ACIT Vs Tiruchangodu Sengodagounder Ramasamy Khannaiyan (ITAT Chennai)
Sporadic Land Deals Not Adventure in Trade – Long-Term Land Holding of 22 Years Shows Investment, Not Real Estate Business
The Revenue filed appeals with a delay of 13 days. Tribunal found the reasons for delay bonafide & condoned the delay. Since issues were identical, both appeals were heard together & disposed of by a consolidated order.
AO had treated surplus from sale of land as business income, holding it to be an adventure in the nature of trade. AO relied upon the Bombay High Court decision in DCIT v. Gopal Ramnarayan Kasat (328 ITR 556), pointing to frequency of transactions & sales at high prices to Hindustan Educational & Charitable Trust. Addition of ₹10.83 crore was made as business income.
CIT(A) however noted that Assessee had held land for more than 20 years, never developed/ plotted them, & transactions were sporadic without continuity. Referring to earlier ITAT orders in Assessee’s own cases for AYs 2011-12 & 2009-10, CIT(A) held that surplus was assessable only as capital gains.
On appeal, Tribunal observed that AO failed to establish Assessee’s engagement in real-estate business. It was clear that Assessee, being in transformer manufacturing business, had invested in lands sporadically & held them as investments. The facts were distinguishable from Gopal Ramnarayan Kasat. Respectfully following earlier ITAT decisions in Assessee’s own cases, Tribunal upheld CIT(A)’s order directing assessment of surplus under “capital gains”.
