The ITO, Ward-5(2), Ahmedabad V. M/s. Pripan Investment Pvt. Ltd., Ahmedabad

ITA 143/AHD/2014

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8589 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-07-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 16-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Capital Gains
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER ./ ITA NO.143/AHD/2014 / ASSTT. YEAR:2010-2011 I.T. O , WARD-5(2), AHMEDABAD VS. M/S. PRIPAN INVESTMENT PVT. LTD. , ZYDUS TOWER, SATELLITE CROSS ROAD, OPP. ISKON TEMPLE, AHMEDABAD-380054. PAN: AAACP9017B ( APPLICANT ) ( RESPONENT ) REVENUE BY : NONE ASSESSEE BY : SHRI JIGAR PATEL , A. R / DATE OF HEARING : 23/10/2019 / DATE OF PRONOUNCEMENT: 20/01/2020 *+/ O R D E R PER MS MADHUMITA ROY, JUDICIAL MEMBER: THE INSTANT APPEAL AT THE INSTANCE OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 01.10.2013, PASSED BY THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS)-XI, AHMEDABAD, ( IN SHORT LD.CIT(A)) ARI SING OUT OF THE ORDER DATED 31.01.2013 PASSED BY THE A.C.I.T UNDER SECTIO N 143(3) OF THE INCOME TAX ACT, 1961(HEREIN AFTER REFERRED TO AS THE ACT)FO R THE ASSESSMENT YEAR 2010- 2011. 2. THE ORDER DIRECTING THE LD.AO TO TREAT PROFIT ON SALE OF PLOTS OF LAND AMOUNTING TO RS.3,82,66,938/- AS PROFITS AND GAINS OF BUSINESS AS AGAINST THE TREATMENT GIVEN BY THE LD.AO AS CAPITAL GAIN HAS B EEN CHALLENGED BEFORE US BY THE REVENUE. ITA NO.143/AHD/2014 A.Y.2010-2011 2 3. THE BRIEF FACTS RELATING TO THIS CASE IS THIS THA T THE APPELLANT HAD SHOWN AN AMOUNT OF RS.63 CR. AS INCOME FROM SALE OF PLOTS OF LAND IN THE PROFITS AND LOSS ACCOUNTS. AS AGAINST THE SALE, THE APPELLANT ALSO D EBITED AN AMOUNT OF RS.2,47,33,062/- ON ACCOUNT OF COST OF PLOTS OF LAN D FOR RESALE. UPON GOING THROUGH THE OBJECTS OF THE APPELLANT COMPANY AND TH E DETAILS OF TRANSACTION IN RESPECT OF THE SALE OF LAND AND UPON MAKING INQUIRI ES FROM THE GOVERNMENT AUTHORITIES THE LD.AO CAME TO THE CONCLUSION THAT TH E INCOME CANNOT BE TREATED AS BUSINESS INCOME AND THE PROFIT ARISING TO THE AP PELLANT COMPANY FROM THE SALE OF PLOTS OF LAND HAS BEEN TAXED AS INCOME UNDER THE HEAD CAPITAL GAIN WHICH WAS REVERSED BY THE FIRST APPELLATE AUTHORITY AND H ENCE THE INSTANT APPEAL BEFORE US. 4. HEARD THE PARTIES, PERUSED THE RELEVANT MATERIAL S AVAILABLE ON RECORD. THE ASSESSEE IS A PRIVATE LIMITED COMPANY INCORPORATED ON 01.12.2018 WITH FOUR MAIN OBJECTS OF THE COMPANY FOLLOWED BY AN INSERTION OF FIFTH OBJECT PURSUANT TO A SPECIAL RESOLUTION PASSED AT THE EXTRA ORDINARY GENE RAL MEETING OF THE COMPANY ON 03.11.2008; THE FIFTH OBJECT RELATING TO DEALING OF PROPERTIES WHEREOF IS AVAILABLE AT PAGE 2 OF THE ASSESSMENT ORDER. UPON V ERIFICATION OF THE PROFIT AND LOSS ACCOUNTS IT WAS SEEN THAT THE ASSESSEE HAD SHO WN RS.6,30,00,000/- UNDER THE HEAD SALE ON PLOTS OF LAND AND ALSO DEBITED AN AM OUNT OF RS.2,47,33,062/- UNDER THE HEAD COST OF PLOTS OF LAND FOR RESALE. UPON VERIFICATION OF THE PAST RECORD OF THE ASSESSEE IT REVEALED THAT THE COMPANY WAS INVESTMENT COMPANY AND NEVER DEALT WITH TRADING IN LAND AS COMMODITY (STOC K-IN-TRADE), AS OBSERVED BY THE LD.AO. ONLY ON THE BASIS OF MAIN OBJECT OF THE MOU OF THE COMPANY, THE ASSESSEE HAS CONSIDERED THE SALE OF LAND AS BUSINES S INCOME WITH A SOLE INTENTION OF SETTING OFF BROUGHT FORWARD BUSINESS LOSS OF A.Y . 2002-03 WHICH IS ON THE VERGE OF GETTING TIME BARRED AND THEREBY REDUCED TH E TAXABLE INCOME IN THE CURRENT YEAR WAS ALSO THE OBSERVATION MADE BY THE L D. AO. THE GARB OF THE LD. AO IS THIS THAT THE LAND IS NOT A COMMERCIAL COMMOD ITY BEING TREATED AS STOCK-IN- TRADE AND THUS TRANSACTION OF LAND IN THIS CASE IS NOTHING BUT TRANSFER OF CAPITAL ITA NO.143/AHD/2014 A.Y.2010-2011 3 GAIN AS AGAINST BUSINESS INCOME. SHOW-CAUSE NOTICE DATED 12.07.2012 WAS ALSO ISSUED TO THE ASSESSEE AS TO WHY THE SALE CONSIDERA TION RECEIPT FROM THE SALE OF LAND SHOULD NOT BE ASSESSED UNDER THE HEAD CAPITAL GAINS AND NOT AS BUSINESS INCOME. IN-REPLY WHEREOF THE ASSESSEE SUBMITTED TH AT THE PLOTS OF LAND WERE DULY ACCOUNTED BY THE COMPANY STOCK-IN-TRADE IN THE BOOKS OF ACCOUNTS FOR A.Y.2009-10 WHICH WAS ACCEPTED BY THE INCOME TAX SC RUTINY ASSESSMENT BY THE THEN CIT(A) AND THUS THE SALE OF PLOTS OF LAND CORRE CTLY BEEN OFFERED TO TAX BY THE COMPANY UNDER THE HEAD BUSINESS INCOME FOR THE Y EAR UNDER CONSIDERATION. THE LD.AO IN THIS RESPECT FURTHER OBSERVED THAT THE LANDS WERE PURCHASED BEFORE THE RESOLUTION WAS PASSED BY THE COMPANY AND FURTHE R THAT THE RESOLUTION IS NOTHING BUT AFTER-THOUGHT OF THE BOARD TO AVOID PAY MENT OF TAXES. ON THE OTHER HAND IT APPEARS FROM RECORD THAT ON 24.10.2008 IN T HE BOARD MEETING ITSELF DECIDED TO ADD THE NEW OBJECT BEING CLAUSE NO.5 IN THE MEMORANDUM OF ASSOCIATION OF THE APPELLANT COMPANY. ON 03.11.2008 BY AND UNDER A SPECIAL RESOLUTION APPROVING CHANGE IN THE OBJECT CLAUSE BY HOLDING EXTRA ORDINARY GENERAL MEETING THE CLAUSE NO.5 HAS BEEN INSERTED F OR THE PURCHASE OF TWO PLOTS FOR SURVEY NOS.1055 AND 1055 AT VILLAGE BALWA, TALU KA DHOLKA PAYMENT WAS MADE TO SMT. BHANUMATI R. DESAI TO THE TUNE OF RS.2 ,31,00,000/- (RS.31,00,000/- + RS.2,00,00,000/-) ON 10.11.2008. IT IS RELEVANT TO MENTION THAT THE COMPANY HAS ALSO FILED SPECIAL RESOLUTION UNDER THE PRESCRIBED FORM BEING NO.23 WITH THE REGISTRAR OF THE COMPANY (ROC), GUJA RAT AT AHMEDABAD, ON 12.11.2008. FURTHER THAT ONE SHRI DEEPAK RAWAL HAS BEEN AUTHORIZED IN THE BOARD MEETING ON 18.11.2008 TO NEGOTIATE AND FINALI ZE THE TERMS. ULTIMATELY THE PURCHASE DEEDS IN CONNECTION WITH TH ESE TWO LANDS WERE EXECUTED IN THE MEETING ON 05.12.2008 AND COPIES OF EACH OF THE DOCUMENTS HAVE BEEN DULY FILED BEFORE US BY THE LD. COUNSEL FOR TH E ASSESSEE. THE LD. AO, HOWEVER, HAS NOT TOOK IT IN ITS PROPER PERSPECTIVE AND NEGATED THE CLAIM OF THE APPELLANT BY HOLDING THAT THE BUSINESS MODULE OF TH E APPELLANT DOES NOT SPEAK OF PLOT/REAL ESTATE FURTHER HOLDING THAT THE RESOLUTIO N PASSED BY THE COMPANY WAS ITA NO.143/AHD/2014 A.Y.2010-2011 4 AFTER THE LANDS WERE PURCHASED THAT TOO AS AN AFTER THOUGHT TO AVOID THE PAYMENT OF TAXES. 5. IN APPEAL WE FIND FROM THE RECORD THAT THE ''LD.C IT (A)'' CONTROVERTED EACH AND EVERY COUNTS OF OBSERVATIONS MADE BY THE LD. A O ON THE BASIS OF LIST OF EVIDENCE QUA DATED. FINALLY RELYING UPON THE JUDGM ENT PASSED BY THE HONBLE JURISDICTIONAL HIGH COURTIN THE CASE OF CIT VSREWAS HANKER A. KOTHARI, REPORTED IN 283 ITR 338(GUJ.) AND ALSO THE JUDGMENT PASSED BY THE APEX COURT IN THE CASE OF PARIMANGALDASGIRDHARDAS HOLDING THAT THE T RANSACTIONS MADE BY THE APPELLANT COMPANY IS BUSINESS IN NATURE, THE INITIA L INTENTION OF THE ASSESSEE, THE TREATMENT UNDER THE BOOKS OF ACCOUNTS, THE TREATMEN T BY ASSESSING OFFICER IN THE PRECEDING YEAR, NEWLY INSERTED CLAUSE IN THE MOA, T HE INTENTION OF PROFIT EARNING AND THE ACTIVITIES TO CONVERT THE LAND INTO NON-AGR ICULTURE USING BORROWED FUNDS IN THE BALANCE SHEET OBSERVING PREDOMINANTLY THE CA SE OF THE APPELLANT OF BEING ENGAGED IN THE BUSINESS OF LAND TRADING AND RESULTA NTLY DIRECTED THE ''LD.AO TO TREAT THE PROFIT FROM LAND SALE IS UNDER THE HEAD PROFIT AND GAINS OF BUSINESS AND PROFESSION AS SHOWN BY THE APPELLANT WHILE, ACCORDI NG TO US, IS JUSTIFIED AND PROPER AND WITHOUT ANY INFIRMITY SO AS TO WARRANT I NTERFERENCE. THUS, THE ORDER IN PASSED IN THE AFFIRMATIVE I.E. IN FAVOUR OF THE ASS ESSEE AND AGAINST THE REVENUE. HENCE, THE REVENUE APPEAL IS FOUND TO BE DEVOID OF ANY MERIT AND THUS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 20/01/2020 AT AHMEDABAD. SD/- SD/- ( WASEEM AHMED ) ACCOUTANT MEMBER ( MS MADHUMITA ROY ) JUDICIAL MEMBER AHMEDABAD; DATED 20/01/2020 TANMAY, SR. PS TRUE COPY ITA NO.143/AHD/2014 A.Y.2010-2011 5 *+ , -./0 1*0. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! / CONCERNED CIT 4. ! ( ) / THE CIT(A) 5. $%& '' , / DR, ITAT, 6. &)* + / GUARD FILE. *+ 2 3 / BY ORDER, 4/3 56 ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION : 15-11-2019 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S. - 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT .. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. : 20-01-2020 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE