TaxTMI 
TaxTMI 
2022 (7) TMI 989
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....fore 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." 3. Briefly, the facts of the case are as under : The respondent-assessee is a ....
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....t 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 verification of entries in 7/12 extracts of the land, found that some part of the land is "P....
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....acts 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 decision of the ld. CIT(A), the Revenue is in appeal before us. 7. The ld. CIT-DR submitted that whether a particular land is agricultural or not is essential a question of fact which should be decided with reference ....
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....ound 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 the payment of land revenue 2 Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time? (i)No, the land was not ordinarily used for agricultural purpose. (i) Yes, the Respondent has used the land for agricultural purp....
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....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 the context of developing the properties by planting, paving, drawing, farming, cultivating, etc. This is an Ancillary object which is incidental for attaining Main cultivation/farming object. So cultivation / farming cannot be a separate business activity of the company (iii) Notes to Accounts for fi....
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....f 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 the assessee). (v)The said PoA is dated 25.1.2013 It is important that on the said date initial amount of Rs 7 crores was paid by the Joint developer as mentioned in final agreement to sell (page 192 of the PB filed by the assessee). Incidentaly it was the only payment made by Namrata Developer to the assessee and bal....
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.... 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 cultivation of the agricultural lands and taking the crops such as Jawar, Rice and animal green grass, etc. (Page no.179 to 183of the Paper Book filed by the Respondent) AS per statements of Directors of companies, the land was purchased for development/construction. The only intention was to earn profit through development/appreciation. The meagre income declared by the assessee clearly in....
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....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 capacity of self as well as in the capacity of partner, founder and main person of the assessee and Namrta Realty (other Joint Development Partner) (kind reference to page 438 of PB filed by the Assessee ). The land was finally developed in plots as reported by the inspector. 12 Whether the land was sold on yardage or on acreage basis ? Consideration was determined on per square meter basis. Even though it is mention....
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....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: "From the material on record, it could be deduced that the respondent has discharged his burden and proved that the lands were agricultural lands, at the time of transfer. Sufficient evidence has been adduced by the respondent, to prove that the subject lands have been put to agricultural operations before the sale. Classification of the lands, in the revenue records, as agricultural lands, is not varied and that is a determining factor." ....
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....n'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 follows :- "8.3 ......... In our understanding, the test stipulates that the subject matter of land is capable of being used for agricultural purposes without inhibition both in fact by change of user and by law by orders of conversion from agricultural to non-agricultural. Any other future independent application of said tests, is impractical from the perspective of sale and purchase. The judgment of this Court in Kalathingal Faizal Rahman case refers to the....
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....e 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. No doubt, the statements of the directors of the assessee company before the DDIT, Investigation Wing that the lands were purchased with the intention of developing of housing project clearly indicates that the land were originally purchased with intention of holding lands as business assets. But such intention of the assessee company had underwent change owing to several reasons, such as slump in real estate market rate etc. Thus, the very object of holding the lands had changed and th....
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....hange 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 Acquisition Act, the Income Tax Officer, while assessing that the Company was a dealer in lands, had held that the acquired land constituted the Company's stock-in-trade and compensation received by the Company was liable to be taxed as an income in three assessment years under consideration. The question which was raised was answered by the Delhi Court in paragraph 9 of the ruling under consideration, which reads thus : "This Court further held that in other words the agricultural lands purchased ....