Income Tax Appellate Tribunal - Chennai
V N Devadoss Huf, Chennai vs Acit, Ncc-10(1), Chennai on 28 March, 2019
आयकर अपीलीय अिधकरण, "ए" ायपीठ, चे ई
IN THE INCOME-TAX APPELLATE TRIBUNAL 'A' BENCH, CHENNAI
ी अ ाहम पी. जॉज, लेखा सद एवं ी धु ु आर.एल रे ी, ाियक सद के सम
Before Shri Abraham P. George, Accountant Member &
Shri Duvvuru RL Reddy, Judicial Member
आयकर अपील सं./I T.A. No.3358/Chny/2018
िनधारण वष/Assessment Year :2014-15
M/s. Shivani Constructions, The Income Tax Officer,
No. 333, Poonamallee High Road, Vs. Non Corporate Ward - 10(3),
Amaindakarai,Chennai-600 029. Chennai-34.
[PAN:ABVFS4574M]
(अपीलाथ /Appellant) ( थ /Respondent)
आयकर अपील सं./I T.A. No.3359/Chny/2018
िनधारण वष/Assessment Year :2012-13
V.N. Devadoss HUF, Vs. The Assistant Commissioner
No. 333, Poonamallee High Road, of Income Tax,
Amaindakarai,Chennai-600 029. Non Corporate Circle 10(1),
[PAN:AAAHV2596J] Chennai - 600 034.
(अपीलाथ /Appellant) ( थ /Respondent)
अपीलाथ की ओर से / Appellant by : Shri K.M. Mohandass, C.A.
थ की ओर से/Respondent by : Shri AR.V. Sreenivasan, JCIT
सु नवाई की तारीख/ Date of hearing : 13.03.2019
घोषणा की तारीख /Date of Pronouncement : 28.03.2019
आदे श /O R D E R
PER DUVVURU RL REDDY, JUDICIAL MEMBER:
Both the appeals filed by different assessees are directed against the orders of the ld. Commissioner of Income Tax (Appeals)-12, Chennai both dated 28.09.2018 relevant to the assessment years 2014-15 and 2012-13 respectively. Since the common nature of issue has been raised in both the 2 I.T.A. Nos.3358 & 3359/Chny/2018 appeals of different assessees pertaining to one group, heard together and are being disposed of by this common order for the sake of brevity. I.T.A. No. 3358/Chny/2018 [AY 2014-15]
2. The assessee has raised the following grounds of appeal:
"1. The order of the Ld. Commissioner of Income-tax (Appeals) - 12, Chennai is contrary to the law and facts of the case.
2. The Ld. CIT(A) - 12, Chennai erred in adjudicating the appeal without considering the Grounds of Appeal and the Written Submissions filed by the appellant.
3.1 The Ld. CIT(A) - 12, Chennai erred in confirming the Order of the Assessing Officer assessing the sale of lands held as investments, as business income instead of capital gains.
3.2 The Ld. CIT(A) - 12, Chennai erred in confirming the Order of the Assessing Officer assessing the income on sale of land under the head 'Capital Gains' by incorrectly noting that the lands were not held as investments.
3.3 The Ld. CIT(A) - 12, Chennai erred by not appreciating the fact that the business of the appellant is carrying out construction activity and the lands held as investments sold prior to carrying out the said activity is not business, hence the gain on sale of said investments cannot be assessed as business income.
3.4 The Ld. CIT(A) - 12, Chennai erred in confirming the observation of the Assessing Officer that the appellant has not been consistently showing the lands as investments.
3.5 The Ld. CIT(A) - 12, Chennai erred in disregarding the CBDT Circular No. 4/2007 dated 15.06.2007 wherein it is stated that an assessee can have two portfolios, both for investment and trading, holding that the said circular was issued in the context of investment in securities.
4.1 The Ld. CIT(A) - 12, Chennai erred in confirming the addition of notional interest income on the delayed receipt of sale consideration, when there was not even an interest expenditure borne by the appellant on the other hand.
4.2 The Ld. CIT(A) - 12, Chennai erred in stating that the non-receipt of sale consideration by the appellant is disbelievable and hence, the I 3 I.T.A. Nos.3358 & 3359/Chny/2018 same warrants addition of notional interest income of IRs. 44,41,2001- on the sale consideration receivable.
5. The appellant craves leave to add, to amend or alter the above grounds of appeal as may be deemed necessary."
2. Brief facts of the case are that the assessee is engaged in construction activity and filed return admitting income of ₹.8,23,68,230/-. The case as selected for scrutiny and against statutory notices, the AR of the assessee filed details and explanations as called for. The Assessing Officer observed from the details that during the relevant assessment year, the assessee has sold 4.61 acres of his land holdings to 3 buyers viz., Maharishi Institute 2.00 acres ₹.4.44 crores VGN Homes P. Ltd. 2.21 acres ₹.4.91 crores VGN Builders P. Ltd. 0.40 acres ₹.0.88 crores Total ₹.10.23 crores The cost of acquisition as per books of accounts for the above land is ₹.1.19 crores. Hence, the profit on the sale of land is ₹.9.04 crores [₹.9,04,06,414/-]. In the income tax computation, the assessee has considered this profit under income from capital gains (long term) and after indexation, shown net income from capital gains of ₹.8,23,68,232/- [₹.8.23 crores] and paid tax at the special rate of 20% applicable to long term capital gains. To verify the assessee's claim of LTCG, a show cause notice was issued requiring the assessee to explain why the profit on sale of land should not be treated as income from business. After considering the detailed submissions of the assessee, partnership deed, etc. the Assessing Officer charged the net profit 4 I.T.A. Nos.3358 & 3359/Chny/2018 on sale of the land of ₹.9,03,45,509/- under profits and gains of business or profession and not under capital gains after allowing expenses of ₹.60,905/-.
3. The assessee carried the matter in appeal before the ld. CIT(A) and placed reliance on CBDT circular No. 4/2007 dated 15.06.2007. After considering the submissions of the assessee, the ld. CIT(A) confirmed the order of the Assessing Officer assessing the sale of lands held as investment, as business income instead of capital gains.
4. On being aggrieved, the assessee is in appeal before the Tribunal. By relying on the CBDT Circulars No. 4/2007 dated 15.06.2007 as well as No. 6/2016 dated 29.02.2016 and the decision in the case of Narshinghdas Surajmal Properties (P.) v. ACIT 154 ITD 412 [Gawahati - Trib.], the ld. AR submitted that where assessee declared profit arising from sale of land as long term capital gain, especially when assessee showed the plot of land as investment in the relevant year, as was done in earlier years, the impugned order treating amount in question as 'business income' was to be set aside. Ld. Counsel for the assessee pleaded for setting aside the orders of authorities and to allow the profit arising from sale of land to be considered as long term capital gains. On the other hand, the ld. DR strongly supported the orders of authorities below.
5. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. The assessee is a 5 I.T.A. Nos.3358 & 3359/Chny/2018 partnership firm formed on 26th day of December, 2009 with the following partners:
a. VGN Enterprises P. Ltd.
b. VGN Well Built Properties P. Ltd.
c. Mr. V N Devadoss
The companies which had joined as partners (a) and (b) are renowned real estate and property development companies and the other partner Mr. Devadoss is the promoter of those companies. As per the partnership deed, the main object of the firm is to carry on the business of real estate development, property development, builders, civil contractors, buyers, sellers, developers of land into housing plots/sites. The partners have introduced their land worth ₹.4.54 crores (being land in Melpakkam village) as capital contribution. As per clause 2 of the partnership deed, the partners are required to make capital contribution to the firm for its business requirement. On sale of property as detailed above, the assessee has taxed the profit on sale of land under income from long term capital gains after indexation and paid due tax. However, the Assessing Officer treated the profit on sale of land as business income instead of capital gains, which was confirmed by the ld. CIT(A). Against the reliance of CBDT Circular No. 4/2007 dated 15.06.2007, the ld. CIT(A) was of the opinion that the same was issued specifically in the context of investments in securities and cannot be applicable to the facts of the current case. According to the ld. CIT(A), even if one tried to apply the above circular, as relied by the assessee by quoting the 6 I.T.A. Nos.3358 & 3359/Chny/2018 decision of ITAT, Pune in the case of Shri Krishna Kumar K. Goyal, Shri Vinit K. Goyal v. ACIT in I.T.A. Nos. 1299 & 1300/PN/2012, the facts appreciated in that case was entirely different from the facts of the current case. In that case, as per the ld. CIT(A), for many years, the land was shown in the balance sheet as 'Personal asset', as a part of investments and other land held as stock-in-trade were separately disclosed in the balance sheet as well as in profit and loss account as 'business assets' and such position was also accepted in the past years even in scrutiny assessment finalized by the Assessing Officer. The ld. CIT(A) also noted the fact that in that case the land was held for a fairly long period of 9 to 10 years before being sold and there was no trading activity. Therefore, the ld. CIT(A) was of the opinion that the CBDT circular as well as case law relied as above, had no application to the facts of the present case. At this juncture, we need to have a look on circular No. 6/2016 dated 29.02.2016, where the CBDT has clarified at (b) of para 3 as under:
"(b) In respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as capital gain, the same shall not be put to dispute by the Assessing Officer........"
Subsequent to this, for determining the tax-treatment of income arising from transfer of unlisted shares for which no formal market exists for trading, it seems CBDT recognized to have a consistent view in assessments pertaining to such income. It was, accordingly, notified vide CBDT Clarification F. No. 225/12/2016/ITA.II dated 02.05.2016 that the income 7 I.T.A. Nos.3358 & 3359/Chny/2018 arising from transfer of unlisted shares would be considered under the head 'Capital Gain', irrespective of period of holding, with a view to avoid disputes/litigation and to maintain uniform approach. It is, however, clarified that the above would not be necessarily applied in the situations where:
i. the genuineness of transactions in unlisted shares itself is questionable; or ii. the transfer of unlisted shares is related to an issue pertaining to lifting of corporate veil; or iii. the transfer of unlisted shares is made along with the control and management of underlying business.
A reading of the above, in our opinion show that the objection of the ld. CIT(A) in applying the circular to other types of investments was not appropriate.
5.1 Further, the main thrust of the argument of the Revenue is that assessee having shown the land sold by it, as a part of its current assets, cannot take a stand that the surplus arising is not business profits but capital gains. Against the above argument, the contention of assessee is that this is not so and it was constrained to show it as a part of current asset in the returns prior to that of assessment year 2011-12 due to deficiencies in the return format which did not have a column for showing immovable property under the head investment. To solve this, we need to have a look at assessee's balance sheet as on 31.03.2011, 31.03.2012 and 21.03.2013.
Asset side of balance sheets for the year ending 31.03.2011, 31.03.2012 and 31.03.2013 are re-produced hereunder:
8 I.T.A. Nos.3358 & 3359/Chny/2018
Balance sheet for the year ending Assets 31.03.2011 Assets 31.03.2012 Assets 31.03.2013 Lands at Lands at - Investments:
Melpakkam Melpakkam
Village: Village:
VGN Well Built 2,48,25.604 Cash & Bank Raw lands at 4,28,57,044
Properties P. Ltd. Balances: Melpakkam Village
VGN Enterprises 1,25,83,133 Sundry 57,84,000 Cash & Bank -
Pvt. Ltd. Debtors Balance
V.N. Devadoss 71,89,125 Cash-in-hand 59,310 Cash-in-hand 59,310
Cash & Bank Bank Balance 9,719 Bank Balance 14,703
Balances
Cash-in-hand 29,310 Income Tax - 1,090
Refund Receivable
Bank Balance 9,719 Sundry Debtors
Partners Current VGN Builders Pvt. 10,133
Account Ltd.
V.N. Devadoss 3,713 V.N. Devadoss 43,18,149
VGN Well Built 12,881 -
Properties P. Ltd.
VGN Enterprises 6,531 -
Pvt. Ltd.
5.2 A reading of the above clearly indicates that the assessee had
classified the assets either into investments or current assets only for the year ending 31.03.2013. Prior to that, assets were given in the name of the individual spear only. Hence, claim of the assessee that it had not classified the land sold as current asset is definitely a probable one. Now let us have a look at the return format for AY 2011-12 & AY 2012-13 in so far as it relates to assets. Part A-BS of these return forms are reproduced hereunder:
2 Investments a. Long-term investments i Government and other Securities - Quoted ii Government and other Securities - Unquoted iii Total (ai + aii) b Short-term investments i Equity Shares, including share application money ii Preference Shares iii Debentures iv Total (bi + biii) c Total investments (aiii +biv) 9 I.T.A. Nos.3358 & 3359/Chny/2018 5.3 As against above, the return form for the AY 2013-14 gives the same part as under:
2 Investments
a. Long-term investments
i Investment in property
ii Equity Instruments
A Listed equities
B Unlisted equities
C Total
iii Preference shares
iv Government or trust securities
v Debenture or bonds
vi Mutual funds
vii Others
viii Total Long-term investments(i+iiC+iii+iv+v+vi+vii) b Short-term investments i Equity instruments A Listed equities B Unlisted equities C Total ii Preference Shares iii Government or trust securities iv Debenture or bonds v Mutual funds vi Others vii Total Short-term investments (iC+ii+iii+iv+v+vi) c Total investments (aviii +bvii) Thus the format went through a change from AY 2013-14 onwards, it facilitated division of investments into immovable property, as well, in addition to shares. Admittedly, assessee in his return from AY 2013-14 onwards had shown the land as part of its investment in the return. Thus, we are inclined to accept the argument of the assessee that the land was held by it as an investment and not as current asset. Consequently, the surplus arising on the sale was to be assessed under the head 'Capital Gains'. Accordingly, we set aside the orders of authorities below and direct the Assessing Officer to 10 I.T.A. Nos.3358 & 3359/Chny/2018 assess the sale of land under the head 'Capital Gains'. Thus, the ground raised by the assessee stands allowed.
6. The next ground raised in the appeal of the assessee is that the ld.
CIT(A) erred in confirming the addition of notional interest income on the delayed receipt of sale consideration, when there was not even an interest expenditure borne by the assessee on the other hand. By way of a Registered Sale deed (duly registered with Sub Registrar, Kundrathur), the assessee sold 2 Acres of land to M/s. Maharishi Institute. Consideration for the same was ₹.4.44 Crores. As per the sale deed dated 31st May 2013, the said amount of ₹.4.44 Crores has been paid to the assessee (Page 7 of the Sale deed -Document No.7709/13). However, the assessee shown the said amount as due from Maharishi Institute (under Debtors) in the Balance sheet. When the assessee was asked to explain this, it was replied that the amount has actually not been received and it has been shown as received in the sale deed merely for the purpose of satisfying the pre-requisite for registration. It was also mentioned that the consideration had not been received till date. It is highly improbable that a seller would sell his land to a buyer without receiving the consideration and more so when it is a third party. Further, both parties have stated in the sale deed that the amount of consideration is fully received. For reasons best known to the assessee this transaction is recorded in a divergent manner in books of account and before the registering authorities. There is no way the assessee can exercise its rights 11 I.T.A. Nos.3358 & 3359/Chny/2018 over the receivable. The sale documents as stated above clearly transfers the title of the possession of the property to the buyer with documentation, that the money for transfer shown of ₹.4.44 crores has been received by the assessee. Hence, there is no reason for the buyer to honour the receivable reported in the balance sheet of the assessee firm. The buyer ought to have paid the sale consideration on 31st May 2013. Non-payment of sale consideration would normally invite interest payment (as a prudent businessman would not part with his asset without getting the consideration and if it is delayed the same has to be compensated by way of interest). Accordingly, the Assessing Officer worked out the interest on the said sum of ₹.4.44 crores for the period from 31.05.2013 to 31.03.2014 @ 12% per annum for 10 months which comes out to ₹.44,41,200/- and brought to tax. This is added as Interest income on the sale consideration receivable which is ought to have been charged on normal arms length transaction. Hence, it was added under Profits and gains from business as it is interest in pursuance of the trading transaction. On appeal, the said addition was confirmed by the ld. CIT(A).
6.1 We have heard the rival contentions. The question of 'believe' or disbelieve' does not arise when the authorities below have recorded in the respective orders that as per sale deed dated 31.05.2013, the consideration has been paid to the assessee [page 7 of the sale deed document No. 7709/13). In fact, it is immaterial whether the assessee chose not to account 12 I.T.A. Nos.3358 & 3359/Chny/2018 the above amount in his books of accounts as receipt, but what was mentioned in the registered sale deed cannot be held wrong. The parties are not related and the rights in the property have been transferred. Once sale deed establishes that the assessee has received the entire sale consideration, the question of payment of interest on sale consideration does not arise. The entries made in the books of account are irrelevant. Therefore, the impugned interest levied by the Assessing Officer is nothing but imaginary and thus, we reverse the findings of the authorities below and allow the ground raised by the assessee.
I.T.A. No. 3359/Chny/2018 [AY 2012-13]
7. The first ground raised in the appeal of the assessee is with regard to confirmation of assessment under section 147 of the Act on the ground that the assessee had not admitted income from business from the sale of lands after developing/converting them into plots. First, we shall adjudicate as to whether the property in question held by the assessee for the purpose of investment or for business purposes warranting reassessment. 7.1 The ld. Counsel for the assessee has submitted that during the year under consideration, the assessee has sold lands at Ayyappanthangal and Kowl Bazaar, which were acquired in 1981-82 and 2003-04/2005-06 respectively. The assessee, at the time of purchase, has intended to hold the said lands for long-term purposes and accordingly, accounted the same under the head 'investments'. The purpose of holding assets JS investments 13 I.T.A. Nos.3358 & 3359/Chny/2018 is either to earn recurring income from the said asset or for capital appreciation therefrom. Whereas, in the case of an asset held for business purposes, such an intent is absent and the asset is always held for sale in the ordinary course of business. The fact that the assessee is engaged in the business of real estate and property development does in no way denote that the lands were allegedly held for business purposes but not as investments. In respect of holding the shares and securities as investments and for trading purpose, the CBDT vide its Circular No.4/2007 dated 15.06.2007, clarified that an assessee can maintain two portfolios i.e., an investment portfolio comprising of securities which are to be treated as capital assets and a trading portfolio comprising of stock-in-trade. The clarification of the CBDT holds good in respect of land holdings also. The Pune Bench of ITAT in the case of Shri Krishna Kumar K. Goyal, Shri Vinit K.GoyaJ vs. ACIT in ITA Nos.1299 & 1300/PN/2012, following the CBDT Circular has held that an assessee is entitled to maintain two portfolios i.e., a Trading Portfolio and an Investment Portfolio and the fact that an assessee is engaged in the business of purchase and sale of lands cannot be a conclusive factor in holding that the sale of lands held is a business activity, even though they were held as 'investments' by such assessee.
It was further submission that the relevant/crucial fact in determining the nature of gain on transfer of an asset is the intention at the time of purchase. If the intention at the time of purchase was to merely resell at profit, the asset 14 I.T.A. Nos.3358 & 3359/Chny/2018 would be in the nature of stock-in-trade. On the other hand, if the intention at the time of acquisition is to hold the asset for use and/or earn income therefrom, then the character of such asset would be 'Capital Asset/ investment and income from its sale would be 'Capital Gains' and not 'Business income'. It was held by Courts in various cases that the determinative factor for considering a particular asset as an investment or stock-in-trade is based on the accounting treatment in the Books of Account of an assessee. In the present case, the intention of purchasing the lands was to hold them as investments, which is evident from the accounting treatment of the said lands as 'Investments' in the Books of Account of the assessee from the date of its acquisition. Once the lands are accounted as investments in its books of account and accepted by the Assessing Officer, a contrary stand cannot be taken by him subsequently that the lands does not constitute the investments of an assessee. In the instant case, in all the assessment made in the earlier year, the Assessing Officer has accepted the classification of the lands as investments by the assessee, which cannot be contradicted in the year of sale alone i.e., during the year under consideration.
It was further submissions of the assessee that in the assessee's case for the assessment year 2003-04, a similar issue has arisen in respect of sale of land at Ayyappanthangal. The Tribunal in ITA No.388/Mds/2009, following the decision of the Jurisdictional High Court in the case of ClT vs. A. 15 I.T.A. Nos.3358 & 3359/Chny/2018 Mohammed Mohideen 176 ITR 393 (Mad.) has held that - when the assessee holding the lands as Capital Asset being Investment, then, merely because the assessee is in Real Estate would not ipso facto change the nature of the asset from Capital to Stock-in-trade and the Income from the sale of the said asset cannot partake the character of the business income in the absence of the intention of the assessee in acquiring the said asset for business purpose. It was also held that Revenue cannot take a contrary stand when there is no change in the facts and the character of the asset, particularly, when the assessee has disclosed and offered the lands in question as Capital Asset in the Return of Net Wealth. Thus it was prayed for deleting the addition and quashing the reassessment proceedings.
8. Per contra, the ld. DR strongly supported the order passed by the authorities below.
9. We have heard the rival contentions, perused the materials available on record and gone through the orders of authorities below including the paper book. The years of acquisition of properties are not in dispute. The intention of the assessee to hold the said lands for long term purposes and accounted the same under the head 'investments' was also not disputed by the Department and in fact, the Assessing Officer has accepted the classification of the lands as investments by the assessee except during the year under consideration. Further, we find that similar issue was subject 16 I.T.A. Nos.3358 & 3359/Chny/2018 matter in appeal before the Tribunal in assessee's own case for the assessment year 2003-04 and vide order in I.T.A. No. 388/Mds/2009 dated 12.03.2010 and while carefully going through the order of the Tribunal, we find that the assessee has been maintaining two portfolio viz., investment as well as trading. The Tribunal has observed that the asset in question was acquired long back and held the same as capital asset being investment, then, merely because the assessee is in the business of real estate, would not ipso facto change the nature of the assets from capital to stock-in-trade and the income from the sale of the said assets cannot partake the character of business income in the absence of the intention of the assessee in acquiring the said asset for business purposes. Thus, the Tribunal was of the view that the Revenue cannot take a contrary stand for different years when there is no change in the facts and character of the asset, particularly, when the assessee has disclosed and offered the lands in question as capital asset in the return of Wealth Tax, which was accepted continuously for a long time, coupled with the acceptance of the income on sale of a part of the agricultural land in the earlier years and also in the subsequent years as capital gain, then for a particular year the Revenue cannot take a contrary and altogether opposite stand. Thus, the treatment of income from sale of the lands in question as business income is arbitrary and an unjustified act on the part of the Revenue. Accordingly, the Tribunal set aside the orders of the lower 17 I.T.A. Nos.3358 & 3359/Chny/2018 authorities and hold that the income from sale of the land should be treated as 'Capital Gains'.
10. Similarly, in the assessment year under consideration, admittedly, the assessee has disclosed and offered the lands in question as capital asset in the return of Wealth Tax, which was accepted continuously for a long time, coupled with the acceptance of the income on sale of a part of the agricultural land as capital gain. Moreover, it evident from the CBDT Circular No.4/2007 dated 15.06.2007 that an assessee can maintain two portfolios i.e., an investment portfolio comprising of securities which are to be treated as capital assets and a trading portfolio comprising of stock-in-trade. The CBDT has further affirmed its clarification mentioned in the above said Circular in a recent Circular No. 6/2016 dated 29.02.2016. The said clarification of the CBDT circulars holds good in respect of land holdings also. Following the above said circular, in the case of Shri Krishna Kumar K. Goyal, Shri Vinit K. Goyal v. ACIT in I.T.A. Nos. 1299 & 1300/PN/2012 dated 15.09.2014, the Pune Bench of the Tribunal has held that an assessee is entitled to maintain two portfolios i.e., a trading portfolio and an investment portfolio of lands and the fact that an assessee is engaged in the business of purchase and sale of lands cannot be a conclusive factor in holding that the sale of lands held is a business activity, when the lands were held as 'investments' by such assessee.
18 I.T.A. Nos.3358 & 3359/Chny/2018
11. It is pertinent to refer the decision of the Hon'ble Hon'ble Bombay High Court in the case of CIT vs. Baguio Investment Pvt. Ltd. vide Income Tax Appeal No.998 of 2011 dated 24.01.2013 and the was relating to income on sale of land which was treated by the Assessing Officer as a sale of stock-in- trade and taxed under the head income from business whereas the assessee claimed it as a sale of investment assessable under the head capital gains. The Hon'ble High Court noted three factual findings arrived at by the A. Y. :
2008-09 Tribunal, namely, (i) that the assessee had disclosed the land in its books of account as an investment and not stock-in-trade; (ii) that the land sold was held for a period of 10 years by the assessee; and, (iii) that no steps were taken for development of property by assessee during the period it held the land. Considering the aforesaid features the Hon'ble High Court affirmed the order of the Tribunal holding that the income arising on sale of land was chargeable under the head capital gains. Admittedly, in the present case in hand, the assessee disclosed the land in its books as an investment and not stock-in-trade and moreover, no development activity on the property in question was carried out by the assessee. With regard to the duration of holding the property, it was further clarified and notified vide CBDT Clarification F. No. 225/12/2016/ITA.II dated 02.05.2016 that the income arising from transfer of unlisted shares would be considered under the head 'Capital Gain', irrespective of period of holding, with a view to avoid disputes/litigation and to maintain uniform approach. 19 I.T.A. Nos.3358 & 3359/Chny/2018
12. In para No. 2.5 of the assessment order the Assessing Officer stated that the assessee has developed the land into plots and sold and in coming to the conclusion that the activity is an adventure in the nature of trade. However, there was no credible material brought on record to say that the activity of the assessee was an adventure in the nature of trade since the assessee has not claimed any expenditure towards development of the property before sale of the land. Merely obtaining CMDA approval cannot be held that the assessee has carried out development activity on the land in question before sale because, the purchase M/s. VGN Enterprises Pvt. Ltd. has subsequently sold the developed plots to the ultimate buyer after development of the raw lands purchase from the assessee. Further, we find that the ld. CIT(A) has not distinguished the case law relied on by the assessee in assessee's own case for the assessment year 2003-04 as well as the decision of the Pune Bench, referred above. Under the above facts and circumstances, we set aside the orders of the lower authorities and hold that the income from sale of the land should be treated as 'Capital Gains'.
14. Once we held that the income from sale of the land should be treated as capital gains as declared by the assessee and accepted by the Department vide assessment under section 143(3) of the Act dated 27.12.2014, the reassessment proceedings initiated appears to be baseless 20 I.T.A. Nos.3358 & 3359/Chny/2018 and accordingly the assessment order passed under section 143(3) r.w.s. 147 of the Act dated 31.12.2016 stands quashed.
15. In the result, the appeal in I.T.A. No. 3358/Chny/2018 and the appeal in I.T.A. No. 3359/Chny/2018 are allowed.
Order pronounced on the 28th March, 2019 at Chennai.
Sd/- Sd/- (ABRAHAM P. GEORGE) (DUVVURU RL REDDY) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, the 28.03.2019 VM/-
आदे श की ितिलिप अ ेिषत/Copy to: 1. अपीलाथ /Appellant, 2. थ / Respondent, 3. आयकर आयु (अपील)/CIT(A), 4. आयकर आयु /CIT,
5. िवभागीय ितिनिध/DR & 6. गाड फाईल/GF.