M/s. Cama Motors Pvt. Ltd., Ahmedabad V. The Dy.CIT, Circle-1(1)(2), Ahmedabad

ITA 231/AHD/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1041 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-07-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 01-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAGDISH
• Assessee Lawyers: J P SHAH
• Keywords: Capital asset; Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI S.K. YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 231/AHD/2016 (ASSESSMENT YEAR: 2012-13) M/S. CAMA MOTORS PVT. LTD. RUSTOM CAMA MARG, LAL DARWAJA, AHMEDABAD V/S THE DY. COMMISSIONER OF INCOME TAX CIRCLE1)1(1)(2),AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACC8734G APPELLANT BY : SHRI J.P. SHAH, AR RESPONDENT BY : SHRI JAGDISH, CIT/DR ( )/ ORDER DATE OF HEARING : 21 -07-201 6 DATE OF PRONOUNCEMENT : 27-07-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. WITH THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE C ORRECTNESS OF THE ORDER OF LD. CIT(A)-I, AHMEDABAD DATED 30.12.2015 P ERTAINING TO A.Y. 2012-13. ITA NO. 231/ AHD/2016 . A.Y. 2012-1 3 2 2. THE GRIEVANCE OF THE ASSESSEE IS TWO-FOLD AND READS AS UNDER:- 1. THAT THE C.I.T.(APPEALS) GRIEVOUSLY ERRED ON FACTS AND IN LAW IN CONFIRMING THE TAXING OF AN AMOUNT OF RS.24,13,24,783/- RECEIVED I N RESPECT OF THE SALE OF LAND ACQUIRED IN THE YEAR 2003 BY WAY OF CAPITAL INVESTM ENT FOR THE CONSTRUCTION OF THE SHOWROOM CUM WORKSHOP OF THE APPELLANT AS BUSINESS INCOME BY TREATING THE SAME AS AN ADVENTURE IN THE NATURE OF TRADE INSTEAD OF TAXING THE SAME AS SHOWN AND DECLARED IN I.T.R. FILED AS AN 'INCOME FROM LON G-TERM CAPITAL GAINS AT RS.22,78,50,090/- AFTER DEDUCTING THE INDEXED COST 7 INDEXED COST OF IMPROVEMENT AGGREGATING TO RS.2,44,01,910/- FROM SA LE CONSIDERATION OF RS.25,22,52,000/-. IT IS SUBMITTED THAT HAVING REGA RD TO THE FACTS AND JUDICIAL DECISIONS, THE AMOUNT OF RS.22,78,50,090 BE TAXED A S LONG-TERM CAPITAL GAINS AND THAT THE ADDITION OF RS. 24,13,24,783/- MADE AS BUSINESS INCOME BE DELETED. 2. THAT THE C.I.T(APPEALS) FURTHER ERRED IN NOT DEALIN G WITH THE GROUND NO. 2 RELATING TO THE DISALLOWANCE OF COST OF IMPROVEMENT OF RS.3412817 OUT OF TOTAL CLAIM OF RS.47,47,534- MADE ON THE GROUND THAT SIGN ATURE OF THE RECIPIENT WAS NOT FOUND FOR THE BROKERAGE PAID AND THE APPELLANT HAD FAILED TO FURNISH ANY VOUCHER /BILL ETC. TO PROVE THE CLAIM OF EXPENDITURE WHEN I N FACT ALL THE SUPPORTING WERE FILED VIDE LETTER DT. 9-10-2014 AND 12-11-2014 AND THE APPELLANT HAD DEDUCTED DUE TAX AT SOURCE FROM THE PAYMENTS SO MADE, WHEREV ER APPLICABLE. [RECTIFICATION APPLICATION FILED WITH C.I.T.(APPEAL S)] IT IS SUBMITTED THAT THE ENTIRE COST OF IMPROVEMENT OF RS.4747534 BE ALLOWED AS A D EDUCTION AFTER APPLYING DUE INDEXATION WHILE WORKING OUT TAXABLE CAPITAL GAINS OR RS.4747534 BE ALLOWED AS A DEDUCTION WHILE WORKING OUT 'BUSINESS INCOME' IF TH E GROUND NO. 1 IS NOT ALLOWED AND THAT THE ASSESSMENT BE DIRECTED TO BE MODIFIED ACCORDINGLY. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AT LENGTH. WE HAV E CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND HAV E GIVEN A THOUGHTFUL CONSIDERATION TO THE RELEVANT DOCUMENTAR Y EVIDENCES BROUGHT ON RECORD IN THE FORM OF PAPER BOOK. ITA NO. 231/ AHD/2016 . A.Y. 2012-1 3 3 4. BRIEFLY STATED THE FACTS EMANATING FROM THE ORDERS OF THE AUTHORITIES BELOW SHOW THAT THE ASSESSEE IS AN ESTABLISHED AUTO MOBILES DEALER SINCE 1945. IN OCTOBER, 1997, THE ASSESSEE SECURED DEALERSHIP OF MERCEDES BENZ INDIA PVT. LTD. (MBIPL) AND CONDUCTED THE DEALERSHIP AT RENTED PREMISES AT LAL DARWAJA, AHMEDABAD 5. THE PRINCIPAL INSISTED FOR THE EXPANSION OF THE DEA LERSHIP ON THE PART OF THE ASSESSEE. THE ASSESSEE COMPANY RESOLVED FOR PUR CHASE OF LAND AT S.G. HIGHWAY VIDE RESOLUTION DATED 03.11.2003 AND P URCHASED LAND VIDE SALE DEED DATED 01.12.2003 AND 12.12.2003. THE LANDS WERE PURCHASED IN THE NAME OF THE DIRECTOR SHRI JAHANGIR RUSOTM CAMA, THE TOTAL AREA OF TWO ADJOINING PLOTS SO PURCHASED WERE AT 8572 SQ. MTR. FOR A CONSIDERATION OF RS. 95,92,500/-. SINCE, THE LANDS WERE FOR AGRICULTURE PURPOSE AND ASSESSEE INTENDED TO START A SHOW ROOM /WORK SHOP FOR MBIPL, IT APPLIED FOR NA PERMISSION ON 06. 12.2005 AND THE SAME WAS GRANTED ON 18.03.2006. SUBSEQUENTLY, DEVEL OPMENT PERMISSION FROM AUDA WAS TAKEN ON 15.06.2006. 6. HOWEVER, IN THE YEAR 2006, A DISPUTE AROSE BETWEEN THE ASSESSEE AND ITS PRINCIPAL MBIPL, PURSUANT TO WHICH, THE ASSESSE E RESIGNED FROM THE DEALERSHIP ON 27.02.2009. THE RESIGNATION WAS ACCEP TED ON 04.03.2009 AND THE ASSESSEE COMPANY RESOLVED FOR TH E SALE OF THE IMPUGNED LAND ON 23.03.2011 AND THE SALE DEED WAS E XECUTED ON 02.04.2011 FOR A CONSIDERATION OF RS. 25,22,52,080/ - 7. THE REVENUE AUTHORITIES WERE OF THE STRONG BELIEF T HAT THE INTENTION OF THE ASSESSEE WHEN IT PURCHASED THE IMPUGNED LAND WA S TO MAKE PROFIT OUT OF THE SALE OF THE SAME AND, THEREFORE, TREATED THE ENTIRE ITA NO. 231/ AHD/2016 . A.Y. 2012-1 3 4 TRANSACTION AS AN ADVENTURE IN THE NATURE OF TRADE AND TAXED THE SURPLUS AS INCOME FROM BUSINESS. 8. WHILE DOING SO, THE REVENUE AUTHORITIES HAVE COMPLE TELY IGNORED THE FACT THAT THE ASSESSEE WAS NEVER IN THE BUSINESS OF REAL ESTATE. ON THE CONTRARY, THE FACTS ON RECORD SHOW THAT ASSESSE E IS AN AUTOMOBILES DEALER SINCE 1945 AND DURING THE COURSE OF ITS BUSI NESS ACTIVITIES DOWN THE YEAR IT GOT THE DEALERSHIP OF MBIPL AND FOR THE EXPANSION OF THIS HIGH PROFILE DEALERSHIP, ASSESSEE PURCHASED THE IMP UGNED LAND. 9. THE ENTIRE BELIEF OF THE REVENUE AUTHORITIES IS ON THE FACT THAT THE ASSESSEE PURCHASED AGRICULTURAL LAND AND APPLIED FO R N.A PURPOSE. TAKING A LEAF OUT OF THIS ACTION OF THE ASSESSEE, T HE REVENUE AUTHORITIES CAME TO THE CONCLUSION THAT THE ASSESSEE INTENDED T O MAKE HUGE PROFIT AND, THEREFORE, TREATED THE TRANSACTION AS AN ADVEN TURE IN THE NATURE OF TRADE. 10. WHILE DOING SO, THE REVENUE AUTHORITIES ONCE AGAIN COMPLETELY IGNORED THE FACT THAT IF THE ASSESSEE INTENDED TO U SE THE IMPUGNED LAND AS SHOW ROOM/WORK SHOP, IT HAD TO APPLY FOR NA OTHERWISE IT COULD NOT HAVE SUBMITTED ITS PLAN TO AUDA FOR APPROVAL. T HE INTENTION OF THE ASSESSEE FOR APPLYING THE USE OF LAND FOR NA IS CLE ARLY ESTABLISHED FROM THE FACT THAT THE AUDA APPROVED ITS PLAN FOR ESTABL ISHING A SHOW ROOM/WORK SHOP AT THE IMPUGNED LAND. MOREOVER, THE ASSESSEE HAS BEEN CONSISTENTLY SHOWING THE SAID PIECE OF LAND AS A CAPITAL ASSET IN ITS BLOCK OF ASSETS IN THE BALANCE SHEET. THE REVEN UE AUTHORITIES HAVE SIMPLY DISMISSED THE CONTENTIONS OF THE ASSESSEE WI THOUT BRINGING ANY CORROBORATIVE EVIDENCE ON RECORD. IF, THE REVENUE A LLEGES THAT THE TRANSACTION WAS AN ADVENTURE IN THE NATURE OF TRADE THEN THE ONUS WAS ITA NO. 231/ AHD/2016 . A.Y. 2012-1 3 5 CLEARLY UPON THEM TO JUSTIFY THEIR STAND WHICH THE LOWER AUTHORITIES HAVE COMPLETELY FAILED. ON THE CONTRARY, THE FACTS ON RECORD CLEARLY SHOW THAT THE BALANCE OF CONVENIENCE IS TILTED IN F AVOUR OF THE ASSESSEE. CONSIDERING THE FACT OF AUTOMOBILES DEALE RSHIP WITH THE SEQUENCE OF EVENTS FOLLOWING SINCE THE AWARD OF DEA LERSHIP OF MBIL IN 1997, WE HAVE NO HESITATION TO HOLD THAT THE SALE C ONSIDERATION HAS TO BE TAXED UNDER HEAD CAPITAL GAINS AND CANNOT TREAT THE TRANSACTION AS AN ADVENTURE IN THE NATURE OF TRADE. WE, ACCORDINGL Y, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O TO TR EAT THE SURPLUS UNDER THE HEAD CAPITAL GAINS AS RETURNED BY THE ASSESSEE. GROUND NO. 1 IS ACCORDINGLY ALLOWED. 11. A PERUSAL OF THE ORDER OF THE FIRST APPELLATE AUTHO RITY SHOWS THAT HE HAS NOT ADJUDICATED UPON THE GRIEVANCE RAISED BY THE ASSESSEE VIDE GROUND NO. 2, WE FIND THAT THIS GROUND WAS TAKEN BE FORE THE LD. CIT(A) AS PER GROUND OF APPEAL IN FORM NO. 35. THEREFORE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THIS ISSUE TO THE FILES OF TH E LD. CIT(A). THE LD. CIT(A) IS DIRECTED TO DECIDE THIS GRIEVANCE TAKEN B EFORE HIM AS PER THE GROUNDS OF APPEAL IN FORM NO. 35. GROUND NO. 2 IS T REATED AS ALLOWED FOR STATISTICAL PURPOSE. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED IN PART FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 27 - 07 - 201 6. SD/- SD/- (S.K. YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY