9911796707
TMI Blog2023 (9) TMI 1532X X X X Extracts X X X X X X X X Extracts X X X X ..... No. S.R./4/2006-07 land/D/VASHI/1355/2008 dated 27/05/2008 and taken the permission for construction from Vadodra Municipal Corporation on 26.08.2008. The assessee also got his lay out map. Assessee entered into development agreement with the company M/s Mahindra Patel Builders Private Limited on 08.04.2013 and given the land for development. The assessee has claimed that permission for construction was revised on 23.07.2012. The assessee had converted the land use from agricultural to non-agricultural, and paid the prescribed requisite fee including the betterment charges, development charges, scrutiny charges, mapping fees, zoning certificate fees and sketch plan and other charges. AO observed that the land was purchased, and subsequently substantial expenses were incurred for improvement to make it useful for business purposes and to exploit it in commercial way. The department has claimed that the payments for sale of land was not received immediately on development agreement entered into by the assessee on 08.04.2013 , but were received in 20 months and the assessee shared the risk with developer, while the assessee is claiming that the entire consideration was received in on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn of income under section 139(1) on 28.09.2014 declaring total income of Rs. 4,11,94,876/-. The case of the assessee was selected for framing scrutiny assessment under section 143(2) r.w.s. 143(3) of the 1961 Act. Statutory notices were issued from time to time, and the assessee participated in assessment proceedings. During the course of assessment proceedings, the AO observed that the assessee claimed to have earned long term capital gain of Rs. 3,20,56,598/- on sale of land bearing revenue survey no. 1915, City survey No. 1793/2, Final plot no. 112 of the proposed T.P. Scheme No. 63. This capital gain represents the sum of Rs. 3,33,54,750/- received by him after deducting the cost of acquisition of Rs. 12,98,152/-. The AO asked assessee to furnish necessary supporting documents including purchase and sale deeds, working of the indexed cost of acquisition etc.. The assessee submitted copies of purchase deed of impugned property and development agreement made with M/s Mahendra Patel Builders Pvt. Ltd. i.e. developer of the impugned land from whom the total sale amount of Rs. 6,71,20,500/- was received by the assessee jointly with his brother Sh. Bipin Chaturbhai Patel, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y survey No.1793/2, Final Plot no.112 of the proposed T.P. Scheme NO.63. As per the records, you have purchased the above plots of land vide purchase deed dated 01.09.2001 vide registration no.2463-13/14/2002 sub registrar, Vadodara 4, gorwa. You got the category of the above land converted from 'agriculture' to 'non-agriculture' vide collectors order no. S.R./4/2006-2007, No. land/D/Vashi/1355/2008 dated 27.05.2008 and taken the permission for construction by Vadodara Municipal corporation on 26.08.2008 which was revised on 23.07.2012. As per the Development agreement dated 08.04.2013 made by M/s. Mahendra Patel Builders private Limited with you, you have given the land to develop admeasuring to 4629 sq. which includes 4553 sq.mt as N.A. Land The above transaction was decided for sum of Rs. 6,66,20,500 +5,00,000/-= Rs. 6,71,20,500/- out of which an amount of Rs. 5 lac has been received jointly by you and balance as per the agreement within 19 month approx. On the basis of the same, you have jointly received Rs. 6,71,20,500/- during the year under assessment and shown the above income as L.T.C.G. on the same. 3. In this matter, it is important to state that the whol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- Date Fact 19.06.1992 You became the Managing Director of M/s Mahendera Patel Builders P. Ltd. 1.9.2001 You purchased the impugned agricultural land in your individual capacity jointly with your brother vide registration no. 2463-13/14/2002 registered by the sub registrar, Vadodara-4 On your application, the impugned agricultural land is ordered to be converted into Non Agricultural land vide collector s order no. S.R./4/2006-2007, No. land/D/Vashi/1355/2008 dated 27.05.2008 26.8.2008 You obtained the requisite permission of Vadodara Municipal Corporation for developing the land as a commercial property. Copy of the permission is annexed herewith as Annexure-A 23.07.2012 The permission obtained on 26-8-2008 is revised on the application of the assessee 8.4.2013 You enter into a Development Agreement with M/s. Mahendera Patel Builders P. Ltd. (The entity in which you are the Managing Director and enjoy substantial interest) and confers the right to develop the impugned land and receive the sum of Rs. 6,71,29,500/- jointly with your brother 28.09.2014 The corresponding return of income is filed treating therein the income representing the sum received from the builder as Long Term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade, commerce or manufacture; 9. Accordingly, the undersigned is of the opinion that your income of Rs 3,20,56,598/- against granting and/or transferring development right in respect of the impugned plot of land constitute your income from business or profession chargeable to Income- tax u/s 28 of the Act as against your claim of treating it as Long Term Capital Gains. 10. You are hereby given an opportunity to show cause as to why the aforesaid income be not included in your Total Income as Profits and Gains of business or profession. You may file your written reply duly supported by cogent documentary evidences including certified copies of all the sale deeds, agreements with all the annexure thereto on 26-8- 2016 at 11-00 am either personally or through a duly authorized representative. 11. In case no reply is preferred on the given date and time, the undersigned shall be constrained to arrive at the conclusion that you have no objection to the proposed addition and the assessment order shall be passed accordingly without any further opportunity. 12. Notice u/s 142(1) of the Act is enclosed herewith for statutory purposes. 3.4 The assessee, in response to SCN, submitted befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... native plea, it was submitted that if the income is to be treated as business income, then the expenditure incurred towards such business income should be allowed as deduction on same principles. The assessee relied upon the decision in the case of CIT v. Jalannagar Tea Estate Private Limited 45 ITR 626(Assam). The assessee submitted that he does not have his own business and has not shown as stock in trade. The assessee relied upon the decision in the case of ITO v. Sitaram Chamaria (2006) 6 SOT 594(Bom.) The assessee referred to the provisions of Section 45 and 2(47)(v) of the 1961 Act as well to provisions of Section 53A of The Transfer of Property Act, 1882. 3.5 The AO rejected the contentions of the assessee. The AO observed that immediately after purchase of the agriculture land in 2001 bearing survey no. 1915, City survey no. 1793/2, Final plot no. 112 of the proposed T.P. Scheme No. 63 vide registration no. 2463 with Sub Registrar, Baroda on 13.04.2002, the assessee applied for getting non-agriculture(NA) permission from the Collector s Order No. S.R./4/2006-07 land/D/Vashi/1355/2008 dated 27.08.2008 , and was granted permission for construction by Vadodara Municipal Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce , the directors of the company purchase the land in their name and later they do development agreement with the company in order to avoid paying taxes at a higher rate of 30%. The AO referred to the decision of Hon ble Supreme Court in the case of CIT v. Sutlej Cotton Mills Supply Agency Ltd. (1975) 100 ITR 706(SC). The AO was of the view that it was adventure in the nature of trade. The contention of the assessee was rejected by the AO that land was acquired mainly for the purpose of getting capital appreciation. The AO observed that even after transferring the rights in the land , the assessee deferred the receipt from sale of land to more than 20 months and the assessee is sharing the risk with the developers. The AO referred to clause 14 of the agreement, that if the full amount in respect of land is not received till the time frame mentioned in the agreement, seller is free to start proceeding to cancel the agreement, and the assessee was sharing the risk with the developer. The AO observed that it is not necessary that there should be a series of transactions to constitute adventure in the nature of trade , and even a single transaction is sufficient to be categorized as b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 4,68,550/-. Therefore, in view of the reasons mentioned above as also the reasons recorded by the Assessing Officer, the transaction of purchase and sale of land under consideration was nothing but an adventure in the nature of trade. 4.2.1. It is worthwhile to mention here that the Hon'ble Supreme Court in the case of Raja J. Rameshwar Rao Vs. CIT, 42 ITR 179 (SC) has categorically held that when a person acquires land with a view to selling it later after developing the same, he is carrying an activity resulting in profit and hence such activity can only be described as a business venture. Hon'ble ITAT (Third Member Bench) in the case of Vitta Kristappa Vs. ITO (2005) 92 ITD 1 (Hyd.) (TM) has held that when land was purchased and sold under a well-thought scheme to make profit, it was a clear case of adventure in nature of trade . The ratio laid down in these cases, very clearly support the case of revenue that the transaction of purchase and sale of land under a pre-planned scheme of earning huge profit by the appellant was nothing but an adventure in the nature of trade . Accordingly, I hold that the Assessing Officer has rightly assessed the profit from sale of la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed upon by the Ld. Authorized Representative are of no help to the assessee-appellant. 4.2.4. The Ld. Authorized Representative has also raised an alternative argument that the expenses incurred on conversion of land and obtaining approval from Vadodara Municipal Corporation, should be allowed as deduction. In this regard, I find that neither at assessment stage nor at appellate stage, the appellant has furnished details of such expenses along with source thereof. Thus, for want of proper details and evidences, no relief on this account can be allowed to the appellant. 4.3. In view of the above factual and legal position, the action of the Assessing Officer in treating the purchase and sale of land as adventure in the nature of trade and then assessing the income as business income is confirmed. Thus, Ground No. 2 is dismissed. 5. Aggrieved by the decision of ld. CIT(A) , the assessee has filed second appeal with Tribunal. The learned counsel for the assessee opened argument before the Bench. The ld. Counsel for the assessee drew our attention to assessment order as well as to the appellate order passed by learned CIT(A). It was submitted that the assessee is the co-owner of the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Managing Director of M/s Mahendra Patel Builders Private Limited. The case of the assessee was selected by Revenue for framing scrutiny assessment u/s. 143(2) read with Section 143(3) . Statutory notices were issued by the AO. The assessee participated in assessment proceedings. The assessee has sold land bearing revenue survey no. 1915, City survey No. 1793/2, Final plot no. 112 of the proposed T.P. Scheme No. 63 for Rs. 3,33,54,750/- and after deducting cost of acquisition of Rs. 12,98,152/-, and has declared long term capital gains of Rs. 3,20,56,598/- and paid taxes to Revenue. The assessee is co-owner of the land holding 50% share , wherein his brother Mr. Bipinbhai Chaturbhai Patel is also co-owner of the said land holding 50% share. Both the brothers sold their share of aforesaid land to M/s Mahendra Patel Builders Private Limited. The assessee is Managing Director of M/s Mahendra Patel Builders Private Limited, while as per facts emerging from records, the brother of the assessee namely Mr. Bipinbhai Chaturbhai Patel is farmer( contentions of the tax-payer namely Mr. Bipinbhai Chaturbhai Patel recorded in para 3.1 of ld. PCIT order dated 28.03.2019 passed u/s 263). As per f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reference is drawn to the decision of Hon ble Supreme Court in the case of CIT v. Sutlej Mills Agency Limited (1975) 100 ITR 706(SC). In the instant case, it transpires that the assessee is Managing Director of the Company M/s Mahindra Patel Builders Private Limited, since 1992. The said company is engaged in building/construction activities, while the brother of the assessee namely Mr. Bipin Chaturbhai Patel who happens to be co-owner with assessee holding 50% share in the said land is admittedly a farmer. Thus, the facts are distinguishable. Now, coming to the background of the land of which the assessee is co-owner with his brother Mr. Bipinbhai Chaturbhai Patel , both holding 50% share each in the aforesaid land .The said land was admittedly acquired in 2001. The said land was agricultural land, and it is an admitted position that no agriculture activities were ever carried on in the said land since it was acquired in 2001 by the assessee and his brother, both as co-owner. The assessee applied for getting NA(Non agriculture ) permission from Collector order No. S.R./4/2006-07 land/D/VASHI/1355/2008 dated 27/05/2008 and taken the permission for construction from Vadodra Municip ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
