2017 (4) TMI 180 - HC - Income Tax

Addition on account of short-term capital gains - ownership of land - whether only for convenience the land was purchased in the name of the director otherwise it has been accounted for by the company? - Held that - The sale deed was executed by the assessee in respect of Khasra No. 6/1 and 6/4 at village Basda Alias for and on behalf of M/s. Grass Field Farms and Resorts Pvt. Ltd. and the said amount was shown as stock in the books of M/s. Grass Field Farms and Resorts Pvt. Ltd. as on March 31, 2008 and not only this, the limited company had also made a surrender in the survey conducted on February 28, 2008 and the sale proceeds of the said land at ₹ 1,51,80,000 is duly recorded in the books of account of the company and business profit has been offered to tax in the case of the company. On perusal of the material available on record, it is also noticed that the limited company, namely, M/s. Grass Field Farms and Resorts Pvt. Ltd. sold this land to another limited company namely; Grass Field Fire Capital Developers Private Limited on August 5, 2008 for ₹ 1,51,80,000 where also the assessee executed sale deed as an agent for and on behalf of M/s. Grass Field Farms and Resorts Pvt. Ltd. and even the Commissioner of Income-tax (Appeals) and the Tribunal have found that the sale amount is duly recorded in the books of M/s. Grass Field Farms and Resorts Pvt. Ltd. It is also a fact that even a certificate of the company was placed on record confirming ownership of the land before the Assessing Officer himself. There can be no two owners and in the instant case, from the material placed by the assessee and considered by both the appellate authorities, it clearly proves that the assessee being a director executed title deeds for and on behalf of M/s. Grass Field Farms and Resorts Pvt. Ltd. and the beneficial owner for all practical purposes was the limited company which had even paid due taxes later on at the time when the property was sold. - Decided in favour of assessee.

Summary

Issues:
Income tax appeal under section 260A challenging order of Income-tax Appellate Tribunal regarding short-term capital gains assessment for the assessment year 2009-10.

Analysis:
The appellant-Revenue appealed against the Income-tax Appellate Tribunal's order concerning the short-term capital gains assessment for the assessment year 2009-10. The respondent-assessee, a director of private limited companies engaged in real estate business, sold land to a company where the assessee was also a director. The Assessing Officer considered the gain as short-term capital gains, but the assessee argued that the land was purchased for the company's use. The Commissioner of Income-tax (Appeals) accepted the assessee's contention, noting the transaction was recorded in the company's books. The Tribunal also dismissed the Revenue's appeal.

The appellant contended that the sale deed was in the assessee's name, without mentioning the company, and argued insufficient evidence was provided. However, both appellate authorities found the land was purchased by the company for business purposes and accounted for in its books. The Tribunal highlighted the survey operation at the company's premises, revealing unaccounted payments and inventory of land transactions. The Tribunal relied on apex court judgments emphasizing the real beneficial owner over legal ownership.

The apex court judgments clarified the concept of "owner" in income tax provisions, emphasizing entitlement to receive income. They also emphasized dominion over the property and actual use for business purposes to determine ownership for depreciation claims. These judgments supported the assessee's position that the company was the beneficial owner, as evidenced by the transaction details and tax payments made by the company upon selling the land.

In conclusion, the Tribunal's finding was based on evidence and did not raise any legal questions for review. The court found no grounds to interfere with the Tribunal's decision, ultimately dismissing the appeal for lack of merit.