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2013 (8) TMI 833 - AT - Income TaxAdventure in the nature of trade - Treating income arising out of the sale of agricultural land as business income – Sale of agricultural land, a long term capital gain, exempted under Income Tax Act - Assessee owns the agricultural lands situated at Mankal village in Maheswaram Mandal of R.R. Dist - During the year, i.e., 2007-08, the assessee has sold the entire land on 1.12.2006 to M/s. Prajay Holding Pvt. Ltd. for a total consideration of ₹ 24,81,60,000 - Held that:- Agricultural land of the assessee is outside the Municipal Limits of Hyderabad Municipality and that also 8 km away from the outer limits of this Municipality, assessee's land does not come within the purview of section 2(14)(iii) either under sub clause (a) or (b) of the Act, hence the same cannot be considered as capital asset within the meaning of this section. Hence, no capital gain tax can be charged on the sale transaction of this land entered by the assessee – Reliance is placed upon the cases s.a. DCIT vs. Arijit Mitra[2011 (8) TMI 556 - ITAT, KOLKATA]; M.S. Srinivas Naicker vs. ITO [2007 (1) TMI 149 - MADRAS High Court ] etc. It is important to note that what was the intention of the assessees at the time of acquiring the land or interval action by the assessee between the period from purchase and sale of the land and the relevant improvement/development taken place during this time is relevant for deciding the issue whether transaction was in the nature of trade. Though intention subsequently formed may be taken into account, it is the intention at the inception is crucial. One of the essential elements in an adventure of the trade is the intention to trade; that intention must be present at the time of purchase. The mere circumstances that a property is purchased in the hope that when sold later on it would leave a margin of profit, would not be sufficient to show, an intention to trade at the inception. In a case where the purchase has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding the property for himself or otherwise enjoying or using it, the presence of such an intention is a relevant factor and unless it is offset by the presence of other factors it would raise as strong presumption that the transaction is an adventure in the nature of trade. In the present case, considering the facts and circumstances of the case it cannot be considered as an adventure in the nature of trade. The intention of the assessee from the inception was to carry on agricultural operations and with this intention assessee entered into lease agreement and even there was no intention to sell the land in future at that point of time. It was due to certain compelling circumstances came into picture at a later stages, the assessees were forced to sell the land. Merely because of the fact that the land was sold in a short period of holding, it cannot be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade – Appeal allowed - Decided in favor of Assessee.
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