S.MMOHAMMED ABBAS,COIMBATORE vs. ACIT, COIMBATORE

This appeal of the assessee is directed against the order of the Commissioner of Income Tax(Appeals)-2, Coimbatore dated 30.01.2015 and pertains to assessment year 2011-12.

Shri S.Sridhar, learned counsel for the assesse, submitted that the assessee converted the land into housing plots and sold it to various persons. According to the counsel, the very same land was the subject of wealth tax assessment. The land was treated as capital asset by the assesse. Placing reliance on the judgement of Madras High Court in CIT vs. A. Mohammed Mohideen (1989) 176 ITR 393, the learned counsel for the assessee submitted that when the owner of the land developed the land and converted into house sites with a view to get a better price, it could hardly be said that the transaction is anything more than realization of capital investment or conversion of one form of asset into another. Therefore, both the lower authorities are not justified in taking the profit on sale of land as business. On a query from the Bench, whether the assessee has converted the land into housing plots only during the year under consideration or it is a regular business of the assesse, the learned counsel submitted that fact is not coming out of the records.

On the contrary, Ms. Kumudha, learned DR submitted that the assessee engaged in the real estate business. The assessee converted the land into housing plots and sold to various persons, therefore the transaction of the assessee was in the nature of an adventure in the nature of trade. Hence, the profit on sale of land has to be necessarily treated under the head ‘business income’. The learned DR further submitted that it is not known whether the assessee has converted any another land into housing plots in the earlier assessment years or not.

We have considered the rival submissions on either side and perused the relevant materials available on record. The assessee admittedly converted the land into housing sites and sold to various persons during the year under consideration. It is not known whether the assesse is in the habit of dividing the land into housing plots in the earlier assessment years. Therefore, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer. Accordingly both the orders of the authorities below are set aside and the entire issue is remitted back to the file of the Assessing Officer . The Assessing Officer shall re-examine the matter afresh in the light of the any other materials that may be filed by the assessee and bring on record whether the assessee has converted any other land, other than the subject matter of land during the year under consideration and in the earlier assessment years as housing plots and thereafter decide the issue in accordance with law in the light of the judgement of the Madras High Court in CIT vs. A.Mohammed Mohideen cited supra.