P.A. Ibrahim, V. CIT, Bangalore

ITA 195/BANG/2014

• Counselvise Citation: 19521114 RSA 2014
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 06-02-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C H SUNDAR RAO CITIDR
• Keywords: Business income; Cost of acquisition
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO.195/BANG/2014 ASSESSMENT YEAR : 2008-09 MR. P.A. IBRAHIM, OFFICE NO.19/2026 D, II FLOOR, INDUS AVENUE, KALLAI ROAD, KOZHIKODE. PAN : AADPI 2603J VS. THE ADDL. DIRECTOR OF INCOME TAX (INTL. TAXN.), MANGALORE. APPELLANT RESPONDENT WTA NOS.1 & 2/BANG/2014 ASSESSMENT YEARS : 2006-07 & 2007-08 THE ADDL. DIRECTOR OF WEALTH TAX (INTL. TAXN.), MANGALORE. VS. MR. P.A. IBRAHIM, CALICUT. PAN : AADPI 2603J APPELLANT RESPONDENT REVENUE BY : SHRI C.H. SUNDAR RAO, CIT-I(DR) ASSESSEE BY : NONE DATE OF HEARING : 28.01.2015 DATE OF PRONOUNCEMENT : 13.02.2015 ITA NO.195/BANG/14 & WTA NOS.1 & 2/BANG/14 PAGE 2 OF 6 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER ITA 195/B/14 IS AN APPEAL FOR THE A.Y. 2008-09 BY THE ASSESSEE AND WTA NOS. 1 & 2/B/14 ARE APPEALS FOR THE A.YS. 2006- 07 & 2007-08 BY THE REVENUE. ALL THESE APPEALS ARE DIRECTED AGAINST TH E COMMON ORDER DATED 25.11.2013 OF THE CIT(APPEALS)-IV, BANGALORE. 2. THE FACTS AND CIRCUMSTANCES UNDER WHICH THESE A PPEALS ARISE FOR CONSIDERATION ARE AS FOLLOWS. THE ASSESSEE IS AN I NDIVIDUAL. HE IS A NON- RESIDENT. HE OWNED 6.97 ACRES OF LAND AT CHELLAGHA TTA, VARTHUR HOBLI, BANGALORE [HEREINAFTER REFERRED TO AS THE 'CHELLAGH ATTA PROPERTY']. HE SOLD THIS PROPERTY BY A REGISTERED SALE DEED DATED 12.9. 2007. HE OFFERED TO TAX LONG TERM CAPITAL GAINS ON SALE OF THIS PROPERTY IN THE RETURN OF INCOME FILED FOR THE A.Y. 2008-09. IN THE PROCEEDINGS CONCLUDED BY THE AO U/S. 143(3) R.W.S. 263 OF THE ACT, THE QUESTION THAT AROSE FOR CONSIDERATION WAS AS TO WHETHER INCOME ON SALE OF CHELLAGHATTA PROPERTY WAS TO BE ASSESSED AS BUSINESS INCOME OR AS LONG TERM CAPITAL GAINS. THE AO CAME TO THE CONCLUSION THAT CHELLAGHATTA PROPERTY WAS ALWAYS TR EATED AS STOCK-IN-TRADE OF BUSINESS CARRIED ON BY THE ASSESSEE IN THE BOOKS OF ACCOUNT AND SALE OF SUCH LAND AND GAIN ARISING THEREFROM WILL GIVE RISE TO INCOME UNDER THE HEAD 'INCOME FROM BUSINESS'. IN COMING TO THE ABOV E CONCLUSION, THE REVENUE AUTHORITIES ALSO TOOK NOTE OF THE FACT THAT THE PROPERTY WAS DECLARED AS STOCK-IN-TRADE OF BUSINESS CARRIED ON B Y THE ASSESSEE AND FOR ITA NO.195/BANG/14 & WTA NOS.1 & 2/BANG/14 PAGE 3 OF 6 THAT REASON, WAS NOT TREATED AS PART OF TAXABLE WEA LTH IN THE RETURN OF WEALTH TAX RETURNS FILED BY THE ASSESSEE. 3. AS FAR AS PROCEEDINGS UNDER THE WEALTH-TAX ACT, 1957 ARE CONCERNED, THE ASSESSEE DID NOT DECLARE THE CHELLAG HATTA PROPERTY AS PART OF THE TAXABLE WEALTH AS IT WAS TREATED BY HIM AS S TOCK-IN-TRADE. FOR THE A.YS. 2006-07 & 2007-08, THE ASSESSEE FILED RETURN OF WEALTH IN WHICH CHELLAGHATTA PROPERTY WAS NOT OFFERED TO TAX AS PAR T OF NET WEALTH. PROCEEDINGS U/S. 16(1) R.W.S. 17 OF THE WEALTH-TAX ACT, 1957 WERE INITIATED AGAINST THE ASSESSEE FOR THE AFORESAID ASSESSMENT Y EARS. IN RESPONSE TO THE NOTICES U/S. 17 OF THE WEALTH-TAX ACT, THE ASSE SSEE FILED RETURNS OF WEALTH IN WHICH CHELLAGHATTA PROPERTY WAS OFFERED T O TAX AS PART OF TAXABLE WEALTH OF ASSESSEE. THE ASSESSEE, HOWEVER, DID NOT DECLARE SALE CONSIDERATION OF RS.30 CRORES RECEIVED BY HIM, BUT DECLARED ONLY THE PURCHASE COST OF THE SAID PROPERTY AT RS.1,79,67,29 5. 4. IN THE PROCEEDINGS CONCLUDED U/S. 16(3) OF THE WEALTH-TAX ACT, THE WTO ADOPTED THE VALUE OF LAND OF CHELLAGHATTA PROPE RTY AT RS.24,79,00,000 FOR A.Y. 2006-07 & RS.27,27,00,000 FOR THE A.Y. 2007-08. THE AFORESAID VALUES WERE ARRIVED AT BY THE WTO IN THE FOLLOWING MANNER:- A.Y. 2006-07 SALE CONSIDERATION ON 02.05.2007: RS.30 CRORES. RECKONING THE APPRECIATION IN VALUE AT 10% P.A., WH ICH IS NORMALLY CONSIDERED BY REGISTRATION AUTHORITIES WHI LE FIXING THE GUIDANCE VALUE, THE SAME REWORKED BY REDUCING THE V ALUATION BY ITA NO.195/BANG/14 & WTA NOS.1 & 2/BANG/14 PAGE 4 OF 6 10% P.A. FOR EARLIER YEARS. SINCE THE VALUATION DA TE FOR THE SUBJECT A.Y. FALLS ON 31.03.2006 THE VALUE OF THE ASSET WOR KS OUT TO RS.24,79,00,000/- CONSIDERING THE SALE PRICE OF RS. 30 CRORES IS ENHANCED VALUE @ 10% FROM F.Y. 2005-06 (30 CRORES * 100/121). A.Y. 2006-07 SALE CONSIDERATION ON 02.05.2007: RS.30 CRORES. RECKONING THE APPRECIATION IN VALUE AT 10% P.A., WH ICH IS NORMALLY CONSIDERED BY REGISTRATION AUTHORITIES WHI LE FIXING THE GUIDANCE VALUE, THE SAME REWORKED BY REDUCING THE V ALUATION BY 10% P.A. FOR EARLIER YEARS. SINCE THE VALUATION DA TE FOR THE SUBJECT A.Y. FALLS ON 31.03.2007 THE VALUE OF THE ASSET WOR KS OUT TO RS.27,27,00,000/- CONSIDERING THE SALE PRICE OF RS. 30 CRORES IS ENHANCED VALUE @ 10% FROM F.Y. 2006-07 (30 CRORES * 100/110). 5. AGGRIEVED BY THE ORDERS OF ASSESSMENT BOTH UNDER THE INCOME-TAX ACT, 1961 TREATING THE GAIN ON SALE OF CHELLAGHATTA PROPERTY AS GIVING RISE TO INCOME FROM BUSINESS; AND ADOPTING THE VALUE OF CHE LLAGHATTA LAND BY THE PROCESS OF REVERSE WORKING FROM THE SALE CONSIDERAT ION OF RS.30 CRORES FOR THE PURPOSE OF DETERMINING ITS VALUE TO BE INCLUDED IN THE NET WEALTH IN THE WEALTH-TAX PROCEEDINGS, THE ASSESSEE PREFERRED APPE ALS BEFORE THE COMMISSIONER (APPEALS). 6. THE INCOME-TAX APPEAL AS WELL AS WEALTH-TAX APP EALS WERE HEARD TOGETHER BY CIT(APPEALS). AS FAR AS INCOME-TAX APP EAL IS CONCERNED, THE CIT(A) CONCURRED WITH THE VIEW OF THE AO AND HELD T HAT CHELLAGHATTA PROPERTY WAS HELD AS STOCK-IN-TRADE OF BUSINESS CAR RIED ON BY THE ASSESSEE AND THEREFORE GAIN ON SALE OF AFORESAID PROPERTY GI VES RISE TO INCOME FROM ITA NO.195/BANG/14 & WTA NOS.1 & 2/BANG/14 PAGE 5 OF 6 BUSINESS. AS FAR AS WEALTH-TAX APPEALS ARE CONCER NED, THE CIT(A) CAME TO THE CONCLUSION THAT SINCE THE PROPERTY HAS BEEN HEL D TO BE STOCK-IN-TRADE OF THE BUSINESS OF THE ASSESSEE IN INCOME-TAX PROCEEDI NGS, THERE WAS NO QUESTION OF INCLUDING THE PROPERTY AS TAXABLE WEALT H AND ACCORDINGLY THE ASSESSMENT BY INCLUDING THE VALUE OF PROPERTY FOR T HE PURPOSE OF NET WEALTH IN THE WEALTH-TAX PROCEEDINGS, AND AS SUCH WEALTH-T AX ASSESSMENTS WERE CANCELLED/ANNULLED BY THE CIT(APPEALS). 7. AGGRIEVED BY THE ORDER OF CIT(A) HOLDING THAT C HELLAGHATTA PROPERTY IS PART OF STOCK-IN-TRADE OF BUSINESS OF THE ASSESS EE AND THE GAIN ON SALE OF SUCH PROPERTY HAS TO BE ASSESSED AS INCOME FROM BUS INESS IN A.Y. 2008- 09, THE ASSESSEE HAS PREFERRED APPEAL ITA NO.195/B/ 14. AGGRIEVED BY THE ORDER OF CIT(A) HOLDING THAT CHELLAGHATTA PROPERTY IS STOCK-IN-TRADE AND THEREFORE THE SAME CANNOT FORM PART OF TAXABLE WEAL TH OF THE ASSESSEE IN WEALTH-TAX PROCEEDINGS FOR A.YS. 2006-07 & 2007-08, THE REVENUE HAS PREFERRED WEALTH-TAX APPEALS BEFORE THE TRIBUNAL. 8. AT THE TIME OF HEARING OF THE APPEALS, THE ASSE SSEE HAS FILED A MEMO WHICH READS AS FOLLOWS:- THE ABOVE APPEAL HEARING IS FIXED ON 13.11.2014 I MAY SUBMIT THAT I DO NOT WANT TO PROCEED WITH THE APPEA L AND I MAY INFORM THAT THE APPEAL FILED BY ME MAY BE TREATED A S WITHDRAWN. 9. IN VIEW OF THE AFORESAID MEMO FILED BY THE ASSES SEE, THE APPEAL BY THE ASSESSEE IN ITA NO.195/B/14 IS DISMISSED AS NOT PRESSED. ITA NO.195/BANG/14 & WTA NOS.1 & 2/BANG/14 PAGE 6 OF 6 10. IN VIEW OF THE FACT THAT THE FINDINGS OF THE L D. CIT(APPEALS) IN INCOME-TAX PROCEEDINGS THAT CHELLAGHATTA PROPERTY I S HELD AS STOCK-IN-TRADE BY THE ASSESSEE AND SINCE THAT FINDING HAS NOW BECO ME FINAL, CHELLAGHATTA PROPERTY CANNOT BE CONSIDERED AS FORMING PART OF NE T WEALTH OF THE ASSESSEE. WE HOLD ACCORDINGLY. AS SUCH, THE WEALT H-TAX APPEALS BY THE REVENUE ARE ALSO DISMISSED. 11. IN THE RESULT, ALL THE APPEALS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS D AY OF FEBRUARY, 2015. SD/- SD/- ( ABRAHAM P. GEORGE ) ( N.V. VASU DEVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 13 TH FEBRUARY, 2015. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENTS 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.