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TMI Blog2021 (8) TMI 816X X X X Extracts X X X X X X X X Extracts X X X X ..... rred supra.6.4. Subsequent to taking the land on partition, the assessee has sold the property after the development and declared the average sale value of ₹ 24488/- per sq.yard which is more than the value adopted by the AO in the assessment. The reason for postponement of taxation was explained by the assessee as disadvantageous location for marketing. The Ld.CIT(A) followed the decision of Hon ble Supreme Court in the case of CIT Vs. Excel Industries . [ 2013 (10) TMI 324 - SUPREME COURT] and viewed that there was no loss of revenue. Therefore, we agree with the finding of the Ld.CIT(A) that the excess area of land received was not taxable u/s 28(iv) of the Act and there is no loss of revenue. Hence, we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. Appeal of the revenue is dismissed. - I.T.A.No.319/Viz/2018, Cross Objection No.68/Viz/2018 (Arising out of I.T.A.No.319/Viz/2018) - - - Dated:- 18-8-2021 - Shri N.K.Choudhry, Hon ble Judicial Member And Shri D.S. Sunder Singh, Hon ble Accountant Member For the Revenue : Shri D.K.Sonowal, CIT(DR) For the Assessee : Shri G.V.N.Hari, AR ORDER PER D.S.SUNDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being convinced with the explanation of the assessee, the AO made addition of ₹ 3,19,68,000/- representing the value of excess land received by the assessee to the extent of 2613 sq.yds valuing the same at ₹ 12,000/- per sq.yd as per the SRO and accordingly taxed the sum of ₹ 3,19,68,000/- u/s 28(iv) of the Act. 3. Against the order of the AO, the assessee went on appeal before the CIT(A) and argued that the assessee has not received any benefit or perquisite which required to be taxed u/s 28(iv) of the Act. Section 28(iv) applies to the perquisite or the value of benefit received in connection with the business carried on by the assessee and whereas in the instant case, the assessee along with other co-owner have purchased the piece of land which was retained as capital asset and divided the same equally among both the partners as per the market value of the land, thus, there is no benefit either accrued or received by the assessee to attract section 28(iv) of the Act. 3.1. The assessee further stated that the land was purchased as investment and divided between both the co-owners and the value of the land received by the co-owners are more or less equal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent sale of land at higher rate also supports contention of the revenue. The assessee deemed to have commenced the business, no sooner the land was purchased and it was purchased with an intention to do business, therefore, argued that the land in question received by the assessee was the business asset, but not capital asset and hence the excess value of land required to be treated as benefit received u/s 28(iv) of the Act. The Ld.DR further argued that the observation of the Ld.CIT(A) that it was only preponement of incidence of taxation is contrary to the provision of the Income Tax Act, when the benefit was already received by the assessee as on the date of partition deed. The Ld.DR further stated that each assessment year is independent, therefore, income is to be computed each year independently, thus the contention of the Ld.CIT(A) that there was no loss of revenue due to postponement of incidence of tax was incorrect and hence requested to set aside the order of the Ld.CIT(A) and allow the appeal of the Revenue. 5. Per contra, the Ld.AR reiterated the submissions made before the Ld.CIT(A) and further submitted that both the parties are not related, and hence, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion to page No.48 of the paper book, the Ld.AR submitted that the proposal for construction of residential apartment was received on 16.12.2013, where as the partition deed was entered on 21.10.2013, i.e. after the land was divided among the co-owners. The assessee also submitted that the land in question was never shown as business asset and it was shown as capital asset from the date of purchase. The Ld.AR argued that the Ld.CIT(A) has rightly held that the provisions of section 28(iv) are not applicable and no case for taxing the same u/s 28(iv) of the Act and hence, requested to uphold the order of the Ld.CIT(A) and no interference is called for. 6. We have heard both the parties and perused the material placed on record. The AO made the addition in this case, invoking the provisions of section 28(iv) of the Act. Section 28(iv) envisages to tax the benefit or the perquisite arising from the business or exercise of profession. The benefit must accrue or arise in the course of carrying on such business. For the sake of clarity we extract relevant part of 28(iv) of the Act which reads as under : Profits and gains of business or profession. 28. The following income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the context of section 28(iv) contemplates not some connection with the business undertaking of the assessee but it envisages that the benefit or perquisite must arise out from actual conduct of the business of the assessee. In other words, before sub-section (iv) of Sec28 is invoked it is necessary to show and prove the proximate cause or nexus between the alleged benefit or perquisite and the business actually carried on by the assessee. The nexus or the proximate cause must be real, immediate and not illusionary or imaginary. The benefit or perquisite contemplated by Sec.28(iv) must necessarily have a live connection with the business carried on by the assessee and the benefit must accrue or arise in the course of carrying on of such business. The benefit or perquisite should be in the nature of trade receipt. 3) The future gain or benefit when actually denied by the assessee, the same certainly will be assessed as business income and only because a transaction now undertaken will bring more commercial gain or benefit to the assessee in future does not entitle to treat the present transaction itself as benefit or perquisite arising from business and bring the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee as a partner in the erstwhile partnership, on separation of some of the partners, cannot be described as a benefit or perquisite having arisen from the business or the exercise of a profession. The amount has been received by the assessee when four of his partners separated from the erstwhile partnership and shares of erstwhile partners in that firm were divided along with the assets . Though the decision was rendered in connection with the partnership firm the same is equally applies to this case, since the capital asset was divided on partition of co-ownership. The coordinate bench of ITAT, Kolakata in Income-tax Officer, Ward 7(3), Kolkata.v.Shreyans Investments (P.) Ltd. [2013] 31 taxmann.com 11 (Kolkata - Trib.)has considered the issue of taxing the capital receipt u/s 28(iv) and given ruling that unless it is a revenue receipt, it cannot be in the nature of income [except in a situations in which capital receipts are specifically included in the definition of income such as under section 2(24)(vi)], and unless it is in nature of income, it cannot be considered for taxation under section 28(iv) of the act . For the sake of clarity we, extract relevant part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, in principle, is outside the scope of income chargeable to tax. Of course, there are specific provisions under the Income Tax Act which provide that certain capital receipts can also be considered as income, such as under section 2 (24)(vi) which covers any capital gains chargeable under section 45 , but right now we are confined to normal connotations of the expression 'income'. Howsoever liberal or narrow be the interpretation of expression 'income', it cannot alter character of a receipt, i.e. convert a capital receipt into revenue receipt or vice versa. The crucial distinction between capital and revenue cannot be blurred or nullified by even the most liberal interpretation of expression 'income'. It is also important to bear in mind that, as held by Hon'ble Supreme Court in the case of Dr K George Thomas v. CIT [1985] 156 ITR 412/23 Taxman 46, the burden is on the revenue to establish that the receipt is of a revenue nature though once a receipt is found to be of revenue character, whether it comes under exemption or not, it is for the revenue to establish . It is thus clear that capital receipts are inherently outside the scope of an income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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