The ITO, Ward-3,, Bharuch v. Shri Ajay Ramlal Shah, Ankleshwar

ITA 2874/AHD/2010 | 2007-2008
Pronouncement Date: 24-04-2014 | Result: Dismissed

Appeal Details

RSA Number 287420514 RSA 2010
Assessee PAN AHZPS6083M
Bench Ahmedabad
Appeal Number ITA 2874/AHD/2010
Duration Of Justice 3 year(s) 6 month(s) 10 day(s)
Appellant The ITO, Ward-3,, Bharuch
Respondent Shri Ajay Ramlal Shah, Ankleshwar
Appeal Type Income Tax Appeal
Pronouncement Date 24-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 24-04-2014
Date Of Final Hearing 06-08-2014
Next Hearing Date 06-08-2014
Assessment Year 2007-2008
Appeal Filed On 14-10-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI D.K. TYAGI J.M. & SHRI ANIL CHATURVE DI A.M.) I.T. A. NO. 2874/AHD/2010 (ASSESSMENT Y EAR: 2007-08) ITO WARD-3 BHARUCH V/S SHRI AJAY RAMLAL SHAH PROP. OF SHAH BUILDERS 1 SHALIGRAM KESHAV PARK SOCIETY PIRAMAN ROAD PIRAMAN NAKA ANKLESHWAR (APPELLANT) (RESPONDENT) PAN: AHZPS6083M APPELLANT BY : SHRI K.C. MATHEWS SR. D.R . RESPONDENT BY : SHRI MUKUND BAKSHI A.R. ( )/ ORDER DATE OF HEARING : 24-03-2014 DATE OF PRONOUNCEMENT : 24 -04-2014 PER SHRI ANIL CHATURVEDI A.M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF CIT(A)-VI BARODA DATED 02.07.2010 FOR A.Y. 2007-08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS O F CIVIL CONSTRUCTION. ASSESSEE FILED HIS RETURN OF INCOME FOR AY 2007-08 ON 31.10.2007 ITA NO 2874/AHD/2010 . A.Y. 2007-0 8 2 DECLARING TOTAL INCOME OF RS.2 83 434/-. THE CASE W AS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U /S 143(3) VIDE ORDER DATED 24.12.2009 AND THE TOTAL INCOME WAS DET ERMINED AT RS. 21 51 360/-. AGGRIEVED BY THE ORDER OF A.O ASSESSE E CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 3.7.2010 GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY TH E ORDER OF CIT(A) REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED T HE FOLLOWING GROUNDS:- L(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. C1T(A) ERRED IN ALLOWING THE INCOME OF RS. 17 34 758/- ON ACCOUNT OF SALE OF LAND AS LONG TERM CAPITAL GAIN INSTEAD OF BUSINESS INCOME. L(II) THE C1T(A) ERRED IN NOT APPRECIATING THE FACTS THAT THE MAIN BUSINESS OF THE ASSESSEE IS OF CIVIL CONTRACTOR AND THE ASSESSEE DEVELOPED AND CONVERTED THE INHERI TED LAND RECEIVED BY HIM INTO SMALL RESIDENTIAL PLOTS. ON ONE PLOT THE ASSESSEE HAS C ONSTRUCTED A BUILDING CALLED SHRINATH FLATS. OUT OF THESE PLOTS THE ASSESSEE HAS SOLD 12 PLOTS OF LAN D AND 1 FSI IN RESPECT OF FIAT NO. 5 IN THE BUILDING KNOWN AS SHRINATH FLATS AND RECEIVED RS. 17 60 0 00/- ON ACCOUNT OF SALE OF THESE PLOTS AND FSI AND AFTER CONSIDERING THE COST PRICE NET INCOME IS S HOWN AT RS. 17 34 758/-. IN RESPECT OF SALE OF VALUE OF PLOT THE ASSESSEE HAS SHOWN THIS INCOME A S CAPITAL GAIN AND IN RESPECT OF CONSTRUCTION WORK ON THE SAID LAND THE ASSESSEE HAS SHOWN THE SAME AS INCOME FROM BUSINESS. SINCE THE ENTIRE ACTIVITY UNDERTAKEN ON THE LAND IS A COMPOSITE A CTIVITY THE TREATMENT GIVEN BY THE ASSESSEE TREATING SOME PORTION OF INCOME AS CAPITAL GAIN A ND SOME PORTION OF INCOME AS BUSINESS INCOME CANNOT BE ACCEPTED. THE ENTIRE PROFIT OF RS. 17 34 758 /- WAS THEREFORE RIGHTLY TREATED BY THEA.O. AS BUSINESS INCOME THOUGH REVENUE HAS RAISED 2 GROUNDS BUT BOTH THE GR OUNDS ARE INTERCONNECTED AND THEREFORE CONSIDERED TOGETHER. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOTI CED THAT ASSESSEE HAD GOT POSSESSION OF LAND IN NOV 1979. HE DEVELOPE D AND CONVERTED THE LAND INTO SMALL RESIDENTIAL PLOTS AND ON ONE SUCH P LOT HAD CONSTRUCTED BUILDING CALLED SRINATH FLATS. ASSESSEE HAD SOLD 12 PLOTS AND FSI IN RESPECT OF ONE FLAT IN THE BUILDING. THE INCOME REC EIVED ON SALE OF PLOT WAS CONSIDERED AS CAPITAL GAIN BY THE ASSESSEE. AO WAS OF THE VIEW THAT THE SINCE THE ASSESSEE HAD UNDERTAKEN THE DEVELOPME NT AND CONSTRUCTION ITA NO 2874/AHD/2010 . A.Y. 2007-0 8 3 ACTIVITY THE INCOME CANNOT BE CONSIDERED AS CAPITA L GAIN BUT HAS TO BE TREATED AS BUSINESS INCOME. HE ACCORDINGLY TREATED THE ENTIRE PROFIT OF RS 17 34 758/- RECEIVED BY THE ASSESSEE AS BUSINESS IN COME. AGGRIEVED BY THE ORDER OF A.O ASSESSEE CARRIED THE MATTER BEFOR E CIT(A). CIT(A) DELETED THE ADDITION MADE BY A.O. BY HOLDING AS UND ER:- 4.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. A.R . AND FACTS OF THE CASE AND FIND THAT THE PLOTS SOL D BY THE APPELLANT DURING THE YEAR ARE INHERITED BY HIM FROM HIS LATE FATHER IN THE YEAR 1979. THE NUMBER O F PLOTS INHERITED IS 56. IN THE YEAR 1987 THE APPELL ANT HAS SUBDIVIDED 32 NO. OF PLOTS INTO SMALLER SIZ E TO MAKE IT SALEABLE BY OBTAINING APPROVAL OF THE ANKLE SHWAR MUNICIPALITY. THE APPELLANT HAD THEREAFTER RETAINED THE SAME FOR SEVERAL YEARS AND SOLD 12 NOS (SUBDIVIDED) DURING THE YEAR. THE SALE OF SUCH PLOTS ACCORDING TO ME CANNOT BE TREATED AS BUSINE SS INCOME AS HELD BY THE ASSESSING OFFICER PARTICULARLY -WHEN THE APPELLANT HAS SOLD THEM IN T HE SAME FORM. THE DEVELOPMENT AND CONSTRUCTION OF FLATS ON TWO PLOTS ADMEASURING 6157 SQ. FT. WOULD B E A TRANSACTION IN THE NATURE OF CONVERSION OF A CAPITAL ASSET INTO STOCK IN TRADE AS ENVISAGED U/S. 45 (2) PROVIDING THE TAXATION OF THE SALE PROCEEDS AS CAPITAL GAINS UP TO THE MARKET VALUE ON THE DATE OF ITS CONVERSION AND THE SALE PROCEEDS IN EXCESS OF THE MARKET VALUE OF THE CAPITAL ASS-ET ON THE DATE OF C ONVERSION AS BUSINESS INCOME. FROM THE RECORDS IT IS SEEN THAT THE SALE OF THE PROPORTIONATE LAND FSI I N RESPECT OF TWO PLOTS IS SOLD DURING THE SAME YEAR WHEN THE TWO PLOTS ARE CONVERTED FOR BUSINESS PURPO SES AND SOLD AT THE SAME VALUE AS IT EXISTED ON THE DATE OF CONVERSION DURING THE YEAR. I THEREFORE H AVE NO HESITATION IN HOLDING THAT THE TRANSACTION O F SALE OF PLOTS IS AN INDEPENDENT TRANSACTION OF SALE OF CAPITAL ASSET AND IS TO BE TAXED AS INCOME FRO M CAPITAL GAINS. LIKEWISE THE PROCEEDS FROM SALE OF PROPORTIONATE LAND FSI BEING THE SAME VALUE AS ON THE DATE OF CONVERSION IS ALSO TO BE TAXED AS CAPIT AL GAINS. ACCORDINGLY THE ASSESSING OFFICER IS DIRECTED TO TREAT THE INCOME FROM SALE OF LAND /PLO TS DURING THE YEAR AMOUNTING TO RS. 17 34 758/-AS INCOME FROM SALE OF CAPITAL ASSETS. THE INCOME FROM SALE OF CAPITAL ASSET BEING INVESTED IN THE BONDS AS PER THE PROVISIONS OF SEC. 54EC THE CHARGEABLE CAP ITAL GAINS IN THE CASE OF THE APPELLANT WOULD BE NI L. THE APPELLANT THUS GETS A RELIEF OF RS. 17 34 758/- . 5. AGGRIEVED BY THE ORDER OF CIT(A) REVENUE IS NOW IN APPEAL BEFORE US. BEFORE US ID DR TOOK US THROUGH THE ORDER OF A .O AND SUPPORTED THE ORDER OF A.O. ON THE OTHER HAND ID AR SUPPORTE D THE ORDER OF CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) AFTER CONSIDERING THE S UBMISSIONS OF THE ASSESSEE HAS GIVEN A FACTUAL FINDING THAT THE LAND WAS INHERITED BY THE ASSESSEE AND IN 1987 THE ASSESSEE HAD SUBDIVIDED TH E PLOTS AND OBTAINED NECESSARY PERMISSION FROM MUNICIPAL AUTHOR ITIES. THE ITA NO 2874/AHD/2010 . A.Y. 2007-0 8 4 ASSESSEE HAD THEREAFTER RETAINED THE PLOTS FOR MANY YEARS AND THEREFORE THE ACT OF ASSESSEE IN SELLING THE SAME CANNOT BE T REATED AS BUSINESS INCOME. BEFORE US LD. D.R. ALSO COULD NOT CONTROV ERT THE FINDINGS OF CIT(A) NOR HAS BROUGHT ANY MATERIAL IN ITS SUPPORT. IN VIEW OF THE AFORESAID FACTS WE FIND NO REASON TO INTERFERE WIT H THE ORDER OF CIT(A) AND THUS DISMISS THESE 2 GROUNDS OF REVENUE. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 24 - 04 - 2014. SD/- SD/- (D.K. TYAGI ) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AH MEDABAD