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2018 (5) TMI 739
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....of the Assessing Officer. Now the assessee is in appeal before the ITAT by taking following grounds of appeal: 1. The Ld. CIT(A) has erred on facts and in law in holding that assessee has not filed any evidence that the agricultural land sold by the assessee is covered u/s 2(14) of the Act and thereby holding that assessee is liable for capital gain in respect of the agricultural land sold by him. 2. The Ld. CIT(A) has erred on facts and in law in holding that exploitation of agricultural land by converting it into residential plot before selling them is an adventure in the nature of trade and the income arising therefrom is liable to be taxed in the hands of assessee as business income as against income from long term capital gain assessed by the AO. 2.1 The Ld. CIT(A) has erred on facts and in law in adopting the sales consideration of the land u/s 50C at Rs. 33,38,015/- as against actual consideration of Rs. 28,24,000/- declared by the assessee while holding that income is assessable as business income. 2.2 The Ld. CIT(A) has erred on facts and in law in not directing the AO to assess the income as per the provisions of section 45(2) of the Ac....
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....2 2427 1 bigha 12 biswa Full 1 bigha 12 biswa Purchased on 22/06/1986 (PB 10-17). Out of 32 biswa, 30.4 biswa sold on 20/03/2007 for Rs. 9.50 lacs. 2428 11 biswa Full 11 biswa Purchased on 22/06/1986 (PB 10-17) 2417 12 biswa ½ share 6 biswa Purchased from brother on 16/07/2003 (PB 18-21) The assessee has claimed that this land was not a capital asset in terms of Section 2(14) of the Income Tax Act, 1961 (in short the Act), hence not liable to be capital gain tax. The ld. CIT(A) has taxed the sale of plots as income from profit and gain in business and profession not as a long term capital gain as assessed by the Assessing Officer. The assessee has also objected taking the sale consideration at Rs. 33,38,015/- as against the sale consideration declared at Rs. 28,24,000/-. The assessee has also contended that the ld. CIT(A) has not directed the Assessing Officer to apply provisions of Section 45(2) of the Act and the assessee has also contested that the contention U/s 54B of the Act should have been allowed. 5. On the other hand, the ld DR has relied on the orders of the authorities below. 6. The Bench have heard both the s....
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....dav 06/06/2007 150000/- 176000/- 5. Pawan Kumar 06/06/2007 150000/- 172084/- 6. Vipin Arora 06/06/2007 170000/- 242000/- 7. Seema Devix 06/06/2007 170000/- 242664/- 8. Krishan Kumar 07/06/2007 150000/- 231104/- 9. Krishan Kumar 07/06/2007 150000/- 215107/- 10 Balbeer Singh 16/06/2007 100000/- 136884/- 11. Jaswant Singh 22/06/2007 160000/- 180000/- 12. Subhash Chand 11/07/2007 100000/- 154880/- 13. Savitri Devi 16/07/2007 150000/- 193000/- 14. Usha Tatwani 08/08/2007 230000/- 254214/- 15. Roshni Devi 06/09/2007 500000/- 554400/- 16. Smt. Santosh Devi 26/09/2007 124000/- 125154/- 17. Smt. Pinki Devi 26/09/2007 120000/- 132000/- Total 2824000/- 3338015/- 4. That the A.O has stated that the land was transferred /sold for residential purposes as they were divided into small plots in sq.yards. 5. That the A.O has rejected the claim of deduction u/s 54B of the Act holding that the assessee did not meet the conditions as stipulated in section ....
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.... the judgment is reproduced as under; The tribunal and the High Court have found that the transaction in question is an adventure in the nature of trade; and it is the correctness of this view that is challenged in the present appeal. The expression " adventure in the nature of trade" is used by the Act in s. 2. sub-s. (4) which defines business as including any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture. Under s. 10, tax shall be payable by an assessee under the head profits and gains of business, profession or vocation in respect of the profit or gains of any business, profession or vocation carried on by him. Thus the appellant would be liable to pay the tax on the relevant amount if it is held that the transaction which brought him this amount was business within the meaning of a, 2, sub-s. (4) and it can be said to be business of the appellant if it is held that it is an adventure in the nature of trade. In other words, in reaching the conclusion that the transaction is an adventure in the nature of trade, the tribunal has to find primary evidentiary facts and then apply the legal principles involved in ....
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....sulting from it would inevitably lack the characteristics attributed to it by Sir George Loundes in Commissioner of I. T. v. Shaw Wallace and Company (1) 'Income their Lordships (1) (1932) L. R. 59 I.A. 206. Lord Carmont observed that he did not wish to read the said passage out of its context and without regard to the facts of the case then under consideration. Then Lord Carmont added that though the language used by Lord Dunedin " may cover the purchase of houses" it " would not cover a situation in which a purchaser bought a commodity which from G its nature can give no annual return "This comment of mine ", said Lord Carmont," is just another way of saying that certain transactions show inherently that they are not investments but incursions into the realm of trade or adventures of that nature Then reference was made to the fact that the assessee was a warehouse company director and not a property agent or speculator and that the only purchases of property with which he was concerned were two separated by ten years and that the first heritage was acquired without the intention to sell, which only arose fortuitously. His Lordship then put his conclusion in this way:....
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.... about the onus of proof became a matter of substance; and, as we have already pointed out, all tile learned judges have emphasized that the onus had not been discharged and that no case had been made out for reversing the order of discharge -passed by the Commissioners. However that may be, it would, we think, be unsafe to treat this case as laying down any general proposition the application of which would assist the appellant before us. We would also like to add that there can be no doubt that Lord Russell's criticism against the contention raised by the Lord Advocate was fully justified because the contention as raised clearly overstated the significance and effect of the initial intention. As we have already pointed out, if it is shown that, in purchasing the commodity in question, the assessee was actuated by the sole intention to sell it at a profit, that no doubt is a relevant circumstance which would raise a strong presumption that the purchase and subsequent sale are an adventure in the nature of trade; but the said presumption is not conclusive and it may be rebutted or offset by other relevant circumstances. What then are the relevant facts in the present case? The ....
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....tion of purchase and resale It is a series of four transactions undertaken by the appellant in pursuance of a scheme and it was after the appellant had consolidated its holdings that at a convenient time it sold the lands to the Janardana Mills in two lots. When the tribunal found that, as the managing agent of the mills, the appellant was in a position to influence the mills to purchase its properties its view cannot be challenged as unreasonable. If the property had been purchased by the appellant as a matter of investment it would have tried either to cultivate the land, or to build on it; but the appellant did neither and just allowed the property to remain unutilised except for the net rent of Rs. 80 per annum which it received from the house on one of the plots. The reason given by the appellant for the purchase of the properties by the mills has been rejected by the tribunal; and so when the mills purchased the properties it is not shown that the sale was occasioned by any special necessity at the time. In the circumstances of the case the tribunal was obviously right in inferring that the appellant knew that it would be able to sell the lands to the mills whenever it though....
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....ultural land into smaller plots, developed access road within the plotted land and sold to individual purchasers as residential plots over a period. Thus, the nature of the land had undergone irreversible change. The development of land was done with the undisputed intention of exploiting the land assets to maximize the gain. The exploitation of the land assets was done over a period of time and the entire area has been developed as a residential colony. If we look at the sequence of events as mentioned above, I have no doubt whatsoever, that the motive, intention and realization of the entire scheme of thing adopted by the appellant was to maximize the value of the asset and using it for business purposes. In that pursuit the appellant had constantly tried and execute different methods at different time exploiting the resources and maximize the profit out of it. The registering and stamp duty authorities have also recognized the plotting as residential plots. In this regard, I have also noted the above mentioned Apex Court Judgment where it has said that just as the conduct of the purchaser subsequent to the purchase of a commodity improving or converting it so a....
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.... certain agricultural land on which no tax was levied. During the year to have a better realisation of the capital asset, the same is sold after plotting. Selling of an agricultural land after plotting in order to secure better price is not an adventure in the nature of trade or business. The word "business" has been defined u/s 2(13) of the IT Act, 1961 which includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. To consider the question of business, there must be regular activity of purchasing and selling. In the present case, there is nothing on record to show that the land when acquired was with an intention to sell it by plotting. 2. In various cases it has been held that purchase of land once upon a time and thereafter selling the same in piecemeal after development, the profit arising would be taxed under the head capital gain and cannot be treated as adventure in the nature of trade. Some of these decisions are as under: Commissioner of Income-tax Vs. Sohan Khan & Mohan Khan [2008] 304 ITR 194 (Raj.) In order to arrive at a conclusion, as to whether sale consideration is to be taxed....
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....ld that assessee's activity could not be termed as an adventure in the nature of trade and gain/profit arising from sale could not be taxed as business income. Smt. M. Vijaya & Ors. Vs DCIT (2015) 116 DTR 393 (Hyd.) (Trib.) Land in question is shown as agricultural in revenue records, not under conversion proceedings, not put to non-agricultural use, not situated in developed area and not falling in any municipality but falling in a village was agricultural land not liable to capital gain tax on sale, the fact that the land was purchased by a developer cannot be a determining factor by itself to say that the land was converted into use for nonagricultural purposes. Saroj Kumar Mazumdar Vs. Commissioner of Income Tax 37 ITR 242 (SC) Section 2(13) of the Income-tax Act, 1961 - Adventure in nature of trade - Whether where transaction under examination is not in line of business of assessee and is an isolated or a single instance of a transaction like that, burden lies on revenue to bring case within words of statute, namely, that it was an adventure in nature of trade - Held, yes - Assessee entered into agreement with a society to purchase plot of l....
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....usiness. The word "business" has been defined under Section 2(13) of the Income Tax Act, 1961, which includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. An isolated transaction or activity can also be part of business, but to consider the question of business, there must be regular activity of purchasing and selling. In this case, there is nothing on record to show that the land was purchased for the purpose of selling into plots. Basically, it is a gifted land and the land was developed and was sold after converting into the plots with a view to secure the better price, therefore, the isolated activity cannot come within the purview of adventure in the nature of trade and business. The main earning on the sale of the land was in the nature of capital gain and, therefore, not assessable as income from business and this question is essentially a question of fact". CIT Vs. A Mohammed Mohideen 176 ITR 393 (Madras) Para 14 of this order is reproduced as under: "Bearing in mind the principles laid down by the Supreme Court, it is necessary to examine the facts of the present case. Already we ....
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.... ITR 242, the dividing line between the two types of cases is very thin. The decision of this court in CIT v. Kasturi Estates (P.) Ltd. [1966] 62 ITR 578, has only reiterated the position that in order to hold that an activity is in the nature of an adventure, there must be positive materials to prove that the assessee intended to trade in such an activity and, in the absence of evidence, the sale of immovable property consisting of land could give rise only to capital accretions". Plotting and developing of land before sale by itself would not establish that the person concerned was indulging in a trading activity. It may be that for realizing the maximum price, he undertakes certain acts which any other owner would undertake. Revenue has to establish by positive evidence that the purchase and sale of property was with the view to earn profits through trading transaction. In the present case, circumstances relied on by Revenue only throw suspicion on the assessee's act of purchasing a property which did not immediately yield income, but there are no materials to further prove that assessee intended to indulge in a trading activity. Transaction of assessee in purchasing an....
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....n name (PB 37-41). The investment is made out of the withdrawal from bank of Rs. 26 lacs on 12.07.2007 and Rs. 7,60,000/- on 21.08.2007 (PB 24-26). Thus, when the investment is made in the name of minor sons and in own name from the sale proceeds of the agricultural plots, the assessee is entitled for deduction u/s 54B. Further, the observation of AO that the land sold was not used for agricultural purpose in the preceding 2 years from the date of transfer is incorrect in as much as from the Khasra Girdawari it is evident that the land was used for agricultural purpose in the preceding two years. 4. Without prejudice to above, even if it is held that assessee has entered into an adventure in the nature of trade, its taxability would be governed by section 45(2) in as much as it would be a case of conversion of agricultural land into stock in trade. As per this section, profits & gains arising from the transfer by way of conversion by the owner of a capital asset into or its treatment by him as stock in trade of business carried on by him, shall be chargeable to tax as income of the previous year in which such stock in trade is sold and for the purpose of section 48, the FM....