TaxTMI 
TaxTMI 
2017 (12) TMI 524
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....ed for scrutiny assessment and notices u/s. 143(2) and 142(1) were issued and served upon the assessee. On scrutiny of accounts it revealed to the Assessing Officer that assessee has derived income from trading in plastic, cotton and steel, also shown profit of Rs. 3,52,19,658/- from sale of agricultural land situated at village : Paddhar, Tal : Bhuj- Kutch. This profit has been claimed as exempt on the ground of that the said land is not a capital asset within the meaning of Section 2(14) of the IT Act, 1961. 4. Ld. Assessing Officer did not accept the contentions of the assessee and treated him as a trader in the land. He assessed the alleged amount as business income. 5. On appeal ld. CIT(A) has partly accepted the contention of the assessee. He confirmed the assessment of Rs. 2,60,55,922/- under the head "business income" and accepted the contention of the assessee qua the balance amount. The revenue is challenging the order of ld.CIT(A) qua the amount, which has been accepted as assessable under the head "capital gain" and exempt from tax being arisen on sale of agriculture land. On the other hand, assessee is impugning the order of the ld.CIT(A) for assessing the balanc....
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.... the profit resulted to him has been assessed as a business income. Ld. first appellate authority accepted the assessee as an investor in agriculture land, same would not result any capital gain, because the asset possessed by the assessee was not a capital asset within the meaning of section 2(14)(iii) of the Act. 10. Thus, at this stage, let us first note the facts in a little more detail. It is pertinent to observe that assessee is an agriculturalist by inheritance. He purchased agricultural land comprised in Survey No.563/2 and 564 admeasuring 10.18 Acre at village Paddhar Tal. Bhuj in Kutch District in the month of April 2005 for consideration of Rs. 84,600/-. Brother of the assessee has also purchased the adjoining agricultural land comprised at Survey No. 559/1, 562/1 and 563/1, subsequently, in the month of Feb- March 2007. They have purchased further land in Survey No. 567/1, 567/2 admeasuring 4.33 and 9.23 Acre. This land was purchased for a consideration of Rs. 22,000/- and Rs. 43,600/-. The assessee has sold the land in July-August 2008. The details have been noticed by the ld. first appellate authority, while taking cognizance of the submissions made by the assessee....
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.... "1. Whether the land was classified in the Revenue records as agricultural and whether it was subject to the payment of land revenue? Yeas the land is classified in the revenue records as agricultural land. 2. Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time? Yes the land was used for agricultural purpose. 3. Whether such user of the land was for long period or whether it was of a temporary character or by any or a stopgap arrangement? It was not for stopgap arrangement but the intention was for longer period. 4. Whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land? The crop of Juwar was given to the trust/Panjarapol for cattle feeds. 5. Whether, the permission under Section 65 of the Bombay Land Revenue Code was obtained for the non-agricultural use of the land? If so, when and by whom (the vendor or the vendee)? Whether such permission was in respect of the whole or a portion of the land? If the permission was in respect of a portion of the la....
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....as entered into by the assessee with a pre-dominant intention of trading or investment. The following tests are worth to note: "13. After considering above rulings we cull out following principles, which can be applied on the facts of a case to find out whether transaction(s) in question are in the nature of trade or are merely for investment purposes: (1) What is the intention of the assessee at the time of purchase of the shares (or any other item). This can be found out from the treatment it gives to such purchase in its books of account. Whether it is treated stock-in-trade or investment. Whether shown in opening/closing stock or shown separately as investment or non-trading asset. (2) Whether assessee has borrowed money to purchase and paid interest thereon? Normally, money is borrowed to purchase goods for the purpose of trade and not for investing in an asset for retaining. (3) What is the frequency of such purchase and disposal in that particular item? If purchase and sale are frequent, or there are substantial transaction in that item, if would indicate trade. Habitual dealing in that particular item is indicative of intention of trade. ....
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....ade? 10. It is permissible as per CBDT's Circular No. 4 of 2007 of 15th June, 2007 that an assessee can have both portfolios, one for trading and other for investment provided it is maintaining separate account for each type, there are distinctive features for both and there is no intermingling of holdings in the two portfolios. 11. Not one or two factors out of above alone will be sufficient to come to a definite conclusion but the cumulative effect of several factors has to be seen." 15. The Hon'ble Gujarat High Court had also an occasion to consider this issue in the case of Commissioner of Income Tax vs. Riva Sharkar A Kothari reported in 283 ITR 338. Hon'ble court has made reference to the test laid by it in its earlier decision rendered in the case of Pari Mangaldas Girdhardas vs. CIT reported in 1977 CTR 647. These tests read as under: "After analyzing various decisions of the apex court, this court has formulated certain tests to determine as to whether an assessee can be said to be carrying on business. (a) The first test is whether the initial acquisition of the subject-matter of transaction was with the intention of dealing in the i....
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....ere held for more than three years while the remaining six pieces were held for less than ten to fifteen months. There has been a massive increase of about 800% in the price of the land within a very short span of time. There are two possibilities. Either the purchase price has been doctored or there are some exceptional circumstances leading to such an abnormal increase in price. The first possibility cannot be commented upon as no efforts have been done by the A.O. in this regard. Also, what exactly has brought about the massive increase in the price of the lands is not clear. However, it can be said with certainty that the appellant was very much aware of the developments in that area and in respect of the six pieces of lands which have been held for less than ten to fifteen months, he has sensed the business opportunity of making a kill and has therefore purchased these lands and sold them after a short period. This conduct on the part of the appellant can definitely point to these transactions being in the nature of business activity or adventure in the nature of trade. 7.19 However, the above logic cannot be applied in entirety to all pieces of land. This can he appl....