Dr. Sanjyot Deshpande, Pune V. Income-tax Officer, Ward - 5(2), Pune

ITA 2401/PUN/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2676 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 31-12-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 13-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K VERMA
• Keywords: Capital asset; Business income; Date of conversion
• Section: 45(2); 143(3); 250

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 2401 /P U N/201 7 / ASSESSMENT YEAR : 20 1 0 - 1 1 DR. SANJYOT DESHPANDE, 221, ALANKAPURI HSG SOCIETY, RAMBAUG COLONY, KOTHRUD, PUNE 411038 . / APPELLANT PAN: AELPD3235R VS. THE INCOME TAX OFFICER, WAD 5( 2 ) , PUNE . / RESPONDENT / APPELLANT BY : S/SHRI NIKHIL PATHAK AND SUHAS BORA / RESPONDENT BY : SHRI M.K. VERMA / DATE OF HEARING : 0 6 . 0 3 .201 9 / DATE OF PRONOUNCEMENT: 08 . 0 3 .201 9 / ORDER PER SUSHMA CHOWLA, J M : TH E APPEAL FILED BY ASSESSEE IS AGAINST ORDER OF CIT (A) , PUNE - 1, DATED 27 . 0 7 .201 7 RELATING TO ASSESSMENT YEAR 20 1 0 - 1 1 AGAINST ORDER PASSED UNDER SECTION 250 / 143(3) R.W.S. 14 7 OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND S OF APPEAL: - 1 . THE LEARNED CIT(A) - 1, PUNE AS WELL AS LEARNED AO, PUNE ERRED IN LAW AND ON FACTS IN ASSESSING THE TAXABLE INCOME OF THE APPELLANT AT RS . 21, 13,190/ - INSTEAD OF RS.8,84,320/ - . ITA NO. 2401 /P U N/201 7 DR. SANJYOT DESHPANDE 2 2. THE LEARNED CIT(A), PUNE ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE LEARNED AO, PUNE OF TREATING THE GAIN ARISING ON SALE OF LAND AS BUSINESS INCOME ' INSTEAD OF 'CAPITAL GAIN'. 3. THE LEARNED CIT(A),PU NE AS WELL AS LEARNED AO OUGHT TO HAVE APPRECIATED THAT MERELY CONVERTING ANCESTRAL & INHERITED AGRICULTURE LAND IN NON - AGRICULTURE LAND DOES NOT LEAD TO CON V ERSION OF A CAPITAL ASSET INTO STOCK IN TRADE. THE I T AUTHO R I TI ES OUGHT TO HAVE APPRECIATED THAT C ONVERSION TO NA STATUS WAS UNDERTAKEN CONSIDERING FAMILY NEEDS / DESIRES.ETC & NOT WITH BUSINESS INTENTION. 4. THE IT AUTHORITIES ERRED IN LAW AND IN FACTS BY INVOKING THE PROVISIONS OF SECTION 45(2) O F THE ITA,1961. T HE I T AUTHORITIES OUGHT TO HAVE ALSO APPRECIATED THAT IT WAS NOT POSSIBLE TO SELL A BIG PARCEL OF LAND AT 59400 SQ METERS WITHOUT CONVERT I NG IT INTO SMALLER PLOTS ALONG WITH ACCESS ROADS. 5. ALT ERN A TIVELY AND WITHOUT PREJUDICE TO ABOVE GROUNDS LEARNED AO ERRED IN LAW AND IN FACTS IN MAKING ADDITIONS ON THE BASIS OF INCORRECT CALCULATION AN D ADOPTING INCORRECT RATES 3. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS WHETHER THE GAIN ARISING ON SALE OF AGRICULTURAL LAND WHICH WAS CONVERTED INTO NA LAND IS AKIN TO CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE AND THE GAIN ARISING ON SALE OF LAND IS TO BE ASSESSED AS BUSINESS INCOME INSTEAD OF INCOME FROM CAPITAL GAINS DECLARED BY ASSESSEE. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE HAD INHERITED AGRICULTURAL INCOME SITUATED AT BARAMATI ALONG WITH THREE OTHER FAMILY MEMBERS. THE TOTAL LANDHOLDING WAS 15 ACRES OF LAND. THE ASSESSEE ALONG WITH OTHER FAMILY MEMBERS HAD MADE AN APPLICATION FOR CONVERSION OF THE SAID PROPERTY TO NON AGRICULTURAL LAND, WHICH WAS GRANTED TO THE ASSESS EE VIDE ORDER DATED 02.06.2008. THEREAFTER, THE ASSESSEE GOT THE LAYOUT PLAN APPROVED FOR SUB - PLOTTING OF LARGE PLOT OF LAND. HOWEVER, THE ASSESSEE SOLD THE LAND AS SUCH ALONG WITH OTHER CO - OWNERS AND OFFERED THE INCOME AS INCOME FROM CAPITAL GAINS. T HE ASSESSING OFFICER WAS OF THE VIEW THAT WHERE THE ASSESSEE HAD GOT ITS PROPERTY CONVERTED FROM AGRICULTURAL LAND TO NON AGRICULTURAL USE AND HAD ALSO GOT APPROVED THE LAYOUT PLAN IN ORDER TO ENABLE IT TO SELL THE SAME BY WAY OF SMALLER PLOTS, THEN DEEMED CAPITAL GAINS ARE TO BE RECOGNIZED IN THE HANDS OF ITA NO. 2401 /P U N/201 7 DR. SANJYOT DESHPANDE 3 ASSESSEE ON THE DATE OF CONVERSION OF AGRICULTURAL LAND INTO NON AGRICULTURAL LAND I.E. 02.06.2008 AND ALSO INCOME FROM BUSINESS IS TO BE WORKED OUT IN THE HANDS OF ASSESSEE ON SALE OF ASSET. 5. THE CIT( A) UPHELD THE ORDER OF ASSESSING OFFICER, AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LIMITED ISSUE WHICH ARISES IS WHETHER THE GAIN ARISING ON TRANSFER OF LAND AS SUCH IS TO BE ASSESSED AS INCOME FROM BUSINESS OR INCOME FROM LONG TERM C APITAL GAINS. THE CASE OF ASSESSEE BEFORE US IS UNDOUBTEDLY, IT OWNED AGRICULTURAL LAND AS CO - OWNER ALONG WITH OTHER FAMILY MEMBERS AND IT HAD RECEIVED NA PERMISSION FROM THE AUTHORITIES FOR CONVERSION OF LAND USE FROM AGRICULTURAL TO NON AGRICULTURAL US E. IT HAD ALSO SOUGHT AND OBTAINED SANCTION FOR SUB - PLOTTING OF THE SAID LAND INTO SMALLER PLOTS. HOWEVER, NO BENEFIT AROSE FROM SUCH SUB - PLOTTING. THE ASSESSEE ALONG WITH CO - OWNERS HAD SOLD THE PLOT OF LAND IN ENTIRETY TO PURCHASERS. WHERE THE SAID LA ND OWNED BY THE ASSESSEE WAS ANCESTRAL LAND AND WAS HELD FOR LONG PERIOD AND HENCE, GAIN WHICH ARISES IN THE HANDS OF ASSESSEE IS INCOME FROM CAPITAL GAINS. HOWEVER, THE CASE OF REVENUE IN THE HANDS OF ASSESSEE IS THAT SINCE THE ASSESSEE HAD OBTAINED NA PERMISSION FOR CONVERSION OF LAND USE AND HAD ALSO RECEIVED SANCTION TO PLOT THE PROPERTY IN SMALL PIECES OF LAND, THEN THE CAPITAL ASSET HA D BEEN CONVERTED BY THE ASSESSEE INTO STOCK IN TRADE BY ITS ACTION AND THE GAIN ARISING IS TO BE ASSESSED IN TWO SL OTS I.E. INCOME FROM LONG TERM CAPITAL GAINS ON CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE AND INCOME FROM BUSINESS ON SALE OF THE LAND. 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD POINTED OUT THAT IN THE CASE OF ONE OF CO - OWNERS SHRI PRABHAKAR KESHAV ITA NO. 2401 /P U N/201 7 DR. SANJYOT DESHPANDE 4 DESHPANDE (HUF), THE CIT(A) HIMSELF HAS ACCEPTED THE CASE OF ASSESSEE AND HELD THAT SALE OF ASSET WAS SALE OF CAPITAL ASSET AND NOT STOCK IN TRADE. THE ASSESSING OFFICER WAS DIRECTED TO TREAT THE INCOME UNDER THE HEAD I NCOME FROM CAPITAL GAINS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ALSO PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF ALLAHABAD IN AMRIT CORP. LTD. VS. ADDL. CIT (2014) 46 TAXMANN.COM 32 (ALLAHABAD), WHEREIN THE PROPOS ITION WHICH WAS LAID DOWN WAS THAT WHERE THE REVENUE COULD NOT PROVE THAT THE ASSESSEE HAD TRANSFERRED THE LAND IN QUESTION AFTER CONVERTING THE SAME INTO STOCK IN TRADE, THEN THE BUSINESS PROVISIONS OF SECTION 45(2) OF THE ACT WERE NOT APPLICABLE. 8. T HE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF ALLAHABAD IN RAJENDRA KUMAR DWIVEDI VS. CIT (2012) 349 ITR 432 (ALLAHABAD). 9. THE LEARNED AUTHORIZED REPRESENTAT IVE FOR THE ASSESSEE IN REJOINDER POINTED OUT THAT IN THE FACTS OF THE CASE IN RAJENDRA KUMAR DWIVEDI VS. CIT (SUPRA) RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE, THE ASSESSEE THEREIN , HAD CARVED OUT PLOTS IN AGRICULTURAL LAND AN D HAD SOLD BY 43 SALE TRANSACTIONS AND HENCE, IT WAS HELD TO BE CASE OF BUSINESS ACTIVITY UNDERTAKEN BY THE ASSESSEE. 10. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WHERE THE ASSESSEE HELD LARGE CHUNK OF LAND ADMEASURING ABOUT 15 ACRES, WHICH W AS HELD IN JOINT OWNERSHIP, WITH OTHER FAMILY MEMBERS AND THE LAND AS SUCH WAS SOLD BY THE ASSESSEE TO PROSPECTIVE PURCHASERS, THEN THE LAND WHICH WAS BEING HELD AS ANCESTRAL LAND FOR SEVERAL YEARS BY THE ASSESSEE AND CO - OWNERS, IS CAPITAL ITA NO. 2401 /P U N/201 7 DR. SANJYOT DESHPANDE 5 ASSET IN THE HAN DS OF ASSESSEE AND THE PROFIT ARISING ON SALE OF SAID CAPITAL ASSET IS TO BE ASSESSED AS INCOME FROM CAPITAL GAINS IN THE HANDS OF ASSESSEE. MERELY BECAUSE THE ASSESSEE HAD CHANGED THE LAND USER FROM AGRICULTURAL TO NON AGRICULTURAL AND HAD EVEN RECEIVE D THE SANCTION FOR SUB - PLOTTING THE SAID LAND INTO SMALLER PLOTS, BUT THE SAID ACTIVITY WAS NOT FOLLOWED BY THE ASSESSEE AS THE LAND AS SUCH WAS SOLD BY THE ASSESSEE AND OTHER CO - OWNERS . H ENCE, IT DOES NOT BECOME BUSINESS ASSET IN THE HANDS OF ASSESSEE AN D OTHER CO - OWNERS. WE HOLD THAT SALE OF LAND IN SUCH FACTS AND CIRCUMSTANCES IS SALE OF CAPITAL ASSET AND THE GAIN ARISING THEREFROM IS TO BE ASSESSED AS INCOME FROM CAPITAL GAINS. WE MAY ALSO POINT OUT THAT SIMILAR VIEW HAS BEEN TAKEN BY THE CIT(A) IN THE CASE OF ANOTHER CO - OWNER SHRI PRABHAKAR KESHAV DESHPANDE (HUF) AND THE COPY OF APPELLATE ORDER IS AVAILABLE ON RECORD. 11. WE ALSO FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF ALLAHABAD IN AMRIT CORP. LTD. VS. ADDL. CIT (SUPRA), WHEREIN THE FACTS ARE SIMILAR AND THE TRANSACTION WAS HELD TO BE TRANSACTION OF DEALING IN CAPITAL ASSET. 12. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE HAS PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF ALLAHABAD IN RAJ ENDRA KUMAR DWIVEDI VS. CIT (SUPRA) AND THE FACTS OF SAID CASE ARE AT VARIANCE, WHEREIN OUT OF AGRICULTURAL LAND OWNED BY THE SAID PERSON, SMALLER PLOTS WERE CARVED OUT AND THE SAME WERE SOLD BY 43 SALE TRANSACTIONS. FURTHER, NO AGRICULTURAL OPERATIONS WE RE CARRIED OUT ON SUCH LAND. IN SUCH CIRCUMSTANCES, THE HONBLE HIGH COURT HELD THAT CAPITAL ASSET WAS CONVERTED INTO STOCK IN TRADE AND THE SALE OF PLOTS WAS TO BE TREATED AS BUSINESS ACTIVITY TO ITA NO. 2401 /P U N/201 7 DR. SANJYOT DESHPANDE 6 MAKE THE PROFITS. HOWEVER, IN THE FACTS OF PRESENT CASE B EFORE US, THOUGH SANCTION WAS RECEIVED FOR CONVERSION INTO SMALLER PLOTS OF LAND , BUT THE ASSESSEE DID NOT SELL THE INDIVIDUAL SMALLER PLOTS OF LAND BUT SOLD THE TOTAL LANDHOLDING OF FAMILY MEMBERS AS A WHOLE AND SUCH TRANSFER OF LAND IS THE TRANSFER OF CA PITAL ASSET AND CANNOT BE TREATED AS INCOME FROM BUSINESS. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO ASSESS THE GAIN ARISING FROM SALE OF THE SAID LAND AS INCOME FROM CAPITAL GAINS. THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE THUS, ALLOWED. 1 3 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 8 TH DAY OF MARCH , 201 9 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 8 TH MARCH , 201 9 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / T HE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) , PUNE - 1 ; 4. THE PR. CIT - 3 , PUNE ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE