×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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This appeal by the assessee is directed against the order passed by the CIT(A) on 26-06-2018 in relation to the assessment year 2014-15.
2. The only issue raised in this appeal is against the confirmation of addition of Rs.89,54,638/- towards long term capital gain and of Rs.1,42,43,500/- as business income on sale of land situated at Gut no. 123, Tisgaon Tal and Dist. Aurangabad.
3. Succinctly, the facts of the case are that the assessee along with certain other persons purchased a piece of land admeasuring 6100 sq. mtrs on 4.4.2003 at Gut No.123, Tisgaon, Waluj, Aurangabad, with her separate share at 66.67% coming to 4066 sq.mtrs. The assessee converted such land from capital asset to stock in trade in the Financial year 2010-11 relevant to the assessment year 2011-12 and computed deemed capital gain u/s.45(2) of the Income-tax Act, 1961 (hereinafter also called `the Act’) at Rs.89,54,638/-. Thereafter, a partnership firm with the name and style of M/s. Fulzan Properties was brought into existence by the assessee and her husband. The firm undertook construction of a project on the said land owned by the assessee and also simultaneously gave loan of Rs.3.86 crore to the assessee.
4. During the course of the assessment proceedings, the assessee was called upon to explain the nature of unsecured loan of Rs.3.86 crore taken from M/s. Fulzan Properties. She submitted that the partnership firm planned to set up a new Hotel project and for that purpose land at Gut No.123 belonging to her was used, on which the construction work was undertaken. The assessee claimed that the land continued to be her own stock in trade which was reflected in the balance sheet as such and not that of thepartnership firm. The Assessing Officer observed that M/s. Fulzan Properties had shown a sum of Rs.1.63 crore in its Balance sheet under the head Fixed Assets as “Gut No.123, Waluj” and capital work in progress of Rs.44,40,471/-. When further enquired, it transpired that M/s. Fulzan Properties started construction on the land belonging to the assessee which was also partly rented out. The AO opined that M/s. Fulzan Properties had acquired a right in the land owned by the assessee which was covered within the purview of the definition of `transfer’ u/s. 2(47)(vi) of the Act. He, therefore, held that income from such transfer was liable to be taxed in the hands of the assessee. Considering the fact that the assessee had herself computed deferred capital gain u/s.45(2) at Rs.89,54,638/- in her return for the A.Y. 2011-12 when the capital asset was converted into stock in trade, the AO computed business profit at Rs.1,42,43,500/-, being, the value adopted for stamp duty as on 01-04-2013 at Rs.4050 per sq.mtr on 6100 sq. mtrs as reduced by the market value considered on the date of conversion in the F.Y. 2010-11 at Rs.1.04 crore. He, therefore, added Rs.89,54,638/- as capital gain in the hands of assessee and a further sum of Rs.1.42 crore as business income on the transfer of such land to M/s. Fulzan Properties. The ld. CIT(A) echoed the assessment order on this point. The assessee is aggrieved by the decision of the ld. CIT(A).
5. We have heard the rival submissions and gone through the relevant material on record. It is an undisputed fact that the assessee purchased Gut no. 123 at Village Tisgaon, Waluj, Aurangabad on 04-04-2003 with a total area of 61R. This land was shown by her as a capital asset till the F.Y. 2010-11, when it was converted into stock in trade. Thereafter she continued to show the same land as stock in trade in her balance sheets including for the year underconsideration. No agreement was entered into with M/s. Fulzan Properties, a partnership firm in which the assessee is a partner along with her husband, for transferring the land to the firm. M/s. Fulzan Properties constructed building thereon and the only business activity carried on by the firm is to commercially exploit the property so constructed. A part of the building so constructed on the said land was let out by M/s Fulzan Properties to M/s Bhuvan, from which rental income to the tune of Rs.20.00 lakh was received and offered for taxation by the firm in its own return for the A.Y. 2013-14. Notwithstanding the above, it is clear from the above factual narration that the assessee did not legally transfer the ownership of land to M/s. Fulzan properties and simply gave its possession for constructing building thereon
6. At this juncture, it is relevant to note the judgment of Hon’ble Supreme Court in CIT Vs. Balbir Singh Maini (2017) 398 ITR 531 (SC) in which the issue was about the ambit of “transfer” u/s. 2(47) of the Act. While dealing with the issue, the Hon’ble Supreme Court has held that if an agreement for transfer of immovable property is not registered, it does not take effect and hence transfer of immovable property, otherwise than through a registered agreement, does not amount to `transfer’ u/s 53A of the TPA in view of the 2001 amendment and also simultaneous amendment to sections 17(1A) and 49 of the Registration Act, 1908. Their Lordships further observed in para 19 of the judgment that: `An agreement of sale which fulfilled the ingredients of Section 53A was not required to be executed through a registered