TaxTMI 
TaxTMI 
2014 (2) TMI 744
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.... and therefore the grounds are reproduced from ITA No.2530/Ahd/2012 (in the case of Mohanbhai N. Turakhiya) which read as under:- "1(i) On the facts and in the circumstances of the case and in law, the ld.CIT(Appeals) erred in holding that since the assessee had dealings in land even gain on sale of Sayajipura land should be considered as business income without appreciating that the transaction of Sayajipura land stands on different footings, in so far as it was purchased along with 6 other persons and could not have been part of assessee's trading stock. 1(ii) The ld.CIT(A) further erred in not appreciating that out of the 5 purchasers, 3 had shown short term capital gains on sale of this land and sale of composite land cannot be partly treated as capital gain and partly as business income. 1(iii) Without prejudice to the above, the ld.CIT(A) further erred in not appreciating that the assessee had not raised ground about the Assessing Officer's finding in respect of other 4 lands viz. Bopod, Jamba, Maretha and Metri Corporation land and, therefore, this cannot be the ground for deleting the additi....
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....h the same Assessing Officer. The details of income shown from sale of this land by these assessees are as under: Sr. No . Name of the assessee Income shown Shown as 1 Shri Dharamsinh Narsinbhai Prajapati Rs.136,34,800/- STCG 2 Shri Jivarajbhai Narsinbhai Turkhiya Rs.1,03,72,400 Business income 3 Shri Mohanbha Narsinbhai Turkhiya Rs.88,35,200/- Business income 4 Shri Kishor Dharmsinh Prajapati Rs.1,09,60,400 STCG 5 Shri Harjivanbhai Ramjibhai Mistry Rs.1,19,58,312 STCG 3.1.3 Upon enquiry by the Assessing Officer it was intimated by the Sub-Registrar that the stamp duty valuation of the property sold was Rs.8,56,89,700/-. The assessee was requested to explain as to why valuation of property should not be adopted at Rs.8,56,89,700/- by invoking the provisions of section50C of the Act. In response the assessee claimed that the gain arising out of the said transaction should be assessed as business income as he was in the business of dealing in land and sale consideration received is the document price only. The assessee also claimed that section 50C does not apply to business incomes. ....
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....s business income and consequently provisions of section 50C cannot be invoked. He further held that the percentage of these assessee's in the sale proceeds as per sale-deed of Rs.768.63 lacs has to be 14% in the case of Shri Jivrajbhai N.Turakhiya and 12% in the case of Shri Mohanbhai N.Turakhiya as against 20% of each of these two was considered by the AO. Now, the Revenue is in appeals before us on both these aspects. 4. The ld. Sr. DR of the Revenue has supported the assessment orders, whereas ld.AR of the assessee has supported the orders of the ld.CIT(A). He also submitted that in earlier years also, the assessee declared the profit on sale of land as business income and the same was accepted by the Revenue. He drawn our attention to the copies of balance-sheet and P&L account filed with returns of income for preceding two years, i.e. AYs 2007-08 & 2008-09. He also submitted that in the present year also, other lands were also sold by these assessees resulting into profit but the AO has not disputed in respect of these properties that profit on sale of those properties is not business income but capital gain and the dispute was raised by the AO only for this property which....
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....ear is available on page 15 of the paper-book and in this year, it is seen that the assessee has shown profits on account of sale of five lands including this land, i.e. the land at Survey No.607 for which dispute is before us. 5.1 In respect of other four lands which were sold by the assessee in present year, the assessee could not show that the jantri price of these lands were more than the declared sale value. This is also not the case of the assessee that any land was sold after three years resulting into long-term capital gain. The tax rate for business profit and short-term capital gain is same and if the jantri price is not more than the sale price, then no adjustment in income is called for with regard to sale of land even if it is assessed as short-term capital gain as against business profit declared by the assessee and, therefore, it cannot be a guiding factor that the AO had not disputed the claim of the assessee regarding business income in respect of four other lands in the present year. This is also worth noting that in the P&L account also, the assessee had not shown opening stock, sale and closing stock. Rather, the assessee has shown "profit on sale of other in....
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....bhai N. Turakhiya. As per the P&L account of this assessee for AY 2007-08, which is available on page No.5 of the paper-book, it is seen that there is no sale of land in this year. The P&L account of this assessee for AY 2008-09 is available page No.9 of the paper-book and from the same, it is seen that the assessee has declared a profit of Rs.894,973/- on account of sale of Maretha Survey No.38/1 and he has also declared profit of Rs.40,000/- on account of sale of Vemali Survey No.182A Paiki. The profit in respect of these two lands sale was disclosed by the assessee under the head "income from business" and although the assessment for AY 2008-09 of this assessee was completed by the AO u/s.143(3) of the Act and the income as per return was accepted by the AO but there is no discussion in the assessment order regarding this aspect as to whether the profit on sale of land is assessable as capital gain or business profit. This is also not shown to us that any query was raised by the A.O. in that year on this aspect. Hence, it cannot be said that any opinion was formed by the A.O. The assessee has not brought any material on record to show that jantri price of these two lands sold by....
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....s as a business asset and the same was acquired as a capital asset for earning capital gain. We, therefore, reverse the order of the ld.CIT(A) on this issue in both the cases and restore that of the AO. 6. Now the second aspect to be decided by us is this as to whether the profit on sale of land is to be distributed among the five co-owners in whose name the land was registered in equal proportion or such profit is to be assessed to the extent of 14% and 12% in these two cases as has been claimed by the assessee on the basis of Memorandum of Understanding(MOU). In this regard, we examine the various deeds and MOU. The copy of purchase-deed is available at page Nos.18 to 38 of the paper-book and its English version is available on page Nos.39 to 75 of the paper-book. This purchase-deed is dated 15/05/2006 and as per this purchase-deed, seven persons jointly purchased this property for a sum of Rs.18 lacs and no percentage of holding of each person is specified in this purchase-deed; meaning thereby that each of the purchaser were having equal right in the property. Subsequently deed of rectification was executed on 15/07/2006, copy of which is available on pager Nos.76 to 79 of t....