ITO-WARD-1(4), Nagpur V. S. K. CELEBRATION PVT. LTD., Nagpur

ITA 367/NAG/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4523 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-04-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 22-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGNESH P THOMAS
• Assessee Lawyers: HIMESH DEMBLE
• Keywords: Capital asset; Business income
• Section: 2(14); 115JB

Judgement Text

ITA NO. 367/NAG/2014 1 , INCOME TAX APPELLATE TRIBUNAL,NAGPUR BENCH . . , BEFORE S/SH. D T GARASIYA,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER ./ ITA/367/NGP/201 4 , / ASSESSMENT YEAR:2011 - 12 THE INCOME - TAX OFFICER, WARD - 1(4), NAGPUR. VS. S.K. CELEBRATION PVT. LTD., NAGPUR. PAN:AANCS6448Q. ( / APPELLANT ) ( / RESPONDENT ) REVENUE BY: SMT. AGNESH P. THOMAS. ASSESSEE BY: SHRI HIMESH DEMBLE. / DATE OF HEARING: 29.08.2016 / DATE OF PRONOUNCEMENT: 29.08.2016 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA A.M. - CHALLENGING THE ORDER DATED 07 - 04 - 2014 OF CIT(APPEALS) - I, NAGPUR, THE ASSESSING OFFICER (AO)HAS FILED THE PRESENT APPEAL.ASSESSEE - COMPANY, ENGAGED IN THE BUSINESS OF CONSTRUCTION, FILED ITS RETURN OF INCOME ON 25 - 03 - 2013, DECLARING TOTAL INCOME AT RS. NIL. THE AO COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT ON 31 - 12 - 2013, DETERMINING ITS INCOME AT RS.2.78 CRORES. 2. FIRST TWO GROUNDS ARE ABOUT THE NATURE OF THE P LOT OF LAND SOLD BY THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD SHOWN OTHER INCOME UNDER THE HEAD SALE OF LAND,AMOUNTING TO RS.2.78 CRORES,THAT IT HAD ACQUIRED A PLOT OF LAND HAVING AN AREA OF 2.55 HECTORS,SITUATED AT VILLAGE DONGARGAON,ON 28 - 01 - 2010,FOR A CONSIDERATION OF RS.1.15 CRORES. HE OBSERVED THAT IT WAS OBLIGATORY ON THE PART OF THE ASSESSEE TO FILE RETURN OF INCOME, IT FAILED TO COMPLY WITH THE PROVISIONS OF SECTION 139(1) OF THE ACT, THAT THE PLOT OF LAND WA S ACQUIRED BY THE STATE LAND ACQUISITION OFFICER, NAGPUR (NHAI) AND A SUM OF RS.2.98 CRORES WAS PAID TO IT ON 30 - 03 - 2011, THAT IT CONSIDERED THE SURPLUS OF RS.2.78 CRORES AS INCOME FROM BUSINESS AND SUBSEQUENTLY CLAIMED THE WHOLE AMOUNT AS EXEMPT UNDER THE ACT.THE AO DIRECTED THE ASSESSEE TO STATE THE SECTION UNDER WHICH EXEMPTION WAS CLAIMED.IN RESPONSE TO THE ABOVE,THE ASSESSEE SUBMITTED THAT PROFIT ARISING ON SALE OF THE PLOT OF LAND WAS NOT TAXABLE ACCORDING TO THE PROVISIONS OF SECTION 2(14)(III)(B) OF THE ACT,THAT THE LAND IN QUESTION WAS OUT OF PURVIEW OF DEFINITION OF CAPITAL ASSET.THE AO HELD THAT THE ASSESSEE HAD CLAIMED THE EXEMPTION CONSIDERING THE LAND AS NOT BEING CAPITAL ASSET. HE REFERRED TO THE PROVISION OF SECTION 45 AND SECTION 2(14) OF TH E ACT AND HELD THAT IT HAD MADE A REFERENCE TO ITA NO. 367/NAG/2014 2 TAKE SHELTER OF SECTION 2(14)(III)(B) OF THE ACT TO CONSIDER THE LAND ACQUIRED BY THE NHAI AS AGRICULTURAL LAND LOCATED BEYOND A DISTANCE OF 8 KMS. FROM THE LIMIT OF LOCAL MUNICIPAL CORPORATION, THAT THE CLAIM MADE BY IT WAS NOT CORRECT,THAT THE ASSISTANT DIRECTOR, TOWN PLANNING, NAGPUR,ON 22 - 10 - 2013,HAD INFORMED THAT THE PLOT OF LAND IN QUESTION WAS LOCATED AT A DISTANCE OF 7.30 KMS. FROM THE LOCAL LIMITS OF NAGPUR MUNICIPAL CORPORATION,THAT THE ASSESSEE HAS WRONGLY CLAIMED THAT THE LAND WAS AN AGRICULTURAL LAND, THAT IT HAD NOT FILED ANY RETURN FOR THE AY.2010 - 11,THAT IT HAD NOT DISCLOSED ANY INCOME FROM THE AGRICULTURAL ACTIVITIES OR HAD NOT CLAIMED ANY EXPENDITURE AGAINST SUCH INCOME FOR THE YEAR UNDER APPE AL,THAT THE ASSESSEE DID NOT HAVE MUCH OF THE INDEPENDENT FUNDS TO MAKE INVESTMENT. HE ISSUED A SHOW CAUSE NOTICE ON 25 - 10 - 2013 ASKING THE ASSESSEE TO EXPLAIN AS TO WHY THE STCG SHOULD NOT BE CONSIDERED AS ITS INCOME FOR THE YEAR UNDER APPEAL. IT FILED A D ETAILED REPLY IN THAT REGARD.IT RELIED UPON THE CASE OF JAWAHAR DEVELOPMENT ASSOCIATION(127ITR 431),GURDIAL NARAINDAS & CO.(50 ITR 633), RAJA RAMESHWAR RAO 42 ITR 179) AND OTHERS. AFTER CONSIDERING THE AVAILABLE MATERIAL, THE AO HELD THAT GAIN ON ACQUISIT ION OF LAND WAS FULLY CHARGEABLE TO TAX, THAT IT HAD FAILED TO COMPUTE THE BOOK PROFIT, U/S 115JB, THAT AS PER THE P&L ACCOUNT THE NET PROFIT FOR COMPANY AS PER THE PROVISIONS OF THE COMPANIES ACT WORKED OUT TO RS.2.77 CRORES,THAT THE PROVISIONS OF SECTION 115JB WERE APPLICABLE, THAT THE LAND WAS SITUATED WITHIN THE RADIUS OF 8 KMS. FINALLY, BUSINESS INCOME OF THE ASSESSEE FROM THE TRANSFER OF THE PLOT OF LAND WAS COMPUTED AT RS.2.78 CRORES, AS STATED EARLIER. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM IT WAS ARGUED THAT THE PLOT OF LAND WAS SITUATED ON 8 KMS.FROM THE LIMITS OF MUNICIPAL CORPORATION,THAT THE POPULATION OF THAT AREA DID NO T EXCEED 2000 PEOPLE,THAT THE LAND WAS PURCHASED BY IT WITH THE INTENTION OF INVESTMENT AND NOT AS STOCK IN TRADE, THAT THE PLOT OF LAND WAS COMPULSORILY ACQUIRED BY THE NHAI FOR A CONSIDERATION OF RS.3.98 CRORES,THAT THE ACT OF COMPULSORY ACQUISITION OF A RURAL AGRICULTURAL LAND WAS COMPLETELY OUT OF THE PURVIEW OF THE ACT BY VIRTUE OF SECTION 2(14) OF THE ACT AND WAS NOT AT ALL TAXABLE,THAT THE DISTANCE HAD TO BE MEASURED BY THE APPROACHABLE ROAD AND NOT AERIAL ROUT IN ORDER TO DETERMINE WHETHER AN AGRICU LTURAL LAND WAS A RURAL LAND OR AN URBAN LAND.THE ASSESSEE RELIED UPON CERTAIN CASES AND STATED THAT IT HAD A CERTIFICATE FROM TALATHI KARYALAYA, WHEREIN IT WAS CERTIFIED THAT THE PLOT OF LAND WAS SITUATED MORE THAN 10 KMS, THAT TILL THE DATE OF COMPULSORY ACQUISITION OF THE LAND IN QUESTION THE ASSESSEE COMPANY HAD NOT CHANGED THE BASIC AGRICULTURAL CHARACTER OF THE SAID PLOT OF LAND, THAT THE DISCLOSURE OF THE AGRICULTURAL INCOME IN ASSESSEES RETURN OF INCOME WAS NOT A PRECONDITION FOR TREATING A PIECE O F LAND AS ITA NO. 367/NAG/2014 3 AN AGRICULTURAL LAND. IT ALSO REFERRED TO THE CERTAIN DOCUMENTS ISSUED BY THE TOWN PLANNING DEPARTMENT WHEREIN IT WAS STATED THAT THE SAID LAND WAS AN AGRICULTURAL LAND.IT WAS FURTHER THAT THE AO HIMSELF WAS NOT SURE AS TO WHETHER THE GAIN ARISIN G FROM THE CAPITAL ACQUISITION WAS TO BE TAXED UNDER THE HEAD BUSINESS PROFESSION OR CAPITAL GAIN, THAT THE AO WAS UNDER PRESUMPTION THAT THE ASSESSEE WAS IN THE BUSINESS OF REAL ESTATE ACTIVITIES,THAT HIS PRESUMPTION WAS BASED ON INCORRECT FACTS, THAT TRA NSACTION WAS NOT A BUSINESS TRANSACTION,THAT THE ASSESSEE HAD ACTUALLY BOUGHT THE PLOT OF LAND TO DEVELOP A LAWN WHERE MARRIAGES COULD BE SOLEMNIZED. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER, THE FAA HELD THAT THE ASSESSE E HAD FILED A COPY OF 7/12 EXTRACT,A CERTIFICATE FROM GRAM PANCHAYAT,COPY OF SALE DEED AND OTHER DETAILS OF ACQUISITION OF LAND BY NHAI IN SUPPORT OF ITS CLAIM FOR LAND IN QUESTION BEING AGRICULTURAL LAND, THAT THE PLOT WAS PURCHASED IN JANUARY, 2010, IT W AS ACQUIRED BY THE LAND ACQUISITION OFFICER IN MARCH, 2011, THAT IT WAS AWARDED A COMPENSATION IN LIEU OF THE PLOT,THAT THE CONTENTION OF THE ASSESSEE THAT IT HAD NEVER APPLIED FOR CHANGE OF USE OF PROPERTY FROM AGRICULTURE TO ANY OTHER PURPOSE WAS NOT DIS PUTED BY THE AO,THAT THE ASSESSEE HAD, DURING THE COURSE OF APPELLATE PROCEEDINGS, SUBMITTED A CERTIFICATE FROM TALATHI, DONGARGAON, STATING THAT PLOT WAS AN AGRICULTURAL LAND SITUATED NEAR THE NATIONAL HIGHWAY NO. 7 AND WAS BEYOND 10 KMS. FROM THE MUNICIP AL LIMITS OF NAGPUR MUNICIPAL CORPORATION, THAT AS PER THE CERTIFICATE THE POPULATION OF THE VILLAGE WAS LESS THAN 2000, THAT THE LAND WAS AGRICULTURAL LAND AND WAS SITUATED BEYOND 8 KMS. OF MUNICIPAL LIMITS OF NAGPUR, THAT IT WAS OUTSIDE THE AMBIT OF SECT ION 2(14)(III)(B)OF THE ACT AND WAS NOT TAXABLE. HE RELIED UPON THE CASES OF SANJAY NAGRAO PADLEWAR (ITA/ 112/NAG/2012) AND NITISH RAMESHJCHANDRA CHORDIA (ITA/113/NAG/ 2012) AND ASHOK SHUKLA (ITA/207/IND/2012 - AY.2008 - 09)AND HELD THAT THE DISTANCE WAS TO BE MEASURED THROUGH THE APPROACH ROAD AND NOT STRAIGHT - LINE DISTANCE METHOD. FINALLY,HE DELETED THE ADDITION MADE BY THE AO. 4. DURING THE COURSE OF HEARING BEFORE US, THE DEPARTMENTAL REPRESENTATIVE (DR) RELIED UPON THE ORDER OF THE AO AND CONTENDED THAT THE PLOT WAS WITHIN THE DISTANCE OF 8 KMS. OF THE MUNICIPAL LIMITS,THAT IT WAS NOT AN AGRICULTURAL LAND, THAT THE ASSESSEE HAD TREATED IT AS STOCK IN TRADE,THAT THE PROFIT ARISING ON ACCOUNT OF SALE OF PLOT WAS TO BE ASSESSED AS BUSINESS INCOME.THE AUTHORISED REPRESENTATIVE (AR) SUPPORTED THE ORDER OF THE FAA.HE REFERRED TO THE CIRCULAR NO. 17 OF 2015 DATED 06 - 10 - 2015, F.NO. 279 - MISC. - 140 - 2015 - ITJ AND STATED THAT LETTERS OF THE TALATHI OF DONGARGAON AND VALUATION DEPARTMENT PROVED THAT THE PLOT WAS OUTSIDE THE MUNICIPAL LIMITS. ITA NO. 367/NAG/2014 4 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE PLOT OF LAND WAS SITUATED IN DONGARGAON, THAT THE ASSESSEE HAD FILED COPIES OF REGISTERED SALE DEED ALONG WITH COPY OF 7/12 EXTRACT, THAT THE LA ND IN QUESTION WAS CATEGORIESED AS AGRICULTURAL LAND IN THE REVENUE RECORD. IN THESE CIRCUMSTANCES, IN OUR OPINION, THE FAA WAS JUSTIFIED IN HOLDING THAT THE LAND IN QUESTION WAS AGRICULTURAL LAND.IT IS ALSO A FACT THAT THE PLOT OF LAND WAS COMPULSORILY AC QUIRED BY THE GOVERNMENT AND WAS PURCHASED AS AGRICULTURAL LAND.THE CERTIFICATE,DATED 23 - 08 - 2013 OF GRAM ADHIKARI, DONGARGAON STATES THAT PLOT OF LAND WAS AN AGRICULTURAL LAND SINCE IT WAS PURCHASED TILL THE DATE OF COMPULSORY ACQUISITION.THE AO HIMSELF HAS ADMITTED,REFERRING TO THE 7/12 EXTRACTS.THAT LAND IN QUESTION WAS AGRICULTURAL LAND IN THE EARLIER ASSESSMENT YEARS.IN OUR OPINION, THE CHARACTER OF LAND WOULD NOT CHANGE AUTOMATICALLY IN SUBSEQUENT YEARS UNTIL AND UNLESS THE SAME IS USED FOR SOME OTHE R PURPOSES. THERE IS NOTHING ON RECORD TO SHOW THAT THE LAND WAS NOT USED FOR AGRICULTURAL PURPOSES.THE AO HAS NOT BROUGHT ON RECORD TO PROVE THE FACT THAT AGRICULTURAL LAND WAS CONVERTED INTO NON AGRICULTURAL LAND OR THAT THE ASSESSEE HAD APPLIED FOR SUCH CONVERSION.THE AO HAD REFERRED TO THE AERIAL DISTANCE TO DETERMINE THE DISTANCE OF PLOT OF LAND FROM THE MUNICIPAL LIMITS.THE CIRCULAR NO. 7/215 (SUPRA)CLEARLY STIPULATES THAT DISTANCE BETWEEN THE MUNICIPAL LIMITS AND AGRICULTURAL LAND HAD TO BE MEASURED HAVING REGARD TO THE SHORTEST ROAD DISTANCE. IN OTHER WORDS, THE AERIAL DISTANCE HAS NOT TO BE CONSIDERED FOR DETERMINING THE DISTANCE BETWEEN THE MUNICIPAL LIMITS AND THE PLOT OF LAND AND AS PER THE ROAD DISTANCE THE PLOT WAS OUTSIDE THE LIMITS OF MUNICI PAL CORPORATION OF NAGPUR. WE FURTHER FIND THAT THE FAA HAS HELD THAT THE TRANSACTION IN LAND WAS AN ADVENTURE IN NATURE OF TRADE.IN OUR OPINION THE SALE OF AGRICULTURAL LAND CANNOT BE TREATED AS AN ADVENCTUR,AS THE LAND WAS COMPULSORILY ACQUIRED BY NHAI. THE PLOT OF LAND, ACQUIRED BY THE ASSESSEE WAS AN AGRICULTURAL LAND AND, THEREFORE, WAS OUT OF AMBIT OF TAXABILITY. IT WAS NOT LIABLE FOR CHARGING UNDER THE CAPITAL GAINS/BUSINESS PROFIT. IN THESE CIRCUMSTANCES,WE ARE OF THE OPINION THAT THE ORDER OF THE F AA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY.SO,ENDORSING 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 29 TH .AUGUST, 2016. 29 , 2016 SD/ - SD/ - ( . . / D T GARASIYA ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER NAGPUR ; DATED :29 . 0 8 . 2016. ITA NO. 367/NAG/2014 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.