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Income Tax Appellate Tribunal, ‘’A’’ BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED
PER Ms MADHUMITA ROY, JUDICIAL MEMBER:
The instant appeal at the instance of the Revenue is directed against the order dated 01.10.2013, passed by the Learned Commissioner of Income Tax (Appeals)-XI, Ahmedabad, ( in short “ Ld.CIT(A)”) arising out of the order dated 31.01.2013 passed by the A.C.I.T under section 143(3) of the Income Tax Act, 1961(herein after referred to as “the Act’’)for the Assessment Year 2010- 2011.
The order directing the Ld.AO to treat profit on sale of plots of land amounting to Rs.3,82,66,938/- as profits and gains of business as against the treatment given by the Ld.AO as “Capital gain” has been challenged before us by the Revenue.
2 3. The brief facts relating to this case is this that the appellant had shown an amount of Rs.63 cr. as income from sale of plots of land in the profits and loss accounts. As against the sale, the appellant also debited an amount of Rs.2,47,33,062/- on account of cost of plots of land for resale. Upon going through the objects of the appellant company and the details of transaction in respect of the sale of land and upon making inquiries from the government authorities the Ld.AO came to the conclusion that the income cannot be treated as business income and the profit arising to the appellant company from the sale of plots of land has been taxed as income under the head “capital gain” which was reversed by the First Appellate Authority and hence the instant appeal before us.
Heard the parties, perused the relevant materials available on record. The assessee is a private limited company incorporated on 01.12.2018 with four main objects of the company followed by an insertion of fifth object pursuant to a special resolution passed at the Extra Ordinary General Meeting of the company on 03.11.2008; the fifth object relating to dealing of properties whereof is available at page 2 of the Assessment Order. Upon verification of the profit and loss accounts it was seen that the assessee had shown Rs.6,30,00,000/- under the head “sale on plots of land” and also debited an amount of Rs.2,47,33,062/- under the head “cost of plots of land for resale”. Upon verification of the past record of the assessee it revealed that the company was investment company and never dealt with trading in land as commodity (stock-in-trade), as observed by the Ld.AO. Only on the basis of main object of the MOU of the company, the assessee has considered the sale of land as business income with a sole intention of setting off brought forward business loss of A.Y. 2002-03 which is on the verge of getting time barred and thereby reduced the taxable income in the current year was also the observation made by the Ld. AO. The garb of the Ld. AO is this that the land is not a commercial commodity being treated as stock-in- trade and thus transaction of land in this case is nothing but transfer of capital
3 gain as against business income. Show-cause notice dated 12.07.2012 was also issued to the assessee as to why the sale consideration receipt from the sale of land should not be assessed under the head “capital gains” and not as “business income”. In-reply whereof the assessee submitted that the plots of land were duly accounted by the company “stock-in-trade’’ in the books of accounts for A.Y.2009-10 which was accepted by the income tax scrutiny assessment by the then CIT(A) and thus the sale of plots of land correctly been offered to tax by the company under the head “business income’’ for the year under consideration. The Ld.AO in this respect further observed that the lands were purchased before the resolution was passed by the company and further that the resolution is nothing but after-thought of the Board to avoid payment of taxes. On the other hand it appears from record that on 24.10.2008 in the Board Meeting itself decided to add the new object being clause No.5 in the Memorandum of Association of the appellant company. On 03.11.2008 by and under a special resolution approving change in the object clause by holding Extra Ordinary General Meeting the clause No.5 has been inserted for the purchase of two plots for survey Nos.1055 and 1055 at village Balwa, taluka Dholka payment was made to Smt. Bhanumati R. Desai to the tune of Rs.2,31,00,000/- (Rs.31,00,000/- + Rs.2,00,00,000/-) on 10.11.2008. It is relevant to mention that the company has also filed special resolution under the prescribed form being No.23 with the Registrar of the company (ROC), Gujarat at Ahmedabad, on 12.11.2008. Further that one Shri Deepak Rawal has been authorized in the board meeting on 18.11.2008 to negotiate and finalize the terms.
Ultimately the purchase deeds in connection with these two lands were executed in the meeting on 05.12.2008 and copies of each of the documents have been duly filed before us by the Ld. Counsel for the assessee. The Ld. AO, however, has not took it in its proper perspective and negated the claim of the appellant by holding that the business module of the appellant does not speak of plot/real estate further holding that the resolution passed by the company was 4 after the lands were purchased that too as an afterthought to avoid the payment of taxes.
In appeal we find from the record that the ''Ld.CIT (A)'' controverted each and every counts of observations made by the “Ld. AO” on the basis of list of evidence qua dated. Finally relying upon the judgment passed by the Hon’ble Jurisdictional High Courtin the case of CIT vsRewashanker A. Kothari, reported in 283 ITR 338(Guj.) and also the judgment passed by the Apex Court in the case of PariMangaldasGirdhardas holding that the transactions made by the appellant company is business in nature, the initial intention of the assessee, the treatment under the books of accounts, the treatment by Assessing Officer in the preceding year, newly inserted clause in the MOA, the intention of profit earning and the activities to convert the land into non-agriculture using borrowed funds in the balance sheet observing predominantly the case of the appellant of being engaged in the business of land trading and resultantly directed the ''Ld.AO to treat the profit from land sale is under the head “profit and gains of business and profession as shown by the appellant while, according to us, is justified and proper and without any infirmity so as to warrant interference. Thus, the order in passed in the affirmative i.e. in favour of the assessee and against the revenue. Hence, the Revenue appeal is found to be devoid of any merit and thus dismissed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Court on 20/01/2020 at Ahmedabad.