MRS.CHANDERKALA GOENKA,MUMBAI vs. DCIT CIRCLE-13(2), MUMBAI

Commissioner of Income Tax (Appeals)-55 [the ld. CIT(A)], Mumbai dated 11.02.2014 for Assessment Year 2011-12. In this appeal, the assessee has raised two ground of appeal

The ld. CIT(A) has erred in law and on the facts of the case in sustaining the order of the Assessing Officer assessing capital gain of Rs. 5,75,250/- derived against sale of flats under the head “Business Income” instead of “Capital Gain”.

Brief facts of the case are that the assessee while filing return of income for Assessment Year 2011-12 claimed Capital Gain on account of sale of two flats in Amritsar. The plot of land on which is owned by assessee with other three co-owners and the assessee share is 25%. The assessee claimed that the property was purchased in the Assessment Year 2000-01. The property was developed during the Assessment Year 2007-08 and 16 flats were constructed. Out of these 16 flats was one flat was sold in Assessment Year 2010-11 by one of the co-owner and two flats were sold by assessee in Assessment Year 2011-12. The assessee calculated the index cost of acquisition and after subtracting/deducting it from sale of consideration, the assessee calculated / worked out Capital Gain and offered for taxation. The Assessing Officer treated the said gain in the nature of trade and treated the same as ‘Business Income’. On appeal before the ld. CIT(A), the action of Assessing Officer was upheld. Thus, aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us.

We have heard the submission of ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the 2 Mum 2018-Mrs. Chanderkala Goenka revenue and perused the material available on record. The ld. AR of the assessee submits that the assessee is 72 years old lady. The main source of income of assessee is from share of profit from the partnership firm, M/s Ramanand Kidarnath International Mumbai, which is dealing in Dyes and chemicals. The assessee acquired a piece of land in Assessment Year 2000-01 along with Purushottam Goenka, Ravi Goenka HUF and Angira Goenka. The assessee developed the said land in the Assessment Year 2004-05 to 2006-07. The assessee along with other co-owner constructed 16 flats over the said land. Out of which, the co-owner of sold 1 flat in Assessment Year 2010-11 and offered Capital Gain for taxation. The Capital Gain was accepted relevant to Assessment Year 2011-12, the assessee sold two flat during the relevant period under consideration.

The assessee has not borrowed any fund for purchase and development of any property. The assessee has not incurred any administrative or advertisement expenses for sale of these flats. The said property has been rented out and rental income was offered under the head “Income from House Property”. One of the co-owner namely Ravi Goenka HUF also offered same Capital Gain in Assessment Year 202-11 and was accepted by revenue, copy of which filed on record at page no. 35 & 36 of Paper Book. In support of her submission, the ld. AR of the ITA No. 2411 Mum 2018-Mrs. Chanderkala Goenka assessee further relied upon the decision Tribunal in ACIT vs. Narendra J. Bhimani (169 ITD 245 (Rajkot Trib.), ITO vs. Mrs. Lilavati M. Dhabaria in ITA No. 6070 & 6144/Mum/2004 dated 27.07.2007, decision of Hon’ble Delhi High Court in CIT vs. R.V.

On the other hand, the ld. DR for the revenue supported the order of authorities below. The assessee and her co-owner are selling the flat constructed by them on by one. The activities undertaken by assessee are business activity.

We have considered the rival submission of the parties and have gone through the orders of authorities below. We have noted that in the return of income, the assessee offered Capital Gain on sale of two flats in Amritsar. The Assessing Officer asked the assessee as to why the gain earned by assessee should not be assessed as ‘Business Income’.

We have seen the assessment order of Ravi Goenka (HUF) passed under section 143(3) dated 20.03.2013 by ITO 13(2)(3), wherein income from ‘Capital Gain’ is accepted by revenue. The co-ordinate bench of Rajkot Tribunal in ACIT vs. Narendra J. Bhimani (supra) held that where assessee sold its land held for more than 60 years in small plots as required by end users and sale consideration was not Mum 2018-Mrs. Chanderkala Goenka ploughed back in land, investment, gains on sale of these plots was to be treated as capital gains. In ITO vs. Mrs. Lilavati M. Dhabaria (supra) on similar set of fact allowed the capital gain on sale of flat.

The Hon’ble Delhi High Court in CIT vs. R.V. Gupta (supra) held that dismissing the appeal, that both the authorities had found that the assessee was in service; that no change in the character of the said plot had been effected from the year 1971 to 1989; that there was no material on record from which it could be said that the assessee ever had the intention to exploit the plot as a commercial venture. There was no ground to interfere with the concurrent findings of the Commissioner of Income-tax (Appeals) and the Tribunal. No substantial question of law arose from the order of the Tribunal. The Hon’ble Delhi High Court in CIT vs. B.K. Bhaumik (supra) held that when assessee did not enter into any adventure in nature of trade, the gain earned on sale of asset would give rise to the capital gain.

Considering the above factual and legal discussion, we are of the view that the assessee is not engaged in any systemic activities for sale and purchase of property or any activities which may give rise to the Assessing Officer to treat the gain on sale of a flat as a Business Income. Therefore, respectfully following the decision of co-ordinate ITA No. 2411 Mum 2018-Mrs. Chanderkala Goenka bench of Tribunal and the decisions of Hon’ble Delhi High Court, the ground of appeal raised by assessee is allowed.

In the result, appeal filed by assessee is allowed.