, ""
IN THE INCOME TAX APPELLATE TRIBUNAL" F" BENCH, MUMBAI
BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, (JM)
.., ,
/I.T.A. No.1063/Mum/2014
( / Assessment Year : 2009-10)
Mr.Vinod D Motiwala, / Income Tax Officer 12(2)(3),
206, Jolly Bhavan, No.2, Aayakar Bhavan,
New Marine Lines,
Vs. Mumbai-400020
Mumbai-400020
( /Appellant) .. ( / Respondent)
./ ./PAN :AACPM2414Q
/ Applicant by Shri Dharmesh Shah
/ Assessee by Shri Abhinav Kumbhar
/ Date of Hearing : 26.10.2015
/Date of Pronouncement :26.10.2015
/ O R D E R
Per B.R.BASKARAN, Accountant Member:
The appeal of the assessee is directed against the order dated 09-
12-2013 passed by Ld CIT(A)-23, Mumbai for assessment year 2009-10.
The assessee is assailing the decision rendered by Ld CIT(A) affirming the
decision of the AO on the following issues:-
(a) Determination of rent at fair market value.
(b) Assessment of gains arising on sale of plot as business
income.
2. The assessee is an individual and filed his return of income declaring
a total income of Rs.24,69,360/-. The assessee had let out a property
having an extent of 400 Sq. Ft., for a monthly rent of Rs.20,000/- and
accordingly computed the income from house property. The AO made
2 ITA No.1063/Mum/2014
market enquiries and determined the annual letting value at Rs.6,89,325/-
and accordingly enhanced the income from house property. The assessee
had sold two plots during the year under consideration and declared long
term capital gain thereon at Rs.10,34,353/-. The assessee had also sold
one more plot along with super structure constructed thereon and
declared short term capital gain thereon at Rs.7,57,668/-. The AO noticed
that the assessee had purchased these plots as agricultural land, but did
not carry on any agricultural activity. Further, the assessee had purchased
these plots as a co-owner, i.e., jointly with other unrelated persons.
Hence, the AO took the view that the assessee had indulged in real estate
activities and accordingly assessed the capital gains, referred above, as
business income. The assessee could not succeed in the appeal filed
before Ld CIT(A) and hence the assessee has filed this appeal before us.
3. We heard the parties and perused the record. With regard to the
first issue relating to the determination of Annual letting value of the
property, both the parties agreed that the same requires fresh examination
at the end of the AO by duly considering the decision rendered by the
Hon'ble jurisdictional Bombay High Court in the case of Tip Top
Typography (2014)(368 ITR 330). Accordingly, we set aside the order of
Ld CIT(A) on this issue and restore the same to the file of the AO with the
direction to examine this issue afresh by following the decision rendered
by the Hon'ble jurisdictional Bombay High Court rendered in the case of
Tip Top Typography (supra).
4. The next issue relates to the assessment of capital gain arising on
sale of plots as business income of the assessee. We notice that the
assessee has been making investments in purchase of plots since 2006 at
periodic intervals. We further notice that the assessing officer himself has
observed that the assessee has held the plots as investment. The only
reason cited by the assessing officer was that the assessee did not carry
3 ITA No.1063/Mum/2014
on agricultural activities, though the plots have been purchased as
agricultural lands. Further the AO has noticed that the assessee has
carried out certain construction on a plot and sold the same. With these
observations, the AO has come to the conclusion that the intention of the
assessee was to act as trader in plots and not to act as investor. We
notice that the Ld CIT(A) has also confirmed the order of the AO accepting
the reasoning given by him.
5. We have noticed earlier that the AO has considered the fact that the
assessee did not carry on any agricultural activity. In our view, the
absence of agricultural activity cannot be considered to be the sole ground
to determine the intention of the assessee. The question relating to
presence or absence of agricultural activity may be relevant to determine
the character of land, but, in our view, the same may not be relevant to
determine the intention of the assessee to hold the same as investment or
as stock in trade. Similarly, the joint purchase of land cannot also be
considered to be the main determinative factor, since it is quiet normal to
make investments jointly with others. It is well settled proposition that the
intention of the assessee at the time of purchase of plot would determine
the nature of asset either as investment or as stock in trade. In the
instant case, the submission of the assessee is that these assets were
purchased by him to hold them as his investments. In our view, the
assessing officer is very much entitled to examine the veracity of the claim
of the assessee that he purchased the plots as investment on the basis of
his conduct and surrounding circumstances. However, the assessing
officer should contradict the claim of the assessee with proper reasoning
and material, if any.
6. We notice that the assessee has been holding various plots for quiet
a reasonable time and hence he has declared long term capital gain on
sale of two adjacent plots. We also notice that the assessee continues to
4 ITA No.1063/Mum/2014
hold other plots as his investments only. The long holding period, in our
view, supports the case of the assessee. Further, it is not shown to us
that the assessee has been indulging in repetitive transactions of purchase
and sale in plots. It was also not shown that the assessee has borrowed
funds for the purpose of purchasing plots. Since the AO has not brought
on record any valid reason to support his case, we are of the view that the
tax authorities are not justified in assessing the capital gain as his business
income. Hence, we are not able to agree with the view taken by the Ld
CIT(A) on this issue. Accordingly, we set aside the order of Ld CIT(A) on
this issue and direct the AO to assess the profit arising on sale of plots as
Capital gains.
7. In the result, the appeal filed by the assessee is treated as allowed
for statistical purposes.
Pronounced accordingly in the open court on 26th Oct, 2015.
th
26 Oct, 2015
Sd sd
( /SANJAY GARG) ( .. / B.R. BASKARAN)
/ JUDICIAL MEMBER / ACCOUNTANT MEMBER
Mumbai: 26 Oct, 2015
th
.../ SRL , Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A)- concerned
4. / CIT concerned
5. , , /
DR, ITAT, Mumbai concerned
6. / Guard file.
/ BY ORDER,
True copy
(Asstt. Registrar)
, /ITAT, Mumbai
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