Smt. Seema B. Gajria, Bangalore V. Addl.CIT, Bangalore

ITA 816/BANG/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1511 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 21-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income

Judgement Text

ITA.816/BANG/2010 P AGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'B', BANGALORE BEFORE DR. O. K. NARAYANAN, VICE PRESIDENT AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER I.T.A NO.816/BANG/2010 (ASSESSMENT YEAR : 2006-07) SMT. SEEMA B. GAJRIA, L/R OF LATE BHARAT R. GAJRIA .. APPELLANT V. ASSL. COMMISSIONER OF INCOME-TAX, RANGE-4, BANGALORE .. RESPONDENT APPELLANT BY : SMT. SHEETAL BORKAR, ADVOCATE RESPONDENT BY : SHRI. MANOJ KUMAR, ADDL.CIT O R D E R PER DR. O. K. NARAYANAN, VICE PRESIDENT : THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVAN T ASSESSMENT YEAR IS 2006-07. THE APPEAL IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME-TAX(A)-II, AT BANGALORE, DAT ED.12.03.2010 AND ARISES OUT OF ASSESSMENT COMPLETED U/S.143(3) O F THE IT ACT, 1961. 02. THE ASSESSEE HAD RETURNED AN INCOME OF ` .1,30,14,773/- FOR THE ASSESSMENT YEAR UNDER APPEAL. THE TOTAL INCOME DEC LARED BY THE ASSESSEE ALSO CONSISTED OF THE LONG TERM CAPITAL GA INS ON SALE OF LAND IN ITA.816/BANG/2010 P AGE - 2 FOUR SEGMENTS IN NELAMANGALA AREA. THE ASSESSING O FFICER TREATED THE INCOME ARISING TO THE ASSESSEE AGAINST THE SALE OF LAND AS BUSINESS INCOME. HE HELD THAT THE ASSESSEE WAS PURCHASING A GRICULTURAL LAND FROM TIME TO TIME AND CONVERTING THOSE LANDS INTO S ALEABLE UNITS BY CONVERTING THEM INTO PLOTS AND THEREFORE THE ACTIVI TIES CARRIED ON BY THE ASSESSEE SHOULD BE TREATED AS AN ADVENTURE IN T HE NATURE OF TRADE AND THEREFORE, THE SURPLUS ARISING OUT OF SUCH TRAN SACTION SHOULD BE TREATED AS BUSINESS INCOME. 03. THE DISPUTE WHETHER THE INCOME IS LONG-TERM CAP ITAL GAIN OR THE INCOME IS BUSINESS INCOME WAS TAKEN BEFORE THE COMM ISSIONER OF INCOME-TAX(A) IN FIRST APPEAL. AFTER CONSIDERING T HE FACTS OF THE CASE AND EXAMINING A NUMBER OF DECISIONS PRONOUNCED BY C OURTS OF LAW, THE COMMISSIONER OF INCOME-TAX(A) AGREED WITH THE ASSES SING AUTHORITY AND HELD THAT THE ASSESSING AUTHORITY HAS RIGHTLY T REATED THE INCOME AS BUSINESS INCOME. THE FIRST APPEAL WAS DISMISSED. 04. WE HEARD SMT. SHEETAL BORKAR, ADVOCATE APPEARIN G FOR THE ASSESSEE AND SHRI.MANOJ KUMAR, THE LEARNED ADDITION AL COMMISSIONER OF INCOME-TAX APPEARING FOR THE REVENUE. ITA.816/BANG/2010 P AGE - 3 05. THIS APPEAL HAS BEEN FILED BY THE LEGAL REPRESE NTATIVE OF LATE BHARAT R. GAJRIA WHO WAS ASSESSED TO TAX. HE EXPIR ED ON 29.09.2007 EVEN BEFORE COMPLETION OF ASSESSMENT ON 29.12.2008. THEREFORE AS A MATTER OF FACT, THERE WAS NO MUCH OCCASION FOR THE ASSESSING AUTHORITY TO EXAMINE THE EXACT OBJECTIVE OF THE LATE ASSESSEE IN PURCHASING AND SELLING THE LAND. THE LATE ASSESSEE WAS SUFFERING FROM CANCER WHEN THE ASSESSMENT PROCEEDINGS WERE IN PROGRESS AND THEREFO RE, THERE WAS NO MUCH ACTIVE PARTICIPATION BY THE ASSESSEE IN ASSESS MENT PROCEEDINGS. 06. THE ABOVE HISTORY OF THE CASE IS BROUGHT HERE B ECAUSE WHAT IS DETERMINATIVE IN DECIDING THIS APPEAL IS THE OBJECT IVE OF THE LATE ASSESSEE WHETHER TO CARRY ON AN ADVENTURE IN THE NA TURE OF TRADE OR TO PURCHASE LAND AS INVESTMENT AND SALE AT THE APPROPR IATE FAVOURABLE TIME. 07. IN PAGE 13 OF HIS ORDER, THE COMMISSIONER OF IN COME-TAX(A) HAS LISTED OUT THE DETAILS OF VARIOUS PURCHASES MADE BY THE LATE ASSESSEE FROM 1988-89 TO 2003-04. THE LAND WAS SOLD IN FINA NCIAL YEAR 2005- 06 WHICH IS THE PREVIOUS YEAR RELEVANT TO THE ASSES SMENT YEAR UNDER APPEAL. THE MAIN CHUNK OF LAND LIKE 1 ACRE 1 GUNTA ; 2 ACRES 64 GUNTAS; 1 ACRE 23 GUNTAS; 9 ACRE 20 GUNTAS ETC WERE IN FACT PURCHASED BY THE ASSESSEE IN FINANCIAL YEARS 1988-89, 1989-90, 1991- 92, 1992-93, ETC., ITA.816/BANG/2010 P AGE - 4 AT THAT RELEVANT POINT OF TIME WHEN LANDS WERE PURC HASED BY THE ASSESSEE, THEY WERE AGRICULTURAL LANDS. THE ASSESS EE SOLD THOSE HOLDINGS IN THE FINANCIAL YEAR 2005-06 WHICH MEANS AFTER A PERIOD OF FIVE TO SEVEN YEARS. THE HOLDING OF LAND FOR THAT LONG A PERIOD IS PRIMARILY AN INDICATION OF THE FACT THAT THE ASSESS EE HELD THE AGRICULTURAL LANDS PURCHASED BY HIM AS INVESTMENT. THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE ASSESSEE HAS BE EN CARRYING ON THE ACTIVITIES AS ADVENTURE IN THE NATURE OF TRADE. ON LY FOR THE REASON THAT THE AGRICULTURAL LAND PREVIOUSLY PURCHASED BY THE A SSESSEE WERE DEVELOPED AND PLOTTED AND SOLD AT A HUGE PRICE, DOE S NOT MEAN THAT THE ASSESSEE WAS CARRYING ON THE ACTIVITIES IN AN ORGAN IZED MANNER IN THE NATURE OF BUSINESS. AS A PRUDENT INVESTOR, THE ASS ESSEE STARTED SAVING HIS INVESTMENTS IN LAND IN ANTICIPATION OF GOOD PRI CE ON SALE. THIS PRUDENCE OF THE LATE ASSESSEE CANNOT BE EQUATED WIT H AN OBJECT OF INDULGING IN ADVENTURE IN THE NATURE OF TRADE. BEC AUSE OF THE DEVELOPMENT OF BANGALORE CITY, LIKE MANY OTHER PERS ONS, THE ASSESSEE ALSO MIGHT HAVE BENEFITED BY A WINDFALL. THE RISE IN PRICE OF THE LAND SURROUNDING BIG CITIES IS A NATURAL THING WITH WHIC H ALONE THE OBJECT OF ASSESSEE CANNOT BE TESTED. 08. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF TH E CASE, WE FIND THAT THE COMMISSIONER OF INCOME-TAX(A) WAS CARRIED AWAY BY A ITA.816/BANG/2010 P AGE - 5 NUMBER OF DECISIONS RELIED ON BY HIM RATHER THAN TH E BASIC FRAME OF THE FACTS OF THE CASE. WE DO NOT HAVE ANY QUARREL WITH THE OBSERVATION OF THE COMMISSIONER OF INCOME-TAX(A) REGARDING THE NATURE OF INCOME DEFINED BY VARIOUS PRONOUNCEMENTS RELIED ON BY HIM. BUT THE FACT IS THAT THE COMMISSIONER OF INCOME-TAX(A) HAS NOT COLL ECTED OR COMPARED THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THOSE JUDICIAL PRONOUNCEMENTS. 09. WE FIND THAT THERE IS NO REASON ON RECORD TO RE JECT THE CLAIM OF THE ASSESSEE THAT THE SURPLUS EARNED BY THE LATE AS SESSEE WAS IN THE NATURE OF LONG-TERM CAPITAL GAINS. ACCORDINGLY, TH E ASSESSING AUTHORITY IS DIRECTED TO REDO THE ASSESSMENT TREATING THE SUR PLUS ON SALE OF LAND AS LONG-TERM CAPITAL GAINS IN ACCORDANCE WITH LAW I NCLUDING THE BENEFIT OF INDEXATION AND DETERMINE THE ULTIMATE TOTAL INCO ME LIABLE FOR TAXATION. 10. IN RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON MONDAY, THE 07TH DAY OF MARCH, 2011, AT BANGALORE. SD/- SD/- (SMT. P. MADHAVI DEVI) (DR. O. K. NARAYANAN) JUDICIAL MEMBER VICE PRESIDENT