IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI SONJOY SARMA, JUDICIAL MEMBER Assessment Year: 2018-19 Inkel Ltd………………………………..…...………………..…..….……….Appellant

14/812&813, 1^st Floor, Ajiyal Complex, Kakkanad, Ernakulam - 682030. [PAN:AABCI6802J]

vs.

DCIT, Circle-1, Trivandrum…….…..….....................……........……...…..…..Respondent Appearances by:

Shri Ranjit Mathews, CA, appeared on behalf of the assessee. Smt. Leena Lal, Snr AR, appeared on behalf of the Revenue.

Date of concluding the hearing: June 12, 2025 Date of pronouncing the order: August 13, 2025

ORDER

Per Sonjoy Sarma, Judicial Member:

This appeal filed by the assessee is directed against the order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income-tax Act, 1961 (hereinafter referred to as "the Act") dated 11.03.2024 for the assessment year 2018-19.

2. Brief facts of the case are that the assessment was completed under Section 143(3) read with Section 144B of the Act on 14.06.2021, determining the total income of the assessee at Rs.17,54,80,455. In the profit and loss account, the assessee had shown Rs.7,78,94,200 as income from disposal of land and buildings on long-term finance lease, and also claimed an expenditure of Rs.3,64,31,906 towards cost of acquisition (land and amenities). The resultant profit of Rs.4,14,62,294 was claimed under the head capital gains'.

3. The Ld. PCIT, on examination of the assessment records, found that the assessee, being engaged in the business of development and providing infrastructure and related services, had misclassified the income arising from the disposal of land and buildings as capital gains instead of business income. The assessee had also disclosed the transaction in its books under 'Revenue from operations', and debited the corresponding cost to the profit and loss account, clearly suggesting a business nature of the transaction. The Ld. PCIT observed that the classification of the said income under capital gains' instead of under the head 'profits and gains of business or profession resulted in a short levy of tax amounting to Rs.36,26,230 and interest of Rs.13,41,694, totalling Rs.49,67,924. Accordingly, invoking the provisions of Section 263 of the Act, the Ld. PCIT held the original assessment order dated 14.06.2021 to be erroneous and prejudicial to the interest of the revenue and directed the Assessing officer to reframe the assessment in accordance with law.

4. Aggrieved, the assessee filed the present appeal before the Tribunal, contending that the property in question was a long-term capital asset converted into stock-in-trade, and hence, the resultant gain was rightly offered to tax under the head 'capital gains' with benefit of indexation as per Section 48 of the Act. It was further submitted that the Assessing Officer had already examined the issue during original assessment proceedings and had correctly accepted the treatment offered by the assessee.

5. The Ld. DR, on the other hand, supported the revisionary order of the Ld. PCIT. It was submitted that the assessee's own treatment in the books and its line of business make it evident that the transaction was in the nature of business and not capital investment. The PCIT had rightly exercised jurisdiction under Section 263 of the Act following the principles laid down by the Hon'ble Supreme Court as in the case of Malabar Industrial Co. Ltd. v. CIT |243 1TR 83 (SC)].

6. We have heard both parties and perused the material available on record. The assessee is engaged in the business of development, sale, marketing and providing infrastructure services. From the financials and disclosures, it is evident that the land and building disposed under long- term finance lease were accounted as part of business inventory. The corresponding income was shown under 'Revenue from operations', and cost was debited to the profit and loss account, indicating business treatment. The Ld. PCIT,