Dr. Sitakant N. K. Ghanekar., Panaji V. Income Tax Officer, Ward-1(1), Panaji., Panaji

CO 44/PAN/2014

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1066 (ITAT-PANAJI)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 17-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-06-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 08-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MEHBOOB ALI KHAN LD
• Assessee Lawyers: D E ROBINSON
• Keywords: Business income; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI GEORGE MATHAN , HONBLE JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, HON'BLE ACCOUNTANT MEMBER ITA N O . 341 /PNJ/20 1 4 : (A.Y 200 5 - 0 6 ) ITO, WARD - 1(1) ( APPELLANT) VS. DR. SITAKANT N.K. GHANEKAR C/O GHANEKAR CLINIC OPP. OLD BUS STAND, PANAJI, GOA. PAN : AECPK7434E (RESPONDENT) ITA N O . 342 /PNJ/20 14 : (A.Y 2005 - 06 ) ITO, WARD - 1(1) ( APPELLANT) VS. SMT. MAYA S .K. GHANEKAR C/O GHANEKAR CLINIC OPP. OLD BUS STAND, PANAJI, GOA. PAN : AECPK7433D (RESPONDENT) CO NO. 44/PNJ/2014 (IN ITA N O . 341 /PNJ/20 14) : (A.Y 2005 - 06 ) DR. SITAKANT N.K. GHANEKAR C/O GHANEKAR CLINIC OPP. OLD BUS STAND, PANAJI, GOA. PAN : AECPK7434E (CROSS OBJECTOR) VS. ITO, WARD - 1(1) ( RESPONDENT) CO NO. 45/PNJ/2014 (IN ITA N O . 342 /PNJ/20 14) : (A.Y 2005 - 06 ) SMT. MAYA S .K. GHANEKAR C/O GHANEKAR CLINIC OPP. OLD BUS STAND, PANAJI, GOA. PAN : AECPK7433D (CROSS OBJECTOR) VS. ITO, WARD - 1(1) ( RESPONDENT) 2 ITA NOS. 341 & 342/PNJ/2014 & CO NOS. 44 & 45/PNJ/2014 (A.Y : 2005 - 06) ASSESSEE S BY : D.E. ROBINSON, ADV. REVENUE BY : MEHBOOB ALI KHAN , LD. DR DATE OF HEARING : 1 7 / 06 /201 5 DATE OF PRONOUNCEMENT : 1 7 / 06 /201 5 O R D E R PER GEORGE MATHAN : 1. ITA NO. 341/PNJ/2014 IS AN APPEAL FILED BY THE REVENUE IN THE CASE OF DR. SITAKANT N.K. GHANEKAR AGAINST THE ORDER OF CIT(A), PANAJI IN ITA NO. 227/PNJ/07 - 08 DT. 15.7.2014 FOR THE A.Y 2005 - 06 AND CO NO. 44/PNJ/2014 IS CROSS OBJECTION FILED BY THE ASSESSEE, DR. SITAKANT N.K. GHANE KAR IN THE REVENUES APPEAL NO. 341/PNJ/2014. ITA NO. 342/PNJ/2014 IS AN APPEAL FILED BY THE REVENUE IN THE CASE OF SMT. MAYA S.K. GHANEKAR AGAINST THE ORDER OF CIT(A), PANAJI IN ITA NO. 226/PNJ/07 - 08 DT. 15.7.2014 FOR THE A.Y 2005 - 06 AND CO NO. 45/PNJ/20 14 IS CROSS OBJECTION FILED BY THE ASSESSEE, SMT. MAYA S.K. GHANEKAR IN THE REVENUES APPEAL NO. 342/PNJ/2014. 2. AS THE ISSUES IN THE APPEALS AND THE CROSS OBJECTIONS ARE IDENTICAL AND AS THEY RELATE TO HUSBAND AND WIFE TO WHOM THE PROVISIONS OF SEC. 5 A OF THE INCOME TAX ACT APPLY, BOTH THE APPEALS AND THE CROSS OBJECTIONS ARE DISPOSED OFF BY A COMMON ORDER. SHRI MEHBOOB ALI KHAN, LD. DR REPRESENTED ON BEHALF OF THE REVENUE AND SHRI D.E. ROBINSON, ADV. REPRESENTED ON BEHALF OF THE ASSESSEES. 3 ITA NOS. 341 & 342/PNJ/2014 & CO NOS. 44 & 45/PNJ/2014 (A.Y : 2005 - 06) 3. IT WAS SUBMITTED BY THE LD. DR THAT IN THE REVENUES APPEALS, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN HOLDING THAT THE CONVERSION OF AGRICULTURAL LAND INTO NON - AGRICULTURAL LAND AND MAKING PLOTS FOR RESIDENCE IN MARKETABLE SIZE WAS NOT ANY ACT IVITY IN THE NATURE OF TRADE OR BUSINESS. IT WAS THE SUBMISSION THAT THE ASSESSEE IS A MEDICAL PRACTITIONER WHO HAD INHERITED AGRICULTURAL LAND FROM HIS FATHER IN 1985. IT WAS THE SUBMISSION THAT IN 2003 THE ASSESSEE HAD CONVERTED THE SAID LAND FROM AGRI CULTURAL TO NON - AGRICULTURAL PURPOSE AND HAD CUT THE SAID LAND INTO MULTIPLE PIECES, LAID ROADS AND HAD SOLD THE SITES FOR RESIDENTIAL PURPOSES. IT WAS THE SUBMISSION THAT CONSEQUENTLY THE AO HAD TREATED THE CONSIDERATION RECEIVED BY THE ASSESSEE ON THE S ALE OF THE SAID PLOTS AS BUSINESS INCOME ON THE GROUND THAT THE SAID CONVERSION OF THE AGRICULTURAL LAND INTO NON - AGRICULTURAL AND DRAWING UP OF PLOTS AND LAYING ROADS WAS AN ADVENTURE IN THE NATURE OF TRADE. IT WAS THE SUBMISSION THAT THE LD. CIT(A) HELD THAT THE SAME WAS LIABLE TO CAPITAL GAINS. IT WAS THE SUBMISSION THAT THAT THE ORDER OF THE LD. CIT(A) WAS LIABLE TO BE REVERSED. 4. IN REPLY, THE LD. AR SUBMITTED THAT THE ASSESSEES FATHER HAD INHERITED THE SAID LAND IN 1947 AND THE ASSESSEE HAD INHERITED THE SAID LAND FROM THE ASSESSEES FATHER IN 1985. THE SAID AGRICULTURAL LAND MEASURED NEARLY 16,450 SQ. MTRS. AFTER CONVERSION, THE REALIZED LAND WAS ONLY 11,818 SQ. MTRS. THE SAME WAS SUB - DIVIDED INTO 21 PLOTS AFTER EXCLUDING THE LAND UT ILIZED FOR THE ROADS AND COMMON AMENITIES. THE SECOND PROPERTY CONSISTED OF AN AREA OF 32,600 SQ. MTRS. AND AFTER CONVERSION, THE AREA REALIZED WAS 25,597 SQ. MTRS. WHICH WAS SUB - DIVIDED INTO 54 PLOTS AFTER PROVIDING FOR ROADS AND COMMON AMENITIES. THE C ONVERSION WAS DONE AFTER OBTAINING THE APPROVAL FROM THE TOWN AND COUNTRY PLANNING DEPT., PONDA VIDE LETTER DT. 31.7.2003. THE SAID LAND WAS 40 KMS. AWAY FROM PANAJI WHERE THE ASSESSEE WAS PRACTICING AS A MEDICAL PRACTITIONER. IT WAS THE SUBMISSION THAT TILL THE TIME OF CONVERSION THE 4 ITA NOS. 341 & 342/PNJ/2014 & CO NOS. 44 & 45/PNJ/2014 (A.Y : 2005 - 06) ASSESSEE WAS DOING AGRICULTURAL OPERATIONS ON THE SAID LAND BUT AS IT WAS BECOMING DIFFICULT TO CONTROL THE AGRICULTURAL OPERATIONS AND THE INCOME FROM AGRICULTURE WAS NOMINAL, SO AS TO PROTECT THE CORPUS AND ALSO TO AVOID A NY POSSIBLE THREAT OF ENCROACHMENT, THE ASSESSEE HAD DECIDED TO CONVERT THE AGRICULTURAL LAND TO NON - AGRICULTURAL PURPOSE, SUB - DIVIDE INTO PLOTS AND SELL IT, SO AS TO MAXIMIZE THE RETURNS. IT WAS THE SUBMISSION THAT THE ASSESSEE NEVER HAD THE INTENTION OF DOING BUSINESS OF PURCHASE AND SALE OF LAND AND REAL ESTATE AND THE PROPERTY SOLD WAS CLEARLY INHERITED AGRICULTURAL LAND. IT WAS THE SUBMISSION THAT THE REVENUE HAS RELIED UPON VARIOUS DECISION IS IN ITS GROUNDS OF APPEAL BUT IN ALL THOSE DECISIONS, THE MAIN DISTINGUISHING FACT WAS THAT THE ASSESSEES THEREIN PURCHASED AND SOLD THE IMMOVEABLE PROPERTY WHEREAS, IN THE ASSESSEES CASE, IT WAS NOT SO. IT WAS THE SUBMISSION THAT FOR THE PURPOSE OF FALLING WITHIN THE TERM TRADE, ONE MUST EITHER PURCHASE AN D SELL OR ACQUIRE THROUGH ONES OWN EFFORTS AND SELL. IN THE ASSESSEES CASE, THERE WAS NO SUCH ADVENTURE WHICH COULD BE IN THE NATURE OF TRADE. THE ASSESSEES BUSINESS IS ALSO NOT DEALING IN PLOTS. RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE PUN JAB & HARYANA HIGH COURT IN THE CASE OF SUSHILA DEVI JAIN REPORTED IN 259 ITR 671 WHEREIN IT HAD BEEN HELD THAT IN THE CASE OF LAND INHERITED BY THE ASSESSEE AND SOLD IN PORTIONS BECAUSE THE AREA WAS LARGE, IT COULD NOT BE TREATED AS AN ADVENTURE IN THE NA TURE OF TRADE. IT WAS THE SUBMISSION THAT THE ORDER OF LD. CIT(A) WAS LIABLE TO BE UPHELD. 5. IT WAS FURTHER SUBMISSION BY THE LD. AR THAT IN THE CROSS OBJECTION S FILED BY THE ASSESSEES , THE ASSESSEES HAVE CHALLENGED THE ACTION OF LD. CIT(A) IN NOT GR ANTING THE ASSESSEES THE BENEFIT OF INDEXATION FROM 1.4.1981 AS THE ASSESSEE HAD INHERITED THE LAND IN 1985 AND THE LAND WAS INHERITED BY HIS FATHER IN 1947 FROM THE ASSESSEES GRANDFATHER. IT WAS THE SUBMISSION THAT THE ISSUE OF 5 ITA NOS. 341 & 342/PNJ/2014 & CO NOS. 44 & 45/PNJ/2014 (A.Y : 2005 - 06) INDEXATION AS ON 1.4.1981 WAS SQUARELY COVERED BY THE DECISION OF THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF MANJULA J. SHAH, 355 ITR 474. 5. IN REPLY, THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AO AND THE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. AT THE OUTSET, IT WAS CLEARLY NOTICED THAT THE ASSESSEE HAS NEVER PURCHASED THE AGRICULTURAL LAND WITH THE INTENTION OF GETTING IT CONVERTED, SUB - DIVIDING INTO PLOTS AND SELLING THE SAME. CLEARLY, THE ASSESSEE HAS INHERITED THE SAID AGRICULTURAL LAND FROM HIS FA THER. ADMITTEDLY, THE ASSESSEE IS STAYING 40 KMS. AWAY FROM THE SAID AGRICULTURAL LAND. THE ASSESSEE HAS CONVERTED THE SAID INHERITED AGRICULTURAL LAND FOR NON - AGRICULTURAL PURPOSE, SUB - DIVIDED THE SAME AND SOLD IT CLEARLY FOR MAXIMIZING HIS RETURNS IN R ESPECT OF THE SAID LAND. THIS FACT BEING UNDISPUTED, IN VIEW OF THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SUSHILA DEVI JAIN REFERRED TO SUPRA, THE TRANSACTION OR THE ACTIVITY CANNOT BE TREATED AS AN ADVENTURE IN THE NATURE OF TRADE GIVING RISE TO BUSINESS INCOME. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE LD. CIT(A) ON THIS ISSUE IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. 7. COMING TO THE ISSUE OF INDEXATION FROM 1.4.1981, AS THIS ISSUE IS NOTICED TO BE SQUARELY COVERED BY THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF MANJULA J. SHAH REFERRED TO SUPRA, THE AO IS DIRECTED TO GRANT THE ASSESSEE INDEXATION IN RESPE CT OF THE SAID INHERITED PROPERTY RIGHT FROM 1.4.1981. HOWEVER, WHEN VALUING THE FAIR MARKET VALUE OF THE SAID PROPERTY AS ON 1.4.1981, THE PROPERTY SHALL BE TREATED AS AN AGRICULTURAL LAND AS THE SAME WAS NOT A CONVERTED LAND AS ON 1.4.1981. THIS IS AS PER THE ADMISSION OF THE LD. AR IN THE OPEN COURT. 6 ITA NOS. 341 & 342/PNJ/2014 & CO NOS. 44 & 45/PNJ/2014 (A.Y : 2005 - 06) 8. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DISMISSED AND THE CROSS OBJECTIONS FILED BY THE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/06/2015. S D / - (N.K. BILLAIYA) ACCOUNTANT MEMBER S D / - ( GEORGE MATHAN ) JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 1 8 /06/ 201 5 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (I) DR. SITAKANT N.K. GHANEKAR & (II) SMT. MAYA S.K. GHANEKAR (3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER , 7 ITA NOS. 341 & 342/PNJ/2014 & CO NOS. 44 & 45/PNJ/2014 (A.Y : 2005 - 06) DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ORDER ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 1 7 /06/2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 17 /06/2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 1 8 /06/2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 1 8 /06/2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 1 8 /06/2015 SR.PS 6. DATE OF PRONOUNCEMENT 1 7 /06/2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 1 8 /06/2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER