P.A. IBRAHIM vs. CIT, BANGALORE

ITA 195/B/14 is an appeal for the A.Y. 2008-09 by the assessee and WTA Nos. 1 & 2/B/14 are appeals for the A.Ys. 2006-07 & 2007-08 by the Revenue. All these appeals are directed against the common order dated 25.11.2013 of the CIT(Appeals)-IV, Bangalore.

The facts and circumstances under which these appeals arise for consideration are as follows. The assessee is an individual. He is a non- resident. He owned 6.97 acres of land at Chellaghatta, Varthur Hobli, Bangalore [hereinafter referred to as the "Chellaghatta property"]. He sold this property by a registered sale deed dated 12.9.2007. He offered to tax long term capital gains on sale of this property in the return of income filed for the A.Y. 2008-09. In the proceedings concluded by the AO u/s. 143(3) r.w.s. 263 of the Act, the question that arose for consideration was as to whether income on sale of Chellaghatta property was to be assessed as business income or as long term capital gains. The AO came to the conclusion that Chellaghatta property was always treated as stock-in-trade of business carried on by the assessee in the books of account and sale of such land and gain arising therefrom will give rise to income under the head 'income from business'. In coming to the above conclusion, the Revenue authorities also took note of the fact that the property was declared as stock-in-trade of business carried on by the assessee and for & WTA Nos.1 & 2/Bang/14 Page 3 of 6 that reason, was not treated as part of taxable wealth in the return of wealth tax returns filed by the assessee.

As far as proceedings under the Wealth-tax Act, 1957 are concerned, the assessee did not declare the Chellaghatta property as part of the taxable wealth as it was treated by him as stock-in-trade. For the A.Ys. 2006-07 & 2007-08, the assessee filed return of wealth in which Chellaghatta property was not offered to tax as part of net wealth. Proceedings u/s. 16(1) r.w.s. 17 of the Wealth-tax Act, 1957 were initiated against the assessee for the aforesaid assessment years. In response to the notices u/s. 17 of the Wealth-tax Act, the assessee filed returns of wealth in which Chellaghatta property was offered to tax as part of taxable wealth of assessee. The assessee, however, did not declare sale consideration of Rs.30 crores received by him, but declared only the purchase cost of the said property at Rs.1,79,67,295.

In the proceedings concluded u/s. 16(3) of the Wealth-tax Act, the WTO adopted the value of land of Chellaghatta property at Rs.24,79,00,000 for A.Y. 2006-07 & Rs.27,27,00,000 for the A.Y. 2007-08. The aforesaid values were arrived at by the WTO in the following manner:-

Aggrieved by the orders of assessment both under the Income-tax Act, 1961 treating the gain on sale of Chellaghatta property as giving rise to income from business; and adopting the value of Chellaghatta land by the process of reverse working from the sale consideration of Rs.30 crores for the purpose of determining its value to be included in the net wealth in the Wealth-tax proceedings, the assessee preferred appeals before the Commissioner (Appeals).

The income-tax appeal as well as wealth-tax appeals were heard together by CIT(Appeals). As far as income-tax appeal is concerned, the CIT(A) concurred with the view of the AO and held that Chellaghatta property was held as stock-in-trade of business carried on by the assessee and therefore gain on sale of aforesaid property gives rise to income from & WTA Nos.1 & 2/Bang/14 Page 5 of 6 business. As far as wealth-tax appeals are concerned, the CIT(A) came to the conclusion that since the property has been held to be stock-in-trade of the business of the assessee in income-tax proceedings, there was no question of including the property as taxable wealth and accordingly the assessment by including the value of property for the purpose of net wealth in the wealth-tax proceedings, and as such wealth-tax assessments were cancelled/annulled by the CIT(Appeals).

Aggrieved by the order of CIT(A) holding that Chellaghatta property is part of stock-in-trade of business of the assessee and the gain on sale of such property has to be assessed as income from business in A.Y. 2008- 09, the assessee has preferred appeal ITA No.195/B/14. Aggrieved by the order of CIT(A) holding that Chellaghatta property is stock-in-trade and therefore the same cannot form part of taxable wealth of the assessee in wealth-tax proceedings for A.Ys. 2006-07 & 2007-08, the Revenue has preferred wealth-tax appeals before the Tribunal.

At the time of hearing of the appeals, the assessee has filed a memo which reads as follows:-

In view of the aforesaid memo filed by the assessee, the appeal by the assessee in is dismissed as not pressed. & WTA Nos.1 & 2/Bang/14 Page 6 of 6 10. In view of the fact that the findings of the ld. CIT(Appeals) in income-tax proceedings that Chellaghatta property is held as stock-in-trade by the assessee and since that finding has now become final, Chellaghatta property cannot be considered as forming part of net wealth of the assessee. We hold accordingly. As such, the wealth-tax appeals by the Revenue are also dismissed.