Principal Commissioner Of Income Tax, Ahmedabad -3 v. Ashwamegh Co. Op. Housing Society Ltd. =============================================================

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL No. 955 of 2017With R/TAX APPEAL No. 956 of 2017 ============================================================= PRINCIPAL COMMISSIONER OF INCOME TAX, AHMEDABAD -3VersusASHWAMEGH CO. OP. HOUSING SOCIETY LTD.============================================================= Appearance :Mr VARUN K PATEL, Advocate for the PETITIONER(s) No. 1Mr DARSHAN R PATEL, Advocate for the RESPONDENT(s) No. 1 ============================================================= CORAM:HONOURABLE Mr. JUSTICE AKIL KURESHIandHONOURABLE Mr. JUSTICE B.N. KARIA26[th] March 2018 andHONOURABLE Mr. JUSTICE B.N. KARIA26[th] March 2018 COMMON ORDER(PER : HONOURABLE Mr. JUSTICE AKIL KURESHI) These appeals arise in the common factual background. We may, therefore, refer to the facts from Tax Appeal No. 955 of 2017. Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal dated 30[th] June 2017 concerning AY 2010-2011, raising following question for our consideration : “Whether in the facts and circumstances of the case, ITAT has erred in law and on facts in upholding the order of CIT [A] treating the assessee’s income of Rs. 4,02,45,750/= from six transactions of sale of plots as capital gain instead of business income ?” Respondent-assessee is a Cooperative Housing Society. During the period relevant to the said assessment year, it had sold six plots for a total sale consideration of Rs. 4.02 Crores [rounded off] and claimed the same as its long term capital gain. Assessing Officer, however, believed that the same was assessee’s business income. CIT [A] reversed the finding, upon which, the Revenue approached the Tribunal. The Tribunal, by the impugned judgment, rejected the Revenue’s appeal making the following observations : “4.We have given our thoughtful consideration to rival connections strongly supporting their respective cases. We first of all come to the relevant facts forming subject matter of Revenue’s appeal ITA No. 1524/Ahd/2014. The assessee was a cooperative society earlier as established on 01.03.1995. It acquired lands in question of agricultural nature way back in 1990s. It thereafter got converted itself into a cooperative housing society. The assessee then entered into a development agreement in the year 2002 with M/s. Agarwal Estate Organizer Pvt. Ltd. for development of its agricultural land in question to agricultural farms and farm houses etc. The same stood annulled in lieu of payment of damages made to the abovestated developer. This followed, another development agreement with M/s. Nirma Chemicals Works Ltd., in the year 2002 as cancelled in 2005. The assessee’s last development agreement was with Navratna Organizers & Developers Pvt. Ltd. in the year 2006. The project in question was to be named as Kalhar Exotica. The said developer thereafter sold some of the plots after development. This is not the Revenue’s case that the assessee had undertaken any risk and responsibility therein in the nature of adventure or trade in all the said episode. Learned Departmental Representative also does not dispute that assessees’ income derived in relation to the said earlier transfers was never treated as business income. It emerges that the third developer also terminated the above development agreement in the year 2009 ie., the preceding assessment year. This made the assessee to sale plots in question in the impugned assessment year. Page 2 of the CIT(A)’s order reveals that the assessee sold total six plots involving a gross amount of Rs. 4,02,45,750/- in the impugned assessment year treated as business income. We asked the learned Departmental Representative to refer to any cogent evidence which could lead us to a conclusion that either the assessee had ever undertaken risk and responsibilities in earlier assessment years or it itself acted as a developer’ after the other party had cancelled the development agreement in preceding assessment year. There is no such evidence on both counts produced at Revenue’s behest. It therefore emerges that the assessee has sold the plots in question without making any value addition to the developers’ efforts in the impugned assessment year. We repeat that the assessee is a registered cooperative society wherein all its books and records are well audited as regulated by cooperation by laws. There is again no matter in the case file in the nature of any agenda or resolution suggesting us that it had ever taken any development activity of the plots in question. We therefore see no reason to interfere in the learned CIT(A)’s conclusion as extracted in preceding paragraph forming subject matter of challenge in the instant appeal. The Revenue’s sole substantive ground as well as its instant appeal ITA No. 1524/Ahd/2014 is declined.” Material on record would show that the assessee had entered into multiple agreements to sale with various developers for developing its open land for putting up construction thereon. All these agreements for some reason or the other failed. Having cancelled such agreements, finally, the assessee during the said year, sold six of the open plots. It was on the basis of such facts that CIT [A] and the Tribunal believed that the Assessing Officer was wrong in holding that the assessee was in the business of development of land. Analysis of the agreements entered by the assessee with the developers suggest that the assessee had at no point of time agreed to take any risk in the process. The conclusion drawn by the CIT [A] as well as the Tribunal are based on factual material. Tax Appeals are dismissed. [Akil Kureshi, J.] Prakash [B.N Karia, J.]