AI Drafter 
TaxTMI 
TaxTMI 
2022 (7) TMI 989
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.... the impugned land was to earn higher profit and therefore the transaction was in the nature of adventure of trade. 3. On the facts and circumstances of the case, the Ld. CIT(A) has erred in ignoring the fact that the Assessing Officer in Para 8.4 of his assessment order has found that the land was not used for agricultural purposes. 4. On the facts and circumstances of the case, the Ld. CIT(A) has erred in ignoring the fact that the Ld. CIT(A) has not appreciated the ratio of decisions of Hon'ble 1TAT, Pune Bench B in the case of Abhijit Subhas Gaikwad Vs. DCIT, CC-2(1), Pune and the decision of the Hon'ble Supreme Court in the case of Sarifa Bibi Mohamed Ibrahim and jurisdictional Bombay High Court Gopal C. Sharma Vs. CIT as applicable in the present case, when in fact they are different. 5. The emphasis laid by the Ld. CIT(A) on the period of holding the land was more than 12 years is irrelevant because the assessee is a professional trader in land. 6. The order of the Ld. CIT(A) may be vacated and the Assessing Officer be restored. 7. The appellant craves leave to add, alter amend and modify any of the above grounds of appeal....
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....ist but businessman. The Assessing Officer conducted enquiries with the office of District Collector. On such enquiry it revealed that the respondent-assessee had applied for conversion of the land for non-agricultural purpose on 16.07.2012. However, the same was rejected by the District Collector, Pune. The Assessing Officer also referred to the statements recorded from all three directors of the respondent-assessee company, namely, Shri Sharad Goil, Shri Fali J. Pastakia and Shri Anand Mutha recorded by the Investigation Wing of the Department, Pune on 28.03.2013 wherein, one of the directors, Shri Sharad Goil in reply to question no.10 had stated that the land was purchased by the respondent-assessee company for the purpose of construction of the project and had also stated that construction of the project was not undertaken because there was major recession in real estate in the year 1995. He also stated that the land was situated in Khadkale, Pune. The Assessing Officer also deputed one of the Inspector of his office for spot verification of the land. The Inspector submitted a report dated 07.09.2015 stating that this is fully developed area. The Assessing Officer also, on ver....
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.... for the remand report from the Assessing Officer on entries in 7/12 extracts. The ld. CIT(A) considering the remand report, and taking into consideration the following facts that :- (i) The Assessing Officer has not made any adverse comments on the factual details submitted by the respondent-assessee. (ii) Considering area of such huge size some part of the land is always uncultivable/padit land hence it could not be held that land was not used for agricultural operations. It cannot be said that the land was not cultivated. (iii) The land was held for more than 17 years from the date of purchase. (iv) The appellant had been carrying out agricultural activities resultant the agricultural income was shown in the year 2007-08 was accepted by the Assessing Officer. (v) The entries in 7/12 extracts of the land indicates that the appellant was carrying agricultural operations. held that the Assessing Officer was not justified in holding that the land was not agricultural land. Accordingly, the ld. CIT(A) concluded that the gains arises on sale of land cannot be taxed under the head 'business income'. 6. Being aggrieved by the deci....
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....e also placed reliance on the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Smt. Debbie Alemao, 196 Taxman 230 (Bombay) in support of the proposition that if the agricultural operation does not result in income that cannot be ground to say that the land was not used for the agricultural purpose. He also filed a chart before us demonstrating as to how in terms of the tests/guidelines laid down by the Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim & Others vs. CIT, 204 ITR 631 (SC) the land in question can be treated as agricultural land. The scanned images of the said submissions are reproduced below :- Sr. No. Factors as approved by Hon'ble SC in the case of SarifabibiMohmed Ibrahim vs CIT 204 ITR 631 Contentions of the Learned CIT(DR) Contentions of the Respondent 1 Whether the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue? Yes. But as held by various courts classification in revenue records is not a sole factor to decide the nature of land. Yes. The land was classified in the revenue records as agricultural and was also subjected to th....
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.... Book filed by Respondent) wherein it is clear that what has been mentioned is that the animal grass is being cultivated on only a minor portion of the land, with Rice being the main crop. Thus, the contention of the Ld. CIT(DR) is based on misinterpretation of the facts. 3 Whether such use of the land was for a long period or whether it was of temporary character or by way of stop-gap arrangement? (i)The agriculture use was only a stop gap arrangement and neither the company nor The directors (now partners) intended to do agricultural activity on the said land. Yes.The land was purchased by the Respondent in F.Y. 1994-95 which was initially treated as stock-in-trade. Subsequently, on realising that the development on the land was not feasible, the Respondent-converted the land into investment in the F.Y. 2000-01, after which the land has been used for cultivation for more than 10 years. Hence, Your Honours would appreciate that the agricultural activity cannotbe said to be of temporary character or by way of stop-gap arrangement. (ii) Cultivation was never the main object of the assessee. In fact the phrase 'cultivation' used in object clause 4 in MoA is in ....
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....ed as requisite documents were not filed (kind reference to para 5.3 at page 8 of the assessment order) The power of attorney (POA) referred to on Page 286 to 290 of the Paper Book is only a draft POA and has never been executed by all the parties mentioned in the document. The same is evident from no sign on the last page of the POA on Page 292 and page 293 of the P.B. (iii)Later, the permission for non agricultural use was given on 05.09,2014 on a joint application made by Shri Fali Jehangir (in the capacity of self as well as in the capacity of partner, founder and main person of the assessee and M/s Namrta Realty (other Joint Development Partner) (kind reference to page 438 of PB filed by the assessee). (iv) Reference is also invited to the Power of Attorney dated 25.01.2013, granted by the assesse to Its development Partner for obtaining permission for non-agricultural from relevant authorities. It is clearly mentioned in POA that as the assessee is unable to attend to various matters related for sanction, so it is authorising the Namrta Developer for same. (Kind reference is invited to page 286 to 290 of PB filed by t....
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.... Thus, as per the ratio laid down by Hon'ble Bombay High Court CIT vs VA. Trivedi (1988) 38 Taxman 102 (Bom) as well as other case laws, the land ceased to be agricultural land before the relevant date The spot verification made by the Inspector clearly established that the land has been developed in 298 residential plots. (kind refence to para 5.4/page 12 of assessment order) This development is permanent. 7 Whether the land, though entered in revenue records, had never been actually used for agriculture, that is, it had never been ploughed or tilled? Whether the owner meant or intended to use it for agricultural purposes? The assessee is a company which was later converted as LLP. And as per MoA, the main object was to construct, develop, purchase, sell, etc of immovable properties. The Directors (now partners) of the assessee are established builders and not agriculturist. The land has always been used for agricultural purposes. This fact has also been accepted by the Department at the time of assessment of the Respondent for A.Y. 2006-07 and 2007-08 wherein the Assessing Officer has specifically stated that the Respondent is engaged in business of cultiv....
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....o development agreement not only with M/s Namrata Realty but with M/s Panchshil. Group as well. (Reference is invited to page 244 to 261 of paper book filed by the assessee). The assessee has neither during the post search investigation, assessment proceedings, or appellate proceedings has denied the existence of these agreements/MoUs. There was no sale of any portion of land in the past for non-agricultural purposes. 11 Whether permission under Section 63 of the Bombay Tenancy and Agricultural Lands Act, 1948, was obtained because the sale intended sale was in favour of nonagriculturist was for non- agricultural or agricultural use? It is not clear as to whether such permission was taken or not but, it may be submitted or that the lawyer of Namrata Developer clearly advised that such permission shall be required (reference is invited to page 219 of PB filed by the assessee). The permission for the conversion of land was never obtained by the Respondent during the period that the land was owned by the Respondent. But the fact remains that later permission for nonagricultural use was granted on 05.09.2014 on a joint application made by Shri Fali Jehangir (in the ca....
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....ration was given to other factors, being entry in revenue records, permission for nonagricultural use, etc. 10. We heard the rival submissions and perused the material on record. The only issue in the present appeal relates to whether or not in the facts of the present case can it be held that the profits arising on sale of lands in question to be taxable under the head "business income". There is no dispute that the subject lands were classified in the revenue record as agricultural lands as per entries in 7/12 extracts of the lands. The entries in 7/12 extracts of the lands also clearly indicate that majority of the land was under cultivations with only small size of land is uncultivable. In this connection, the Hon'ble Madras High Court in the case of CIT vs. Mansi Finance Chennai Ltd., 388 ITR 514 vide para 6 held as follows :- "7.2 In Mansi Finance Chennai Ltd., the Madras High Court, while dealing with the importance of classification of land in the revenue records, particularly when the said classification is not rebutted, what is the extent to which such a factor will have a decisive influence in considering what constitutes agricultural land or not, held thus: ....
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....the 7/12 extracts shows that lands were agricultural lands at the time of transfer and the lands have been put to agricultural operations, it can be said that the assessee company had discharged his burden and proved that the lands were agricultural lands. Further, the fact that the purchaser of the lands had used the lands for non-agricultural purpose has no bearing in determining the nature of assets sold by the assessee on the date of sale as held by the Hon'ble Madras High Court in the case of M. S. Srinivas Naicker vs. ITO, 292 ITR 481 as extracted above. 12. Further, in the present case, the seller of the land had not taken any steps which would indicate the intention to exploit the land for non-agricultural use, it is only the buyer of the land who sought the permission for conversion of land into agricultural to nonagricultural on 05.09.2014 which is subsequent to the sale of land by the respondent. Recently the Hon'ble Kerala High Court in the case of CIT vs. Cochin Malabar Estates and Industries Ltd., 440 ITR 121 after referring to the judgement of the Hon'ble Madras High Court in the case of Mansi Finance Chennai Ltd. and MS. Srinivasa Naicker referred (supra) held as....
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....ing as to how in terms of the tests laid down by the Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim & Others vs. CIT, 204 ITR 631 (SC) the land is an agricultural land, remain uncontroverted by ld. CIT-DR. 17. In the light of above discussion, we are of the considered opinion that the assessee company had brought on record a conclusive proof to infer that the lands sold were agricultural lands. Accordingly, we uphold that the findings of the ld. CIT(A) that the lands sold were agricultural lands. 18. As regards to the finding of the A.O. that lands were held as business assets in the year of purchase of lands and, therefore, the gains arising on sale of lands should be assessed as business income, we find that the lands were purchased in the year 1994-95, however, shown initially in the books of accounts as stock-in-trade, later on changed it to investments in the books of account, this treatment was accepted by the Department, which goes to prove the intention of the assessee company to hold land as "investments". The bona-fide of this treatment was never doubted by the Department in the assessment year in which change the character of land took place. N....
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..../property cannot be considered as business income. The relevant part of the said decision is reproduced as under :- "13. In the ruling in the case of DLF United Ltd. v. CIT [1995] 217 ITR 333/84 Taxman 379 the Hon'ble Delhi High Court referred to explanation to section 2(1A) relied upon by the Counsel for the Revenue and held that surplus of the compensation amount arising as a result of acquisition of agricultural land in question was capital asset and not the income at all. The question of change in the definition of agricultural income because of insertion of the explanation has no relevance. Thus, in the facts and circumstances of the case, when M/s.DLF United Ltd. was carrying on business as colonisers by purchase, development and selling the plots of lands in and around Delhi in the course of its business and the Company had acquired certain agricultural land in certain villages around Delhi, out of which some land was acquired by the Government through a notification issued u/s.4 of the Land Acquisition Act followed by declaration issued under Section 6 of the Land Acquisition Act and the Company received compensation for the land after assessment under the Land....