A.V.Thomas Leather & Allied Products Private Limited, CHENNAI V. DCIT, CHENNAI

ITA 2067/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8141 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-12-2015
• Assessment Year: 2012-2013
• Appeal Filed On: 19-10-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR MILIND MADHUKAR BHUSARI
• Assessee Lawyers: T BANUSEKAR
• Section: 2(14); 115JB; 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2067/MDS/2015 ' (' / ASSESSMENT YEAR : 2012-13 M/S A.V. THOMAS LEATHER & ALLIED PRODUCTS PRIVATE LIMITED, 64, RUKMANI LAKSHMIPATHY SALAI, EGMORE, CHENNAI - 600 008. PAN : AAACA 6246 K V. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(1), CHENNAI - 600 034. (*+/ APPELLANT) (,-*+/ RESPONDENT) ./ ITA NO.2101/MDS/2015 ' (' / ASSESSMENT YEAR : 2012-13 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(1), CHENNAI - 600 034. V. M/S A.V. THOMAS LEATHER & ALLIED PRODUCTS LTD., 22, MARSHALLS ROAD, EGMORE, CHENNAI - 600 008. (*+/ APPELLANT) (,-*+/ RESPONDENT) './ 0 1 /ASSESSEE BY : SH. T. BANUSEKAR, CA 2 0 1 /REVENUE BY : DR. MILIND MADHUKAR BHUSARI, CI T 3 0 /$ / DATE OF HEARING : 30.12.2015 4!( 0 /$ / DATE OF PRONOUNCEMENT : 05.02.2016 2 I.T.A. NO.2067/MDS/15 I.T.A. NO.2101/MDS/15 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH THE APPEALS OF THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE SAME ORDER OF THE COMMISSIONER OF INCOM E TAX (APPEALS)-1, CHENNAI, DATED 05.08.2015 AND PERTAIN TO ASSESSMENT YEAR 2012-13. WE HEARD BOTH THE APPEALS TOGETHER A ND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. DR. MILIND MADHUKAR BHUSARI, THE LD. DEPARTMENTA L REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE-COMPANY SOLD AGRICULTURAL LAND MEASURING 15.14 ACRES AT KEEZHAKO TTAIYUR AND MAMBAKKAM VILLAGE FOR A TOTAL CONSIDERATION OF ` 56,24,95,297/- TO M/S SMART VALUE HOMES LIMITED, MUMBAI. THE ASSESSE E CLAIMED THE PROFIT ON SALE OF THE LAND AS EXEMPT UNDER SECT ION 2(14) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). BY CONS IDERING THE EXORBITANT PRICE FOR WHICH THE LAND WAS SOLD, AND T HE BUYER BEING A PERSON WHO DEALS IN REAL ESTATE, THE ASSESSING OFFI CER FOUND THAT THE GAIN ARISING OUT OF THE SALE OF THE LAND CANNOT BE TREATED AS SALE OF AGRICULTURAL LAND. IN FACT, THE ASSESSING OFFIC ER PLACED HIS RELIANCE ON THE JUDGMENT OF APEX COURT IN SARIFABIB I MOHAMED IBRAHIM V. CIT (70 TAXMAN 301). ON APPEAL BY THE A SSESSEE, THE 3 I.T.A. NO.2067/MDS/15 I.T.A. NO.2101/MDS/15 CIT(APPEALS) FOUND THAT THE USE OF THE LAND BY THE BUYER CANNOT BE A DETERMINING FACTOR TO DECIDE THE NATURE OF LAND I N THE HANDS OF THE ASSESSEE. PLACING RELIANCE ON THE JUDGMENT OF MADR AS HIGH COURT IN SRI M.S. SRINIVASA NAICKER V. ITO (292 ITR 481), THE COMMISSIONER FOUND THAT THE LAND IN QUESTION IS AGR ICULTURAL LAND. ACCORDING TO THE LD. D.R., NO AGRICULTURIST WOULD P URCHASE THE LAND AT THE PRICE AT WHICH THE LAND WAS SOLD BY THE ASSE SSEE-COMPANY AND THE BUYER HAS PURCHASED THE LAND FOR PROMOTING REAL ESTATE, THEREFORE, THE CIT(APPEALS) IS NOT JUSTIFIED IN TRE ATING THE LAND AS AGRICULTURAL LAND. 3. ON THE CONTRARY, SH. T. BANUSEKAR, THE LD. REPRE SENTATIVE FOR THE ASSESSEE, SUBMITTED THAT ADMITTEDLY, 15.54 ACRE S OF LAND WAS SOLD BY THE ASSESSEE FOR A TOTAL CONSIDERATION OF ` 56,24,95,297/- TO M/S SMART VALUE HOMES LIMITED, MUMBAI. REFERRING T O THE COPY OF VILLAGE ACCOUNT NO.2, OTHERWISE KNOWN AS ADANGAL, W HICH IS AVAILABLE AT PAGES 29 TO 34 OF THE PAPER-BOOK, THE LD. REPRESENTATIVE SUBMITTED THAT THE LAND WAS CLASSIFI ED AS AGRICULTURAL LAND AND THE SAME WAS SUBJECTED TO CULTIVATION. TH E ASSESSEE HAS ALSO RETURNED AGRICULTURAL INCOME IN REGULAR COURSE . IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE LAND IS NOT SUBJECTED TO 4 I.T.A. NO.2067/MDS/15 I.T.A. NO.2101/MDS/15 CULTIVATION. THE ONLY OBJECTION OF THE ASSESSING O FFICER IS THAT THE ASSESSEE SOLD THE LAND AT AN EXORBITANT RATE AND TH E PURCHASER IS A REAL ESTATE DEALER. PLACING RELIANCE ON THE JUDGME NT OF MADRAS HIGH COURT IN SRI M.S. SRINIVASA NAICKAR (SUPRA), THE LD . REPRESENTATIVE SUBMITTED THAT ON IDENTICAL SET OF FACTS, THE MADRA S HIGH COURT EXAMINED THE ISSUE. THE CASE BEFORE THE MADRAS HIG H COURT IS THAT THE ASSESSEE CULTIVATED THE LAND; THE ADANGAL REGIS TER SHOWED THAT THE LAND WAS AGRICULTURAL LAND WHEREIN THE ASSESSEE CARRIED ON AGRICULTURAL OPERATION TILL THE DATE OF SALE OF THE LAND. THE PURCHASER APPLIED FOR CONVERSION OF THE LAND INTO INDUSTRIAL PLOT. THEREFORE, THE ASSESSING OFFICER FOUND THAT THE LAND IN QUESTION W AS AGRICULTURAL ONLY. SINCE THE INTENTION OF THE PURCHASER IS TO C ONVERT THE AGRICULTURAL LAND INTO INDUSTRIAL PLOT, THE LAND IN QUESTION CANNOT BE CONSTRUED AS AGRICULTURAL LAND. IN THOSE FACTUAL C IRCUMSTANCES, THE MADRAS HIGH COURT FOUND THAT THE LAND IS CLASSIFIED AS AGRICULTURAL LAND AND THE AGRICULTURAL OPERATIONS WERE CARRIED B Y THE ASSESSEE. BY PLACING RELIANCE ON THE EARLIER JUDGMENTS IN M. VENKATESAN V. CIT (1983) 144 ITR 886, CIT V. P.J. THOMAS (1995) 2 11 ITR 897 AND IN CWT V. E. UDAYAKUMAR (2006) 284 ITR 511, IT WAS FOUND THAT THE PURPOSE FOR WHICH THE BUYER HAS PURCHASED THE LAND WAS TOTALLY DIFFERENT FROM WHAT THE TRANSFEROR HAD INTE NDED TO USE THE 5 I.T.A. NO.2067/MDS/15 I.T.A. NO.2101/MDS/15 LANDS IN QUESTION. SINCE THE ASSESSEE INTENDED TO CULTIVATE THE LAND AND IN FACT, AGRICULTURAL OPERATIONS WERE CARRIED O N, THE HIGH COURT FOUND THAT THE LAND IN QUESTION WAS AGRICULTURAL LA ND EVEN THOUGH IT WAS SOLD FOR INDUSTRIAL USE. 4. THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS ALSO PLACED HIS RELIANCE ON THE JUDGMENT OF MADRAS HIGH COURT IN SA KUNTHALA VEDACHALAM V. VANITHA MANICKAVASAGAM (2014) 369 ITR 558 AND SUBMITTED THAT WHEN THE LAND WAS CLASSIFIED AS AGRI CULTURAL LAND IN REVENUE RECORDS AND WHICH WAS EVIDENCED BY THE ADAN GAL, THE SAME HAS TO BE TREATED AS AGRICULTURAL LAND. THE H IGH COURT FURTHER FOUND THAT PRIOR TO THE DATE OF SALE, IT MAY NOT BE NECESSARY TO CARRY OUT THE AGRICULTURAL OPERATIONS. 5. THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE DECISION OF COCHIN BENCH OF THIS TR IBUNAL IN HARISSONS MALAYALAM LTD. V. ACIT (2009) 32 SOT 497 AND SUBMITTED THAT THE AMOUNT OF INCOME TO WHICH THE PR OVISIONS OF SECTION 10 OF THE ACT APPLIES, IF ANY SUCH AMOUNT I S CREDITED TO THE PROFIT & LOSS ACCOUNT, SHALL BE REDUCED FROM THE BO OK PROFIT FOR THE PURPOSE OF SECTION 115JB OF THE ACT. REFERRING TO SECTION 10(1) OF THE ACT, THE LD. REPRESENTATIVE SUBMITTED THAT IN C OMPUTING THE TOTAL 6 I.T.A. NO.2067/MDS/15 I.T.A. NO.2101/MDS/15 INCOME OF A PREVIOUS YEAR OF ANY PERSON, AGRICULTUR AL INCOME SHALL NOT BE INCLUDED THEREIN. REFERRING TO THE COPY OF CIRCULAR ISSUED BY CBDT IN NO.550 DATED 1 ST JANUARY. 1990, A COPY OF WHICH IS AVAILABLE AT PAGE 59 OF THE PAPER-BOOK, THE LD. REP RESENTATIVE SUBMITTED THAT CAPITAL GAINS ARISING FROM THE TRANS FER OF THE AGRICULTURAL LAND WILL NOT CONSTITUTE REVENUE WIT HIN THE MEANING OF SECTION 2(1A)(A) OF THE ACT. THE LD. REPRESENTATIV E FURTHER SUBMITTED THAT THE PROFIT ON SALE OF AGRICULTURAL L AND CONSTITUTES AGRICULTURAL INCOME AS OBSERVED BY THE CBDT IN THE ABOVE CIRCULAR. THEREFORE, THE CAPITAL GAINS ARISING ON SALE OF THE LAND CANNOT FORM PART OF BOOK PROFIT FOR THE PURPOSE OF SECTION 115J B OF THE ACT. REFERRING TO ANOTHER DECISION OF COCHIN BENCH OF TH IS TRIBUNAL IN I.T.A. NO.377/COCH/2010 DATED 29.02.2012, A COPY OF WHICH IS AVAILABLE AT PAGES 56-58 OF THE PAPER-BOOK, THE LD. REPRESENTATIVE SUBMITTED THAT THE COCHIN BENCH BY PLACING RELIANCE ON THE JUDGMENT OF APEX COURT IN SINGHAI RAKESH KUMAR V. U NION OF INDIA (2001) 247 ITR 150 AND CIT V. ALL INDIA TEA AND TRA DING CO. LTD. (1996) 219 ITR 544, SUBMITTED THAT INCOME ARISING O N TRANSFER OF AGRICULTURAL LAND IS NOT EXIGIBLE TO CAPITAL GAINS TAX BEING IN THE NATURE OF AGRICULTURAL INCOME. IN FACT, ACCORDING TO THE LD. REPRESENTATIVE, THE COMPUTATION OF BOOK PROFIT UNDE R SECTION 115JB 7 I.T.A. NO.2067/MDS/15 I.T.A. NO.2101/MDS/15 OF THE ACT WAS RAISED BY THE ASSESSEE IN THE ASSESS EES APPEAL. THEREFORE, THE LD. REPRESENTATIVE SUBMITTED THAT TH E CIT(APPEALS) IS NOT JUSTIFIED IN NOT REDUCING THE PROFIT ON SALE OF THE AGRICULTURAL LAND WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS SOLD THE LAND I N QUESTION FOR AN EXORBITANT PRICE OF ` 56,24,95,297/- TO M/S SMART VALUE HOMES LIMITED, MUMBAI, A REAL ESTATE DEALER. THEREFORE, THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE FOR EXEM PTION AS AGRICULTURAL INCOME. THE FACT THAT THE LAND IS CLA SSIFIED AS AGRICULTURAL LAND IS NOT IN DISPUTE. IT IS ALSO NO T IN DISPUTE THAT THE ASSESSEE HAS RETURNED AGRICULTURAL INCOME YEAR AFTE R YEAR. THE ADANGAL EXTRACT, WHICH IS AVAILABLE AT PAGES 29 TO 34 OF THE PAPER- BOOK, CLEARLY SHOWS THAT THE LAND IN QUESTION WAS S UBJECTED TO AGRICULTURAL OPERATION. THEREFORE, IT WAS OBVIOUS THAT THE LAND IS AN AGRICULTURAL LAND. THEREFORE, THE PROFIT ARISING O UT OF SUCH LAND HAS TO BE TREATED AS AGRICULTURAL INCOME AS FOUND BY TH E APEX COURT IN SINGHAI RAKESH KUMAR (SUPRA) AND ALL INDIA TEA AND TRADING CO. LTD. (SUPRA) WHICH WAS FOLLOWED BY THE DECISION OF COCHIN BENCH OF 8 I.T.A. NO.2067/MDS/15 I.T.A. NO.2101/MDS/15 THIS TRIBUNAL IN NILGIRI TEA ESTATES LTD. (SUPRA). THE CBDT HAS ALSO SUBSEQUENTLY CLARIFIED THAT THE PROFIT ON SALE OF T HE LAND HAS TO BE TREATED AS AGRICULTURAL INCOME AND WILL NOT CONSTIT UTE REVENUE WITHIN THE MEANING OF SECTION 2(1A)(A) OF THE ACT. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION T HAT THE CIT(APPEALS) HAS RIGHTLY FOUND THAT THE PROFIT ON S ALE OF THE LAND HAS TO BE CLASSIFIED AS AGRICULTURAL INCOME. 7. NOW COMING TO THE ASSESSEES APPEAL, THE ONLY CO NTENTION OF THE ASSESSEE IS WHILE COMPUTING BOOK PROFIT UNDER S ECTION 115JB OF THE ACT, THE AGRICULTURAL INCOME CANNOT FORM PART O F BOOK PROFIT. THE LD. REPRESENTATIVE FOR THE ASSESSEE PLACED HIS RELI ANCE ON THE DECISION OF COCHIN BENCH IN HARRISONS MALAYALAM LTD . (SUPRA) AND CONTENDED THAT THE AMOUNT OF INCOME TO WHICH THE PR OVISIONS OF SECTION 10 OF THE ACT APPLIES, SUCH AMOUNT, IF CRED ITED TO THE PROFIT & LOSS ACCOUNT, SHALL BE REDUCED FROM THE BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB OF THE ACT. THE LD. REPRESENTATIV E FURTHER FOUND THAT IN COMPUTING THE TOTAL INCOME OF PREVIOUS YEAR OF ANY PERSON, AGRICULTURAL INCOME SHALL NOT BE INCLUDED THEREIN. IN THIS CASE ALSO, IT IS AN ADMITTED FACT THAT THE LAND IN QUESTION IS AN AGRICULTURAL LAND AND THE ASSESSEE WAS CARRYING ON AGRICULTURAL OPERA TION. THEREFORE, 9 I.T.A. NO.2067/MDS/15 I.T.A. NO.2101/MDS/15 AS DISCUSSED EARLIER, THE PROFIT ON SALE OF THE LAN D HAS TO BE TREATED AS AGRICULTURAL INCOME. THEREFORE, IF ANY SUCH INC OME IS CREDITED TO THE PROFIT & LOSS ACCOUNT, THE SAME HAS TO BE REDUC ED FROM THE BOOK PROFIT WHILE COMPUTING INCOME UNDER SECTION 11 5JB OF THE ACT. THEREFORE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE OR DER OF THE CIT(APPEALS) ON THIS ISSUE. BY FOLLOWING THE ORDER OF COCHIN BENCH OF THIS TRIBUNAL IN HARRISONS MALAYALAM LTD. (SUPRA ), THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE. THE ASSESSING OFFICER IS DIRECTED TO REDUCE THE PROFIT ON SALE OF AGRICULTUR AL LAND FROM THE BOOK PROFIT FOR THE PURPOSE OF COMPUTING INCOME UND ER SECTION 115JB OF THE ACT. 8. IN VIEW OF THE ABOVE DISCUSSION, THE APPEAL OF T HE REVENUE IS DISMISSED. HOWEVER, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 5 TH FEBRUARY, 2016 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 6 /DATED, THE 5 TH FEBRUARY, 2016. KRI. 10 I.T.A. NO.2067/MDS/15 I.T.A. NO.2101/MDS/15 0 ,/78 98(/ /COPY TO: 1. './ /ASSESSEE 2. ASSESSING OFFICER 3. 3 :/ () /CIT(A)-I, CHENNAI 4. PRINCIPAL CIT, CHENNAI-1, CHENNAI 5. 8; ,/ /DR 6. <' = /GF.