2016 (12) TMI 108 - AT - Income Tax

Consideration received for relinquishing of rights in the land by the assessee - business income or capital gain - owners of the land subsequently entered into MOU with M/s. Esteem Construction Private Ltd. in respect of same land on as is where as basis. M/s. Esteem Construction Private Ltd. agreed to settle/negotiate with the earlier purchasers of land i.e. assessee and other 11 persons - Held that - In case of all the assessees the amount received on relinquishing of rights in land situated at Mundhwa has been declared as capital gain. The Department has accepted the same. In such situation, we do not find any reason as to why in the case of present assessee alone, the Department has taken a different view. The case of the assessee is at par with all the other aforementioned persons. The Revenue should have taken a consistent view while treating the income of assessee which is arising from identical set of facts and from same series of transaction. The ld. DR has not been able to show any distinguishing feature in the case of assessee. The authorities below should have taken a consistent view while treating the income arising from the same series of transaction. It is not the case of Revenue that the assessee has indulged in sale-purchase of land/property on regular basis. The contention of the assessee that the transaction in question was the sole transaction remains unrebutted. Without going into the other arguments raised by the ld. AR we accept the appeal of the assessee on the ground of consistency alone. - Decided in favour of assessee

Summary

Issues:
1. Assessment of gain from relinquishing rights in land as business income.
2. Discrepancy in treatment of similar cases by the Department.

Issue 1: Assessment of gain from relinquishing rights in land as business income:
The case involved the assessment of the gain arising from the relinquishing of rights in a land transaction as business income. The Assessing Officer considered the transaction commercial in nature due to the purchase and sale of development rights, thus treating the gain as business income. The Commissioner of Income Tax (Appeals) upheld this decision. However, the appellant argued that the transaction was a solitary one and not part of a regular trade, citing the Pune Tribunal's decision in a similar case. The appellant also contended that compensation received for relinquishing land rights should be assessed as capital gain, supported by legal precedents such as Saroj Kumar Mazumdar Vs. CIT and CIT Vs. Gajanana Enterprises. Additionally, the appellant highlighted that other parties involved in similar transactions treated the proceeds as capital gains, accepted by the Department, emphasizing the inconsistency in the treatment of the appellant's case.

Issue 2: Discrepancy in treatment of similar cases by the Department:
The Tribunal noted that the Department treated the gain from relinquishing land rights as capital gains in the cases of other individuals involved in the same transaction, except for the appellant. The Tribunal emphasized the lack of distinguishing features in the appellant's case compared to the others and stressed the importance of consistency in such assessments. It was highlighted that the appellant's transaction was a one-time event, and the Department failed to provide a valid reason for the differing treatment. Consequently, the Tribunal allowed the appeal based on the principle of consistency in treatment of similar cases.

In conclusion, the Tribunal set aside the assessment order, ruling in favor of the appellant due to the inconsistency in the Department's treatment of similar cases and the lack of evidence to support the classification of the gain as business income. The judgment emphasized the importance of uniformity in assessing transactions with identical factual backgrounds.