ITO, Jaipur V. JAGDISH PD. AGARWAL, Jaipur

ITA 412/JPR/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1550 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 04-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA
• Assessee Lawyers: R K GURWALA
• Keywords: Capital asset

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR (BEFORE SHRI B.R. MITTAL AND SHRI B.R. JAIN) ITA NO. 412/JP/2011 ASSESSMENT YEAR : 2006-07 PAN: ACNPA 1403 E THE ITO VS. SHRI JAGDISH PRASAD AGARWAL WARD- 1(1) P/O. M/S. J.K. GEMS, VIJAY GOPALJI KA MANDIR JAIPUR GOPALJI KA RASTA, JOHRI BAZAR, JAIPUR (APPELLANT) (RESPONDENT) DEPARTMENT BY: MISS. ROSHANTA MEENA ASSESSEE BY : SHRI R.K. GURWALA DATE OF HEARING: 23-01-2013 DATE OF PRONOUNCEMENT: 23-01-2013 ORDER PER B.R. MITTAL, JM:- THE DEPARTMENT HAS FILED THIS APPEAL FOR THE ASS ESSMENT YEAR 2006-07 AGAINST THE ORDER OF THE LD. CIT(A)-I, JAIPUR DATED 02-02-2011 ON FOLLOWING GROUND. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN ALLOWING DEDUCTI ON U/S 54EC OF THE I.T. ACT, 1961. 2.1 AT THE TIME OF HEARING, THE LD. DR RELIED ON TH E ORDER OF THE AO WHEREAS THE LD. AR RELIED ON THE ORDER OF THE LD. CIT(A). 2.2 WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES B ELOW. WE OBSERVE THAT THE ASSESSEE DEALS IN PRECIOUS AND SEMI PRECIOUS STONES. THE ASS ESSEE STARTED HIS BUSINESS IN A RENTAL SHOP AT GOPALJI KA RASTA, JAIPUR. IT IS STATED THAT IN 1992, THE LANDLORD INSISTED THE ASSESSEE TO VACATE THE RENTED SHOP. SINCE THE ASSES SEE DID NOT VACATE THE SAID SHOP, LITIGATION WAS STARTED. IN FINANCIAL YEAR 2002-03, THE ASSESSEE PURCHASED AN OLD BUILDING IN 2 GOPALJI KA RASTA AND DEMOLISHED IT. A SHOPPING COMP LEX IN THE NAME OF J.K. ENCLAVE WAS CONSTRUCTED. SIX SHOPS WERE SOLD TO DIFFERENT P ERSONS. THE ASSESSEE ALSO PURCHASED ANOTHER BUILDING IN THE YEAR 1999-2000 AT LALJI SAN D KA RASTA ALONGWITH 07 OTHER PERSONS AND AFTER DEMOLISHING THE SAME, AN APARTMEN T WAS CONSTRUCTED. THE ASSESSEE SOLD 04 ROOMS OF THIS COMPLEX DURING THE YEAR UNDER CONS IDERATION. THE AO TREATED SAID ACTIVITY OF THE ASSESSEE AS BUSINESS ACTIVITY OR AD VENTURE IN THE NATURE OF TRADE AND CONSIDERED THE SALE PROCEEDS UNDER THE HEAD BUSINE SS INCOME AS AGAINST CAPITAL GAIN CLAIMED BY THE ASSESSEE. 2.3 BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSES SEE CONTENDED THAT BUILDING IN LALJI SANDA KA RASTA WAS VERY OLD I.E. 150 YEARS OLD WHIC H WAS NOT SAFE. HENCE, IT WAS DEMOLISHED AND GOT IT FRESHLY CONSTRUCTED AFTER 05 YEARS OF PURCHASE AND NOT IMMEDIATELY. THE TOTAL AREA OF 390 SQ.FT OF THE BUILDING OWNED B Y THE ASSESSEE IS ONLY 4.17% OF THE AREA OF ENTIRE BUILDING. THE SAID ASSET WAS SHOWN AS PER SONAL CAPITAL ASSET AS IT WAS NOT PURCHASED WITH THE INTENTION OF BUSINESS OF PURCHAS E AND SALE OF REAL ESTATE. THE ASSESSEE WANTED TO HAVE A PROPER PLACE OF BUSINESS DUE TO D ISPUTE WITH THE LANDLORD OF SHOP IN GOPALJI KA RASTA. SINCE THE LOCATION OF SHOP AT LAL JI SANDA KA RASTA WAS NOT FOUND PROPER FOR THE BUSINESS OF GEM STONES, THE ASSESSEE SOLD 130 SQ.FT AREA DURING THE YEAR UNDER CONSIDERATION. FURTHER THE ASSESSEE STATED TH AT IN RESPECT OF BUILDING IN GOPALJI KA RASTA, WHICH IS ONE OF THE MAIN CENTRE FOR GEMS AND STONES, THIS BUILDING WAS VERY OLD AND WAS NOT SAFE TO LIVE IN. THE ASSESSEE OWNED 410 2 SQ.FT AREA OUT OF WHICH 1499 SQ.FT WAS GIVEN ON LONG PERIOD LEASE. THE ASSESSEE SOLD O NLY 593 SQ.FT AREA IN THE YEAR UNDER CONSIDERATION. IT WAS STATED THAT 62.44% OF THE BUI LDING IS STILL OWNED BY THE ASSESSEE. IT WAS SUBMITTED THAT THE ASSESSEE HAS NEVER CONVERTED HIS CAPITAL ASSET INTO STOCK IN TRADE AND ONLY A PART OF CAPITAL ASSET WAS SOLD. THERE WA S NO SYSTEMATIC DESIGN TO EARN INCOME IN AN ORGANIZED MANNER IN RESPECT OF SALE AND PURCH ASE OF IMMOVABLE PROPERTY. THE 3 ASSESSEE HAS SHOWN RENTAL INCOME FROM THE PROPERTY IN QUESTION UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE AGAINST THE INCOME DECLARED AS TO PURCHASE OR SALE OF IMMOVABLE PROPER TY. THE LD. CIT(A) AFTER CONSIDERING THE ABOVE FACTS HAS HELD THAT THERE APPEARS NO SYST EMATIC DESIGN TO EARN INCOME WITH PERPETUAL INTEREST AND ACTIVITY WAS CARRIED OUT IN AN ORGANIZED MANNER OF DOING BUSINESS OF REAL ESTATE. THE SAID TRANSACTION CANNOT BE CONS IDERED AS AN ADVENTURE IN THE TRADE. THEREFORE, HE HAS DIRECTED THE AO TO CONSIDER THE S ALE OF BOTH THE CAPITAL ASSETS AS SALE OF INVESTMENT AND ACCORDINGLY THE INCOME FROM THE TRAN SACTIONS SHOULD BE TAXED AS CAPITAL GAIN. 2.4 SINCE NO FACTS HAVE BEEN BROUGHT BY THE DEPARTM ENT TO DISPUTE THE ABOVE FINDINGS BY THE LD. CIT(A), WE ARE OF THE CONSIDERED VIEW TH AT THERE IS NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). HENCE, WE UPHOLD HIS O RDER AND REJECT THE GROUND OF APPEAL TAKEN BY THE DEPARTMENT. 3.0. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED AS ANNOUNCED IN THE OPEN COURT IMMEDIATELY AFTER CONCLUSION OF HEARING ON 23 -01-2013. SD/- SD/- (B.R. JAIN) (B.R. MITTAL) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 23 RD JAN 2013 *MISHRA COPY FORWARDED TO:- BY ORDER 1. THE ITO, WARD- 1(1), JAIPUR 2. SHRI JAGDISH PRASAD AGARWAL, JAIPUR 3.THE LD. CIT 4.THE LD. CIT(A) 5.THE LD. DR 6.THE GUARD FILE (IT NO.412/JP/11) A.R. ITAT: JA IPUR 4 5