DCIT, CIRCLE-2, Nagpur V. M/S R & Y LOGISTICS PVT. LTD., Nagpur

ITA 244/NAG/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4538 (ITAT-NAGPUR)
• Duration Of Justice: 3 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-04-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Capital asset; Business income
• Section: 2(14); 260A

Judgement Text

1 , INCOME TAX APPELLATE TRIBUNAL,NAGPUR BENCH . . , BEFORE S/SH. D T GARASIYA,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER ./ ITA/244/NAG/2013 , / ASSESSMENT YEAR:2009 - 10 DY. COMMISSIONER OF INCOME - TAX, CIRCLE - 2, NAGPUR. VS. M/S R Y LOGISTICS PVT. LTD., 1 ST FLOOR, VALI MANZIL, KAMPTEE ROAD, NAGPUR - 440001. PANAAACR9011K. ( / APPELLANT) ( / RESPONDENT ) REVENUE BY: SHRI A.R. NINAWE. ASSESSEE BY: SHRI K.P. DEWANI. / DATE OF HEARING: 01.09.2016 / DATE OF PRONOUNCEMENT: 01.09.2016 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA A.M. - CHALLENGING THE ORDER,DATED 21/03/2014 OF THE CIT(A) - I,NAGPUR,THE ASSESSING OFFICER(AO)HAS FILED THE PRESENT APPEAL.ASSESSEE - COMPANY ENGAGED IN THE BUSINESS OF CLEARING AND FORWARDING FILED ITS RETURN OF INCOME ON 30/09/2009, DECLARING TOTAL INCOME AT RS.47.92 LAKHS.T HE ASSESSING OFFICER(AO)COMPLETED THE ASSESSMENT U/S.143(3),ON 27/12/2011,DETERMINING ITS INCOME AT RS.1,06,38, 275/ . 2. SOLITARY GROUND OF APPEAL DEALS WITH DELETING THE ADDITION MADE BY THE AO WITH REGARD TO SALE OF PLOTS OF LAND. DURING THE ASSESSMENT P ROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD PURCHASED TO PLOTS OF LAND AT BRAHAMANI(3.63 HECTERS) AND JANGESHWAR (2.32 HECTERS), IN ASSOCIATION WITH ITS PARTNERS.HE HELD THAT THE INTENTION OF PURCHASING THE PLOTS OF THE LAND WAS TO EARN QUICK PROFIT,THA T THE PURCHASERS TO WHOM THE PLOTS WERE SOLD WERE NOT AGRICULTURISTS. HE ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE AND ASKED IT TO EXPLAIN AS TO WHY THE GAIN OF RS. 58.46 LAKHS ON SALE OF THE PLOTS,CLAIMED AS EXEMPT,SHOULD NOT BE TREATED AS BUSINESS INCOM E. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, HE HELD THAT 2 INTENTION OF THE ASSESSEE WAS TO TAKE ADVANTAGE OF ARISING REAL ESTATE PRICE, THAT THE INCOME WAS ASSESSABLE AS BUSINESS INCOME. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM,THE ASSESSEE MADE ELABORATE SUBMISS - IONS AND RELIED UPON CERTAIN CASE LAWS.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER,THE FAA HELD THAT THE SURPLUS HAD ARISING ON SALE OF THE AGRICULTURAL LAND,THAT THE PLOTS OF LAND IN QUESTION WERE LOCATED BEYOND 8 KM FROM MUNICIPAL LIMIT OF NAGPUR,THAT THE PLOTS OF LAND COULD NOT BE CONSIDERED AS CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE ACT, THAT THE DETAILS AS APP EARING FROM THE REVENUE RECORDS (FORM NUMBER 7/12) INDICATED THAT THE ASSESSEE HAD PURCHASED AND SOLD AGRICULTURAL LAND, THAT ONE OF THE PLOT WAS LOCATED AT 36 KM AND THE OTHER WAS AT 30 KM FROM THE MUNICIPAL LIMITS OF THE CITY OF NAGPUR,THAT THE ASSESSEE HAD SHOWED INCOME FROM AGRICULTURAL ACTIVITIES AND THAT THE SAID FACT WAS ACCEPTED BY THE AO, THAT IT HAD NOT UTILISED ANY BORROWED MONEY FOR ACQUISITION OF THE PLOTS OF LAND, THAT THE CHARACTER OF THE LAND CONTINUED TO BE AGRICULTURAL AND BEFORE AND AFTER THE SALE, THAT IT HAD NOT OBTAINED ANY PERMISSION FOR CHANGE OF USE OF THE LAND,THAT THE ASSESSEE HAD NO INTENTION TO CARRY OUT ANY TRADING ACTIVITY WITH REGARD TO THE PLOTS OF LAND, THAT THE PURCHASER OF THE LAND HAD APPLIED TO THE REVENUE AUTHORITIES TO CHANGE THE NATURE OF THE LAND, THAT THE PERMISSION TO CHANGE THE NATURE OF THE LAND WAS GRANTED ON 15/07/2009, THAT THE CONVERSION OF THE LAND BY THE PURCHASER COULD NOT ESTABLISH THE FACT THAT ASSESSEE WAS ENGAGED IN TRADING ACTIVITIES,THAT IF AGRICULTUR AL LAND WAS ACQUIRED AND SOLD THEN SURPLUS ARISING ON THE SAME WAS NOT EXIGIBLE TO TAX AS INCOME FROM BUSINESS.HE REFERRED TO THE CASES OF HINDUSTAN INDUSTRIAL RESOURCES LTD.(335ITR77)AND SHAGUN INFRASTRUCTURE PRIVATE LTD. (ITA/209/NAG/2009 DATED 27/06/2 011) AND HELD THAT THE RATIO LAID DOWN BY THE AFORESAID DECISIONS SQUARELY APPLIED TO THE FACTS OF THE CASE, THAT THE ADDITION MADE BY THE AO WAS NOT JUSTIFIED. 3 4.BEFORE US,THE DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTED THE ORDER OF THE AO AND STATED THAT A SSESSEE HAD PURCHASED THE PLOTS OF LAND WITHIN INTENTION TO EARN QUICK MONEY, THAT THE TRANSACTION IN QUESTION WAS A BUSINESS DEAL, THAT BORROWED MONEY WAS UTILISED FOR PURCHASING THE LAND. THE AUTHORISED REPRESENTATIVE (AR) THE ASSESSEE HAD ACQUIRED THE P LOTS OF LAND WITH THE SOLE OBJECTIVE OF CARRYING OUT AGRICULTURAL ACTIVITIES, THAT BOTH THE PLOTS WERE SITUATED AT A DISTANCE BEYOND 30 KM FROM NAGPUR MUNICIPAL CORPORATION LIMITS. HE REFERRED TO THE CASES OF M/S. DLF UNITED LTD. (217 ITR 333) SINGHAI RAKE SH KUMAR (247 ITR 150). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US WE FIND THAT THE ASSESSEE HAD PURCHASED TO PLOTS OF LAND IN THE FINANCIAL YEAR 2007 08, THAT BOTH THE PLOTS WERE LOCATED AT A DISTANCE BEYOND 30 KM FROM THE CITY LIMITS, THE CERTIFICATE ISSUED BY THE LOCAL REVENUE AUTHORITIES INDICATE THAT PLOTS OF LAND WERE PART OF AGRICULTURAL LAND, THAT THE AO HAD NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THAT THE ASSESSEE HAD USED BORROWED FUNDS FOR PURCHASING THE AGRICU LTURAL LAND, THAT ASSESSEE HAD CARRIED OUT AGRICULTURAL ACTIVITIES, THAT IT HAD NOT APPLIED FOR CONVERSION OF LAND, THAT AT THE TIME OF PURCHASE AND SALE OF THE BOTH THE PLOTS OF LAND,THEIR, AS PER THE REVENUE RECORDS, WERE PART OF AGRICULTURAL LAND, THAT THE PURCHASER OF THE LAND HAD REQUESTED THE REVENUE AUTHORITIES TO CONVERT IT INTO NON - AGRICULTURAL LAND,THAT THE PURCHASE OF LOTS OF LAND WAS SHOWN AS INVESTMENT IN THE BALANCE SHEET,THAT IT WAS HOLDING VARIOUS OTHER AGRICULTURAL LANDS AND THE AGRICULTURA L INCOME SHOWN BY IT IN THE RETURNS OF INCOME WAS REGULARLY ACCEPTED BY THE AO WHILE COMPLETING THE SCRUTINY ASSESSMENTS,THAT THE AGRICULTURAL LANDS WERE HELD BY THE ASSESSEE AS FIXED ASSETS AND NEVER AS BUSINESS ASSETS,THAT SHOWING MEAGER INCOME FROM THE AGRICULTURAL ACTIVITIES CANNOT BE A BASE FOR TREATING THE AGRICULTURAL LAND AS BUSINESS ASSETS,THAT INDEPENDENT ACTIVITY BY ONE OF THE CO - OWNERS OF SELLING AND BUYING PLOTS OF LAND CANNOT BE A REASON TO TAKE AN ADVERSE VIEW IN THE CASE OF THE ASSESSEE, THA T ASSESSEE HAD NOT CARRIED OUT ANY ACTIVITY FOR DEVELOPMENT AND TO MAKE THE LANDS READILY MARKETABLE. HERE WE WOULD LIKE TO REFER TO THE CASE OF SMT.DEBBIE ALEMAO(331ITR59),DELIVERED BY THE HONBLE BOMBAY HIGH COURT.FACTS OF THE CASE WERE THAT T HE ASSESSEE S, HUSBAND AND WIFE, WERE CO - OWNERS OF LAND WHICH THEY HAD PURCHASED FOR A SUM OF RS. 8,00,000 UNDER A SALE DEED DATED 28.02.1988 AS AGRICULTURAL LAND. ON 03.09.1990, THEY SOLD THE LAND TO A COMPANY 4 FOR A SUM OF RS.73,00,000 AND THE CONSIDERATION WAS PAID EQUALLY TO THE WIFE AND HUSBAND.THE ASSESSEES FILED SEPARATE RETURNS OF INCOME CLAIMING EXEMPTION OF THE CAPITAL GAINS ARISING OUT OF THE SALE OF THE AGRICULTURAL LAND. THE AO BROUGHT THE CAPITAL GAINS TO TAX ON THE GROUND THAT THE LAND HAD NON - AGRICULTURA L POTENTIAL AND THE FACT THAT IT WAS SOLD AT NEARLY 10 TIMES THE PURCHASE PRICE WITHIN TWO YEARS FROM ITS PURCHASE AND IT WAS PURCHASED BY THE PURCHASER FOR THE PURPOSE OF A BEACH RESORT SHOWED THAT THE LAND WAS NOT AGRICULTURAL LAND. THE ASSESSEES APPEALE D BEFORE THE FAA,WHO HELD IN FAVOUR OF THE ASSESSEES. ON APPEAL BY THE DEPARTMENT,THE TRIBUNAL CONFIRMED HIS DECISION.ON FURTHER APPEAL THE HONBLE COURT HELD AS UNDER: ORDINARILY, THE QUESTION WHETHER A CERTAIN PIECE OF LAND IS AGRICULTURAL OR NON - AGRI CULTURAL LAND IS A QUESTION OF FACT AND THE FINDING ON THE QUESTION OF FACT RECORDED BY THE TRIBUNAL WAS FINAL. THE FINDING WAS NEITHER PERVERSE NOR WAS IT ARRIVED AT BY WRONG APPLICATION OF ANY PRINCIPLE OF LAW AND IT WAS NOT OPEN TO THE COURT TO INTERFER E IN THE POSSIBLE FINDING OF FACT IN AN APPEAL UNDER SECTION 260A OF THE INCOME - TAX ACT, 1961. THE DEPARTMENTS OBSERVATION THAT THE LAND WAS NOT ACTUALLY USED FOR AGRICULTURAL PURPOSES INASMUCH AS NO AGRICULTURAL INCOME WAS DERIVED FROM THIS LAND AND WAS NOT SHOWN BY THE ASSESSEES IN THEIR INCOME - TAX RETURNS WAS EXPLAINED SAYING THAT THERE WERE COCONUT TREES IN THE LAND BUT THE AGRICULTURAL INCOME DERIVED BY SALE OF THE COCONUTS WAS JUST ENOUGH TO MAINTAIN THE LAND AND THERE WAS NO ACTUAL SURPLUS. IF AN AG RICULTURAL OPERATION DOES NOT RESULT IN GENERATION OF SURPLUS THAT CANNOT BE A GROUND TO SAY THAT THE LAND WAS NOT USED FOR AGRICULTURAL PURPOSE. ADMITTEDLY THE LAND WAS SHOWN IN THE REVENUE RECORD AS USED FOR AGRICULTURAL PURPOSE AND NO PERMISSION WAS EVE R OBTAINED FOR NON - AGRICULTURAL USE BY THE ASSESSEES. PERMISSION FOR NON - AGRICULTURAL USE WAS OBTAINED FOR THE FIRST TIME BY THE PURCHASER AFTER IT HAD PURCHASED THE LAND. THUS, THE FINDING THAT THE LAND WAS USED FOR THE PURPOSE OF AGRICULTURE WAS BASED ON APPRECIATION OF EVIDENCE AND BY APPLICATION OF CORRECT PRINCIPLES OF LAW. NO INTERFERENCE IN THE ORDER OF THE TRIBUNAL WAS WARRANTED. CONSIDERING THE ABOVE,WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY.THEREFORE,UPHOLDING HIS ORDER WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST SEPTEMBER ,2016. 01 , 2016 SD/ - SD/ - ( . . / D T GARASIYA ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER NAGPUR ; DATED :01 . 0 9 . 2016. 5 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR NAGPUR BENCH, ITAT, / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT,NAGPUR.