TaxTMI 
TaxTMI 
2013 (10) TMI 778
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.... Add: Development charges colleted 62,47,890 4,37,35,670 Less: Cost of land Rs. 4840 per acre in 1981 70060 Indexed cost 70060 x 497/100 348198 Dev expenses as per MoU 9000000 9348198 Cost of land per sq.yd. (9348198/38021)=245.87 Cost of land of 20826.3 sq.yds. sold during the year Rs. 245.87 x 20826.3 sq.yds. 5120562 Long term capital gains 3,86,15,108 4. The AO was of the opinion that Assessee developed agricultural land of 14.19 acres into residential plots and sold them, therefore, the transaction is an adventure in the nature of trade and hence, assessable as 'income from business'. AO called for objections from Assessee. Assessee submitted that he is from an agricultural family and his mother purchased agricultural land of 14.19 acres at Nallagandla Village, Serilingampally Mandal, RR Dt., with an intention to carry on agriculture and that the lands were purchased in 1979 by her and agricultural operations were carried on for more than 20 years. Due to development of habitations in and around the land, agricultural operations became difficult and in order to obtain better price, Assessee's mother got the land converted into plots by app....
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....effort, finance and legal processing had been invested. 4. Assessee acquired the land in 2004, on the death of his mother and not in 1979 when she purchased it. The process of plotting and development of the land had already begun by then. Assessee began to sell the land in the year in which he acquired it and not after a long period of holding as investment. 5. Assessee had never been engaged in agricultural operations on the land. Such agricultural operations as had been conducted had been done by his mother and even she had admittedly stopped agricultural operations on the land in 1999 approximatley. 4.31 These facts cumulatively establish that Assessee had acquired the land, albeit, by inheritance, in 2004. At the time of its acquisition, the land had already lost its agricultural status, by virtue of the admitted position that no agricultural operations had been carried on the land since 1999 and also by virtue of the admitted position that development work had begun on the land along with the application for HUDA layout approval. By his own admission, what Assessee inherited was not agricultural land but land which had already been plotted and which was intended for commer....
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....Rupesh Mohan (ITA No. 816/Hyd/2010, dt. 31-01-2011) 6. Dhirubhai Kanjibhai Patel (ITA No. 1745/Ahd/2010, dt. 30-08-2013.) 7. CIT Vs. Sohan Khan, 304 ITR 194 (Raj) 8. CIT Vs. Suresh Chand Goyal, 163 Taxman 54(MP) 9. CIT Vs. Smt. Saraswati Bai Jaiswal, 264 ITR 358 (MP) 10. CIT Vs. Sushila Devi Jain, 130 Taxman 120 (P&H) 11. G. Venkataswamy Naidu & Co. Vs. CIT, 35 ITR 594 (SC) 8. The learned DR, on the other hand, relied on the orders of the Revenue authorities and submitted that the AO has correctly brought to tax the gain as business income. He relied on the decision of the Hon'ble Supreme Court in the case of P.M. Mohammed Meerakhan Vs. CIT 73 ITR 735 SC and particularly referred to the observations in page 3 of the said decision. 9. We have considered the rival submissions and perused the material available on record. We have also perused the authorities relied upon by the parties before us. It is not always easy to describe what are the circumstances that render a transaction as an 'adventure in the nature of trade'. In dealing with the question, the Hon'ble Supreme Court in G. Venkataswamy Naidu & Co (supra) observed that no principle can be evolved which would govern th....
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....for better price realization she had applied for HUDA permission. Incidentally, the approval came much later and Assessee inherited the property after the death of his mother that does not mean that Assessee has indulged in business as an adventure in the nature of trade, (d) are the transactions of purchase and sale repeated ? This test is answered negatively in the case under consideration as Assessee has not purchased any other land and has sold the property inherited by him which is itself was agricultural land for more than 20 years. In the aforesaid decision the Hon'ble Supreme Court has held that in each case it is the total effect of all relevant factors and circumstances that determines the character of the transaction. A cumulative consideration of the facts of the present case unmistakably points to the transaction of sale being a realization of the investment in land and consequently the gains are chargeable only to capital gains tax and not to be considered as gains of an adventure in the nature of trade. 10. In coming to this conclusion we have duly taken note of the following facts: (a) In the present case, Assessee is an agriculturist and did not carry on any bu....
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....AO has ignored the provisions of section 45(2) altogether and treated the entire capital gain as 'income from business' thereby reducing actual cost of land which was purchased way back in 1979 with indexation benefit and allowing development charges, which are meager. Out of Rs. 90 lakhs which was claimed to have spent, Assessee recovered the development charges to the extent of Rs. 62,47,890/- proportionately during the year as can be seen from the computation extracted above. The entire capital gain offered was treated as business profits without bifurcating the same as stated above. Therefore, even the computation done by the AO is not in accordance with the provisions of law and this aspect was neither examined by the AO nor considered by the CIT(A). 11. Be that as it may, various case law relied upon by Assessee support the contention that the gains obtained by selling the land in bits and pieces by converting into plots is not in the nature of business. In this connection, we have discussed the principles laid down by the Hon'ble Supreme Court in the case of G. Venkataswamy Naidu & Co. Vs. CIT (supra). The facts in the case relied upon by the AO of P.M. Mohammed Meerakhan V....
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....e and business. The main earning on the sale of land was in the nature of capital gain and, therefore, not assessable as income from business. The facts of the above case are similar to the case of Assessee in the present case wherein the land instead of receiving as a gift was received by way of inheritance. Thus, this activity cannot come within the purview of adventure in the nature of trade and commerce so as to treat it as business. Therefore, respectfully following the said decision in the case of CIT Vs. Suresh Chand Goyal (supra), we have no hesitation to hold that the earnings on sale of land in this case was in the nature of capital gain and, therefore, not assessable as income from business. 14. Similar view was taken by various Benches of Tribunal and High Courts in the following cases: 1. B. Narasimha Reddy Vs. ITO, [1993] 47 ITD 398(Hyd.) 2. ITO Vs. D.N. Krishnappa, 126 TTJ 149 (Bang.) 3. ITO Vs. Baguio Investment (P) Ltd., [2010] 127 TTJ (Pune) 423. 4. K. Radhika 47 SOT 180 (Hyd.) 5. Dhirubhai Kanjibhai Patel HUF, ITA No. 1745/Ahd/2010, dt. 30-08-2013 6. K. Rupesh Mohan and Others, ITA Nos. 816,926 and 925/Hyd/2010 dt. 31-01-2011. 7. A. Mohammed Mohideen, 176....