ITO, Hyderabad v. Sri Rupesh Mohan, Secunderabad

ITA 816/HYD/2010 | 2004-2005
Pronouncement Date: 31-01-2011 | Result: Dismissed

Appeal Details

RSA Number 81622514 RSA 2010
Assessee PAN ABZPM3741Q
Bench Hyderabad
Appeal Number ITA 816/HYD/2010
Duration Of Justice 7 month(s) 27 day(s)
Appellant ITO, Hyderabad
Respondent Sri Rupesh Mohan, Secunderabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 31-01-2011
Assessment Year 2004-2005
Appeal Filed On 03-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B' HYDERABAD BEFORE SHRI N.R.S. GANESAN JM AND SHRI CHANDRA POOJARI AM I.T.A. NO. 816/HYD/2010 (ASSESSMENT YEAR 2004-05) THE INCOME-TAX OFFICER WARD-10(1) HYDERABAD VS. SHRI K. RUPESH MOHAN SECUNDERABAD PAN: ABZPM 3741 Q APPELLANT RESPONDENT I.T.A. NO. 926/HYD/2010 (ASSESSMENT YEAR 2004-05) THE ACIT CIRCLE 10(1) HYDERABAD VS. SHRI K. RAJESH MOHAN SECUNDERABAD PAN: AJSPK5263E APPELLANT RESPONDENT I.T.A. NO. 925/HYD/2010 (ASSESSMENT YEAR 2004-05) THE ACIT CIRCLE-10(1) HYDERABAD VS. SHRI K. RANJIT MOHAN SECUNDERABAD PAN: AJLPK6402C APPELLANT RESPONDENT APPELLANT BY: SHRI K.E. SUNIL BABU RESPONDENT BY: SHRI CH.G. MURALIKRISHNA MURTHY O R D E R PER NRS GANESAN JM: ALL THE THREE APPEALS OF THE REVENUE ARE DIRECTED AGAINST THREE INDEPENDENT ORDERS OF CIT(A)-VI HYDE RABAD DATED 22.3.2010 AND RELATE TO THREE INDEPENDENT ASS ESSEES. SINCE COMMON ISSUE ARISES FOR CONSIDERATION IN ALL THE THREE APPEALS WE HEARD THESE APPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. I.T.A. NO. 816 926 & 925K /HYD/ 2010 SHRI K. RUPESH MOHAN & ORS. ========-----------============== 2 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IN ALL T HE THREE APPEALS IS WITH REGARD TO CLASSIFICATION OF P ROFIT EARNED BY THE ASSESSEES ON SALE OF LANDED PROPERTY. 3. SRI K.E. SUNIL BABU THE LEARNED DR SUBMITTED T HAT THE ASSESSEES' FATHER SHRI K. MOHAN PRASAD PURCHASE D AGRICULTURAL LAND IN THE YEAR 1967. HOWEVER ON TH E APPLICATION FILED BY THE ASSESSEES' FATHER THE PATTA WAS GRANTED IN THE NAME OF ALL THE THREE ASSESSEES AND THEIR FATHER SHRI K. MOHAN PRASAD. SUBSEQUENTLY THE AGRICULTURAL LAND WAS DIVIDED INTO SEVERAL HOUSING PLOTS AND THE LAYOUT WAS APPROVED BY CONCERNED AUTHORITIE S. ALL THE THREE ASSESSEES SOLD THE LAND AND THE PROFIT WA S CLAIMED AS CAPITAL GAIN. HOWEVER THE ASSESSING OF FICER FOUND THAT THE PROFIT HAS TO BE TAKEN AS BUSINESS I NCOME. ON APPEAL BY THE ASSESSEE THE CIT(A) ACCEPTED THE CLAIM OF THE ASSESSEES. 4. THE LEARNED DR FURTHER POINTED OUT THAT THE LAND IN QUESTION WAS DIVIDED INTO DIFFERENT SIZES OF PLOTS. EACH PLOT WAS SOLD AS A HOUSING PLOT BY DIRECTLY EXECUTING TH E SALE DEED. ACCORDING TO THE LEARNED DR THE ASSESSEES HA VE NO AGRICULTURAL BACKGROUND. NEITHER THE ASSESSEES NOR ANYBODY IN THEIR FAMILY CARRIED OUT ANY AGRICULTURA L ACTIVITY. ACCORDING TO THE LEARNED DR THE ASSESSEE S ARE I.T.A. NO. 816 926 & 925K /HYD/ 2010 SHRI K. RUPESH MOHAN & ORS. ========-----------============== 3 PARTNERS IN M/S. KNB CONSTRUCTIONS THAT CONSTRUCTED COMMERCIAL COMPLEXES AND ALSO UNDERTAKING ACTIVITIE S TO DEVELOP REAL ESTATE PROPERTIES. THEREFORE ACCORDI NG TO THE LEARNED DR PLOTTING OF LAND AND SALE OF THE SAME AS HOUSING SITES AMOUNTS TO ADVENTURE IN THE NATURE OF TRADE. ACCORDING TO THE LEARNED DR THE VERY PURPOSE OF INC LUDING THE NAMES OF THE ASSESSEES IN THE REVENUE RECORDS A FTER THE LAND WAS PURCHASED BY THEIR FATHER CLEARLY SHOWS TH E INTENTION OF THE ASSESSEES TO DO BUSINESS. AS PER THE LEARNED DR THE CIT(A) IS NOT CORRECT IN ACCEPTING THE CLAIM OF THE ASSESSEES TO TREAT THE PROFIT AS CAPITAL GAI N. 5. ON THE CONTRARY SRI CH. G. MURALIKRISHNA MURTHY THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMIT TED THAT ADMITTEDLY THE LAND IN QUESTION WAS PURCHASED BY TH E ASSESSEES' FATHER IN THE YEAR 1967. HOWEVER THE A SSESSEES' FATHER OBTAINED PATTA FROM THE REVENUE AUTHORITIES BY INCLUDING HIS THREE SONS NAMES. THE HOUSING PLOTS WERE MADE AFTER 35 YEARS FROM THE DATE OF PURCHASE. THE INTENTION OF THE ASSESSEES' FATHER AT THE TIME OF P URCHASE OF THE PROPERTY IS ONLY TO KEEP IT AS AGRICULTURAL LAN D AND AS AN INVESTMENT. ACCORDING TO THE LEARNED REPRESENTA TIVE FOR THE ASSESSEE THE INTENTION OF THE ASSESSEE AT THE T IME OF PURCHASE OF PROPERTY HAS TO BE SEEN FOR THE PURPOSE OF CLASSIFICATION OF INCOME WHETHER IT IS A CAPITAL G AIN OR I.T.A. NO. 816 926 & 925K /HYD/ 2010 SHRI K. RUPESH MOHAN & ORS. ========-----------============== 4 BUSINESS INCOME. THE SALE OF PROPERTY AFTER 35 YEAR S FROM THE DATE OF PURCHASE BY DIVIDING INTO HOUSING PLOTS FOR THE PURPOSE OF GETTING MORE PROFIT DOES NOT MEAN THAT T HE ASSESSEES WERE DOING REAL ESTATE BUSINESS. THOUGH THE ASSESSEES WERE PARTNERS IN M/S. KNB CONSTRUCTIONS T HE SUBJECT MATTER OF THE LAND WAS NOT TAKEN AS STOCK-I N-TRADE OF THE PARTNERSHIP FIRM. THE SUBJECT-LAND WAS DEAL T WITH INDEPENDENTLY BY THE ASSESSEES AS IT WAS AN INVESTM ENT MADE BY THEIR FATHER. IT WAS NEVER TREATED AS STOC K-IN- TRADE OF THE ASSESSEES AT ANY POINT OF TIME. THERE FORE MERELY BECAUSE THE ASSESSEES GOT MORE PROFIT BY SEL LING THE LAND AFTER DIVISION INTO HOUSING SITES THAT ACTIVI TY CANNOT BE CONSTRUED AS AN ADVENTURE IN THE NATURE OF TRADE . REFERRING TO THE ORDER OF THE CIT(A) THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) AFTER CONSIDERING THE VARIOUS CASE-LAWS ON THE SUBJ ECT FOUND THAT THE TRANSACTION IN QUESTION CANNOT BE CONSIDERED AS A BUSINESS ACTIVITY. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON REC ORD. THE ONLY QUESTION ARISES FOR CONSIDERATION IS WHETH ER THE SURPLUS ARISING ON SALE OF LAND AFTER DIVIDING THE SAME AS HOUSING PLOTS HAS TO BE TREATED AS BUSINESS INCOME OR CAPITAL GAIN. FOR THE PURPOSE OF DETERMINING THE N ATURE OF I.T.A. NO. 816 926 & 925K /HYD/ 2010 SHRI K. RUPESH MOHAN & ORS. ========-----------============== 5 INCOME WE HAVE TO SEE THE INTENTION OF THE ASSESSE E AT THE TIME OF PURCHASE OF THE PROPERTY. IF THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF PROPERTY IS TO KEEP THE SAME AS INVESTMENT THEN MERELY BECAUSE IT WAS SOLD AS HOUSING PLOTS THAT CANNOT BE CONSTRUED AS BUSINESS ACTIVITY. HOWEVER IF THE INTENTION OF THE ASSESSE E AT THE TIME OF PURCHASE OF THE PROPERTY IS TO DO BUSINESS IN REAL ESTATE THEN NATURALLY THE PROFIT ON SALE OF SUCH LA ND EITHER AS A SINGLE PLOT OR AS SEVERAL SUB-PLOTS THE SAME HAS TO BE CONSTRUED AS BUSINESS ACTIVITY. THE INTENTION OF T HE ASSESSEES HAS TO BE FIND OUT FROM THE CIRCUMSTANCES WHICH EXISTED AT THE TIME OF PURCHASE OF PROPERTY INCLUDI NG THE PERIOD OF HOLDING. 7. IN THIS CASE ADMITTEDLY THE PROPERTY IN QUESTI ON WAS PURCHASED BY THE ASSESSEES' FATHER IN THE YEAR 1967 . IT IS ALSO NOT IN DISPUTE THAT THE PROPERTY WAS PURCHASED BY THE ASSESSEES' FATHER INDIVIDUALLY. HOWEVER THE PATTA WAS OBTAINED FROM THE STATE REVENUE AUTHORITIES IN THE NAMES OF ALL THE THREE SONS AND THEIR FATHER SHRI K. MOHA N PRASAD. IT IS WELL SETTLED PRINCIPLES OF LAW THAT PATTA IS NOT A DOCUMENT OF TITLE. PATTA IS ONLY AN EXTRACT FOR THE PURPOSE OF COLLECTING LAND REVENUE IN RESPECT OF THAT LAND. THEREFORE IN OUR OPINION MERELY BECAUSE THE PATTA WAS OBTAINED IN THE NAMES OF ALL THE ASSESSEES THAT WIL L NOT GIVE I.T.A. NO. 816 926 & 925K /HYD/ 2010 SHRI K. RUPESH MOHAN & ORS. ========-----------============== 6 ANY RIGHT OF OWNERSHIP ESPECIALLY WHEN THE SALE DEE D WAS EXECUTED FOR PURCHASE OF THE PROPERTY IN THE NAME O F ASSESSEES' FATHER. WHEN THE PROPERTY WAS PURCHASED IN THE YEAR 1967 NEITHER THE ASSESSEES NOR THEIR FATHER WE RE IN THE BUSINESS OF REAL ESTATE. IF THE INTENTION OF THE A SSESSEES OR THEIR FATHER WAS TO DEAL WITH REAL ESTATE PROPERTY THEY WOULD HAVE PLOTTED THE LAND IMMEDIATELY AFTER PURCH ASE. THE VERY FACT THAT THEY KEPT THE LAND FOR 35 YEARS AS SUCH SHOWS THAT THE PROPERTY WAS PURCHASED ONLY AS AN INVESTMENT AND NOT FOR THE PURPOSE OF CARRYING OUT ANY BUSINESS ACTIVITY. MERELY BECAUSE THE LAND WAS DIV IDED INTO SEVERAL HOUSING PLOTS FOR THE PURPOSE OF GETTI NG BETTER PRICE AND TO FIND OUT PROSPECTIVE PURCHASERS IT DO ES NOT MEAN THAT THE ASSESSEES WERE CARRYING ON BUSINESS A CTIVITY IN REAL ESTATE. THE CIRCUMSTANCES IN WHICH THE PRO PERTY WAS PURCHASED BY THE ASSESSEES' FATHER AND THE HOLD ING OF THE PROPERTY OVER 35 YEARS CLEARLY SHOWS THAT THE I NTENTION OAT THE TIME OF PURCHASE OF THE PROPERTY IS TO KEEP THE SAME AS INVESTMENT AND NOT TO TRADE IN REAL ESTATE. IN T HIS CASE THE MATERIAL AVAILABLE ON RECORD DOES NOT SUGGEST T HAT THE PROPERTY WAS PURCHASED FOR THE PURPOSE OF DOING BUS INESS ACTIVITIES. 8. THE ASSESSING OFFICER FOUND THAT THE ASSESSEES W ERE PARTNERS IN M/S. KNB CONSTRUCTIONS THAT BUILDS I.T.A. NO. 816 926 & 925K /HYD/ 2010 SHRI K. RUPESH MOHAN & ORS. ========-----------============== 7 COMMERCIAL COMPLEXES AND DEVELOPS REAL ESTATE PROPE RTIES. M/S. KNB CONSTRUCTIONS IS ADMITTEDLY A PARTNERSHIP FIRM AND AN INDEPENDENT ASSESSABLE UNIT. IT IS NOT THE CASE OF THE REVENUE THAT THE PROPERTY IN QUESTION WAS TRANS FERRED TO THE PARTNERSHIP FIRM AT ANY POINT OF TIME. IT I S ALSO NOT THE CASE OF THE REVENUE THAT THE PROPERTY IN QUESTI ON WAS TREATED AS STOCK-IN-TRADE OF THE ASSESSEES AT ANY P OINT OF TIME. THEREFORE MERELY BECAUSE THE ASSESSEES WERE PARTNERS IN M/S. KNB CONSTRUCTIONS WE CANNOT PRESU ME THAT THE ASSESSEES WERE DEALING IN REAL ESTATE ACTI VITIES. UNDER THE INCOME-TAX ACT THE PARTNERSHIP FIRM IS D IFFERENT AND THE ASSESSEE INDIVIDUAL IS DIFFERENT. THEREFOR E MERELY BECAUSE THE ASSESSEES WERE PARTNERS IN M/S. KNB CONSTRUCTIONS IT WILL NOT AUTOMATICALLY LEAD TO A S ITUATION TO PRESUME THAT THE ASSESSEES WERE DOING REAL ESTAT E BUSINESS. M/S. KNB CONSTRUCTIONS AN INDEPENDENTLY ASSESSABLE UNIT IS DOING BUSINESS IN REAL ESTATE. THE ASSESSEES BEING OWNING THE LAND INDIVIDUALLY DIVIDE D THE SAME AS HOUSING PLOTS AND SOLD THE HOUSING PLOTS FO R THE PURPOSE OF GETTING BETTER PRICE. IN THE ABSENCE OF ANY MATERIAL TO SHOW THAT THE ASSESSEES UNDERTOOK ANY SYSTEMATIC AND ORGANISED ACTIVITY WHICH IS ADVENTUR E IN THE NATURE OF TRADE WITH AN INTENTION TO EARN PROFIT I N OUR OPINION THE SURPLUS ARISING OUT OF SALE OF PROPERT Y CANNOT I.T.A. NO. 816 926 & 925K /HYD/ 2010 SHRI K. RUPESH MOHAN & ORS. ========-----------============== 8 BE TREATED AS BUSINESS INCOME. THEREFORE IN OUR O PINION THE CIT(A) HAS RIGHTLY FOUND THAT THE PROFIT ARISIN G OUT OF SALE OF PROPERTY HAS TO BE TREATED AS CAPITAL GAIN. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF THE LOWER AUTHORITY. ACCORDINGLY THE SAME IS CONFIRMED . 9. IN THE RESULT ALL THE THREE APPEALS OF THE REVE NUE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST JANUARY 2011. SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER SD/- (N.R.S. GANESAN) JUDICIAL MEMBER HYDERABAD DATED 31ST JANUARY 2011 TPRAO COPY FORWARDED TO: 1. SHRI K. RUPESH MOHAN H. NO. 1-1-92 R.P. ROAD SECUNDERABAD. 2. SHRI K. RAJESH MOHAN H. NO. 1-1-92 R.P. ROAD SECUNDERABAD. 3. SHRI K. RANJIT MOHAN H. NO. 1-1-92 R.P. ROAD SECUNDERABAD. 4. THE INCOME-TAX OFFICER WARD 10(1) 5TH FLOOR ' A' BLOCK I.T. TOWERS A.C. GUARDS HYDERABAD. 5. THE ACIT CIRCLE 10(1) ROOM NO. 515 I.T. TOWER S A.C. GUARDS HYDERABAD. 6. CIT(A)-VI HYDERABAD. 7. THE CIT-V HYDERABAD 8. THE DR B BENCH ITAT HYDERABAD