ACIT, CHENNAI V. Shri Vijayakumar Gauhar, CHENNAI

ITA 1133/CHNY/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 8193 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 12-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P B SEKARAN
• Assessee Lawyers: SHRIT N SEETHARAMAN
• Keywords: Business income; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NOS. 1133 & 1134/MDS/2010 ASSESSMENT YEARS : 2005-06 & 2006-07 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-V, CHENNAI. V. SHRI VIJAYAKUMAR GAUHAR. NO. 273, VIJAY BHAGYAM CONSTRUCTION, 403-A, VELACHERY MAIN ROAD, VELACHERY, CHENNAI-600 042. PAN NO. AADPG3022B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.B. SEKARAN RESPONDEN T BY : SHRIT.N. SEETHARAMAN O R D E R PER BENCH: THESE ARE APPEALS FILED BY THE REVENUE AGAINST THE ORDERS OF THE LEARNED CIT(APPEALS)-VIII, CHENNAI IN ITA NOS. 69 & 70/08 D ATED 08-04-2010 FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 RESPECTIVELY. 2. SHRI P.B. SEKARAN, LEARNED CIT-DR REPRESENTED ON BEHALF OF THE REVENUE AND SHRI T.N. SEETHARAMAN, ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE. 3. IN THE REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : I.T.A. NOS.1133 & 1134/MDS/2010 2 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS OPPOSED TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO RECOMPUTE THE INCOME FROM DEVELOPMENT OF RESIDENTIAL APARTMENTS AS CAPITAL GA INS AS AGAINST TREATMENT OF THE SAME AS BUSINESS. 2.1. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE HIMSELF HAS CONCEIVED, PLANNED, DESIGNED, APPLIED AND RECEIVED APPROVAL FROM VARIOUS AUTHORIT IES FOR CONSTRUCTION AND ELECTRICITY CONNECTION, WATER SEWAGE, ROAD FORMATION ETC., FOR CONSTRUCTION OF RESIDENTIAL APARTMENTS WITH REGARD TO THE FIRST AGREEMENT, WHICH COULD CLEARLY BE IDENTIFIED AS VEN TURE IN THE NATURE OF TRADE. 2.2. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE DEVELOPED HIS PROPERTY WITH AN INTENTI ON TO MAKE PROFIT WHICH IS EVIDENCED BY THE VERY ACTIO N OF THE ASSESSEE IN ENTERING INTO A SECOND AGREEMENT FO R DEVELOPING HIS PROPERTY. 2.3. THE LD. CIT(A) ERRED IN HOLDING THAT THE DEPARTMENT CANNOT TAKE AN INCONSISTENT STAND FOR DIFFERENT YEARS. IT IS SUBMITTED THAT WITH REGARD TO THE FIRST AGREEMENT FOR THE ASSESSMENT YEAR 2001-02, CAPITAL GAIN WAS ASSESSED ONLY WITH REGARD TO THE TRANSFER OF 53% UNDIVIDED SHARE OF LAND WHICH EVENT WAS DIFFERENT FROM SELLING OF CONSTRUCTED RESIDENTI AL APARTMENTS DURING THE SUBSEQUENT YEARS. I.T.A. NOS.1133 & 1134/MDS/2010 3 2.4. IT IS RESPECTFULLY SUBMITTED THAT THE ORDERS O F THE HON'BLE ITAT IN ITA NO. 796/MDS/2008 DATED 06-05- 2009 HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND FURTHER APPEAL BEFORE THE HON'BLE HIGH COURT OF MAD RAS HAS BEEN PREFERRED. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) MAY BE SET ASIDE AND THAT OF ASSESSING OFFICER RESTORED. 4. AT THE TIME OF HEARING IT WAS FAIRLY AGREED BY B OTH THE SIDES THAT THE ISSUE IN THE APPEAL WAS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO. 796/MDS/2008 DATED 6-5-200 9 WHEREIN IN PARA 5 IT HAS BEEN HELD AS FOLLOWS : 5. IN REGARD TO THE SECOND ISSUE, WE FIND THAT THE ASSESSEE WAS NOT IN CONSTRUCTION BUSINESS. THIS IS THE SOLI TARY TRANSACTION UNDERTAKEN BY THE ASSESSEE. THE LAND M EASURING 25,630 SQ.FT. AT SURVEY NO. 214 OF VELACHERRY VILLA GE WAS PURCHASED BY THE ASSESSEE. THIS LAND WAS USED FOR THE BUSINESS OF MANUFACTURE OF SMALL MACHINERY COMPONEN TS. AT NO POINT OF TIME THE ASSESSEE WAS ENGAGED IN BUYING OR SELLING PROPERTIES IN THE NATURE OF TRADE IN REAL E STATE. ON 22 ND MARCH, 2000 HE ENTERED INTO A JOINT DEVELOPMENT AGR EEMENT WITH M/S. BHAGYAM CONSTRUCTIONS. THE SAID AGREEMEN T PROVIDED FOR DEVELOPMENT OF THE PROPERTY INTO A RES IDENTIAL COMPLEX. 16 FLATS WERE ALLOTTED TO THE ASSESSEE IN I.T.A. NOS.1133 & 1134/MDS/2010 4 CONSIDERATION OF THE LAND ON WHICH THE ASSESSEE DID OFFER LONG TERM CAPITAL GAINS. IN THE CASE OF CIT V. HOTEL SR EERAJ IN ITA NO. 282 OF 2002 VIDE ORDER DATED 6 TH DECEMBER, 2007, THE HON'BLE KARNATAKA HIGH COURT HAS HELD THAT WHEN THE ASSESSEE WAS RUNNING THE HOTEL FOR SEVERAL YEARS AN D AFTER CLOSING DOWN THE HOTEL IF THE ASSESSEE SOLD THE PRO PERTY FOR SALE CONSIDERATION, IT CANNOT BE SAID TO BE BUSINES S OF THE ASSESSEE1. S.L.P. FILED AGAINST THIS JUDGMENT OF T HE KARNATAKA HIGH COURT WAS DISMISSED BY THE APEX COURT VIDE 307 ITR (ST.) 3 & 4. WE FIND NO MERIT IN THE CONTENTION OF THE REVENUE THAT THE ENTIRE TRANSACTION WILL COME UNDER BUSINESS INCOME. AS SUCH, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IT WAS SUBMITTED BY THE LD. DR THAT THE ORDER OF TH E CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO. 796/MDS/2008 DATED 6-5-2009 WAS SUBJECT MATTER OF APPEAL BEFORE THE HON'BLE HIGH COURT OF MADRAS. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT AS ON THE DATE OF HEARING OF THIS APPEAL THE ISSUE IN THE APP EAL IS COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO . 796/MDS/2008 DATED 6-5- 2009 AND AS THIS ORDER HAS NOT BEEN DISLODGED, RESP ECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE, THE FINDING OF THE LEARNED CIT(A) IN FOLLOWING THE ORDE R OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL AND HOLDING THAT THE INCOME FROM THE SALE OF THE LAND AND THE CONSTRUCTED PORTION HAS BEEN RIGHTLY OFFERED BY THE ASSESSEE AS LONG TERM CAPITAL I.T.A. NOS.1133 & 1134/MDS/2010 5 GAINS AND SHORT TERM CAPITAL GAINS STANDS UPHELD. IN THE CIRCUMSTANCES, THE APPEALS OF THE REVENUE STAND DISMISSED. 6. THE ORDER WAS PRONOUNCED IN THE COURT ON 9/9/201 0. SD/- SD/- ( ABRAHAM P. GEORGE ) (GEORGE MATHAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 9 TH SEPTEMBER, 2010. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE