The Income-tax Officer Vs. Smt. Sejal D Shah (ITAT Ahmedabad)
Learned Departmental Representative vehemently contends that the Assessing Officer had rightly invoked Section 50C of the Act before making the impugned short term capital gains addition. His case therefore is that the impugned addition is liable to be restored. We find no merit in the instant argument. It has come on record that the assessee’s share in the land in question is only to the extent of 1/10th. The department itself has assessed the remaining two co-sharers namely Smt. Kalaben N. Patel (8%) and Shri Devang Dineshbhai Shah (10%) to have derived business income from plotting the relevant capital asset in question. There is no distinction on facts pointed out at the Revenue’s behest in assessee’s case vis-à-vis above two remaining co-sharers. This tribunal in case of Jayantibhai C. Patel (supra) admittedly holds that income derived from sale of agricultural land after its conversion to a non-agricultural parcel amounts to an adventure in the nature of business and trade resulting in business income. It has further come on record that the instant assessee had entered into an MOU(supra) with the developer in question. We therefore affirm CIT(A)’s findings under challenge treating the assessee to have derived business income instead of capital gains. Learned Departmental Representative fails to dispute that the Section 50C of the Act does not apply in the instant case.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This Revenue’s appeal for assessment year 2010-11 arises against the CIT(A)-XIV, Ahmedabad’s order dated 09.09.2014 in case no. CIT(A)-XIV/ITO/Ward-7(4)/215/2013-14, reversing Assessing Officer’s action making short term capital gains addition of Rs. 36,06,950/- after invoking Section 50C, in proceedings u/s.143(3) of the Income Tax Act, 1961; in short “the Act”.
Heard both the parties reiterating their respective stands. Case file perused.
2. We notice at the outset that the CIT(A)’s findings under challenge elaborately discuss the relevant facts, Assessing Officer’s action making the impugned addition in assessment order dated 28.03.2013 as well as various evidences filed during the course of lower appellate proceedings as under:
“5. I have perused the facts of the case as enumerated by A.O. and as submitted by appellant. I have perused the case laws relied on by A.O. as well as appellant. After careful consideration of facts, submission and contention of both A.O. as well as of appellant, ground wise adjudication is as follows:
5.1. Before adjudication of grounds following facts requires consideration:
(1) There is a notarized M.O.U. dated 06.03.2007 between Navratna Township Pvt. Ltd. and appellant to act as facilitator in view of-
(I) M/s. Navratna Group is engaged in the activities of purchasing and selling lands, building and construction of such building.
(ii) A plotting scheme comprising inter- alia various residential and non-residential building, golf course and a club is proposed by M/s. Navratna Group at land situated at Sanand, and at Vsana lyava for which land had already identified by M/s. Navratna group. Negotiations are
already made from land owner but in view of the land in question being agricultural land it will take time to get it converted into non-agricultural land and M/s. Navratna Group is not entitled to purchase agricultural land.
(iii) The appellant being agriculturist and can purchase such agricultural land and M/s. Navratna group does not want to lose opportunity or otherwise any impediment in the scheme as well as rate for purchase (cost of acquisition) contacted appellant. The appellant has to only lend her name whiie all other formalities about identification, title clearance, registration etc. are to be carried out by M/s. Navratna Group’s instruction and all related expenses are required to be borne by M/s. Navratna group. The appellant was to receive Rs. 15,000 for such name facilitation. It was also agreed that after getting such land converted to non-agricultural, land has to be transferred or conveyed to M/s. Navratna group party.
(2) As per deed of conveyance dated 30.06.2008, agricultural land (old tenure), non-irrigated (Bin piyat) admeasuring 4 Hector, 80 acre and 68 sq.mt. of survey No. 231/1 + 2 of Moje Sanand Village, Tal.Sanand was purchased by appellant along with other co-owners for a consideration of Rs.2,28,12,111. The land was purchased from Hasmukh Singh Bhavsingh Vaghela. Three co-owners with respective share are as follows:
(i) Shri Devang Dineshbahi Shah (10%) i.e. land ad measuring 49 Aare 07 mt.of undivided share of land (PAN : ADFPS 9924H)
(ii) Smt. Sejalben Bipinbhai Amin(10%) i.e. land ad measuring 49 Aare 07 sq.mt of undivided share of land: (PAN: AASPA 3326P)
(iii) Smt. Kalaben BipinbhaijjAmin (80%) i.ef. land ad measuring 3 Hector 92 aare 54 sq.mt.undivided share of land.
The appellant paid Rs.22,81,211 (as mentioned in conveyance deed) vide ch. No. 521852, dated 14.08.2008 drawn on Union Bank of India, C.G.Road, Ahmedabad Stamp duty of Rs. 11,17,200 (577100 + 540100) was paid.
(3) The appellant submitted a contra account and confirmation from M/s.Navratna Township Pvt.Ltd. (PAN AACCN 3909 L) which reflect that Rs. 22,81,211 vide ch.No.348396 of HDFC Bank paid on 21.08.2008 to appellant for purchase of this land. The appellant submitted ledger account, contra account to reflect that expenditure related to stamp duty, for conversion of agricultural land to non-agricultural land also incurred by M/s. Navratna Group.
(4) As per sale deed dated 01.10.2009 of this land between all the three co-owners i.e. Shri Devang Dineshbhai Shah, Smt. Sejalben Bipinbra Amin and Smt.Kalaben Bipinbhai Amin through their power of attorney Srr Piyush Bhanuprasad Trivedi(Shri Piyush Bhanuprasad Trivedi was witness for the MOU) and Sagar Sanand Infrabuild Pvt. Limited(PAN AALCS3683F) for a consideration of Rs. 2,47,23,000, the purchaser paid stamp duty :•” Rs.28,85,300 (1211500 + 1673800). The appellant received Rs. 24,72,3CC vide ch.No.244916 dated 01.10.2009 drawn on HDFC Bank, Navrangpura.
(5) The appellant submitted ledger account of land held for Navratna group where apart from appellant share for cost of purchase of Rs. 22,81,211 and share of sale consideration of rs.24,72,300, appellant debited share of stamp charges for purchase of Rs. 1,11,802, Regd. expenses of Rs. 22,857 and N.A.charge,s M Bs. 50,295 resulting into profit on sale of land at Rs.6135.
(6) A copy of statement recorded by A.O. of Smt. Sejalben Bipinbhai Amin u/s. 131 of the Act dated 01.11.2012. reflect that appellant admitted in reply to Q.No.5 that her name as facilitator was used in dealing of land by Sagar Sanand Infrabuild Pvt. Limited which is a company in which her husband Shri Devang D Shah is one of the directors. She stated categorically that al! the transactions of money are related to company.
(7) The appellant submitted a copy of order dated 08.02.2013 u/s.143(3) of the Act for A.Y. 2010-11 in the case of Shri Devang Dineshbhai Shah (PAN ADFPS 9924 H) by the ITO.Wd.11(1), Ahmedabad where A.O. show caused (dated 16.01.2013) as follows:
“4 From the details submitted by you on 16-01-2013 it appears that the purchase of lands are made by you from the funds provided by a company called Navratna Township Private Limited and it also appears that these lands are sold to a company named Sagar Sanand Infra build Private Limited, please provide what is the arrangement/agreement/understanding with these companies. Further, considering the significant number of transaction of purchase and sale of land with such borrowed funds show me cause as to why the profit made on the sale of land of Rs. 30,771 shown as capital gain in your Return of Income of A. Y. 2010-11 should not be treated as profits and gains made from business and profession.”
Shri Devang Dineshbhai Shah vide letter dated 24.01.2013 replied as follows:
“3. Vide Point No. 4 Your Good selves has show caused as to why the profit earned on sale of land of Rs. 30,771 should not be treated as profit and gains made from business and profession as against profit shown as capital gain in the Return of Income for A. Y. 201 0-11, considering that the purchase of land was made from the funds provided by Navratna Township Pvt Limited. In this connection the Assessee submits as under:
(i) The facts of this transaction are that the Assessee is a faimer and is eligible to purchase an agricultural land in his name. Navratna Township Pvt Limited in 2006 -07 had approached me to purchase an agricultural land on their behalf for the reason that the Company was unable and legally not eligible to purchase the agricultural land from the farmers In its name till the same was converted into non-agricultural land.
(ii) For helping the Company to purchase the land the Assessee had acted as a facilitator for purchasing the agricultural land from the..,owners of the agricultural land i.e. the farmers on behalf of Navratna Township Pvt. Limited.
(iii) As the Assessee was only a facilitator, the entire legal work for verification of the title till the completion of the transaction up to registration of Conveyance Deed was to be carried out by the Navratna Group.
(iv) Further, all the funds required for purchase of land on behalf of the Company including all charges, expenses and outflows were to be borne by the Navratna Group. It was also understood that all risk, rewards and obligations including compliance of legal provisions were to be done by the Navratna Group.
(v) The Assessee was also under obligation to sell the said land after its conversion to non-agricultural status to the Navratna Township Pvt Limited or any of its Group Companies.
(vi) All the above were mutually understood by way of a memorandum of understanding entered by the Assessee with Navratna Township Pvt Limited in- 2006-07, the copy of which is enclosed vide Annexure —3 for your ready reference.
3.1 In view of the above and taking into consideration the Memorandum of Understanding entered the Assessee was being provided the necessary funds for purchase of land on behalf of Navratna Township Pvt. Limited. The copy of the ledger account is also submitted to Your Good serves vide communication dated 16th January, 2013 and for the sake of convenience the same is not repeated. These funds were utilized in making payment to the farmers for purchase of agricultural land.
3.2 Once the land was purchased from the farmers necessary legal formalities for converting the land into non-agricultural land was carried out by the personnel of the Naviatna Group and after short period all those lands were sold to Sagar Sanand Infrabuild Pvt. Limited at the instance of Navratna Township Pvt Limited. The date on which the NA permission was obtained and Conveyance Deed executed is as under:
