M/s.Synthite Industries Ltd, Cochin V. JTCIT, Cochin

ITA 192/COCH/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8586 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-05-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 20-03-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHANTOM BOSE
• Keywords: Capital asset
• Section: 45(2); 143(3); 2(14); 14A

Judgement Text

ITA NO 192 & 193/C/2015 . 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI B P JAIN , A M & G EORGE GEORGE.K , J M ITA NO S . 192 & 193/COMP/2015 (ASST YEAR S 2010 - 11 & 2011 - 12 ) M/S SYNTHITE INDUSTRIES LTD AJAY VIHAR M G ROAD KOCHI 682 016 VS THE JT COMMR OF INCO ME TAX RANGE 4 KOCHI ( APPELLANT) (RESPONDENT) PAN NO. AADCS5616E ASSESSEE BY SH THOMSON THOMAS REVENUE BY SH SHANTOM BOSE, CIT - DR DATE OF HEARING 25 TH M AY 2016 DATE OF PRONOUNCEMENT 1 ST JUNE 2016 OR D ER PER GEORGE GEORGE. K. J M: THES E APPEALS, AT THE INSTANCE OF THE ASSESSEE, ARE DIRECTED AGAINST SEPARATE ORDERS OF THE CIT(A), BOTH DATED 12.2.2015. THE RELEVANT ASSESSMENT YEARS ARE 2010 - 11 AND 2011 - 12. 2 WE SHALL FIRST TAKE UP FOR ADJUDICATION THE APPEAL IN ITA NO. 192/COCH/2015. 3 THREE GROUNDS ARE RAISED IN THIS APPEAL. GROUND NO. 3 IS GENERAL IN NATURE AND NO ADJUDICATION IS CALLED FOR AND HENCE, THE SAME IS DISMISSED. GROUND NO.2 IS WITH REGARD TO THE ADDITION U/S 14A OF THE ACT . THIS G ROUND WAS NOT PRESSED BY THE LD COUNSEL FOR THE ASSESSEE IN THE COURSE OF HEARING OF THIS APPEAL ITA NO 192 & 193/C/2015 . 2 AND HENCE THE SAME IS DISMISSED, AS NOT PRESSED. THE SURVIVING SOLE GROUND AND ITS SUB - GROUNDS READ AS FOLLOW : GROUND NO.1 : I) THE LD CIT (A) HAS ERRED IN DISMISSING THE APPELLANTS CLAIM THAT PROFIT OF RS. 24,26,299/ - ON SALE OF AGRICULTURAL LAND SITUATED IN PANCHAYAT LIMIT WHICH IS NOT NOTIFIED IS FULLY EXEMPT AS AGRICULTURAL LAND IS EXCLUDED FROM THE DEFINITION OF CAPITAL ASSET UNDER SECTION 2(14) (III ). II) WITHOUT PREJUDICE TO THE ABOVE GROUND, THE LD CIT(A) OUGHT TO HAVE ALLOWED AT LEAST THE PROFIT ARISING ON CONVERSION OF AGRICULTURAL LAND INTO STOCK - IN - TRADE AS EXEMPT BY APPLYING THE PROVISIONS OF SECTION 45(2) OF THE I T ACT READ WITH SECTION 2(1 4)(III) 4 THE BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLLOWS: FOR THE ASSESSMENT , 2010 - 11, THE ASSESSEE COMPANY HAD FILED THE RETURN OF INCOME DECLARING A TOTAL INCOME OF RS. 38,05 , 78,820/ - . IN THE RETURN OF INCOME, PROFIT ON SALE OF LAND AMOUNTI NG TO RS. 24,26,299/ - WAS CLAIMED AS EXEMPT . ACCORDING TO THE ASSESSEE THIS LAND IS AGRICULTURAL LAND SITUATED OUTSIDE THE MUNICIPAL LIMITS. THE AO, WHILE COMPLETING THE ASSESSMENT U/S 143(3) APPLIED PROVISIONS OF SECTION 45(2) AND ASSESSED 50% OF THE GAIN AS SHORT TERM CAPITAL GAIN AND BALANCE 50% WAS ASSESSED AS BUSINESS. 5. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) CONFIRMED THE ACTION OF THE AO. 6 THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFORE US. T HE LD COUNSEL FOR THE ASSESSEE FAIRLY SUBMITTED THAT THE ISSUE IN QUESTION IS DECIDED AGAINST THE ITA NO 192 & 193/C/2015 . 3 ASSESSEE BY THE ORDER OF THE TRIBUNAL , IN ASSESSEES OWN CASE FOR THE AY 2007 - 08 TO 2009 - 10 IN ITA NOS. 270/COCH/2014, 3 04/COCH/2014 AND 305/COCH/2014 ( ORDER DATED 6 TH FEB 2015). THE LD DR PRESENT WAS DULY HEARD. 7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IDENTICAL ISSUE WAS SUBJECTED MATTER OF APPEAL BEFORE THE TRIBUNAL IN AS S ESSEES OWN CASE FOR THE AYS 2007 - 08 TO 2009 - 10. THE TRIBUNAL, VIDE ITS ORDER DATED 6.2.2015 (SUPRA) HAD HELD THAT THE LAND IN QUESTION WAS NOT AGRICULTURAL LAND AND WAS LIABLE FOR TAXATION. THE RELEVANT FINDINGS OF THE TRIBUNAL READ AS UNDER: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERU SED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLAIMS THAT IT PURCHASED 512 CENTS OF AGRICULTURAL LAND FOR THE PURPOSE OF EXPANSION OF ITS FACTORY . IT IS NOT IN DISPUTE THAT IT WAS A RUBBER PLANTATION. THE ASSESSEE CLAIMS THAT AN INCOME OF RS.2,50,000 WAS RETURNED AS AGRICULTURAL INCOME FROM THE AGRICULTURAL ACTIVITY. FROM THE MATERIAL AVAILABLE ON RECORD IT APPEARS THAT A RESOLUTION WAS PASSED ON 15 - 03 - 2005 FOR PURCHASE OF 512CENTS OF LAND FOR EXPANSION OF THE FACTORY. AS PER THIS RESOLUTION, THE LAND WAS PURCHASED ON 29 - 03 - 2005. WITHIN A PERIOD OF SIX MONTHS, I.E. ON 19 - 09 - 2006 ANOTHER RESOLUTION WAS PASSED TO CONVERT THE LAND INTO RESIDENTIAL PLOTS . MOREOVER, THE MEMORANDUM OF UNDERSTANDING OF THE COMPANY WAS ALSO AMENDED SO AS TO ENABLE THE COMPANY T O CARRY ON BUSINESS IN REAL ESTATE. ON 27 - 03 - 2007 THE ASSESSEE SOLD 188 CENTS OF LAND TO VARIOUS PARTIES AND ALSO ENTERED INTO AGREEMENT FOR CONSTRUCTION OF BUILDING IN THE SAID LAND. THEREFORE, AS ON 27 - 03 - 2007 THE ASSESSEE IS NOT THE OWNER OF T HE LAND; A T LEAST FOR 188 CENTS OF LAND. IT IS NOT KNOWN WHEN THE REMAINING PORTION OF THE LAND WAS SOLD BY THE ASSESSEE TO OTHER PERSONS. THE FIRST QUESTION ARISES FOR CONSIDERATION IS WHETHER THE LAND WHICH WAS CONVERTED BY THE ASSESSEE INTO STOCK IN TRADE IS AN A GRICULTURAL LAND OR NOT? THE ASSESSEE MAINLY PLACE RELIANCE ON THE CERTIFICATE ISSUED BY THE VILLAGE OFFICER, THE TRANSLATED COPY OF WHICH IS AVAILABLE AT PAGE 3 OF THE PAPER, WHICH READS AS FOLLOWS: CERTIFICATE THIS IS TO CERTIFY THAT THE PROPERTY LYIN G IN BLOCK 45, RESURVEYNOS.324/1, 324/2, 324/3 & 324/4 OF AIKKARANADU NORTH VILLAGE,KADAYIRUPPU KARA HELD FOR AND ON BEHALF OF SYNTHITE INDUSTRIAL CHEMICALS LTD BY ITS MANAGING DIRECTOR MR. C.V. JACOB, S/OVARKEY, NECHUPADOM, KADAYIRUPPU AS PER VILLAGE RECO RDS 56/6 IS AGRICULTURAL LAND (NILAM) AND THAT IT IS BEING USED FOR AGRICULTURAL OPERATIONS. ITA NO 192 & 193/C/2015 . 4 THIS CERTIFICATE IS ISSUED FOR PRODUCING IT BEFORE THE INCOME TAX OFFICE, ERNAKULAM. S D/ - WITH DATE 20/10/10 KADAYIRUPPU VILLAGE OF FICER 20 - 10 - 2010 AIKKAANADU NORTH 6. FROM THE ABOVE CERTIFICATE IT APPEARS THAT THE LAND IN RE - SURVEY NOS324/1, 324/2, 324/3 & 324/4 WAS OWNED BY THE ASSESSEE COMPANY AND THE SAME WAS AGRICULTURAL LAND AND USED FOR AGRICU LTURAL PURPOSE. THE CERTIFICATE WAS ADMITTEDLY ISSUED ON 20 - 10 - 2010 BY VILLAGE OFFICER, AIKKARANADU NORTH VILLAGE. HOWEVER, FROM THE RESOLUTION SAID TO BE PASSED BY THE ASSESSEE COMPANY ON 19 - 09 - 2006 AS EXTRACTED BY THE CIT(A) SAYS THAT THE LAND WAS SITUAT ED AT RESURVEY NOS. 299/4, 324/2, 324/3, 324/5,324/1, 324/6 AND 299/2 OF AIKKARANADU NORTH VILLAGE. THE VILLAGE OFFICER CERTIFIES ONLY RESURVEY NOS. 324/1, 324/2, 324/3 & 324/4 BELONGING TO THE ASSESSEE AND IT WAS AGRICULTURAL LAND. IN RESPECT OF LAND IN R ESURVEYNOS.299/4, 299/2, 324/5 AND 324/6 THERE IS NO MATERIAL AVAILABLE ON RECORD TO SUGGEST THAT IT WAS AGRICULTURAL LAND. THE RESURVEY NOS. 299/4, 324/5,324/6 AND 299/2 ARE OMITTED IN THE CERTIFICATE SAID TO BE ISSUED BY THE VILLAGE OFFICER. FURTHERMORE, THE ADMITTED CASE OF THE ASSESSEE IS THAT PART OF THE LAND TO THE EXTENT OF 188 CENTS OF AND WAS SOLD TO VARIOUS PERSONS ON 27 - 03 - 2007. IF THAT IS SO, IT IS NOT KNOWN WHICH SURVEY NUMBER OF THE LAND THAT WAS SAID TO BE SOLD. IF ANY PART OF THE LAND IS SOL D IN RESURVEY NOS. 324/1, 324/2, 324/3 & 324/4 THEN THE ASSESSEE CANNOT OWN THE ENTIRE LAND AS ON 20 - 10 - 2010 WHEN THE VILLAGE OFFICER ISSUED THE CERTIFICATE. IF THAT IS SO, IT IS NOT KNOWN UNDER WHAT CAPACITY THE VILLAGE OFFICER ISSUED THE CERTIFICATE SAYI NG THAT THE LAND BELONGS TO THE ASSESSEE COMPANY AND IT WAS AGRICULTURAL LAND USED FOR AGRICULTURAL PURPOSE. THE LAND ADMITTEDLY WAS CONVERTED INTO STOCK IN TRADE BY DIVIDING THE SAME INTO RESIDENTIAL PLOTS AND THE BASIS OF THE RESOLUTION DATED 19 - 09 - 2006, I.E. WITHIN A PERIOD OF SIX MONTHS FROM THE DATE OF THE PURCHASE. THEREFORE, THE USAGE AND PURPOSE OF THE LAND WAS CONVERTED AND CHANGED INTO NON AGRICULTURAL PURPOSE. MOREOVER, THERE WAS A CONFUSION AS TO WHICH PART OF THE LAND WAS SOLD AS ON 27 - 03 - 207. IT IS ALSO NOT KNOWN WHETHER THE OTHER PART OF THE LAND SOLD TO OTHER PERSONS FOR THE PURPOSE OF CONSTRUCTING VILLAS. THE ADMITTED FACT IS THAT 188 CENTS OF LAND WAS SOLD TO VARIOUS PERSONS AND AN AGREEMENT WAS ENTERED INTO FOR CONSTRUCTION OF VILLAS. THER EFORE, IT HAS TO BE ASCERTAINED WHAT HAPPENED TO THE REMAINING PART OF THE LAND AFTER ITS CONVERSION. THE FACT REMAINS IS THAT ENTIRE 512 CENTS OF LAND WAS CONVERTED INTO RESIDENTIAL PLOTS ON THE BASIS OF THE RESOLUTION PASSED ON 19 - 09 - 2006. THEREFORE, THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CERTIFICATE ISSUED BY THE VILLAGE OFFICER GOES AGAINST THE FACT ADMITTED BY THE ASSESSEE. SINCE THE ASSESSEE ITSELF ADMITS THAT THE LAND WAS CONVERTED INTO HOUSING PLOTS AS ON19 - 09 - 2006 THE SAME CANNOT REMAI N AS AGRICULTURAL LAND FOR ANY LONGER. IN OTHER WORDS, THE PURPOSE AND USAGE OF THE LAND WAS CONVERTED INTO NONAGRICULTURAL LAND AS ON 19 - 06 - 2006 AND PART OF THE LAND WAS SOLD AS ON 27 - 03 - 2007. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHE N THE ASSESSEE ITSELF CLAIMS THAT THE LAND WAS CONVERTED INTO NON AGRICULTURAL LAND AS ON 19 - 06 - 2006 IT CANNOT CONTINUE AS AGRICULTURAL LAND ANY FURTHER. THEREFORE, THE CERTIFICATE SAID TO BE ISSUED BY THE VILLAGE OFFICER HAS NO RELEVANCE IN VIEW OF THE FA CTS ADMITTED BY THE ASSESSEE. HENCE, THERE IS NO JUSTIFICATION IN THE CLAIM OF THE ASSESSEE THAT THE LAND IS AN AGRICULTURAL LAND. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE SUBJECT LAND IS NOT AN AGRICULTURAL LAND. ITA NO 192 & 193/C/2015 . 5 7 .1 IN VIEW OF THE DECISION OF THE COCHIN BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AYS 2007 - 08 TO 2009 - 10 (SUPRA) , WE HOLD THAT THE AUTHORITIES BELOW ARE JUSTIFIED IN HOLDING THAT THE LAND IN QUESTION IS CAPITAL ASSET LIABLE FOR TAXATION . HENCE, THE GROUND NO.1 IS REJEC TED. ITA NO. 193/COCH/2015: 8 THE SOLITARY ISSUE RAISED IN THIS APPEAL IS WITH REGARD TO THE ADDITION MADE U/S 14A OF THE ACT. AT THE TIME OF HEARING OF THIS APPEAL, THE LD COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND AND HENCE, THE SAME IS DISMIS SED, AS NOT PRESSED. 9 IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 1 ST DAY OF JUNE 2016 . SD/ - SD/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 1 ST J UNE 2016 RAJ* ITA NO 192 & 193/C/2015 . 6 COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT , 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN