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2014 (11) TMI 773 - AT - Income TaxAssessment of gains on sale of agricultural land - Whether the CIT(A) was justified in confirming the assessment of gain arising on sale of agricultural land as “business Profit” by rejecting the claim of the assessees that the same is not liable for taxation – Held that:- CIT(A) has proceeded on a new line of thought and concluded that there was no purchase or sale of land and further held that it was a simple case of giving advance in the course of business activity - the business activity of the assessees is not giving of advances - Even if it is considered to be so, for a moment, the advance should be returned back by the same person who had received the advance - If the assessee had not acquired interest in the land, there was not necessity for the Mumbai SEZ Ltd to enter into MOU with the assessee. The tax authorities have proceeded to assess the income as business income of the assessee on wrong understanding of facts - they were influenced by the fact that the assessees have sold the lands within a period of one year from the date of purchase - the tax authorities have not brought any material to show that these assessees had intention to hold the agricultural lands as their trading asset, which would have warranted the gain arising on their sale as business income - They have also not brought any material to contradict the submissions made by the assessees - these assessees were constrained to sell the lands to Mumbai SEZ Ltd in view of the notification issued by the State Government within one year from the date of purchase - these assessees were constrained to sell the lands and there is nothing on record to show that they intended to sell the lands within short period from the date of their purchase - the AO himself have accepted the fact that the lands were agricultural lands and they will not fall in the category of “Capital asset” as defined u/s 2(14) of the Act - the tax authorities are not justified in treating the gains arising on transfer of land as business profits – the order of the CIT(A) is set aside and AO is directed not to assess the gains arising on sale of lands as business profits – Decided in favour of assessee.
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