TaxTMI 
TaxTMI 
2015 (10) TMI 2838
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....was processed u/s 143(1). Subsequently, the case was selected for scrutiny assessment under CASS. As per return of income the assessee has shown capital gains from sales of property against which deduction u/s 54F of the Income-tax Act, 1961 (in short 'the Act') was claimed amounting to Rs. 51,12,860/- being the amount invested in the construction of residential house. The assessee had purchased an agricultural land measuring 20 kanals 1 marla on 7.6.1998 with clear intention for agricultural purpose and assessee sold 11 kanal 19 marla in this year i.e. after a gap of 20 years and assessee used agricultural land for agricultural purpose throughout the period of holding and shown agricultural income in his income tax returns. On remaining land measuring 8 Kanal 2 marla, the assessee constructed residential house and all the sale proceeds of sold land had been invested on construction of residential house. Firstly, the sale proceeds were deposited in Indusind bank and construction expenses on residential house were made from withdrawals from the said bank. During the course of assessment proceedings, the assessee submitted the details of expenses along with some purchase bill....
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....oping the land in question. The Assessing officer further held that the moment the land is developed and the facilities such as street light, water supply, sewerage, road, park etc. were provided the land in question no longer remained investment but becomes part of the stock-in-trade. The Assessing officer concluded that no capital gain is arising to the assessee on sale of the plots amounting to Rs. 50.84,000/-. The Assessing officer assessed these receipts under the head 'business income'. The Assessing officer further held that assessee was not eligible for claiming deduction u/s 54F. The assessee claimed the benefit of indexation amounting to Rs. 77,568/- which was also disallowed by the Assessing officer. 5. On appeal, the CIT(A) upheld the order of the Assessing officer observing that plots sold by the assessee is a developed property situated in the New Khanna City Colony which is approved by the PUDA. He also observed that it was not the case of the assessee that the plots sold by him are agricultural land within the meaning of section 2(14)(iii) of the Act. He further observed that the very fact that the plots sold were of the size of about 500 square yards each and th....
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.... given by the Assessing officer holding that the transactions were of adventure in nature of trade are not tenable. It appears that Revenue authorities below were influenced by the fact that five plots of 500 square yards each have been sold and further when the land was sold by the assessee in the form of plots, no cultivation was being done on it. It is also one of the contentions of the authorities below that when the land was sold by the assessee, the facilities like street light, water supply, sewerage etc. were available in the New Khanna City Colony. In our considered view, in the facts and circumstances of the present case, the authorities below were not justified in holding that income derived by the assessee from sale of plots was from an adventure in the nature of trade. While taking such a view we are fortified by the decision of Hon'ble Jurisdictional High Court in the case of Kaur Singh v CIT (supra) wherein the Hon'ble Jurisdictional High Court on similar set of facts has held as under:- "11. Keeping in view the principles enunciated by the Supreme Court, we shall now independently examine whether on the facts found by the Tribunal, the sale was an a....
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...., the assessee had intention to sell the property. The Hon'ble Jurisdictional High Court held that converting agricultural land into the plots and selling them cannot be treated as adventure in nature of trade when it could be established that assessee had no intention to sell the land at the time when it was purchased. In our opinion, the decision of Hon'ble Jurisdictional High Court in the case of Kaur Singh v CIT (supra) is squarely applicable to the facts of the present case. 9. The contention of the assessee was that the assessee has sold part of the land after holding it for a period of 20 years and utilizing it for agricultural purposes during the said period without effecting any kind of improvement on the land, therefore, earning of sale of land has to be treated as capital gain and not profit and gains of business and profession. In support of the above contention the Ld. Counsel for the assessee relied on the judgment of the Hon'ble Jurisdictional High Court in the case of CIT v S. K. Kaintal (supra) wherein the Hon'ble High Court has held (head note) as under:- "The land under reference was purchased by the assessee on 9th Feb., 1983. The sal....
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....ade. At this stage, it would also be worthwhile to refer to the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Shri Harjit Singh Sangha (supra) wherein the Hon'ble Jurisdictional High Court has held as under:- "6. The Tribunal also on appreciation of material on record came to the conclusion that it was not business income but it resulted in Long Term Capital gains. The relevant findings noticed read thus:- "21. In the totality of the above said facts and circumstances and the evidence perused by us, the nature of land being agricultural land stands established ; a) as the said land was part of notified forest area where admittedly no other activities ITA No.16 of 2012 4 except agricultural, if allowed, could be carried out; b) Girdawari of the landholdings of the assessee proves the stand of the assessee that it was agricultural land and also the notification issued for the urban usage/non-agricultural activities certifies that prior to its notification the said land was used for agricultural purposes. The land being registered in Land Revenue Records as Agricultural land, then there is no basis for holding the said land and as not a....
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....l for determining the character of the agricultural land was wrong.' [Emphasis supplied] 23. In view thereof we hold that the gain arising on the sale of the aforesaid agricultural land cannot be taxed as income from business." 7. Learned counsel for the revenue was unable to show that the activity undertaken by the assessee was an adventure in the nature of trade. No error could be pointed out in the findings recorded by the CIT(A) and upheld by the Tribunal warranting interference by this Court." 12. In the instant case also, the land has been recorded in the Revenue records as agricultural land, there is nothing on record to show that the entry was wrong. In the above decision it has been held that the fact that the purchaser had purchased the land for the purpose of constructing his house has no relevance because so far as the seller is concerned, he will be deemed to have parted with the agricultural land in the form of agricultural land, unless it is proved otherwise. The Hon'ble Rajasthan High Court in the case of CIT v Sohan Khan (supra) had made a remarkable observations and stated that in the absence of anything to show that assessee had....