TaxTMI 
TaxTMI 
2019 (1) TMI 1987
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....ion and was also engaged in breeding, owning and maintaining of race horses and civil construction. Rajah Sir Annamalai Chettiar of Chettinad, the assessee's paternal grandfather under his Will dated 04.03.1948 bequeathed the land in RS No. 4288/2 in favour of his first son Dr. Rajah Sir M.A. Muthiah Chettiar who is assessee's father. Dr. Rajah Sir Muthiah Chettiar died on 12.05.1984 and on his death, the land in RS No. 4288/2 devolved on the assessee and on his brother's family. Assessee's brother Kumararajah M.A.Muthiah Chettiar died on 24.01.1970 and therefore his interest devolved on his wife Mrs Kumararani Dr. Meena Muthiah and his adopted son Mr. M.A.M.M. Annamalai. Thus, the assessee and his brother's family became the owners of the land in RS No 4288/2. They decided to develop the lands by putting up multistoreyed buildings (flats) in the name and style of "Rani Meyyammai Towers". By an agreement of division dated 14.04.1994, they provisionally bifurcated the lands equally. The assessee started constructing flats on his land in the name of Rani Meyyammai Towers Phase-1,but his brother's family wanted the land to be jointly developed. A dispute arose and the assessee got an ....
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....of the AO. The appellant obtained the land relating to RMT-ll on partition. The fact that he got a bigger share of land for which he paid owelty of Rs.50 crores would not alter the nature of partition into purchase. After considering the entire facts, I am of the considered opinion that the land allotted on partition is a long-term capital assets devolved on the assessee from his grandfather and father. The asset was a long- term asset. Therefore, the AO is directed to assess the gain on sale of undivided share of land as long-term capital gain after verifying the computation as given above. Accordingly, the ground is allowed for statistical purpose". 3. Further, during the remand proceedings in connection with ay 2008-09, the AO has raised a new issue and requested the CIT(A) for making an enhancement of income. The relevant part is as under:- "5.1 The assessment had failed to disallow the below narrated claim of expenditure. The taxable income of the assessee comprises gains from construction activity, betting activities in horse racing which is adjusted against loss from breeding activities. The expenditure for the year in the activity of breeding horses is ....
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.... appreciated that the assessee's treatment of bifurcating the sale proceeds of project RMT I , (profits of sale of land offered under LTCG and the profits on sale of flats offered as business profits) were accepted since the land comprised in project RMT I were inherited by the assessee. The CIT(A) ought to have further appreciated that however in respect of RMT II, the land and semi-finished building was acquired at a cost of about Rs.82 crores and though the scheme of arrangement is titled as partition, going by the facts of the case, the channel by which the assessee acquired the property cannot in any way categorized as partition. 2.5 The CIT(A) ought to have appreciated that by the partition, a distinct and clear apportionment of the property were made and the subsequent arrangement in order to take over the land and the unfinished building cannot be stated to be partition and consequently it does not fall under the exclusions provided in sec.49(1) and therefore, the cost of previous owner or the value as at 1.4.1981 cannot determine the cost for the present owner, i.e., the assessee. 2.6 It is submitted that Dr. Meena Muthiah and her son M.A.M.M.Annamalai ha....
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....d in holding that the land comprised in the project 'RMT Phase II' is a capital asset and the gain out of the sale of the same should be treated as capital gains. 2.2. The CIT(A) ought to have appreciated that the assessee's treatment of bifurcating the sale proceeds of project RMT I , (profits of sale of land offered under LTCG and the profits on sale of flats offered as business profits) were accepted since the land comprised in project RMT I were inherited by the assessee. 2.3 The CIT(A) failed to appreciate that unlike project RMT I, in respect of RMT II, the land and semi4inished building was acquired at a cost of about Rs.82 crores and though the scheme of arrangement is titled as partition, going by the facts of the case, the channel by which the assessee acquired the property cannot in any way categorized as partition. 2.4. The CIT(A) ought to have appreciated that when the mode of acquiring the property could not be termed as partition, it does not fall under the exclusions provided in sec.49(1) and therefore, the cost of previous owner or the value as at 1.4.1981 cannot determine the cost for the present owner, i.e., the assessee. 2.5. ....
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..... DR pleaded on the lines of grounds of appeal extracted, supra. Per contra, the Ld. AR invited our attention to the relevant portion of the order of the Ld. CIT(A) which is extracted as under: "6.1 The ld.AR has strongly contested the above suggestion for enhancement and stated that all the activities relating to horses/foals have been considered as a single activity by the Hon'ble ITAT in appellant's own case for AY 2003-04 in ITA No. 13/2007 dated 11.01.2000 and ITA Nos. 800,801,802 & 2346 of 1991 dated 28.03.2002 and the observation of the ITAT is very clear that the loss or gain in this activity should be assessed as commercial activity in horse racing business. The ld.AR argued that the foals, which are young, have no values. The value of these foals and horses depend upon its performances in races and unless they are sold and proceeds realized, they do not have any value except that they are held as assets for pride of possession. He also relied on the decision of the Hon'ble Delhi High Court in CIT v. Usha Stud and Agriculture Farm Pvt. Ltd (276 ITR 25) wherein it was held that the value of expenditure actually incurred in any year is to be allowed and the consider....