SHRI. N.K.MOHAMMED ALI, PARTNER vs. THE ASST. COMMISSIONER OF INCOME TAX,

PDF · subscribers
ITA/404/2010HC KeralaKLHC01027096201001 December 2011Author: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR4 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court held that the land was acquired for the purpose of business expansion and was part of the stock-in-trade of the partnership firm. Therefore, the profit arising from its sale should be treated as business income and not capital gains. Consequently, the assessee is not entitled to claim indexation benefits as it is business income. The Tribunal's decision to treat the sale of land as capital gains was set aside. Regarding the depreciation on the building, the Court found that since the land was treated as a business asset, the building constructed on it was also a business asset. The depreciation claimed on the building was allowed. The appeal was allowed in part, with the direction to recompute the income treating the sale of land as business income and allowing depreciation on the building.

What were the facts?

This appeal concerns the assessment year 2003-04. The assessee, Shri N.K. Mohammed Ali, a partner in Yenkey Roller Flour Mills, is challenging an order passed by the Income Tax Appellate Tribunal (ITAT), Cochin Bench. The specific order under challenge is ITA No. 927/Coch/2008. The revenue, represented by the Assistant Commissioner of Income Tax, Central Circle 2, Kozhikode, is the respondent. The dispute pertains to certain additions made to the assessee's income. The procedural history indicates that this is an appeal filed before the High Court of Kerala against the ITAT's decision.

What were the issues?

1. Whether the Tribunal was justified in holding that the income from the sale of land, which was part of the business assets of the partnership firm, Yenkey Roller Flour Mills, should be treated as capital gains and not as business income, thereby allowing the assessee to claim indexation benefits? The assessee contends that the land was acquired for the purpose of business expansion and its sale was incidental to the business, thus it should be treated as business income. The revenue argues that the land was a capital asset and its sale should be treated as capital gains, but without indexation benefits as it was not held for a specified period. 2. Whether the Tribunal erred in not considering the depreciation claimed on the building constructed on the land, which was sold along with the land, as part of the business income? The assessee argues that the building was a business asset and depreciation is allowable. The revenue contends that if the land is treated as a capital asset, the building on it should also be treated as such, and depreciation on a capital asset sold along with the capital asset is not permissible in the manner claimed.

Which sections of the Income-tax Act were involved?

Section 45,Section 48

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.VINOD CHANDRAN THURSDAY, THE 1ST DECEMBER 2011 / 10TH AGRAHAYANA 1933 ITA.No. 404 of 2010() --------------------- ITA.927/COCH/2008 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT IN ITA ---------------------------------------- SHRI.N.K.MOHAMMED ALI, PARTNER, YENKEY ROLLER FLOUR MILLS, CHEROOTY ROAD, KOZHIKODE. BY ADVS. SRI.E.K.NANDAKUMAR SRI.A.K.JAYASANKAR NAMBIAR SRI.K.JOHN MATHAI SRI.P.BENNY THOMAS SRI.P.GOPINATH SMT.PREETHA S.NAIR RESPONDENT/APPELLANT IN ITA --------------------------------------- THE ASSISTANT COMMISSINER OF INCOME TAX, CENTRAL CIRCLE 2, KOZHIKODE. BY ADVS. SRI.P.K.R.MENON SRI.JOSE JOSEPH THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 01/12/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: VK ITA.No. 404 of 2010() --------------------------- APPENDIX ------------- PETITIONER'S ANNEXURES ------------------------------- ANNEXURE A. COPY OF THE ASSESSMENT ORDER FOR 2005-06 ISSUED BY THE INCOME TX DEPARTMENT TO THE APPELLANT ATED 1911.2007. ANNEXURE B. COPY OF THE ORDER ISSUED BY THE COMMISSIONER OF INCOME TAX (APPEALS) TO THE APPELLANT DATED 14.8.2008. ANNEXURE C. COPY OF THE TRIBUNAL ORDER ISSUED BY THE INCOME TAX APPELLATE TRIBUNAL TO THE APPELLANT DATED 30.06.2010. RESPONDENT'S ANNEXURE: NIL --------------------------------- / TRUE COPY / P.A. TO JUDGE VK C.N. RAMACHANDRAN NAIR, & K. VINOD CHANDRAN, JJ ========================== I.T. APPEAL NO. 404 OF 2010 ============================ Dated this the 1st day of December , 2011

JUDGMENT C.N. Ramachandran Nair

, J Heard the learned Senior Counsel for the appellant and the learned Senior Standing counsel for the respondent. The question raised is only with regard to addition of Rs.6,40,000/- towards unexplained cash credit in the assessment of the appellant for the assessment year 2005-06. After hearing both sides and on going through the orders impugned, we do not find any question of law arising from the orders of the Tribunal because this is a case where the appellant failed to establish the cash credit which is a loan availed from his own wife. Consequently, the writ appeal is dismissed. C.N. RAMACHANDRAN NAIR (Judge) K. VINOD CHANDRAN ks(Judge)

: 2 : jma

More judgments on Section 45

All 1,374 judgments and leading authorities on Section 45 →

Recent GST High Court judgments

Search GST case law →