ACIT, CHENNAI V. S.Sridhar, CHENNAI

ITA 2795/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86303 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 11-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: N DEVANATHAN
• Keywords: Business income
• Section: 54F

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' $ % , & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 2795/MDS/2014 ( / ASSESSMENT YEAR: 2007-08) THE ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE-V CHENNAI-34. VS MR. S.SRIDHARAN, 401, BRINDAVAN APARTMENT, 117/3, SRINIVASAMURTHY AVENUE, ADYAR, CHENNAI-600 020. PAN:ALEPS6348G ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. S. DAS GUPTA, JCIT /RESPONDENT BY : MR. N.DEVANATHAN, ADVOCATE /DATE OF HEARING : 5 TH FEBRUARY, 2015 /DATE OF PRONOUNCEMENT : 20 TH FEBRUARY, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, CHENNAI DATED 01.08.2014 FOR THE ASSESSMENT YEAR 2007-08. THE O NLY GRIEVANCE OF THE REVENUE IN ITS APPEAL IS THAT COM MISSIONER OF INCOME TAX (APPEALS) ERRED IN TREATING THE GAI NS FROM SALE OF LAND AS LONG TERM CAPITAL GAINS AND ALLOWIN G EXEMPTION CLAIMED UNDER SECTION 54F OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPR ECIATE THAT THE MAIN INTENTION OF THE ASSESSEE WAS TO DO B USINESS 2 ITA NO.2795/MDS/2014 BY DIVIDING THE LAND INTO PLOTS AND HENCE SALE TRA NSACTION IS ONLY AN ADVENTURE IN NATURE OF TRADE. 2. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSEE SUBMITS THAT ON IDENTICAL FACTS IN ASSESSEES OWN C ASE FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO.1718/MDS/2013 DAT ED 25.02.2014, THIS TRIBUNAL DISMISSED THE APPEAL OF T HE REVENUE ACCEPTING THE CONTENTION OF THE ASSESSEE T HAT SALE OF AGRICULTURAL LANDS SHOULD BE ASSESSED UNDER THE HEAD CAPITAL GAINS AND CONSEQUENTLY DEDUCTION UNDER 54F SHOULD BE ALLOWED. 3. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER. 4. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE ORDER OF THE CO-ORDINATE BENCH OF THIS TRIB UNAL IN ITA NO.1718/MDS/2013 DATED 25.02.2014 FOR THE ASSESSMEN T YEAR 2008-09. WE FIND THAT AN IDENTICAL ISSUE HAS B EEN DECIDED BY THIS TRIBUNAL IN ASSESSEES OWN CASE IN FAVOUR OF THE ASSESSEE HOLDING THAT PLOTS SOLD BY THE ASSESSE E SHOULD 3 ITA NO.2795/MDS/2014 BE ASSESSED AS INCOME FROM CAPITAL GAINS. WHILE HOL DING SO, THE TRIBUNAL OBSERVED AS UNDER:- 2. AT THE OUTSET, THE PARTIES CLARIFY THAT THE ONLY IS SUE INVOLVED IN BOTH THESE APPEALS IS IDENTICAL I.E THE REVENUES GRIEVANCE IS THAT THE CIT(A) OUGHT TO HAV E AFFIRMED THE FINDINGS OF THE ASSESSING OFFICER TREA TING THE PROFITS FROM THE LAND SOLD AFTER CARVING OUT PL OTS AS BUSINESS INCOME. QUA CROSS OBJECTIONS, IT IS FOUN D THAT THE SAME ONLY SUPPORT THE ORDER OF THE CIT(A) IN I.T.A.NO.1380/MDS/2013. IN THIS BACKDROP, WE TREAT I.T.A.NO.1380/ MDS/2013 AS THE LEAD CASE. 3. THE ASSESSEE, AN INDIVIDUAL, IS A CIVIL ENGINEER ON 30.1.2010, HE HAD FILED HIS RETURN DISCLOSING INCOM E OF ` 12,39,346/-.IN SCRUTINY, THE ASSESSING OFFICER NO TICED THE ASSESSEE TO HAVE DISCLOSED CAPITAL GAINS OF ` 30,45,610/- ARISING FROM PLOTS CARVED OUT OFA PARCE L OF LAND AT RAJAKILPAKKAM VILLAGE, TAMBARAM TALUK. HE H AD ALSO CLAIMED DEDUCTION U/S 54F OF THE ACT. PER ASSESSING OFFICER, THESE CAPITAL GAINS WERE IN FACT ASSESSEES BUSINESS INCOME AS ALONGWITH 14 OTHERS [INCLUDING SHRI S.SRIDHARAN I.T.A.NO.1718/MDS/201 3], HE HAD EXECUTED VARIOUS AGREEMENTS WITH A PROPRIETA RY CONCERN NAMELY, M/S TELLUS IN THE YEAR 2006 PERMITT ING IT TO FIND PROSPECTIVE BUYERS, FIX SALE PRICE AS PE R SRO RATES, GET NECESSARY EXPENSES REIMBURSED, TO SELL T HE PLOTS IN LIEU OF ` 2500/- PER GROUND, GET LAYOUT PLAN APPROVED AND CERTIFICATE COLLECTED. HE ALSO TOOK COGNIZANCE OF THE FACT THAT THEREAFTER, THE ASSESSE E HAD SYSTEMATICALLY CARVED OUT PLOTS ON THE LAND, SOLD T HEM YEAR AFTER YEAR,RECEIVED PAYMENTS FROM THE AFORESAI D ENTITY OF ` 1.98 CRORES. SO, THE ASSESSING OFFICER CONCLUDED THAT ASSESSEES AFORESAID ACTIVITIES AMOUNTED TO ADVENTURE IN THE NATURE OF TRADE AND TH AT FOR EXPLOITING COMMERCIAL POTENTIAL OF THE CHUNK OF LAND, HE HAD RESORTED TO THE AFORESAID BUSINESS ARRANGEMENTS. THEREFORE, IN THE ASSESSMENT ORDER DATED 30.12.2011, THE ASSESSING OFFICER TREATED THE AFORESAID CAPITAL GAINS AS ASSESSEES BUSINESS INCOME. 4 ITA NO.2795/MDS/2014 4. IN LOWER APPELLATE PROCEEDINGS, THE CIT(A) HAS ACCEPTED THE ASSESSEES ARGUMENTS AND DIRECTED THE ASSESSING OFFICER TO TREAT THE AMOUNT IN QUESTION A S CAPITAL GAINS AND ALSO TO GRANT DEDUCTION U/S 54F O F THE ACT. THE FINDINGS OF THE CIT(A) READ THAT THE ASSES SEE HAD PURCHASED LAND IN QUESTION IN 1999, SOLD THE SA ME IN THE YEAR 2007 ONWARDS. PER CIT(A), USUALLY STOCK -IN- TRADE IN BUSINESS ACTIVITIES IS NOT KEPT IDLE FOR E IGHT LONG YEARS. COMING TO THE ARRANGEMENTS MADE BY THE ASSESSEE WITH THE PROPRIETARY CONCERN(SUPRA), HE OBSERVES THAT THE SAME IS ONLY FOR THE PURPOSE OF C APITAL INVESTMENTS. WHILE INTERFERING WITH THE FINDINGS OF THE ASSESSING OFFICER, HE TAKES INTO CONSIDERATION THE CASE LAW OF G. VENKATASWAMI NAIDU & CO. VS CIT, 35 ITR 594, BOARDS CIRCULAR NO.4/2007 TO HOLD THAT ASSESS EES POSITION AS A DIRECTOR IN AN INVESTMENT COMPANY WOU LD NOT DECIDE THE NATURE OF INVESTMENT AS STOCK-IN-TR ADE AND AFORESAID ARRANGEMENTS WERE ONLY A METHODOLOGY TO APPLY THE SAME PROCEEDS. THUS, THE ASSESSEES CONTENTIONS STAND ACCEPTED BY THE LOWER APPELLATE AUTHORITY WHICH LEAVES THE REVENUE AGGRIEVED. 5. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE CASE FILE. A PAPER BOOK FILED BY THE ASSESSEE HAS A LSO BEEN GONE THROUGH. THE ONLY CONTENTION OF THE REVEN UE IN SUPPORT OF THE FINDINGS OF THE ASSESSING OFFICER IS THAT SINCE THE ASSESSEE HAD RESORTED TO PROPER PLANNING IN CARVING OUT THE PLOTS IN THE LAND IN QUESTION IN AGREEMENT WITH A PROPRIETARY CONCERN ALONG WITH 15 OTHERS, IT IS AN ADVENTURE IN THE NATURE OF TRADE. PER CONTRA, THE ASSESSEE RELIED ON THE ORDER OF THE TR IBUNAL IN THE CASE OF SRI S. VASANTHAKUMAR, I.T.A.NO. 1491 / MDS/2010, DATED 8.8.2012, WHEREIN THE SAME ISSUE HA D ARISEN PERTAINING TO THE OTHER 14 LAND OWNERS AND DECIDED AGAINST THE REVENUE. ON BEING ALLOWED OPPORTUNITY TO REBUT, THE REVENUE HAS NOT DRAWN ANY DISTINGUISHING FEATURES. THAT BEING THE CASE, WE HO LD THAT IN ABSENCE OF ANY EVIDENCE REGARDING ASSESSEE CONVERTING THE INVESTMENTS INTO STOCK-IN-TRADE AND IN VIEW OF THE FACTUAL POSITION THAT QUA OTHER LAND OW NERS, THE VERY ISSUE HAS BEEN DECIDED AGAINST THE REVENUE , WE FOLLOW THE SAME AND CONFIRM THE FINDINGS OF THE CIT(A). 5 ITA NO.2795/MDS/2014 5. AS THE FACTS AND CIRCUMSTANCES BEING SIMILAR AND IDENTICAL, RESPECTFULLY FOLLOWING THE SAID DECISION , WE AFFIRM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S) AND REJECT THE GROUNDS RAISED BY THE REVENUE. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DAY OF FEBRUARY, 2015 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 20 TH FEBRUARY, 2015 SOMU 12 32 / COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .