ACIT, CHENNAI V. Chettinad Logistics Pvt. Ltd., CHENNAI

ITA 307/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73647 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-02-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 19-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N BETGIRI JT
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Business income
• Section: 143(3); 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , . . !' , # '$ % [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI S. S. GODARA, JUDICIAL MEMBER] ./ I.T.A.NO.307/MDS/2013 / ASSESSMENT YEAR : 2004-05 THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE I(3) CHENNAI VS. M/S CHETTINAD LOGISTICS PVT. LTD NO.603, RANI SEETHAI HALL 5THFLOOR ANNA SALAI, CHENNAI 600 006 [PAN AABCC 4551 C] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI T.N.BETGIRI, JT.CIT /RESPONDENT BY : SHRI A.S.SRIRAMAN, ADVOCATE / DATE OF HEARING : 04-02-2014 / DATE OF PRONOUNCEMENT : 05-02-2014 '* / O R D E R PER S.S.GODARA, JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE FOR ASSESSMENT Y EAR 2004- 05, IS DIRECTED AGAINST THE ORDER OF THE COMMISSION ER OF INCOME-TAX (APPEALS)-III, CHENNAI, DATED 29.11.2012, PASSED IN APPEAL NO. 856/ I.T.A.NO307/13 :- 2 -: 2010-11/A.III, IN PROCEEDINGS UNDER SECTION 143(3) R.W.S 147 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 2. THE GROUNDS RAISED BY THE REVENUE READ AS FOLLOWS: 2.1 THE LEARNED CIT(A) ERRED IN ALLOWING THE ASSE SSEE'S CLAIM THAT PROFITS ARISING OUT OF LANDS SOLD AT TIRUCHI S HOULD BE TAXED A LONG TERM CAPITAL GAINS ONLY AND NOT AS BUSINESS IN COME AS HELD BY THE ASSESSING OFFICER. 2.2. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE COMPANY WANTED TO DISPOSE OFF THE LAND TO THE MAXIM UM ADVANTAGE TO THE COMPANY ITSELF SHOWS THAT IT IS A 'BUSINESS DECISION'. 2.3 THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE M ADRAS HIGH COURT'S DECISION IN THE CASE OF CIT. VS. MOHAMMED M OIDEEN (176 ITR 393) IS DISTINGUISHABLE AND NOT APPLICABLE TO T HE FACTS OF THIS CASE. 2.4. IT IS SUBMITTED THAT THE EARLIER DECISION OF T HE ITAT IN THE ASSESSEE'S OWN CASE IN ITA NO.1679/2008 DATED 10/07 /2009 HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND AN APPEAL H AS BEEN PREFERRED AGAINST THE SAME BEFORE THE HON'BLE HIGH COURT OF MADRAS. 3. IN THE COURSE OF HEARING, THE REVENUE STRONGLY ARGU ES THAT THE CIT(A) OUGHT TO HAVE UPHELD THE ACTION OF THE A SSESSING OFFICER IN TREATING THE LONG TERM CAPITAL GAINS DECLARED BY TH E ASSESSEE OF ` 11,37,07,780/- AS BUSINESS INCOME IN THE RE-ASSE SSMENT FINALIZED ON 31.12.2010 AND PRAYS FOR ACCEPTANCE OF THE APPEAL. 4. THE ASSESSEE RELIES ON THE CIT(A)S ORDER WHICH HA S BEEN PASSED AFTER TAKING INTO CONSIDERATION ORDER OF THE TRIBUNAL DATED I.T.A.NO307/13 :- 3 -: 10.7.2009 QUA THE VERY GROUNDS FOR ASSESSMENT YEAR 2003-04 AND PRAYS FOR REJECTION OF THE APPEAL. 5. THE ASSESSEE, A COMPANY, IS IN THE BUSINESS OF C LEARING AND FORWARDING, MANUFACTURING, TRADING AND SHIP MANAGEM ENT SERVICES. FOR THE IMPUGNED ASSESSMENT YEAR, IT HAD FILED ITS RETURN ON 30.11.2004 DISCLOSING TOTAL INCOME OF ` 16,02,66,000/-. THE SAME WAS SUMMARILY PROCESSED. THE ASSESSEE HAD DECLARED L ONG TERM CAPITAL GAINS OF ` 86,23,038/- WHICH PERTAINED TO ITS LAND SITUATED IN TRICHY SOLD AFTER CARVING OUT SMALL RESIDENTIAL PLOTS. 6. WE FIND FROM THE CASE FILE THAT AFTER PROCESSING OF THE RETURN, THE ASSESSING OFFICER FORMED AN OPINION T HAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF SALE OF THE LANDS IN QUESTION WERE IN THE NATURE OF TRADE ADVENTURE AND ACCORDINGLY, L ONG TERM CAPITAL GAINS DECLARED AFORESAID DESERVED TO BE TREATED AS BUSINESS INCOME AFTER EXCLUDING THE COST OF INDEXATION ETC. THIS P ROMPTED HIM TO ISSUE REOPENING NOTICE U/S 148 DATED 2.9.2009 TO THE AS SESSEE. IN RESPONSE, THE ASSESSEE REITERATED THE RETURN ALR EADY FILED. THEREAFTER, THE ASSESSING OFFICER FRAMED RE-ASSESSM ENT AND HELD IN HIS ORDER THAT THE LONG TERM CAPITAL GAINS IN QUESTION HAD TO BE TREATED AS I.T.A.NO307/13 :- 4 -: ASSESSEES BUSINESS INCOME. IN THIS MANNER, THE PROFITS AND GAINS ON SALE OF LAND IN QUESTION WERE DETERMINED AT ` 95,72,055/-. 7. IN ASSESSEES APPEAL, THE CIT(A) HAS DECIDED THE I SSUE IN ASSESSEES FAVOUR BY PLACING RELIANCE ON THE ORDER OF THE TRIBUNAL FOR PRECEDING ASSESSMENT YEAR PERTAINING TO THE VERY AS SETS IN QUESTION AND FINDINGS OF THE CIT(A) UNDER CHALLENGE READ AS UNDER: 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE ID.AR. I HAVE ALSO GONE THROUGH THE DECISIONS RELIED ON BY THE ID.AR AND THE AO. I HAVE ALSO PERU SED THE ORDER OF THE ITAT IN APPELLANT'S OWN CASE FOR A .Y. 2003-04 IN ITA NO.1679/2008 DATED 10.7.2009. THE HON'BLE ITAT HAS HELD AS UNDER: 'FROM THE ABOVE RESOLUTION THE INTENTION OF THE ASS ESSEE COMPANY CAN BE CLEARLY GATHERED. IT DID NOT TREAT T HE SALE OF LAND AS AN ADVENTURE IN THE NATURE OF TRADE. THE LAND WAS PURCHASED BY THE AMALGAMATED COMPANIES WAY BACK IN 1996- 97 FOR SETTING UP STEEL AND TEXTILE INDUSTRIES, AND TH E LAND WAS EVENTUALLY SOLD, IN OUR CONSIDER OPINION, IT WOULD AMOUNT TO SALE OF LAND, SIMPLICITER, AND ON WHICH ONLY 'CAPITAL GA INS' CAN BE CHARGED WHICH THE ASSESSEE HAS ITSELF DECLARED IN T HE ROI. WE CAN DRAW STRENGTH FROM THE DECISION OF HON'BLE MADR AS HIGH COURT RENDERED IN THE CASE OF CIT VS. MOHAMMED MOHI DEEN 176 ITR 393, THE HELD PORTION OF WHICH WE WOULD ALSO LIKE TO EXTRACT, FOR READY REFERENCE, AS UNDER:- IN ORDER TO HOLD THAT AN ACTIVITY IS IN THE NATURE OF AN ADVENTURE IN THE NATURE OF TRADE, THERE MUST BE POS ITIVE MATERIAL TO PROVE THAT THE ASSESSEE INTENDED TO TRA DE IN SUCH AN ACTIVITY AND IN THE ABSENCE OF EVIDENCE, THE SALE OF IMMOVABLE PROPERTY CONSISTING OF LAND COULD GIVE RI SE ONLY TO CAPITAL ACCRETION. A SALE OF IMMOVABLE PROPERTY MAY POSSIBLY BE A TRADING COMMERCIAL TRANSACTION, BUT NEED NOT NECESSARILY BE SO. IF A LAND OWNER DEVELOPED HIS LAND, EXPANDED MONEY ON IT, LAID ROADS, CONVERT ED THE LAND INTO HOUSE SITES AND WITH A VIEW TO GET A BETTER PRICE FOR THE LAND, EVENTUALLY SOLD THE PLOTS FOR A I.T.A.NO307/13 :- 5 -: CONSIDERATION YIELDING A SURPLUS, IT COULD HARDLY BE SAID THAT THE TRANSACTION IS ANYTHING MORE THAN A REALIZATION OF A CAPITAL INVESTMENT OR CONVERSION OF ONE FORM OF ASSET INTO ANOTHER. OBVIOUSLY, THE SURPLUS IN SUCH A CASE WILL NOT BE TRADING OR BUSINESS PROFIT BECAUSE THE TRANSACTION IS ONE OF REALIZATION OF ASSETS IN INVE STMENTS RATHER THAN ONE IN THE COURSE OF TRADE CARRIED ON B Y THE ASSESSEE OR AN ADVENTURE IN THE NATURE OF TRADE. IN CASE THE AMALGAMATED COMPANY CAN BE SHOWN TO HAV E PURCHASED THE LAND FOR EARNING PROFIT, THE CONCLUSI ON OF THE ASSESSING OFFICER WOULD HAVE BEEN CORRECT AND THE DECISION REFERRED TO BY HIM WOULD HAVE BEEN RELEVAN T, BUT THE FACTS OF THE REFERENCE CASE ARE EXACTLY OPPOSITE. HENCE, WE FIND NO PLAUSIBLE REASON TO INTERFERE WITH APPELLAT E FINDING. WE CANNOT ALLOW THIS GROUND OF REVENUE APPEAL.' RESPECTFULLY FOLLOWING THE ABOVE ORDER OF JURISDICT IONAL ITAT IN APPELLANT'S OWN CASE FOR A.Y.2003-04, THIS GROUND I S ALLOWED . 8. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE CAS E FILE. WE MAKE IT CLEAR THAT SO FAR AS SIMILARITY OF FACTS BETWEEN THE PRECEDING ASSESSMENT YEAR VIS--VIS THE IMPUGNED AS SESSMENT YEAR IS CONCERNED, THERE IS NO EVIDENCE CONTROVERTING THE S AME. THAT LEAVES US WITH THE ONLY OTHER ARGUMENT OF THE REVENUE THAT APPEAL FOR ASSESSMENT YEAR 2003-04 ON THE VERY ISSUE IS PENDIN G BEFORE THE HON'BLE HIGH COURT. IN OUR VIEW, THIS DOES NOT FORM A VALID GROUND TO ADOPT A DIFFERENT VIEW IN THE IMPUGNED ASSESSMENT Y EAR. ACCORDINGLY, WE CONFIRM THE FINDINGS OF THE CIT(A) IN SETTING AS IDE ACTION OF THE ASSESSING OFFICER WHO HAD TREATED THE LONG TERM CAP ITAL GAINS AS I.T.A.NO307/13 :- 6 -: ASSESSEES BUSINESS INCOME. CONSEQUENTLY, THE RE VENUES APPEAL FAILS. 9. THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 5 TH OF FEBRUARY, 2014, AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (S. S. GODARA) JUDICIAL MEMBER DATED: 05 TH FEBRUARY, 2014 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR