AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (12) TMI 525
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....ed upon the assessee. On scrutiny of accounts it revealed to the Assessing Officer that land at Survey No.101/1 admeasuring 3.38 hector was purchased on 25.5.2005 for Rs. 54,500/-. Similarly land at survey 108 admeasuring 1.58 hector and land at survey no.110 admeasuring 1.77 hector were purchased by the assessee on 13.5.2007. These land were sold by the assessee on 13.5.2007 to Coastal Gujarat Power Ltd. ("CGPL" for short) for Rs. 1,21,72,438/-. The assessee had earned a profit of Rs. 1,20,21,138/-. The land were mentioned as agriculture land and situated at village Sukhpur, Tal. Mundra-Kutch. Assessee has claimed the gain as exempt on the ground that said land was not a capital asset within the meaning of section 2(14) of the Income Tax Act, and therefor, gain was not liable to tax under section 45 of the Act. The ld.AO did not accept contentions of the assessee and treated him as a trader in the land. He assessed the alleged profit and sale of land as business income. On appeal, the ld.CIT(A) has observed that gain arisen to the assessee on transfer of land at Survey No.107/1 purchased on 25.5.2005 will be treated as capital gain, and since the land was agriculture land situated....
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....come ? iii. Is the transaction a sham transaction and can it be labeled as a colourable device ? 6. Ld. first appellate authority has made a lucid enunciation of law and facts under each question. She accepted that the land sold by the assessee was agricultural land. She also accepted that the transaction was not sham or colourable transaction. 7. The parties are not disputing on these conclusions. Thus, the controversy between assessee and revenue boils down to question 2 formulated by the ld.CIT(A). The Ld. first appellate authority has partly treated the assessee as indulged in adventure in the nature of trade and thus 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. 8. While appreciating the controversy, ld. First appellate authority took into consideration. The broad principles laid down by the Hon'ble Jurisdictional High Court in the case of CIT vs. Siddharth J. Desai [1983] 139 ITR Page 628/10. Alongwith....
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....y. It is converted into NA by the purchaser after a period of three years from the date of purchase. f. whether the land, on the relevant date, had ceased to be put to the agricultural use', if so, whether, it was put to an alternative use; whether, such a alternative user was of a permanent or temporary nature; In the appellant's case, this is not applicable as the land was not converted into NA and was sold as agricultural land only. g. whether the land, though entered in revenue record, had never been actually used for agriculture; whether the owner meant or intended to use it for agricultural purposes; In the appellant's case, the land has been used as agricultural land till the date of sale. h. whether the land was situate in a developed area; whether its physical characteristics, surrounding situation and use of the lands in the adjoining area were such as would indicate that the land was agricultural; In the appellant's case, the adjoining lands were also agriculture in nature. There was a possibility of this area being converted into an industrial area due to setting up of the Ultra Mega Power Project (UMPP) by Tata Power in 2006. i. whether th....
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.... or there are substantial transaction in that item, if would indicate trade. Habitual dealing in that particular item is indicative of intention of trade. Similarly, ratio between the purchases and sales and the holdings may show whether the assessee is trading or investing (high transactions and low holdings indicate trade whereas low transactions and high holdings indicate investment). (4) Whether purchase and sale is for realizing profit or purchases are made for retention and appreciation its value? Former will indicate intention of trades and latter, an investment. In the case of shares whether intention was to enjoy dividend and not merely earn profit on sale and purchase of shares. A commercial motive is an essential ingredient of trade. (5) How the value of the items has been taken in the balance sheet? If the items in question are valued at cost, it would indicate that they are investments or where they are valued at cost or market value or net realizable value (whichever is less), it will indicate that items in question are treated as stock-in-trade. (6) How the company (assessee) is authorized in memorandum of association/articles of association? Whether for trade ....
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....ion of the subject-matter of transaction was with the intention of dealing in the item, or with a view to finding an investment. If the transaction, since the inception, appears to be impressed with the character of a commercial transaction entered into with a view to earn profit, it would furnish a valuable guideline. (b) The second test that is often applied is as to why and how and for what purpose the sale was effected subsequently. (c) The third test, which is frequently applied, is as to how the assessee dealt with the subject-matter of transaction during the time the asset was the assessee. Has it been treated as stock-in-trade, or has it been shown in the books of account and balance sheet as an investment. This inquiry, though relevant, is not conclusive. (d) The fourth test is as to how the assessee himself has returned the income from such activities and how the Department has dealt with the same in the course of preceding and succeeding assessments. This factor, though not conclusive, can afford good and cogent evidence to judge the nature of the transaction and would be a relevant circumstance to be considered in the absence of any satisfactory explanation. (e)....
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....l Gujarat Power Ltd (CGPL) was incorporated on 10 February 2006. The distance between the appellant's land and the Tata Power plant is about 10 Kms. 4. There has been a massive increase in the price of the land. The appellant purchased it for a dirt-cheap price. Within a span of fourteen months, the price shot up to Rs. 1,21,00,000/-. There was no change in the productivity of the land, irrigation facilities and the crop patterns. The agricultural income has also been very marginal. The only reason for this abnormal increase in rate is the setting up of UMPP by Tatas in this region. However, as discussed earlier, this cannot be an instantaneous decision and must have been brewing for a long time. It is quite obvious that the Tata officials must have carried out proper survey of this area, must have visited the area and must have held discussions with the villagers. The Tatas must have drawn up a master plan for the power plant including the actual power plant and the other areas like the residential quarters for the officers and staff. What the appellant has done is utilise his knowledge of the market conditions and scenario to decide the correct time for entry and exit so as....