TMI Blog2019 (10) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... t not business income. It is established that the department also has accepted the assessee s contention that the sale consideration on account of sale of plots to be brought to tax under the head long term capital gains. Accordingly, first question is answered in favour of the assessee and against the revenue. Eligibility for deduction u/s 54F if the asset is transferred prior to the transfer of the land - As relying on SRI BOLLINA SRIHARI RAO AND VICE-VERSA [ 2017 (4) TMI 117 - ITAT VISAKHAPATNAM] and CHAMARTHI MOUNICA [ 2019 (8) TMI 847 - ITAT VISAKHAPATNAM] assessee is eligible for deduction u/s 54F even if the construction is commenced before transfer of the capital asset and completed the construction within the period provided in 54F of the Act. Therefore, we set aside the orders of the lower authorities and allow the appeal of the assessee. - I.T.A.No.404/Viz/2019 - - - Dated:- 4-10-2019 - Shri V. Durga Rao, Judicial Member And Shri D.S. Sunder Singh, Accountant Member For the Appellant : Shri.Y.Ratnakar, AR For the Respondent : Smt.Suman Malik, DR ORDER PER SHRI D.S.SUNDER SINGH, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire receipt under the head long term capital gains and allowed the cost of acquisition and cost of improvement and the balance amount of ₹ 31,64,190/- was brought to tax. 4. Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) dismissed the appeal of the assessee. 5. Against the order of the Ld.CIT(A), the assessee filed appeal before this Tribunal. During the appeal hearing, the Ld.AR submitted that the assessee owns agricultural land in Tanuku admeasuring 82.5 cents in Survey No.330, 335/1 of Tanuku and he had applied for conversion of agricultural land into non-agricultural purposes which was approved by Revenue Divisional Officer, Kovvuru by his order dated 22.12.2007 in R.C.C.No.1323/2007(K). The above agricultural land was remained as agricultural land till 31.03.2008. The proposals of lay out was made by the municipal committee, Tanuku by its letter dated 09.04.2008 in ROC No.545/2008/G1 and by its letter dated 06.08.2008 in ROC No.545/2008/G1 which were approved by the Regional Deputy Director of Town and Country Planning, Rajahmundry by his letter dated 14.08.2008 in Lr.D.Dis No.504/2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. 22.09.2008 22.09.2008/3759/2008 394.20 K.Rama Mohan S/o Krishna Murthy Peravali 7,81,000 7. 21.09.2008 22.09.2008/3757/2008 402.35 Akkina Bapineedu S/o Venkata Rao, Tanuku 4,00,000 8. 22.09.2008 22.09.2008/3758/2008 464.77 B.Venkateswara Rao S/o Appa Rao, Tanuku 9,20,500 9. 01.09.2008 01.09.2008/3461/2008 177.45 N.Srinivas S/o Krishna, Tanuku 3,51,502 5.1. Out of the sale consideration of ₹ 36,26,502/-, the assessee has spent for construction of residential building at T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. We have heard both the parties and perused the material placed on record. In the instant case, the short questions involved are (i) whether the sale of plots by the assessee is business income or capital gains (ii) (ii) whether the assessee would be entitled for deduction u/s 54F if construction of house is commenced prior to the transfer of the asset. With regard to the first issue, whether the assessee s income required to be taxed as business income or capital gains. In the instant case, the assessee carried on the agricultural activity till 31.03.2008 and subsequently sold the land in plots. Though the assessee has taken permission for conversion of land for plotting into various units, no evidence was brought on record by the AO that the assessee has carried on any developmental activity. The assessee has not incurred any other expenditure except for payment of conversion fees, transport charges, labour charges etc. From the assessment order, we observe that the AO did not make out a case that the assessee has carried on the business activity. Therefore, the assessee being the agriculturist, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, we are also of the view that the selling of own land after plotting it out in order to secure better price, is not an adventure in the nature of trade or business. (iii) DCIT, Circle-15(1) i/c, Hyd, Vs. Shri B.Venu Madhav In this case ITAT Hyderabad in I.T.A. No.82/Hyd/2015 dt.24.04.2015 the assessee explained that the land was inherited by him after the demise of his late mother and that agricultural operations were carried out on the said land since its purchase in 1979 and therefore, the income from the sale of the land is to be considered as capital gains and not as business income as sought to be held by the AO. By taking note of the following facts, ITAT, Hyderabad held that the CIT(A) erred in holding that the sale proceeds should be assessed as business income after recording certain factual findings. a) In the present case, assessee is an agriculturist and did not carry on any business b) The land was purchased as agricultural land way back in 1979; c) Agricultural operations were carried on for more than 20 years and the land was inherited by assessee wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 621 ITR 578 (Mad) 9. If a land owner developed his land, expended money on it, laid roads, converted the land into house sites and with a view to get a better price for the land, eventually sold the plots for a consideration yielding a surplus; it could hardly be said that the transaction is anything more than a realisation of a capital investment - or conversion of one form of asset into another. Obviously , the surplus in such a case - will not be trading or business profit because the transaction is one of realization of asset in investment rather than one in the course of trade carried on by the assessee or an adventure in the nature of trade The case of the assessee can stand on no different footing, - as we think, only because it is a company which has among its objects power to trade or traffic in land. There is here no evidence of a venture or venture The transaction involved no risk or speculation, nor can it be truly said that it is a plunge in the waters of trade It is a transaction which any prudent owner of land will engage in and which is, therefore, no more than realization of capital investment, conversion of land into money, not a venture in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, we extract relevant part of the order in the case of Chamarthi Mounica which reads as under : 15. The alternate proposition made by the Ld.AR is even if it is presumed that construction was commenced prior to the transfer of the capital asset, the assessee is eligible for deduction u/s 54F of the Act. The assessee relied on the order of this Tribunal in the case of Sri Bollina Srihari Rao (supra). In the cited case, the Tribunal held that the assessee would be entitled for deduction u/s 54F even though the amount is invested in construction prior to the transfer of original asset. For the sake of clarity, we extract relevant part of the order of this Tribunal in para No.11 which reads as under : 11. Having heard both the sides, we find that the Coordinate Bench of this Tribunal, under similar circumstances has held that the Act does not prescribed any condition as to the date of commencement of construction of new house property and only condition is that construction of house property should be completed within three years from the date of transfer of original asset. The date of commencement of construction is irrelevant and the constructi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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