ACIT, CHENNAI V. M.A.M.Ramaswamy, CHENNAI

ITA 425/CHNY/2014

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6421 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-04-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 18-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Capital asset; Business income; Rule of consistency

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , , # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NOS. 424 & 425/CHNY/2014, 1494/CHNY/2012 & 1442/CHNY/2015 / ASSESSMENT YEARS : 2009-10 & 2010-11, 2008-09 & 2011-12 THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -3(2), CHENNAI 600 034. VS. (LATE) SHRI MAM RAMASAMY, LEGAL HEIR SHRI. M.A.M.R. MUTHIAH, CHETTINAD HOUSE, RAJA ANNAMALAI PURAM, CHENNAI 600 028. [PAN: AAJPR 4449M] ( / APPELLANT) ( / RESPONDENT) %& / APPELLANT BY : SHRI. AR V SREENIVASAN, JCIT )*%& / RESPONDENT BY : SHRI. S. SRIDHAR, ADVOCATE & /DATE OF HEARING : 08.01.2019 & /DATE OF PRONOUNCEMENT : 11.01.2019 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THESE APPEALS AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) (C)-II, CHENNA I IN ITA NOS. 411 & 412/13-14 DATED 12.11.2013 FOR ASSESSMENT YEARS 2 009-10 & 2010- :-2-: ITA NOS.424, 425/CHNY/2014 1494/2012 & 1442/2015 11, RESPECTIVELY, COMMISSIONER OF INCOME TAX (APPEA LS)-III, CHENNAI IN ITA NO. 815/2010-11/A-III DATED 05.01.2012 FOR A SSESSMENT YEAR 2008-09 AND COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI IN ITA NO. 644/13-14/A-1 DATED 25.02.2015 FOR ASSESSMENT Y EAR 2011-12. 2. THE FACTS IN BRIEF AS CANVASSED ARE THAT SHRI MAM RAMASAMY (LATE), THE ASSESSEE, WAS A DIRECTOR OF M/S CHETTINAD CEMENT CORPORATION AND WAS ALSO ENGAGED IN BREEDING, OWNIN G AND MAINTAINING OF RACE HORSES AND CIVIL CONSTRUCTION. RAJAH SIR ANNAMALAI CHETTIAR OF CHETTINAD, THE ASSESSEES PATERNAL GRANDFATHER UNDER HIS WILL DATED 04.03.1948 BEQUEATHED THE LAND IN RS NO. 4288 /2 IN FAVOUR OF HIS FIRST SON DR. RAJAH SIR M.A. MUTHIAH CHETTIAR W HO IS ASSESSEES FATHER. DR. RAJAH SIR MUTHIAH CHETTIAR DIED ON 12.0 5.1984 AND ON HIS DEATH, THE LAND IN RS NO. 4288/2 DEVOLVED ON THE AS SESSEE AND ON HIS BROTHERS FAMILY. ASSESSEES BROTHER KUMARARAJAH M. A.MUTHIAH CHETTIAR DIED ON 24.01.1970 AND THEREFORE HIS INTEREST DEVOL VED ON HIS WIFE MRS KUMARARANI DR. MEENA MUTHIAH AND HIS ADOPTED SON MR . M.A.M.M. ANNAMALAI. THUS, THE ASSESSEE AND HIS BROTHERS FA MILY BECAME THE OWNERS OF THE LAND IN RS NO 4288/2. THEY DECIDED TO DEVELOP THE LANDS BY PUTTING UP MULTISTOREYED BUILDINGS (FLATS) IN THE NAME AND STYLE OF RANI MEYYAMMAI TOWERS. BY AN AGREEMENT O F DIVISION DATED 14.04.1994, THEY PROVISIONALLY BIFURCATED THE LANDS EQUALLY. THE :-3-: ITA NOS.424, 425/CHNY/2014 1494/2012 & 1442/2015 ASSESSEE STARTED CONSTRUCTING FLATS ON HIS LAND IN THE NAME OF RANI MEYYAMMAI TOWERS PHASE-1,BUT HIS BROTHERS FAMILY W ANTED THE LAND TO BE JOINTLY DEVELOPED. A DISPUTE AROSE AND THE AS SESSEE GOT AN ORDER OF THE HONBLE MADRAS HIGH COURT IN APPLICATION NO. 23627 OF 2003 IN CS NO. 395 OF 2003 AND PERMISSION WAS GRANTED TO HI M TO SELL OR ALIENATE THE LAND WITH CONSTRUCTION OF FLATS. THIS WAS OBJECTED TO BY HIS BROTHERS FAMILY AND ULTIMATELY, AFTER FURTHER DISC USSIONS, THEY AGREED FOR DIVISION BY PARTITION WHEREIN HIGHER SHARE WAS TAKEN BY THE ASSESSEE. THE ASSESSEE PAID OWELTY OF RS. 25 CRORES EACH OF THEM, VIZ., KUMARARANI DR. MEENA MUTHIAH AND MR. M.A.M.M. ANNAM ALAI. SO, THE TOTAL OWELTY PAID IS RS. 50 CRORES WHICH IS EVIDENC ED BY THE DEED OF PARTITION DATED 15.11.2006 REGISTERED AS DOCUMENT N O. 158 OF 2007. 2.1 BY VIRTUE OF THE ORDER OF HIGH COURT OF MADRAS, THE ASSESSEE SOLD BOTH UNDIVIDED SHARE OF LAND AND BUILT UP FLATS IN RANI MEYYAMMAI TOWERS PHASE-I TO VARIOUS BUYERS. THE GAIN ON SALE OF UNDIVIDED SHARE OF LAND IN IT WAS ASSESSED AS LONG TERM CAPITAL GA IN BY THE AO AND THE PROFIT ON SALE OF CONSTRUCTED FLATS WERE TREATED AS BUSINESS PROFITS. THERE IS NO DISPUTE ON THIS ISSUE. 2.2 HOWEVER, FROM THE PROJECT, KNOWN AS RANI MEYYA MMAI TOWERS- PHASE II (RMT-LL)WHICH WAS OBTAINED IN THE FORM O F LAND AND PARTIALLY :-4-: ITA NOS.424, 425/CHNY/2014 1494/2012 & 1442/2015 COMPLETED FLATS FROM ASSESSEES BROTHERS WIFE VIZ . KUMARARANI DR. MEENA MUTHIAH &HER SON SRI M.A.M.M. ANNAMALAI, STA RTED IN DECEMBER, 2006, OUT OF 128 FLATS, DURING THE FINAN CIAL YEAR 2007-08, HE SOLD 19 FLATS. AFTER HEARING THE ASSESSEE, THE S ALE OF UNDIVIDED SHARE OF LAND FROM THIS PROJECT WAS TREATED BY THE AO AS BUSINESS PROFITS ALONG WITH THE PROFITS ON THE SALE OF CONST RUCTED FLATS IN THE ASSESSMENT MADE FOR ASSESSMENT YEAR 2008-09. THE AS SESSEE OBJECTED TO SUCH DIFFERENTIAL TREATMENT OF FLATS OF RANI MEYYANIMAI TOWERS, PHASE-IL (RMT-LL) BEFORE THE CIT(A) BY AN A PPEAL SUBMITTING THAT SIMILAR TREATMENT GIVEN TO RMT-1 SHOULD ALSO BE GIVEN FOR THE SALE OF UNDIVIDED SHARE OF LAND OF RMT-11 AND THE P ROFIT SHOULD BE ASSESSED AS LONG-TERM CAPITAL GAIN. 2.3 THE LD. CIT(A) IN HIS ORDER RELATED TO THE ASS ESSMENT YEAR 2008- 09 HELD , INTER ALIA, THAT THE AO IN THE REMAND REPORT HAS STATED THAT THE AP PELLANT WAS RIGHT IN BIFURCATING THE PROFITS BETWEEN LTCG AND BUSINESS P ROFIT IN RESPECT OF PROJECT RMT-L, BECAUSE LAND IN RMT-L WAS INHERITED BY THE APPELLANT. HOWEVER, LAND IN RMT-IL WAS INHERITED BY THE FAMILY OF APPELLANTS BROTHER AND SUBSEQUENTLY IT WAS PURCHASED BY THE APPELLANT FROM THEM. I DO NOT AGREE WITH THE ABOVE VIEW OF THE AO. THE APPELLANT OBTAINED THE LAND RELATING TO RMT-LL ON PARTITION. THE FACT THAT HE G OT A BIGGER SHARE OF LAND FOR WHICH HE PAID OWELTY OF RS.50 CRORES WOULD NOT ALTER THE NATURE OF PARTITION INTO PURCHASE. AFTER CONSIDERING THE ENTI RE FACTS, I AM OF THE CONSIDERED OPINION THAT THE LAND ALLOTTED ON PARTIT ION IS A LONG-TERM CAPITAL ASSETS DEVOLVED ON THE ASSESSEE FROM HIS GR ANDFATHER AND FATHER. :-5-: ITA NOS.424, 425/CHNY/2014 1494/2012 & 1442/2015 THE ASSET WAS A LONG- TERM ASSET. THEREFORE, THE AO IS DIRECTED TO ASSESS THE GAIN ON SALE OF UNDIVIDED SHARE OF LAND AS LONG -TERM CAPITAL GAIN AFTER VERIFYING THE COMPUTATION AS GIVEN ABOVE. ACCORDING LY, THE GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 3. FURTHER, DURING THE REMAND PROCEEDINGS IN CONNE CTION WITH AY 2008-09, THE AO HAS RAISED A NEW ISSUE AND REQUESTE D THE CIT(A) FOR MAKING AN ENHANCEMENT OF INCOME. THE RELEVANT PART IS AS UNDER:- 5.1 THE ASSESSMENT HAD FAILED TO DISALLOW THE BELO W NARRATED CLAIM OF EXPENDITURE. THE TAXABLE INCOME OF THE ASSESSEE COM PRISES GAINS FROM CONSTRUCTION ACTIVITY, BETTING ACTIVITIES IN HORSE RACING WHICH IS ADJUSTED AGAINST LOSS FROM BREEDING ACTIVITIES. THE EXPENDIT URE FOR THE YEAR IN THE ACTIVITY OF BREEDING HORSES IS RS. 4,44,56,451/-. T HE ASSESSEE HAS NOT SOLD ANY HORSES DURING THE YEAR AND THEREFORE, THE LOSS PERTAINING TO THIS SEGMENT HAS TO BE ADDED TO THE VALUE OF HORSES AS A T 31- 03-2008 AND CANNOT BE ALLOWED AS A REVENUE LOSS. THE APPELLATE COMMISSIONER MAY KINDLY, DURING THE COURSE OF THE APPELLATE PROCEEDI NGS, ENHANCE THE TAXABLE INCOME BY SUCH AMOUNT OF RS. 4,44,56,451/- WHICH REMAINS AN UNSUPPORTIVE CLAIM OF EXPENDITURE NOT DELIBERATED U PON WHILE CONCLUDING THE SCRUTINY ASSESSMENT FOR THE YEAR UNDER CONSIDER ATION. THUS, THE AO HAS STATED THAT EXPENDITURE INCURRED F OR THE BREEDING OF HORSES RS.4,44,56,451/- CANNOT BE ALLOWED AS THERE WAS NO SALE OF HORSES AND THE VALUE SHOULD BE INCLUDED IN THE CLOS ING STOCK AS ON 31.03.2008. HOWEVER, THE LD. CIT(A) ALLOWED THE AS SESSEES APPEAL BASED ON ASSESSEES PLEA AS WELL AS THIS TRIBUNAL D ECISION, IN ITS OWN CASE, MADE IN THE EARLIER YEAR. :-6-: ITA NOS.424, 425/CHNY/2014 1494/2012 & 1442/2015 4. AGGRIEVED AGAINST THE ORDER OF THE CIT(A), THE REVENUE FILED APPEALS WITH THE FOLLOWING GROUNDS FOR ITA NO. 1494 /2012 FOR AY 2008- 09: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS ANDCIRCUMSTANCES OF THE CASE. 2.1 THE CIT(A) ERRED IN HOLDING THAT THE LAND COMPR ISED IN THE PROJECT RMT PHASE II IS A CAPITAL ASSET AND THE GAIN OUT OF THE SALE OF THE SAME SHOULD BE TREATED AS CAPITAL GAINS. 2.2 THE CIT(A) FAILED TO APPRECIATE THAT THE PROJEC T RMT II WAS NOT CONCEIVED BY THE ASSESSEE BUT THE LAND ALONG WITH T HE BUILDING WAS ACQUIRED BY THE ASSESSEE FROM HIS SISTER-IN-LAW MRS . MEENA MUTHIAH AND HER SON SHRI ANNAMALAI FOR A CONSIDERATION OF RS.81 .34 LAKHS AND ALONG WITH THE COST OF INTEREST EXPENDITURE ON THE UNFINI SHED PROJECT OF RS.95,05,766 , THE OPENING WORK-IN-PROGRESS AS ON 1 .4.2007 AMOUNTED TO RS.82,29,11,383 WHICH FORMED THE BASIS FOR COMPU TING THE PROFITS DURING THE YEAR BASED ON SALES AND CURRENT YEAR EXP ENSES OF THE CURRENT YEAR. 2.3 THE CIT(A) OUGHT TO HAVE REJECTED THE ASSESSEE S CLAIM BEFORE THE CIT(A) THAT THE LAND COMPONENT OF THE SALE VALUE IS A CAPITAL ASSET AND NOT STOCK-IN-TRADE TAKING A PLEA THAT THE PROPERTY DEVOLVED ON HIM FROM THE ERSTWHILE OWNERS THROUGH A PARTITION DEED DT.15 .II.2006 AND IN ORDER TO ACQUIRE A LARGER SHARE OF LAND A SUM OF RS.50 CR ORES WAS PAID TO THEM, AND THEREFORE THE PROFITS ON SALE OF LAND SHO ULD BE SUBJECT TO TAX AS LONG TERM CAPITAL GAINS. 2.4 THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE A SSESSEES TREATMENT OF BIFURCATING THE SALE PROCEEDS OF PROJECT RMT I , (PROFITS OF SALE OF LAND OFFERED UNDER LTCG AND THE PROFITS ON SALE OF FLATS OFFERED AS BUSINESS PROFITS) WERE ACCEPTED SINCE THE LAND COMPRISED IN PROJECT RMT I WERE INHERITED BY THE ASSESSEE. THE CIT(A) OUGHT TO HAVE FURTHER APPRECIATED THAT HOWEVER IN RESPECT OF RMT II, THE LAND AND SEM I-FINISHED BUILDING WAS ACQUIRED AT A COST OF ABOUT RS.82 CRORES AND TH OUGH THE SCHEME OF ARRANGEMENT IS TITLED AS PARTITION, GOING BY THE FA CTS OF THE CASE, THE :-7-: ITA NOS.424, 425/CHNY/2014 1494/2012 & 1442/2015 CHANNEL BY WHICH THE ASSESSEE ACQUIRED THE PROPERTY CANNOT IN ANY WAY CATEGORIZED AS PARTITION. 2.5 THE CIT(A) OUGHT TO HAVE APPRECIATED THAT BY TH E PARTITION, A DISTINCT AND CLEAR APPORTIONMENT OF THE PROPERTY WE RE MADE AND THE SUBSEQUENT ARRANGEMENT IN ORDER TO TAKE OVER THE LA ND AND THE UNFINISHED BUILDING CANNOT BE STATED TO BE PARTITIO N AND CONSEQUENTLY IT DOES NOT FALL UNDER THE EXCLUSIONS PROVIDED IN SEC. 49(1) AND THEREFORE, THE COST OF PREVIOUS OWNER OR THE VALUE AS AT 1.4.1 981 CANNOT DETERMINE THE COST FOR THE PRESENT OWNER, I.E., THE ASSESSEE. 2.6 IT IS SUBMITTED THAT DR. MEENA MUTHIAH AND HER SON M.A.M.M.ANNAMALAI HAD COMPUTED THE CAPITAL GAINS AR ISING IN THIS TRANSFER OF ASSET TO THE ASSESSEE BY ADOPTING THE V ALUE OF THE LAND AS AT 1.4.1981 AND UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, ON THE VERY SAME ASSET, THE PRESENT OWNER CANNOT ONCE AGAI N ADOPT THE VALUE AS ON 1.4.1981 AS COST , TO COMPUTE HIS CAPITAL GAI NS. 2.7 THE CIT(A) OUGHT NOT TO HAVE ENTERTAINED THE NE W SCHEME OF TRANSACTION ADOPTED BY THE ASSESSEE IN COMPUTATION OF PROFITS AND GAINS OF THE PROJECT RMT II, WHICH IS AN AFTER- THOUGHT. IT IS HIGHLIGHTED THAT AS PER THE FINAL ACCOUNTS OF THE ASSESSEE, THE LAND TOGETHER WITH THE BUILDING ACQUIRED IN SEMI-FINISHED STATE WERE INCLU DED IN THE VALUE OF CLOSING STOCK AND THE ASSESSEE DID NOT EXHIBIT THE LAND AS A CAPITAL ASSET AND ONLY THE BUILDING AS STOCK IN TRADE. 2.8 THE CIT(A) OUGHT TO HAVE APPRECIATED THAT CONSI STENCY IS ONE OF THE IMPORTANT ASPECT OF TAXATION AND OUGHT TO HAVE HELD THAT THE ASSESSEE IS NOT FREE TO ALTER THE NATURE AND CHARACTERISTICS OF THE ASSET AS IT WOULD SUIT HIM YEAR AFTER YEAR. 3.1 THE CIT(A) ERRED IN REJECTING THE PROPOSAL OF T HE ASSESSING OFFICER FOR ENHANCEMENT OF INCOME BY DISALLOWING THE EXPEND ITURE IN THE ACTIVITY OF BREEDING HORSES. 3.2 IT IS SUBMITTED THAT THE DECISIONS OF THE ITAT IN THE ASSESSEES OWN CASE FOR THE AY 2003-04 IN ITA NO.13/2007 DATED 11/ 01/2008 AND IN ITA NOS. 800,801, 802 & 2346 OF 1991 DATED 28/03/20 02 HAVE NO CONNECTION TO THE ISSUE RAISED BY THE ASSESSEE BEFO RE CIT(A). :-8-: ITA NOS.424, 425/CHNY/2014 1494/2012 & 1442/2015 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 5. IN THE ASSESSMENTS MADE FOR ASSESSMENT YEARS 2 009-10, 2010- 11 & 2011-12, THE AO CONTINUED TO ASSESS INCOME DE RIVED FROM THE LAND OF PROJECT RMT-II AS BUSINESS INCOME, AS HE HA S DONE IN FOR ASSESSMENT YEAR 2008-09. AGGRIEVED AGAINST THOSE O RDERS, THE ASSESSEE FILED APPEALS BEFORE THE CIT(A). THE CIT( A) FOLLOWING HIS DECISION MADE IN ASSESSMENT YEAR 2008-09, ALLOWED T HE ASSESSEES APPEALS. AGGRIEVED AGAINST THOSE ORDERS, THE REVEN UE FILED APPEALS FOR ALL THESE ASSESSMENT YEARS ON THE COMMON GROUNDS AN D HENCE THE COMMON GROUNDS FILED FOR ITA 425/2014 IS EXTRACTED AS UNDER: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 THE CIT(A) ERRED IN HOLDING THAT THE LAND COMPR ISED IN THE PROJECT RMT PHASE II IS A CAPITAL ASSET AND THE GAIN OUT OF THE SALE OF THE SAME SHOULD BE TREATED AS CAPITAL GAINS. 2.2. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEES TREATMENT OF BIFURCATING THE SALE PROCEEDS OF PROJECT RMT I , (PROFITS OF SALE OF LAND OFFERED UNDER LTCG AND THE PROFITS ON SALE OF FLATS OFFERED AS BUSINESS PROFITS) WERE ACCEPTED SINCE THE LAND COMPRISED IN PROJECT RMT I WERE INHERITED BY THE ASSESSEE. 2.3 THE CIT(A) FAILED TO APPRECIATE THAT UNLIKE PRO JECT RMT I, IN RESPECT OF RMT II, THE LAND AND SEMI4INISHED BUILDING WAS A CQUIRED AT A COST OF ABOUT RS.82 CRORES AND THOUGH THE SCHEME OF ARRANGE MENT IS TITLED AS PARTITION, GOING BY THE FACTS OF THE CASE, THE CHAN NEL BY WHICH THE ASSESSEE ACQUIRED THE PROPERTY CANNOT IN ANY WAY CA TEGORIZED AS PARTITION. :-9-: ITA NOS.424, 425/CHNY/2014 1494/2012 & 1442/2015 2.4. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT WHEN THE MODE OF ACQUIRING THE PROPERTY COULD NOT BE TERMED AS PARTI TION, IT DOES NOT FALL UNDER THE EXCLUSIONS PROVIDED IN SEC.49(1) AND THER EFORE, THE COST OF PREVIOUS OWNER OR THE VALUE AS AT 1.4.1981 CANNOT D ETERMINE THE COST FOR THE PRESENT OWNER, I.E., THE ASSESSEE. 2.5. IT IS SUBMITTED THAT DR. MEENA MUTHIAH AND HER SON M.A.M.M. ANNAMALAI HAD COMPUTED THE CAPITAL GAINS ARISING IN THIS TRANSFER OF ASSET TO THE ASSESSEE BY ADOPTING THE VALUE OF THE LAND A S AT 1.4.1981 AND UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, ON THE VERY SAME ASSET, THE PRESENT OWNER CANNOT ONCE AGAIN ADOPT THE VALUE AS ON 1.4.1981 AS COST ,TO COMPUTE HIS CAPITAL GAINS. 2.6 THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT T HAT AS PER THE FINAL ACCOUNTS OF THE ASSESSEE, THE LAND TOGETHER WITH TH E BUILDING ACQUIRED IN SEMI-FINISHED STATE WERE INCLUDED IN THE VALUE OF C LOSING STOCK AND THE ASSESSEE DID NOT EXHIBIT THE LAND AS A CAPITAL ASSE T AND ONLY THE BUILDING AS STOCK IN TRADE. 2.7 THE CIT(A) OUGHT TO HAVE APPRECIATED THAT CONSI STENCY IS ONE OF THE IMPORTANT ASPECT OF TAXATION AND OUGHT TO HAVE HELD THAT THE ASSESSEE IS NOT FREE TO ALTER THE NATURE AND CHARACTERISTICS OF THE ASSET AS IT WOULD SUIT HIM YEAR AFTER YEAR. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 6. ON THE ISSUE OF PROFITS ON SALE OF LAND, OFFERED UNDER LONG TERM CAPITAL GAINS IN RESPECT OF RMT-II, BUT ASSESSED AS BUSINESS PROFITS, THE LD. DR PLACED HIS ARGUMENTS ON THE LINES OF GROUNDS OF APPEAL EXTRACTED, SUPRA, AND RELIED ON THE ORDERS OF THE A O. PER CONTRA, THE LD. AR PLACED HIS RELIANCE ON THE ORDERS OF THE LD. CIT(A). WHEN WE CALLED FOR THE RELEVANT DOCUMENTS, BOTH THE PARTIES COULD NOT PLACE ANYTHING BUT PLEADED ON THE ORDERS OF THE LOWER AUT HORITIES. HOWEVER, :-10-: ITA NOS.424, 425/CHNY/2014 1494/2012 & 1442/2015 BOTH OF THEM HAVE AGREED THAT THIS ISSUE CAN BE REM ITTED BACK TO THE AO FOR A FRESH EXAMINATION. IN THE FACTS AND CIRCU MSTANCES, WE DEEM IT FIT TO REMIT THIS ISSUE BACK TO THE AO FOR A FRE SH EXAMINATION. THE ASSESSEE SHALL PLACE ALL THE MATERIALS IN ITS SUPP ORT BEFORE THE AO AND COMPLY TO THE AOS REQUIREMENTS AS PER LAW. THE A O IS FREE TO CONDUCT APPROPRIATE ENQUIRY AS DEEMED FIT, BUT HE SHALL FURNISH ADEQUATE OPPORTUNITY TO THE ASSESSSEE ON THE MATER IAL ETC TO BE USED AGAINST IT AND DECIDE THE MATTER IN ACCORDANCE WIT H LAW FOR ASSESSMENT YEARS 2008-09 TO 2011-12. 7. IN RESPECT OF THE PROPOSAL OF THE AO FOR ENHANCE MENT OF INCOME TO THE CIT(A), TOWARDS DISALLOWANCE OF EXPENDITURE IN THE ACTIVITY OF BREEDING HORSES FOR ASSESSMENT YEAR 2008-09, THE LD . DR PLEADED ON THE LINES OF GROUNDS OF APPEAL EXTRACTED, SUPRA. P ER CONTRA, THE LD. AR INVITED OUR ATTENTION TO THE RELEVANT PORTION OF TH E ORDER OF THE LD. CIT(A) WHICH IS EXTRACTED AS UNDER: 6.1 THE LD.AR HAS STRONGLY CONTESTED THE ABOVE SUG GESTION FOR ENHANCEMENT AND STATED THAT ALL THE ACTIVITIES RELA TING TO HORSES/FOALS HAVE BEEN CONSIDERED AS A SINGLE ACTIVITY BY THE HO NBLE ITAT IN APPELLANTS OWN CASE FOR AY 2003-04 IN ITA NO. 13/2 007 DATED 11.01.2000 AND ITA NOS. 800,801,802 & 2346 OF 1991 DATED 28.03.2002 AND THE OBSERVATION OF THE ITAT IS VERY CLEAR THAT THE LOSS OR GAIN IN THIS ACTIVITY SHOULD BE ASSESSED AS COMMERCIAL ACTIVITY IN HORSE RACING BUSINESS. THE LD.AR ARGUED THAT THE FOALS, WHICH AR E YOUNG, HAVE NO VALUES. THE VALUE OF THESE FOALS AND HORSES DEPEND UPON ITS :-11-: ITA NOS.424, 425/CHNY/2014 1494/2012 & 1442/2015 PERFORMANCES IN RACES AND UNLESS THEY ARE SOLD AND PROCEEDS REALIZED, THEY DO NOT HAVE ANY VALUE EXCEPT THAT THEY ARE HEL D AS ASSETS FOR PRIDE OF POSSESSION. HE ALSO RELIED ON THE DECISION OF TH E HONBLE DELHI HIGH COURT IN CIT V. USHA STUD AND AGRICULTURE FARM PVT. LTD (276 ITR 25) WHEREIN IT WAS HELD THAT THE VALUE OF EXPENDITURE A CTUALLY INCURRED IN ANY YEAR IS TO BE ALLOWED AND THE CONSIDERATION FOR THE SALE VALUE SHOULD BE ASSESSED WHEN THEY ARE SOLD. 6.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE SUBMISSIONS OF THE LD.AR. I HAVE ALSO GONE THROUGH THE DECISION S RELIED ON BY THE LD.AR. THE APPELLANT HAS BEEN REGULARLY FOLLOWING T HE METHOD OF ACCOUNTING WHEREBY PROCEEDS FROM THE SALE OF HORSES /FOALS ARE OFFERED AS INCOME. HAVING ACCEPTED THIS METHOD FOR EARLIER YEA RS, THE AO CANNOT CHANGE THE METHOD AND ADD THE EXPENDITURE OF BREEDI NG HORSES TO THE CLOSING STOCK OF HORSE. THE EXPENDITURE INCURRED FO R THE BREEDING OF HORSES CANNOT BE TREATED AS VALUE ADDITION TO THEM. THE EXPENDITURE FOR THE MAINTENANCE AND BREEDING ACTIVITIES IS ALSO ALL OWABLE AS PER THE DECISION OF THE HONBLE ITAT STATED ABOVE. THE APPE LLANT HAS CONSISTENTLY FOLLOWED THE METHOD OF OFFERING AS INCOME THE SALE PROCEEDS OF FOALS/HORSES, WHICH HAS BEEN ACCEPTED BY THE DEPART MENT. SINCE THE METHOD ADOPTED HAS BEEN ACCEPTED, THERE IS NO NECES SITY TO ENHANCE THE INCOME BY ADDING THE EXPENDITURE OF HORSE BREEDING TO THE VALUE OF HORSE AS AT 31.3.2008. THE DECISIONS OF HONBLE ITAT IN I TA NO.13/MDS/2007, ITA NOS.800,801,802 AND 2342/MDS/1991 (SUPRA), DECI SION OF CIT(A) IN ITA NO.596/09- 10/ALL! DATED 29.9.2010 AND THE DECI SION OF HONBLE DELHI HIGH COURT IN USHA STUD AND AGRICULTURE FARM (SUPRA ) ALSO SUPPORTS THE VIEW OF THE LD.AR. IN VIEW OF THE ABOVE FACTS AND P RECEDENTS, I AM OF THE CONSIDERED OPINION THAT NO ENHANCEMENT OF INCOME IS CALLED FOR. THE PROPOSAL OF THE AO IS ACCORDINGLY REJECTED . AND SUBMITTED THAT SINCE, THIS ISSUE IS DECIDED IN ITS FAVOUR BY THE HONBLE ITAT IN THE EARLIER YEARS, WHICH HAS BEEN F OLLOWED BY THE LD. CIT(A), ON THE PRINCIPLE OF CONSISTENCY THE REVENUE S APPEAL MAY BE DISMISSED. :-12-: ITA NOS.424, 425/CHNY/2014 1494/2012 & 1442/2015 8. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL. SINCE, THE LD. CIT(A) FOLLOWED THE ORDER OF THIS TRIBUNAL, SUPRA, WE DO NOT FIND ANY REASON TO INTERFERE WITH HIS ORDER AND HENCE, THE CORRESPONDING GROUNDS OF THE REVENUE FOR ASSESS MENT YEAR 2008- 09 IS DISMISSED. 9. IN THE RESULT, THE REVENUES APPEAL FOR ASSESSME NT YEAR 2008-09 IN ITA NO. 1494/CHNY/2012 IS TREATED AS PARTLY ALLO WED AND ALL OTHER APPEALS FOR ASSESSMENT YEARS 2009-10, 2010-11 & 201 1-12 IN ITA NOS. 424,425/CHNY/2014 & ITA NO. 1442/CHNY/2015, RESPECT IVELY, ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 11 TH DAY OF JANUARY, 2019 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) ! /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ! /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED: 11 TH JANUARY, 2019 JPV &)1232 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 4 ) (/CIT(A) 4. 4 /CIT 5. 2) /DR 6. 7 /GF