C I T vs. M/S RAJ BRICKS INDUSTRY

ITA/294/2009HC Punjab & HaryanaPHHC01084386200915 July 2009Author: MR. JUSTICE ADARSH KUMAR GOEL,MRS JUSTICE DAYA CHAUDHARY4 pages
AI SummaryDismissed

What were the facts?

The revenue appealed to the High Court against an order of the Income Tax Appellate Tribunal (ITAT) for the assessment year 2005-06. The assessee, M/s Raj Bricks Industry, a partnership firm running a brick kiln, sold land it had acquired as a capital asset. The assessee claimed the profit as capital gains. The Assessing Officer (AO) treated the income as business income, considering the sale an adventure in the nature of trade. The Commissioner of Income Tax (Appeals) [CIT(A)] reversed the AO's decision, holding it to be capital gains. The ITAT upheld the CIT(A)'s finding. A dispute also arose regarding the valuation of the land for capital gains computation, with the AO estimating Rs. 301.42 per sq. yard and the CIT(A) adopting Rs. 200 per sq. yard, which was upheld by the ITAT.

What did the High Court hold?

The High Court dismissed the revenue's appeal, finding that no substantial question of law arose. Regarding the first issue, the Court noted that the CIT(A) and the Tribunal had concurrently held that it was not the assessee's business to purchase and sell land and that the income was covered by the head of capital gains. The Court found this finding of fact to be not perverse. On the second issue concerning the valuation of land, the Court held that the CIT(A) and the Tribunal, on appreciation of evidence, had reached a finding of fact regarding the rate, and this also did not constitute a substantial question of law. Therefore, the appeal was dismissed. The operative direction was the dismissal of the appeal, upholding the ITAT's order which directed the AO to assess the profit under the head 'capital gains' at the rate confirmed by the CIT(A).

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was legally correct in holding that the profit on sale of land by the assessee was not an adventure in the nature of trade, despite facts indicating otherwise, as per Section 45 of the Income Tax Act, 1961. 2. Whether, on the facts and in the circumstances of the case, the ITAT was legally justified in confirming the CIT(A)'s action of adopting the market value of land at Rs. 200/- per sq. yard, as against Rs. 301.42 estimated by the AO, for the purpose of Section 45(4) of the Income Tax Act, 1961. Assessee's Contentions: The assessee argued that the land was acquired as a capital asset, shown in the balance sheet, and part of it was refilled with the intention of reusing it. The sale was necessitated by tax liability. Dealing in land was not the assessee's business. The assessee relied on Raja Bahadur Kamakhya Narain Singh Vs. CIT, (1970) 77 ITR 253. Revenue's Contentions: The revenue contended that the transaction of land sale was an adventure in the nature of trade. The revenue argued that the AO's estimate of Rs. 301.42 per sq. yard was based on comparable cases and should have been adopted.

Which sections of the Income-tax Act were involved?

Section 260A,Section 45(4)

AI-generated summary — verify with the full judgment below

(1) IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH DATE OF DECISION: 15.7.2009 The Commissioner of Income Tax, Patiala ..........Appellant Versus M/s Raj Bricks Industry, 70, Ajit Nagar, Patiala ..........Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MRS. JUSTICE DAYA CHAUDHARY Present:- Mr. Rajesh Katoach, Advocate for the appellant **** ADARSH KUMAR GOEL, J. (Oral)

1.

The revenue has preferred this appeal under Section 260A of the Income Tax Act, 1961 (for short, “the Act”) against the order of Income Tax Appellate Tribunal, Chandigarh dated 31.10.2008 passed in I.T.A. No. 110/CHD/2008 in the case of ACIT, Circle, Patiala Vs. M/s Raj Bricks Industry 70, Ajit Nagar, Patiala, for the assessment year 2005-06, proposing to raise following substantial questions of law:- (i) Whether on the facts and in the circumstances of the case, the ITAT is legally correct in holding that the profit on sale of land shown by the assessee was not an adventure in the nature of trade, even when the facts of the case indicate that the transaction of land was an adventure in the nature of trade. (ii)Whether on

The order continues below.

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