Dy. Commissioner of Income Tax, Central Circle- 2, Vadodara, Vadodara V. Anil Bholabhai Patel, Vadodara

ITA 718/AHD/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 8345 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-02-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 19-09-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

आयकरअपीलीयअधिकरण , अहमदाबादनयायपीी INTHEINCOMETAXAPPELLATETRIBUNAL, ‘’B’’BENCH,AHMEDABAD BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And MsMADHUMITAROY,JUDICIALMEMBER आयकरअपीलसं./ITANos.729,718&719/AHD/2023 धििाधरणवरध / Asstt.Years:(2014-2015,2015-2016&2016-2017) D.C.I.T, CentralCircle-2, Vadodara. Vs. AnilBholabhaiPatel, A1-2,DarshanParkSociety, VIPRoad, Karelibaug, Vadodara-390018. PAN:ACTPP2509G (Applicant)(Respondent) Revenueby:ShriSudhenduDas,CITDR Assesseeby:Smt.ArtiNShah,AR सुिवाईकीतारीख/DateofHearing:21/02/2024 घोरणाकीतारीख /DateofPronouncement:08/03/2024 आदेश/ORDER PERWASEEMAHMED,ACCOUNTANTMEMBER: Thecaptionedthreeappealshavebeenfiledattheinstanceoftherevenue againsttheordersoftheCommissionerofIncomeTax(Appeals),Vadodaraarising inthematteroforderpassedunderSection143(3)oftheIncomeTaxAct,1961 (here-in-afterreferredtoas"theAct")relevanttotheAssessmentYears2014-15 to2016-17. ITANos.729,718&719/Ahd/2023 A.Ys.2014-15to2016-17 2 First,wetakeupITANo.729/AHD/2023forAY2014-15,anappealbythe Revenue. 2.Theinter-connectedissueraisedbytherevenueingroundnumbers1and 2isthattheLd.CIT(A),erredintreatingtheincomedisclosedbytheassesseeas theincomeundertheheadcapitalgainagainstthefindingoftheAOandthereby directingtheAOtoallowtheexemptionu/s54FoftheActafterverification. 3.Thenecessaryfactsarethattheassesseeinthepresentcaseisan individualandhasdeclaredincomeundertheheadproperty,salary&capitalgain andshareofprofitfromthepartnershipfirm.Theassesseeduringtheyearhas soldmanypropertiesandshownlongtermcapitalgainofRs.2,14,07,457/-only. However,theAOwasoftheviewthattheassesseehascarriedoutactivitiesof landsellingwhichisadventureinthenatureoftrade.Therefore,theAOre- workedouttheincomefromthesaleoflandundertheheadbusinessand professionamountingtoRs.2,14,07,457/-andtheAOfurtherdeniedthebenefit ofdeductionclaimedu/s54FoftheAct. 4.Onappeal,theLd.CIT(A)heldthattheincomeonthesaleoflandistobe chargedundertheheadcapitalgainandaccordinglytheAOwasfurtherdirected toallowtheexemptionclaimedbytheassesseeunderthehead54FoftheAct afternecessaryverificationaspertheprovisionoflaw. 5.BeingaggrievedbytheorderoftheLd.CIT(A)therevenueisinappeal beforeus. 6.BoththeLd.DRandtheLd.ARbeforeusvehementlysupportedtheorder oftheauthoritiesbelowasfavourabletothem. 7.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethattheidenticalissuearose ITANos.729,718&719/Ahd/2023 A.Ys.2014-15to2016-17 3 intheassessmentyear2012-13inITANo.371/AHD/2016intheowncaseofthe assesseewhichhasbeendecidedbytheITATinfavouroftheassesseevideorder dated27/10/2016.Therelevantextractoftheorderisreproducedasunder: Wehavecarefullyconsideredtherivalsubmissionandassessmentorderaswellasthe orderoftheCIT(A)appealagainstandalsovariousdoucmentsandreferredtoatthetime ofhearingandcaselawscited.Thecommonissuethattranscendsinallthepresent appealsiswhethergainsarisingonsaleoflandandotherpropertiesbytheasseseeinthe relevantassessmetnyearsisrequiredtobetaxedunderthehead“capitalgains”asoffered bytheassesseeoristobetreatedas"businessincome"oftheassessee.Theissue involvedisessentiallyfactualinnature.Itisthecaseoftheassesseethatthelandand otherpropertieswerenocorrectionandacquired/purchasedoverseveralyearsandheldas "capitalasset"inthenatureofinvestment.Fromthewrittensubmissionsoftheassessee asextractedbytheCIT(A)inhisorder,wenotethatthereaconsiderabletimelag betweenthepurchaseandthesaleoflandandotherproperties.Simultaneously,the land/propertieshavebeendeclaredas"capitalinvestment"bytheassesseeallalong.We alsotakenoteofthefactthatsomeofthepropertieswereletoutandrentthereonwas earnedasayieldonsuchinvestments.Agriculturalincomehasbeenconsistentlydeclared year-after-yearonagriculturallandsoheldbeforeitssale.Thenon-agriculturallandso heldwereshownasinvestmentandsubjectedtowealthtaxbeingcapitalasset.On perusalofthewrittensubmissionsasreproducedbytheCIT(A)inpara-6ofhisorder,we notethattheland/propertieswerepurchasedandheldforseveralyearsinmanycases beforeitssale.Coupledwiththis,wealsotakenoteofthefactthatassesseehaslarge capitalofitsownatitsdisposalwhichisfarinexcessofthecorrespondinginvestments madeinland/propertiesoveryears.Oncumulativereadingoftheseglaringfacts,wefailto comprehendtheactionoftheRevenueinholdingcapitalgainsearnedonsaleasdeclared tobeabusinessventure.ItismanifestthattheAOaswellasCIT(A)misdirected themselvesinlawandonfactsinholdingtheland/propertiestobeinthenatureoftrading assetmerelyonthegroundthatsomeoftheagriculturallandwereconvertedintonon- agriculturallandandsomeagreementswereenteredforthedevelopmentofthelandin theyearunderappealacquiredandheldfordecadesinmanycases.Wefindconsiderable weightinthepleaoftheassesseethatintentionatthetimeofpurchasetoholdimpugned land/propertiesasacapitalassetismanifestonrecords.Thebalance-sheetfiledbythe assesseeoveryears,wealth-taxreturnsfiledbytheassessee,adequacyofitsowncapital clearlyunderscoretheintentionoftheassesseetoholdland/propertiesascapitalassetas claimed.Inextricably,wealsotakenoteofthepleaoftheassesseethatheisaco-owner ofimpugnedland/propertiesholdingcertainpercentageofownership-rightsthereinand theclaimoftheland/propertiesascapitalassethasbeenacceptedbytheRevenueinthe handsofotherco-ownersintheassessmentproceedingsu/s.143(3)oftheAct.Thisfact hasremaineduncontroverted.Wealsonotethathavingregardtothefactsnotedabove, theCoordinateBenchoftheTribunalinassessee'sowncaserelevanttoAY2004-05has decidedtheissueinfavouroftheassessee.Thus,wefindthattheactionoftheAOwas simplyguidedbytheconsiderationsofrevenuealoneoutsidetheboundsofrationality.At thisjuncture,wehavealsocarefullyperusedtheorderoftheCoordinateBenchofTribunal inassessee'sowncaseforAY2006-07whereadverseviewhasbeentaken.However,we takenoteofthefactthattheCoordinateBenchoftheTribunalinthematterforAY2006- 07hastakenadifferentviewindeparturewiththeearlierorderoftheCoordinateBench relevanttoAsstt.Year2004-05mainlyonthepremisethattheagriculturalincomehasnot beendeclaredontheagriculturallandheldinthatyear.Aspointedoutonbehalfofthe assessee,agriculturalincomehasbeendulyreportedinallassessmentyearsexceptAY 2006-07.Therefore,thefactsprevailinginthecaptionedappealsareproximatewithAY 2004-05wherethefactsarefoundtobeonsamepedestalanddistinguishablequaAY 2006-07.Thus,thefactsprevailinginAY2007-08aresomewhatdifferent.Therefore, respectfullyfollowingthedecisionoftheCoordinateBenchoftheTribunalinAY2004-05 ITANos.729,718&719/Ahd/2023 A.Ys.2014-15to2016-17 4 andhavingregardtothetotalityofthefactsandcircumstancesnotedabove,wefind considerablemeritinthepleaoftheassessee.Weaccordinglyholdthatland/properties wereheldbytheassesseeascapitalassetbeforeitssaleandconsequentialgainsarising onsaletheretoischargeableundertheheadof"capitalgains".Accordingly,theAOis directedtoconsiderthegainsarisingonsaleofland/propertiesunderthehead"capital gains".Inthelightofthefactsnotedabove,theAOisfurtherdirectedtodenovoconsider thereliefasandwhereclaimedbytheassesseeu/s.54Brelevanttoassessmentyears underappealsinaccordancewithlawafteraffordingrequisiteopportunitytotheassessee. Weaccordinglysetasidetheissuetowardseligibilityofreliefclaimedv/s.54BoftheAct backtothefileoftheAssessingOfficerforfreshconsideration. 12.Thus,theappealoftheAssesseeinITANo.371/Ahd/2016relevanttoA.Y2012- 13ispartlyallowedintermsofdirectionsnotedabove. 7.1BeforeusnomaterialhasbeenplacedonrecordbytheRevenue demonstratinganycontrarydecisionoftheHigherJudicialAuthorities.Likewise, theRevenuehasnotplacedanymaterialonrecordpointingoutanydistinguishing featureinthefactsofthecasefortheyearunderconsiderationandthatofthe earlieryearcitedabove.Thus,respectfullyfollowingtheorderofCo-ordinate Benchdiscussedabove,thegroundofappealoftherevenueisherebydismissed. 8.Thenextissueraisedbytherevenueingroundnumber3isthattheLd. CIT(A)erredindeletingtheadditionmadebytheAOforRs.1,89,412/-underthe provisionsofsection14Ar.w.Rule8DofIncomeTaxRules. 9.Theassesseeintheyearunderconsiderationhasshownexemptincome amountingtoRs.2,03,05,814/-butfailedtomakeanydisallowanceagainstsuch exemptincomeinpursuancetotheprovisionsofsection14Ar.w.Rule8Dof IncomeTaxRules.Accordingly,theAOinvokedtherelevantprovisionandmade thedisallowanceasunder: Sr.noParticularsAmount (inRs.) 1DirectExpensesNil 2.InterestExpenses61364 3.AdministrativeExpenses128048 Total189412 ITANos.729,718&719/Ahd/2023 A.Ys.2014-15to2016-17 5 9.1TheAO,inviewoftheabove,disallowedtheexpensesundertheprovision ofsection14Ar.wRule8DofIncomeTaxRulesandaddedtothetotalincomeof theassessee. 10.AggrievedassesseepreferredanappealtotheLd.CIT(A)whodeletedthe additionmadebytheAObyobservingasunder: 10.3Groundofappeal3isagainsttheactionoftheAOtodisallowasumofRs.1,89,412/- outofthetotalinterestpaidofRs.22,60,711/-byapplyingsec.14Ar.wrule&D.TheAO haddisallowedcertainsumofinterestpaidtodepositorsonthegroundthatthedeposits wereutilisedforgivingloansandadvancestothefamilymemberswithoutchargingany interestTherein.Theappellanthasgivenatableshowingthattheamountswereinvested inPartnershipfirmsandfromthesameithadcarriedinterestamountingtoRs.27,51,244/- IthasalsoearnedinterestofRs.3,16,677/-fromthebankwhichisreflectedinthe computationofincome.Thus,totalinterestincomewasRs.30,67,921/-againstwhich interestpaidwasRs.22,60,711/-Furthertheappellantsubmittedthatithadinvested Rs.3,18,02,876/-infixedassetsoutofwhichrentalincomeofRs.70,15,658/-wasearned. Thus,totalinvestmentinfirmsandimmovablepropertiescomesouttobe Rs.5,64,19,912/-againstwhichinterestbearingleantakenisRs.1,88,39,258/-.Thus,he questionedtheadditionmadebytheAO. 10.3.1Thereismeritintheargumentoftheappellant,hehasearnedmoreinterestthan hehaspaidFurther,theamountofinterest-bearingloanismuchlowerthanthe investmentsfromwhichincomeisearned.Hence,therewasnojustificationforthe disallowanceasmadebytheAOisdirectedtodeletetheadditionofRs.1,89,412-.Ground ofappeal3isallowed. 11.BeingAggrievedbytheorderoftheLd.CIT(A)theRevenueisinappeal beforeus. 12.BoththeLd.DRandtheLd.ARbeforeusvehementlysupportedtheorder oftheauthoritiesbelowasfavourabletothem. 13.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Fromtheprecedingdiscussion,wenotethatthe issueinthepresentcaserevolvesagainstthedisallowanceofinterestand administrativeexpensesinpursuancetotheprovisionsofsection14Ar.w.Rule8D ofIncomeTaxRules.Undeniably,theinterestincomeshownbytheassesseeat Rs.30,67,921/-exceedsthetotalamountofinterestexpensesamountingtoRs. 22,60,711/-andtherefore,nodisallowanceofinterestexpenseiswarranted. ITANos.729,718&719/Ahd/2023 A.Ys.2014-15to2016-17 6 13.1However,regardingtheadministrativeexpensewenotethattheassessee hasnotgivenanyexplanationwhysuchexpensesshouldnotbedisallowed. Admittedly,assesseeearnedexemptedincomenotchargeabletotaxand thereforetheexpensesincurredbytheassesseeagainstsuchexemptincome cannotbeallowedwhilecalculatingtheincomechargeabletotax.Theprimary onuslieswiththeassesseetodemonstratethatnoadministrativeexpensehas beenincurredbytheassessee.However,fromtheorderoftheauthoritiesbelow, wefindthatsuchanonushasnotbeendischargedbytheassessee.Therefore, weareoftheviewthattheadministrativeexpenseagainsttheexemptedincome needstobeworkedoutundertheprovisionsofrule8DofIncomeTaxRulesin theabsenceofanyjustificationfromtheassessee.Accordingly,weconfirmedthe disallowanceatRs.1,28,048/-onlyrepresentingthedisallowanceof administrativeexpenseasmadebytheAO.Hence,groundofappealofthe revenueisherebypartlyallowed. 14.Intheresult,theappealfiledbytherevenueisherebypartlyallowed. ComingtoITANo.718/Ahd/2023,anappealbytheRevenueforAY 2015-2016 15.Thesolitaryissueraisedbytherevenueinthegroundofappealisthatthe Ld.CIT(A)erredintreatingtheincomedisclosedbytheassesseeastheincome undertheheadcapitalgainagainstthefindingoftheAOandtherebydirectingthe AOtoallowtheexemptionu/s54FoftheActafterverification. 16.Attheoutset,wenotethattheissueraisedbytheRevenueinitsgrounds ofappealfortheAY2015-16isidenticaltotheissueraisedbytheRevenueinITA No.729/Ahd/2023fortheassessmentyear2014-15.Therefore,thefindingsgiven in729/Ahd/2023fortheAY2014-15shallalsobeapplicablefortheyearunder considerationi.e.AY2015-16.ThegroundappealoftheRevenueforthe ITANos.729,718&719/Ahd/2023 A.Ys.2014-15to2016-17 7 assessment2014-15hasbeendecidedbyusvideparagraphNo.7ofthisorder againsttheRevenue.ThelearnedARandtheDRalsoagreedthatwhateverwill bethefindingsfortheassessmentyear2014-15shallalsobeappliedfortheyear underconsiderationi.e.AY2015-16.Hence,thegroundofappealfiledbythe Revenueisherebydismissed. 17.Intheresult,theappealoftheRevenueisherebydismissed. ComingtoITANo.719/Ahd/2023anappealbytheRevenueforA.Y. 2016-17. 18.Thesolitaryissueraisedbytherevenueinthegroundsofappealisthatthe Ld.CIT(A)erredintreatingtheincomedisclosedbytheassesseeastheincome undertheheadcapitalgainagainstthefindingoftheAOandtherebydirectingthe AOtoallowtheexemptionu/s54FoftheAct,afterverification. 19.Attheoutset,wenotethattheissueraisedbytheRevenueinitsgrounds ofappealfortheAY2016-17isidenticaltotheissueraisedbytheRevenueinITA No.729/Ahd/2023fortheassessmentyear2014-15.Therefore,thefindingsgiven in729/Ahd/2023fortheassessmentyear2014-15shallalsobeapplicableforthe yearunderconsiderationi.e.AY2016-17.ThegroundappealoftheRevenuefor theassessment2014-15hasbeendecidedbyusvideparagraphNo.7ofthis orderagainsttheRevenue.ThelearnedARandtheDRalsoagreedthatwhatever willbethefindingsfortheassessmentyear2014-15shallalsobeappliedforthe yearunderconsiderationi.e.AY2016-17.Hence,thegroundofappealfiledbythe Revenueisherebydismissed. 20.Intheresult,theappealoftheRevenueisherebydismissed. ITANos.729,718&719/Ahd/2023 A.Ys.2014-15to2016-17 8 21.Inthecombinedresults,outofthethreeappealsfiledbytheRevenue,the ITAbearingNo.729/Ahd/2023forAY2014-15ispartlyallowedwhereasITA bearingNos.718-719/Ahd/2023forAY2015-16&2016-17areherebydismissed. OrderpronouncedintheCourton08/03/2024atAhmedabad. Sd/-Sd/- (MADHUMITAROY)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated08/03/2024 Manish,Sr.PS