TaxTMI 
TaxTMI 
2018 (11) TMI 1733
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....export and import scrips and brokerage under the name and style of M/s S.S. Consultants. The assessee also derives income from salary and house property. The assessee filed his return of income on 19/3/2009 declaring total income of Rs. 68,91,170/-. The assessee is working as Director of M/s Grass Field Farms and Resorts Pvt. Ltd. and M/s Grass Field Fire Capital Developers Pvt. Ltd.. During the assessment proceedings, the Assessing Officer noted that the assessee has purchased 16 lands and also sold 16 lands during the year under consideration. Thus, the Assessing Officer found that during the year under consideration, the assessee has purchased land amounting to Rs. 1,32,98,540/- and sold the lands amounting to Rs. 2,69,85,258/-. The assessee appended a note to the computation of income and expenditure that he has sold the agricultural land situated in different villages to M/s Grass Field Fire Capital Developers Pvt. Ltd. and M/s Grass Field Fire Land Developers Pvt. Ltd. for a consideration of Rs. 2,29,01,000/- which was purchased for a sum of Rs. 34,29,000/-. The assessee claimed that the lands sold during the year does not fall in the ambit of capital asset as per Section 2(1....
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....of M/s Grass Field Farms and Resorts Pvt. Ltd. and M/s Grass Field Fire Capital Developers Pvt. Ltd. has purchased these lands with the purpose to sell the same to the companies owned by the assessee. Therefore, the entire exercise of purchase and sale was to inflate the cost of acquisition in the hand of these two companies to avoid the tax liability as the assessee has claimed the huge surplus in the transaction of purchase and sale as exempt from tax. Thus, this is a device to avoid the tax by inflating the cost of acquisition in the hand of the companies and claiming the surplus as exempt in the hand of the assessee. The ld DR has submitted that the ld. CIT(A) has committed an error while holding that the lands in questions are held by the assessee as capital asset and not converted into stock in trade wherein the assessee has not been maintaining regular books of account and therefore, the question of holding these lands as capital asset and not as a stock in trade cannot be decided based on the books of the assessee. He has further contended that when the assessee has claimed the income as exempt then the onus is on the assessee to prove that the activity carried out by the a....
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....Hon'ble Supreme Court dated 19/11/1997 in the case of State of U.P. Vs. Nand Kumar Aggarwal & Ors. and submitted that the Hon'ble Supreme Court has held that it is not enough if the land is entered in revenue record as agricultural land but it is being used for the purpose of agriculture and mainly used for the purpose of agriculture to hold that the land is agricultural land. He has also relied upon the decision of Hon'ble Supreme Court in the Union of India Vs S. Muthyam Reddy 106 Taxman 501 (SC) and submitted that the decisions which were relied upon by the assessee as well as by the ld. CIT(A) while passing the impugned order were set aside by the Hon'ble Supreme Court. Thus, he has submitted that when the assessee purchased the lands not for carrying the agriculture operations but to resale the same for non-agricultural purposes then the land in question cannot be treated as agricultural land and therefore, even if the lands are situated beyond a distance of more than 8 k.m. from the municipal limits, it will not get the benefits of Section 2(14)(iii) of the Act. He has supported the order of the Assessing Officer. 6. On the other hand, the ld AR of the asse....
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....saction of investment and the surplus arising from the sale of the lands is capital gain which is not chargeable to tax in view of Section 2(14)(iii) of the Act. In support of this contention, the ld AR has relied upon the following decisions: 1. J. Raghottama Reddy Vs. ITO (1988) 169 ITR 174. 2. Harrisons Malayalam Ltd. Vs. ACIT (2009) 32 SOT 497. 3. Agri Gold Foods & Farm Products Ltd. Vs CIT, ITA No. 451/Vizag/2012 order dated 30/07/2014. 4. ACIT Vs. Nilgiri Tea Estate Ltd. (2014) 47 taxmann.com 329 (Cochin Trib). 5. Singhai Rakesh Kumar Vs Union of India (2001) 115 Taxman 101 (SC). 6. Manubhai A. Sheth Vs N.D. Nirgudkar, Second ITO 128 ITR 87 (Bom). 7. ACIT Vs. M/s Focal Point Builders & Promoters Pvt. Ltd. ITA No. 759/JP/2012 order dated 31/03/2016. 8. Raja Bahadur Kamakhya Narain Singh Vs CIT (1970) 77 ITR 253 (SC) 9. CIT vs. Smt. Debbie Alamao (2011) 196 Taxman 230 (Bom). 10. ACIT Vs Atma Ram Gupta ITA No. 529/JP/2012 order dated 29/05/2015. He has further submitted that even otherwise the income arising from sale and transfer of agricultural land is an agricultural income as per Sec....
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....f registration of purchase deed Amount Description of land purchased 1. Ramniwas, Rampal 17/05/2007 Rs. 21,50,200/- Khasra No. 424/5 2. Rambabu Kasana 04/06/2007 Rs. 6,04,900/- Khasra No. 424/5 3. Ramkaran 11/04/2007 Rs. 4,63,450/- Khasra No. 42/65 4. Shri Raj Kishor Gothwal 28/05/2007 Rs. 90,75,000/- Khasra No. 825/1/6/7/8 5. Kirtiraj Handia 25/05/2007 Rs. 9,65,790/- Khasra No. 522/4 6. Rajkishore Gothwal 25/05/2007 Rs. 2,86,180/- Khasra No. 365 7. Dinanath/Sitaram Nagar 31/05/2007 Rs. 57,275/- Khasra No. 542 8. Dinanath/Sitaram Nagar 31/05/2007 Rs. 1,93,455/- Khasra No. 553 9. Tej Singh 13/08/2007 Rs. 1,08,040/- Khasra No. 1504 10. Bhagwat 24/10/2007 Rs. 1,40,200/- Khasra No. 1505 11. Rajkishore Gothwal 28/05/2007 Rs. 32,30,025/- Khasra No. 825/1/6 12. Rajkishore Gothwal 28/05/2007 Rs. 32,30,025/- Khasra No. 825/1/7 13. Rajkishore Gothwal 28/05/2007 Rs. 32,30,030/- Khasra No. 825/1/8 14. Ramniwas/Rampal 31/05/2007 Rs. 21,50,200/- Khasra No. 424/5 15. Rambabu ....
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..... It is evident from these details that the land purchased during the year bearing khasra No. 424/5 on 31/5/2007 was sold on 30/6/2007. Therefore, the said sale was within a period of 13 days from the date of purchase. Similarly some of the other transactions of land bearing khasara No. 42 and 65 were also sold within a period of four months from the date of purchase. Thus, it is discernable from the number of transactions carried out by the assessee one after another during the year under consideration and the period of holding is less than month and in some cases within few months which cannot be on the face of it regarded as investments made by the assessee in agricultural lands. The intention of the assessee for purchase of the land is also not in dispute that it was for resale and within a short period of time though the sale is only to the companies of which the assessee is a Director. Thus, it is apparent that the assessee was acting as an interface to purchase the lands from the land owners and then converted in nonagricultural use and sold to these companies who are in the business of real estate. The ld AR has relied upon the decision of the Hon'ble Supreme Court in t....
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....nd earned the profit/gain but these are regular and systematic transactions of purchase and sale without having any intention to retain these lands or to carry out any agricultural operations on the same. Further the assessee has also taken a plea that the assessee has not treated these lands as stock in trade in the books, however, it is also not a disputed fact that the assessee is not maintaining regular books of account and therefore, the books of account cannot be relied upon in support of the claim of investment or stock in trade. The nature of transaction has to be determined only by looking into the bare details of the transactions and intention of the assessee for purchase of agricultural land. The consideration received in the form of share capital of the companies owned by the assessee would not change the character of transaction as the lands were purchased by the assessee from the agriculturists then those lands were converted to non-agriculture at the time of sale to the company. The assessee has contended that conversion charges were paid by the company and not by the assessee, however, it is not relevant once the assessee being the Director of those companies then t....
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....mstances proved therein and which determine the character of the transaction. 7.9 Thus, the cumulative facts and circumstances seen holistically and read in conjunction the tests or parameters laid down by judicial precedents provides sound basis to infer the intention of commercial gain in the impugned transaction. 8. Having regard to the totality of facts and circumstances, we have no hesitation to hold that the impugned land was purchased with an intention to sell the same to the identified buyers to achieve commercial objectives outright. As noted earlier, section 2(13) of the Act seek to explain the term of 'business' by way of inclusive definition. As per section 2(13) expression 'business' include not only trade or commerce, etc. but definition further extends to encompass within its ambit an 'adventure in the nature of trade'. The entire gamut of action of the assessee in engaging in such big ticket land purchase without employing any fund of his own and almost immediate re-sale thereof clearly demonstrates the implicit intention of the assessee that the transaction entered was nothing but an 'adventure in the nature of trade....
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.... land under the head 'business income'. 10. In view of the aforesaid discussion, we do not consider it necessary to go into the other aspects of controversy as to whether the impugned land was agricultural land or otherwise as these aspects are relevant only for the purpose of taxability under the head 'capital gain' in the light of section 2(14) of the Act." Even otherwise the decisions relied upon by the ld AR of the assessee cannot be straightway applied but the question of nature of transaction has to be decided depending upon the relevant facts and circumstances of each case. Thus there cannot be a single criteria which can be applied to each and every case for determining the question of nature of transaction whether it is adventurous in nature or merely an investment. This is a mixed question of law and facts and the principle of law can be applied depending upon the facts of each case. In the case in hand when the facts clearly revealed the intention and patron of the transaction which is nothing but adventurous in nature then the large number of transactions were entered into within a short period of time shows that it was an organized bus....
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.... 5. The contention raised on behalf of the assessee before the Tribunal to the effect that his explanation ought to have been accepted as aforesaid, is unreasonable and has rightly been rejected by the Tribunal. 6. On a totality of the assessment of the facts and circumstances of the case and on the material on record we find that the conclusion arrived at by the Tribunal is correct. In this context we also find that the assessee was, at least so far as the transactions in question are concerned, carrying on business or an adventure in the nature of trade, and that, therefore, the profit which accrued from such transactions would be taxable as business income. 7. In view of our observations made hereinabove we do not propose to enter into a detailed discussion as to the treatment given by the Tribunal on the material on record and the appreciation of such evidence. Suffice it to say that the conclusions drawn by the Tribunal on the basis of such material is eminently reasonable and sustainable and it cannot be said that the Tribunal erred in law in arriving at such conclusion. 8. In the aforesaid premises, the question before us would be required to....
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....them are more in the nature of guidelines. The question has to be answered in each case having regard to the facts and circumstances of that case. There may be factors both for and against a particular point of view. The Court has to answer the question on a consideration of all of them-a process of evaluation. The inference has to be drawn on a cumulative consideration of all the relevant facts. The first decision of this Court which considered the meaning of the expression 'agricultural land' is in CIT v . Raja Benoy Kumar Sahas Roy [1957] 32 ITR 466. But the question there was whether the income from forest land derived from sal and piyasal trees, 'not grown by human skill and labour' constitutes agricultural income? The decision that directly considered the issue, though under the Wealth-tax Act, 1957 is in CWT v. Officer-in-charge ( Court of Wards) [1976] 105 ITR 133 (SC) (hereinafter referred to as the Begumpet Palace case). It was an appeal from a Full Bench decision of the Andhra Pradesh High Court. The High Court had taken the view, following a decision of the Madras High Court in T. Sarojini Devi v. T. Sri Krishna AIR 1944 Mad. 401, that the expre....
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....n connection with an agricultural land is the connection with agricultural purpose and user and not the mere possible of user of land by some possible future owner. The Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim v. Commissioner of Income-tax (supra) has also considered the decision of Hon'ble Bombay High Court in the case of CIT Vs. V.A. Trivedi 172 ITR 95 and observed at page 641 as under: " The Bench observed that to ascertain the true character and the nature of the land, it must be seen whether it has been put to use for agricultural purposes for a reasonable span of time prior to the relevant date and further whether on the relevant date the land was intended to be put to use for agricultural purposes for a reasonable span of time in the future. Examining the facts of the case from the said point of view, the Bench held that the agreement entered into by the assessee with the Housing Society is the crucial circumstance since it showed that the assessee agreed to sell the land to Housing Society admittedly for utilisation for non-agricultural purposes. The sale-deeds were executed four months after the agreement of sale and even if any agri....
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....rom the year 1965-66 until it was sold in 1969; the appellants had entered into an agreement sale with a Housing Co-operative Society to sell the said land for an avowed non-agricultural purpose, namely, construction of houses; they had applied in June 1968 and March 1969 for permission to sell the said land for non-agricultural purposes under section 63 of the Bombay Tenancy and Agricultural Lands Act and obtained the same on 22-41969; soon after obtaining the said permission they executed sale-deeds in the following month, i.e., in May 1969; the land was sold at the rate of Rs. 23 per sq. yd. and the purchaser-society commenced construction operations within three days of purchase. What is the inference that flows from a cumulative consideration of all the aforesaid contending facts? This question has to be answered keeping the criteria evolved in Begumpet Palace's case (supra) set out hereinbefore. In our opinion, the entering into the agreement to sell the land for housing purposes, the applying and obtaining the permission to sell the land for non-agricultural purposes under section 63 and its sale soon thereafter and the fact that the land was not cultivated for a period ....
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....ereof at the relevant time is undoubtedly one of the crucial tests for determination of the issue. It is well settled that the nature and character of land may undergo a change depending upon its situation, growth of locality, zone in which it is situate and its potentiality. According to recent decisions of the Supreme Court, the fact that the land is sold or transferred to a non-agriculturist for a nonagricultural purpose or that it is likely to be used for non-agricultural purpose soon after its transfer is also a relevant factor germane to the determination of the issue. Merely because the land was used for agricultural purpose is remote past or it continue to be assessed to land revenue on the footing of agricultural land is not decisive. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 24. The learned counsel for the assessee mainly relied upon the Division Bench judgment of this Court in the case of CWT v. H.V. Mungale [19841145ITR 208, ratio of judgment of the Division Bench of this Court in the case of Wealth-tax Reference No. 5 of 1964 decided on 4-12-1973 and the judgment of this Court in CIT v. P.C. Joshi and B.C. Joshi [1993] 202 ITR 1017 . Th....
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....bi Mohmed Ibrahim's case (supra) and the test laid down by this Court in V.A. Trivedi's case (supra) are to be applied to this case as they ought to be, it would become obvious that the finding of fact arrived at by the ITO, the AAC and the Tribunal cannot be characterised as perverse or unsupported by evidence or erroneous in law. It is not possible to accept the submission made by the learned counsel for the assessee that the authorities below did not apply the correct test or misdirected themselves in law or that the finding of fact arrived by the Tribunal was not supported by evidence. 26. In view of the above discussion we do not think it necessary to refer to the other authorities cited at the Bar. We uphold the finding of the Tribunal to the effect that the reference lands were not agricultural lands." It is held by the Hon'ble Bombay High Court that the future use of land was non-agricultural purpose and therefore, the same cannot be categorized as agricultural land at the time of sale. This fact of future use of land is not in dispute in the case before us even the assessee not an agriculturist and has no intention to carry out the agricultural operatio....
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....ection 2(14)( iii)(a) and (b) should be held to be excluded from the definition of 'capital asset'. Thus section 2(14)( iii) should read as excluding from capital asset agricultural land in India, not being land situated in the areas mentioned therein. Upon such interpretation, section 2(14)(iii ) does not enable levy of tax on capital gains arising from transfer of land which is used for agricultural purposes wherever it may be situated. 2. In this appeal, challenge to this order is based on many grounds and our attention has been drawn to several decisions not only taking similar but also a contrary view. The respondents having remained ex parte, we requested Shri Dhruv Mehta, the learned advocate, to assist the Court as amicus curiae. We are beholden for the valuable assistance rendered by him to the Court. 3. By the Finance Act, 1989, Explanation to section 2(1A) is inserted with effect from 1-4-1970 to supersede the view expressed in the order under appeal and several decisions setting out similar ratio. This declaratory amendment having retrospective operation though coming into force during the pendency of this appeal must be given effect to. The sa....