TaxTMI 
TaxTMI 
2015 (4) TMI 365
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....tment of gain arising on sale of plots i.e. whether the same is to be assessed under the head 'income from capital gain' or as an adventure in the nature of trade. 4. The brief facts of the case are that, the assessee was engaged in the business of trading in gold ornaments under the name and style as "M/s. Guruprasad Jewellers". During the year under consideration, the assessee had declared income from long term capital gain and income from other sources. From the perusal of the details produced/ filed during the course of assessment proceedings, the Assessing Officer noted that the assessee had sold land of 13550 sq. ft. for Rs. 23,80,000/- on which, the assessee had shown long term capital gain of Rs. 17,06,841/-. The assessee had further claimed deduction under section 54 of the Act on account of purchase of flat amounting to Rs. 16,38,004/-. The assessee had purchased the original asset i.e. agricultural land admeasuring 1,69,000 sq. ft. on 26.08.1997 for Rs. 9,24,325/-. The Assessing Officer vide para 4.2 of the assessment order observed that the assessee had started developing activities on the said land by making plots of different sizes. The assessee from year to year had....
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....ind purchase of land was to carry out agricultural activities, was not accepted by the Assessing Officer in the absence of any evidence Ingavale Digamber Balasaheb produced by the assessee to establish its claim. In the absence of any agricultural activity being carried on by the assessee and because of the development of the land and its sale in pieces, the Assessing Officer held that the entire income from sale of plots was to be assessed as income from business activity. In view thereof, the Assessing Officer allowed proportionate cost of acquisition against the total sale consideration and computed the income from trading activities of sale of plots at Rs. 19,37,186/-. 5. The CIT(A) after considering the ratios laid down in various decisions and after considering the facts of the case i.e. the amount paid for the purchase of property and the expenditure incurred on development activities from assessment year 2001-02 to 2005-06 aggregating to Rs. 48,56,935/- and also the permission obtained from the Collector, Kolhapur, whereby the land use was changed, observed that the cost of land including development charges was Rs. 28.74 per sq. ft. The assessee on sale of 13550 sq. ft. o....
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....pellant has stated that he was not receiving good price for the land owned by him, nothing has been brought on record to suggest that any action was taken by the appellant to sell the land. The appellant has not disclosed the location of land. No evidence has been adduced to prove the intention of keeping the land as investment. On the contrary, the organised action of conversion of agricultural land into non-agricultural land, plotting and development after incurring considerable expenses over the years shows the urge of the appellant to earn something more than normal appreciation in value of land. There cannot be a proposition in law that it is only the intention at the inception that must be taken into account and the intention as disclosed by the subsequent facts and circumstances should be excluded in determining the nature of transaction. There can be also no doubt that in this case whatever has been done to the plot has been done with a view to make it fetch more profits than it would have fetched had it been sold as an agricultural land without development. The value addition to agricultural land brought about by continued organised efforts is sufficient proof of the inten....
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.... activities. Another aspect was the conversion of the land from agricultural usage to non-agricultural usage and also the assessee was not an agriculturist but was a jeweler. Further, the increase in the price of land sold by the assessee was because of the development of land and the assessee's intention was to make profits from the said transaction. Reliance in this regard was placed upon 41 CTR 307. 9. The learned Authorized Representative for the assessee in rejoinder pointed out that the fact of non-agricultural activity does not demonstrate adventure in the nature of trade. However, the period of holding demonstrates the intention of the assessee to make the said investment and the sale of which would result in income from capital gains. 10. We have heard the rival contentions and perused the record. Both the Authorized Representatives and also the CIT(A) have referred to plethora of judicial rulings on the issue whether a particular transaction of sale of asset is to be taxed under the head 'capital gain' or as sale of stock in trade to be taxed under the head 'income from business'. In order to decide whether a particular transaction is a sale of investment or an adventur....
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....f water and labour and therefore, the land was not cultivable profitably, the development and sale of land was undertaken by the assessee. 12. The observations of the Hon'ble Madras High Court in Janab Abubucker Suit Vs. CIT (1962) 45 ITR 37 (Mad.) were "a purchaser of agricultural lands does not always judge the wisdom of the transaction by the returns he would get. Other considerations also prevail in the matter of such purchase, namely, the pride of possession of agricultural lands, security which is inherent in the investment of money in such property, etc. Admittedly, it is not the case of the assessee that he was an agriculturalist but he was carrying on the business of jeweler. It is paramount that at the time of investment in an agricultural land, the first fact which has to be looked into is whether the land is fertile and whether the same can be put to agricultural activity. It is the case of the assessee that there was later realization about scarcity of water and labour, but it is the case of Assessing Officer and CIT(A) that the assessee had not furnished any evidence in support of its claim of scarcity of water and labour. Further, it is undisputed that Kolhapur dist....