2008 (5) TMI 444 - AT - Income Tax

Summary

Issues Involved:
1. Whether the sale of agricultural land by the assessee to Citizen Co-operative Housing Society can be considered as a transfer of capital asset.
2. Whether the sale can be treated as an adventure in the nature of trade.

Detailed Analysis:

Issue 1: Transfer of Capital Asset

Background:
The assessee purchased agricultural land in Juchandra, Thane, between 1986 and 1992, acquiring around 450 acres. The land was sold to Citizen Co-operative Housing Society. The assessee contended that the land was agricultural, situated beyond 8 km of municipal limits, and thus not a capital asset under section 2(14) of the Income-tax Act.

Findings:
- The Assessing Officer (AO) claimed the land fell within 8 km of municipal limits, citing a letter from the Additional Collector, Thane.
- The first appellate authority (CIT(A)) found the land was beyond 8 km from Greater Mumbai Urban Agglomeration, based on certificates from the Urban Development Department and statutory orders under the Urban Land Ceiling Act.
- The CIT(A) concluded the land was not a capital asset and thus not liable for capital gains tax.

Conclusion:
The appellate tribunal upheld the CIT(A)'s findings, confirming that the land was beyond 8 km of municipal limits and not a capital asset under section 2(14). Thus, no capital gains tax liability arose from the transaction.

Issue 2: Adventure in the Nature of Trade

Background:
The AO argued that the assessee, being a builder, purchased the land with the intention of resale for profit, treating the transaction as an adventure in the nature of trade.

Findings:
- The CIT(A) noted the assessee had not developed the land and sold it as agricultural land. The land was in a green zone and used for agricultural purposes.
- The assessee had declared agricultural income over the years, which was accepted by the AO.
- The CIT(A) relied on the judgments of the Bombay High Court in CIT v. V.A. Trivedi and the Supreme Court in Smt. Indramani Bai v. Addl. CIT, concluding the transaction was not an adventure in the nature of trade.

Conclusion:
The appellate tribunal agreed with the CIT(A), holding that the transaction was not an adventure in the nature of trade. The land was agricultural, used as such, and the sale did not indicate a business activity.

Separate Judgments for Different Assessment Years:

Assessment Year 1992-93:
The tribunal dismissed the revenue's appeal, confirming the CIT(A)'s findings that the land was not a capital asset and the transaction was not an adventure in the nature of trade.

Assessment Year 1998-99:
The tribunal, consistent with its decision for 1992-93, dismissed the revenue's appeal, holding the transaction as not an adventure in the nature of trade.

Assessment Year 2001-02:
Following the same reasoning as for the previous years, the tribunal dismissed the revenue's appeal, affirming the transaction was not an adventure in the nature of trade.

Final Outcome:
The appeals filed by the revenue for the assessment years 1992-93, 1998-99, and 2001-02 were dismissed.