ACIT, Mangalore V. M/s Mangala Builders Pvt. Ltd., Mangalore

ITA 1361/BANG/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4436 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-08-2013
• Assessment Year: 1994-1995
• Appeal Filed On: 17-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P CHANDRASHEKAR
• Assessee Lawyers: EDMOND DSOUZA
• Keywords: Capital asset; Business income; Question of law
• Section: 143(3); 260A; 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO.1361/BANG/2012 (ASSESSMENT YEAR : 1994-95) ASST. COMMISSIONER OF INCOME TAX , CIRCLE 1(1), MANGALORE. VS. M/S. MANGALA BUILDERS PVT. LTD. 4-9-776/15, SANU PALACE, M.G. ROAD, KODIALBAIL, MANGALORE. PAN AADCM 2995A APPELLANT RESPONDENT. APPELLANT BY : SHRI P. CHANDRASHEKAR. RESPONDENT BY : SHRI EDMOND DSOUZA. DATE OF HEARING : 29.08.2013. DATE OF PRONOUNCEMENT : 25.10.2013. O R D E R PER SHRI JASON P. BOAZ, A.M. : THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS), MYSORE FOR ASSESSMENT YEAR 1994-95. 2. THE FACTS OF THE CASE, IN BRIEF, ARE AS UNDER : 2.1 THE ASSESSE COMPANY IS IN THE BUSINESS OF REAL ESTATE AS BUILDERS AND CONTRACTORS. FOR ASSESSMENT YEAR 1994-95, THE ASSESSEE DID NOT FILE THE RETURN OF INCOME WITHIN THE STIPULATED TIME. PROCEEDINGS UNDER SECTION 147 OF INCOME TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS 'THE ACT') WERE INITIATED BY THE ASSESSING OFFICER AND N OTICE UNDER SECTION 148 OF THE ACT WAS ISSUED REQUIRING THE ASSESSEE TO FILE THE RETURN OF INCOME FOR ASSESSMENT YEAR 1994-95. THE ASSESSMENT WAS COMPLETED EX-PARTE UNDER SECTION 144 OF THE ACT BY ORDER DT.30.3.1999 DETERMINING THE SHORT 2 ITA NO.1361/BANG/2012 TERM CAPITAL GAINS (STCG) ON SALE OF PROPERTY AT A TTAVARA, MANGALORE AT RS.18,00,000. ON APPEAL, THE CIT(A) BY ORDER DT.24.12.2001 ALLOWED THE ASSES SEE'S APPEAL HOLDING THAT THE INCOME OF THE ASSESSEE FROM SALE OF SAID PROPERTY IS TO BE TREAT ED AS DERIVED FROM BUSINESS INCOME AND THE PROPERTY AS STOCK IN TRADE AND ADOPTED THE INCOME A T RS.2,49,940 AS PER THE COMPUTATION GIVEN BY THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE CIT(A) , MANGALORE DT.24.12.2001, REVENUE PREFERRED AN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL VIDE O RDER IN ITA NO.56/PNJ/2002 DT.27.7.2005 DISMISSED REVENUES APPEAL. ON FURTHER APPEAL BY R EVENUE, THE HONBLE KARNATAKA HIGH COURT VIDE ORDER IN ITA NO.3260/2005 DT.17.3.2010 REMANDED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE WHETHER THE SALE OF PROPERTY IN Q UESTION AMOUNTS SALE OF STOCK-IN-TRADE OR CAPITAL ASSET. 2.2 IN THE SECOND ROUND OF ASSESSMENT, THE ASSESSIN G OFFICER COMPLETED THE ASSESSMENT BY AN ORDER UNDER SECTION 143(3) R.W.S. 260A OF THE ACT D T.11.11.2011 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.18,00,000 ON ACCOUNT OF STCG O N SALE OF THE SAID PROPERTY AT ATTAVARA, MANGALORE HOLDING AS UNDER : IN VIEW OF THE DISCUSSION IN ABOVE PARAS AND SINC E THE ASSESSEE HAD NOT COMMENCED ANY BUSINESS ACTIVITIES AS EVIDENCED BY THE AUDIT R EPORT FILED ALONG WITH THE RETURN OF INCOME FILED FOR THE EARLIER AND SUBSEQUENT ASSESSM ENT YEARS RELEVANT TO THE ASSESSMENT YEAR UNDER SCRUTINY, THE SALE WOULD NOT BE A SALE OF STOCK IN TRADE AND THE SURPLUS FROM SALE OF PROPERTY WILL NOT TENTAMOUNT T O BUSINESS INCOME BUT IT WOULD BE TREATED AS CAPITAL GAIN. SINCE THE PROPERTY, WHICH FORMED THE SUBJECT MATTER OF SALE WAS ACQUIRED ON 3.9.1991 AND SOLD WITHIN A PERIOD O F 36 MONTHS, AND THE ASSESSEE HAD MADE A PROFIT OF RS.18,00,000, THE PROFIT ON SALE P ROCEEDS IS ASSESSED AS SHORT TERM CAPITAL GAIN. 2.3 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASSESS MENT YEAR 1994-95 DT.11.11.2011, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), MAN GALORE. THE LEARNED CIT (APPEALS) BY ORDER DT.31.5.2012 ALLOWED THE ASSESSEE'S APPEAL HOLDING THAT THE INCOME DERIVED BY THE ASSESSEE FORM 3 ITA NO.1361/BANG/2012 THE SALE OF ATTAVAR PROPERTY AT MANGALORE WAS BUSIN ESS INCOME, SINCE THE ASSESSEE HELD THE SAID PROPERTY AS STOCK-IN-TRADE AND WAS NOT A CAPITAL A SSET LIABLE TO STCG AS HELD BY THE ASSESSING OFFICER. IN HIS ORDER, THE LEARNED CIT (APPEALS) H ELD AS UNDER : 8. THE APPELLANT BY AND LARGE REITERATED THE ARGU MENT MOOTED BEFORE THE AO AS WELL AS BEFORE THE APPEAL AUTHORITIES EARLIER. IN VIEW O F DECISION OF HON'BLE SUPREME COURT IN THE CASE OF UNIVERSAL PLAST LTD VS. CIT (1999) 237 ITR 454 THE FOLLOWING NEEDS TO BE ADDRESSED TO : 1. NO PRECISE TEST CAN BE LAID DOWN TO ASCERTAIN WH ETHER INCOME (REFERRED TO BY WHATEVER NOMENCLATURE, LEASE AMOUNT, RENTS, LICENSE FEES) RECEIVED BY THE APPELLANT FROM LEASING OR LETTING OUT OF ASSETS WOULD FALL UN DER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. FROM THIS, IT IS CLEAR THAT WHATEVER IS THE NAME GIVEN AND THE TREATMENT GIVEN IN THE BOOKS THE ACTUAL NATURE HAS TO BE ASCERTAINED. AS SEEN FROM THE GAMUT OF THE ENTIRE TRANSACTION, THE APPELLANT HAS TAKEN OVER THE BUILDING ALONG WITH THE TENANTS WITH THEIR TENANCY RIGHTS INTACT. THE APPELLANT HAS TAKEN OVER THE DEPOSITS GIVEN BY THE TENANTS TO THE EARLIER OWNER AND THE S AME WAS ADJUSTED TOWARDS PURCHASE CONSIDERATION. THE APPELLANT'S CONTENTION IS THAT T HE PROPERTY UNDER OCCUPATION BY VARIOUS TENANTS CAN BE MADE VACANT POSSESSION ONLY AFTER VACATION OF THE TENANTS THROUGH LEGAL PROCESS SINCE THE TENANTS HAD TENANCY RIGHTS EVEN BEFORE THE APPELLANT PURCHASED THE PROPERTY. UNDER THIS COMPELLING CIRCU MSTANCE, THE ONLY OPTION LEFT TO THE APPELLANT IS TO TAKE OVER THE PROPERTY ALONG WITH T HE TENANTS VACATED BY FOLLOWING DUE LEGAL PROCESS BEFORE THE PROPERTY COULD BE EXPLOITE D COMMERCIALLY. THIS IS A TIME CONSUMING PROCESS AND THE RENTAL INCOMES DERIVED ME ANWHILE ARE INCIDENTAL INCOME OUT OF THE BUSINESS ASSET AND HENCE PARTAKE THE CHARACT ER OF BUSINESS INCOME ONLY. I FIND STRENGTH IN THE ARGUMENT OF THE APPELLANT. FROM THE OBJECTS OF THE COMPANY, IT COULD BE SEEN THAT THIS PURCHASE OF THE ASSETS FOR COMMER CIAL EXPLOITATION IS WITHIN THE OBJECTS OF THE BUSINESS OF THE APPELLANT. IF THE IN TENTION IS TO EXPLOIT THE SAME FOR RENTAL INCOME, THE APPELLANT WOULD HAVE LET OUT ANY VACANT AREA SOON AFTER THEY FALL VACANT. IT IS PLEADED BY THE APPELLANT THAT NO FRES H LEASE DEED HAVE BEEN EXECUTED AND THE RENT RECEIVED WAS FROM THE EXISTING TENANTS. TH E APPELLANT HAS TAKEN STEPS TO EVICT THE TENANTS IN THE CASE OF MAHALAKSHMI BUILDING TEN ANTS AND THE APPELLANT HAS TAKEN STEPS FOR EVICTION OF EXISTING TENANTS AND COURT PR OCEEDINGS ARE PENDING IN THIS REGARD. IN THE CASE OF MARUTHI PLAZA, THE COMPLEX WAS SOLD BACK TO THE ORIGINAL OWNER AND THE REASON EXPLAINED BY THE APPELLANT IS THAT THE COMPA NY REALIZED THAT COMMERCIAL EXPLOITATION OF THIS PROPERTY WOULD NOT BE VIABLE. THE COMPANY TREATED THE ASSETS AS STOCK IN TRADE IN THE BOOKS OF ACCOUNTS. UNDER THIS CIRCUMSTANCE, I AM OF THE VIEW THAT THE FACTS OF THE CASE OF THE APPELLANT ARE COVERED BY THE DECISION OF HON'BLE SC IN THE CASE OF CEPT VS. SRI LAKSHMI MILLS LIMITED 20 ITR 4 51. 2. IT IS A MIXED QUESTION OF LAW AND FACT AND HAS T O BE DETERMINED FROM THE POINT OF VIEW OF A BUSINESSMAN, IN THAT BUSINESS ON THE FACT S AND IN THE CIRCUMSTANCES OF EACH CASE INCLUDING A TRUE INTERPRETATION OF THE AGREEME NT UNDER WHICH THE ASSETS ARE LET 4 ITA NO.1361/BANG/2012 OUT. AS DISCUSSED IN EARLIER PARA, FROM THE POINT OF VIEW OF BUSINESSMAN, I.E. THE APPEL/ANT, THE APPELLANT ARGUED BEFORE THE A.O AS W ELL AS BEFORE ME THAT THE INTENTION OF PURCHASE OF THESE PROPERTIES ARE FOR COMMERCIAL EXPLOITATION ONLY AND NOT FOR DERIVING RENTAL INCOME. IF ANY, PROPERTY WITH TENAN TS HAS TO BE TAKEN FOR COMMERCIAL EXPLOITATION, ANY BUSINESSMAN IS REQUIRED TO TAKE ALONG WITH TENANTS AND THEN UNDERGO THE PROCESS OF EVICTION OF TENANTS THROUGH LEGAL PR OCESS BEFORE THE PROPERTY COULD BE COMMERCIALLY EXPLOITED. ON THIS SET OF FACTS, IT C ANNOT BE HELD THAT THE PROPERTY WAS ACQUIRED FOR REALIZATION OF RENTS AND NOT FOR COMM ERCIAL EXPLOITATIONS. SINCE THE PORTIONS WERE LET OUT BY THE PREVIOUS OWNERS THE ON LY CHOICE LEFT WITH THE APPELLANT IS TO TAKE OVER THE PROPERTY ALONG WITH TENANTS IN WHI CH CASE, THE DEPOSITS RECEIVED BY THE EARLIER TENANT HAS TO NECESSARILY BE ADJUSTED F ORM THE PURCHASE PRICE OR ALTERNATIVE OPTIONS COULD BE A DISCOUNTED PRICE IN THE COST OF THE PROJECT. HOWEVER, THAT IS BETWEEN THE APPELLANT AND THE EARLIER OWNER TO DECIDE. THE INITIATION OF LEGAL PROCESS FOR EVICTION OF THE TENANTS CLEARLY SHOW TH E INTENTION OF THE APPELLANT AS A BUSINESSMEN TO EXPLOIT THE ASSETS COMMERCIALLY AND NOT TO REALIZE THE RENTAL INCOME OUT OF THE PROPERTY. 3. WHERE ALL THE ASSETS OF THE BUSINESS ARE LET OUT , THE PERIOD FOR WHICH THE ASSETS ARE LET OUT IS A RELEVANT FACTOR TO FIND OUT WHETHER TH E INTENTION OF THE ASSESSEE IS TO GO OUT OF BUSINESS ALTOGETHER OR TO COME BACK AND RES TART IT. IN THE CASE OF THE APPELLANT, THERE ARE PRE EXISTIN G TENANTS WHICH WERE TAKEN OVER BY THE APPELLANT AND BY VIRTUE OF THOSE AGREEMENTS THE APPELLANT WAS RECEIVING THE RENTALS AND RIGHTLY SO, SINCE TILL THE TENANTS ARE EVICTED THROUGH LEGAL PROCESS THE APPELLANT IS ENTITLED TO RECEIVE THE SAME. THIS BY ITSELF DOES N OT OVER RIDE THE BASIC INTENTION OF PURCHASE OF THE PROPERTY. 4. IF ANY, FEW OF THE BUSINESS ASSETS ARE LET OUT T EMPORARILY, WHILE THE APPEL/ANT IS CARRYING OUT HIS OTHER BUSINESS ACTIVITIES, THEN IT IS A CASE OF EXPLOITIN G THE BUSINESS ASSETS OTHERWISE THAN EMPLOYING THEM FOR THIS, OWN USE FOR MAKING PROFIT FOR THAT BUSINESS.; BUT IF THE BUSINESS NEVER STARTED OR HAS STARTED BUT SEIZED WI TH NO INTENTION TO BE RESUMED, THE ASSET ALSO WILL SEIZE TO BE BUSINESS ASSETS AND THE TRANSACTION WILL ONLY BE EXPLOITATION OF PROPERTY BY AN OWNER THEREOF BUT NOT EXPLOITATIO N OF BUSINESS ASSET. IN THE CASE OF THE APPELLANT, THE SCOPE OF CONFUSIO N IS ON ACCOUNT OF MENTIONING IN THE AUDIT REPORT BY THE CHARTERED ACCOUNTANT, THAT THE BUSINESS HAS NOT YET STARTED. APPARENTLY, THE APPELLANT PURCHASED THE PROPERTY AL ONG WITH TENANTS ONLY DURING THE PREVIOUS YEAR. HENCE, THIS IS THE FIRST TRANSACTION AND THE TRY NATURE OF TRANSACTION HAS TO BE SEEN IN ISOLATION. AND THE UNDISPUTED FACT IS THAT THE APPELLANT HAS SHOWN THIS ASSET HAS STOCK IN TRADE IN THE BOOKS OF ACCOUNTS. THE COMMENTS OF THE CA IN THE AUDIT REPORT CANNOT SHADOW THE INTENTION OF THE APPELLANT WHICH CAN ONLY BE UNDERSTOOD FROM THE NATURE OF TRANSACTION AND THE EVENTS LIKE FILIN G OF CASES FOR EVICTION OF TENANTS AND REH SALE OF THE ASSETS TO THE ORIGINAL OWNER ONCE T HE NONH FEASIBILITY OF COMMERCIAL EXPLOITATION OF THE ASSETS WAS UNDERSTOOD. SINCE TH IS IS THE FIRST TRANSACTION, THE MAIN ACTIVITY OF COMMERCIAL CONSTRUCTION ETC., CAN START ONLY AFTER EVICTION OF TENANTS IN LIGHT OF THAT THERE IS SCOPE FOR A COMMENT THAT THE REAL BUSINESS HAS NOT STARTED, THOUGH 5 ITA NO.1361/BANG/2012 TECHNICALLY IT IS NOT CORRECT TO SAY SO SINCE THE B USINESS SHOULD BE CONSIDERED AS STARTED ONCE THE FIRST TRANSACTION TOOK PLACE. HOWE VER, THAT IS PURELY A TECHNICAL ISSUE AND CANNOT EVIDENCE THE FACTS OF NATURE OF TRANSACT ION PER SE. AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF UNIVERSAL PLAST LTD CI TED ABOVE, IT IS THE NATURE AND INTENTION OF THE WHOLE TRANSACTION THAT MATTERS AND NOT THESE OBSERVATIONS. FOR THE DETAILED DISCUSSIONS EARLIER THE INTENTION OF THE A PPELLANT IS CLEAR I.E TO EXPLOIT THE ASSETS COMMERCIALLY. 9. UNDER THESE CIRCUMSTANCES, IN THE APPEAL FOR THE AY'S 1992-93 AND 193-94 IT WAS HELD BY ME, THAT THE INCOME DERIVED BY THE APPELLAN T IS BUSINESS INCOME, INCIDENTAL INCOME IN THE FORM OF RENTS ON THE PROPERTY PURCHAS ED FOR COMMERCIAL EXPLOITATION HAS TO BE TREATED AS BUSINESS INCOME AND NOT HOUSE PROP ERTY INCOME. IN VIEW OF THIS FINDING, IT IS BUT LOGICAL THAT THE TRANSACTIONS H AS TO BE TREATED AS BUSINESS TRANSACTION AND NOT A TRANSACTION OF CAPITAL GAINS SINCE THE AS SET IS TREATED BY THE APPELLANT AS STOCK IN TRADE. 3. AGGRIEVED BY THE ORDER OF THE CIT(A), MYSORE DT. 31.5.2012 FOR ASSESSMENT YEAR 1994-95, REVENUE IS BEFORE US RAISING THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED CIT (APPEALS) IS OPPO SED TO LAW AND FACTS OF THE CASE. 2. THE LEARNED CIT (APPEALS) OUGHT TO HAVE UPHELD THE DECISION OF THE ASSESSING OFFICER TREATING THE GAIN ON SALE OF IMMOVABLE PROP ERTY UNDER THE HEAD SHORT TERM CAPITAL GAIN. 3. THE CIT (APPEALS) HAS ERRED IN ALLOWING THE CLA IM OF THE ASSESSEE TO ASSESS THE INCOME ON SALE OF IMMOVABLE PROPERTY UNDER BUSINESS INCOME SINCE THE ASSESSEE IS RECEIVING ONLY RENTAL INCOME FROM THE TENANTS AND H AD NO OTHER ACTIVITY DURING THE YEAR. 4. THE CIT (APPEALS) HAS ERRED IN HOLDING THAT TH E COMPANY IS ENGAGED IN REAL ESTATE BUSINESS WHEREAS IT IS CLEAR FROM THE AUDIT REPORT FILED BY THE ASSESSEE THAT THE COMPANY HAS NOT COMMENCED ANY BUSINESS ACTIVITY DUR ING THE YEAR UNDER CONSIDERATION AND SUBSEQUENT YEARS. 5. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE U RGED THAT THE ORDER OF THE CIT (APPEALS), ON THE ABOVE POINTS MAY BE SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ALL OR ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF THE HEARING OF THE APPEAL. 4. THE GROUNDS RAISED AT S.NOS.1, 5 AND 6 BY THE ASSESSEE ARE GENERAL IN NATURE AND NOT BEIN G URGED BEFORE US, NO ADJUDICATION IS CALLED FOR THER EON. 5.1 THE GROUNDS RAISED AT S.NOS.2 TO 4 RELATE TO THE QUESTION OF WHETHER THE PROFIT ON SA LE OF THE PROPERTY AT ATTAVAR, MANGALORE SHOULD BE TREATE D AS STCG ON SALE OF A CAPITAL ASSET AS HELD BY 6 ITA NO.1361/BANG/2012 THE ASSESSING OFFICER OR AS STOCK-IN-TRADE AND THER EFORE BUSINESS INCOME AS CLAIMED BY THE ASSESSEE AND HELD BY THE LEARNED CIT (APPEALS). 5.2 THE LEARNED DEPARTMENTAL REPRESENTATIVE IN SUPP ORT OF THE GROUNDS RAISED SUBMITTED THAT THE LEARNED CIT (APPEALS) OUGHT TO HAVE CONFIRMED T HE DECISION OF THE ASSESSING OFFICER IN TREATING THE GAIN ARISING ON SALE OF THE SAID PROPE RTY AS STCG. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICE R FOUND THAT THE ASSESSEE HAD PURCHASED THE SAID PROPERTY, A BUILDING CONSISTING OF SHOPS, OFFI CE PREMISES, ETC. AND DERIVED INCOME THERE FROM. IT IS ALSO SUBMITTED THAT THE ASSESSING OFFICER NOT ED THAT THE AUDIT REPORT FILED BY THE ASSESSEE STATED THAT IT HAD NOT COMMENCED ANY BUSINESS DURIN G THE YEAR UNDER CONSIDERATION. IT IS CONTENDED BY THE LEARNED DEPARTMENTAL REPRESENTATIV E THAT THE ASSESSEE MERELY COLLECTED RENT FROM THE EXISTING TENANTS AND SINCE THE PROPERTIES WERE NEVER USED FOR BUSINESS AND THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAD ANY INTENTIO N TO EXPLOIT THIS PROPERTY AS A COMMERCIAL ASSET. IN THESE CIRCUMSTANCES, SECTION 22 OF THE ACT IS C LEARLY ATTRACTED AND THEREFORE THE RENTAL INCOME IS ASSESSABLE AS INCOME FROM HOUSE PROPERTY. THE L EARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE LETTING OUT OF PROPERTY IS NOT THE BUSINES S OF THE ASSESSEE AND THIS ACTIVITY WOULD NOT AMOUNT TO EXPLOITATION OF A COMMERCIAL ASSET. IN V IEW OF THE ABOVE FACTS, THE LEARNED DEPARTMENTAL REPRESENTATIVE CONTENDS THAT THE LEARNED CIT (APPEA LS) ERRED IN HOLDING THAT THE ASSESSEE IS ENGAGED IN REAL ESTATE BUSINESS AND THAT THE INCOME ARISING ON SALE OF THE SAID IMMOVABLE PROPERTY IS BUSINESS INCOME. THE LEARNED DEPARTMENTAL REPRE SENTATIVE PRAYS THAT THE ORDER OF THE LEARNED CIT (APPEALS) ON THIS ISSUE BE REVERSED AND THAT OF THE ASSESSING OFFICER RESTORED. 5.3 PER CONTRA, THE LEARNED AUTHORISED REPRESENTATI VE PLACED SUPPORT ON THE FINDING OF THE LEARNED CIT (APPEALS) ON THIS ISSUE THAT THE INCOME ARISING ON SALE OF THE SAID PROPERTY, WHICH IS 7 ITA NO.1361/BANG/2012 SHOWN AS STOCK-IN-TRADE IN THE ASSESSEE'S BOOKS, IS EXIGIBLE TO TAX AS BUSINESS INCOME ONLY. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT TH E LEARNED CIT (APPEALS) IN COMING TO THE FINDING THAT THE SAID PROPERTY WAS STOCK-IN-TRADE O F THE ASSESSEE AND THEREFORE THE INCOME ARISING ON SALE OF THE SAME WAS EXIGIBLE TO TAX AS BUSINESS INCOME, REFERRED TO AND APPLIED THE OBSERVATIONS OF THE HON'BLE APEX COURT IN THE CASES OF UNIVERSA L PLAST LTD. V CIT (1999) 237 ITR 454 AND FOLLOWED SRI LAKSHMI MILLS LTD. REPORTED IN 20 ITR 451. IN VIEW OF THIS, THE LEARNED AUTHORISED REPRESENTATIVE SOUGHT DISMISSAL OF REVENUES GROUN DS AND THAT THE ORDER OF THE LEARNED CIT (APPEALS) BE UPHELD. 5.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. FROM THE DETAILS ON RECORD, IT IS SEEN THA T IN THE PERIOD UNDER CONSIDERATION, THE ASSESSEE HAD SOLD A PROPERTY CONSISTING OF LAND AND BUILDING SITUATED AT ATTAVARA VILLAGE, MANGALORE BY REGISTERED SALE DEED DT.20.12.1993 TO ONE SRI ABDU LLA FOR A CONSIDERATION OF RS.78 LAKHS. THIS PROPERTY WAS ACQUIRED BY THE ASSESSEE ON 3.9.1991 F OR A CONSIDERATION OF RS.60 LAKHS. WHILE THE CASE OF THE ASSESSEE WAS THAT THIS PROPERTY WAS STO CK-IN-TRADE IN ITS BOOKS OF ACCOUNT AND THEREFORE THE PROFIT / INCOME ARISING ON SALE THERE OF WOULD BE EXIGIBLE TO TAX AS BUSINESS INCOME, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PROF IT ON SALE THEREOF WAS NOT BUSINESS INCOME, BUT BEING AN INVESTMENT WAS EXIGIBLE TO TAX UNDER THE H EAD CAPITAL GAINS I.E. STCG. THE LEARNED CIT (APPEALS) ON EXAMINATION OF THE OBJECTIONS OF THE ASSESSEE COMPANY NOTES THAT THE PURCHASE OF ASSETS FOR COMMERCIAL EXPLOITATION IS ONE OF THE OB JECTS THEREIN. THE LEARNED CIT (APPEALS) HAS ALSO OBSERVED THAT THE ASSESSEE TREATED THE ASSETS PURCHASED AS STOCK-IN-TRADE IN ITS BOOKS OF ACCOUNTS. THESE FACTS, WE FIND, HAVE NOT BEEN DISP UTED BY THE ASSESSING OFFICER NOR CONTROVERTED BY REVENUE BEFORE US BY THE LEARNED DEPARTMENTAL RE PRESENTATIVE. ON EXAMINATION OF THE DETAILS 8 ITA NO.1361/BANG/2012 ON RECORD AND FOLLOWING THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF UNIVERSAL PLAST LTD. (SUPRA), THE LEARNED CIT (APPEALS) HAS HELD THAT IT IS CLEAR THAT THE NATURE AND THE INTENTION OF THE ASSESSEE IS TO EXPLOIT THE ASSET COMMERCIALLY. WE ALSO FIND THAT THE LEARNED CIT (APPEALS) IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 1992-93 AN D 1993-94 HAS HELD THAT THE INCOME DERIVED BY THE ASSESSEE IS BUSINESS INCOME AND THAT THE INC IDENTAL INCOME IN THE FORM OF RENTS FROM TENANTS IN THE PROPERTY PURCHASED FOR COMMERCIAL EXPLOITATI ON HAS TO BE TREATED AS BUSINESS INCOME ONLY. IN THIS FACTUAL MATRIX AS LAID OUT ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE INCOME / PROFIT ARISING ON SALE OF THE SAID PROPERTY AT ATTAVARA VI LLAGE, MANGALORE, BEING STOCK-IN-TRADE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY, IS EXIGIB LE TO TAX AS BUSINESS INCOME AND THEREFORE UPHOLD THE ORDER OF THE LEARNED CIT (APPEALS). CON SEQUENTLY, REVENUES GROUNDS RAISED AT S.NOS.2 TO 4 ARE DISMISSED. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 5 TH OCTOBER, 2013. SD/- SD/- (N.V. VASUDEVAN) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - B BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDE R ASST. REGISTRAR, ITAT, BANGA LORE