Shri. P. A. Ibrahim , Mangalore vs Department Of Income Tax

Date of hearing : 28.01.2015 Date of Pronouncement : 13.02.2015 ITA No.195/Bang/14 & WTA Nos.1 & 2/Bang/14 Page 2 of 6

ORDER

Per N.V. Vasudevan, Judicial Member

ITA 195/B/14 is an appeal for the A.Y. 2008-09 by the assessee and

WTA Nos. 1 & 2/B/14 are appeals for the A.Ys. 2006-07 & 2007-08 by the

Revenue. All these appeals are directed against the common order dated

25.11.2013 of the CIT(Appeals)-IV, Bangalore.

2. The facts and circumstances under which these appeals arise for

consideration are as follows. The assessee is an individual. He is a non-

resident. He owned 6.97 acres of land at Chellaghatta, Varthur Hobli,

Bangalore [hereinafter referred to as the "Chellaghatta property"]. He sold

this property by a registered sale deed dated 12.9.2007. He offered to tax

long term capital gains on sale of this property in the return of income filed

for the A.Y. 2008-09. In the proceedings concluded by the AO u/s. 143(3)

r.w.s. 263 of the Act, the question that arose for consideration was as to

whether income on sale of Chellaghatta property was to be assessed as

business income or as long term capital gains. The AO came to the

conclusion that Chellaghatta property was always treated as stock-in-trade

of business carried on by the assessee in the books of account and sale of

such land and gain arising therefrom will give rise to income under the

head 'income from business'. In coming to the above conclusion, the

Revenue authorities also took note of the fact that the property was

declared as stock-in-trade of business carried on by the assessee and for ITA No.195/Bang/14 & WTA Nos.1 & 2/Bang/14 Page 3 of 6

that reason, was not treated as part of taxable wealth in the return of wealth

tax returns filed by the assessee.

3. As far as proceedings under the Wealth-tax Act, 1957 are

concerned, the assessee did not declare the Chellaghatta property as part

of the taxable wealth as it was treated by him as stock-in-trade. For the

A.Ys. 2006-07 & 2007-08, the assessee filed return of wealth in which

Chellaghatta property was not offered to tax as part of net wealth.

Proceedings u/s. 16(1) r.w.s. 17 of the Wealth-tax Act, 1957 were initiated

against the assessee for the aforesaid assessment years. In response to

the notices u/s. 17 of the Wealth-tax Act, the assessee filed returns of

wealth in which Chellaghatta property was offered to tax as part of taxable

wealth of assessee. The assessee, however, did not declare sale

consideration of Rs.30 crores received by him, but declared only the

purchase cost of the said property at Rs.1,79,67,295.

4. In the proceedings concluded u/s. 16(3) of the Wealth-tax Act, the

WTO adopted the value of land of Chellaghatta property at

Rs.24,79,00,000 for A.Y. 2006-07 & Rs.27,27,00,000 for the A.Y. 2007-08.

The aforesaid values were arrived at by the WTO in the following manner:-

A.Y. 2006-07

"Sale consideration on 02.05.2007: Rs.30 crores.

Reckoning the appreciation in value at 10% p.a., which is normally considered by registration authorities while fixing the guidance value, the same reworked by reducing the valuation by ITA No.195/Bang/14 & WTA Nos.1 & 2/Bang/14 Page 4 of 6

10% p.a. for earlier years. Since the valuation date for the subject a.y. falls on 31.03.2006 the value of the asset works out to Rs.24,79,00,000/- considering the sale price of Rs.30 crores is enhanced value @ 10% from F.Y. 2005-06 (30 crores * 100/121)."

A.Y. 2006-07

"Sale consideration on 02.05.2007: Rs.30 crores.

Reckoning the appreciation in value at 10% p.a., which is normally considered by registration authorities while fixing the guidance value, the same reworked by reducing the valuation by 10% p.a. for earlier years. Since the valuation date for the subject a.y. falls on 31.03.2007 the value of the asset works out to Rs.27,27,00,000/- considering the sale price of Rs.30 crores is enhanced value @ 10% from F.Y. 2006-07 (30 crores * 100/110)."

5. Aggrieved by the orders of assessment both under the Income-tax

Act, 1961 treating the gain on sale of Chellaghatta property as giving rise to

income from business; and adopting the value of Chellaghatta land by the

process of reverse working from the sale consideration of Rs.30 crores for

the purpose of determining its value to be included in the net wealth in the

Wealth-tax proceedings, the assessee preferred appeals before the

Commissioner (Appeals).

6. The income-tax appeal as well as wealth-tax appeals were heard

together by CIT(Appeals). As far as income-tax appeal is concerned, the

CIT(A) concurred with the view of the AO and held that Chellaghatta

property was held as stock-in-trade of business carried on by the assessee

and therefore gain on sale of aforesaid property gives rise to income from ITA No.195/Bang/14 & WTA Nos.1 & 2/Bang/14 Page 5 of 6

business. As far as wealth-tax appeals are concerned, the CIT(A) came to

the conclusion that since the property has been held to be stock-in-trade of

the business of the assessee in income-tax proceedings, there was no

question of including the property as taxable wealth and accordingly the

assessment by including the value of property for the purpose of net wealth

in the wealth-tax proceedings, and as such wealth-tax assessments were

cancelled/annulled by the CIT(Appeals).

7. Aggrieved by the order of CIT(A) holding that Chellaghatta property

is part of stock-in-trade of business of the assessee and the gain on sale of

such property has to be assessed as income from business in A.Y. 2008-

09, the assessee has preferred appeal ITA No.195/B/14. Aggrieved by the

order of CIT(A) holding that Chellaghatta property is stock-in-trade and

therefore the same cannot form part of taxable wealth of the assessee in

wealth-tax proceedings for A.Ys. 2006-07 & 2007-08, the Revenue has

preferred wealth-tax appeals before the Tribunal.

8. At the time of hearing of the appeals, the assessee has filed a

memo which reads as follows:-

" The above appeal hearing is fixed on 13.11.2014 I may submit that I do not want to proceed with the appeal and I may inform that the appeal filed by me may be treated as withdrawn."

9. In view of the aforesaid memo filed by the assessee, the appeal by

the assessee in ITA No.195/B/14 is dismissed as not pressed. ITA No.195/Bang/14

& WTA Nos.1 & 2/Bang/14 Page 6 of 6

10. In view of the fact that the findings of the ld. CIT(Appeals) in

income-tax proceedings that Chellaghatta property is held as stock-in-trade

by the assessee and since that finding has now become final, Chellaghatta

property cannot be considered as forming part of net wealth of the

assessee. We hold accordingly. As such, the wealth-tax appeals by the

Revenue are also dismissed.

11. In the result, all the appeals are dismissed.

Pronounced in the open court on this day of February, 2015.

Sd/- Sd/-

( ABRAHAM P. GEORGE ) ( N.V. VASUDEVAN ) Accountant Member Judicial Member

Bangalore, Dated, the 13th February, 2015. /D S/

Copy to: 1. Appellant 2. Respondents 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file By order

Assistant Registrar / Senior Private Secretary ITAT, Bangalore.