2016 (10) TMI 632 - HC - Income Tax

Profit on sale of the plot of land - to be assessed under the head of Capital Gains OR business receipts - Held that - We find that the impugned order of the Tribunal has rendered a finding of fact to the effect that the plot of land is owned by the respondent assessee. This plot was a subject matter of sale during the previous year relevant to the subject assessment year and had always been shown as a fixed asset in its balancesheet. Further, the Tribunal records the fact that the business of the respondent assessee was not of trading in plots of land and, therefore, the amounts received on sale of plot of land which was originally purchased for construction of administrative building could never be taxed as a business income. The impugned order of the Tribunal is unexceptionable in its reasoning. The grievance of the Revenue by placing reliance upon the Goetze (India) Ltd. (2006 (3) TMI 75 - SUPREME Court) is that no fault can be found with the order of the Assessing Officer in not entertaining a claim in the absence of a Revised return of income. However, this submission overlooks the fact that in Goetze (India) Ltd. (supra), it was clarified that the same does not deal with the power of Appellate Authority to consider a new point of law. In any case, this Court in Commissioner of Income Tax Vs. Pruthvi Brokers and Shareholders P. Ltd. 2012 (7) TMI 158 - BOMBAY HIGH COURT , on consideration of the Apex Court s decisions in Goetze (India) Ltd.(supra) and National Thermal Power Co. Ltd. Vs. Commissioner of Income Tax, 1996 (12) TMI 7 - SUPREME Court , held that the assessee is entitled to raise additional grounds before the Appellate Authority which may not have been raised before the Assessing Officer. Thus, the grievance of the Revenue is unsustainable in view of the decision of this Court in Pruthvi Brokers and Shareholders P. Ltd. (supra). No substantial question of law.

Summary

Issues:
Challenge to order under Section 260A of the Income Tax Act, 1961 regarding Assessment Year 2008-09. Question of law on assessing profit on sale of land as capital gains or business income.

Analysis:
The respondent, a bank, purchased land to construct an administrative building but later sold it during the assessment year. The respondent claimed the sale as a capital asset subject to long-term capital gain but did not reduce it from taxable income under business income. The Assessing Officer classified the profit as business income. The Commissioner of Income Tax (Appeals) upheld this decision. The Tribunal, noting the respondent was not in the land trading business and the land was a fixed asset, directed the Assessing Officer to reduce the profit element from business income, allowing the appeal.

The Revenue contested the Tribunal's decision, arguing the Assessing Officer couldn't decide without a revised return. The High Court found the Tribunal's factual findings valid, emphasizing the land was a fixed asset, not for trading. Citing precedents, the court clarified that the Appellate Authority can consider new legal points, even if not raised before the Assessing Officer. Relying on previous decisions, the court dismissed the Revenue's grievance, stating the proposed question did not raise any substantial legal issue.

In conclusion, the High Court dismissed the appeal, highlighting the Tribunal's correct assessment based on factual findings and legal precedents. The court upheld the decision to treat the land sale as capital gains, rejecting the Revenue's argument against considering new legal points.