The Commissioner Of Income Tax, Patiala v. M/S Raj Bricks Industry

I.T.A. No. 294 of 2009 (O&M) IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. No. 294 of 2009 (O&M) DATE OF DECISION: 15.7.2009 The Commissioner of Income Tax, Patiala ..........Appellant Versus M/s Raj Bricks Industry, 70, Ajit Nagar, Patiala..........Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MRS. JUSTICE DAYA CHAUDHARY Present:-Mr. Rajesh Katoach, Advocatefor the appellant **** ADARSH KUMAR GOEL, J. (Oral) 1.The revenue has preferred this appeal under Section 260A ofthe Income Tax Act, 1961 (for short, “the Act”) against the order of IncomeTax Appellate Tribunal, Chandigarh dated 31.10.2008 passed in I.T.A. No.110/CHD/2008 in the case of ACIT, Circle, Patiala Vs. M/s Raj BricksIndustry 70, Ajit Nagar, Patiala, for the assessment year 2005-06,proposing to raise following substantial questions of law:- (i) Whether on the facts and in the circumstances of the case, the ITAT is legally correct in holding that theprofit on sale of land shown by the assessee was notan adventure in the nature of trade, even when thefacts of the case indicate that the transaction of landwas an adventure in the nature of trade. (ii)Whether on the facts and in the circumstances of thecase, the ITAT is legally justified in confirming thecase, the ITAT is legally justified in confirming the action of the Ld. CIT (A) regarding adoption of marketvalue of land at Rs.200/- per sq. yard as against thatof Rs. 301.42 estimated by the A.O. for the purpose ofSection 45 (4) of the I.T. Act, when the estimate madeby the A.O. was based on comparable case.” 2.The assessee is a partnership firm and carries on business ofrunning brick kiln. It derived income from sale of land earlier purchased.The land was sold on winding up of the firm. The said income was claimedto be income from capital gain. The Assessing Officer, however, held thesaid income to be not from capital gain but from business, by treating thesale to be adventure in the nature of trade. On appeal, the CIT(A)reversed the view taken by the Assessing Officer and held that income wascovered by the heading of capital gains. Reliance was also placed on thejudgment of Hon'ble Suprme Court in Raja Bahadur Kamakhya NarainSingh Vs. CIT, (1970) 77 ITR 253. 3.Finding of the CIT(A) was upheld by the Tribunal. The findingof the Tribunal is as under:- “There is no dispute to the fact that the assessee isrunning a brick kiln and the land was acquired as acapital asset over a period and the same was shown bythe assessee in the balance sheet. The part of the landwas got refilled in the year 2001 with the sole intention ofreusing the same but the character of the land was notchanged. The assessee was forced to sell the land topay off the tax liability. It is not the case that theassessee is in regular business of sale of land rather theassessee was doing its bricks business. In view of thisfact we are in agreement with the impugned order thatthere was no adventure in the nature of trade specially when the filling was done in 2001 and the sale wasmade in the financial year 2004-05. Even otherwise itwas the prerogative of the assessee to decide as towhich part of the land is to be used for its brick kilnbusiness. The contention of the revenue that thepurchaser was a property dealer, therefore, it is anadventure in the nature of trade. We are not inagreement with this plea of the revenue because theassessee was not the property dealer and secondly theland was purchased for running the brick kiln and theland was sold to pay off the tax liabilities and dealing inland is not the business of the assessee or sale thereof.Therefore, we are in agreement with the conclusiondrawn by the Learned First Appellate Authority.Therefore, the direction to the Assessing Officer toassess the profit under the head “capital gains” isjustified, consequently, this ground of revenue fails,therefore, dismissed.” 4.On the issue of computing the capital gain, the AssessingOfficer applied the ratio of Rs. 301.42 per sq. yard but the CIT (A) adoptedthe ratio of Rs. 200 per square yard, as claimed by the assessee, whichwas upheld by the Tribunal. 5.We have heard learned counsel for the appellant. 6.On question (i), we find that the CIT(A) as well as the Tribunalconcurrently held that it was not business of assessee to purchase and sellthe land and having regard to all the circumstances, the income of theassessee was covered by the head of capital gain. This finding of fact isnot shown to be perverse. In these circumstances, the question sought to be raised cannot be held to be substantial question of law. 7.As regard question (ii), the said question can also be not heldto be substantial question, as the CIT (A) as well as the Tribunal have onappreciation of evidence reached the finding of fact about the rate. 8.We, thus, do not find that any substantial question of lawarises. 9.The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE July 15, 2009(DAYA CHAUDHARY)poojaJUDGE Note:-Whether this case is to be referred to the Reporter .......Yes/No