The ACIT, Circle-3, Baroda V. Shri Mohanbhai N.Turakhiya, Baroda

ITA 2530/AHD/2012

• Counselvise Citation: 253020514 RSA 2012
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 23-08-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 07-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income
• Section: 50C

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD , , , , . .. . . .. . !'# !'# !'# !'#, , , , $ % $ % $ % $ % BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER APPEAL(S) BY APPELLANT VS. RESPONDENT SL. NO(S) . ITA NO(S) / CO NO. ASSESSMENT YEAR(S) APPELLANT (S) RESPONDENT(S) 1. 2530/AHD/2012 2009-10 THE ACIT CIRCLE-3 BARODA (REVENUE) SHRI MOHANBHAI N. TURAKLHIYA 6-A, RAJLAXMI SOCIETY NEW SAMA ROAD VADODARA-390 002 (PAN: AAGPT 2467 C) 2. 2531/AHD/2012 2009-10 -DO-REVENUE SHRI JIVRAJBHA I N. TURAKHIYA 4-A, RAJLAXMI SOCIETYF NEW SAMA ROAD VADODARA-390 002 (PAN: AAVPT 5362 K) 3. CO NO.22/AHD/2013 (IN ITA NO.2531/AHD/12) 2009-10 SHRI JIVRAJBHAI TURAKHIYA VADODARA-390 002 THE ACIT CIRCLE-3 BARODA REVENUE BY : SHRI J.P.JANGID SR.D.R . ASSESSEE(S) BY : SHRIO MUKUND BAKSHI, A .R. &' ( )$ / / / / DATE OF HEARING : 03/09/2013 +!, ( )$ / DATE OF PRONOUNCEMENT : 16/09/2013 - / O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER: BOTH THESE APPEALS ARE FILED BY THE REVENUE WHICH ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF THE LD.CIT(A)-II BAR ODA BOTH DATED 31.8.2012 FOR AY 2009-10 IN THE CASE OF TWO ASSESSE ES, I.E. SHRI MOHANBHAI N.TURAKHIYA AND JIVRAJBHAI N.TURAKHIAYA. THE CROSS OBJECTION IS FILED BY ONE OF THE ASSESSEES, I.E. SH RI JIVRAJBHAI N.TURAKHIYA. ALL THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENC E. ITA NOS.2530 & 2531/AHD/2012 ACIT VS. SHRI MOHANBHAI N. TURAKHIA & ACIT VS. SHRI JIVARAJBHAI N.TURAKHIAYA (RESPECTIVEL Y) & CO NO. 22/AHD/2013 (IN ITA 2531/AHD/2012) ASST.YEAR 2009-10 - 2 - 2. THE CROSS OBJECTION FILED BY THE ASSESSEE WAS NO T PRESSED BY THE LD.AR OF THE ASSESSEE AND, HENCE, THE SAME IS REJEC TED AS NOT PRESSED. 3. REGARDING THESE TWO REVENUES APPEALS, WE FIND T HAT BOTH THESE ASSESSEES WERE CO-OWNERS OF THE SAME PROPERTY ALONG WITH THREE OTHER PERSONS AND, HENCE, THE GROUNDS ARE IDENTICAL AND T HEREFORE THE GROUNDS ARE REPRODUCED FROM ITA NO.2530/AHD/2012 (IN THE CA SE OF MOHANBHAI N.TURAKHIYA) WHICH READ AS UNDER:- 1(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(APPEALS) ERRED IN HOLDING THAT SINCE THE ASSESSEE HAD DEALINGS IN LAND EVEN GAIN ON SALE OF SAYAJIPUR A LAND SHOULD BE CONSIDERED AS BUSINESS INCOME WITHOUT APPRECIATING THAT THE TRANSACTION OF SAYAJIPURA LAN D STANDS ON DIFFERENT FOOTINGS, IN SO FAR AS IT WAS PURCHASE D ALONG WITH 6 OTHER PERSONS AND COULD NOT HAVE BEEN PART O F ASSESSEES TRADING STOCK. 1(II) THE LD.CIT(A) FURTHER ERRED IN NOT APPRECIATI NG THAT OUT OF THE 5 PURCHASERS, 3 HAD SHOWN SHORT TERM CAPITAL GA INS ON SALE OF THIS LAND AND SALE OF COMPOSITE LAND CANNOT BE PARTLY TREATED AS CAPITAL GAIN AND PARTLY AS BUSINESS INCO ME. 1(III) WITHOUT PREJUDICE TO THE ABOVE, THE LD.CIT(A ) FURTHER ERRED IN NOT APPRECIATING THAT THE ASSESSEE HAD NOT RAISE D GROUND ABOUT THE ASSESSING OFFICERS FINDING IN RESPECT OF OTHER 4 LANDS VIZ. BOPOD, JAMBA, MARETHA AND METRI CORPORAT ION LAND AND, THEREFORE, THIS CANNOT BE THE GROUND FOR DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. 1(IV) THE LD.CIT(A) ERRED IN NOT APPRECIATING THAT PERCENTAGE HAS BEEN FIXED ARBITRARILY AFTER THE EVENT OF PURCHASE HAD ITA NOS.2530 & 2531/AHD/2012 ACIT VS. SHRI MOHANBHAI N. TURAKHIA & ACIT VS. SHRI JIVARAJBHAI N.TURAKHIAYA (RESPECTIVEL Y) & CO NO. 22/AHD/2013 (IN ITA 2531/AHD/2012) ASST.YEAR 2009-10 - 3 - ALREADY TAKEN PLACE AND HAS NO BASIS AND THAT PERCE NTAGE OF ALL THE PURCHASES SHOULD BE EQUAL. 2. THE APPELLANT CRAVES LEAVE TO ADD TO AMEND OR AL TER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. RELIEF CLAIMED IN APPEAL IT IS PRAYED THAT THE ORDER OF THE CIT (APPEALS) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3.1. BRIEF FACTS TILL THE ASSESSMENT STAGE ARE NOTE D BY THE LD.CIT(A) IN PARAGRAPH NOS.3.1.1 TO 3.1.5 OF HIS ORDER. THESE A RE REPRODUCED BELOW FOR THE SAKE OF CONVENIENCE. 3.1.1. DURING THE COURSE OF ASSESSMENT PROCEEDING S THE ASSESSING OFFICER NOTED THAT A LAND SITUATED AT R.S .NO.607/A OF SAYAJIPURA VILLAGE OF BARODA DISTRICT WAS ACQUIRED ON 15 TH MAY, 2006 BY THE FOLLOWING ASSESSEES: 1. SHRI DHARAMSINH NARSINBHAI PRAJAPATI 2. SHRI JIVARAJBHAI NARSINBHAI TURKHIYA 3. SHRI MOHANBHAI NARSINBHAI TURKHIYA 4. SHRI KISHOR DHARAMSINH PRAJAPATI 5. SHRI HARJIVANBHAI RAMJIBHAI MISTRY 6. SHRI RAMESHBHAI PITAMBARBHAI 7. SHRI VINODBHAI PITAMBARBHAI 3.1.2. AS PER THE PURCHASE DEED THE SAID LAND WAS A CQUIRED FOR A TOTAL CONSIDERATION OF RS.18,00,000/- WITHOUT SPECI FYING THE RATIO OF CONSIDERATION PAID BY EACH OF THE ABOVE PURCHASE RS. THE PARTIES MENTIONED AT SR.NO.1 TO 5 MADE AMENDMENT IN THE PURCHASE DEED ON 15.07.2006 IN WHICH THE NAMES OF P ARTIES MENTIONED AT SR.NO.6 & 7 WERE REMOVED SINCE THESE T WO PARTIES WERE NOT FARMERS. ON 16 TH JULY, 2007, A MEMORANDUM OF UNDERSTANDING WAS MADE BETWEEN THE PARTIES MENTION ED AT ITA NOS.2530 & 2531/AHD/2012 ACIT VS. SHRI MOHANBHAI N. TURAKHIA & ACIT VS. SHRI JIVARAJBHAI N.TURAKHIAYA (RESPECTIVEL Y) & CO NO. 22/AHD/2013 (IN ITA 2531/AHD/2012) ASST.YEAR 2009-10 - 4 - SR.NO.1 TO 5 AND PARTIES AT SR.NO.6 & 7, ACCORDING TO WHICH THE SHARE OF PARTIES AT SR.NO.6 & 7 WAS SPECIFIED AT 14 % AND 12%, WHICH WAS TO BE PAID AT THE TIME OF SALE OF LAND. THE SAID LAND WAS SOLD ON 16 TH OCTOBER, 2008 BY THE ABOVE PARTIES TO M/S.PACL IND IA LTD., NEW DELHI. THE SALE CONSIDERATION MENTIONED IN THIS SALE DEED WAS RS.7,68,63,000/-. ALL THE ABOVE ASSESSEE MENTIONED AT SR.NO.1 TO 5 WERE ASSESSED TO TAX WITH THE SAME ASS ESSING OFFICER. THE DETAILS OF INCOME SHOWN FROM SALE OF THIS LAND BY THESE ASSESSEES ARE AS UNDER: SR.NO. NAME OF THE ASSESSEE INCOME SHOWN SHOWN AS 1 SHRI DHARAMSINH NARSINBHAI PRAJAPATI RS.136,34,800/- STCG 2 SHRI JIVARAJBHAI NARSINBHAI TURKHIYA RS.1,03,72,400 BUSINESS INCOME 3 SHRI MOHANBHA NARSINBHAI TURKHIYA RS.88,35,200/- BUSINESS INCOME 4 SHRI KISHOR DHARMSINH PRAJAPATI RS.1,09,60,400 STCG 5 SHRI HARJIVANBHAI RAMJIBHAI MISTRY RS.1,19,58,312 STCG 3.1.3. UPON ENQUIRY BY THE ASSESSING OFFICER IT WAS INTIMATED BY THE SUB-REGISTRAR THAT THE STAMP DUTY VALUATION OF THE PROPERTY SOLD WAS RS.8,56,89,700/-. THE ASSESSEE WAS REQUES TED TO EXPLAIN AS TO WHY VALUATION OF PROPERTY SHOULD NOT BE ADOPT ED AT RS.8,56,89,700/- BY INVOKING THE PROVISIONS OF SECT ION50C OF THE ACT. IN RESPONSE THE ASSESSEE CLAIMED THAT THE GAI N ARISING OUT OF THE SAID TRANSACTION SHOULD BE ASSESSED AS BUSINESS INCOME AS HE WAS IN THE BUSINESS OF DEALING IN LAND AND SALE CON SIDERATION RECEIVED IS THE DOCUMENT PRICE ONLY. THE ASSESSEE ALSO CLAIMED THAT SECTION 50C DOES NOT APPLY TO BUSINESS INCOMES . 3.1.4. THE ASSESSING OFFICER DID NOT ACCEPT THE ASS ESSEES CONTENTION AND HELD THAT IT HAS NEVER BEEN SHOWN TH AT THE SALE AND ITA NOS.2530 & 2531/AHD/2012 ACIT VS. SHRI MOHANBHAI N. TURAKHIA & ACIT VS. SHRI JIVARAJBHAI N.TURAKHIAYA (RESPECTIVEL Y) & CO NO. 22/AHD/2013 (IN ITA 2531/AHD/2012) ASST.YEAR 2009-10 - 5 - PURCHASE OF THE PROPERTY CARRIED ON BY THE ASSESSEE WAS IN THE NATURE OF BUSINESS. IN THE ACCOUNT OF AYRS. 2008-0 9 AND 2009-10 THIS HAS BEEN REFLECTED UNDER THE HEAD INVESTMENT . THE ASSESSING OFFICER NOTED THAT THE ASSESSEES REGULAR BUSINESS ACTIVITY WAS NOT IN NATURE OF TRADING AND THUS THIS WILL CLEARLY FAL L IN THE DEFINITION OF CAPITAL ASSET AS PER SECTION 2(14)(I). THE AS SESSING OFFICER FURTHER NOTICED THAT THE PURCHASER PACL INDIA LTD., HAS NOT DISPUTED THE VALUE ADOPTED BY THE STAMP DUTY VALUAT ION AND HAS PAID FULL STAMP DUTY OF RS.42,00,000/- ACCEPTING TH E VALUE OF THE ASSET AT RS.8,56,89,700/-. THE ASSESSING OFFICER F URTHER OBSERVED THAT THE PARTIES MENTIONED AT SR.NO.6 AND 7 VIZ. SH RI RAMESHBHAI TURKHIYA AND SHRI VINODBHAI TURKHIYA WERE FARMERS A S BOTH THESE ASSESSEES HAD SHOWN AGRICULTURE INCOME OF RS.90,540 /- AND RS.96,000/- RESPECTIVELY. NAMES OF THESE ASSESSEES WERE REMOVED FROM THE DEED FOR THE REASON THAT THEY WERE NOT FAR MERS BUT IN FACT THEY WERE. THE RATIO OF THEIR SHARE WAS ALSO NOT M ENTIONED IN THE PURCHASE DEED AND SUBSEQUENTLY AT THE TIME OF REMOV ING NAMES, THEIR RATIOS WERE FIXED WITHOUT ANY BASIS. WHEN TH E ASSET WAS SOLD THE PURCHASER PACL INDIA LTD. HAS ISSUED CHEQUES OF EQUAL AMOUNTS, WHICH ESTABLISHES THAT THESE FIVE ASSESSEE S WERE HOLDING EQUAL SHARE IN THE ASSET. THE ASSESSEE HAS SHOWN C OST OF ACQUISITION OF RS.3,88,200/- WHICH WAS EQUAL TO RAT IO OF 1/5 TH (RS.18,00,000 PURCHASE VALUE OF ASSET + RS.1,05,000 STAMP = 19,05,000 / 5 IS RS.3,81,600/-). THEREFORE THE AS SESSING OFFICER HELD THAT ORIGINAL ASSET WAS ACQUIRED BY THE FIRST 5 ASSESSEES AND THEY ARE EQUALLY LIABLE FOR CAPITAL GAIN WHICH IS W ORKED OUT AS UNDER:- SALE VALUE OF ASSET RS.8,56,89700/- LESS : PURCHASE VALUE RS. 18,00,000/- RS.8,38,89,700/- SHARE OF ASSESSEE BEING 1/5 TH RS.1,67,77940/- 3.1.5. THE ASSESSING OFFICER ACCORDINGLY ASSESSED T HE PROFIT ON SALE OF LAND AS SHORT TERM CAPITAL GAIN AT RS.1,67, 77,940/- IN THE CASE OF THE ASSESSEE, AS AGAINST BUSINESS INCOME SH OWN. ITA NOS.2530 & 2531/AHD/2012 ACIT VS. SHRI MOHANBHAI N. TURAKHIA & ACIT VS. SHRI JIVARAJBHAI N.TURAKHIAYA (RESPECTIVEL Y) & CO NO. 22/AHD/2013 (IN ITA 2531/AHD/2012) ASST.YEAR 2009-10 - 6 - 3.2. BEING AGGRIEVED, THE ASSESSEE WAS CARRIED THE MATTER BEFORE THE LD.CIT(A) WHO DECIDED BOTH THE ISSUES IN FAVOUR OF THE ASSESSEE. HE HELD THAT THE PROFIT ON SALE OF LAND IS TAXABLE AS BUSIN ESS INCOME AND CONSEQUENTLY PROVISIONS OF SECTION 50C CANNOT BE IN VOKED. HE FURTHER HELD THAT THE PERCENTAGE OF THESE ASSESSEES IN THE SALE PROCEEDS AS PER SALE-DEED OF RS.768.63 LACS HAS TO BE 14% IN THE CA SE OF SHRI JIVRAJBHAI N.TURAKHIYA AND 12% IN THE CASE OF SHRI MOHANBHAI N.TURAKHIYA AS AGAINST 20% OF EACH OF THESE TWO WAS CONSIDERED BY THE AO. NOW, THE REVENUE IS IN APPEALS BEFORE US ON BOTH THESE ASPEC TS. 4. THE LD.SR.DR OF THE REVENUE HAS SUPPORTED THE A SSESSMENT ORDERS, WHEREAS LD.AR OF THE ASSESSEE HAS SUPPORTED THE ORD ERS OF THE LD.CIT(A). HE ALSO SUBMITTED THAT IN EARLIER YEARS ALSO, THE A SSESSEE DECLARED THE PROFIT ON SALE OF LAND AS BUSINESS INCOME AND THE S AME WAS ACCEPTED BY THE REVENUE. HE DRAWN OUR ATTENTION TO THE COPIES OF BALANCE-SHEET AND P&L ACCOUNT FILED WITH RETURNS OF INCOME FOR PRECED ING TWO YEARS, I.E. AYS 2007-08 & 2008-09. HE ALSO SUBMITTED THAT IN T HE PRESENT YEAR ALSO, OTHER LANDS WERE ALSO SOLD BY THESE ASSESSEES RESUL TING INTO PROFIT BUT THE AO HAS NOT DISPUTED IN RESPECT OF THESE PROPERTIES THAT PROFIT ON SALE OF THOSE PROPERTIES IS NOT BUSINESS INCOME BUT CAPITAL GAIN AND THE DISPUTE WAS RAISED BY THE AO ONLY FOR THIS PROPERTY WHICH I S NOT JUSTIFIED. AT THIS JUNCTURE, A QUERY WAS RAISED BY THE BENCH AS TO WHE THER THE JANTRI PRICE OF OTHER PROPERTIES SOLD BY THE ASSESSEE IN THE PRESEN T YEAR OR IN EARLIER YEAR WAS MORE THAN THE DECLARED SALE PRICE AND, IN REPLY , THE LD.AR OF THE ASSESSEE COULD NOT BRING ANY EVIDENCE ON RECORD TO SHOW THAT THE JANTRI ITA NOS.2530 & 2531/AHD/2012 ACIT VS. SHRI MOHANBHAI N. TURAKHIA & ACIT VS. SHRI JIVARAJBHAI N.TURAKHIAYA (RESPECTIVEL Y) & CO NO. 22/AHD/2013 (IN ITA 2531/AHD/2012) ASST.YEAR 2009-10 - 7 - PRICE IN RESPECT OF ANY OTHER PROPERTY WHETHER SOLD IN THE PRESENT YEAR OR IN EARLIER YEARS WAS MORE THAN THE SALE VALUE DECLA RED BY THE ASSESSEE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, WE HAVE TO DECIDE THIS ISSUE AS TO WHETHER THE PROFIT ON SALE OF THIS PROPERTY BEING SAYAJIPURA REVENUE SURVEY NO.607 IS BUSINESS PROFI T OR CAPITAL GAIN. THE DECISION OF LD.CIT(A) IN THIS REGARD IS ON THIS BASIS THAT IMMEDIATELY ON PURCHASE OF THE LAND, THE CO-OWNERS OF THE LAND HAD APPLIED FOR CONVERSION OF THE SAME TO NON-AGRICULTURAL AND THE LAND WAS ULTIMATELY SOLD WITHIN LESS THAN 2 YEARS. HE HAS NOTED THAT ALTHOUGH THE CO-OWNERS HAVE SHOWN THE AGRICULTURAL INCOME FROM THE SAID LA ND, THE QUICK APPLICATION FOR CONVERSION TO NON-AGRICULTURAL AND SALE WITHIN A SHORT PERIOD OF 2 YEARS INDICATE STRONGLY TO THE FACT TH AT THE LAND WAS NOT PURCHASED FOR THE PURPOSE OF INVESTMENT OR HOLDING FOR A LONG TIME AND EARNING AGRICULTURAL OR OTHER INCOMES. IT IS ALSO STATED BY HIM THAT THREE OF THE SEVEN PERSONS HAVE OFFERED THE INCOME ON SAL E OF THE LAND AS SHORT- TERM CAPITAL GAIN AND FOUR HAVE OFFERED THE SAME AS BUSINESS INCOME IN THE RETURNS FILED BY THEM. HE HAS ALSO OBSERVED TH AT THESE TWO ASSESSEES HAVE OFFERED INCOME FROM SALE OF LANDS AS BUSINESS INCOME IN THE RETURNS FILED FOR AYS 2006-07 TO 2008-09. HE HAS ALSO NOTE D THAT AS PER BALANCE- SHEET OF THE ASSESSEES, IT WAS STATED THAT THESE LA NDS WERE HELD BY THEM AND WERE SHOWN AS BUSINESS ASSETS AND NOT AS INV ESTMENTS AS ALLEGED IN THE ASSESSMENT ORDERS. NOW WE EXAMINE THE FACTS FROM THE BALANCE- SHEET AND P&L ACCOUNT OF THESE TWO ASSESSEES AVAILA BLE IN THE PAPER- BOOK. THE P&L ACCOUNT OF SHRI JIVRAJBHAI N.TURKHIY A FOR AY 2007-08 ITA NOS.2530 & 2531/AHD/2012 ACIT VS. SHRI MOHANBHAI N. TURAKHIA & ACIT VS. SHRI JIVARAJBHAI N.TURAKHIAYA (RESPECTIVEL Y) & CO NO. 22/AHD/2013 (IN ITA 2531/AHD/2012) ASST.YEAR 2009-10 - 8 - IS AVAILABLE ON PAGE 4 OF THE PAPER-BOOK AND FROM T HE SAME, IT IS SEEN THAT THERE IS NO SALE OF LAND IN THAT YEAR. THE P&L ACC OUNT OF THE SAME ASSESSEE FOR AY 2008-09 IS AVAILABLE ON PAGE 9 OF T HE PAPER-BOOK AND IT IS SEEN THAT IN THIS YEAR ALSO, THERE IS NO SALE OF LAND BY THE ASSESSEE. THE P&L ACCOUNT OF THIS ASSESSEE FOR THE PRESENT ASSESS MENT YEAR IS AVAILABLE ON PAGE 15 OF THE PAPER-BOOK AND IN THIS YEAR, IT I S SEEN THAT THE ASSESSEE HAS SHOWN PROFITS ON ACCOUNT OF SALE OF FIVE LANDS INCLUDING THIS LAND, I.E. THE LAND AT SURVEY NO.607 FOR WHICH DISPUTE IS BEFO RE US. 5.1. IN RESPECT OF OTHER FOUR LANDS WHICH WERE SOLD BY THE ASSESSEE IN PRESENT YEAR, THE ASSESSEE COULD NOT SHOW THAT THE JANTRI PRICE OF THESE LANDS WERE MORE THAN THE DECLARED SALE VALUE. THIS IS ALSO NOT THE CASE OF THE ASSESSEE THAT ANY LAND WAS SOLD AFTER THREE YEA RS RESULTING INTO LONG- TERM CAPITAL GAIN. THE TAX RATE FOR BUSINESS PROFI T AND SHORT-TERM CAPITAL GAIN IS SAME AND IF THE JANTRI PRICE IS NOT MORE TH AN THE SALE PRICE, THEN NO ADJUSTMENT IN INCOME IS CALLED FOR WITH REGARD TO S ALE OF LAND EVEN IF IT IS ASSESSED AS SHORT-TERM CAPITAL GAIN AS AGAINST BUSI NESS PROFIT DECLARED BY THE ASSESSEE AND, THEREFORE, IT CANNOT BE A GUIDING FACTOR THAT THE AO HAD NOT DISPUTED THE CLAIM OF THE ASSESSEE REGARDING BU SINESS INCOME IN RESPECT OF FOUR OTHER LANDS IN THE PRESENT YEAR. THIS IS ALSO WORTH NOTING THAT IN THE P&L ACCOUNT ALSO, THE ASSESSEE HAD NOT SHOWN OPENING STOCK, SALE AND CLOSING STOCK. RATHER, THE ASSESSEE HAS S HOWN PROFIT ON SALE OF OTHER INVESTMENTS AND UNDER THIS HEADING, THE ASSE SSEE HAS SHOWN THE PROFIT ON SALE OF THESE FIVE LANDS. IN THE BALANCE -SHEET OF ALL THE THREE YEARS, THE ASSESSEE HAS SHOWN THE INVESTMENT IN LAN DS UNDER THE HEAD FOR ITA NOS.2530 & 2531/AHD/2012 ACIT VS. SHRI MOHANBHAI N. TURAKHIA & ACIT VS. SHRI JIVARAJBHAI N.TURAKHIAYA (RESPECTIVEL Y) & CO NO. 22/AHD/2013 (IN ITA 2531/AHD/2012) ASST.YEAR 2009-10 - 9 - LAND ASSETS BUSINESS. BUT THIS ONE FACTOR ALONE CANNOT BE DECISIVE IN ISOLATION AND WE HAVE TO SEE THE TOTAL FACTS AND CO NDUCT OF THE ASSESSEE. THE SAME ASSESSEE IN THE P&L ACCOUNT HAVE SHOWN THE PROFIT ON SALES OF LANDS UNDER THE HEADING PROFITS ON SALE OF OTHER I NVESTMENT AND THEREFORE, THIS CANNOT BE SAID THAT THE LANDS IN QU ESTION WERE HELD BY THE ASSESSEE AS BUSINESS ASSETS AND NOT AS INVESTMENT. IN THE EARLIER TWO YEARS NO LAND WAS SOLD BY THIS ASSESSEE, I.E. JIVRA JBHAI N.TURAKHIYA AND IN THE PRESENT YEAR, ALTHOUGH FOUR OTHER LANDS WERE SOLD BY HIM BUT IT COULD NOT BE SHOWN BY THE ASSESSEE THAT THE JANTRI PRICE OF THESE FOUR LANDS WERE MORE THAN THE DECLARED SALE PRICE AND ST ILL THE AO DID NOT MAKE ANY ADDITION BY ASSESSING THE SAME PROFIT AS S HORT-TERM CAPITAL GAIN AND BY INVOKING THE SECTION 50C OF THE ACT. THEREF ORE, THIS IS ALSO NOT HELPING THE ASSESSEE. THIS WAS ALSO A SUBMISSION OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW THAT SHRI JIVRAJBHAI N.TURAK HIYA IS ENGAGED IN THE BUSINESS OF DEALING IN REAL ESTATE AND ALSO ENGAGED IN THE DEVELOPMENT AND CONSTRUCTION OF HOUSING SCHEMES AS A PARTNER OF VARIOUS FIRMS. WE DO NOT FIND ANY MERIT IN THE SAME BECAUSE THE PERSO N WHO IS DOING BUSINESS AS A PARTNER IN VARIOUS FIRMS CAN ALSO HOL D LAND AS INVESTMENT. IT CANNOT BE SAID THAT A JEWELLER CANNOT HAVE JEWELLER Y AS INVESTMENT AND SIMILARLY A SHARE-BROKER CANNOT HAVE SHARES AS INVE STMENT. FROM THE ABOVE DISCUSSION, WE FIND THAT BASIS ADOPTED BY LD. CIT(A) IS NOT VALID. WE ALSO FIND THAT THE PROFIT IN RESPECT OF ALL THE FIVE LANDS SOLD BY SHRI JIVRAJBHAI N.TURAKHIYA WAS ASSESSED BY THE AO AS SH ORT-TERM CAPITAL GAIN AND IT IS NOT CORRECT AS HAS BEEN SUBMITTED BY THE LD.AR OF THE ASSESSEE THAT IN RESPECT OF FOUR OTHER PROPERTIES, THE AO HA D ACCEPTED BUSINESS ITA NOS.2530 & 2531/AHD/2012 ACIT VS. SHRI MOHANBHAI N. TURAKHIA & ACIT VS. SHRI JIVARAJBHAI N.TURAKHIAYA (RESPECTIVEL Y) & CO NO. 22/AHD/2013 (IN ITA 2531/AHD/2012) ASST.YEAR 2009-10 - 10 - INCOME. ADMITTEDLY, NO ADJUSTMENT WAS MADE BY THE AO U/S.50C OF THE ACT IN RESPECT OF FOUR OTHER LANDS BUT SUCH ADJUSTM ENT WAS POSSIBLE ONLY WHEN THE JANTRI PRICE IS MORE THAN THE DECLARED SAL E PRICE AND THE ASSESSEE COULD NOT BRING ANY EVIDENCE ON RECORD TO SHOW THAT JANTRI PRICE OF ANY OTHER LAND WAS MORE THAN THE DECLARED SALE PRICE. 5.2. NOW WE EXAMINE THE FACTS IN THE CASE OF SHRI MOHANBHAI N.TURAKHIYA. AS PER THE P&L ACCOUNT OF THIS ASSESS EE FOR AY 2007-08, WHICH IS AVAILABLE ON PAGE NO.5 OF THE PAPER-BOOK, IT IS SEEN THAT THERE IS NO SALE OF LAND IN THIS YEAR. THE P&L ACCOUNT OF T HIS ASSESSEE FOR AY 2008-09 IS AVAILABLE PAGE NO.9 OF THE PAPER-BOOK AN D FROM THE SAME, IT IS SEEN THAT THE ASSESSEE HAS DECLARED A PROFIT OF RS. 894,973/- ON ACCOUNT OF SALE OF MARETHA SURVEY NO.38/1 AND HE HAS ALSO DEC LARED PROFIT OF RS.40,000/- ON ACCOUNT OF SALE OF VEMALI SURVEY NO. 182A PAIKI. THE PROFIT IN RESPECT OF THESE TWO LANDS SALE WAS DISCL OSED BY THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS AND ALTHOUGH THE ASSESSMENT FOR AY 2008-09 OF THIS ASSESSEE WAS COMPLETED BY THE AO U/S.143(3) OF THE ACT AND THE INCOME AS PER RETURN WAS ACCEPTED BY TH E AO BUT THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER REGARDING THIS A SPECT AS TO WHETHER THE PROFIT ON SALE OF LAND IS ASSESSABLE AS CAPITAL GAI N OR BUSINESS PROFIT. THIS IS ALSO NOT SHOWN TO US THAT ANY QUERY WAS RAISED B Y THE A.O. IN THAT YEAR ON THIS ASPECT. HENCE, IT CANNOT BE SAID THAT ANY OPINION WAS FORMED BY THE A.O. THE ASSESSEE HAS NOT BROUGHT ANY MATERI AL ON RECORD TO SHOW THAT JANTRI PRICE OF THESE TWO LANDS SOLD BY THIS A SSESSEE IN AY 2008-09 WAS MORE THAN THE DECLARED SALE PRICE AND IN SPITE OF THIS, THE AO HAD ITA NOS.2530 & 2531/AHD/2012 ACIT VS. SHRI MOHANBHAI N. TURAKHIA & ACIT VS. SHRI JIVARAJBHAI N.TURAKHIAYA (RESPECTIVEL Y) & CO NO. 22/AHD/2013 (IN ITA 2531/AHD/2012) ASST.YEAR 2009-10 - 11 - ASSESSED THE PROFIT ON SALE OF LAND AS PER SALE VAL UE DECLARED BY THE ASSESSEE INSTEAD OF INVOKING THE PROVISIONS OF SECT ION 50C OF THE ACT. HENCE, THIS FACTOR ALONE CANNOT BE A DECIDING FACTO R BECAUSE THE TAX RATE ON SHORT-TERM CAPITAL GAIN AND BUSINESS PROFIT IS S AME AND NO ADJUSTMENT IS CALLED FOR IN THE AMOUNT OF INCOME EVEN IF ASSES SED UNDER THE HEAD SHORT-TERM CAPITAL GAIN IF JANTRI PRICE IS NOT MO RE THAN THE DECLARED SALES PRICE. 5.3. IN THE CASE OF THIS ASSESSEE ALSO, IN THE BALA NCE-SHEET, THE VALUE OF LAND HAS BEEN SHOWN UNDER THE HEAD LAND ASSETS B USINESS, BUT PROFIT ON SALE OF LAND IN THE PRESENT YEAR HAS BEEN SHOWN BY THE ASSESSEE IN THE P&L ACCOUNT IN THE PRESENT YEAR UNDER THE HEAD PRO FIT ON SALE OF OTHER INVESTMENT AND THEREFORE, THIS HEADING GIVEN BY TH E ASSESSEE IN THE BALANCE-SHEET FOR SHOWING THE LAND VALUE CANNOT BE DECISIVE FACTOR. THE BASIS ADOPTED BY THE LD.CIT(A) IN BOTH THESE CASES IS THIS THAT IMMEDIATELY AFTER PURCHASE OF LAND IN QUESTION, A R EQUEST WAS MADE BY THE CO-OWNERS FOR CONVERSION OF LAND INTO NON-AGRI CULTURAL AND LAND WAS ULTIMATELY SOLD WITHIN 2 YEARS AND, THEREFORE, THI S LAND IS FOR BUSINESS PURPOSE. WE DO NOT FIND ANY MERIT IN THE STAND TA KEN BY THE LD.CIT(A) BECAUSE IN CASE OF INVESTMENT IN LAND ALSO, THE ASS ESSEE CAN MAKE REQUEST FOR CONVERSION INTO N.A. AND IF PROFIT IS AVAILABLE , THEN CAPITAL ASSET CAN ALSO BE SOLD BELOW THREE YEARS AND IF NO SUCH SALE OF CAPITAL ASSET BELOW THREE YEARS IS POSSIBLE, THEN THERE SHOULD NOT HAVE BEEN ANY CONCEPT OF SHORT-TERM CAPITAL GAIN. THE VERY FACT THAT IN THE ACT ITSELF, A CONCEPT IS THERE FOR ASSESSEES PROFIT ON SALE OF INVESTMENT B EFORE THREE YEARS IS TO BE ITA NOS.2530 & 2531/AHD/2012 ACIT VS. SHRI MOHANBHAI N. TURAKHIA & ACIT VS. SHRI JIVARAJBHAI N.TURAKHIAYA (RESPECTIVEL Y) & CO NO. 22/AHD/2013 (IN ITA 2531/AHD/2012) ASST.YEAR 2009-10 - 12 - ASSESSED AS SHORT-TERM CAPITAL GAIN, IT IS ENOUGH TO INDICATE THAT MERELY BECAUSE A PROPERTY WAS SOLD BEFORE THREE YEARS, IT CANNOT BE SAID THAT THE PROPERTY WAS NOT HELD AS INVESTMENT BUT AS A BUSINE SS ASSET. 5.4. FROM THE ABOVE DISCUSSION, WE HAVE SEEN THAT T HE BASIS ADOPTED BY THE LD.CIT(A) FOR HOLDING THAT THE PROFIT ON SALE O F LAND IN QUESTION IS ASSESSABLE AS BUSINESS PROFIT IS NOT PROPER. SINCE THE LAND IN QUESTION WAS ACQUIRED BY ORIGINALLY SEVEN PERSONS AND LATER BY F IVE PERSONS AND THESE PERSONS ARE NOT DOING BUSINESS TOGETHER, IT SHOWS T HAT ATLEAST THIS PROPERTY WAS NOT ACQUIRED BY THESE PERSONS AS A BUSINESS ASS ET AND THE SAME WAS ACQUIRED AS A CAPITAL ASSET FOR EARNING CAPITAL GAI N. WE, THEREFORE, REVERSE THE ORDER OF THE LD.CIT(A) ON THIS ISSUE IN BOTH TH E CASES AND RESTORE THAT OF THE AO. 6. NOW THE SECOND ASPECT TO BE DECIDED BY US IS THI S AS TO WHETHER THE PROFIT ON SALE OF LAND IS TO BE DISTRIBUTED AMONG T HE FIVE CO-OWNERS IN WHOSE NAME THE LAND WAS REGISTERED IN EQUAL PROPORT ION OR SUCH PROFIT IS TO BE ASSESSED TO THE EXTENT OF 14% AND 12% IN THE SE TWO CASES AS HAS BEEN CLAIMED BY THE ASSESSEE ON THE BASIS OF MEMORA NDUM OF UNDERSTANDING(MOU). IN THIS REGARD, WE EXAMINE THE VARIOUS DEEDS AND MOU. THE COPY OF PURCHASE-DEED IS AVAILABLE AT PAG E NOS.18 TO 38 OF THE PAPER-BOOK AND ITS ENGLISH VERSION IS AVAILABLE ON PAGE NOS.39 TO 75 OF THE PAPER-BOOK. THIS PURCHASE-DEED IS DATED 15/ 05/2006 AND AS PER THIS PURCHASE-DEED, SEVEN PERSONS JOINTLY PURCHASED THIS PROPERTY FOR A SUM OF RS.18 LACS AND NO PERCENTAGE OF HOLDING OF E ACH PERSON IS ITA NOS.2530 & 2531/AHD/2012 ACIT VS. SHRI MOHANBHAI N. TURAKHIA & ACIT VS. SHRI JIVARAJBHAI N.TURAKHIAYA (RESPECTIVEL Y) & CO NO. 22/AHD/2013 (IN ITA 2531/AHD/2012) ASST.YEAR 2009-10 - 13 - SPECIFIED IN THIS PURCHASE-DEED; MEANING THEREBY TH AT EACH OF THE PURCHASER WERE HAVING EQUAL RIGHT IN THE PROPERTY. SUBSEQUENTLY DEED OF RECTIFICATION WAS EXECUTED ON 15/07/2006, COPY OF W HICH IS AVAILABLE ON PAGER NOS.76 TO 79 OF THE PAPER BOOK AND ITS ENGLIS H VERSION IS AVAILABLE ON PAGE NOS.80 TO 91 OF THE PAPER-BOOK. AS PER THI S RECTIFICATION-DEED, IT WAS SPECIFIED THAT TWO PERSONS OUT OF TOTAL SEVEN P ERSONS AS PER ORIGINAL PURCHASE-DEED WERE NOT FARMERS OR AGRICULTURISTS AN D, HENCE, THE LAND IN THEIR NAMES CANNOT BE MUTATED IN THE VILLAGE FARM R ECORDS AND AS PER THEIR CONSENT, THE PROPERTY IN QUESTION SHOULD BELONG TO REMAINING FIVE PERSONS AND THE NAMES OF TWO PERSONS BEING PARTY NOS.6 & 7 IN THE ORIGINAL PURCHASE-DEED SHALL BE TREATED AS HAVING BEEN CANCE LLED. FROM THE COMBINED READING OF THESE PURCHASE-DEED AND RECTIFI CATION-DEED, IT COMES OUT THAT AFTER THE EXECUTION OF RECTIFICATION-DEED , THE PROPERTY IN QUESTION WAS HELD JOINTLY BY FIVE PERSONS HAVING EQUAL SHARE IN THE PROPERTY. THEREAFTER, AN MOU WAS EXECUTED ON 16/07/2006 BETW EEN THE FIVE CO- OWNERS AND ALSO TWO PERSONS WHOSE NAMES WERE OMITT ED, TOTAL SEVEN PERSONS AND IT WAS STATED IN THE MOU THAT THESE TWO PERSONS WERE ELIGIBLE FOR SHARE IN THE SALE VALUE OF THIS PROPER TY TO THE EXTENT OF 14% AND 12% RESPECTIVELY. NOW THE QUESTION IS AS TO WH ETHER THESE FIVE CO- OWNERS CAN PAY PART OF SALE PROCEEDS TO TWO OTHER PERSONS BEFORE PAYING TAX ON THE SALE TRANSACTION OR WHETHER THEY CAN PAY SUCH SHARE TO ANY OUTSIDER ONLY AFTER PAYING TAX ON THE SALE TRANSACT IONS. IN OUR CONSIDERED OPINION, FROM THE COMBINED READING OF THE PURCHASE- DEED AND RECTIFICATION-DEED IT HAS TO BE HELD THAT THE PROPE RTY IN QUESTION WAS JOINTLY HELD BY FIVE PERSONS INCLUDING THESE TWO PE RSONS WHO ARE BEFORE ITA NOS.2530 & 2531/AHD/2012 ACIT VS. SHRI MOHANBHAI N. TURAKHIA & ACIT VS. SHRI JIVARAJBHAI N.TURAKHIAYA (RESPECTIVEL Y) & CO NO. 22/AHD/2013 (IN ITA 2531/AHD/2012) ASST.YEAR 2009-10 - 14 - US AND ANY AGREEMENT OF THESE PERSONS WITH TWO OTHE R PERSONS FOR SHARE OF PROFIT ON SALE OF THE LAND IN QUESTION CAN BE ON LY OUT OF POST TAX PROFIT AND NOT PRE-TAX PROFIT BECAUSE WHEN THE PROPERTY IS JOINTLY OWNED BY THESE FIVE PERSONS AND SOLD BY THESE FIVE PERSONS, PROFIT ON SUCH SALE HAS TO BE ASSESSED EQUALLY IN THE HANDS OF THESE FIVE P ERSONS AND AFTER PAYING TAX THEREON AS PER LAW THEY CAN DEAL WITH THE MONEY REMAINING WITH THEM AFTER SUCH PAYMENT OF TAX IN THE MANNER THEY LIKE B UT FOR THE PURPOSE OF TAXATION OF THE PROFIT ON SALE OF THE PROPERTY, NO DEDUCTION CAN BE ALLOWED ON ACCOUNT OF ANY PAYMENT TO OUTSIDER BECAUSE FOR T HE PURPOSE OF COMPUTING CAPITAL GAIN, ONLY ALLOWABLE DEDUCTION IS COST OF THE PROPERTY AND COST OF IMPROVEMENT AND COST OF TRANSFER AND NO OTHER DEDUCTION IS ALLOWABLE. SIMILARLY, EVEN IF SUCH PROFIT IS ASSES SABLE IS BUSINESS INCOME, THEN ALSO FROM THE SALE PROCEEDS, ONE CAN G ET DEDUCTION ON ACCOUNT OF COST OF PURCHASE AND EXPENSES INCURRED F OR THAT BUSINESS AND NO DEDUCTION IS ALLOWABLE IN RESPECT OF ANY PAYMENT WHICH IS GIVEN TO OUTSIDERS AS SHARE OF PROFIT. HENCE, ON THIS ASPEC T ALSO, WE REVERSE THE ORDER OF THE LD.CIT(A) AND RESTORE THAT OF THE AO. 7. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE AR E ALLOWED, WHEREAS CROSS OBJECTION FILED BY THE ASSESSEE IS DI SMISSED. SD/- SD/- ( ) ( .. !'# ) $ ( MUKUL KR. SHRAWAT ) ( A. K. GARODIA ) JUDICIAL MEMBER A CCOUNTANT MEMBER AHMEDABAD; DATED 16/ 09 /2013 .)..&, .&../ T.C. NAIR, SR. PS ITA NOS.2530 & 2531/AHD/2012 ACIT VS. SHRI MOHANBHAI N. TURAKHIA & ACIT VS. SHRI JIVARAJBHAI N.TURAKHIAYA (RESPECTIVEL Y) & CO NO. 22/AHD/2013 (IN ITA 2531/AHD/2012) ASST.YEAR 2009-10 - 15 - - ( /0 10, - ( /0 10, - ( /0 10, - ( /0 10,/ COPY OF THE ORDER FORWARDED TO : 1. 23 / THE APPELLANT 2. /423 / THE RESPONDENT. 3. 5 / CONCERNED CIT 4. 5() / THE CIT(A)-II, BARODA 5. 08 /& , , / DR, ITAT, AHMEDABAD 6. #9 :' / GUARD FILE. -& -& -& -& / BY ORDER, 40 / //TRUE COPY// ; ;; ;/ // / < < < < ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION 11.9.13 (DICTATION-PAD 38 PAGES ATTACHED WITH TH E FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 12.9.13 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.17.9.13 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 17.9.13 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE SGISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER