PRINCIPAL COMMISSIONER OF IN vs. M/S MANGAL TIRTH ESTATES LTD

T.C.A.No.898 of 2019 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 15.11.2019 CORAM : THE HONOURABLE MR.JUSTICE N.KIRUBAKARAN and THE HONOURABLE MR.JUSTICE P.VELMURUGAN T.C.A.No.898 of 2019 Principal Commissioner of Income Tax 4, No.121, Nungambakkam High Road, Chennai 600 034.

... Appellant Vs M/s.Mangal Tirth Estates Ltd., Spencer Plaza, 769, Anna Salai, Chennai - 600 002. PAN: AAACM 4614 R.

...Respondent PRAYER: Tax Case Appeal filed under Section 260A of Income Tax Act, 1961 against the order dated 04.02.2015 in ITA No.2690/Mds/2014 on the file of the Income Tax Appellate Tribunal Madras 'A' Bench for the assessment year 2010-2011. For Appellant : Mr.Karthik Ranganathan, Senior Standing Counsel. For Respondent : Mr.N.V.Balaji

J U D G M E N T 1/6 http://www.judis.nic.in T.C.A.No.898 of 2019 (Order of the Court was delivered by N.KIRUBAKARAN, J) The assessee who is the respondent herein, is engaged in the business of property developer and had constructed some shops at 'Spencer Plaza', Mount Road, Chennai. Upto the year ending 31.03.2003, all the shops of the assessee were shown as stock-in-trade, i.e., inventories. However, in the year ending 31.03.2004 relevant to the assessment year 2004-05, the assessee treated certain shops as fixed assets, by passing a Board Resolution. 2.During this present assessment year 2009-10, the assessee sold the shops which were converted into capital asset and offered capital gains from such sale (long term capital gains) relying that conversion of property from one form to another is allowed under Section 45(2) of the Income Tax Act. The Assessing Officer held that the IT act allows only conversion from 'capital asset' to 'stock in trade' and not vice versa. Since something which is not provided in the IT Act cannot be imagined and treated the income arising from sale of those shops as 'business income'. 3. Aggrieved by the assessment order, the assessee filed an 2/6 http://www.judis.nic.in T.C.A.No.898 of 2019 appeal before the Commissioner of Income Tax (Appeals). The CIT(A) confirmed the order of Assessing Officer and dismissed the appeal of the assessee. 4. Aggrieved by the appellate order, the Assessee filed an appeal before the Income Tax Appellate Tribunal. The Tribunal accepted the plea of the assessee, by holding that income from sale that there is nothing in law to prevent the assessee from converting its stock- in-trade into fixed assets and that it was purely a decision of management to suit the requirements of the business of the assess and thereby allowed the assessee appeal. Against the order of the Income Tax Appellate Tribunal, the present appeal has been filed. 5.This appeal is admitted on the following substantial questions of law; “1.Whether the ITAT was justified in holding that the income received by the assessee from the sale of certain shops is assessable as 'long term capital gains' and not as 'business income', thereby, allowing the assessee to pay lesser tax at 20% instead of 30%? 3/6 http://www.judis.nic.in T.C.A.No.898 of 2019 2.Whether the ITAT was justified in deciding that income from sale of certain shops is assessable as 'long term capital gains', particularly, when the action of converting only certain shops as fixed assets is not genuine?"

6.Mr.Karthik Ranganathan, learned Senior Standing Counsel for the appellant would submit that the tax effect in this case is less than Rs.1 crore and is covered by Circular No.17/2019 dated 08.08.2019 issued by the Director, Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India, Delhi. As per the said circular, the monetary limit to file an appeal before the High Court is fixed at Rs.1 crore. In this case, tax effect is less than Rs.1 crore and therefore, the case has to be dismissed. 7.This Court perused the circular dated 08.08.2019 and Paragraph No.2 of the Circular, which prescribes monetary limit for filing appeal. Paragraph No.2 is usefully extracted as follows: "2.As a step towards further management of 4/6 http://www.judis.nic.in T.C.A.No.898 of 2019 litigation, it has been decided by the Board that monetary limits for filing of appeals in income-tax cases be enhanced further through amendment in Para 3 of the Circular mentioned above and accordingly, the table for monetary limits specified in Para 3 of the Circular shall read as follows: S.No. Appeals / SLPs in Income-tax matters Monetary Limit (Rs.) 1. Before Appeallate Tribunal 50,00,000 2. Before High Court 1,00,00,000 3. Before Supreme Court 2,00,00,000" 8.In view of the submissions made by the learned counsel appearing on behalf of the appellant and also in view of the Circular No.17/2019 dated 08.08.2019 issued by the Director, Central Board of Direct Taxes, Delhi, the Tax Case Appeal is dismissed on account of tax effect. However, the substantial questions of law framed is left open. In the event the tax effect is above the limit fixed in the said circular, liberty is granted to the Revenue to make a mention to this Court to restore the N.KIRUBAKARAN, J. and 5/6 http://www.judis.nic.in T.C.A.No.898 of 2019 P.VELMURUGAN, J. ay appeal to be heard and decided on merits. No costs. (N.K.K.,J.) (P.V.,J.) 15.11.2019 ay To Principal Commissioner of Income Tax 4, No.121, Nungambakkam High Road, Chennai 600 034.

T.C.A.No.898 of 2019

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