENUE BY : SHRI M ANIL KUMAR, CIT DR ASSESSEE BY : SHRI R KRISHNAN DATE OF HEARING : 12-03-2014 DATE OF PRONOUNCEMENT : 14-03-2014 O R D E R PER N.R.S. GANESAN (JM) THE REVENUE FILED THE APPEAL AGAINST THE ORDER OF CIT(A), KOZHIKODE DATED 07-08-2013 FOR ASSESSMENT YEAR 2009-10. THE ASSESSEE FILED THE CROSS OBJECTION AGAINST THE VERY SAME ORDER OF CIT( A). THEREFORE, WE 2 ITA NO.676/COCH/2013 CO NO.126/COCH/2013 HEARD THE APPEAL AND THE CROSS OBJECTION TOGETHER A ND DISPOSE OF THE SAME BY THIS COMMON ORDER. 2. WE HEARD SHRI M ANIL KUMAR, THE LD.DR AND SHRI R KRISHNAN, THE LD.REPRESENTATIVE FOR THE ASSESSEE. ORIGINALLY THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 23-12-2011 TREATING THE SAL E OF MAHAGONI TREES AS AGRICULTURAL INCOME. HOWEVER, THE ADMINISTRATIVE C OMMISSIONER IN EXERCISE OF HIS POWERS U/S 263 OF THE ACT FOUND THA T THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF REVENUE SO FAR AS IN TREATING THE SALE PROCEEDS OF MAHAGONI TR EES AS AGRICULTURAL INCOME IS CONCERNED, THEREFORE, DIRECTED THE ASSESS ING OFFICER TO RECONSIDER THE MATTER. THE ASSESSING OFFICER ON RE CONSIDERATION FOUND THAT THE SALE PROCEEDS OF MAHAGONI TREES ARE CAPITAL REC EIPTS, THEREFORE, IT IS LIABLE FOR TAXATION AS CAPITAL GAIN. ON APPEAL BY THE ASSESSEE, THE CIT(A) FOUND THAT IN RESPECT OF OTHER FIVE ASSESSEES THE A SSESSING OFFICER HAS TAKEN 30% OF THE SALE PROCEEDS OF MAHAGONY TREES AS INCOME FROM CAPITAL GAIN. BY FOLLOWING THE ABOVE SAID PRECEDENT THE CI T(A) FOUND THAT IN THIS CASE ALSO THE ASSESSING OFFICER SHALL TREAT 30% OF THE SALE PROCEEDS OF MAHAGONI TREES AS CAPITAL GAIN. 3 ITA NO.676/COCH/2013 CO NO.126/COCH/2013 3. BEING AGGRIEVED BY THE ORDER OF CIT(A), THE REVE NUE FILED THE APPEAL. THE ONLY CONTENTION OF THE REVENUE IS THAT THE ASSE SSING OFFICER REJECTED THE CLAIM FOR EXPENSES ON THE GROUND THAT THERE IS NO EVIDENCE FOR INCURRING THE EXPENDITURE. THE LD.DR FURTHER SUBMITTED THAT THE MAHAGONI TREES WERE CUT ALONGWITH ROOTS, THEREFORE, THE ENTIRE PRO CEEDS SHOULD BE TAKEN AS CAPITAL GAIN. IN THE CROSS OBJECTION THE ASSESSEE CLAIMS THAT THE SALE PROCEEDS SHOULD BE TAKEN AS AGRICULTURAL INCOME. 4. WE FIND THAT THE APEX COURT IN THE CASE OF CIT V S KALPETTA ESTATES LTD 221 ITR 601 (SC) HAD AN OCCASION TO CONSIDER AN IDENTICAL ISSUE AND FOUND THAT WHEN THE OLD AND UNYIELDING RUBBER TREES WERE SOLD BY THE ASSESSEE NO CAPITAL GAIN AROSE OR ACCRUED ON SUCH T RANSACTION. THE CALCUTTA HIGH COURT IN CIT VS SUMAN TEA AND PLYWOOD INDUSTRIES (P) LTD (1997) 226 ITR 34 (CAL) HAS ALSO CONSIDERED AN IDEN TICAL ISSUE ELABORATELY AND AFTER REFERRING TO THE JUDGMENT OF THE KERALA H IGH COURT IN TRAVNCORE TEA ESTATES CO LTD VS CIT (1974) 93 ITR 314 (KER) A ND THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS B.C. SRINIVASA SETTY (1981) 128 ITR 294 (SC) FOUND THAT WHEN THERE IS NO COST OF ACQUIS ITION OR COST OF IMPROVEMENT ON THE ASSET THE SALE PROCEEDS OF SUCH ASSET WILL NOT FETCH ANY GAIN OR PROFIT AND THEREFORE NOT LIABLE FOR CAP ITAL GAIN TAX. IN THIS CASE, THE MAHAGONI TREES ARE PLANTED AS SHADOW TREES AND IT GREW ON ITS OWN 4 ITA NO.676/COCH/2013 CO NO.126/COCH/2013 WITHOUT ANY HUMAN INTERFERENCE OR HUMAN EFFORT. TH EREFORE, THE MAHAGONI TREES WERE GROWN NATURALLY EVEN THOUGH IT WAS PLANT ED AS SHADOW TREES. HENCE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION T HAT THERE IS NO COST OF ACQUISITION OR IMPROVEMENT ON SUCH TREES. HENCE, T HE COMPUTATION PROVISION FAILS. ONCE THE COMPUTATION PROVISION FA ILS FOR COMPUTING THE CAPITAL GAIN UNDER THE INCOME-TAX ACT, THERE CANNOT BE ANY LEVY OF CAPITAL GAIN TAX. HOWEVER, IN THIS CASE, THE ASSESSEE IS N OT CHALLENGING THE ESTIMATION OF CAPITAL GAIN AT 30% OF THE SALE PROCE EDS. THE ASSESSEES CLAIM IS THAT THE ENTIRE INCOME IS AGRICULTURAL INC OME. THIS CLAIM OF THE ASSESSEE AS AGRICULTURAL INCOME CANNOT BE CORRECT I N VIEW OF THE JUDGMENTS OF THE APEX COURT REFERRED ABOVE. SINCE THE ASSESSEE IS NOT CHALLENGING THE TREATMENT OF 30% OF THE SALE PROCEE DS AS CAPITAL GAIN, THE REVENUE MAY NOT HAVE ANY GRIEVANCE IN THE ORDER OF THE CIT(A). ACCORDINGLY, THE APPEAL OF THE REVENUE HAS NO MERIT AT ALL. 5. IN THE RESULT, APPEAL OF THE REVENUE AND THE CRO SS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH MARCH, 2014. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 14 TH MARCH, 2014 PK/- 5 ITA NO.676/COCH/2013 CO NO.126/COCH/2013 COPY TO: 1. ITO, WD.1(4), KOZHIKODE 2. SHRI GOPALAKRISHNA IYER, VENUGOPAL, KALPETTA, WA YANAD 3. THE COMMISSIONER OF INCOME-TAX, KOZHIKODE 4. THE COMMISSIONER OF INCOME-TAX(A), KOZHIKODE 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH