TaxTMI 
TaxTMI 
2016 (5) TMI 634
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.... 2. Before we proceed to pass the judgment, we wish to record that after 17.12.2014 none appeared on behalf of the assessee and on the said date Shri Rajesh Khurana had appeared and had noted down the next date of hearing. Thereafter, none has appeared and, therefore, the matter was heard in the absence of the ld A/R for the assessee. 3. Brief facts of the case are that a search operation was conducted on 17.09.2008 on the Kamdhenu Group. M/s. Focal Point Buildrs & Promoters (P) Ltd. was controlled by Shri Ziaulla Sheriff & Shri Tafsir Ahmed during the period relevant to A.Y. 2003-04. However, the shareholding has changed the hands to Shri Roop Bansal and Shri Basant Bansal. In A.Y. 2007-08 the shareholding again changed hand and it was controlled by Pahwa Group. The assessee company has not done any business activity during the period relevant to A.Y. 2003-04 to 2007-08 except holding a land in Gurgaon. In the relevant assessment year 2008-09 the assessee company had itself engaged in buying some land properties and selling one of such property during the year. A notice under section 153A was issued and served on the assessee and in pursuance thereof, a return declaring NIL in....
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....lso points towards its business being related to real estate which includes purchase & sale of land, agricultural or other wise. As can be seen from the details in the Balance Sheet filed by the assessee that it has purchased 3 more agricultural lands during the year other than the one which has been purchased during the year and has been sold during the year itself. Short duration of holding of the land under consideration also proves that the land purchased and then sold during the itself was not intended for the purpose of agriculture. It has been noticed from return of income filed by the assessee for the A.Y. 2003-04 to 2009-10 that assessee has not declared any agricultural income which proves that it is not the intention of the assessee to carry out any agricultural activity in the lands purchased by the assessee which it has claimed to be agricultural land. In view of the discussion as above, purchase and sale of agricultural land by the assessee is considered to be an adventure in the nature of trade and also the assessee has not been able to prove that the land sold was agricultural and was the profit earned was exempt. Therefore, on both counts profit Rs. 57,39,....
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....03-04 to A.Y. 2008-09 and even till the passing of the assessment order, though the main object as seen from the MOA also include activity of builder. But the undisputed fact is that the company had never taken up any business activity in these years, what to talk of activity of builders & promoters, which has been used by the AO as a basis for treating the sale of agricultural land as adventure in the nature of trade. The AO is right in mentioning that the facts and the circumstances of the case will decide whether the particular activity of the assessee is activity of sale of agriculture land or it is essentially adventure in the nature of trade. The Hon'ble Courts, while deciding such matters, have gone into the facts of the case and in most of the cases the courts have decided against the department and in favour of appellant. It is only in those cases where there is systematic activity carried out by the assessee right from the time of purchase of the land and also thereafter by way of making improvement in the land with the intention to resell it at profit, by de-marking and dividing it into smaller pieces/plots and by laying kachha/pukka roads etc. that the courts have decid....
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....venture in nature of trade. 4.4. Now coming to the issue whether the impugned land was the agriculture land within the meaning of Sec. 2(14) of IT Act or not. From the perusal of the assessment order, it is seen that though the certificate from the Survey Lekhpal produced by the appellant during the assessment proceeding says that village Motipur, Pargana-Dunkaur, Dist. Gautam Budh Nagar is basically a village and rural area and is not urban area, hence it does not fall within any municipal limit, but the AO was of the view that in absence of the certification that impugned land was within or outside 8 kms. From the municipal limits, it can be safely assumed that the land was within 8 kms of municipal limits and hence is not agriculture land. The AR has rightly argued that AO has just presumed that land was within 8 kms. Only in absence of any mention of distance by the Survey Lekhpal by ignoring the details and submission made by the AR in the assessment proceeding. The AR has furnished another certificate from Survey Lekhpal as additional evidence in the appellate proceedings wherein the distance of the village Motipur containing impugned land is mentioned to be more tha....
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....A.Y. 2003-04 to A.Y. 2007-08 and also even in subsequent 1-2 years. It is the settled law that Sec. 40A(3) is applicable on the expenditure incurred which includes the expenditure for purchase of stock-in-trade as had been held by Hon'ble Supreme Court in the case of Attar Singh Gurumukh Singh (supra) and Sec. 40A(3) is not at all applicable for purchase of fixed assets. In the instant case, undisputedly the purchase of land is part of purchase of fixed asset and is not part of the stock-in-trade. The AO's observation that appellant is in the business of purchase and sell of land, is country to the facts on record, as discussed here-in-above in brief and also discussed while deciding earlier ground. In any case even the finding of the AO of purchase and subsequent sale of the agriculture land being treated as adventure in nature of trade (though it was only one isolated transaction) has been found to be not sustainable, as discussed in the earlier ground. Accordingly on this count also it is undisputed that the purchase of agriculture land is part of fixed asset and not stock-intrade. 5.4. In totality the facts and circumstances and legal position on the issue under consid....
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....ricultural activity claimed to be carried on by the assessee is neither a major nor an incidental object of the assessee company. The short period of holding and the amount of huge earning itself indicates that the object of the assessee was not to hold the land as agricultural land but to engage in the business of selling it to earn huge profits. It is pleaded that, therefore, the addition has been rightly confirmed by the lower authorities. 5.4. The transaction of agricultural land which has resulted into a profit of Rs. 57,39,980/-which the assessee has claimed exempt by treating the same as fixed assets, is an adventure in the nature of trade. 5.5. The property under consideration was purchased in the year and was sold in the year itself. Period of holding of the property also indicates that the property though agricultural land was purchased with a profit motive. coupled with the fact that the"business of the assessee company is dealing in real estate, therefore, the profit earned on sale of agricultural land is business income ofthe assessee which is taxable as per the provisions of the Income-tax Act. 5.6. On the other hand, in the written submission the Ld AR for t....
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.... from conduct that there are no sale of agriculture land in the subsequent year and all the agricultural lands are existing as agricultural lands only and till date there is no action about conversion! Land use charges etc of existing agriculture lands in hand. Even in the impugned agricultural land, no any activity related to conversion or land use change or any activity of such nature was carried out. Thus the dominant intention of keeping the land only as agriculture land was quite clear. 5.7. We have heard the rival contentions and perused the material available on record. In our view, the main allegation of the assessing officer is to the effect that the assessee is a building company with a main objects to acquire land and develop it and in that process it has acquired the agriculture land which is the subject matter of assessment proceedings under consideration . On the basis of this , assessing officer has drawn the influence that Group taken as a whole was engaged in various activities of real estate development, therefore, the assessee is engaged in real estate business. In our considered view his assumption has no legs to stand. First of all, assessing officers has no....
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....led position by Hon'ble Delhi High Court in Delhi Apartments (P) Ltd. (supra) and D.L.F. United Ltd. (supra) that real estate companies can also hold separate portfolio of land as stock-in-trade and as investment portfolio; the sale of investment portfolio is always taxed as capital gains. Thus, assuming worst against assessee, even if it is inferred that it has carried on business activity so long as it holds specified agricultural land in terms of s. 2(14) in,i,e. not being an asset, its transfer will neither attract capital gain tax nor can be treated as business income. In view of the foregoing and respectfully following the case law cited by the assessee we have no hesitation but to held that the assessee's gains were profits from sale of specified agricultural land which does not come within the definition of asset as prescribed under s. 2(14) and by virtue of s. 2(lA)(a) r/w s, 2(14)(iii) r/w s. 10(1) the assessee's gains from sale of such agricultural land are exempt income. Thus, assessee succeeds on all the counts. 6. Second ground of the revenue's appeal is in respect of deletion of addition of Rs. 55,20,000/- made on account of disallowance under section ....