M/s. Kohli Estates Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 410/DEL/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1998 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 28-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: G S KOHLI
• Keywords: Capital asset; Business income; Depreciation; Business expenditure; Treatment of capital gains as business income; Competent authority; TDS; Capital Gains
• Section: 2(14); 40(a)(ia); 201; 192; 40a(ia); 73; 13; 22; 37; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SH. AMIT SHUKLA, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 410/DEL/2016 : ASSTT. YEAR : 2011-12 M/S KOHLI ESTATES PVT. LTD., 80, SCINDIA HOUSE, NEW DELHI-110001 VS INCOME TAX OFFICER, WARD-14(4), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAACK3430D ASSESSEE BY : SH. G. S. KOHLI, ADV. REVENUE BY : SH. RAKESH KUMAR, SR. DR DATE OF HEARING: 18.02.2020 DATE OF PRONOUNCEMENT: 05.05.2020 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-5, DELHI DATED 26.10.20 15. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: 1. THE LEARNED CIT (APPEAL) WAS NOT JUSTIFIED IN CONFIRMING AN ADDITION OF RS.9,63,74,327/- BY TREATING IT AS BUSINESS INCOME AGAINST THE APPELLAN T'S CLAIM OF RS.9,26,86,690/- AS 'LONG TERM CAPITAL GAIN'. 2. THE LEARNED A.O. AS WELL AS CIT (APPEAL) HAD FAILED TO APPRECIATE THE RESPECTIVE SUBMISSION BEFO RE THEM. 3. THE LEARNED A.O. AS WELL AS CIT(APPEAL) HAD ERRED IN NOT TREATING THE CONCERNED LAND AS 'CAPITA L ASSET' WHILE THE REGULAR INCOME SHOWN BY THE APPELLANT FROM SUCH LAND/ INVESTMENT HAS BEEN ACCEPTED IN THE EARLIER YEARS. ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 2 4. THAT THE CIRCUMSTANCES AND FACTS OF THE CASE EVIDENTLY PROVES THAT THE CONCERNED LAND WAS 'CAPIT AL ASSETS', THUS THE 'CAPITAL GAIN' EARNED ON ITS SALE S DESERVES TO BE ACCEPTED. 5. THE LEARNED CIT (APPEAL) WAS NOT JUSTIFIED IN CONFIRMING AN ADDITION OF RS.2,00,000/- RELATED TO 'BROKERAGE PAID' U/S 40A(IA) OF INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE IS ENGAGED IN PURCHASE AND SALE OF IMMOVABLE PROPERTIES. DURING T HE YEAR UNDER CONSIDERATION, THE ASSESSEE SOLD AGRICULTURAL PLOT AT VILLAGE BHATTI, HAUZ KHAS, NEW DELHI FOR A CONSIDER ATION OF RS. 10,00,00,000/-. AFTER CLAIMING BUSINESS EXPENDITURE AGAINST THE SALE, THE NET PROFIT OF RS. 9,63,74,327/- WAS CLAIM ED AS EXEMPT UNDER SECTION 10 OF THE INCOME TAX ACT READ WITH SE CTION 2(14) ON THE GROUNDS THAT THE LAND WAS LOCATED OUTSIDE TH E MUNICIPAL LIMITS. CONSEQUENTLY THE RETURN OF INCOME WAS FILED ON 28.11.2011 FOR A.Y. 2011-12 DECLARING NIL INCOME. THE AO AFTER DUE ENQUIRIES CONDUCTED DURING THE ASSESSMENT REGARDING THE LAND SOLD WAS SITUATED AT VILLAGE BHATTI, TEHSI L HAUZ KHAS, MEHRAULI, NEW DELHI AND FOUND THAT THE AGRICULTURAL LAND IN QUESTION WAS WITHIN THE MUNICIPAL LIMITS OF SOUTH D ELHI MUNICIPAL CORPORATION. ACCORDINGLY, THE AO SHOW-CAU SED THE ASSESSEE TO EXPLAIN AS TO WHY THE CLAIM OF EXEMPTIO N ON SALE OF AGRICULTURAL LAND SHOULD BE NOT DISALLOWED. IN REPL Y TO THE SHOW CAUSE THE ASSESSEE EXPLAINED THAT IT HAD ALREADY FI LED REVISED COMPUTATION FOR LONG TERM CAPITAL GAINS, AND PAID T AX ON THE SAME. IT WAS ALSO CLAIMED THAT THE LAND WAS INCORRE CTLY DISCLOSED AS STOCK IN TRADE INSTEAD OF THE INVESTME NT IN THE BALANCE SHEET. THE LAND HAS BEEN PURCHASED WITH AN INTENTION TO EARN PROFIT AND HAS BEEN SOLD AFTER A LONG PERIOD O F THIRTEEN ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 3 YEARS AND WAS, THEREFORE, A LONG TERM INVESTMENT. I T WAS STATED THAT THE MAIN REASON FOR THE SALE OF LAND WAS THE N OTICE RECEIVED FROM REVENUE DEPARTMENT TO SURRENDER THE P OSSESSION OF LAND AS IT WAS AN ENCROACHMENT ON THE GAON SABHA LAND HENCE THE AO WAS REQUESTED TO TREAT THE SALE AS LON G TERM CAPITAL GAINS AS THE LAND WAS A CAPITAL ASSET IN TH E HANDS OF THE ASSESSEE. REVISED BALANCE SHEET WAS FILED BEFORE TH E AO ON 19.3.2014. HOWEVER, THE AO WAS NOT CONVINCED WITH T HIS ARGUMENT AS THE ASSESSEE HAS IN THE BALANCE SHEET I TSELF SHOWN THE ASSET IN QUESTION AS STOCK OF THE CURRENT YEAR FILED ALONG WITH THE ORIGINAL RETURN OF INCOME, BUT ALSO IN THE PREVIOUS YEARS. AS PER THE AO THE GUJARAT HIGH COURT IN THE CASE OF REWASHANKER A KOTHARI 283 ITR 338 (2006) WHICH ANAL YZED VARIOUS DECISIONS OF THE APEX COURT, THE FOLLOWING TESTS WERE HELD TO BE NECESSARY TO DETERMINE WHETHER THE TRANS ACTION QUESTION WAS A BUSINESS TRANSACTION OR NOT: A) THE FIRST TEST IS WHETHER THE INITIAL ACQUISITIO N OF THE SUBJECT- MATTER OF TRANSACTION WAS WITH THE INTENTION OF DEA LING IN THE ITEM, OR WITH A VIEW TO FINDING AN INVESTMENT. IF T HE TRANSACTION, SINCE THE INCEPTION, APPEARS TO BE IMP RESSED WITH THE CHARACTER OF A COMMERCIAL TRANSACTION ENTERED I NTO WITH A VIEW TO EARN PROFIT, IT WOULD FURNISH A VALUABLE GU IDELINE. B) THE SECOND TEST THAT IS OFTEN APPLIED IS AS TO W HY AND HOW FOR WHAT PURPOSE THE SALE WAS AFFECTED SUBSEQUENTLY . C) THE THIRD TEST, WHICH IS FREQUENTLY APPLIED, IS AS TO HOW THE ASSESSEE DEALT WITH THE SUBJECT-MATTER OF TRANSACTI ON DURING THE TIME THE ASSET WAS WITH THE ASSESSEE. HAS IT BEEN T REATED AS STOCK-IN-TRADE, OR HAS IT BEEN SHOWN IN THE BOOKS O F ACCOUNT ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 4 AND BALANCE SHEET AS AN INVESTMENT. THIS INQUIRY, T HOUGH RELEVANT, IS NOT CONCLUSIVE. D) THE FORTH TEST IS AS TO HOW THE ASSESSEE HIMSELF HAS RETURNED THE INCOME FROM SUCH ACTIVITIES AND HOW THE DEPARTM ENT HAS DEALT WITH THE SAME IN THE COURSE OF PRECEDING AD S UCCEEDING ASSESSMENTS. THIS FACTOR, THOUGH NOT CONCLUSIVE, CA N AFFORD GOOD AND COGENT EVIDENT TO JUDGE THE NATURE OF TRAN SACTION AND WOULD BE A RELEVANT CIRCUMSTANCE TO BE CONSIDERED I N THE ABSENCE OF ANY SATISFACTORY EXPLANATION. E) THE FIFTH TEST, NORMALLY APPLIED IN CASES OF PAR TNERSHIP FIRMS AND COMPANIES, IS WHETHER THE DEED OF PARTNERSHIP O R THE MEMORANDUM OF ASSOCIATION, THE CASE MAY BE, AUTHORI ZES SUCH AN ACTIVITY. F) THE LAST TEST, CONTINUITY AND REGULARITY OF TRAN SACTIONS OF PURCHASE AND SALE OF THE GOODS CONCERNED. IN A CASE WHERE THERE IS REPETITION AND CONTINUITY, COUPLED WITH TH E MAGNITUDE OF TRANSACTION BEARING REASONABLE PROPORTION TO THE STRENGTH OF HOLDING, THEN AN INFERENCE CAN READILY BE DRAWN THA T THE ACTIVITY IS IN THE NATURE OF BUSINESS. 4. ACCORDING TO THE A.O ALMOST ALL THE CONDITIONS E XIST IN THE ASSESSEE COMPANY'S CASE WHICH LEADS TO THE CONCLUSI ON THAT THE LAND WAS HELD AS STOCK IN TRADE AND THE RESULTANT I NCOME WAS BUSINESS INCOME. THAT THE ASSESSEE INTENDED TO SELL THE LAND AT THE TIME OF PURCHASE WAS CLEAR FROM THE FACT THAT S UCCESSIVE RETURNS HAVE BEEN FILED DECLARING THE SAME AS STOCK IN TRADE. NO INVESTMENTS HAVE BEEN MADE IN THE LAST FIVE YEARS. IT IS ONLY WHEN THE DEPARTMENT SPECIFICALLY ISSUED THE SHOW CA USE NOTICE ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 5 AS TO WHY THE PROFITS MAY NOT BE ASSESSED AS BUSINE SS INCOME RATHER THAN LONG TERM CAPITAL GAINS AS SHOWN IN THE RETURN, THAT THE APPELLANT TRIED TO CHANGE ITS STAND. THE MEMORA NDUM OF ASSOCIATION CLEARLY STATED THAT THE APPELLANT IS EN GAGED IN THE DEALING IN LAND AND OTHER PROPERTIES. HENCE, THE CL AIM OF THE ASSESSEE THAT THE INCOME RESULTED FROM LONG TERM CA PITAL GAINS WAS REJECTED AND THE AMOUNT OF RS.9,63,74,327/- WAS TREATED AS BUSINESS INCOME. 5. THE ASSESSEE HAS CHALLENGED THIS FINDING OF THE A.O BEFORE THE LD. CIT (A). 6. BEFORE THE LD. CIT (A), THE ASSESSEE REITERATED THE ARGUMENTS THAT THE SAID LAND IS SHOWN AS CLOSING ST OCK OF THE PROPERTY WHICH PROVES THAT IT IS BEING HOLD AS LONG TERM INVESTMENT. IT WAS ARGUED THAT THE AO HAS WRONGLY T REATED THE CLOSING STOCK AS STOCK-IN-TRADE. IT WAS ARGUED THAT THE ASSESSEE WAS UNDER THE IMPRESSION THAT THE AGRICULTURAL LAND IS FULLY EXEMPT FROM LTCG AND HENCE NIL RETURN WAS FILED. IT WAS ARGUED THAT THE ASSESSEE REVISED THE ITR AND DECLAR ED THE PROFIT ON SALE OF LAND AS LONG TERM CAPITAL GAINS. IT WAS ARGUED THAT THE LONG TERM CAPITAL GAINS PAID BY THE ASSESSEE OU GHT TO HAVE BEEN ACCEPTED AS THEY HAVE BEEN WRONGLY SHOWN UNDER THE HEAD STOCK-IN-TRADE INSTEAD OF INVESTMENT. SUCH WRON G ACCOUNTING OF THE LAND UNDER THE HEAD STOCK-IN-TRADE INSTEAD OF INVESTMENT CAN ALSO BE VERIFIED FROM THE RETURN FIL ED BY THE ASSESSEE. IT WAS ARGUED THAT THE ASSESSEE SOLD THE LAND AFTER A GAP OF 12 YEARS, HENCE IT SHOULD BE TREATED AS SALE OF INVESTMENT BUT NOT SALE OF STOCK-IN-TRADE. ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 6 7. THE LD. CIT (A) REJECTED THE CONTENTION OF THE L D. AR AND CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R AFTER GOING THROUGH THE BALANCE SHEET FILED BY THE ASSESS EE. 8. AGGRIEVED WITH THE ORDER OF THE LD. CIT (A) THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL. 9. BEFORE US, THE ASSESSEE FILED ADDITIONAL GROUNDS VIDE VERIFICATION DATED 10.10.2008 WHILE THE ORIGINAL GR OUNDS WERE DATED 27.06.2016. THE ADDITIONAL GROUNDS READ AS UN DER: 1. THAT WITHOUT PREJUDICE TO THE EARLIER GROUNDS O F APPEAL TAKEN BY THE APPELLANT COMPANY THE LEARNED AO AS WELL AS CIT(APPEAL) HAS ERRED IN ASSESSING TH E SURPLUS ON SALE OF AGRICULTURAL LAND AS BUSINESS INCOME WHERE THERE IS AN ADMITTED FACT THE CONCERNED LAND IS AN AGRICULTURAL LAND WHICH HAS BE EN ACCEPTED IN THE EARLIER YEARS. 2. THE RECEIPT ON ITS SALE NEITHER IS TO BE WORKED OUT AS CAPITAL GAIN NOR A BUSINESS INCOME AS THE APPELLANT COMPANY IS QUITE ELIGIBLE TO AVAIL ITS EXEMPTION. 10. ON GOING THROUGH THE ORIGINAL GROUNDS OF APPEAL , WE FIND THERE IS NO MATERIAL DIFFERENCE BETWEEN THE GROUND NO. 1 OF THE ORIGINAL GROUNDS AND THE ADDITIONAL GROUNDS. BOTH P ERTAINS TO TREATMENT OF CAPITAL GAINS AS BUSINESS INCOME BY TH E LD. CIT(A). 11. THE SECOND GROUND TO BE ADJUDICATED DEALS WITH EXEMPTION AVAILABLE TO THE SALE OF LAND IF SO TREATED AS CAPI TAL GAINS. 12. DURING THE ARGUMENTS BEFORE US, THE ASSESSEE AR GUED BASED ON THE SUBMISSIONS AND ARGUMENTS TAKEN UP BEF ORE THE REVENUE AUTHORITIES. HE FURTHER FILED HIS WRITTEN S UBMISSIONS DATED 15.10.2018, 24.12.2018 AND ALSO ON 18.02.2020 . ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 7 13. THE SUBMISSIONS DATED 24.12.2018 CONSISTS OF BA LANCE SHEETS FOR THE SUBSEQUENT YEARS POST THE ASSESSMENT AND THE SALE DEEDS AND PURCHASE DEEDS OF LAND IN QUESTION. 14. THE CONTENTIONS OF THE ASSESSEE HAVE BEEN DEALT HEREUNDER ALONGWITH THE SUBMISSIONS OF THE ASSESSEE. THE MATTER BEFORE YOUR HONOUR IS THAT THE APPELLAN T SOLD THE AGRICULTURAL LAND FOR RS.10 CRORES FROM WH ERE THEY DERIVED THE SURPLUS/PROFIT OF RS.9,63,74,327/- AND CLAIMED ITS EXEMPTION BY TREATING THE 'CAPITAL ASSE T' U/S 2(14) OF INCOME TAX ACT, 1961 WHILE THE LEARNED A.O. HAS TREATED IT AS 'BUSINESS INCOME. THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE LEARNED A.O. DEPUTED INCOME TAX INSPECTOR (ITI) TO GIVE THE STATUS OF LAND WHO REPORTED THAT THE CONCE RNED LAND FALLS WITHIN 8 KM FROM THE JURISDICTION OF MUN ICIPAL CORPORATION, THEREFORE, IT DOES NOT FALL U/S 2(14) OF INCOME TAX ACT, 1961. THE APPELLANT COMPANY OBJECTE D THAT ITI IS NOT THE COMPETENT AUTHORITY TO GIVE SUC H CERTIFICATION. THAT ITI HAS NEITHER APPROVED VALUER NOR TECHNICAL PERSON NOR IS HOLDER OF ANY QUALIFICATION TO GIVE SUCH CERTIFICATION. THE LEARNED AO DID NOT EXAGGERATED THIS ISSUE, HOWEVER HE TREATED THE PROF IT AS 'BUSINESS INCOME' GIVING THE CONTENTION THAT THE APPELLANT COMPANY THEIRSELVES HAS SHOWN AS 'STOCK-I N- TRADE' UNDER THE HEAD 'CURRENT ASSETS'. THAT TO STRENGTHEN HIS OBSERVATION HE STATED ON PAG E-2 OF AN ASSESSMENT ORDER THAT THE ASSESSEE DEALS IN PURCHASE AND SALES OF PROPERTY. HE FURTHER STATED ON PAGE 9 THAT THE ASSESSEE HAS SHOWN THEIRSELVES AS STOCK-IN-TRADE. IT WAS OBJECTED WHICH HAS BEEN REPRODUCED BY AO ON PAGE 4 & 6 OF AN ASSESSMENT ORDER THAT IT IS LONG TERM INVESTMENT AND BEING A N AGRICULTURAL LAND THE ASSESSEE COMPANY IS QUITE ELI GIBLE TO CLAIM ITS EXEMPTION U/S 2(14) OF INCOME TAX ACT, 1961. IT IS AN ADMITTED FACT THAT THERE IS AN OMISSION ON THE PART OF THE ASSESSEE COMPANY BY SHOWING THE CONCERN ED LAND UNDER THE HEAD 'CURRENT ASSETS' BUT STILL IT I S NOT ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 8 TO BE TREATED AS 'STOCK-IN-TRADE'. THE WORD 'STOCK- IN- TRADE' INDICATES WHERE THERE IS FREQUENT PURCHASE A ND SALES WHILE THE ASSESSEE IS SHOWING 'AT COST' SINCE FROM ITS PURCHASE (1998 ONWARDS), THUS, IT DESERVES TO B E TREATED AS 'LONG TERM INVESTMENT'. IN THE CIRCUMSTANCES AND FACTS STATED ABOVE THE ASSESSEE COMPANY PREFERRED AN APPEAL BEFORE I.T.A.T . TAKING TWO GROUNDS SUMMARIZED AS UNDER:- (1) THE CONCERNED LAND IS TO BE TREATED AS 'LONG TE RM INVESTMENT', THUS, ANY SURPLUS/PROFIT ON ITS SALE I S TO BE TREATED AS 'CAPITAL GAIN'. (2) THAT IT IS AN AGRICULTURAL LAND, THUS THE ASSES SEE COMPANY IS QUITE ELIGIBLE TO CLAIM THE SURPLUS/PROF IT EXEMPTED. THAT IRRESPECTIVE OF THE FACT THAT THERE IS AN OMIS SION ON THE PART OF ASSESSEE COMPANY BY SHOWING THE CONCERNED LAND UNDER THE HEAD 'CURRENT ASSETS' BUT NOT SHOWN AS 'STOCK-IN-TRADE', IT HAS BEEN SHOWN AS 'CLOSING STOCK OF AGRICULTURAL LAND'. (BALANCE SHEE T FROM 2001 TO 2010 FILED IN PAPER BOOK FROM PAGES 8 TO 17 ). THUS, THERE ARE TWO FACTORS WHICH CAN GIVE THE CONCLUSION OF ISSUE:- 1. HOLDING WHERE AN ASSESSEE HOLDS THE ASSETS FOR SUFFICIENT P ERIOD IT GIVE THE SENSE OF LONG TERM INVESTMENT AND ON ITS SALE THE PROFIT/SURPLUS IS TO BE TREATED AS CAPITA L GAIN AS HELD BY 393 ITR 132 (8-17) GUJARAT HIGH COURT 397 ITR 687 (18-24) GUJARAT HIGH COURT 334 ITR 192 (25-26) PUNJAB & HARYANA HIGH COURT 2. AT COST THAT WHERE THE ASSESSEE IS REGULARLY SHOWING THE VA LUE OF CAPITAL ASSETS 'AT COST' IT IS TO BE TREATED AS 'LONG TERM INVESTMENT' BECAUSE 'STOCK-IN-TRADE' NOT ONLY FLUCTUATES EVERY YEAR DUE TO FREQUENT PURCHASE AND ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 9 SALES RATHER ALWAYS TO BE SHOWN AT 'COST OR MARKET PRICE WHICHEVER IS LESS' OR AT ANY STANDARD MODE GI VEN FOR SPECIFIC PRODUCT. HERE IN THE INSTANT CASE THERE IS NO DISPUTE AS APP ELLANT SINCE FROM ITS PURCHASE IN 1998 IS SHOWING AT COST SUBJECT TO IMPROVEMENT HELD IN THAT VERY FIRST YEAR BY INSTALLING TUBE-WELL, BOUNDARY WALLS, ETC. AND HAS SOLD IT AFTER THE LAPSE OF 13 YEARS. THIS FACTOR HAS BEEN CONSIDERED BY 382 ITR 175 (27-30) JAMMU & KASHMIR HIGH COURT 387 ITR 248 (31-33) KARNATAKA HIGH COURT 333 ITR 445 (34-37) DELHI HIGH COURT IT IS SUBMITTED THAT EVEN THE BOOKS OF ACCOUNTS/BALANCE SHEET IS NOT CONCLUSIVE IN DETERMI NING THE NATURE OF INCOME AS HELD BY 336 ITR 287 (38-40) BOMBAY HIGH COURT THAT WITHOUT PREJUDICE TO ABOVE THE CLERICAL OMISSI ON DESERVES TO BE OVER RULED IN VIEW OF THE CIRCULAR NO.14/XL-35/11-04-55 WHERE THEY HELD 'OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF AN ASSESSEE TO HIS RIGHTS PARTICULARLY WHERE SOME REFUND OR RELIEF IS DUE TO ASSESSEE.' COPY OF CIRCULAR PLACED ON PAGE 78 OF PAPER BOOK. THE SAID CIRCULAR HAS BEEN FOLLOWED GIVING THE REFE RENCE OF THE SAID CIRCULAR BY 243 ITR 56 (41-60) SUPREME COURT 150 ITR 460 (61-64) BOMBAY HIGH COURT ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 10 IT WILL BE RELEVANT TO STATE HERE THAT THE CIT (APP EAL) TO STRENGTHEN HIS ORDER HAS CITED 2CASES WHERE THE FAC TS ARE ABSOLUTELY DIFFERENT TO THE APPELLANT'S CASE AS IN CITED CASES THE 'BUSINESS INCOME' IS QUITE APPARENT . THE LEARNED C.I.T. (APPEAL) CITED THE CASE 73 ITR 735 (65-73) SUPREME COURT IT IS RELATED TO ASSESSMENT YEAR 1956-57 OR TO SAY IT IS PRIOR TO INCOME TAX ACT, 1961. HOWEVER, IN THAT CAS E THE ASSESSEE ENTERED INTO AN AGREEMENT FOR THE PURCHASE OF LAND FOR RS.6,00,000/- AND THE PAYMENT WAS TO BE MADE WITHIN STIPULATED PERIOD OF ABOUT 2 MONTHS. THE ASSESSEE PAID RS.11,000/- BUT COULD NOT PAY THE BALANCING AMOUNT, HOWEVER, HE AVAILED THE BENEFIT OF WRITTEN CLAUSE THAT THE SALE DEED CAN BE EXECUTED EITHER DIRECTLY BY HIM OR BY HIS NOMINEES, THUS, THE ASSESSEE DIVIDED THE CONCERNED LAND INTO 23 PLOTS AND OUT OF THAT HE HELD 1 PLOT AND REMAINING 22 PLOTS HE SOLD BY EXECUTING THE 'SALE DEED' IN FAVOU R OF NOMINEES. THAT SUCH TRANSACTIONS EVIDENTLY PROVES I T WERE BUSINESS TRANSACTIONS, THUS, THE APEX COURT HA S RIGHTLY GIVEN THE FAVOUR TO THE REVENUE BY TREATING IT AS 'BUSINESS INCOME'. THE OTHER CASE CITED BY THE LEARNED CIT (APPEAL) 328 ITR 556 (74-91) BOMBAY HIGH COURT THE ASSESSEE PURCHASED AN AGRICULTURAL LAND WHICH W AS LATER ACQUIRED BY GOVT. THE SURPLUS WHICH HE GOT AL ONG WITH ADDITIONAL COMPENSATION WAS TREATED AS 'BUSINE SS INCOME' GIVING THE CONTENTS THAT THERE WAS NO INTEN TION TO CULTIVATE IT AND FURTHER THE ASSESSEE'S PAST HIS TORY SHOWS THAT HE WAS ENGAGED IN SUCH ACTIVITIES REGULA RLY, THUS, IT IS EVIDENT IT IS HIS BUSINESS TO PURCHASE THE LAND AND TOOK THE BENEFIT ON ITS ACQUISTION COST AS WELL AS ADDITIONAL COMPENSATION GIVEN BY THE GOVT. AGRICULTURAL LAND - EXEMPTION IN VIEW OF THE FACTS STATED ABOVE THERE SHOULD BE N O DISPUTE THAT THE CONCERNED LAND WAS A CAPITAL ASSET S OR ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 11 TO SAY 'LONG TERM INVESTMENT' AND FURTHER THE SURPLUS/PROFIT DERIVED BY THE APPELLANT COMPANY ON ITS SALE DESERVES TO BE EXEMPTED BY TAKING THIS CAPITAL ASSETS U/S 2(14) OF INCOME TAX ACT, 1961 IN VIEW OF THE REASONS/SUPPORTING DOCUMENTS GIVEN HEREUNDER:- 1. THE APPELLANT COMPANY IS REGULARLY SHOWING THE AGRICULTURAL INCOME AND THE REVENUE HAS ALSO ACCEPTED IT AS THE ITR PLACED ON THE RECORD ON PAGE 19 TO 24 OF PAPER BOOK. 2. THAT MERELY BY HAVING AGRICULTURAL CROPS IT CANN OT BE TREATED AS AGRICULTURAL LAND. THAT LAND DESERVES TO BE RECORDED IN REVENUE ESTATE AND SUCH FACTS ARE RECOR DED IN 'SALE DEED' (PURCHASE) ON PAGE 84 AND 96. FURTHER ON INSERTION OF 'CIRCLE RATE' IT WAS ON THE PART OF THE REGISTRAR TO GIVE THE STATUS OF LAND, THUS, WHERE THE APPELLANT COMPANY SOLD THE CONCERNED LAND ON 29/01/2011 THE STATUS/STRUCTURE TYPE IS GIVEN ON PA GE 107 AS 'AGRICULTURAL LAND'. FURTHER ON PAGE 110 IT HAS BEEN SPECIFICALLY STATED CONCERNED LAND IS RECORDED IN THE REVENUE RECORDS. IT IS SUBMITTED THAT WHERE THE 'AGRICULTURAL LAND' IS SOLD AT NOMINAL VALUE THAT CAN BE REGISTERED EVEN IN THE COURT OF TEHSILDAR BUT WHERE THE QUANTUM IS HIGH LI KE IN THE INSTANT CASE THAT IS TO BE EXECUTED IN THE REGU LAR OFFICE OF THE REGISTRAR BY FILING THE PRESCRIBED FO RM 'A' WHICH IS TO BE DULY CERTIFIED BY THE REGISTRAR GIVI NG THE STATUS OF LAND AS IT IS GIVEN ON PAGE 117. FURTHER 'GIRDWARI' ALWAYS GIVEN WHERE THE LAND IS RECORDED IN REVENUE ESTATE THAT HAS BEEN PLACED ON THE RECORD ON PAGE 53 TO 59. WHERE ABOVE SUCH FACTORS ARE AVAILABLE IT IS TO BE TREATED AS 'AGRICULTURAL LAND AS HELD BY 404 ITR 173 (92-95) MADRAS HIGH COURT 409 ITR 196 (96-100) GUJARAT HIGH COURT ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 12 ADDITION OF RS.2,00,000/- RELATED TO BROKERAGE IT HAS BEEN ADDED BY THE LEARNED ASSESSING OFFICER. GIVING THE CONTENTION THAT TDS HAS NOT BEEN DEDUCTE D ON SUCH PAYMENT, THEREFORE ON VIOLATION OF PROVISO U/S 40(A)(1)(A) IT HAS BEEN ADDED. IT IS HUMBLY SUBMITT ED THE SAID PROVISO IS APPLICABLE WHERE THE INCOME IS SHOWN UNDER THE HEAD 'BUSINESS INCOME' OR HAS CLAIM ED AN EXPENDITURE U/S 37 OF INCOME TAX ACT, COMPANY HA S TREATED THE CONCERNED LAND AS 1961 WHILE IN THE INS TANT CASE THE APPELLANT 'CAPITAL ASSETS', THUS, THE SAID PROVISO IS NOT APPLICABLE. SUBMISSION DATED 15.10.2018 1. COPY OF BALANCE SHEET AS ON 31/03/1998 AND 31/03/2000 TO 31/03/2011---- TO PROVE THAT THE APPELLANT COMPANY HAS NEVER STATED AS STOCK-IN-TRAD E, HOWEVER, THERE IS NO DOUBT THAT THE CONCERNED LAND IS APPEARING UNDER THE HEAD 'CURRENT ASSETS' BUT HAD ALWAYS SHOWN IT AS 'CLOSING STOCK OF AGRICULTURAL LAND'. IT HAS ALWAYS BEEN SHOWN 'AT COST' WHILE IN 'STOCK IN TRADE' ALWAYS AT 'COST OR MARKET PRICE WHICHEVER IS LOWER' OR 'AT MARKET PRICE. IT DESERVE S TO BE TREATED AS 'CAPITAL GAIN'. 2. CIRCUMSTANCES AND INTENTION OF THE ASSESSEE ALWA YS PROVES THE STATUS RELATED TO---- 'CAPITAL GAIN' (I) HOW IT IS VALUED SINCE FROM THE DATE OF ITS PURCHASE IT HAS ALWAYS B EEN SHOWN AT COST. (II) PERIOD OF HOLDING OF 'LAND' THAT THE PROPERTY WAS WITH HELD WITH THE APPELLANT FOR 13 YEARS AND THEY SOLD IT UNDER THE FORCED CIRCUMSTANCES. (III) HOW THE TREATMENT IS GIVEN TO 'LAND' THAT DURING THE POSSESSION OF THE PROPERTY THE APPELLANT COMPANY HAS ALWAYS SHOWN AGRICULTURAL INCOME WHICH HAS BEEN ACCEPTED BY THE REVENUE. THE ABOVE FACTORS EVIDENTLY GIVES THE SMELL OF INVESTM ENT AND NOT A 'STOCK IN TRADE'. ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 13 (IV) IT HAS BEEN WELL SETTLED LAW THAT WHERE THE AB OVE 3 CONTENTS PREVAILS IT GIVES THE SMELL OF 'INVESTME NT' AND NOT AS 'STOCK IN TRADE' AND FURTHER BY SHOWING IT AS 'CLOSING STOCK' THE APPELLANT CANNOT BE HELD LIA BLE BY TREATING IT AS 'STOCK IN TRADE'. A. THE FOREMOST FACTOR IS HOW THE LAND HAS BEEN VAL UED SINCE ITS PURCHASE. IF IT HAD BEEN VALUED 'AT COST' SINCE FROM ITS PURCHASE SUBJECT TO NOMINAL ADDITION LIKE BOUNDARY-WALL, IT WILL BE TREATED AS 'CAPITAL GAIN' . (I) KARNATAKA HIGH COURT PRINCIPAL COMMISSIONER OF INCOME-TAX AND ANOTH ER VS TELESTAR INVESTMENTS P. LT D. 387 ITR 248 'THE COST WAS REFLECTED THROUGHOUT IN THE BALANCE- SHEET AND IT WAS NEVER TREATED AS STOCK-IN-TRADE SHOWING COST OR MARKET PRICE WHICHEVER IS LOWER. TH E PROFIT DERIVED ON ITS SALE WAS ASSESSABLE AS CAPITA L GAIN (II) DELHI HIGH COURT COMMISSIONER OF INCOME TAX VS JUBILANT SECURITIES PVT. LTD . 333 ITR 445 'FROM THE VERY BEGINNING IT HAD BEEN VALUING AT COS T AND NOT ON THE BASIS OF COST OR MARKET PRICE WHICH WAS LOWER AT THE END OF RELEVANT ACCOUNTING YEARS. (III) THE JAMMU AND KASHMIR HIGH COURT COMMISSIONER OF INCOME TAX VS SMAA ENTERPRISES PVT. LTD. 382 ITR 175 'IT IS AN ADMITTED FACT THAT THE ASSESSEE HOLD STOC K IN TRADE BUT WITHOUT PLACING ANY MATERIAL PARTICULARLY WHERE IT HAS ALWAYS BEEN SHOWN AS STOCK FROM THE VE RY BEGINNING.-------THE CLAIM OF THE REVENUE IS DOING STOCK-IN-TRADE IS WITHOUT ANY BASIS AND NO MATERIAL WAS ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 14 BROUGHT ON RECORD TO SHOW THAT THE ASSESSEE HAD BEE N VALUING ITS HOLDING AT THE END OF THE YEAR ON FIFO METHOD OR AT COST OR MARKET PRICE WHICHEVER IS LOWE R.' B. HOLDING PERIOD GUJARAT HIGH COU RT COMMISSIONER OF INCOME TAX VS TEJAS SECURITIES 393 ITR 132 'THE COMMISSIONER OF INCOME TAX (APPEAL) AND THE APPELLATE TRIBUNAL HAD RIGHTLY CAME TO THE CONCLUSI ON CONSIDERING THE HOLDING PERIOD ETC. AND HAD SPECIFI CALLY HELD THAT THE TRANSACTION COULD NOT BE SAID TO BE FREQUENT TRANSACTION OF PURCHASE AND SALE WITH A VI EW TO EARN QUICK PROFIT AND TO TREAT IT AS BUSINESS IN COME. THE TRIBUNAL HAS RIGHTLY TREATED IT AS SHORT TERM C APITAL GAIN AND TO LEVY TAX U/S 111 A OF INCOME TAX ACT, 1961.' GUJARAT HIGH COURT DEEPABEN AMITBHAI SHAH VS DEPUTY COMMISSIONER OF INCOME T AX 397 ITR 687 'THE PERIOD OF HOLDING PLAYS A VITAL ROLE. ANY TRAD ER DERIVING THE BUSINESS INCOME WON'T BLOCK HIS ASSETS FOR A LONG PERIOD, THEREFORE, THE PROFIT DERIVED ON SUC H SALE DESERVES TO BE ASSESSABLE AS CAPITAL GAIN. PUNJAB & HARYANA HI GH COURT COMMISSIONER OF INCOME T AX VS AMIT MODI 334 ITR 192 'INVESTMENT IN SHARES WITH THE INTENTION BY HOLDING THEM AS INVESTMENT AND SURPLUS ARISING ON ITS SALE HAS RIGHTLY BEEN DECLARED BY THE ASSESSEE UNDER THE HEA D CAPITAL GAIN.' ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 15 BOMBAY HIGH COURT COMMISSIONER OF INCOME TAX VS GOPAL PUROHIT 336 ITR 287 'IT IS HELD THAT THE ENTRIES IN THE BOOKS OF ACCOUN TS ALONE ARE NOT CONCLUSIVE IN DETERMINING THE RETURN OF INCOME. THE CIRCUMSTANCES, FACTS OF THE CASE AND INTENTION OF THE ASSESSEE IS TO BE SEEN, THUS, THE TRIBUNAL HAS RIGHTLY TREATED AS SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN FOR THE RESPECTIVE SECTI ONS.' THAT WITHOUT PREJUDICE TO ABOVE ANY OMISSION ON THE PART OF THE ASSESSEE, THE REVENUE SHOULD NOT TAKE UNDUE BENEFIT OF IT. BOARD'S CIRCULAR NO.14(XL-35) DATED 11/04/1955 CLEA RLY STIPULATES:- OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF AN ASSESSEE TO HIS RIGHTS. IT IS ONE O F THEIR DUTY TO ASSIST A 'TAX PAYER' IN EVERY REASONA BLE WAY PARTICULARLY IN THE MATTER OF CLAIMING AND SECU RING RELIEF.' THAT WITHOUT PREJUDICE TO ABOVE THE APPELLANT IS QU ITE ELIGIBLE TO AVAIL ITS EXEMPTION AS THE CONCERNED LA ND IS NEITHER CAPITAL ASSET NOR THE CURRENT ASSET AS IT I S AN AGRICULTURAL LAND THUS, AS DEFINED U/S 2(14) IS NOT TO BE TREATED AS CAPITAL ASSETS. THE AGRICULTURAL INCOME HAS BEEN ACCEPTED IN THE EARLIER YEARS AS THE ITR ARE PLACED ON THE RECORD O N PAGES 19-24. IT IS ALSO BROUGHT TO YOUR KIND NOTICE THAT IN THE YEAR WHEN THE ASSESSMENT IS MADE THE CONCERNED LAND BECAME WITHIN 8 KM LIMIT DUE TO TREMENDOUS CHANGE O F MUNICIPALITY LOCATION. BUT TO ASSESS THE LIABILITY OF THE ASSESSEE THE STATUS OF THE LAND IS TO BE CONSIDERED FOR THE YEAR UNDER ASSESSMENT AND NOT TO THE PERIOD WHE N THE ASSESSMENT IS TO BE ASSESSED. THE RELEVANT DOCUMENTS IN THIS RESPECT ARE ENCLOSED ON PAGES 19- 24 AND 52-77. ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 16 15. THE LD. DR RELIED ON THE ORDERS OF THE LD. CIT (A). 16. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PER USED THE MATERIAL AVAILABLE ON RECORD. ADJUDICATION AS TO WHETHER THE INCOME EARNED BY THE ASSESSEE CONSTITUTE BUSINESS INCOME OR LONG TERM CA PITAL GAINS: 17. WE FIND THAT THE ASSESSEE HAS ALWAYS SHOWN IT A S CLOSING STOCK OF AGRICULTURAL LAND IN THE BALANCE SHEETS. T HE CONTENTION OF THE ASSESSEE THAT IT HAS ALWAYS BEEN SHOWN AT CO ST WHILE IN STOCK-IN-TRADE IT IS ALWAYS AT COST OR MARKET PRICE WHICHEVER IS LOWER. THE ARGUMENTS OF THE ASSESSEE THAT SINCE THE LAND HAVE BEEN ALWAYS VALUED AT COST DOESNT GIVE ANY CREDENC E TO TREAT THEM AS CAPITAL ASSET. EVEN IN CLOSING STOCK OR STO CK-IN-TRADE, THE VALUATION IS ALWAYS AS PER THE MARKET PRICE OR THE COST PRICE WHICHEVER IS LOWER. THERE IS NO PROOF THAT THE COST PRICE HAS GONE DOWN SO AS TO TAKE IT AT A LOWER PRICE. HENCE, THE ASSESSEES CONTENTION IS THAT SINCE THE LAND IS ALW AYS VALUED AT COST NOT AT MARKET PRICE CANNOT BE ACCEPTED. THE PE RIOD OF HOLDING FOR 13 YEARS CANNOT BE CONSIDERED TO TREAT THE LAND AS INVESTMENTS AS IT IS NOT THE CASE THAT ALL THE UNSO LD STOCK-IN- TRADE SHOULD ALWAYS BEEN TREATED AS INVESTMENTS. FU RTHER, WE FIND THAT THE ASSESSEE HAS BEEN CONTINUOUSLY TREATI NG THE LAND AS CLOSING STOCK IN THE BOOKS OF ACCOUNTS. THE ARGU MENT THAT THE ASSESSEES AGRICULTURAL INCOME DERIVED OUT OF T HIS LAND HAS BEEN ACCEPTED BY THE REVENUE CANNOT GIVE RISE TO A CONCLUSION THAT THE LAND IS HELD AS INVESTMENT. THE DERIVING O F AGRICULTURAL INCOME FROM A LAND DOESNT NECESSARILY ENTITLES LAN D TO BE AN INVESTMENT OR FOR THAT MATTER TO BE AN AGRICULTURAL LAND IN ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 17 ACCORDANCE WITH THE PROVISIONS OF SECTION 2(14) AND SECTION 2(14)(III) THE INCOME TAX ACT ELIGIBLE FOR EXEMPTIO N NOT BEING A CAPITAL ASSET. WE HAVE ALSO GONE THROUGH THE MEMORA NDUM AND ARTICLE OF ASSOCIATION WHICH PROVES THAT THE ASSESS EE IS PRIMARILY INTO BUSINESS OF PURCHASE AND DISPOSE OF LAND AND PLOTS. THE MAIN OBJECTS TO BE PURSUED BY THE COMPAN Y ON ITS INCORPORATION ARE AS UNDER: 1. TO PURCHASE, ACQUIRE, TAKE ON LEASE IN EXCHANGE OR IN ANY OTHER LAWFUL MANNER ANY AREA, LAND, BUILDINGS, STRUCTURES AND TO DEVELOP THE SAME AND DISPOSE OF O R MAINTAIN THE SAME AND BUILD TOWNSHIP, MARKETS, OR O THER BUILDINGS, OR CONVENIENCES THEREON AND TO EQUIP THE SAME OR AY PART THEREOF WITH ALL OR ANY AMENITIES OR CONVENIENCES DRAINAGE, ELECTRIC, TELEGRAPHIC, TELEP HONIC, TELEVISION INSTALLATIONS AND TO DEAL WITH THE SAME IN ANY MANNER. 2. TO ACQUIRE LAND AND PLOTS FOR COLONIZATION OR OT HERWISE SELL PLOTS, CONSTRUCT BUILDINGS AND FLATS FOR SALE ON INSTALLMENTS OR OTHERWISE AND TO ACT AS REAL ESTATE AGENTS. 3. TO LAY OUT, DEVELOP, CONSTRUCT, BUILD, ERECT, DE MOLISH RE-ERECT, ALTER, REPAIR, OR DO ANY OTHER WORK IN CO NNECTION WITH ANY BUILDING OR BUILDING SCHEMES, ROADS, HIGHW AYS, SEWERS, BRIDGES, CANALS, WALLS, DAM, POWER PLANTS, RESERVOIRS, EMBANKMENTS, RAILWAYS, AIRPORTS IRRIGAT IONS, RECLAMATIONS, IMPROVEMENTS, SANITARY, WATER AND POW ER SUPPLY WORKS, OR ANY OTHER STRUCTURAL OR ARCHITECTU RAL WORK AND FOR SUCH PURPOSE TO PREPARE ESTIMATES, DESIGNS, PLANS, SPECIFICATION OR MODELS. 18. WE HAVE ALSO PERUSED THE OBJECTS INCIDENTAL OR ANCILLARY TO ATTAINMENT OF THE MAIN OBJECT. 1. TO ACQUIRE BY PURCHASE, LEASE, EXCHANGE OR OTHE RWISE ANY MOVABLE OR IMMOVABLE PROPERTY AND ANY RIGHTS OR PRIVILEGES WHICH THE COMPANY MAY THINK NECESSARY OR CONVENIENT FOR THE PURPOSE OF ITS BUSINESS AND EITH ER TO RETAIN THE SAME OR TURN THE SAME TO ACCOUNT, AS MAY SEEM EXPEDIENT. 2. TO ENTER INTO PARTNERSHIP OR INTO ANY ARRANGEMEN T FOR SHARING PROFITS, UNION OF INTEREST, JOINT VENTURE, RECIPROCAL ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 18 CONCESSION OR CO-OPERATION WITH PERSONS OR COMPANIE S CARRYING ON OR ENGAGED IN ANY BUSINESS OR TRANSACTI ON WHICH THIS COMPANY IS AUTHORIZED TO CARRY ON. 19. WE HAVE ALSO PERUSED THE CASE LAWS SUBMITTED BY THE ASSESSEE. THE CASE CIT VS TEJAS SECURITIES 393 ITR 132 (GUJ.), DEEPA BEN SHAH VS DCIT 397 ITR 687, CIT VS DEALT W ITH SHORT TERM CAPITAL GAINS VS BUSINESS INCOME IN CASE OF SH ARE TRANSACTION BY A BROKER. NEITHER THE FACTS NOR THE RATIO IS APPLICABLE TO THE INSTANT CASE AS THAT CASE DEALS W ITH VARIOUS PARAMETERS LAID DOWN BY THE CBDT AS TO HOW THE HOLD ING PERIOD OF THE SHARES BE CONSIDERED. THE CASE OF CIT VS AMI T MODI 334 ITR 192 (P&H) ALSO DEALS WITH THE TREATMENT OF SURP LUS ARISING ON THE SALE OF SHARES BY AN ASSESSEE TAKING INTO CO NSIDERATION OF MULTIPLE FACTORS FOR INFERRING WHETHER A PARTICU LAR TRANSACTIONS IS AN ADVENTURE IN THE NATURE OF TRADE OR NOT. SIMILARLY, THE CASE OF CIT VS SMAA ENTERPRISES 382 ITR 175 DEALS WITH TREATMENT OF SHARES MADE OUT OF OWN FUND S. SIMILARLY, THE CASE OF TELESTAR INVESTMENT 387 ITR 248 AND JUBILANT SECURITIES PVT. LTD. 333 ITR 445 HAVE BEEN PERUSED AND FOUND THAT THE FACTS ARE PERTAINING TO SHARE TRANSA CTION AND INVESTMENT AND THE RATIO IS NOT APPLICABLE TO THE I NSTANT CASE. 20. IN THE CASE OF CIT VS GOPAL PUROHIT 336 ITR 287 , THE HONBLE HIGH COURT OF BOMBAY UPHELD THE TRIBUNAL FI NDINGS THAT THERE OUGHT TO BE UNIFORMITY IN TREATMENT AND CONSI STENCY WHEN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL. IT DECID ED AGAINST THE ACTION OF THE REVENUE TO TREAT THE INCOME DIFFERENT LY IN ONE PARTICULAR YEAR AGAINST REGULAR METHOD FOLLOWED BY THE ASSESSEE AND THE REVENUE. SIMILARLY, THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE MAHENDRA MILLS 243 ITR 56 HELD TH AT THE DEPARTMENT CANNOT TAKE THE ADVANTAGE OF MISTAKE DON E BY THE ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 19 ASSESSEE. THIS JUDGMENT HAS BEEN DELIVERED IN CONNE CTION WITH NON-CLAIMING OF DEPRECIATION BY THE ASSESSEE IN THE RETURN WHICH HAS BEEN CLAIMED AS A LATER DATE. THE OTHER C ASE LAWS FILED BY THE LD. AR HAVE BEEN DULY PERUSED AND FIND THAT THEY ARE NOT APPLICABLE TO THE FACTS OF THE CASE. MOST O F THE CASE LAWS RELIED UPON BY THE LD. AR PERTAINS TO TREATMEN T OF UNSOLD STOCK-IN-TRADE AS INVESTMENT BY THE STOCK BROKERS A T THE COMPLETION OF THE FINANCIAL YEAR. THE CONVERSION OF STOCK-IN- TRADE TO INVESTMENTS IS A CONTINUOUS PROCESS RESORT ED TO BY THESE STOCK BROKERS WHICH THE REVENUE DISPUTED TO B E TREATED AS INVESTMENTS. SIMILARLY, WE HAVE ALSO GONE THROUGH T HE JUDGMENT WHEREIN THE REVENUE CANNOT TAKE THE BENEFIT OF THE MISTAKE COMMITTED BY THE ASSESSEE IN OFFERING THE INCOME TO TAX. WE HAVE ALSO GONE THROUGH THE JUDGMENTS STATING THAT B OOKS OF ACCOUNTS IS NOT THE FINAL AUTHORITY TO DETERMINE TH E NATURE OF THE TRANSACTIONS. IN THIS BACKGROUND, WE HAVE GONE THROUGH THE NATURE OF THE TRANSACTIONS INDEPENDENTLY SO AS TO D ETERMINE WHETHER THE LAND IN QUESTION IS INVESTMENT OR STOCK -IN-TRADE IRRESPECTIVE OF THE FACT WHETHER THE BOOKS OF ACCOU NTS HAVE BEEN WRONGLY ACCOUNTED OR WHETHER THE CAPITAL GAINS HAVE BEEN WRONGLY OFFERED TO TAX. 21. THE ASSESSEE HAS ALSO TAKEN PLEA THAT THE LAND HAS BEEN SOLD ONLY ON ACCOUNT OF THE NOTICE RECEIVED FROM TH E REVENUE DEPARTMENT TO SURRENDER THE LAND AS IT WAS AN ENCRO ACHMENT ON THE GAON SABHA LAND. THE NOTICE WAS ISSUED IN THE Y EAR 1997 HENCE CANNOT BE GIVEN ANY RELEVANCE WITH REGARD TO DETERMINATION FOR THE ISSUE BEFORE US. THE FACT THA T THE LAND IN QUESTION HAS BEEN SOLD AFTER OBTAINING NOC FROM THE ADM, SOUTH DISTRICT, NEW DELHI ON 24.01.2011. WE FIND TH AT THE MAIN ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 20 OBJECTS OF THE COMPANY ARE TO ACQUIRE PURCHASE TAKE ON LEASE ARE OTHERWISE ANY LAND BUILDING, STRUCTURES PLOT TO ACT AS REAL ESTATE AGENTS IN CONNECTION WITH BUILDINGS SCHEMES AND ALSO TO BE COLONIZERS TO SALE PLOTS AND FLATS. HAVING ACQUI RED THE LAND AS STOCK-IN-TRADE, THE LAND CONTINUED TO BE HELD FO R BUSINESS PURPOSE AND CONTINUED TO BE SHOWN AS CLOSING STOCK FOR ALL THE YEARS. THE ASSESSEE IS INTO THE BUSINESS OF ACQUIRI NG AND SALE OF PLOT AND COLONIZERS. HENCE, ON GOING THROUGH THE ME MORANDUM AND ARTICLES OF ASSOCIATION, CONDUCT AND BUSINESS A FFAIRS OF THE ASSESSEE, AND ON PERUSAL OF THE BOOKS OF ACCOUNTS O F THE ASSESSEE, IT CANNOT TO BE SAID TO BE AN INCOME ARIS ING OUT OF CAPITAL GAINS AND HAS BEEN RIGHTLY TREATED AS BUSIN ESS INCOME BY THE LD. CIT (A). ADJUDICATION AS TO WHETHER THE CAPITAL GAINS ARE EL IGIBLE TO AVAIL ITS EXEMPTION: 22. SINCE, WE HAVE ALREADY RULED THAT THE INCOME DE RIVED BY THE ASSESSEE IS BUSINESS INCOME BUT NOT CAPITAL GAINS, ANY ADJUDICATION AS TO WHETHER THE CAPITAL GAINS ARE EL IGIBLE FOR EXEMPTION OR NOT WOULD BE ONLY ACADEMIC IN NATURE. AS A GROUND TO THIS EXTENT HAS BEEN TAKEN BY THE ASSESSEE, THE SAME IS BEING ADJUDICATED AS UNDER: 23. SECTION 2(14)(III) DEALS WITH AGRICULTURAL LAND IN INDIA WITH REGARD TO THE MEANING OF CAPITAL ASSET. THE SECTION READS AS UNDER: SECTION 2(14).. (III) AGRICULTURAL LAND IN INDIA, NOT BEING LAND SITUATE ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 21 (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURISDICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNICIPAL CORPORATION, NOTIFIED AREA COMMITTEE, TOWN AREA COMMITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAME) OR A CANTONMENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAN D [***] ; OR [(B) IN ANY AREA WITHIN THE DISTANCE, MEASURED AERIALLY, (I) NOT BEING MORE THAN TWO KILOMETRES, FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOAR D REFERRED TO IN ITEM (A) AND WHICH HAS A POPULATION OF MORE THAN TEN THOUSAND BUT NOT EXCEEDING ONE LAKH; OR (II) NOT BEING MORE THAN SIX KILOMETRES, FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOAR D REFERRED TO IN ITEM (A) AND WHICH HAS A POPULATION OF MORE THAN ONE LAKH BUT NOT EXCEEDING TEN LAKH; OR (III) NOT BEING MORE THAN EIGHT KILOMETERS, FROM TH E LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOAR D REFERRED TO IN ITEM (A) AND WHICH HAS A POPULATION OF MORE THAN TEN LAKH. EXPLANATION.FOR THE PURPOSES OF THIS SUB-CLAUSE, 'POPULATION' MEANS THE POPULATION ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR;]] 24. THE FUNDAMENTAL PRINCIPLES WITH REGARD TO THE S ECTION 2(14)(III) CAN BE SUMMED UP IN THE CASE OF ASSESSEE AS UNDER: A. NO LAND WITHIN THE MUNICIPAL LIMIT OF DELHI CAN BE CONSIDERED AS AGRICULTURAL LAND. B. THE ISSUE OF POPULATION ARISES IF THE LAND IS SITUATED OUTSIDE THE LIMITS OF THE MUNICIPALITY. IN THAT CASE THE TWIN CONDITIONS OF DISTANCE AND THE POPULATION HAVE TO BE MADE TO CLAIM IT AS A NON- CAPITAL ASSET. ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 22 25. THE ASSESSEES CONTENTION THAT SOUTH DELHI MUNI CIPAL CORPORATION HAS CAME INTO EXISTENCE IN THE YEAR 201 1 DOESNT MATERIALLY SUPPORT ANYTHING WITH REGARD TO THE MUNI CIPAL LIMIT AS EVEN AFTER BIFURCATION, THE MUNICIPAL LIMIT REMA INED UNALTERED. HENCE, EVEN BASED ON THE MUNICIPAL LIMIT S OF DELHI MUNICIPAL CORPORATION OR EVEN BASED ON MUNICIPAL LI MITS OF SOUTH DELHI MUNICIPAL CORPORATION, THE ASSESSEES L AND WHICH IS IN THE BHATTI, HAUZ KHAS, NEW DELHI FALLS WITHIN TH E JURISDICTION OF THE MUNICIPALITY AT THE TIME OF PURCHASE AND AT THE TIME OF SALE AS WELL AS AT THE TIME OF SALE CANNOT ESCAPE T HE RIGORS OF TAXATION. 26. SINCE, THE INCOME EARNED HAS BEEN ALREADY ADJUD ICATED ON MERITS TO BE TAXED AS BUSINESS INCOME, IT IS HERE BY CLARIFIED THAT THE TREATMENT PROPOSED BY THE ASSESSEE TO CONS IDER THE PROCEEDS OF THE SALE OF LAND UNDER THE HEAD LONG T ERM CAPITAL GAINS AND SUBSEQUENT EXEMPTION FROM TAXATION CANNO T BE HELD TO BE VALID IN THE EYES OF LAW. 27. REGARDING THE DISALLOWANCE OF RS.2,00,000/- U/S 40(A)(IA), THE ASSESSEE CLAIMED TO HAVE PAID BROKERAGE TO A PE RSON NAMELY, SH. SUNDER SINGH. THE ASSESSEE SUBMITTED TH AT SINCE THIS IS THE FIRST YEAR OF BUSINESS TRANSACTION IN T HE ABSENCE OF TAN, NO TDS COULD BE DEDUCTED. THE LD. CIT (A) UPHE LD THE DISALLOWANCE U/S 40(A)(IA) ON THE GROUNDS THAT THE ASSESSEE IS NOT A NEW COMPANY AND BEEN IN THE BUSINESS OF LAND TRANSACTIONS FROM 1997 AND THE PROVISIONS OF TDS AR E CLEARLY DEFAULTED BY THE ASSESSEE. IN THE ABSENCE OF ANY EV IDENCES CONTRA, PUTFORTH BY THE ASSESSEE, WE HEREBY DECLINE TO INTERFERE WITH THE ORDER OF THE LD. CIT (A) ON THIS ISSUE. ITA NO. 410/DEL/2016 KOHLI ESTATES PVT. LTD. 23 28. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/05/2020. SD/- SD/- (AMIT SHUKLA) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACCOUNT ANT MEMBER DATED: 05/05/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR