TMI Blog2015 (10) TMI 2838X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, surplus is taxable as capital gains. Also in Pai Provision Stores [ 2011 (8) TMI 725 - KARNATAKA HIGH COURT] held that even though development and sale of property was one of the object of the assessee firm, the assessee was in fact not carrying on that business hence income from sale of part of developed property, which was utilized in clearing the debts incurred in development of property was capital gains and not business income, more so even the remaining property was used by assessee in carrying out its business and letting out to tenants. In the instant case, the assessee sold part of the agricultural land holding for last 20 years and entire sale proceeds were invested in constructing the residential house, which clearly suggest that assessee is not in the business of sale / purchase of immovable property and, therefore, the stand taken by the authorities below are not sustainable. Decided in favour of assessee. - ITA No. 298/Chd/2013 - - - Dated:- 16-10-2015 - SHRI H.L.KARWA, HON'BLE VICE PRESIDENT AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER For the Appellant : Sh. Parikshit Aggarwal For the Respondent : Sh. S.K. Mittal ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23 650 Sq. Yards 11,70,000/- 2. 08.09.2008 01K-3-1/2 Marla 27 706.95 Sq. Yards 12,72,000/- 3. 11.12.2008 01K-2-1/3 Marla 31 671 Sq. Yards 10,07,000/- 4 20.02.2009 OOK-17-1/3 Marla 29 519 Sq. Yards 9,35,000/- 5 16.03.2009 OOK- 16-2/5 Maria 54 492.55 Sq. Yards 7,00,000/- Total 50,84,000/- On perusal of sale deed of the above plots, the Assessing officer noticed the following features in the same. i) All the plots sold had distinct plot numbers. ii) The plots sold were situated in New Khanna City Colony. iii) The New Khanna City Colony is approved by PUDA. iv) At Page No.4 of the registration deed, it was specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. He further observed that the very fact that the plots sold were of the size of about 500 square yards each and the sale deed mentioned the plots numbers, block numbers as well as availability of facilities like, sewerage, roads, parks, street light etc., clearly show that the land (plots) were not sold for agricultural use but for residential use. Consequently, the CIT(A) dismissed the appeal of the assessee and, hence, the assessee is in appeal before the Tribunal. 6. We have heard the rival submissions. Shri Prakshit Aggarwal, Ld. Counsel for the assessee reiterated the submissions made before the lower authorities. He also relied on the following judgments:- 1. CIT vs SK Kaintal (231 CTR 531) (2009) (P H HC) 2. Kaur Singh vs. CIT (144 ITR 756) (1983) (P H) 3. CIT vs Sushila Devi Jain (259 ITR 671) (2003) (P H) 4. CIT vs Sh. Harjit Singh Sangha (ITA No. 16 of 2012) (P H) 5. CIT vs Sohan Khan (304 ITR 194) (2008) (Raj. HC) 6. CIT Vs. Suresh Chand Goyal ( 298 ITR 277)(2008)(MP HC) 7. Janki Ram Bahadur vs CIT (57 ITR 21) (1965) (SC) 8 CIT vs Pai Provision Stores (203 Taxman 196) (20110 (Kar. HC) 9. ITO vs Ashok Kumar (ITA No. 1046 1314 of 2012) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether on the facts found by the Tribunal, the sale was an adventure in the nature of trade. A bare analysis of the facts found by the Tribunal would show that for arriving at this conclusion that it was an adventure in the nature of trade, the Tribunal was mainly influenced by the fact that out of the land attached to the Krishan Bagh Kothi, 42 plots of 2000 sq. yards each have been earmarked for sale ; that in the year in question 7 plots were sold for Rs. 18,500 and that advances were received in respect of other plots. In our view, on the basis of these facts alone, no such inference could legally be drawn that the transaction in dispute has the character of a trade in nature. The assessee admittedly had purchased the property in the year 1967. The Revenue has not at all brought any circumstance or evidence on the, record to show that at the time of the purchase of _the property in the year 1967, the assessee had an intention to sell the property. Merely carving out plots in a portion of the land, without proof of anything more, cannot give rise to the conclusion that the transaction is an adventure in the nature of trade. Our attention was pointedly drawn by the Ld. counsel f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was purchased by the assessee on 9th Feb., 1983. The sale transactions were eventually made by the assessee on 18th June, 2003 and 16th Feb., 2004 i.e., after a period of two decades. Secondly, for the period of two decades intervening the sale of agricultural land, the assessee continued to use the land in question for agricultural purposes, and as such, continued to derive income therefrom through the sale of agricultural produce. Even for the assessment year under reference the assessee declared his agricultural income at Rs. 2,34,000. Thirdly, there is no material on the record of this case to suggest that the assessee effected any kind of improvement in the land, so as to be able to sell the same at higher price. It is not possible to accept the contention of the counsel for the Revenue so as to treat the sale of agricultural land at the hands of the assessee as falling under the head Profits and gains of business or profession . Therefore, the earning of the assessee from sale transaction of agricultural land is liable to be treated as a capital gain . 10. In the aforesaid case, the assessee sold the agricultural land after holding it for a period of two decades. Durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no basis for holding the said land and as not agricultural land. We find support from the ratio laid down by the Chandigarh Bench of the Tribunal in DCIT v. A.P.Paper Mills Limited (supra). Accordingly, we hold that the nature of the land sold by the assessee as on the date of its sale was agricultural land, which was acquired by the assessee in the year 1995 and was sold during the year under consideration. 22. The said asset being held by the assessee cannot be said to be a business asset and its sale in small plots of land to different purchasers is not adventure in the nature of trade, in the absence of the assessee having floated the same or having developed its land for the purposes other than agricultural land. Further for converting the usage, prior permission is required from the authorities and in the absence of any permission being obtained by the assessee from PUDA authorities in respect of the land sold, merely because the land is sold in small plots to persons who intended its residential use, does not change the nature of land sold in the hands of the assessee and its taxability. We find support from the ratio laid down by the Hon'ble Patna High Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to show that assessee had purchased the land with the intention to sell it at a profit or that the assessee is a regular dealer in real estate, piecemeal sale of land by the assessee by earmarking plots constituted disposal of capital asset and not an adventure in the nature of trade and therefore, surplus is taxable as capital gains. In similar circumstances, the Hon'ble Karnatkka High Court in the case of CIT v Pai Provision Stores (supra) held that even though development and sale of property was one of the object of the assessee firm, the assessee was in fact not carrying on that business hence income from sale of part of developed property, which was utilized in clearing the debts incurred in development of property was capital gains and not business income, more so even the remaining property was used by assessee in carrying out its business and letting out to tenants. In the instant case, the assessee sold part of the agricultural land holding for last 20 years and entire sale proceeds were invested in constructing the residential house, which clearly suggest that assessee is not in the business of sale / purchase of immovable property and, therefore, the stand tak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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