Ita/88/2015 Of V.a.jose v. The Deputy Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN &THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY, THE 7TH DAY OF DECEMBER 2017/16TH AGRAHAYANA, 1939ITA.No. 88 of 2015------------------- AGAINST THE ORDER IN ITA 484/Coch/2013 of I.T.A.TRIBUNAL,COCHIN BENCHDATED 14-11-2014APPELLANT(S):------------ V.A.JOSE, VAIDYAKARAN HOUSE, PALISSERY PO, PALAKKAL, THRISSUR BY ADVS.SRI.MOHAN PULIKKAL SRI.R.SUDHIR SMT.MANJU RAJAN SRI.P.P.NARAYANAN SRI.K.S.MENON (K) RESPONDENT(S):-------------- THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, THRISSUR-680 001. R1 BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) R1 BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON07-12-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: I.T.A. No. 88 of 2015--------------------- APPENDIX--------- APPELLANT(S) ANNEXURE --------------------- ANNEXURE ACOPY OF THE ASSESSMENT ORDER DATED 31-12-2010. ANNEXURE BCOPY OF THE ORDER DATED 04-03-2013 OF THE COMMISSIONER OFINCOME TAX (APPEALS)-I. ANNEXURE CCOPY OF THE ORDER DATED 14-11-2014 OF THE INCOME TAXAPPELLATE TRIBUNAL. dkr K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------- I.T.A. No. 88 of 2015 ------------------------------------------- Dated this the 7[th] day of December, 2017 J U D G M E N T Ashok Menon, J. This appeal arises from ITA No.484/Coch/2013 on the file of theIncome Tax Appellate Tribunal, Cochin Bench dated 14-11-2014. Appellantchallenges the concurrent findings of the first Appellate Authority and theTribunal confirming the findings of the Assessing authority. The appellantis a non-resident Indian, who filed the report of income on 11-05-2010 forthe assessment year 2009-2010 in response to the notice dated 18-02-2010under Section 142(1) of Income Tax Act ('The Act' for brevity). The noticewas one issued by the respondent in pursuance to a search operation underSection 132 of the Income Tax Act. It was revealed that the petitioner hadpurchased 1 acre and 64.75 cents of land at Avinissery Village on16-08-2006 for a sum of Rs.7,39,200/-(inclusive of documentationcharges), and after levelling the land, he entered into an agreement for saleof the said property to one Salgunan of Thrissur on 22-08-2007 forRs.63,96,000/-. He received an advance of Rs.25,00,000/- as per theagreement and finally sold it to M/s St.Antony's Timber Depot on20-08-2008. ITA.No.88/2015 2.The Assessing officer disregarding the objection of the assesseeseeking exemption from taxation on the ground that it is an agriculturalland, opined that no agricultural activities have taken place on the land. Itwas purchased in 2006 and after leveling, it was sold in 2008. Soon afterthe purchase, the assessee had left for Saudi Arabia and he could not havedone any agricultural activity, being a Non-Resident Indian (NRI) withoutobtaining permission of RBI under Foreign Exchange Management(Acquisition & Transfer of Immovable Property in India) Regulation, 2000.The assessing officer held that the transaction was “Adventure in the natureof Trade” and accordingly brought to tax the property under the head“income from business” and determined the total income of the appellantat Rs.56,19,593/- apart from the agricultural income return ofRs.28,17,500/- as per Annexure A. Aggrieved by the order, the appellantfiled ITA No.345/10-11 before the Commissioner of Income Tax(Appeals)-I,Kochi, who confirmed the assessment and dismissed the appeal as perAnnexure B. The appellant challenged the said order before the IncomeTax Appellate Tribunal, Kochi Bench as ITA 484/Coch/2013 and it wasonce again confirmed that the land in question was indisputably not anagricultural land, as per Annexure C. It is this finding, which is underchallenge. 3.We heard the learned counsel for the appellant and thecounsel appearing for Government of India (Taxes) and records wereperused. 3.We heard the learned counsel for the appellant and thecounsel appearing for Government of India (Taxes) and records wereperused. We heard the learned counsel for the appellant and the 4.It is submitted by the learned counsel for the Appellant thatthere is no capital gains accrued, as defined under Section 45 of the IncomeTax Act. The appellant had purchased agricultural land and retained withintention to cultivate it on his return from Gulf, for good. Agricultural landis excluded by sub-clause (iii) of sub-section (14) of Section 2, the definitionof capital asset. It is further stated that the land still continues to be anagricultural property. 5.The question of law arising in this appeal is whether the saleconsideration was liable to be treated as business income of the appellantunder Section 28 of the Act or whether being the sale of an agriculturalland, the appellant was entitled to be exempted from capital gains taxunder Section 45 of the Act. 6.It is an undisputed fact that the appellant had purchasedagricultural land on 16-08-2006 while he was still a Non-resident Indianand thereafter he did not do any agricultural operations on that land. Afterretaining it for about two years, he sold it to St.Antony's Timber Depot,Chevoor. In the meanwhile, he had also levelled the land by expending a sum of Rs.1,75,000/-. Admittedly, he did not obtain the permission of theRBI under Section 47 of the Foreign Exchange Management (Acquisition &Transfer of Immovable Property in India) Act, 1999, which prohibitsacquisition of agricultural land by an NRI. The fact that he had levelled theland and enhanced its saleability is also an indication of his intention toresell the land even when he purchased it. He had made huge profitsconsequent to the sale and therefore undoubtedly the transaction amountsto “adventure in the nature of trade”. The profit which he made out of thissale would therefore be chargeable to tax under the head “income frombusiness”. We do not find any infirmity, whatsoever, in the orders ofassessment confirmed by the two Appellate forums, which had consideredits validity. Consequently, the appeal fails and it is dismissed. No costs. K.VINOD CHANDRANJudge ASHOK MENON Judge