Nagappan Muthuraman, CHENNAI V. ITO Non Corporate Ward 10(4), CHENNAI

ITA 2792/CHNY/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9276 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 27-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SRINIVASA RAO IRS
• Assessee Lawyers: V SUBBARAYAN DCIT RETD
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Benefit of exemption
• Section: 50C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH : CHENNAI . , !' # $! # % . & , ( * + [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBE R AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ] ./I.T.A. NO.2792/CHNY/2018. / ASSESSMENT YEAR : 2013-2014. NAGAPPAN MUTHURAMAN, PLOT NO.2278, Y BLOCK, 7 TH STREET, 12 TH MAIN ROAD, ANNA NAGAR, CHENNAI 600 040. VS. THE INCOME TAX OFFICER, NON CORPORATE WARD 10(4) CHENNAI. [PAN AABPN 4216A] ( ,- / APPELLANT) ( ./,- /RESPONDENT) / APPELLANT BY : SHRI. V. SUBBARAYAN, DCIT, (RETD) /RESPONDENT BY : SHRI. M. SRINIVASA RAO, IRS, CIT. /DATE OF HEARING : 27-03-2019 ! /DATE OF PRONOUNCEMENT : -03-2019 0 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE, WHICH IS DIRECTED AGAINST AN ORDER DATED 31.07.2018 OF LD. COMMISSION ER OF INCOME TAX (APPEALS)-7, CHENNAI, IT HAS ALTOGETHER RAISED FOUR GROUNDS OF WHICH GROUND 1 IS GENERAL NEEDING NO SPECIFIC ADJUDICATI ON. ITA NO.2792 /2018 :- 2 -: 2. LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMI TTED THAT HE WAS NOT PRESSING GROUND 4 AND ENDORSEMENT WAS MADE IN THE GROUNDS OF APPEAL IN THIS REGARD. ACCORDINGLY, GROUND NO.4 IS DISMISSED AS NOT PRESSED. 3. THIS LEAVES US WITH GROUNDS 2 & 3. GROUND NO. 2 ASSAILS TREATMENT OF INCOME FROM SALE OF COFFEE BERRIES A S NON AGRICULTURAL WHEREAS GROUND NO.3 ASSAILS SURPLUS ARISING OUT OF SALE OF A PROPERTY BEING TREATED UNDER THE HEAD INCOME FROM CAPITAL GAINS AGAINST CLAIM OF THE ASSESSEE THAT IT WAS BUSINESS INCOME . 4. FACTS APROPOS ARE THAT ASSESSEE HAD FILED HIS RETURN FOR THE IMPUGNED ASSESSMENT YEAR DISCLOSING INCOME OF E96,1 90/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY T HE LD. ASSESSING OFFICER THAT ASSESSEE ALONGWITH THREE OTHER PERSON S HAD ENTERED INTO AN AGREEMENT WITH ONE SHRI. M. ACHUTHAN NAIR ON 04 .02.2012 FOR ACQUIRING ABOUT ONE ACRE OF PROPERTY AT OLD SURVEY NO.102/10-A, NO.92, NOOMBAL VILLAGE, AMBATTUR TALUK, THIRUVALLUR DISTRICT FOR A PRICE OF RS.2,10,00,000/-. REGISTERED POWER OF ATTORNEY WAS EXECUTED BY THE VENDOR SHRI. M. ACHUTHAN NAIR ON 08.06.2012 APP OINTING ASSESSEE ALONGWITH ONE OTHER PERSON AS LAWFULLY CONSTITUTED POWER AGENTS, IN ITA NO.2792 /2018 :- 3 -: RESPECT OF THE ABOVE PROPERTY. THEREAFTER ON 30.11 .2012, ASSESSEE ALONGWITH THE ABOVE POWER AGENT, EXECUTED A SALE DEED IN FAVOUR OF ONE SHRI. S. RAJAKUMAR AND THE SALE CONSIDERATION MENTIONED IN THE SALE DEED WAS RS.2,10,00,000/-. IN THE RETURN FILED BY THE ASSESS EE SURPLUS/ DEFICIT ARISING OUT OF THE SALE WAS SHOWN UNDER THE HEAD INCOME FROM BUSINESS. LD. AO WAS OF THE OPINION THAT THERE WAS DELIVERY OF POSSESSION COMBINED WITH PAYMENT OF CONSIDERATION AMOUNTING TO A PART PERFORMANCE COMING WITHIN THE AMBIT OF CLAUSE (V) OF SECTION 2(47) OF THE INCOME TAX ACT, 1961 (IN SHORT THE A CT). ACCORDING TO HIM, BY EXECUTION THE POWER OF ATTORNEY, SHRI. A CHUTHAN NAIR HAD EFFECTED A TRANSFER OF PROPERTY TO THE ASSESSEE AN D THREE OTHER PERSONS. AS PER THE LD. ASSESSING OFFICER, SALE OF SUCH PROPERTY DONE BY THE ASSESSEE AND THREE OTHERS TO SHRI. S. RAJAKU MAR WAS A SOLITARY TRANSACTION AND ASSESSEE HAD NOT INDULGED IN ANY TR ADE OR BUSINESS. AS PER THE LD. AO UNLESS THERE WAS A SYSTEMATIC, REGU LAR ACTIVITY WITH THE SET PURPOSE, WITH THE OBJECTIVE OF EARNING PROFIT, VENTURE CANNOT BE CONSIDERED AS BUSINESS. RELIANCE WAS PLACED ON TH E JUDGMENT OF HONBLE APEX COURT IN THE CASE OF NEW SWADESHI 26 ITR 765. AS PER THE LD. AO, ASSESSEE RECEIVED DELIVERY OF POSSESSIO N FROM SHRI. M. ACHUTHAN NAIR ON EXECUTION OF POWER OF ATTORNEY AN D THEREAFTER SOLD THE PROPERTY. AS PER THE LD. AO INCOME ARISING FRO M SUCH TRANSFER ITA NO.2792 /2018 :- 4 -: COULD BE CONSIDERED ONLY UNDER THE HEAD CAPITAL GAINS AND NOT UNDER THE HEAD BUSINESS INCOME. RELYING ON SECT ION 50C OF THE ACT, LD. AO RELYING ON THE VALUATION FIXED BY THE STAMP DUTY AUTHORITIES FIXED THE CONSIDERATION AT RS.4,24,71,000/- AND TAX ED THE SURPLUS OF RS.1,12,46,714/-. 5. APART FROM THE ABOVE, ASSESSEE HAD CLAIMED EXEMP TION FOR A SUM OF RS.32,60,000/- ARISING OUT OF SALE OF COFFEE BERRIES AS AGRICULTURAL INCOME. LD. AO WAS OF THE OPINION THA T ASSESSEE HAD PURCHASED A COFFEE PLANTATION IN BELUR TALUK, KARNA TAKA FOR A SUM OF RS.1,30,00,000/- ON 11.03.2013 AND WITHIN A SHORT S PAN OF FIVE DAYS SOLD COFFEE BERRIES FOR A SUM OF RS.33,00,000/-. AS PER THE LD. AO PROFIT ON SUCH SALE COULD NOT BE CONSIDERED AS AGRICULTURA L INCOME. LD. AO ALSO DOUBTED THE VELOCITY OF THE CLAIM OF THE ASSE SSEE THAT COFFEE SEEDS COULD NOT BE HARVESTED IN FOUR DAYS THAT TOO IN THE MONTH OF MARCH, 2013. RELYING ON THE JUDGMENT OF HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MADDI VENKATASUBBAYYA, 20 ITR 151, LD. AO HELD THAT SALE OF STANDING CROP COULD NOT BE CO NSIDERED AS AGRICULTURAL INCOME. AS PER THE LD. AO, ASSESSEE DID NOT CARRY OUT ANY AGRICULTURAL OPERATIONS FOR CLAIMING THE BENEFIT OF EXEMPTION FOR AGRICULTURAL INCOME. RELIANCE WAS ALSO PLACED ON T HE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF CIT VS. BENOY KUM AR SAHAS ROY, 32 ITA NO.2792 /2018 :- 5 -: ITR 466. AN ADDITION OF RS.32,60,000/- WAS MADE UN DER THE HEAD INCOME FROM OTHER SOURCES. 6. AGGRIEVED ON THE ABOVE, ASSESSEE MOVED IN APPEAL BEFORE LD. CIT(A) WITHOUT ANY SUCCESS. LD. CIT(A) RELYING ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M. C. CHERIAN VS. CIT, ........... (HONBLE SIR WILL SAY) HELD THAT INDIC ATIONS DISPLAYED BY ASSESSEES INTENTION FOR ACQUIRING A CAPITAL ASSET AND THEREFORE TRANSACTION WAS RIGHTLY MADE UNDER THE HEAD CAPIT AL GAINS. AS FOR THE SALE OF COFFEE BERRIES IS CONCERNED, LD. CIT(A) WA S OF THE OPINION THAT ASSESSEE HIMSELF NOT CARRIED OUT ANY AGRICULTURAL O PERATIONS AND THEREFORE NOT ENTITLED TO CLAIM EXEMPTION U/S.2(1A) OF THE ACT. 7. NOW BEFORE US, LD. AUTHORIZED REPRESENTATIVE S TRONGLY ASSAILING THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) SUBMITTED THAT ASSESSEE HAD NO INTENTION OF HOLDING THE LAND AS INVESTMENTS. AS PER THE LD. AR, ASSESSEE HAD ENTERED INTO INFORMAL AGREEMENT WITH THREE PARTIES FOR ACQUIRING THE LAND AND SELLING TH E LAND. INTENTION OF THE ASSESSEE AS PER THE LD. AR WAS TO VENTURE INTO THE BUSINESS OF TRADING IN LAND AND NOT INVESTMENT. IN SO FAR AS, AGRICULTURAL ISSUE OF SALE OF COFFEE BERRIES WAS CONCERNED, LD. COUNSEL S UBMITTED THAT COFFEE ITA NO.2792 /2018 :- 6 -: BERRIES WAS NOTHING BUT RESULT OF AGRICULTURAL OPE RATIONS COULD NOT BE DENIED EXEMPTION U/S.2(1A) OF THE ACT. 8. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STR ONGLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE ORDERS OF THE AUTHORITIES BELOW. FIRST ISSUE WITH REGARD TO SALE OF LAND AT NOOMBAL VILLAGE, AMBATTUR TALUK, THIRUVALLUR DIS TRICT TREATED BY THE ASSESSEE AS BUSINESS VENTURE AND TREATED BY THE REV ENUE AS INVESTMENT. IT IS NOT DISPUTED THAT PARTIES AGREEM ENT FOR SALE ENTERED BY THE ASSESSEE ALONGWITH THREE OTHER PERSONS NAMEL Y SHRI. S.M.MUTHU, SHRI. S. SETHU AND SHRI. M. MEYYAPPAN, NONE OF THEM WERE RELATED TO THE ASSESSEE. IF ASSESSEE HAD INDE ED TO ACQUIRE THE PROPERTY AS INVESTMENT, IT WOULD NOT HAVE DARED TO DO SO WITH UNRELATED PARTIES. AGREEMENT FOR SALE WAS ENTERED ON 04.02.2012, WHEREAS GENERAL POWER OF ATTORNEY ON 8.06.2012. TH E PROPERTY WAS NEVER TRANSFERRED TO THE NAME OF ASSESSEE AND THE O THER THREE PERSONS. THEY HAD SOLD IT TO ONE SHRI. S. RAJAKUMA R. IN OUR OPINION, JUST BECAUSE TRANSACTION WAS A SOLITARY ONE IT COU LD NOT BE HELD BY INTENTION TO HOLD THE PROPERTY AS INVESTMENT. CONDU CT AND INTENTION OF THE ASSESSEE CLEARLY INDICATE THAT HE HAD ASSOCIAT ED WITH THREE OTHERS ITA NO.2792 /2018 :- 7 -: PERSONS FOR ACQUIRING THE LAND AND SELLING IT AT A LATTER POINT OF TIME. THE INDICATION IN OUR OPINION DID NOT SHOW ANY IN TENTION TO HOLD THE LAND AS CAPITAL ASSET. IN THE JUDGMENT OF HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF M .C. CHERIAN (SUPRA ) RELIED ON UP BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), IT HAS BEEN C LEARLY POINTED OUT THAT INTENTION OF THE ASSESSEE AT THE TIME OF PURCH ASE OF PROPERTY COULD BE A VERY RELEVANT FACTOR IN WHICH THE PROPER TY WAS DEALT BETWEEN THE TIME OF PURCHASE AND DATE OF SALE WO ULD AFFORD VALUABLE INDICATION OF THE CONDUCT OF THE ASSESSEE. HERE THE SHORT PERIOD OF HOLDING AND ASSOCIATIONS WITH UNRELATED PARTIES IN OUR OPINION INDICATE AN ADVENTURE IN THE NATURE OF TRADE. IN OUR OPINI ON, LOWER AUTHORITIES FELL IN ERROR IN TREATING THE CONSIDERATION AS CAPI TAL GAINS. ADDITION OF E1,12,46,714/-AS SHORT TERM CAPITAL GAINS STANDS DE LETED. 10. COMING TO THE SALE OF COFFEE BERRIES, IT IS NO T DISPUTED THAT THE INCOME AROSE TO THE ASSESSEE ON THE SALE OF COFFEE BERRIES. IT IS ALSO NOT DISPUTED THAT AT THE TIME OF SALE OF COFFEE BE RRIES, ASSESSEE WAS THE OWNER OF THE AGRICULTURAL LAND, THE LAND WERE THE COFFEE BERRIES WERE HARVESTED. IT MIGHT BE TRUE THAT ASSESSEE HA D PURCHASED COFFEE ESTATE ON 11.03.2013 AND HAD SOLD COFFEE BERRIES WI THIN A SPAN OF FIVE DAYS. THERE IS NO CASE FOR THE REVENUE THAT COFFEE BERRIES HAD FRUCTIFIED ON THE COFFEE TREES WITHOUT ANY AGRICULT URAL OPERATIONS. ITA NO.2792 /2018 :- 8 -: SECTION 2(1A) OF THE ACT WHICH GIVES EXEMPTION TO AGRICULTURAL INCOME IS REPRODUCED HEREUNDER:- (1A) 'AGRICULTURAL INCOME' MEANS- (A) ANY RENT OR REVENUE DERIVED FROM LAND WHICH IS SITUATED IN INDIA AND IS USED FOR AGRICULTURAL PURP OSES ; (B) ANY INCOME DERIVED FROM SUCH LAND BY- (I) AGRICULTURE ; OR (II) THE PERFORMANCE BY A CULTIVATOR OR RECEIVER OF RENT-IN- KIND OF ANY PROCESS ORDINARILY EMPLOYED BY A CULTIV ATOR OR RECEIVER OF RENT-IN-KIND TO RENDER THE PRODUCE RAIS ED OR RECEIVED BY HIM FIT TO BE TAKEN TO MARKET ; OR (III) THE SALE BY A CULTIVATOR OR RECEIVER OF RENT- IN-KIND OF THE PRODUCE RAISED OR RECEIVED BY HIM, IN RESPECT O F WHICH NO PROCESS HAS BEEN PERFORMED OTHER THAN A PROCESS OF THE NATURE DESCRIBED IN PARAGRAPH (II) OF THIS SUB- CLAUSE ; (C) ANY INCOME DERIVED FROM ANY BUILDING OWNED AND OCCUPIED BY THE RECEIVER OF THE RENT OR REVENUE OF ANY SUCH LAND, OR OCCUPIED BY THE CULTIVATOR OR THE REC EIVER OF RENT-IN-KIND, OF ANY LAND WITH RESPECT TO WHICH, OR THE PRODUCE OF WHICH, ANY PROCESS MENTIONED IN PARAGRAP HS (II) AND (III) OF SUB-CLAUSE (B) IS CARRIED ON : ONCE INCOME IS DERIVED FROM LAND, WHICH LAND IS USE D FOR AGRICULTURAL PURPOSES, SUCH INCOME IS NOTHING BUT AGRICULTURAL INCOME. THE EXEMPTION IS GIVEN FOR AGRICULTURAL IN COME. LD. ASSESSING OFFICER HAD RELIED ON THE JUDGMENT OF JUR ISDICTIONAL HIGH COURT IN THE CASE OF MADDI VENKATASUBBAYYA (SUPRA) FOR ITA NO.2792 /2018 :- 9 -: DISBELIEVING THE CLAIM OF THE ASSESSEE. HOWEVER, I N THE SAID CASE TRADER HAD PURCHASED THE STANDING CROP OF TOBACCO AND THE CLAIM OF EXEMPTION WAS MADE BY SUCH TRADER. HERE ON THE OTHER HAND, CLAIM OF EXEMPTION WAS MADE BY THE OWNER OF THE LAN D AND NOT THE TRADER. IN OUR OPINION THE CASE CITED BY THE LD. AS SESSING OFFICER HAD NO RELEVANCE. COMING TO THE JUDGMENT OF HONBL E SUPREME COURT IN THE CASE OF BENOY KUMAR SAHAS ( SUPRA) WHAT HAS BEEN STATED HERE WAS THAT LAND TO BE USED FOR AGRICULTU RAL PURPOSE AND THE INCOME SHOULD BE FROM SUCH AGRICULTURAL OPERATI ONS. THERE IS NO CASE FOR THE REVENUE THAT COFFEE BERRIES FRUCTIFIED ON THE COFFEE TREES WITHOUT ANY AGRICULTURAL OPERATIONS. IT MIGH T BE TRUE THAT ASSESSEE HAD NOT DIRECTLY PERFORMED ANY AGRICULTURA L OPERATIONS. HOWEVER, WITHOUT DOING AGRICULTURAL OPERATIONS, CO FFEE BERRIES COULD NOT HAVE BEEN HARVESTED. THE PRODUCE OF COFFEE BERR IES AND SALE THEREOF IN OUR OPINION WAS NOTHING BUT AGRICULTURA L OPERATIONS. THERE IS NO CASE FOR THE REVENUE THAT COFFEE BERRIES WER E SUBJECT TO ANY ................. BY THE ASSESSEE AND THEREFORE RUL E 7B OF THE INCOME TAX RULES, 1962 SHOULD BE APPLIED. ACCORDINGLY, WE ARE OF THE OPINION THAT THE INCOME FROM SALE OF COFFEE BERRIES WAS EXEMPT UNDER SECTION 2(1A) OF THE ACT. THE ADDITION STANDS DELETED. GRO UNDS 2 & 3 ARE ALLOWED. ITA NO.2792 /2018 :- 10 -: 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED ON , THE DAY OF AUGUST, 2018, AT CHENNAI. ( # $! # % . & ) ( DUVVURU RL REDDY ) ( / JUDICIAL MEMBER ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED: AUGUST, 2018. KV %& '()( / COPY TO: 1 . / APPELLANT 3. *+, / CIT(A) 5. (-. / / DR 2. / RESPONDENT 4. * / CIT 6. .01 / GF