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TMI Blog2015 (12) TMI 1797X X X X Extracts X X X X X X X X Extracts X X X X ..... reated as stock in trade. The detailed finding recorded by CIT(A) to the effect that land was held as investment, is as per material on record. We, therefore, do not find any reason to interfere in the findings of the CIT(A). Nothing was brought on record by DR to controvert the finding of the CIT(A). No reason to interfere in the findings of CIT(A) so as to tax the gain arising on sale of plot as capital gains rather than business income - Revenue is dismissed. - ITA no.337/Mum./2014 (Assessment Year : 2009-10) - - - Dated:- 16-12-2015 - Shri R.C. Sharma, And Shri Sandeep Gosain, JJ. Revenue By: Shri Shrikant Namdeo Assessee By: Shri Pradeep Kapasi ORDER R.C. sharma, This appeal filed by the Revenue is against the order of CIT(A) for assessment year 2004-05, in the matter of order passed u/s 143(3) of the Income Tax Act. 2. The only grievance of the Revenue relate to CIT(A) s action for allowing assessee s claim of Long Term Capital Gain on sale of land. 3. Rival contentions have been heard and record perused. Facts in brief are that assessee is a partnership firm engaged in the business of Buildin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licable legal position. 2.4.2 Ground No.1 is general in nature and is subsumed in Ground No.2 dealing with the treatment of LTCG as Business Income and denial of benefit of indexation etc. and hence, it need not be adjudicated separately. 2.4.3 Ground No.2 deals with the action of the Ld. A.O. in assessing the LTCG of ₹ 62,34,88,496/- on sale of plot of land as Business Income and not assessing the same at ₹ 66,53,72,212/-. The said ground is also against denying the benefit of indexation of cost of the said plot of land, disallowance of ₹ 8,45,506/incurred on the sale of the said plot of land and ultimately denying the benefit of concessional rate of taxation u/s.112 of the I.T. Act. 2.4.4 Ld. A.O while dealing with the same has made a detailed discussion and mainly based his decisions on the following grounds:- i) No documents were submitted in support of the claim that while purchasing the land in question in the year 1986 although the appellant wanted to develop one part of the said land, owing to the desire of the vendor to sell the land to the appellant in one piece, the whole land had to be purchased. (ii). A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... division of the land in two parts led the appellant firm to take a view that the undeveloped part of the land should be held as an investment. Even for sector A which was separately being developed by the appellant, CIDCO demanded a development charge of ₹ 30.13 lakhs which though appealed against was rejected by the Government of Maharashtra in the year 1993 further restricting the sale of the project. Later, draft development plan of CIDCO of 1998 provided for reservation of a large part of the appellant's land for construction of railway station. In view of these difficulties, the appellant firm passed accounting entries on 1.4.2000 to show in its books of accounts that the firm held the said part of land (sector B to G) as investment and ever since the said asset was being shown as investment. According to the Ld. AR, the fact that the assets had been held as investment was also examined in the past assessments of the firm particularly AY.2006-07 and 2008-09 where orders u/s.143(3) were passed. It has also been mentioned that during the course of assessment proceedings for AY.2008-09, an Inspector was entrusted to verify the correctness of the status of the land and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s about the intention of the appellant firm to hold a part of the land as investment, it passed accounting entries on 1.4.2000 to recognize the said land as an investment asset. This decision was taken in view of the fact that the said part of the land fell in CRZ and was no more in development zone together with the fact that permission for NA had lapsed way back in 1991 and MMRDA and CIDCO had made it impossible to carry out any development activities even in sector 'A' which was meant for business purpose. It was also pointed out that treatment of land as an investment was accepted by the Ld. AO in the past by way of speaking assessment orders u/s. 143(3) clearly confirming the intention of the appellant firm to hold the part of the land as investment asset. Regarding the accounting entries and their relevance, following have been brought to my attention:- i) The Supreme Court vide order dated 15.11.2010 dismissed the Department's Special Leave Petition against the judgment of the Bombay High Court in CIT vs. Gopal Purohit 228 CTR 582 (Bom) where it was held that entries in books of account have a bearing in determining the nature of income though not concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sset is held by an assessee as investment in the books of accounts, the gain arising on the transfer of said asset shall have to be treated as capital gains {Heritage Estate Pvt. Ltd. 213 CTR 275 (Bom)}. Similar view has been taken by the Hon'ble Mumbai Bench of ITAT in a number of decisions, some of which are delineated below:- i) J.M. Shares Stock Broker, 109 TT J 311 (Mum). ii) Management Structure Systems Pvt. Ltd., 41 DTR 426 (Mum). iii) Bharat Kunverji Kenia, 8 ITR (Trib.) 325 (Mum). 2.4.11 Reliance has also been placed on Circular No.4 of 2007 dt.15.06.2007 of CBDT where it has been held that an assessee is not prevented from converting the stock in trade into investment and holding the same as investment thereafter. It has also been mentioned that the entire land which was treated as investment has been sold as one block and hence, it cannot be also said that there was an intention to reap the benefits in part which could give a tint of business activity to the transaction carried out. As mentioned earlier, it has been reiterated that the appellant has no expertise to develop the land and even in resped of sector 'A' w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets held as investment. ii) Treatment in the books of accounts from 1.4.2000 completely removed any doubts whatsoever regarding the nature of the said asset as investment. iii) The said conversion of land into investment was accepted by the department after due verification u/s. 143(3) in AYs. 2006-07 and 2008- 09. iv) Statements of purchasers of land from the appellant were recorded by the Ld. A.O. who confirmed the fact that the land was non agricultural and that they had obtained N.A permission on their own after the sale of the land by the appellant firm. v) Role of consistency demanded that the investment in plot of land and the treatment in the books of accounts having been accepted in the past could not be suddenly changed without bringing anything on record. vi) Plots held for development purposes were shown separately in the appellant's Balance Sheet as WIP and the plots held for investment were shown as investment even in the balance sheets for A.Y.2006-07 to 2008-09. vii) The plots were always valued at cost year after year and not at cost or market price whichever was lower and hence, the same could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by assessee as investment, therefore, capital gain arose on its sale was correctly held by CIT(A) as capital gains. 7. On the other hand, ld.DR contended that assessee was in the business of construction and development and land was purchased for developing housing project, on part of the land assessee has developed a housing project income of which was offered as business income, therefore, assessee was not free to treat major part of the same land as investment. He contended that the AO has correctly computed the gain arising on sale of this land as business income. 8. We have considered rival contentions and carefully gone through the orders of the authorities below and also deliberated on the judicial pronouncements cited at bar in the context of factual matrix of the case. From the record we found that after purchase of land in the year 1986, the assessee had debited the cost of purchase of plot to the land account and not to the stock-in-trade account and had apportioned only that part of the land to the work-in-progress account which was intended to be developed and earmarked as Sector-A. On 1-4-2000 the assessee had also passed entries in its books of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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