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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI D. KARUNAKARA RAO, AM
आदेश / ORDER
PER D. KARUNAKARA RAO, AM
This appeal filed by the assessee is directed against the order of the CIT(Appeals), Pune-5, Pune dated 13.10.2017 for the assessment year 2010- 11.
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Briefly stated relevant facts include that the assessee is a civil and
labour contractor and is engaged in the business of purchase and sale of
land. The assessee entered into a Memorandum of Understanding (MOU)
with Goka Engg. Company Pvt. Ltd for aggregation and sale of land. There
were many such aggregators named in the MOU. The assessee is one of the
aggregator who acquired the land from farmers. On obtaining the lands, all
the rights on the land stands transferred to the company. As per the
assessee, the land constitutes stock-in-trade and not an investment. No
financial statement was maintained by the assessee in this regard. During
the year, the assessee entered into various transactions regarding purchase
and sale of land by the assessee. As per the assessee these sale transactions
constitutes business transaction. During assessment proceedings, the
Assessing Officer disturbed the claim of the assessee and treated the
transaction as ‘capital investment’ and invoked the provision of section 50C
of the Act. The Assessing Officer computed the assessed income of assessee
at Rs. 5,53,240/- as against the return of income of Rs.91,952/-.
Aggrieved with the assessment order, the assessee filed appeal before
the CIT(Appeals). The CIT(Appeals) confirmed the findings of the Assessing
Officer on this issue and dismissed the appeal of the assessee.
Aggrieved with the order of the Assessing Officer and the CIT(Appeals),
the assessee is in appeal before the Tribunal by raising following grounds:
“i) The learned Assessing Officer erred in taxing income under the head ‘profit & gains from business as income from Capital Gain. ii) The learned Assessing Officer ought to have considered profit on sale of lands as business income. iii) The learned Assessing Officer failed to take into account that the agricultural lands sold were business assets of the assessee and not capital assets as claimed in the assessment order.
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iv) The learned Assessing Officer failed to take into account that section 50C was not applicable for sale of business assets. The assessee craves leave to add, amend and delete any of the above grounds of appeal.”
At the outset, Ld. Counsel for the assessee submitted the facts of the
case and mentioned that same transactions were accepted by the Revenue
Authority as stock-in-trade in the case of Shri Madhukar S. Kadu for the
assessment year 2010-11. The Ld. AR submitted that Shri Madhukar S.
Kadu is one of the aggregator for the Goka Engg. Company Pvt. Ltd. The Ld.
A.R. read out the contents of Para 4 and its sub-paras of the assessment
order. Further, the assessee filed the following written submissions providing
that the transaction of sale constitutes a business transaction. The same are
extracted hereunder:
“1. The assessee is land Aggregator as is popularly known in Maharashtra. As Agricultural land cannot be directly purchased by Land developers, they take the services of Land Aggregators. The Process of getting NA Permission is carried out by the real developers and after the land gets NA Permission, the Company acquires the land from Aggregators. The lands were purchased by me but the expense for making land "NA" was done by the Purchaser Company. For the Aggregators, the land is never purchased as investment or as a capital asset but is purchased as Pass through arrangements. As this activity is a regular feature, the income from such activity should be treated as Income from Business and Profession and should not be charged as capital gains. 2. In the case of this assessee also there are many transactions spread over many years and that again supports this is regular activity of income earning which should generally charged as Income from business and Profession. Even the order of AO at para 4 and 5 (page 2) together, one finds multiple transactions. Even CIT(A) also narrates happening of many transactions at Para 4.1 (page 3 and 4). As directed by Hon. Bench, we also submitted copies of various MOU/s in paper book where MOU/s were at Page 2, 20, 46, 63, 78 (onwards) of Paper Book which establishes the fact that the assessee continues this activity on a regular basis and also establishes the fact that the purchases of Land was always for the developers M/s. Goka Engineering Company Pvt Ltd.
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In a way the assessee never intended to keep plots of land as investment or capital asset. 3. It was also pointed out that another aggregator Mr. Madhukar Sadashiv Kadu (who is one of the transaction nO.2 was assessed for the same transaction under the head "Business and profession". As per the direction of Hon. Bench the copy of the assessment order was submitted. 4. The regular books of accounts were not maintained for the reasons that all the sale transactions were with one company only Namely Goka Engineering Company Pvt Ltd. However, the noting were done in a diary. 5. We, therefore, pray that income of the assessee should be charged under the head "Business Income". 6. As a consequence there of an application of S. 50C is not called for and ordinary profit (Actual sale price less cost price) be charged to tax.”
The Ld. DR for the Revenue heavily relied on the orders of the
Assessing Officer and CIT(Appeals).
Both sides heard and perused the orders of the Revenue Authorities on
the limited issue that the transaction undertaken by the assessee with Goka
Engg. Company Pvt. Ltd. falls in the scope of ‘capital gains’ or ‘business
income’. I have also perused the para 4 of the Assessment order of Shri
Madhukar Sadashiv Kadu. For the sake of completeness, the same is
extracted herein below:
“4. After verifying the details submitted, viz., bank statement, copies of memorandum of understanding, sale deed and other details submitted during the course of scrutiny proceedings, the following additions/disallowances are made: a. Income from sale of land: During the period under consideration assessee was dealing in sale & purchase of land. The details of land sold during the period and the profit earned are as under:
Land at Bedgaon : Assessee purchased land at Gat No.67/4 at Village Bedgaon on 12.2.2009 for a total consideration of Rs.2,62,940/- and sold the same to M/s.Goka Engineering Co. Pvt. Ltd., vide MOU dated 12.5.2009 for a total consideration of Rs.3,00,000/- thereby earning a profit of Rs.37,060/-. Land at Sanaswadi: Assessee purchased land at Gat No.54/4 at Village Sanaswadi on 3.2.2009 for a total consideration of Rs.95,100/- and sold the same to M/s. Goka Engineering Co. Pvt. Ltd., vide, MOU dated
5 ITA No.296/PUN/2018 A.Y.2010-11
12.05.2009 for a total consideration of Rs.1,10,000/ - thereby earning a profit of Rs.14,900/-.
Thus, assessee earned a total profit of Rs.51,960/- on sale of lands during the year. The said profit was not offered for taxation in the return of income filed. The A.R vide his letter dated 05.03.2012 submitted that the said income was inadvertently forgotten to include this profit in the return of income filed for the period under consideration. Accordingly, an amount of Rs.51,960/- is added to the total income of the assessee under the head business income. Penalty proceedings u/s.271(1)(c) are initiated separately for concealment of income.”
I have also perused the list of transactions undertaken by the assessee
with Goka Engineering Co. Pvt. Ltd. The assessee undertook the sale
transactions with Goka Engineering Co. Pvt. Ltd. and details are tabulated
as follows:
Sr. MOU Date MOU Amount Gat No. for No. respective purchase 1 15/05/2018 3,53,000 81/10B 81/10F 86/2 58/14 81/10E Total 3,53,000 2. 26/6/2008 1,85,000 80/10 80/13 Total 1,85,000 3 25/5/2008 1,40,000 81/8 81/10D 81/5 57/0 58/9 Total 1,40,000 4. 30/11/2007 2,00,700 87/7B, 81/10A Total 2,00,700
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Total 8,78,700/- (Transaction 2) 5. 5/11/2009 4,20,000 76(2b) ( Transaction- 1)
From the above chart, it is evident from the list of transactions that
the assessee is merely an aggregator and his activities falls in the scope of
business of aggregation for Goka Engineering Co. Pvt. Ltd. I have also
perused the MOU the copy of which are placed at page 2, 3, 21, 46, 47, 63 ,
64, 78 and 79 of the paper book and find, there is regular business
transactions with Goka Engineering Co. Pvt. Ltd.
Further, on the similar facts in the case of Shri Madhukar Sadashiv
Kadu, the Revenue Authorities allowed the claim of assessee by treating the
transaction as ‘business transaction’ and not investment.
Considering the facts and circumstances of the case as well as the
precedent in the case of another aggregator, I am of the view that the claim
of the assessee is fair and reasonable and it does not call for any
interference. Accordingly, the orders of Assessing Officer and CIT(Appeals)
are hereby reversed. The grounds raised by the assessee are allowed.
In the result, appeal of the assessee is allowed. 9.
Order pronounced on 11th day of February, 2019.
Sd/- (डी.क�णाकरा राव/D. Karunakara Rao) लेखा सद�य / ACCOUNTANT MEMBER
पुणे / Pune; �दनांक / Dated : 11th February, 2019. SB
7 ITA No.296/PUN/2018 A.Y.2010-11
आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :
अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals), Pune-5, Pune. 4. The Pr. CIT, Pune-4, Pune. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक-सद�य” ब�च, पुणे / DR, ITAT, “SMC” Bench, Pune. गाड� फ़ाइल / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
�नजी स�चव /Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.
8 ITA No.296/PUN/2018 A.Y.2010-11
Date 1 Draft dictated on 11.02.2019 Sr.PS/PS 2 Draft placed before author 12.02.2019 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order