Smt. Anita Singh Vs ACIT (ITAT Indore)
in the year 2006 itself the assessee along with other persons initiated the process of developing a colony which is proved by the Registration No.40/2006 issued on 21.8.2006. Few months before and the period thereafter all these 18 persons kept on purchasing the land from various land owners and parallely M/s. ADPL was working to develop the project named “Country Walk”. Once the area was developed then the sales were effected by demarcating them in various plots sizes and the ADPL was having the power of attorney to decide about the sale and development of the land bank. All the sale transactions were effected through it and the land owners used to get their share excluding the expenditure as well as excluding the portion of land which has been used for development. Through this process the assessee gained substantial amount which has been spread over to A.Y 2012-13 and 2013-14.
In our considered view as well as in the given factual matrix it is crystal clear that it was a well thought business project carried out by the assessee jointly with 17 other persons by way of taking the services of Developer M/s. ADPL and the intention of entering into an adventure of business was very clear from the very first day of purchase of impugned land and completed on selling the residential plots. We are of the considered view that both the lower authorities have rightly appreciated the facts and concluded that the profits from sale of land situated at Village Jhalaria, Tehsil Indore is a business profit and cannot be taxed as Short Term Capital Gain or Long Term Capital Gain. In the result these common issue raised for both the assessment years is decided against the assesse. We therefore dismiss all the grounds raised in both these appeals of the assessee.
FULL TEXT OF THE ITAT JUDGMENT
These two appeals filed by the assessee pertaining to A.Ys. 2012-13 & 2013-14 are directed against the order of Ld. Commissioner of Income Tax(Appeals)-I, Indore,(in short ‘CIT(A)’), vide appeal No. IT-752/14-15 &No.IT-23/2016-17 order dated 04.11.2015 &01.05.2017 which is arising out of the order u/s 143(3) of the Income Tax Act 1961(hereinafter called as the ‘Act’) framed on 28.01.2015 & 29.01.2016 by ACIT-3(1), Indore.
2. As the issues raised in both these appeals relates to same assessee and issues are identical, these were heard together and being disposed off by this common order for sake of convenience and brevity.
3. Briefly stated facts, as culled out from the records are that the assessee is engaged in the business of retail trade of country made liquor and foreign liquor. Return of income for Assessment Year 2012-13 and Assessment Year 2013-14 were filed on 23.1.2013 and 29.4.2014 declaring income of Rs.3,22,49,498/- and Rs. 2,47,87,020/- respectively. Cases for both the years were picked up for scrutiny through CASS, followed by the issuances of statutory notices u/s 143(2) of the Act and u/s 142(1) of the Act which were duly served upon the assessee. Detailed questionnaire was issued and were duly replied by the assessee. The Ld. A.O while framing the assessment observed that the assessee has earned significant amount of income shown under the head Capital Gain from sale of land. Ld.A.O also noticed that the assessee owned the land in the same vicinity and some portion of the land were purchased during the financial year 2005-06 and 2006-07 and the remaining were purchased during the financial year 2011-12. The capital gain was accordingly declared as Short Term Capital Gain and Long Term Capital Gain as per the period of ownership. On making further investigation Ld. A.O revealed that the alleged land which has been sold during the Assessment Year 2012-13 and Assessment Year 2013-14 were sold with the assistance of Developer company namely M/s. Aarone Developers Pvt. Ltd who was appointed as holder of power of attorney by the assessee and acted on behalf of the assessee for arranging the sale. M/s. Aarone Developers Pvt. Ltd (ADPL) also contacted other owners of the land in the very same vicinity and combined deal was made in which the sale deeds were executed by the assessee along with various other persons. As far as sale consideration is concerned M/s. ADPL was to provide an account with total sales for the year and after claiming the expenses incurred for the project, the assessee used to receive its share. Ld. A.O on the basis of detailed investigation came to a conclusion that the modus operandi adopted by the assessee is purely an adventure in the nature of trade and as such he assessed the profit earned from sale of land as business profits as against Capital Gain declared in the income Tax return. Apart from this Ld. A.O also made disallowances u/s 14A of the Act at Rs.13,00,145/- for Assessment Year 2012-13 and Rs.8,49,934/- for Assessment Year 2013-14 and assessed the income at Rs.3,36,49,643/- and Rs.2,58,46,160/- for Assessment Year 2013-13 and 2013-14 respectively.
4. Aggrieved assessee preferred appeal before Ld. CIT(A) but could succeed only in relation to disallowances made u/s 14A of the Act.
5. Now the assessee is in appeal before the Tribunal against the common issue of the treatment of the profit earned on sale of land pleading that the alleged profit for both the years is Capital Gain whereas both the revenue authorities have treated it as its business profit.
6. The Ld. Counsel for the assessee referring to the written submissions made before the Ld. CIT(A) submitted that the assessee’s main business is of trading of liquor. Investments were made to purchase land and they were shown under the head of Fixed Assets, and the assessee is not engaged in the activity of purchase/sale of land. The purpose of approaching M/s. Aarone Developers Pvt. Ltd was only to fetch better price for the land and also to find the buyers who were interested to purchase the land She held these lands as a capital asset. The amounts received from this company for the sale of the land has been shown as a long term capital gain/short term capital gain in accordance with the period of holding of the properties. The accounts are audited and the Tax Audit Report is obtained. The assessee acquired the agricultural land of 6. 53 Htrs. at village Jhalaria in the year 2006. This land was held by the assessee as an investment. The assessee entered into an understanding with M/s Aarone Developers Pvt. Ltd., Delhi, for development and sale of this land. The Company Aarone had entered into similar understanding with various land owners holding the surrounding lands. A common map was sanctioned for developing all these lands. It was agreed between the parties to share a particular percentage of the sale consideration of the land. Accordingly the assessee’s share for each sale came to approximately 4.5. Special weightage was given to the assessee for the prime location of her lands. The Company Aarone developed the whole land of approximately 96 Htrs and effected various sale deeds of the developed plots to various purchasers. These sale deeds were executed with the signature of all the land owners along with two of the representatives of Aarone. The assessee received an amount of Rs.3,32,22,388/- during the year and accordingly showed the long term capital gains on the sale of these lands. While framing the assessment the Ld AO observed on page 5 para 3.2 that it is a business activity of the assessee carried out through the Company Aarone and it is in the nature of trading. The Ld AO further observed in para 3.3 that the exact piece of land sold by the builder is not ascertainable. The Ld AO stated in para 3.6 page 7 that the assessee has purchased four plots during the year and as such it establishes that she is engaged in the trading activity. This remark is totally unjustified based on pure surmises since three plots are still held by the assessee as a capital investment. In para 3.8 the Ld AO observed that the capital gains are not quantifiable exactly but it is an estimate which is not acceptable. The Ld AO relied on the decision in the case of Raja Rameshwar reported in 42ITR 179 and ultimately concluded that the activity of the assessee is nothing but an adventure in the nature of trade and the income arising out of it is taxable as a business income.
7. It was further submitted that the said land was purchased as an agricultural land and was held by the assessee for more than four years as a capital asset. On being approached by M/s Aarone the assessee decided to sale this capital asset and for better realisation agreed to receive the consideration in part. The said consideration was received from Aarone on the sale of plots. The Ld AO totally overlooked to the fact that the possession of the land was handed over to Aarone for development. The map for the colony was sanctioned in the name of the Aarone and on the sale deed two of the directors of Aarone have signed along with all the owners. The assessee along with the other owners also signed the sale deeds because the transfer can be effected only by the owners. It is worth noting fact that the total sale consideration was received by Aarone and was deposited in their bank – account. The proportionate consideration was received by the assessee from Aarone in installments. Thus, it establishes the factual position that the assessee has not dealt with the said land as a trading activity but has received the consideration in parts on the sale of a capital asset from the developers. Under these circumstances the capital gains is correctly shown by the assessee on the sale of the capital asset and cannot be taxed as a business profit. The case laws cited by the Ld AO are not applicable in the instant case since the assessee had purchased this land not with the intention of doing any business but held the same as a capital asset. We would like to draw your honours kind attention to the following judgments wherein it has been held that if the plots are sold for getting better price then it would be a capital gain and not the business income.
CIT v/s Suresh Goyal 298 ITR P. 277 (MP)
CIT v/s Gajanana Enterprises 314 ITR P. 247 (Kar)
CIT v/s Sohan Khan 304 ITR 194
8. On the other hand the Ld. Departmental Representative vehemently argued and supported the orders of lower authorities.
9. We have heard rival contentions and perused the records placed before us. The sole issue raised in these two appeals is that whether the profits earned by the assessee from sale of land is to be assessed as business income or Capital Gain.
10. We find that the assessee is mainly engaged in liquor business. Investments were also made in the agricultural land and other properties. The impugned land under consideration of these two appeals are the chunk of land situated at village Jhalaria. Assessee purchased piece of agricultural land at Village Jhalaria near Indore during the financial year 2005-06 and 2006-07 and purchases of another portion of land in the very same area were made during the Financial Year 2010-11. As accepted by the Ld. Counsel for the assessee that the assessee entered into an understanding with M/s. Aerone Developers Pvt. Ltd, Delhi (ADPL) for development and sale of this land. ADPL entered into similar understandings with various land owners holding the surrounding lands. A common map was sanctioned for developing all these lands. It was agreed between various parties to share a particular percentage of the sale consideration and special weightage was given for the land in prime location. As informed by the assessee before the lower authorities that the developer Company M/s. ADPL developed approximately 96 hectares of land and thereafter sold the duly developed plot of lands to various purchasers.
11. We find that for the Assessment Year 2012-13 and 2013-14 following amounts have been disclosed by the assessee as Short Term Capital and Long Term Capital gain from sale of impugned land owned by the assessee.
Assessment Year 2012-13
