Income Tax Appellate Tribunal - Mumbai
Lajju Ranjit Bhanu, Mumbai vs Assessee on 10 July, 2008
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH 'A', MUMBAI.
Before Shri R.K. Gupta, J.M. and Shri J. Sudhakar Reddy, A.M.
I.T.A. No. 5662/Mum/2008
Assessment Year : 2004-05.
Smt. Lajju Ranjit Bhanu, Dy. Commissioner of Income-tax,
9/53 Shyam Niwas, Vs. Circle-16(2), Mumbai.
Bhulabhai Desai Road,
Mumbai - 400026.
PAN AAFPB1068A
Appellant Respondent
Appellant by : Shri Y.P.Trivedi,
Smt. Usha Dalal.
Respondent by : Ms. Mahua Sarkar.
ORDER
Per J. Sudhakar Reddy, A.M.
This is an appeal filed by the assessee directed against the order of the CIT(Appeals)-XVI, Mumbai dated 10-07-2008 for the assessment year 2004-05.
2. The assessee in this case is an individual and derives income from house property as well as other sources. The income from other sources is by way of interest. She has no income from business or profession for any of the previous years or for the subsequent years. During the assessment year the assessee had offered income under the head Capital Gains, on account of sale of plots of land situated in village Vaksi Taluka Maval of Pune District. This land was jointly purchased by her along with two other individuals. All the three individuals purchased 29241 Sq.meters of land on 29-02-1998. The assessee along with the 2 other two individuals obtained approval of the Collector, Pune and Assistant Director of Town Planning and after improving the land, sold 20442 sq. meters to 42 different buyers for the total consideration of Rs.77,31,000/-. The assessee's share was Rs.14,50,087/-. This was offered as long term capital gain. The AO, in his order passed u/s 143(3) on 29-12-2006, took a view that the assessee carried on business in the nature of trade or adventure in the nature of trade and by relying on the judgment of the Hon'ble Supreme Court in the case of Raja J. Rameshwar Rao vs. CIT 42 ITR 179 assessed the income under the head Profits and Gains of business. Aggrieved, the assessee carried the matter in appeal. The first appellate authority rejected the claim of the assessee. Further aggrieved, the assessee is before us.
3. The learned counsel for the assessee Mr. Y.P. Trivedi submitted that the assessee never derived any income by way of business or profession either in any of the earlier assessment years or any of the subsequent years and all that she had done was to make certain investment in a plot of land which was sold after converting the same from agricultural land to non-agricultural land. He pointed out that she was one of the three co-owners and in the hands of other two co-owners the Revenue has not raised any dispute and had accepted that the income in question is assessable under the head Capital Gains. He disputed the factual recording of the CIT(Appeals) that the assessee had five different lands and submitted that this is misleading and it is only part of the unsold land which is sub divided into five parts. He pointed out that the investment in land was being carried on from year to year and there was no dealing in land in any of the intervening years. He filed copy of the commentary by learned Authors Kanga & Palkhiwala & Vyas in the Law and Practice of Income Tax and submitted that the mere fact that the 3 owner of an immovable property take steps to enhance its value before selling it, does not point to an adventure in the nature of trade. He prayed for relief.
4. The learned DR Mr. Mahua Sarkar, on the other hand, relied on the order of the CIT(Appeals) as well as that of the AO and submitted that the assessee indulge in an adventure in the nature of trade as the land was converted into N.A. land fenced, divided into plot and sold to 42 different buyers. He argued that the judgment of the Hon'ble Supreme Court in the case of Raja J. Rameshwar Rao vs. CIT (supra) is applicable to the facts of the case.
5. Joining the issue the learned Senior Advocate, Mr. Trivedi submitted that he relies on the following case laws :
Jaswant Rai vs. CIT 107 ITR 477 C.G. Ghanshyam Das vs. CIT 116 ITR 212 for the proposition that when a particular asset has been considered in a particular manner in the hands of one of the co-owners, a different view cannot be taken in the hands of the other co-owners on the principles of consistency. He prayed for relief.
6. Rival contentions heard. On a careful consideration of facts and circumstances of the case and a perusal of the papers on record and the orders of the authorities below as well s the case laws cited, we hold as follows.
7. The assessee in this case derives income by way of rent, interest and dividend. She has also made certain investment along with three other individuals. Investment in the said land was made way back in the year 1988. The sale has taken place in the year 2003. As the co-
4owners sold the land, the assessee purchased another piece of land at Vaksai for her own use on 20-10-2002. The finding of the AO that the assessee has made investment in five different land is against the facts of the case. It is in fact only a single land purchased by the assessee. Only 5 sub division members are given to the same land. The assessee has never been in business either before or after this assessment year. In fact this investment has been held by her for more than 15 years. On these facts, we are of the considered opinion that the revenue authorities were in error in coming to a conclusion that the income from the sale of these plots is to be assessed under the head "Income from business" and not under the head "Capital gains". The learned Authors Kanga and Palkhiwala and Vyas in the commentary, Ninth Edition Vol. I, page 236 and 237 at para 29 stated as follows :
"29 Land and Building.
Where an individual inherits or otherwise acquires land and deals with it as an owner, he may be regarded as holding it as an investment rather than as something with which to trade; and the same principle applies to a company incorporated for the purpose of management of a family estate. The mere fact that the owner of an immovable property takes steps to enhance its value before selling it, does not point to an adventure in the nature of trade. A landlord may lay out part of his estate with roads and sewers and sell it in lots at various times for building, but if he does this as a landed proprietor and not as a land speculator, the sale would be on capital account. If a landowner, finding his property appreciating in value, sells part of it, and uses part of his money to further develop the remaining parts, and so on, he is not carrying on a sale or business; he is only properly developing and realising his land; and the position would be the same if a company or a firm thus deals with land as a landowner. The case law on the on the point has been discussed in the judgement of Veeraswami J. in CIT v. Kasturi Estate Ltd. where a company established by Royal Charter acquired lands from the Government as part of the consideration for the surrender of its Charter, and sold them in lots from time to 5 time, the sales were held to be by a landowner and not in course of business. In the absence of any evidence of trading activity in cases of purchase and re-sale of land and buildings, the court reversed the finding of the tribunal and held the profit arising from the re- sale to be an accretion of capital."
8. Coming to the other case laws relied upon by the learned counsel for the assessee in the case of Jaswant Rai vs. CIT 107 ITR 477, the Hon'ble Punjab & Haryana High Court was dealing with the wealth- tax and it is held that it is not open to the Wealth Tax Officer to disregard the order passed by the another Wealth Tax Officer, in which the value of 1/3rd share of the same property belonging to a co-sharer was determined at a different value. The Court has held that it is not open to the Department to adopt different yardsticks in case of different assessees. In the case of C.G. Ghanshyam Das vs. CIT 116 ITR 212 the Hon'ble Madras High Court held as follows :
" Held, that as on the date of transfer of the property which resulted in the capital gain, the assessee had not obtained the release deeds from the other two co-owners, the capital gain legally belonged to the three co-owners, the assessee being entitled to one- half while the other two to one-fourth each. Accordingly, the assessee cannot be assessed on the entire capital gains but can be assessed only on his half share thereof."
This case, in our considered opinion, has no bearing to the case on hand.
9. Coming to the case on hand, the undisputed fact is that the assessee has been holding this property as a capital asset for the last 15 years. In case this has to be treated as a business asset, then section 45(2) comes into play. The Revenue has not invoked the same. The mere fact that the owner of the immovable property, who held it as an investment, took certain steps to improve the property and make it convenient for sale, does not result in it becoming an adventure in the nature of trade.
6Thus we agree with the argument of learned Senior Advocate Mr. Trivedi and direct the AO to assess the income from the sale of land under the head "Capital Gains".
10. In the result, the appeal of the assessee is allowed.
Order pronounced on this 24th day of February, 2010.
Sd/- Sd/-
(R.K. Gupta) (J. Sudhakar Reddy)
Judicial Member. Accountant Member.
Mumbai,
Dated : 24th February, 2010.
Wakode
Copy forwarded to :
1. Appellant.
2. Respondent
3. C.I.T.
4. CIT(A)
5. DR, A-Bench.
(True copy)
By Order
Asstt.Registrar,
ITAT, Mumbai Benches, Mumbai.