TaxTMI 
TaxTMI 
TaxTMI 
2017 (12) TMI 529
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....sued and served upon the assessee. On scrutiny of accounts it revealed to the Assessing Officer that assessee has shown a profit of Rs. 68,18,800/- from sale of land at Survey No.539/1 at village : Padhar, Taluka-District, Bhuj admeasuring 4.01 hectors. The same was claimed by the assessee as exempt as agriculture land and falls outside purview of section 2(14) of the Act. According to the assessee, the said land was purchased by the assessee's father for Rs. 54,000/- and gifted to her. The ld.AO did not accept contentions of the assessee and treated her 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 confirmed action of the AO by treating the assessee as trader in land and assessed the profit as business income. In this way, assessee is challenging order of the ld.CIT(A). Thus, the issue before us is, whether total amount of Rs. 68,18,800/- earned by the assessee as profit from sale of land is to be assessed as business income or it is to be assessed as a capital gain, which is exempt from tax under section 2(14) r.w.s. 45 of the Act. 4. With the assistance of ld. Representative, we have gone through the re....
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.... down by the Hon'ble Jurisdictional High Court in the case of CIT vs. Siddharth J. Desai [1983] 139 ITR Page 628/10. Alongwith the test propounded by Hon'ble jurisdictional High Court, ld. first appellate authority has considered the reply given by the assessee as to how his transactions do not fall within the ambit of an adventure in the nature of trade. We deemed it appropriate to take note of those tests as well as the reply given by the assessee, which has been reproduced by the ld.CIT(A) in the impugned order on Page 13. They read as under:- 'a. whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time: In the appellant's case, the land was actually used for agricultural purpose at the time of purchase. However, it has been sold to SPGIL where the intention was to use the land for other than agricultural purpose. b. whether such user of the land was for a long period or whether it was of a temporary character or by way of stop-gap arrangement: In the appellant's case, the land was held only for 7 months. It can thus he said with certainty that this appears to be a stop gap arrangement and there does not appear ....
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....ice. i. whether the land itself was developed by plotting and providing roads and other facilities; No plotting or developing was done on this land at the time of sale. j. whether there were any previous sales of portions of the land for non-agricultural use: In the appellant's case, this is not applicable. k. whether permission under section 63 of the Bombay Tenancy and Agricultural Lands Act, was obtained because the sale or intended sale was in favour of a non-agriculturist: if so. whether the sale or intended sale to such non-agriculturist was for non- agricultural or agricultural user: In the appellant's case, the land was sold to SPOIL for non- agricultural purpose only." 9. It is pertinent to observe that ITAT Lucknow Bench in the case of Sarnath Infrastructure (P) Ltd. v. ACIT (2009) 120 TTJ 216 has also considered issue, whether an assessee deserves to be treated as a "trader" or "investor". Though the issue involved in that case relates to investment/trading in shares, but broad principle carved out by the ITAT is applicable on all sorts of transactions, where adjudicator is required to find out whether transaction was entered into by the assessee wit....
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....vidence to show that his holding is for investment or for trading and what distinction he has kept in the records or otherwise, between two types of holdings. If the assessee is able to discharge the primary onus and could prima facie show that particular item is held as investment (or say, stock-in-trade) then onus would shift to Revenue to prove that apparent is not real. 8. The mere fact of credit of sale proceeds of shares ( or for that matter any other item in question) in a particular account or not so much frequency of sale and purchase will alone will not be sufficient to say that assessee was holding the shares (or the items in question) for investment. 9. One has to find out what are the legal requisites for dealing as a trader in the items in question and whether the assessee is complying with them. Whether it is the argument of the assessee that it is violating those legal requirements, if it is claimed that it is dealing as a trader in that item? Whether it had such an intention (to carry on illegal business in that item) since beginning or when purchases were made? 10. It is permissible as per CBDT's Circular No. 4 of 2007 of 15th June, 2007 that an assessee can....
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.... the least, rather the most important test, is as to the volume, frequency, continuity and regularity of transaction of purchase and sale of the goods concerned. In a case where there is repetition and continuity, coupled with the magnitude of the transaction, bearing reasonable proposition to the strength of holding then an inference can readily be drawn that the activity is in the nature of business." 11. In the light of the above, let us examine order of the ld.CIT(A). A perusal of the impugned order would indicate that the ld.CIT(A) has devoted much energy towards highlighting position of law laid down in various judgment viz. G. Venkataswami Naidu & Co. Vs. CIT, 35 ITR 594 (SC) and P.M. Mohammed Meerakhan Vs. CIT (73 ITR 735). Conclusions briefly drawn by the CIT(A) are on page no.24 of the impugned order. It reads as under: "1. Though the appellant had received the land by way of gift, it is quite obvious that he did not intend it to enjoy it as agricultural land. This is evident from the absence of agricultural income shown in the return of income. 2. The appellant has been shown to be an agriculturist in the purchase deed. This may be true as per Government records. Ho....
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....the Hon'ble Supreme Court in the recent decision of Vodafone Vs. Union of India (2012) 34 ITR 1 (SC) has said as under: .... .... 5.21 This issue has also been dealt with by the Hon'ble Gujarat High Court in the case of Banyan & Berry (222 ITR 831 ) has held as under: .... 5.22 In the appellant's case, the veracity of all the transactions is never doubled. There are no indications anywhere to show that the transaction is artificial or can be said to be a colourable device. Because there was a substantial uain in a relatively short period and the gain was shown to be exempt from taxation due to the asset sold being outside the purview of S.45, it cannot be said that this is a sham transaction. There are no attributes to label it as a colourable device or a sham transaction. The contention of the A.O. is therefore not held to be correct. 5.23 In light of the above discussion, the following conclusions emerge:- 1. The land sold is NOT agricultural land as defined in S.2(14). The gain on sale of this land is NOT beyond the purview of capital gains. 2. Alternatively and without prejudice to the above finding, in case it is held that the land is agricultural land by th....
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.... she has not been trading in the land, rather it was a simplicitor investment for agriculture operation, but on account of getting good price land has been sold. The ld.CIT(A) was of the view that once assessee came to know about rapid development after setting up of Ultra Megha Power Plants in the area of Kutch and functioning of Kandla and Mundra Ports she could have anticipated huge profit and might have purchased land. To our mind, it is a just probability expressed by the ld.CIT(A) after deal was finalized. The AO has neither recorded statement of any person from Ultra Megha Power Plants nor recorded when it has started its power plant; how it has expressed its desire to acquire further land for its residential colony. Whether a person of having background like the assessee could have chance to inter-act with Power Plant officials or concerned Government officials and only thereafter purchase land. All these factors are totally missing on record. Department has started inquiry only when huge claim was made by local persons of the area for exemption of capital gain. We have come arose similar type of cases from nearby village particular. We can make reference to the case of Shr....