TaxTMI 
TaxTMI 
2016 (11) TMI 1063
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.... CIT (A) was justified in deleting the additions, holding that the sale of plot of land by the assessee was a long term capital gains instead of being an adventure in the nature of trade without appreciating the facts that the facts of the case laws relied on were different from the facts of the present case? 3. Whether on the facts and in the circumstances of the case and in law, the Learned CIT (A) was justified in deleting the additions, holding that the sale of plot of land by the assessee was a long term capital gains instead of being an adventure in the nature of trade without appreciating the facts that the assessee was going a very organized, well planned and predetermined activity so as to increase the attractiveness and salability of land which is evident from the fact that the assessee has incurred development expenditure of nearly 3.5 times of the cost of land?" 4. "Whether on the facts and in the circumstances of the case and in law, the Learned CIT (A) was justified in deleting the disallowance of 30% of the development expenses holding that there is no valid reason with A.O. to disallow the same without appreciating the fact that the A.O. has catego....
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....uring the previous year, the assessee had sold the plots for a consideration of Rs. 14,58,01,350/- on which the assessee had shown longterm- capital gain. The Assessing Officer from the perusal of the material and facts on record noted that, assessee has purchased five plots of land during the AY 2004-05 which was combined together. AO observe that assessee has purchased the land for an amount of Rs. 1,91,75,874/- on which he has claimed to have further spent huge amount of Rs. 8,46,36,147/- on its improvement. The improvement includes the following:  Beautification and leveling of land by filing it with sand;  Getting Electricity connection;  Building Elevated water-tank on the land;  Planting trees;  Building approach roads; and  Building concert pond for natural storage of water. The AO's further observation on the facts and analysis of the submissions of the assessee are as under:- "It is to be noted that the assessee has himself shown that part of land was purchased where the previous owner had built road and walls. No evidence has been produced whether the same ha....
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....g to various decisions and considering the facts and material on record the Assessing Officer spelt out the following factors and tests to show that, the entire conduct of the assessee was in the form of 'adventure in the nature of trade'. "9. The key points emerging but of above are which will be relevant in this case are (a) That improvement and increase in marketability itself indicated intention to trade. (b) That conduct of assessee if it was as conduct of normal business engaged in that trade will indicate adventure in nature of trade (AINOT) (c) Whether efforts have been made by assessee to improve marketability, whether special efforts have been made to advertise the goods (d) Whether any income was even expected from the trade without which assessee's argument that this was to be investment would not be sustainable. (e) That in case of in the case of an isolated transaction of purchase and resale of property there is really no middle course open. It is either an adventure in the nature of trade, or else it is simply a case of sale and resale of property." (f) Whether prior conduct of assessee shows a design....
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....s. It can be seen from the evidences available on record that appellant has purchased five plots of land in FY 2003-04 and thereafter has combined the same. These plots of land were purchased at Rs. 1,91,75,874/- and thereafter appellant has spent amount of Rs. 8,46,36,147/- on its improvement development beautification leveling, for electrification, for building wall and constructing water tank, planting trees for beautification, constructing approach road etc., Further, it is found from the record that assessee has given development rights to one M/s Sai Venkata and Associates vide development agreement dated 15.07.2007. Against parting of development rights appellant has received Rs. 2.25 crores as advance from the Developers who has got the right to develop, construct and sell the property. By letter dated 21.12.2011, A.R. of the assessee has submitted before the Assessing Officer that land was sold as a solitary transaction and 87% expenses on the same has been capitalized by the appellant in its books of account during the preceding years and only Z. 1.08 crores was spent on the land for the development in this years. This fact itself proves that there was no agricultural act....
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....e Department to be capitalized in the scrutiny proceedings under section 143(3); (g) This is only a solitary transaction of sale of the land in the block of three preceding years and two subsequent years and hence one solitary transaction cannot be treated as in the nature of business, as there is no systematic activity of purchase and sale of plot/ land; and (h) Reliance was placed on various decisions, which has been noted by the CIT(A) in his impugned order in detail. 6. The Ld. CIT(A) after considering the entire facts and circumstances of the case, held that, Assessing Officer has wrongly treated the LTCG as 'business income' without establishing the fact that business activities has been carried out by the assessee. He noted that, assessee has purchased five piece of land in financial year 2003-04 for Rs. 1,91,75,874/- which consisted of various plots situated in Village Karla, Taluka Maval, district Pune. The 7/12 extract submitted by the assessee reveals that, at the time of purchase of land, it was agricultural land. Thereafter, the assessee had merely carried out incurred some expenditure for improvement and development. Hence it cannot be held that, ....
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....evelopment rights with a Developer vide development agreement dated 15.05.2007 and for assigning the development rights assessee has in fact received sum of Rs. 2.25 crores which was advanced from the developer for parting of the development rights. What happened to this development right has not been discussed by the ld. CIT(A) even though this fact has been noted by him in Para 3.3. Thus, he submitted that the order and reasoning of the AO should be affirmed. 9. On the other hand, Ld. Counsel for the assessee on the issue raised in the cross objections submitted that, in fact, the land was acquired as an agricultural land which continued to be the agricultural land and was sold as such. Once it has been sold as agricultural land then, under the Income Tax Act such an agricultural land cannot be taxed at all either as a business income or as LTCG. In support, he also drew our attention to the certificate issued by Talathi of Mawal district, Pune which has been placed at page 144 of the paper book, to show that this was an agricultural land and is beyond the limit of Lonawala Municipal Council. He also drew our attention to various title search documents along with 7/12 extracts....
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....or the first time before the CIT(A). From the perusal of the CIT(A) order, we find that there is an inherent consistency in his finding. First of all, he holds that additional ground whereby, this issue has been raised is not liable to be admitted and accordingly, he has rejected the additional ground for being admitted only. After rejecting the admission of additional ground, he proceeds to decide the additional ground on merits and dismissed the same after detailed reasoning and noting down the various facts. While deciding the additional ground on merits, he categorically held that, assessee had spent huge amount of expenditure for improvement of such land and had also given development rights to a developer under a development agreement for parting of the rights of development in the said land. Further, the assessee even received huge amount of Rs. 2.2 crores as advance from the developer. After recording these facts, he held that there was no agricultural activity carried out by the assessee at all and therefore, it is not an agricultural land. Once he gives such a categorical finding in para 3.3 (which has been reproduced above in the earlier part of our order), he also rejec....