ANGELINA, CHENNAI V. ITO, CHENNAI

ITA 1075/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6246 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 28-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN
• Assessee Lawyers: K G RAGHUNATH
• Keywords: Sale consideration of property below Jantri Value; Business income; Cost of acquisition; Valuation report
• Section: 50C

Judgement Text

, .. , IN THE INCOME TAX APPELLATE TRIBUNAL , SMC C BENCH, CHENNAI . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.1075/MDS/2017 ( / ASSESSMENT YEAR: 2009-10) SMT. ANGELINA, NO.D3, NEST AURORA II, NO.32, R E NAGAR, THORAIPAKKAM, CHENNAI - 600 097. VS THE INCOME TAX OFFICER, BUSINESS WARD III(1), CHENNAI 600 034. PAN: AADPA8344E ( /APPELLANT) ( /RESPONDENT) & ./ I.T.A.NO.1076/MDS/2017 ( / ASSESSMENT YEAR: 2009-10) SHRI AUGUSTINE, NO.D3, NEST AURORA II, NO.32, R E NAGAR, THORAIPAKKAM, CHENNAI - 600 097. VS THE INCOME TAX OFFICER, BUSINESS WARD III(1), CHENNAI 600 034. PAN: AGAPA4235B ( /APPELLANT) ( /RESPONDENT) / APPELLANTS BY : SHRI K. G. RAGHUNATH, ADVOCATE /RESPONDENT BY : SHRI B. SAGADEVAN, JCIT /DATE OF HEARING : 25.07.2017 ! /DATE OF PRONOUNCEMENT : 07.09.2017 / O R D E R THESE APPEALS BY THE ASSESSEES ARE DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- 15, CHENNAI BOTH DATED 31.01.2017 IN ITA NO.643/201 3- 2 ITA NO.1075& 1076/MDS/2017 14/CIT(A)-15/2013-14 PASSED U/S.250(6) R.W.S.143(3) & 144 OF THE ACT & ITA NO.642/2013-14/CIT(A)-15/A.Y. 2009-10 PASSED U/S.250(6) R.W.S.143(3) OF THE ACT. SINCE THE ISSU E IN BOTH THESE APPEALS IS IDENTICAL AND RELATED TO THE SAME LAND J OINTLY SOLD BY THE ASSESSEES, BOTH THE APPEALS ARE HEARD AND DISPO SED OFF TOGETHER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEES HAS RAISED SEVERAL GROUNDS IN TH EIR APPEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT THE L D.CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD.AO WHO HAD TREATED THE GAIN ARISING OUT OF THE SALE OF THEIR LAND BEING ST OCK-IN-TRADE AS SHORT-TERM CAPITAL GAIN AND NOT PROFIT FROM BUSINES S AS CLAIMED BY THE ASSESSEES AND FURTHER WRONGLY INVOKED THE PR OVISIONS OF SECTION 50C OF THE ACT, WHILE COMPUTING THE SHORT-T ERM CAPITAL GAIN. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE ES ARE HUSBAND AND WIFE ENGAGED IN THE BUSINESS OF CONSTRU CTION CONTRACTORS, FILED THEIR RETURN OF INCOME FOR THE R ELEVANT ASSESSMENT YEAR 2009-10 ON 17.04.2009 & 02.03.2010, ADMITTING TOTAL INCOME OF RS.8,36,333/- & RS.2,26,5 00/- 3 ITA NO.1075& 1076/MDS/2017 RESPECTIVELY. INITIALLY THE RETURN WAS PROCESSED U /S.143(1) OF THE ACT. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTI NY AND FINALLY ORDER U/S.143(3) OF THE ACT WAS PASSED ON 28.12.201 1 IN THE CASE OF BOTH THE ASSESSEES, WHEREIN THE LD.AO ASSES SED SHORT- TERM CAPITAL GAIN OF RS.17,23,478/- IN THE HANDS OF EACH OF THE ASSESSEES TOWARDS SALE OF A PROPERTY AT PADUR, KANC HEEPURAM DISTRICT JOINTLY HELD BY THEM AS AGAINST PROFIT FRO M BUSINESS CLAIMED BY THE ASSESSEES. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT, IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE ALONG WITH HER HUSBA ND HAD SOLD THE AFORESAID PROPERTY FOR SALE CONSIDERATION OF RS .23,62,500/- VIDE SALE DEED DATED 11.08.2008, DOC. NO.5955 AT T IRUPORUR, SUB-REGISTRARS OFFICE. THE LD.AO HAD OBTAINED THE SALE DEED FROM THE SUB-REGISTRARS OFFICE U/S.133(6) OF THE A CT. SINCE THE ASSESSEES HAD NOT DECLARED THE GAIN ARISING OUT OF THE SALE OF THE LAND AND HAD NOT PRODUCED ANY EVIDENCE TOWARDS EXPE NDITURE INCURRED ON THE LAND SUCH AS IMPROVEMENT COST, ETC. , THE LD.AO COMPUTED THE SHORT-TERM CAPITAL GAIN OF THE ASSESSE ES BASED ON THE MATERIALS AVAILABLE BEFORE HIM BY INVOKING THE PROVISIONS OF SECTION 50C OF THE ACT AS FOLLOWS:- 4 ITA NO.1075& 1076/MDS/2017 CONSIDERATION PAID AS PER THE SALE DEED DATED 20.09.2006 : RS. 8,00,000/- ADD: REGISTRATION CHARGES AND STAMP CHARGES PAID : RS. 1,02,145/- TOTAL COST OF ACQUISITION : RS. 9,02,145/- SALE CONSIDERATION RECEIVED RS.43,49,100/- (VALUE PROVIDED U/S 50C IS ADOPTED) ===== ===== TOTAL SHORT TERM CAPITAL GAINS RS.34,46,955/- ========== 50% OF THE SHARE BELONGS TO THE ASSESSEE AND BALANC E 50% BELONGS TO THE HUSBAND OF THE ASSESSEE SHRI AUGUSTINE. 50% OF THE SHORT TERM CAPITAL GAINS RS.17,23,477/- 5. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ORDER OF THE LD.AO CONCURRING WITH THE VIEWS EXPRESSED BY THE LD.AO IN HIS ORDER. WHILE DOING SO, HE REJECTED THE CLAIM OF THE ASSESS EES THAT THEY WERE IN REAL ESTATE BUSINESS AND THE LAND PURCHASED BY THEM HAS TO BE TREATED AS STOCK-IN-TRADE AND ACCORDINGLY PRO VISIONS OF SECTION 50C CANNOT BE INVOKED AND THE GAIN ARISING OUT OF THE TRANSACTION SHOULD BE TREATED AS BUSINESS INCOME IN STEAD OF SHORT-TERM CAPITAL GAIN. 6. AT THE OUTSET, I FIND THAT THE CORE ISSUE IS WIT H RESPECT TO THE INVOKING OF THE PROVISIONS OF SECTION 50C OF THE AC T, THEREBY 5 ITA NO.1075& 1076/MDS/2017 ADOPTING THE SALE VALUE AT THE GUIDELINE VALUE/MARK ET VALUE AT RS.43,49,100/-. IN ORDER TO ESCAPE THE RIGOR OF TH E PROVISIONS OF SECTION 50C OF THE ACT, THE ASSESSEES MIGHT HAVE CL AIMED BEFORE THE LD.REVENUE AUTHORITIES THAT THE ASSET HA S TO BE TREATED AS STOCK-IN-TRADE. THE REVENUE WOULD ALSO HAVE REJECTED THE CLAIM OF THE ASSESSEES BY HOLDING THAT THE ASSET SOLD IS NOT STOCK-IN-TRADE, IN ORDER TO INVOKE THE PROVI SION OF SECTION 50C OF THE ACT. HOWEVER, ON PERUSING THE SALE DEED DATED 20 TH SEPTEMBER 2006, DOC. NO.8393 REGISTERED AT TIRUPORU R SUB- REGISTRAR OFFICE PAGE NO.14 SCHEDULE OF PROPERTY, I FIND THAT THE LAND SOLD BY THE ASSESSEES IS GRAMA NATHAM LAND. IF THE LAND IS CLASSIFIED AS GRAMA NATHAM, THEN THE ASSESSEE WIL L NOT HAVE COMPLETE RIGHT ON THE LAND AS IN THE CASE OF PROPER PATTA LAND. THE GUIDELINE VALUE RECORDED IN THE REGISTER WITH S UB-REGISTRAR ATTRIBUTES ONLY TO PROPER PATTA LAND AND THE SAME I S ALSO ADAPTED TO GRAMA NATHAM LAND WITHOUT GIVING ANY LEVERAGE. THEREFORE WITH RESPECT TO THE GRAMA NATHAM LAND, THE SAME MARKET/GUIDELINE VALUE CANNOT BE ADOPTED. IT IS PE RTINENT TO MENTION THAT THE BARE AND UNUTILIZED LAND IN THE OU TSKIRTS OF CITIES LIKE CHENNAI WHICH IS OWNED BY NONE IS KNOWN AS GRA MA NATHAM. IT IS A PIECE OF LAND ACTUALLY BELONGS TO NONE. THERE IS 6 ITA NO.1075& 1076/MDS/2017 NO LEGAL PROOF OF THE OWNERSHIP OF SUCH LAND. BUYIN G A GRAMA NATHAM LAND CAN BE RISKY AT TIMES AND HAS A LESSER VALUE THAN THE PROPER PATTA LAND, THOUGH LEGALLY ONE CAN BUILD A HOUSE ON SUCH LAND WHILE ENJOYING POSSESSION OF SUCH LAND. BECAUSE OF THE ABOVE STATED REASONS THE LIQUIDITY VALUE OF GRA MA NATHAM LAND IS LESS COMPARED TO PROPER PATTA LAND. FURTHER THERE WILL BE ONLY FEW BUYERS FOR SUCH PROPERTIES. EVEN IF A PER SON IS IN POSSESSION OF GRAMA NATHAM LAND, THOUGH APPLYING FO R PATTA IS FEASIBLE BUT NOT EASY TO OBTAIN THE SAME. GRAMA NA THAM LAND CAN BE USED ONLY FOR BUILDING RESIDENTIAL HOUSE AND AGRICULTURAL ACTIVITIES, HOWEVER IT CANNOT BE USED FOR COMMERCIA L PURPOSES. MOREOVER IN THE CASE OF THE ASSESSEES, THE LD.AO HA S NOT OBTAINED THE VALUATION REPORT FROM THE DVO U/S.50C OF THE ACT. IN FACT WITHOUT GIVING AN OPPORTUNITY TO THE ASSESS EE FOR REFERRING THE MATTER TO THE LD.DVO, THE LD.AO HAS PROCEEDED T O ADOPT THE GUIDELINE VALUE INVOKING PROVISIONS OF SECTION 50C OF THE ACT. CONSIDERING THESE FACTS OF THE CASE, IM OF THE VIE W THAT THE VALUE STATED IN THE SALE DEED AS RS.23,62,500/- WILL BE T HE APPROPRIATE MARKET VALUE OF THE PROPERTY BECAUSE THE LAND IS A GRAMA NATHAM LAND. THEREFORE IM OF THE VIEW THAT SECTIO N 50C CANNOT BE INVOKED IN THE CASE OF THE ASSESSEES. FURTHER, WHEN THE 7 ITA NO.1075& 1076/MDS/2017 ASSESSEES CLAIM BEFORE THE REVENUE THAT THE LAND PU RCHASED BY THEM WAS FOR RESALE AND WITH RESPECT TO THEIR REAL ESTATE BUSINESS ACTIVITIES, THERE IS NO REASON WHY THE REVENUE SHOU LD REJECT THE SAME. CONSIDERING THE ABOVE FACTS OF THE CASE, I H EREBY DIRECT THE LD.AO TO TREAT THE GAIN DERIVED BY BOTH THE ASS ESSEES ON THE SALE OF THEIR LAND AS BUSINESS INCOME BY GIVING DUE WEIGHTAGE FOR THE EXPENSES INCURRED TOWARDS THEIR REAL ESTATE BUS INESS AND ALSO TO COMPUTE THE GAIN BY ADAPTING THE ACTUAL SAL E VALUE OF RS.23,62,500/- WITHOUT INVOKING THE PROVISIONS OF S ECTION 50C OF THE ACT. IT IS ORDERED ACCORDINGLY. 7. IN THE RESULT, THE APPEALS OF BOTH THE ASSESSEE ARE ALLOWED AS INDICATED HEREIN ABOVE. ORDER PRONOUNCED ON THE 07 TH SEPTEMBER, 2017 AT CHENNAI. SD/- ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER '# /CHENNAI, $% /DATED 07 TH SEPTEMBER, 2017 RSR % '( )( /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. , ( )/CIT(A) 4. , /CIT 5. (-. / /DR 6. .0 /GF