TaxTMI 
TaxTMI 
2021 (8) TMI 816
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....during the course of assessment proceedings, the Assessing Officer (AO) found that the assessee has purchased the vacant land admeasuring 10983 sq.yds along with other firm M/s Sai Infra by making equal contribution of investment i.e. Rs. 2,39,69,710/- out of the total consideration of Rs. 4,30,00,615/- including stamp duty at basic rate of Rs. 3641/- per sq.yd. The said land was retained for 34 months and later, both the co-owners have entered into partition deed in Financial Year 2013-14 and the assessee got 8105sq.yds and M/s Sai Infra got 2877 sq.yards towards their share. In partition, the assessee got excess land of 2613 sq.yds than the other coowner. The AO viewed the excess land of 2613 sq.yds, equivalent to the value of Rs. 3,19,68,000/- is the benefit received and chargeable to tax u/s 28(iv) of the Act. Accordingly, the AO issued show cause notice calling for explanation of the assessee and the assessee filed explanation stating that it has received the equal value of share of land and did not receive any excess value of land in market value. The assessee further stated that the land received by the assessee was surrounded by slums on both sides, low lying and uneven. Th....
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....12000/- and admitted the same as business income / capital gains which is more than the value adopted by the AO, hence, submitted that there is no loss of revenue. In this context, the assessee relied on the decision of CIT Vs. Triveni Engineering Industries Ltd. (2011) 336 ITR 374 (Bom), CIT Vs. Excel Industries (2013) 358 ITR 295 (SC), CIT Vs. Aditya Builders (2015) 378 ITR 75 (Bom), accordingly argued that there is no case for the revenue to tax the land received on partition u/s 28(iv) and no benefit was derived by the assessee. Having considered the submissions of the assessee, the Ld.CIT(A) agreed with the view of the assessee that the assessee did not receive any benefit to be taxed u/s 28(iv) of the Act and also given a finding that having held the land for more than 34 months and offered for taxation of the sale proceeds of the land received by the assessee, there is no loss of revenue. The Ld.CIT(A) relied on the decision of Hon'ble Supreme Court in the case of CIT Vs. Excel Industries (supra) and P.Krishna Menon Vs. CIT (1959) 35 ITR 48(SC), accordingly allowed the appeal of the assessee. 4. Aggrieved by the order of the Ld.CIT(A), the department is in appeal before thi....
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....ived the benefit from the business or exercise of profession. In this case, there was no business activity and both the co-owners have purchased the site and retained the same for 34 months as capital asset and divided the land as per the market value. Though the site received by the other co-owner was 2877sq.yds, it was covered by main roads in North and West and commercially advantageous. Therefore, other co-owner has given the excess share of land to the assessee to compensate the loss and market value of both the sites was more or less equal. Ld.AR argued that in partition, when the co-owners divide the land the same cannot be taxed u/s 28(iv) of the Act. The Ld.AR relied on the decision of Hon'ble High Court of Gujarat in the case of CIT Vs. BharatkumarR.Panchal, 252 ITR 0454 and taking our attention to para No.4 of the Hon'ble High Court's order, the Ld.AR argued that there is no case for applying the provision of clause(iv) of section 28 of the act, when the assessee received the asset on account of the separation of partnership. The Ld.AR argued that the Ld.CIT(A) rightly relied on the decision of CIT Vs. Excel Industries (2013) 358 ITR 295 (SC) and held that there is no lo....
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....in applying the section 28(iv) of the IT Act while making the addition on account of 'value of benefit arising from the receipt of land' by the appellant firm during the period of partition of the land under consideration. Section 28(iv) of the IT Act.1961 1) "The plain reading of Sec.28(iv) makes it clear that section 28 refers to the profits and gains& business or profession." It sets out the income which are chargeable to income-tax under the head profits and gains of business or profession" and clause (iv) thereto states that the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession. This provision shows conditions precedent for such taxability i.e. (1) that there should be benefits or perquisites; and that (ii) such benefits or perquisites should arise from the business or exercise of the profession. The expression 'arising from the business' essentially implies that the benefit or perquisite must be in the nature of a business receipt or revenue receipt. One must bear In mind the fact that section 28 only refers to the 'income' which can be charged to income tax under the head ....
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....loss. Since the assessee-firm is carrying out business in real estate, keeping in view the future development, agreed/accepted to acquire, even though, there are slums abetting the land on west, south and east sides. During the transaction, no cash or benefit or perquisite was received neither by the assessee nor by the other firm, it was only a partition. After holding more than 34 months, part of land was converted as stock-in-trade and sold along with built up space in the form of residential apartments. Balance part of the land was sold as investment and the appellant has offered taxes in the subsequent years, under the head capital gains and hence there is no loss of revenue." 6.2. During the course of appeal proceedings, the Ld.AR taking our attention to balance sheet, demonstrated that the subject property purchased along with the co-owner remained as capital asset and divided in partition between the co-owners. Both the co-owners have not carried on any business jointly. The said land was converted into stock-in-trade by the assessee after the partition and this fact was established by the assessee as per the sanction order for conversion of land which was obtained on 16.1....
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....i) that such benefits or perquisites should arise from the business or exercise of the profession. The expression 'arising from the business' essentially implies that the benefit or perquisite must be in the nature of a business receipt or revenue receipt. No matter how wide be the scope of Section 28(iv), the difference between a capital receipt and revenue receipt cannot be overlooked. In the case of Mahindra & Mahindra Ltd. v. CIT [2003] 261 ITR 501/128 Taxman 394, Hon'ble Bombay High Court has, in the context of this significant distinction between revenue and capital receipts, held that waiver of principal amount in respect of imports of plant and machinery could, by no stretch of logic, be treated as 'business income', and, therefore, as an income taxable under section 28(iv). One must bear in mind the fact that section 28 only refers to the "income" which can be charged to income tax under the head "profits and gains from business or profession", and, therefore, when a particular advantage, perquisite or receipt is not in the nature of income, there cannot be any occasion to bring the same to tax under section 28(iv). Hon'ble Supreme Court, in the cas....
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....ns in which capital receipts are specifically included in the definition of income such as under section 2(24)(vi)], and unless it is in nature of income, it cannot be considered for taxation under section 28(iv). The reference to benefits which can be brought to tax under section 28(iv) for benefits 'arising from the business' also indicates that such benefit must be a business receipt, or revenue receipt, in nature." 6.3. In the instant case there is no dispute that the land in question was purchased as capital asset and remained as capital asset till the partition. No business activity was carried on by the co-owners and the assessee has received the land on partition. The share of land received on partition cannot be treated as income arising from the business. As discussed earlier the asset was shown in the balance sheet as capital asset but not stock in trade. Thus the contention of the assessee that the excess land received in partition was not taxable u/s 28(iv) is also supported by the decisions referred supra. 6.4. Subsequent to taking the land on partition, the assessee has sold the property after the development and declared the average sale value of Rs. 24488....