The Commissioner Of Income Taxchennai v. M/S.mysore Premier Investment Co.ltdno

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 16.04.2014 Coram The Honourable Mrs.Justice CHITRA VENKATARAMANandThe Honourable Mr.Justice T.S.SIVAGNANAM Tax Case (Appeal). No.66 of 2014 The Commissioner of Income TaxChennai... Appellant/Appellant -vs- M/s.Mysore Premier Investment Co.LtdNo.2270/1, ChittaranjanMahal, Vinobha RoadJ.L.Puram, Mysore 570 012 ... Respondent/Respondent Tax Case Appeal filed under Section 260A of the Income Tax Act,1961 against the order of the Income Tax Appellate Tribunal, Madras'B' Bench, dated 11.06.2013 in ITA.No.1880/Mds/2012. against the order of the Commissioner of Income Tax(Appeals) -V, 121,Mahatma Gandhi Road, Chennai -34 dated 23.7.2012 and made in CIT(A)-V/ITA No.506/2010-11 against the Order of the Assistant Commissionerof Income Tax, Company Circle - IV(3)i/c Chennai dated 31.12.2010 andmade in P.A.No.AAA CM 4346 G For appellant :Mr.T.R.Senthil kumar, Standing Counselfor Income Tax Department. JUDGMENT (Judgment of the Court was made by CHITRA VENKATARAMAN, J.) Following is the question of law raised by the Revenue seekingadmission of the Tax Case (Appeal) filed for the assessment year2007-08. " Whether under the facts and in the circumstances ofthe case, the Income Tax Appellate Tribunal was right inthat the sum of Rs.2 crores received by the assesseepursuant to the MOU entered into by it for jointdevelopment of its property is assessable under the headincome from capital gains and not income from business?" 2. The assessee herein, a company, entered into Memorandum of https://hcservices.ecourts.gov.in/hcservices/ Understanding on 14.08.2002 for development of its property on jointventure. Pursuant to the agreement, the assessee received a sum ofRs.2 crores, which was offered under the head 'capital gains'. TheAssessing Officer, however, stated that the said income was incomefrom business and profession. 3. The assessee filed appeal before the Commissioner of IncomeTax (Appeals), who concluded that the transaction was not in thenature of business, hence, the income could not be assessed under thehead "income from business". Thus, the Commissioner of Income Tax(Appeals) agreed with the assessee's contention that the income wasto be assessed under the head "capital gains". Aggrieved by this,Revenue went on appeal before the Income Tax Appellate Tribunal. 4. On an overall material consideration, the Income TaxAppellate Tribunal came to the conclusion that there was no evidenceor material produced by the Revenue that the property in questionheld by the assessee for more than five decades was converted intostock-in-trade. In the absence of any evidence to show thatMemorandum of Understanding in question was in the nature of trade,the Income Tax Appellate Tribunal agreed with the view of theCommissioner of Income Tax (Appeals) and treated the income asassessable under "capital gains" and not as "business income".Aggrieved by such finding, the Revenue has preferred the present TaxCase (Appeal) seeking admission on the above cited question of law. 5. Learned Standing Counsel appearing for the Revenue submittedthat even though the assessee had carried on business in insurance,yet, it had started its business in real estate; consequently, theagreement in question was to be treated as business venture resultingin business income. 5. Learned Standing Counsel appearing for the Revenue submittedthat even though the assessee had carried on business in insurance,yet, it had started its business in real estate; consequently, theagreement in question was to be treated as business venture resultingin business income. 6. We do not agree with the said submission of the Revenue. Itis not denied by the Revenue that the assessee was holding theproperty for more than five decades and that it had been carrying onbusiness only in insurance. The consistent case of the assessee isthat when it had entered into joint venture agreement, it had decidedto retain 19,300 sq.ft of developed area or a cash compensation ofRs.2 crores in lieu there off. The assessee contended that theownership of the property was never transferred to the developer inabsolute terms and never it was the intention to embark or venture inthe nature of trade in properties. The Assessing Officer rejectedthe contention of the assessee without any material and adopted 30%tax treating the income as income from "business" and not as "capitalgains", which assessable at the rate of 20%. 7. We find that the Assessing Officer, in so adopting this viewhad not spelt out any material based on which such conclusion wasreached. The Revenue does not dispute the fact that the assessee wascarrying on business only in insurance and in the year under question, the income returned from business as negative. The factthat the assessee had gone for a joint venture agreement fordevelopment of the property itself would not lead to the inferencethat the joint venture was more in the nature of business and thatthe assessee was engaged in property development. Leaving aside thefact that the said venture as a solitary instance, as rightly pointedout by the Income Tax Appellate Tribunal, the Revenue had not placedany material to show that the property in question was to be treatedas "business asset" or the assessee converted it into stock-in-tradefor the purpose of carrying business with it. In such circumstances,we do not find any justifiable ground to admit the Tax Case (Appeal).Accordingly, the same stands dismissed. No costs. Sd/ Asst.Registrar //True Copy// Sub.Asst.Registrar nvsri To1.The Assistant Registrar, Income Tax Appellate Tribunal "B" Bench, Rajaji Bhavan III Floor,Besant Nagar, Chennai -90 2. The Commissioner of Income Tax Chennai 3.The Commissioner of Income Tax (Appeals)-V Chennai-34 4.The Assistant Commissioner of Income Tax, Company Circle -IV(3)i/c, Chennai. +1 cc to Mr.T.R.Senthil kumar,,Advocate, SR. No.18456 Tax Case (Appeal). No.66 of 2014 ng(co)pmk.30.4.2014