TaxTMI 
TaxTMI 
2014 (4) TMI 1184
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....(iii)(a)(b). On the other hand, the case of the Revenue is that it was an adventure in the nature of trade and the income from the impugned land is business income. The AO as well as the CIT(A) were of the opinion that the amount received by the assessee on sale of the impugned land deserves to be treated as profit from adventure in the nature of trade and assessable as business income. When the case was heard by the Division Bench at ITAT Jodhpur, the learned Judicial Member observed that (a) the impugned land was purchased on 7 February, 2006 and it was sold on 23.03.2007, (b) the land is situated beyond the prescribed municipal limits (beyond 8 kms from the municipal limits) in a village of Alwar District, Rajasthan, and (c) it being agricultural land the sale proceeds thereon are not assessable to tax as business income. The learned Judicial Member recorded that the impugned land was purchased and sold along with standing crops and the Department accepted the return of income wherein agricultural income on sale of standing crops was shown. He has also taken into consideration the plea of the assessee that at no point of time the assessee sought for conversion of land use by mak....
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....and is out of the purview of the definition of "capital assets" and hence income therefrom cannot be assessed to tax by treating it as adventure in the nature of trade. 4. The learned Accountant Member was not agreeable with the view taken by the learned Judicial Member. Having regard to the peculiar factual matrix of the case, which was highlighted in his order, he concluded that the assessee sold the land to make profit. He observed that the assessee was not having any agricultural background since she was deriving income by way of salary from Ashapurna Buildcon Ltd. She purchased five pieces of contiguous agricultural land from five different persons. Some amount was spent on levelling the land and also on fencing the land. The land was purchased along with standing crop and the said standing crop was sold in the earlier year. It was claimed that two crops were raised in this year and the first crop was sold resulting in agricultural income. The learned Accountant Member stressed upon the fact that both the lower authorities have given concurrent findings that the transactions of purchase and sale of agricultural land constitute adventure in the nature of trade mainly on accoun....
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.... to make investment and sold at a very high price, i.e. 6 times more than the purchase price also shows that it was an adventure in the nature of trade. He thus concluded that the entries in the books of account is not really material and at any rate not conclusive of the matter and if overall circumstances are taken into consideration it gives a clear view of the assessee of making higher profit, in which event no distinction can be made between agricultural land and non-agricultural land in the case of a dealer in land. In other words, the learned Accountant Member was of the opinion that the assessee was a dealer in land and the intention was to make more profit though in the books a different nomenclature was given to it. 8. With regard to the pleas of the assessee that some expenditure was incurred on levelling and fencing, the learned Accountant Member observed that the expenditure was too small compared to the investment. The case of the assessee was that the lands were levelled to conserve water and fencing was done to avoid entry of stray cattle, etc. whereas the case of the Revenue was that the lands were situated at a distance of more than 500 kms from the place where t....
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....her hand, the learned Accountant Member framed the following question: - "Whether on the facts and circumstances of the case and in law, the transactions of purchase and sale of five pieces of agricultural land with standing crop, by way of separate conveyance deeds, beyond the prescribed distance from any municipal council, amount to transactions on capital account or adventure in the nature of trade?" The questions were forwarded to the Hon'ble President to eable him to consider the matter appropriately and to place the points of difference before Third Member. 11. Though the case was originally posted for hearing on 20th March, 2014 (as has been permitted by the Hon'ble President) for reframing the questions, I have posted the matter on 20.03.2014 by informing both the parties and accordingly the matter was heard on the preliminary issue. Upon hearing both the parties and with the consent of the learned CIT-DR as well as the learned counsel for the assessee the following questions were taken up/reframed, to bring out the difference of opinion expressed by the Members: - "1. Whether on the facts and in the circumstances of the case and in law, the transactions of pu....
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....ue derived from land used for agricultural purposes. Relevant portions of section 2(14)(iii) are extracted for ready reference: - (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette." The learned counsel for the assessee, therefore, submitted that only such land which falls within the description of agricultural land under section 2(14)(iii), upon sale thereof, gives rise to income which cannot be considered as agricultural income within the mean....
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....sions of the learned counsel for the assessee as well as the learned CIT-DR. I have also carefully perused the record as well as the decisions cited before me. It may be noticed that both the parties relied upon the decisions referred to by the Members in their respective orders in support of their contentions. The issue as to whether a particular transaction amounts to mere sale of investment or an adventure in the nature of trade was subject matter of several judicial decisions and the Apex Court have time and again observed that no principle can be evolved which would govern the decision of all cases in which the character of the impugned transaction falls to be considered. In the case of G. Venkataswami Naidu & Co. (supra) the court observed that even an isolated transaction can satisfy the description of adventure in the nature of trade and metaphorically observed that a single plunge in the waters of trade may partake of the character of an adventure in the nature of trade but at the same time cautioned that the 'single plunge must be in the waters of trade'. The Hon'ble court observed that it is impossible to evolve any formula which can be applied in determining....
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....Act defines capital asset, which was substituted by Finance Act, 1970 and thereafter in 1989 whereby only such agricultural land which is located within eight kilometres from the municipal limit should be treated as capital asset. In other words, agricultural land situated beyond eight kilometres from the nearest municipal limit cannot be treated as capital asset and sale proceeds thereof may be treated as revenue derived from land which is situated in India and is used for agricultural purposes. The Apex Court in the case of Singhai Rakesh Kumar v. Union of India [2001] 247 ITR 150 explained the meaning of the expression 'agricultural income' as well as the expression 'capital asset'. In the said case the issue was whether the profit arising out of sale of agricultural land gives rise to capital gains, within the meaning of Income Tax Act, 1961. A writ petition was filed by the assessee asking the High Court to declare as unconstitutional the Explanation to clause (1A) & sub-clause (iii) of clause (14) of section 2 of Income Tax Act, 1961 to declare that capital gains arising from sale of agricultural land within the municipal area were not liable to capital gain t....
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....n 'capital asset', consequently upon sale of such land, it has to be treated as agricultural income. 17. The fact that the land was failing outside the municipal limit was never disputed by both the Members and in fact a specific ground was raised before the Tribunal that the revenue received on sale of land is exempt under section 2(1A) of the Act. The learned counsel filed a detailed written submission wherein he pointed out that the assessee treated the sale proceeds as agricultural income under section 10(1) and offered the same for rate purpose. On an appeal the CIT(A) observed that the income which results from sale of agricultural land is not agricultural income as per sec. 2(1A) of the Act overlooking a specific ground before him that income arising on transfer of agricultural land used for cultivation (subject to land revenue and located beyond eight kilometers of municipal limits) cannot be assessed to tax under the Income Tax Act, 1961. The learned counsel referred to the amendments brought out by the Finance Act, 1970 and by the Finance Act, 1989 with retrospective effect to highlight that the intention of the Legislature was to tax income from transfer of agri....
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.... the benefit out of it though there was no intention to carry on trade. The learned Accountant Member observed that the land was situated within the land already acquired by the Vedic Village Developers Pvt. Ltd. At the time of hearing, the learned counsel for the assessee submitted that it is a concocted fact and it was never admitted by the assessee. It is not even the case of the Revenue that the land purchased by the assessee is situated within the land acquired by the Vedic Village Developers Pvt. Ltd. It cannot thus be inferred that the assessee purchased the land with an intention to convert the same for non-agricultural purposes. It is thus clear that it is a case of sale of agricultural land and the land being situated beyond eight kilometres from the municipal limit, it cannot be subjected to tax under the Income Tax Act either as business income or capital gains. Though the Hon'ble Kerala High Court in the case of CIT v. T.K. Sarala Devi [1987] 167 ITR 136 and the Hon'ble High Court of Punjab and Haryana in the case of Tula Ram 199 ITR 450 dissented from the decision of the Hon'ble Bombay High Court in the case of Manubhai A. Sheth (supra), in the light of th....
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....enture in the nature of trade she has to wait at least till the master plan is finalised as otherwise she cannot expect substantial profit. On the contrary, the land was sold within a short span, seizing the opportunity of offer of better price which shows that the assessee intended to purchase the land as an investment only. It was also submitted by the learned counsel that the land was covered in NCR area since 1985 and hence this fact, in isolation, can never be considered as a key factor to decide the intention of the assessee since it is a long term project. At any rate, the government policy and the concrete master plan of 2031 was notified in the year 2010, which is a date falling after the sale of the agricultural land and hence it was contended on behalf of the assessee that any inference taken by such fact would be improper since the date of purchase of the land and the date of sale can at best be taken into consideration in appreciating the intention of the purchase of the land. The Apex Court in the case of G. Venkataswami Naidu & Co. (supra), which in turn was followed by various other courts, observed that merely because a property was sold for a profit it cannot be a....