THE ACIT, CIRCLE-6,, AHMEDABAD vs. SHRI SIKANDARALI KASAMALI QURESHI,, AHMEDABAD

आदेश / O R D E R

PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : This is an appeal by the department against the order of the Commissioner of Income Tax(Appeals)-XI, Ambawadi, Ahmedabad, dated 31/03/2014, in the matter of assessment under section 143(3) of the Income tax Act, 1961 (‘the Act hereinafter’) for the Assessment Year (AY) 2010-11, on the following Grounds: i. The CIT(A) has erred in law and on facts in directing the Assessing Officer to treat the receipt of Rs.1,42,00,000/- as arising out of transfer of capital asset as against the Assessing Officer's finding to treat these receipts as business income.

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 2 - ii. The CIT(A) has further erred in law and on facts in directing the Assessing Officer to treat the receipt of Rs. 1,42,00,000/- as arising out of transfer of capital asset and work out the long term capital gains after allowing the deduction of Rs.40,74,249/- u/s.54F of the Act as against the Assessing Officer's finding to treat the receipts were not from transfer of capital asset and the assessee would not be entitled for deduction u/s.54F of the Act. iii. On the facts and circumstances of the case, the Ld. Commissioner of Income tax (A) ought to have upheld the order of the Assessing Officer. iv. It is, therefore, prayed that the order of the Ld. Commissioner of Income tax (A) may be set-aside and that of the Assessing Officer be restored.

2.2 During the year, the assessee has shown capital gain of Rs.l,40,58,291/- on sale of land bearing Survey No.1134/1, 1134/2, 1135/2 & 3.

2.4 The land at survey No.1134/1 was purchased by Shri Hakimali Kasamali Qureshi, Sikandarali Kasamali Qureshi and other 5 persons

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 3 - from M/s. General Machinery Store on 14/05/2003 for the cost of Rs.10,000/-. As per the registered sale deed No. 892/2010, 1830 sq.mt. of land was sold by Shri Hakimali Kasamali Qureshi, Sikandarali Kasamali Qureshi and other 4 persons to M/s. A. N. Patel Estate Developers Pvt. Ltd. on 30/01/2010 for total sale consideration of Rs.85,00,000/-.

2.5 The land at survey No.1134/2 and 1135/2 & 3 admeasuring 10218.5 sq.mt. originally belonged to Late Champagar Kevalgar. The land was sold to Chhotalal Bhagvanbhai on 21/02/1933. The land was inherited by the successors of late Chhotalal Bhagvanbhai which included Chandrikaben Naranbhai and Kalavati Naranbhai. Thereafter the land was purchased by Shri Shaileshpuri Ishvarpuri Goswami and Bhurabhai Taljabhai Rabari on 04/03/2006 for value of Rs.9,91,146/-.

2.6 An agreement for sale was executed by Shri Sikandarali Kasamali Qureshi and others with Shri Naranbhai Parsotambhai Dalwadi which was registered at Serial No.15734 in the office of Sub-registrar on 11/08/1989. In the agreement for sale it was mentioned that the possession of the land would be given by the sellers of the land to the purchasers of the land after the registration of sale deed or on receipt of total sale value of the land. It was mentioned in the Agreement for sale that the rate of land would be Rs.50/- per sq. yard and thus the value of 11568 sq. yard land was Rs.5,78,400/-. Out of Rs.5,78,400/-, an advance of Rs,2,00,000/- was given at that time. The balance amount was payable

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 4 - by the purchasers of the land. There was no evidence of payment of balance amount to the sellers of the land. Thus, the right in the land was acquired by Shri Sikandarali Kasamaii Qureshi and other after 04/03/2006, i.e. the date of sale of the land. The land was converted into NA land on 07/11/2009 by order of Collector, Ahmedabad. As per fee registered sale deed No.958/2010, the land at survey No.1134/2 and 1135/1, 2 & 3 admeasuring 10218.5 sq.mt. was sold by Shaileshpuri Ishvarpuri Goswami & Bhurabhai Taljabhai Rabari to M/s. A. N. Patel Estate Developers Pvt. Ltd. on 01/02/2010 for total sale consideration of Rs.3,30,33,000/-. In the said transaction Shri Sikandarali Kasamali Qureshi along with other ten family members/relatives were first confirming party and they received Rs.1,50,22,000/-.

2.7 The land sold was Non-Agricultural land. The purpose of converting agriculture land into Non-Agricultural land was to sale the land for construction activity by M/s. A. N. Patel Estate Developers Pvt. Ltd. It was an adventure in the nature of business. Therefore vide letter dated 18/12/2012, the assessee was asked to explain why the sale consideration of Rs. 1,25,00,000/- received by him as confirming party should not be considered as business income.

2.8 In response to the query the assessee has furnished the reply vide letter dated 25/12/2012 which is reproduced as under: “…Assessee is engaged in the business of trading and dismantling of S.T. buses. This land was purchased by the assessee in 1989 and sold in 2010, the holding period is more than 10 years, the purpose of

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 5 - investment is to earn long term profit from the price appreciation. There is no transaction of any purchase of land etc during the year. This is an isolated transaction where the family purchased the property and later on after 10 years it is sold. Intention of the assessee is also to be seen while deciding whether any transaction will fall within the purview of nature of trade or business. During the year under consideration assessee has sold land to M/s. A. N. Patel Estate Developers Pvt. Ltd. Transaction of sale of land is not in line with the assessee business and it is an isolated one. It is not the regular course of activity and therefore it cannot be said in the nature of trade or business. Therefore the transaction is rightly classified by the assessee as long term capital gain…” 2.9 But the reply of the assessee was not tenable in the eyes of the AO for the reason given here-in-below: The facts of the purchase and sale of land bearing survey no.1134/1, 1134/2, 1135/1, 1135/2 and 1135/3 are summarized here-in- below: The land at Survey No.1134/1 was purchased by Shri Hakimlai Kasamli Qureshi, Sikansarali Kasamali Qureshi and other 5 persons from M/s. General Machinery Store on 14/05/2003 for the cost of Rs.10,000/-. As per the registered sale deed No.892/20101 1830 sq mt. of land was sold by Shri Hakimali Kasamali Qureshi, Sikandarali Kasamali Qureshi and other 5 persons to M/s. A. N. Patel Estate Developers Pvt. Ltd. on 30/01/2010 for total sale consideration of Rs.85,00,000/- as under: Sr. Name Receipt No. (Rs.) 1. Sikandarali Kasamali Qureshi 4,00,000/- 6,00,000/-

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 6 - 7,00,000/- 17,00,000/- 2. Hakimali Kasamali Qureshi 4,00,000/- 6,00,000/- 7,00,000/- 17,00,000/- 3. Aazmatali Kasamali Qureshi 4,00,000/- 6,00,000/- 7,00,000/- 17,00,000/- 4. Zulfikarali Kasamali Qureshi 4,00,000/- 6,00,000/- 7,00,000/- 17,00,000/- 5. Samimben Akaramali Qureshi 4,00,000/- 6,00,000/- 7,00,000/- 17,00,000/- Total 85,00,000/-

The land at Survey No.1134/2 and 1135/2 & 3 admeasuring 10218.5 sq.mt. originally belonged to Late Champagar Kevalgar. The land was sold to Chhotalal Bhagvanbhai on 21/02/1933. The land was inherited by the successors of let Chhotalal Bhagvanbhai which included Chandrikaben Naranbhai and Kalavati Naranbhai. Thereafter the land was purchased by Shri Shileshpuri Ishvarpuri Goswami and Bhurabhai Taljabhai Rabari on 04/03/2006 for value of Rs.9,91,146/-.

An agreement for sale was executed by Shri Sikandarali Kasamali Qureshi and others with Shri Naranbhai Parsotambhai Dalwadi which was registered at serial no.15734 in the office of Sub-registrar on 11/08/1989. In the agreement for sale it was mentioned that the

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 7 - possession of the land would be given by the sellers of the land to the purchasers of the land after the registration of sale deed or on receipt of total sale value of the land. It was mentioned in the Agreement for sale that the rate of land would be Rs.50/- per sq. yard and thus the value of 11568 sq. yard land was Rs.5,78,400/-, Out of Rs.5,78,400/-, an advance of Rs.2,00,000/- was given at that time. The balance amount was payable by the purchaser of the land. There was no evidence of payment of balance amount to the sellers of the land. Thus, the right in theland was acquired by Shri Sikandarali Kasamali Qureshi and others after 04/03/2006, i.e. the date of sale of the land. The land was converted into NA land on 07/11/2009 by order of Collector, Ahmedabad vide order No.CB/land-1/NA/SR/574-2009. As per the registered sale deed no.958/2010, the land at survey no.1134/2 and 1135/1, 2 & 3 admeasuring 10218.5 sq.mt. was sold by Shaileshpuri Ishvarpuri Goswami & Bhurabhai Taljabhai Rabari to M/s. A. N. Patel Estate Developers Pvt. Ltd. on 01/02/2010 for total sale consideration of Rs.3,30,33,000/-. In the said transaction Shri Sikandarali Kasamali Qureshi along with other then family members/relatives were first confirming party and they received Rs.1,50,22,000/-. Similarly as per the registered sale deed No.959/2010, the land at Survey No.1134/2 and 1135/2 & 3 admeasuring 10218.5 sq. mt. was sold by Kalavatiben Naranbhai Rabari to M/s. A. N. Patel Estate Developers Pvt. Ltd. on 01/02/2010 for total sale consideration of Rs.3,30,33,000/-. In the said transaction Shri Sikandarali Kasamali Qureshi along with

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 8 - other then family members/relatives were first confirming party and they received Rs.1,50,22,000/-. The following amount was received by Shri Sikandarali Kasamali Qureshi along with other ten family members/relatives as confirming parties: Sr. Name Amount shown Amount No. in Reg. sale shown in Deed No.958 Reg. Sale Deed No.959. 1. Sikandarali Kasamali Qureshi 5,00,000/- 5,00,000/- 10,00,000/- 10,00,000/- 22,50,000/- 22,50,000/- 25,00,000/- 25,00,000/- 62,50,000/- 62,50,000/- 2. Hasamali Kasamali Qureshi 2,50,000/- 2,50,000/- 5,00,000/- 5,00,000/- 1,00,000/- 10,00,000/- 8,50,000/- 17,50,000/- 3. Hakimali Kasamali Qureshi 2,50,000/- 2,50,000/- 5,00,000/- 5,00,000/- 1,00,000/- 10,00,000/- 8,50,000/- 17,50,000/- 4. Samimben Akaramali Qureshi 2,50,000/- 2,50,000/- 2,50,000/- 2,50,000/- 5,00,000/- 5,00,000/- 5. Zulfikarali Kasamali Qureshi 2,50,000/- 2,50,000/- 2,50,000/- 12,50,000/- 12,50,000/- 2,50,000/- 17,50,000/- 17,50,000/- 6. Husenabanu Kasamali Qureshi 2,50,000/- 2,50,000/- 2,50,000/- 2,50,000/- 5,00,000/- 5,00,000/- 7. Tajbanu Ksamali Qureshi 2,50,000/- 2,50,000/- 2,50,000/- 2,50,000/- 5,00,000/- 5,00,000/- 8. Sherbanu Kasamali Qureshi 2,50,000/- 2,50,000/-

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 9 - 2,50,000/- 2,50,000/- 5,00,000/- 5,00,000/- 9. Najmunnisha Ksamali Qureshi 2,50,000/- 2,50,000/- 2,50,000/- 2,50,000/- 5,00,000/- 5,00,000/- 10. Yasmin Kasamali Qureshi 2,50,000/- 2,50,000/- 2,50,000/- 2,50,000/- 5,00,000/- 5,00,000/- 11. Aazamtali Kasamali Qureshi 2,50,000/- 2,50,000/- 2,50,000/- 2,50,000/- 5,00,000/- 5,00,000/- Total 1,50,22,000/- 1,50,22,000/-

The assessee has shown profit/gain from sale of the land under consideration as long term capital gain. The land at Survey No.1134/2 and 1135/1, 2 & 3 admeasuring 10218.5 sq.mt. was sold by Shaileshpuri Ishvarpuri Goswami & Bhurabhai Taljabbhai Rabari to M/s. A. N. Patel Estate Developers Pvt. Ltd. on 01/02/2010 for total sale consideration of Rs.3,30,33,000/-. The land at Survey No.1134/2 and 1135/1, 2 7 3 admeasuring 10218.5 sq.mt. was sold by Kalavatiben Naranbhai Dalwadi to M/s. A. N. Patel Estate Developers Pvt. Ltd. on 01/02/2010 for total sale consideration of Rs.3,30,33,000/-. In both the transactions Shri Sikandarali Ksamali Qureshi along with other ten family members/relatives were first confirming party and they had received Rs.1,50,22,000/- and Rs.1,50,22,000/- as confirming party.

2.11 Various provision of the IT Act makes it clear that the capital gain arises on sale or transfer of capital asset held by the assessee. In this case, the capital asset is land bearing Survey No.1134/1, 1134/2 and 1135/1, 2

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 10 - & 3. The registered sale deed shows that the owner of the land were Shaileshpuri Ishvarpuri Goswami & Bhurabhai Taljabhai Rabari and Kalvatiben Naranbhai Dalwadi respectively. The assessee and his relatives/associates were confirming parties only. When the land was sold to M/s. A. N. Patel Estate Developers Pvt. Ltd. on 01/02/2010, the land was held by Shaileshpuri Ishvarpuri Goswami & Bhurabhai Taljabhai Rabari and Kalavatiben Naranbhai Dalwadi respectively. It means the capital asset being land bearing Survey No.1134/1, 1134/2 and 1135/1, 2 & 3 was never held by Sikandarali Qureshi and his relatives/associates. Sikandarali Qureshi and his relatives/associates were confirming party.

2.12 As per AO, Shri Sikandarali Kasamali Qureshi & others have acted as confirming party in whole transaction. Here it will be proper to understand the role of confirming party in sale deed of land transaction. A conveyance is a document under which properly and other rights are transferred from one person to another. In a typical transfer, there are obviously at least two parties, namely, the transferor and the transferee. Depending on the nature of the document and the issues that one seeks to address, further parties may be necessary to effectuate the transfer. A Confirming Party is one such party.

2.13 The Confirming Party is brought in to make sure that the interest of the person, usually the transferee, is properly established beyond reasonable doubts. By doing this, the interest of parties to future

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 11 - transactions is also secured. It is in the nature of corroboration or confirmation of certain facts, which are usually recited in the document itself. The Confirming Party in effect, gives an implied assurance that the contentions, usually of the transferor and at times of others or parties to document are true and correct and is normally stopped from questioning the same at a later date. The confirming party usually does not receive any consideration though at times, specific amounts are paid out of the consideration, as per the instructions of the party concerned. The Confirming Party is rather obliged or comes forward to be bound by the terms of the document owning to a peculiar position as relating to the property or other parties to the document.

2.14 As per AO, it is evident that receipt of Rs.1,50,22,000/- and Rs.1,50,22,000/- by Sikandarali Qureshi & others as confirming parties on sale of land bearing Survey No.1134/1, 1134/2, 1135/1, 1135/2 and 1135/3 by Shaileshpuri Ishvarpuri Goswami & Bhurabhai Taljabhai Rabari and Kalavatiben Naranbhai Dalwadi respectively to M/s. A. N. Patel Estate Developers Pvt. Ltd. is not capital gain but it is a business income. Therefore, total receipts of Rs.3,00,44,000/- of Sikandarali Qureshi & others are treated and assessed as business income and Profit of Rs.1,42,00,000/- earned by the assessee in both the transaction is added as business income in the computation of total income.

2.15 Disallowance of exemption u/s.54F of the Act: During the year, Sikandarali Qureshi had received Rs.1,25,00,000/- as confirming party in

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 12 -

respect of sale of land at Survey No.1134/2 and 1135/2 & 1135/3 by Shaileshpuri Ishvarpuri Goswami & Bhurabhai Taljabhai Rabari and Kalavatiben Naranbhai Daiwadi respectively to M/s. A. N. Patel Estate Developers Pvt. Ltd. Sikandarali Qurehsi has worked out capital gain transactions as under: Land Survey Date of Purchase Date of Sale value Gain Indexed No. Purchas cost sale Gain e 1134/2, 01/04/1 20,000 31/03/2010 1,25,00,000 1,24,80,000 1,24,21,491 1135/2&3 988 1134/1 30/04/1 10,000 31/03/2010 17,00,000 16,90,000 16,36,800 978 Total 30,000 1,42,00,000 1,41,70,000 1,40,58,291

Exemption u/s.54F of the Act was worked out as under: Investment in residential house = Rs.41,00,000/- Exemption u/s.54F = Capital gain × investment Net sale consideration = Rs.1,24,21,491 × Rs.41,00,000/- Rs.1,25,00,000/-

= Rs.40,74,249/- According to the assessee has claimed exemption of Rs.40,74,249/- u/s.54F of the Act.

The assessee has claimed exemption u/s.54F of the Act. Section 54F of the IT Act reads as under:

“……(1) Subject to the provisions of sub-section (4), where in the case of an assessee being an individual or a Hindu, undivided family, the capital gain arises from the transfer of any long term capital asset, not being a residential house (hereafter in this section referred to as the

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 13 - original asset), and the assessee has, within a period of one year before or two after the date on which the transfer took place purchased, or has within a period of three years after that date constructed a residential house (hereafter in this section referred to as the new asset), the capital gain Shall be dealt with in .accordance with the following provisions of this section......” Plain reading of section.54F of the I.T. Act suggests that exemption Under that section is availed when the assessee transfer long term capital asset. From the discussion made in preceding para 3.2, it is evident that the assessee neither owned the asset nor has any right in land bearing survey no. 1134/2 and 1135/2&3. Therefore, there was no transfer of long term capital asset by the assessee. The assessee does not qualify the basic condition for claiming exemption u/s.54F of the Act. Moreover, as discussed in earlier paras, the receipt of Rs.1,25,00,000/- has been held as business income, the assessee is not entitled for exemption u/s.54F of the Act. Accordingly, exemption of Rs.40,74,249/- u/s 54F of the Act claimed by the assessee is disallowed. The assessee has made wrong claim of the exemption u/s 56F of the Act. Penalty proceeding are initiated for furnishing inaccurate particulars of income.

Disallowance of exemption u/s.54F Rs. 40,74,249/-

2.16 Disallowance of commission u/s.40(a)(ia) of the Act: The assessee is engaged in the business of trading and dismantling of ST Buses. During the year, the assessee has made purchases of scrap buses from Gujarat State Road Transport Corporation. During the assessment proceedings the assessee has submitted the evidences of major purchases from Gujarat State Road Transport Corporation. The assessee in Para-8 of the submission dated 25/12/2012 has explained that the assessee had made purchases of scrap buses from Gujarat State Road Transport

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 14 - Corporation through the commission agent MSTC Ltd. purchase amount was paid to GSRTC and the commission was paid to MSTC Ltd. by the assessee. In respect of payment of commission of MSTC Ltd., TDS was required to be deducted as per the provisions of Section 194H of the Act. However, the assessee did not make TDS on commission payment to MSTC Ltd. therefore, vide letter dated 14/02/2013 the assessee was asked to explain why the commission payment to MSTC Ltd should not be disallowed u/s.40(a)(ia) of the Act.

2.17 In response to the query the assessee has furnished the reply vide letter dated 19/02/2013 which is as under:

“….. In this regards it is submitted that the assessee is not paying any commission to the MSTC Ltd MSTC is an agency appointed by GSRTC and assists GSRTC in auctioning and biding of Tenders for sale of scrap vehicles. The whole transaction of tender and biding is as under: i. GSRTC informs the MSTC about the scrap vehicles to be auctioned along with reserve price for auction bids. ii. MSTC does auction on behalf of GSTRC and informs GSRTC about the best bid/price discovery. iii. GSRTC collects bid price and also TCS & VAT amount upfront from bidders iv. GSRTC pays commission directly to MSTC Limited. Since the assessee has not paid pay commission to MSTC Limited, it is had also not debited or claim such expenditure. Please also note that firstly there is no claim of such commission in the computation or profit and loss account therefore there is no cause for disallowance. Therefore, there is no question of any disallowance of commission expense u/s.40(a)(ia) of the act.”

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 15 -

During the year, the assessee has made purchases of scrap buses from Gujarat State Road Transport Corporaton. During the assessment proceedings the assessee has submitted the evidences of major purchases from Gujarat State Road Transport Corporation. The evidences suggest that the assessee applied for tender to purchase scrap buses from Gujarat State Road Transport Corporation. After qualification of the tender of the assessee an offer of acceptance of contract was sent by Gujarat State Road Transport Corporation. The assessee had to make payment of stipulated amount mentioned in the contract and then delivery order was given to the assessee to remove scraped buses. The details of major offer of acceptance of contract and subsequent delivery taken by the assessee is as under: Offer of acceptance of contract Delivery taken Date Ref Lot Value GSRTC MSTC Date Ref Lot Value GSRTC MSTC No. Size Payable Payable No. Size paid Paid 16/09/09 3530 1 lot 569886 2436690 58247 05/11/09 3530 1 lot 569136 840953 12161 1 lot 3530 1087012 20102 3530 942055 13/11/09 1 lot 940816 1 lot 3530 25984 3530 343095 18/11/09 1 lot 342644 1 lot 18/11/09 3530 3530 429159 1 lot 428595 1 lot 18/11/09 3530 3530 445442 1 lot 444856 1 lot 29/10/09 4184 650556 9660630 231246 08/12/09 4184 1 lot 650556 1 lot 11/12/09 4184 650556 4184 1 lot 650556 581504 13900 1 lot 15/12/09 4184 807359 4184 1 lot 807359 721662 17251 1 lot 19/12/09 4184 784129 4184 1 lot 784129 699865 16754 1 lot 16/12/09 4184 667282 4184 1 lot 667282 596454 14258 1 lot 4184 1097153 18/01/10 4184 1 lot 1097153 986660 23443 1 lot 4184 787265 11/01/10 4184 1 lot 791336 706735 15821 1 lot 4184 923509 05/01/10 4184 1 lot 923509 827804 19732 1 lot 4184 794001 13/01/10 4184 1 lot 794001 713451 16965 1 lot 4184 756137 08/01/10 4184 1 lot 756137 1 lot 4184 701888 08/01/10 4184 1 lot 700985 1307080 31133 1 lot 4184 793421 01/01/10 4184 1 lot 795748 710486 16593 1 lot 4184 628604 31/12/09 4184 1 lot 630308 561053 13431 1 lot 4184 781806 31/12/09 1704 23/12/09 4184 1 lot 782510 697792 16705 23/12/09 704 1 lot 18/12/09 5545 794466 2991763 71620 11/02/10 5545 1 lot 794466 2003806 17969 1 lot 802016 11/02/10 5545 1 lot 802016 1 lot 648582 11/02/10 5545 1 lot 648582 1 lot 662054 17/02/10 5545 1 lot 662054 590908 14146 1 lot 444855 06/02/10 5545 1 lot 444855 397050 9505 1 lot 18/01/10 6302 866092 1387426 33215 18/03/10 6302 1 lot 866092 773019 33215 1 lot 688383 18/03/10 688383 614407 18459751 16476509 394328 18464064 15420109 857793

Analysis of total value of purchases, amount paid to GSRTC and amount paid to MSTC reveals that MSTC has been paid @2.33% of total value of purchases. This is evident from the fact that total value of purchases shown in letter of acceptance of offer for contract dated 29/10/2009 having reference no.4184 is Rs.98,91,876/-. Out of

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 16 -

Rs.98,91,876/- amount payable to GSRTC is Rs.96,60,630/- and to MSTC is Rs.2,31,246/-. MSTC has been paid such amount. The ratio of payment made to MSTC to total value of purchase comes to 2.33%.

The amount reflected in the delivery order have been verified with purchase register. The comparison of both is as under:

Purchase amount As per delivery order Date Purchase TCS Total Date Ref Value GSRTC MSTC - including No. paid VAT 05/11/09 563501 6385 569886 05/11/09 3530 569136 12161 -750 3530 10/11/09 737512 8352 745864 10/11/09 745864 508725 0 3530 13/11/09 931502 10554 942056 13/11/09 940816 840953 20102 -1240 3530 18/11/09 339251 3844 343095 18/11/09 342644 -451 3530 18/11/09 424351 4808 429159 18/11/09 428595 -564 3530 18/11/09 440451 4991 445442 18/11/09 444856 1087012 25984 -586 08/12/09 644116 7298 651414 08/12/09 4184 650556 -858 4184 11/12/09 644116 7298 651414 11/12/09 650556 581504 13900 -858 4184 15/12/09 799366 9057 808423 15/12/09 807359 721662 17251 -1064 4184 16/12/09 660676 7486 668162 16/12/09 667282 596454 14258 -880 4184 19/12/09 776366 7764 784130 19/12/09 784129 699865 16754 -1 4184 23/12/09 774066 7741 781807 23/12/09 782510 697792 16705 703 23/12/09 0 23/12/09 704 0 4184 31/12/09 622380 6224 628604 31/12/09 630308 561053 13431 1704 4184 31/12/09 0 31/12/09 1704 0 4184 01/01/10 785566 7856 793422 01/01/10 795748 710486 16593 2326 4184 05/01/10 914366 9144 923510 05/01/10 923509 827804 19732 -1 4184 08/01/10 748650 7487 756137 08/01/10 756137 0 4184 08/01/10 694026 6940 700966 08/01/10 700985 1307080 31133 19 4184 11/01/10 779470 7795 78726 11/01/10 791336 706735 15821 4071 4184 13/01/10 786140 7861 794001 13/01/10 794001 713451 16965 0 4184 18/01/10 1086290 10863 1097153 18/01/10 1097153 986660 23443 0 06/02/10 440450 4405 444855 06/02/10 5545 444855 397050 9505 0 5545 11/02/10 786600 7866 794466 11/02/10 794466 2003806 17969 0 5545 11/02/10 794076 7941 802017 11/02/10 802016 -1 5545 11/02/10 662160 6422 668582 11/02/10 648582 -20000 5545 17/02/10 655499 6555 662054 17/02/10 662054 590908 14146 0 5545 18/03/10 857517 8575 866092 18/03/10 866092 773019 33215 0 18/03/10 681567 6816 688383 18/03/10 6302 688383 614407 0 Total 19030031 198328 19228359 19209928 15420109 857793 -18431

From above table it is seen that the value of purchase recorded in the books of account is equal to the amount shown in delivery orders. The purchase value is inclusive of amount payable to GSRTC and that payable to MSTC. Both GSRTC and MSTC have been paid accordingly to the amounts mentioned in the delivery order.

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 17 -

The assessee in Para 8 of the submission dated 25/12/2012 has explained that the assessee had made purchases of scrap buses from Gujarat State Road Transport Corporation through the commission agent MSTC Ltd. The purchase amount was paid to GSRTC and the commission was paid to MSTC Ltd. by the assessee. From above table it is seen that payments to GSRTC and MSTC were made simultaneously and prior to taking of the delivery of scraped buses by the assessee. The purchase account is a composite account in which purchases as well as commission are included. The evidences indicate that the assessee had made payment of commission to MSTC for making purchases from GSRTC. Therefore, in respect of payment of commission of MSTC Ltd., TDS was required to be deducted as per the provisions of Section 194H of the Act. However, the assessee did not make TDS on commission payment to MSTC Ltd.

Disallowance of Commission of Rs.8,57,793/- was made.

Total income of the assessee was recomputed as under: I. Business Income i. As per computation Rs. 6,35,032/- Rs.1,56,92,825/- of total income Rs.1,42,00,000/- ii. Addition in respect Rs. 8,57,793/- of receipts from land transaction iii. Disallowance of commission u/s.40(a)(ia) of the Act. II. Long Term Capital Gain: i. As per computation Rs. 99,84,042/- Rs. Nil of total income Rs. 99,84,042/- ii. Less: LTCG considered as business income III Total income Rs.1,56,92,852/- Total income rounded off to Rs.1,56,92,830/-

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 18 -

Particulars 1134/1 1134/2 1135/2 & 3 Banakhat 19/10/79 11/08/89 Possession 17/05/89 11/08/89 Purchase deed/Irrevocable 14/05/03 11/08/89 POA Sale deed 01/02/10 01/02/10 Time between Possession 20 years 20 years & Sale Deed Sale deed signed in the Owner Confirming Party capacity of

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 19 - 4.2 Assessee offered gain on sale of lands as “capital gain”. However, AO held that such transactions were an adventure in the nature of business and hence, he treated such gain as “business income” broadly on following two counts: � Assessee acted merely as a “confirming party” and hence, assessee was not the owner of such lands; � The lands sold were non-agricultural land and the ultimate buyer (i.e. “M/s. A. N. Patel Estate Developers P. Ltd.”) construction work i.e. business purpose; 4.3 AO failed to appreciate sale deed w.r.t. only the second land was signed as a “confirming party”. The first land was purchased and sold by assessee along with other parties and even the deeds were executed in the capacity of owners as in evident from Page 4, Para 2.2 of Asst. Order.

4.4 Even though sale deed w.r.t. second land was executed in the capacity of confirming party, assessee had “possession” and “rights” in such land as is evident from various deeds as per Annexure – “A”.

4.5 In fact, when a dispute arose between the parties and the matter went up to the Court, an officer was deputed by such Court so as to verify as to who was in “possession” of such land. From the report of such officer, it was evident that assessee had possession of such lands. (page 34 of CIT(A)’ order).

4.6 At the time of execution of final sale deeds, assessee was to hand over "possession" and relinquish "rights in such lands" in favor of the

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 20 - ultimate buyer. Accordingly, the sale deed was signed as "confirming party" and in lieu thereof, assessee received the consideration.

4.7 It would not have been possible to sell such lands without assessee's consent owing to possession and rights in such lands with the assessee. Hence, by obtaining assessee's signature as a "confirming party", it was ensured that ownership is transferred in favor of ultimate buyer in a smooth manner.

4.8 Relinquishment of right in a capital asset ("land" in this case) is "transfer" as per S.2(47) and hence, gain arising on such transfer has been correctly treated as "capital gain".

4.9 As regards the second count, the fact that the ultimate buyer is looking forward to use such lands for construction work (i.e. business) is not to be considered at all while deciding as to whether the transaction of sale to such buyer is an adventure in the nature of business in the hands of the assessee.

4.10 Learned AO failed to appreciate following vital aspects: � Assessee has possession and rights in such lands for almost 20 years; � Such lands deals are isolated transactions; � No other lands transactions have been entered into by the assessee; � Assessee is engaged in business of trading and dismantling ST Buses;

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 21 - � Assessee’s intention behind buying such lands was to earn money from appreciation of land prices over a period of time. � Assessee never intended to commercially exploit such lands in the course of business. � Assessee is not regularly dealing in purchase and sale of land; 4.11 In our opinion, it can be inferred that transactions entered into by the assessee are not in the regular course of business. Rather, the same is isolated transactions and hence, it cannot be treated as an adventure in the nature of trade.

4.12 In our considered opinion, learned CIT(A) has rightly directed AO to treat gain shown by assessee on sale of both the lands as “long term capital gain”

5.2 CIT (A) held that since gain on sale of lands has been held to be “long term capital gain” (LTCG), assessee is eligible for exemption u/s.54F since all the conditions for claiming such exemption have been fulfilled by the assessee as is explained on Page No.39 of CIT(A)’s order.

5.3 Once income on sale of lands is treated as “LTCG” and all the conditions prescribed u/s.54F have been fulfilled by the assessee, assessee is rightly eligible for such exemption.

ITA No.1731/Ahd/2014 ACIT vs. Sikandarali Kasamali Qureshi Asst.Year –2010-11 - 22 -

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Ahmedabad; Dated 12/09/2017 Priti Yadav, sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-XI, Ahmedabad. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad True Copy