PRINCIPAL COMMISSIONER OF INCOME TAX 7 vs. SIKANDARALI KASAMALI QURESHI

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TAXAP/394/2018HC GujaratGJHC24011253201830 April 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no question of law arises from the order of the Income Tax Appellate Tribunal. The Tribunal had confirmed the decision of the CIT(Appeals) by noting that the assessee had entered into agreements to purchase land in 1979 and 1989, took possession, and received irrevocable powers of attorney. The final sale deeds were executed in favor of third parties in 2010, where the assessee acted as a Confirming Party and received substantial amounts, which were offered as capital gains. The Tribunal's finding that the assessee was not in the business of buying and selling land, based on only two such transactions over 20 years, was accepted. Consequently, the appeal filed by the Revenue was dismissed.

What were the facts?

The Revenue is in appeal against an order of the Income Tax Appellate Tribunal (ITAT) dated September 12, 2017. The assessee, an individual, for assessment year 2010-11, had declared a long-term capital gain of Rs. 1.42 Crore and claimed deductions under Section 54F of the Income Tax Act, 1961. The Assessing Officer (AO) treated the receipt as business income, not long-term capital gain. Both the Commissioner of Income Tax (Appeals) and the ITAT ruled in favor of the assessee. The ITAT noted that the assessee had entered into agreements to purchase land in 1979 and 1989, took possession, and received irrevocable powers of attorney. Final sale deeds were executed in favor of third parties in 2010, with the assessee acting as a Confirming Party, receiving substantial amounts which were offered as capital gains.

What were the issues?

1. Whether the Appellate Tribunal has erred in law and on facts in treating the receipt of Rs. 1,42,00,000/- arising out of transfer of capital assets as Long Term Capital Gain (LTCG) and not business income, under Section 45 of the Income Tax Act, 1961? 2. Whether the Appellate Tribunal has erred in law and on facts in granting exemption under Section 54F of the Income Tax Act, 1961, though there being no transfer of any long-term capital asset by the assessee? Assessee's Contentions: The assessee treated the receipt as LTCG and claimed deductions under Section 54F. The ITAT ruled in favor of the assessee, noting that the assessee had only executed these two land transactions in 20 years, indicating it was not a business of buying and selling land. Revenue's Contentions: The Revenue contended that the receipt was in the nature of business profit and not long-term capital gain. The Revenue also questioned the eligibility for exemption under Section 54F.

Which sections of the Income-tax Act were involved?

Section 54F,Section 45

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/394/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 394 of 2018 ================================================================ PRINCIPAL COMMISSIONER OF INCOME TAX 7 Versus SIKANDARALI KASAMALI QURESHI ================================================================ Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 30/04/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)

1.

Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal dated 12.9.2017, raising following questions for our consideration. “(A) Whether the Appellate Tribunal has erred in law and on facts in treating the receipt of Rs.1,42,00,000/- arising out of transfer of capital assets as LTCG and not business income? (B) Whether the Appellate Tribunal has erred in law and on facts in granting exemption u/s 54F of Rs.40,74,249/-, though there being no transfer of any long term capital asset by the assessee?”

2.

The respondent-assessee is an individual. For the assessment year 2010-11. in the return filed, the assessee shown a long term capital gain of Rs.1.42 Crore and offered it to tax after claiming deductions under Section 54F of the Income Tax Act, 1961 (For short, “the Act”).

3.

The Assessing Officer, however, held that the receipt in question was in the nature of a business profit and not long C/TAXAP/394/2018 ORDER term capital gain. The assessee carried the matter in appeal. CIT (Appeal) and thereafter the Tribunal both ruled in favour of the assessee. In particular the Tribunal while confirming the decision of the CIT (Appeals) noted that assessee had entered into an agreement to purchase certain lands by executing Banakhat on 19.10.1979 and 11.10.1989. Possession of the land was also handed over to the assessee. The land owners have also executed irrevocable power of attorney in favour of the assessee in the year 1989 and 2003. The final sale deeds took place in favour of the third parties on 1.2.2010 in which the assessee acted as a Confirming Party. It was on account of such transaction that the assessee received sizeable amounts which were offered to tax as capital gain.

4.

The Tribunal further noted that because of the documents executed in favour of the assessee at the time of execution of final sale deed, the assessee would relinquish his rights in such lands in favour of ultimate buyer and also hand over the possession thereof. It was because of this that the assessee was referred to as a Confirming Party. The Tribunal further noted that the assessee had executed only these two land transactions in a span of 20 years clearly indicating that the assessee was not in the business of buying and selling land. No question of law arises. Tax Appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) R.S. MALEK

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