N.MOHAMMED YAKUB,CHENNAI vs. ITO, CHENNAI

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

This appeal of the assessee is directed against the order of the CIT(A) -10, Chennai dated 28.01.2016 and pertains to Assessment Year 2007-08.

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leather. The assessee has also sold the leather in the domestic markets. For

the purpose of expansion of business, the assessee purchased 74 cents of

land in Survey No.22, Nemilicherry Village, Pallavaram Municipality, Chennai.

The assessee sold the land during the year under consideration. In order to

overcome the financial crisis, the land was sold for Rs.28,05,000/-. The

resultant profit on sale of the land was offered for taxation under the head

income from business. However, the assessing officer assessed the profit on

sale of the land as Short Term Capital Gain by applying the provisions of

Section 50C of the Act. The CIT(A) called for a remand report from the

Assessing Officer. The Assessing Officer during the remand proceedings found

that there was inconsistency in the assessee’s claim regarding the usage of the

land. The assessee has also claimed that 74 cents of land purchased by the

assessee was a vacant agricultural land. The learned representative for the

assessee could not produce any material. On the basis of the so called remand

report filed by the Assessing Officer, the CIT(A) refused to admit the additional

material filed by the assessee. The CIT(A) confirmed the order of the Assessing

Officer holding that the land in question is a capital asset. The claim of the

assessee that it is a agricultural land was not considered by the CIT(A).

Referring to the order of the CIT(A), the learned representative for the

assessee submitted that the CIT(A) admitted that the assessee has purchased

the agricultural land. However, he found that the agricultural land was kept for

commercial purpose. According to the learned representative for the assessee,

the CIT(A) find that it is an agricultural land and the land was not used for any

commercial purpose even though there was an intention to use the same for

3 I.T.A. No.852/Mds//2016

commercial purpose. The CIT(A) is not justified in confirming the order of the

Assessing Officer.

representative submitted that the assessee’s claim that the land in question

was a depreciable business asset, therefore, the profit on sale of the land has

to be assessed as ‘business profit’. Referring to the order of the CIT (A), the

learned department representative submitted that Section 41(5) of the Income

Tax Act refers to profit and gain arising from transfer of capital asset. Since

capital asset was transferred, the CIT (A) found that the profit has to be

assessed as ‘capital gain’. Therefore, the provision of Section 50C is squarely

applicable.

perused the material available on record. The assessee admittedly engaged in

the business of export of leathers and also sale of leather in the domestic

market. It is not the case of the assessee that he is engaged in the business of

real estate. Initially, the assessee purchased the land for expansion of his

leather business. Therefore, the land purchased by the assessee is a capital

asset. It is not the stock in trade of the assessee. The assessee might have

intended to carry on his business by using the land. Due to financial crisis, the

assessee was forced to sell the land during the year under consideration.

Therefore, this Tribunal is of the considered opinion that when the land was

purchased as a capital asset, the profit on sale of such land has to be treated

4 I.T.A. No.852/Mds//2016

as capital gain. The matter would be standing in different footing if the assessee treated the land in question as a stock in trade. As observed earlier, it is not the case of the assessee that the land in question is a stock in trade. Therefore, for the purpose of computing the capital gain, the provisions of Section 50C would come into operation.

Order pronounced on 06th September, 2016 at Chennai.

Sd/- Sd/- (ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन) (A. Mohan Alankamony) (N.R.S. Ganesan) लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member

चे�नई/Chennai, �दनांक/Dated, the 6th September, 2016. sp. आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त (अपील)/CIT(A) 4. आयकर आयु�त/CIT, 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.