ACIT, CHENNAI V. M/s. Meramid Properties P Ltd., CHENNAI

ITA 1656/CHNY/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4971 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 22-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D R R VIJAYAKUMAR
• Assessee Lawyers: N MUTHUKUMARAN
• Keywords: Capital asset; Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C, CHENNAI B E F O R E DR. O.K.NARAYANAN, VICE PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER .. I.T.A. NO.1656(MDS)/2009 ASSESSMENT YEAR: 2006-07 THE ASSISTANT COMMISSIONER M/S.MERM AID PROPERTIES P. OF INCOME-TAX, 1-C, JVL TOWERS, COMPANY CIRCLE IV(2), VS. 117, NELSON MANICKAM ROAD, CHENNAI. CHENNAI-600 029. PAN AAACM7840D. (APPELLANT) (RESPONDENT) APPELLANT BY : D R. R.VIJAYAKUMAR RESPONDENT BY: SHRI N.MUTHUKUMARAN O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL FILED BY THE REVENUE RELATES TO THE ASSESSMENT YEAR 2006-07. THE GROUND RAISED BY THE REVENUE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED I N HOLDING THAT ITA NO.1 656(MDS)/2009 2 THE TRANSFER OF THE LAND CONSIDERED IN THE ASSESSME NT ORDER WOULD RESULT IN YIELDING CAPITAL GAINS AND NOT AS INCOME FROM ADVENTURE IN THE NATURE OF TRADE. THE REVENUE HAS ALSO RELIED O N THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF G.VENKATAS WAMY NAIDU & COMPANY VS. CIT, 35 ITR 594 AND IN THE CASE OF P.M. MOHAMED MEERAKHAN VS. CIT, 73 ITR 735. 2. THE ASSESSEE COMPANY, WHICH WAS INCORPORATED ON 4-5- 1992, HAD PURCHASED CERTAIN VACANT LANDS MEASURING 20.98 ACRES AT A COST OF ` 59,23,261/-. IN ITS BOOKS OF ACCOUNT THE LANDS WE RE TREATED AS FIXED ASSETS. THE ASSESSEE COMPANY HAS BEEN CAR RYING ON THE BUSINESS OF DEALING IN SHARES AND SECURITIES. EXCE PT CONSTRUCTING A COMPOUND WALL AROUND THE PROPERTY, NO OTHER ACTIVIT IES WERE CARRIED ON BY THE ASSESSEE COMPANY. 3. IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE SUB DIVIDED THE CONTIGUO US LAND INTO SEVERAL PLOTS AND ULTIMATELY SOLD THOSE PLOTS RESUL TING IN SURPLUS OVER THE COST INCURRED. THE ASSESSEE CLAIMED THE SURPLU S AS ARISING FROM TRANSFER OF AGRICULTURAL LAND AND SOUGHT EXEMPTION FOR THE ENTIRE SURPLUS FROM LEVY OF TAX. THE ASSESSING OFFICER, O N THE OTHER HAND, TREATED THE SALE TRANSACTION AS AN ADVENTURE IN THE NATURE OF TRADE ITA NO.1 656(MDS)/2009 3 AND BROUGHT THE SURPLUS TO TAX AS INCOME FROM BUSIN ESS. IN FIRST APPEAL THE COMMISSIONER OF INCOME TAX (APPEALS) TRE ATED THE PROPERTY AS CAPITAL ASSET AND HELD THAT THE ASSESSE E WAS LIABLE FOR CAPITAL GAINS TAX. THE ASSESSEE ACCEPTED THE DECIS ION OF THE COMMISSIONER OF INCOME TAX (APPEALS). BUT THE REVE NUE IS AGGRIEVED AND, THEREFORE, FILED THE PRESENT APPEAL BEFORE US PRAYING FOR RESTORATION OF THE NATURE OF INCOME AS BUSINESS INCOME AS PROPOSED BY THE ASSESSING AUTHORITY. 4. THE ASSESSEE COMPANY WAS INCORPORATED WITH THE OBJECT OF CARRYING ON OF BUSINESS IN DEALING IN SHARES AND SECURITIES AND ALSO PROPERTY DEVELOPMENT. THROUGHOUT THE LIFE OF THE P ROPERTY HELD BY THE ASSESSEE COMPANY, THE PROPERTY WAS SHOWN AS FIXED A SSET, INVESTMENT IN THE BOOKS OF ACCOUNT AND BALANCE SHEE T. SO ALSO THE ASSESSEE COMPANY HAS BEEN CARRYING ON THE BUSINESS OF DEALING IN SHARES AND SECURITIES ONLY. THE ASSESSEE COMPANY A LSO HAS NOT CARRIED OUT ANY IMPROVEMENT OR DEVELOPMENT IN THE L AND PURCHASED BY IT SO AS TO MAKE IT ALWAYS FIT FOR SALE. IT IS ONLY WHEN THE LAND WAS NOT FOUND THAT MUCH USEFUL TO THE BUSINESS OF THE A SSESSEE THAT THE COMPANY DIVIDED THE LAND INTO PLOTS AND SOLD THEM I N PIECEMEAL. IN THE ABOVE CIRCUMSTANCES, BY THE CONDUCT OF THE ASSE SSEE AS WELL AS ITA NO.1 656(MDS)/2009 4 THE ACCOUNTING TREATMENT GIVEN TO THE LAND, THE NOR MAL PRESUMPTION IS THAT SUCH LAND HAS BEEN TREATED BY THE ASSESSEE COM PANY AS A CAPITAL ASSET. THAT IS THE MOST CONVINCING PROPOSI TION. THE SAME COULD BE UPTURNED, PROVIDED THE ASSESSING OFFICER H AS MATERIAL ON RECORD TO SHOW OTHERWISE. BUT AS A MATTER OF FACT, NO SUCH MATERIALS ARE AVAILABLE ON RECORD. THEREFORE WE ARE IN AGREE MENT WITH THE FINDING OF THE COMMISSIONER OF INCOME TAX (APPEALS) THAT THE LAND SOLD BY THE ASSESSEE WAS A CAPITAL ASSET AND THE AS SESSEE WAS LIABLE FOR CAPITAL GAINS TAX. 5. IN RESULT THIS APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON MONDAY, THE 6 TH DAY OF JUNE, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 6 TH JUNE, 2011. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.