ACIT, V. Maniknagar "B" Co-op.Hsg.Socy.,

ITA 1433/PUN/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7382 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 07-11-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHAY DAMLE
• Assessee Lawyers: C D UPASANI
• Keywords: Business income; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI D. KARUNAKARA RAO (AM) ITA NO. 14 33 /PN/ 2008 ( ASSTT. YEAR : 2005 - 06 ) ASSTT. COMMISSIONER OF INCOME - TAX, NASHIK .. APP ELLANT V. MANIKNAGAR B CO - O P HOUSING SOCIETY LTD., C/O. SHRI K.B. KULKARNI, 5, SHREYA BUILDING, MANIKNAGAR, NASHIK PAN : NOT AVAILABLE . RESPONDENT APP ELLANT BY : SHRI ABHAY DAMLE RESPONDENT BY : SHRI C.D. UPASANI ORDER PER I.C. SUDHIR J M THE REVENUE HAS QUESTIONNED FIRST APPELLATE ORDER ON SEVERAL G ROUNDS INVOLVING THE SOLE ISSUE AS TO WHETHER LD CIT(A) HAS ERRED IN TREATING THE INCOME AS CAPITAL GAINS AND NOT AS BUSINESS INCOME I.E. ADVENTURE IN THE NATURE OF TRADE. 2. THE RELEVANT FACTS ARE THAT ASSESSEE , A CO - OP ERATIVE HOUSING SOCIETY , DECLARED LONG TERM CAPITAL GAIN ON THE SURPLUS REALIZED ON SALE OF PLOT OF LAND. THE A.O HAS ASSESSED THE SAME AS BUSINESS INCOME TREATING THE SALE OF PLOT AS ADVENTURE IN THE NATURE OF THE TRADE. THE LD CIT(A) HAS ALLOWED THE APPEAL WITH THIS FINDING THAT THE PLOT OF LAND WAS NEITHER PURCHASED NOR SOLD BY THE ASSESSEE HOUSING SOCIETY WITH THE SOLE INTENTION TO EARN PROFIT. THE REVENUE HAS NOT ACCEPTED THIS FINDING OF THE LD CIT(A) TREATING THE INCOME AS CAPITAL GAINS AND IS T HUS IN APPEAL BEFORE US. 3. IN SUPPORT OF THE GROUND, THE LD. D.R. SUBMITTED THAT IN THE PRESENT CASE, THE ASSESSEE HAS CREDITED THE SALE CONSIDERATION IN THE ITA . NO 1433 /PN /2008 MANIKNAGR BCO.OP. HOUSING SOCIETY LTD, .. A.Y. 2005 - 06 PAGE OF 4 2 PROFITS & LOSS ACCOUNT AS A DEVELOPMENT FUND. THE NATURE OF RECEIPT IN THE RECIPIENTS HAND IS MORE RELEVANT THAN MOTIVE OF THE PURCHASE. THE LD. D.R. PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF P.H. DIVECHA V/S. CIT, 48 ITR 222 (SC). 4. THE LD. A.R. ON THE OTHER HAND TRIED TO JUSTIFY THE FIRST APPELLATE ORDER. HE SUBMITTED FURTHER THAT THERE WAS NO OTHER PURCHASE AND SALE THAN THE PLOT IN QUESTION. THE PROCEEDS WERE UTILIZED IN THE WELFARE OF THE SOCIETY. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS : 1. G. VENKATASWAMI NAIDU & CO. VS. CIT (1959), 35 ITR 594 (SC) 2. CIT VS. PRABHU DAYAL (1971), 82 ITR 804 (SC) 3. SAROJ KUMAR MAZUMDAR VS. CIT (1959), 37 ITR 242(SC) 4. CIT VS. MOHAMMED MOHIDEEN (1989), 176 ITR 393 (MAD) 5. CIT VS. GUEST KEEN & NETTLEFOLD (1978) 115 ITR 205(CAL) 6. CIT VS. HINDUSTAN ITR 436 (BOM) INDUSTRIAL AGENC IES PVT. LTD. (1982) 135 7. MICHAEL A. KALLIVAYALI VS. CIT (1976) 102 ITR 202 (KER.) 8. CIT VS. INDUBALA CHANDRA (2002) 258 ITR 111 (DEL.) 5. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT THE UNDISPUTED MATERIAL FACT IN THE PRESENT CASE IS THAT THE LAND IN QUESTION WAS PURCHASED BY THE SOCIETY AROUND MORE THAN 15 YEARS EARLIER FROM THE DATE OF SALE OF THE PART OF THE LAND. THERE WAS NO OTHER TRANSACTION RELATING TO LAND IN BETWEEN THIS PERIOD. THE PART OF LAND WAS SOLD BY THE SOCIETY FOR THE PU RPOSE OF RAISING FUNDS FOR CONSTRUCTING COMPOUND WALL AND OFFICE FOR THE SOCIETY WITH THE PRIOR PERMISSION OF THE REGISTRAR OF CO - OPERATIVE SOCIETIES. THE PERMISSION WAS GRANTED BY THE REGISTRAR SUBJECT TO THE CONDITION THAT SALE PROCEEDS SHOULD BE CREDI TED TO THE DEVELOPMENT FUND AND THE FUNDS SHOULD BE USED FOR DEVELOPMENT PURPOSE OF THE SOCIETY. THE SOCIETY KEPT ASIDE PART OF ITA . NO 1433 /PN /2008 MANIKNAGR BCO.OP. HOUSING SOCIETY LTD, .. A.Y. 2005 - 06 PAGE OF 4 3 FUND FOR PAYMENT OF INCOME - TAX, FOR CONSTRUCTION OF COMPOUND WALL AND INVESTED PART OF THE FUND IN CAPITAL GAIN BONDS OF NABAR D ELIGIBLE FOR DEDUCTION U/S. 54EC. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE A.O WAS NOT JUSTIFIED IN DRAWING AN INFERENCE THAT ACTIVITY OF THE SOCIETY IN SELLING THE LAND IN QUESTION WAS TRADE/BUSINESS. IN THE CASE OF CIT V/S. DR. INDU BAL A CHANDRA (2002) (SUPRA), THE HONBLE DELHI HIGH COURT HAS BEEN PLEASED TO JUSTIFY THE ACTION OF THE TRIBUNAL IN HOLDING THE TRANSACTION NOT AN ADVENTURE IN THE NATURE OF TRADE, WHEREIN THE ASSESSEE RETAINED PROPERTY AND SOLD IT AFTER NEARLY 20 YEARS. U NDER THESE CIRCUMSTANCES, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDING OF THE LD CIT(A) THAT THE PLOT SOLD WAS NOT PURCHASED WITH SOLE INTENTION OF SELLING THE SAME TO EARN PROFIT. THE PLOT OF LAND WAS SOLD TO FULFILL THE LEGITMATE NEEDS OF SOCIETY AN D ITS MEMBERS. THE FACTS IN THE CASE OF P.H. DIVECHA VS. CIT (SUPRA) RELIED UPON BY THE LD. D.R ARE DISTINGUISHABLE, HENCE NOT HELPFUL TO THE REVENUE. IN THAT CASE COMPENSATION RECEIVED AGAINST TERMINATION OF AGENCY WAS HELD CAPITAL RECEIPT AND RELEVANCE OF MOTIVE WAS REFERRED IN THAT ASPECT. THE FINDING OF THE LD CIT(A) IN PARA 6, 6.1 AND 6.2 OF THE FIRST APPELLATE ORDER IS REASONED ONE AND SUPPORTED BY THE DECISIONS RELIED UPON BY THE LD. A.R. THE SAME IS THUS UPHELD. THE ISSUE RAISED IN THE GROUND IS THUS DECIDED IN FAVOUR OF THE ASSESSEE. THE RELATED GROUNDS ARE THUS REJECTED. 6. IN RESULT, APPEAL IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31ST MARCH 2011. SD/ - SD/ - ( D. KARU NAKARA RAO ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER ITA . NO 1433 /PN /2008 MANIKNAGR BCO.OP. HOUSING SOCIETY LTD, .. A.Y. 2005 - 06 PAGE OF 4 4 PUNE , DATED THE 31ST MARCH , 20 1 1 US COPY OF THE ORDER IS FORWARDED TO : 1. THE A PP ELLA NT 2. THE RESPONDENT 3. THE CIT I , NASHIK 4. THE CIT(A) - I, NASHIK 5. THE D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE