M/S.MEGA CITY DEVELOPMENT vs. THE ASSISTANT COMMISSIONER

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TCA/799/2017HC Madras25 March 2021Bench: Hon`ble Mr Justice M.DURAISWAMY5 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court did not decide the substantial questions of law framed for consideration. This was due to subsequent developments, specifically the enactment of the Direct Tax Vivad Se Vishwas Act, 2020. The Court was informed by the assessee's counsel that Form-3 had been issued to the assessee under the Vivad Se Vishwas Act. Consequently, the assessee's counsel sought permission to withdraw the appeal. The High Court, in view of this submission, dismissed the Tax Case Appeal as withdrawn. No costs were awarded. The connected miscellaneous petition was also closed. The specific findings of the ITAT on the classification of income as business income or capital gains, and the reasoning behind it, were not addressed by the High Court.

What were the facts?

The assessee, M/s. Mega City Development Corporation, filed an appeal before the High Court of Judicature at Madras against an order dated 21.06.2017 passed by the Income Tax Appellate Tribunal (ITAT), Madras 'D' Bench. The appeal pertains to assessment year 2012-13. The dispute concerns the classification of gains arising from the sale of land. The assessee had offered the gain as long-term capital gains, while the revenue sought to assess it as business income. The High Court was to decide substantial questions of law framed by the assessee. However, the proceedings were impacted by the enactment of the Direct Tax Vivad Se Vishwas Act, 2020.

What were the issues?

1. Whether the Tribunal was correct in law in holding that the gain arising on the sale of land, classified as a capital asset, should be assessed as profit from business under Section 28 of the Income Tax Act, 1961, instead of long-term capital gains offered by the assessee? 2. Whether the transaction of developing land into plots by a "Developer" pursuant to a development agreement, without the assessee itself undertaking the plotting, constitutes an adventure in the nature of trade, and thus, the income derived therefrom should be assessed as business income rather than long-term capital gains? Assessee's Contention: The assessee argued that the gain arising from the sale of land, which was held as a capital asset, should be treated as long-term capital gains. The assessee also contended that the transaction of developing land into plots through a developer, under a development agreement, does not amount to an adventure in the nature of trade and the income should not be assessed as business income. Revenue's Contention: The revenue contended that the gain should be assessed as business income, not long-term capital gains. The revenue's arguments are not explicitly detailed in the provided text, but their stance is implied by the Tribunal's order being challenged.

Which sections of the Income-tax Act were involved?

Section 28,Section 260A

AI-generated summary — verify with the full judgment below

Tax Case Appeal No.799 of 2017 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 25.03.2021 CORAM THE HON'BLE MR.JUSTICE M. DURAISWAMY AND THE HON'BLE MRS.JUSTICE T.V. THAMILSELVI Tax Case Appeal No.799 of 2017 and C.M.P.No.20021 of 2017 M/s.Mega City Development Corporation, 10 & 11, Dr.Radhakrishnan Salai, Chennai City Centre, 4th Floor, Mylapore, Chennai – 600 004. ... Appellant Vs.

The Assistant Commissioner of Income Tax (OSD), Corporate Range – 5, Chennai – 600 034. ... Respondent

Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras "D" Bench, dated 21.06.2017 passed in I.T.A.No.3255/Mds/2016. For Appellant : Mr.R.Venkatanarayanan For Respondent : Mr.T.Ravi Kumar, Senior Standing Counsel Page 1/5 https://www.mhc.tn.gov.in/judis/ Tax Case Appeal No.799 of 2017 J U D G M E N T (Delivered by M.DURAISWAMY, J.) This appeal filed by the assessee under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity), is directed against the order dated 21.06.2017 passed by the Income Tax Appellate Tribunal, Madras "D" Bench, ('the Tribunal' for brevity) in I.T.A.No 3255/Mds/2016 for the assessment year 2012-13. 2.The appellant has raised the following Substantial Questions of Law in the grounds of appeal: “1)Whether the Tribunal was right in law in holding that the gain arising on the sale of land which was held a capital asset should be assessed as profit from business in terms of Sec.28 of the Act as against long term capital gains offered by the assessee? 2)Whether the transaction of developing the land into the plots by a “Developer” pursuant to a development agreement without the assessee itself plotting it out would amount to adventure in the nature of trade and income therefrom should be assessed as business income and not as long term capital gains?” Page 2/5 https://www.mhc.tn.gov.in/judis/ Tax Case Appeal No.799 of 2017 3.We have heard Mr.R.Venkatanarayanan, learned counsel for the appellant/assessee and Mr.T.Ravi Kumar, learned Senior Standing Counsel for the respondent/Revenue. 4.It may not be necessary for this Court to decide the Substantial Questions of Law framed for consideration on account of certain subsequent developments. The Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3 of 2020) to provide for resolution of disputed tax and for matters connected therewith or incidental thereto. The Act of the Parliament received the assent of the President on 17th March 2020 and published in the Gazette of India on 17th March 2020. 5.We are informed by the learned counsel for the appellant/ assessee that the assessee had already been issued with Form – 3 on 14.12.2020 and the learned counsel for the appellant seeks permission of this Court to withdraw the appeal. Page 3/5 https://www.mhc.tn.gov.in/judis/ Tax Case Appeal No.799 of 2017 6.In view of the submission made by the learned counsel for the appellant, the Tax Case Appeal stands dismissed as withdrawn. No costs. Consequently, the connected miscellaneous petition is closed. [M.D., J.] [T.V.T.S., J.] Index : Yes/No 25.03.2021

Internet : Yes

va To 1. Income Tax Appellate Tribunal, Madras "D" Bench 2. The Assistant Commissioner of Income Tax (OSD), Corporate Range – 5, Chennai – 600 034. Page 4/5 https://www.mhc.tn.gov.in/judis/ Tax Case Appeal No.799 of 2017 M. DURAISWAMY, J. and T.V. THAMILSELVI, J. va Tax Case Appeal No.799 of 2017 and C.M.P.No.20021 of 2017

25.03.2021 Page 5/5 https://www.mhc.tn.gov.in/judis/

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