THE COMMISSIONER OF INCOME TAX V. M/S H M CONSTRUCTIONS

ITA/1126/2008

AI Insights

The case involves appeals filed by the Commissioner of Income-Tax and the Assistant Commissioner of Income-Tax against M/s.H.M.Constructions concerning the tax treatment of a property shown as stock in trade/work in progress. The primary legal question was whether the Income Tax Appellate Tribunal was correct in holding that part of the Geneva House, which was continuously shown as stock in trade, could be converted into a capital asset, and the rental income derived from it could be taxed under the head 'Income from House Property'. The High Court of Karnataka decided to dismiss the appeals based on the precedent set by a Co-Ordination Bench in a similar case and the monetary threshold for maintainability of the appeals as per the relevant circular.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 728915 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 15-12-2014
• Assessment Year: misc
• Other Referred Cases: The Commissioner of Income Tax and another Vs. M/s.Eiko Sales (P) Ltd., Bangalore, The Commissioner of Income Tax Vs. M/s.Ranka and Ranka
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S PARTHASARATHI
• Assessee Lawyers: K V ARAVIND
• Keywords: Capital asset; Income from house property; Income Tax Appeals; Rental income
• Section: 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 15TH DAY OF DECEMBER, 2014 PRESENT THE HON’BLE MR. JUSTICE N.K. PATIL AND THE HON’BLE MRS. JUSTICE RATHNAKALA. ITA NO.1126 OF 2008 C/W ITA NOS.1129 AND 1127 OF 2008 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX, C.R.BUILDING, QUEENS ROAD, BANGALORE. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE – 2(3), C.R.BUILDING, QUEENS ROAD, BANGALORE. ... APPELLANTS (COMMON) (BY SRI K.V.ARAVIND, ADVOCATE) 2 AND M/S.H.M.CONSTRUCTIONS, GENEVA HOUSE, CUNNINGHAM ROAD, BANGALORE – 560 052. ... RESPONDENT (COMMON) (BY SRI S PARTHASARATHI, ADVOCATE) THESE INCOME TAX APPEALS ARE FILED U/S.260-A OF I.T. ACT, 1961, AGAINST THE ORDER DATED 11.07.2008 PASSED IN ITA NOS.516, 518, 517/BNG/2007, FOR THE ASSESSMENT YEARS 2001-02, 2003-04, 2002-03 RESPECTIVELY, AND TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ALLOW THE APPEALS AND SET ASIDE THE ORDER PASSED BY THE ITAT BANGALORE IN ITA NOS.516, 518, 517/BNG/2007, DATED 11.07.2008 CONFIRMING THE ORDER OF THE APELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(3), BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY. THESE INCOME TAX APPEALS COMING ON FOR FINAL HEARING THIS DAY, N.K. PATIL, J., DELIVERED THE FOLLOWING:- JUDGMENT In these appeals, the appellants have questioned the correctness of the order passed by the Income Tax 3 Appellate Tribunal, Bangalore, in ITA Nos.516, 518, 517/BNG/2007, and confirm the order passed by the Appellate Commissioner, confirming the order passed by the Assistant Commissioner of Income Tax, Central Circle – 2(3), Bangalore. 2. The substantial question of law involved in these appeals is; ‘Whether the Tribunal was correct in holding that part of the Geneva House, which was being shown as stock in trade/work in progress year after year can be converted into a capital asset and the rental income derived from the same can be brought to tax under the head ‘Income from House Property?’ 3. We have heard the learned counsel appearing for the appellants and the learned counsel appearing for the respondent. 4 4. Both the counsel appearing for the parties fairly submitted that, the subject matter involved in these appeals is directly covered by the judgment passed by the Co-Ordination Bench of this Court dated 28.10.2014 in ITA No.57/2009 (The Commissioner of Income Tax and another Vs. M/s.Eiko Sales (P) Ltd., Bangalore). Therefore, they submitted that, following the said judgment, the appeals filed by the appellants may also be disposed of. 5. The submission of the learned counsel appearing for both the parties, as stated supra, is placed on record. 6. After hearing the counsel appearing for both the parties and after perusal of the material on record, it emerges that, the net tax effect of the subject matter of these appeals is less than Rs.10,00,000/-. Therefore, in view of the Circular No.3/2011, which is held to be 5 retrospective by this Court in the case of The Commissioner of Income Tax Vs. M/s.Ranka and Ranka reported in (2013) 352 ITR 121 (Karn), these appeals are not maintainable. However, it is submitted that the Revenue has preferred appeals against the said judgment, which is pending before the Apex Court. Therefore, liberty is reserved to the Revenue to seek revival of the appeals in the event of the Supreme Court holding in their favour. With these observations, the appeals filed by the appellants are dismissed. Ordered accordingly. Sd/- JUDGE Sd/- JUDGE AP/- "