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2015 (3) TMI 836 - AT - Income TaxCapital gain arising on sale of agricultural land - transfer of Power of attorney (POA) - treatment of sale of agricultural land as business income of the assessee - sale of land as such or plotted land - Held that:- Power of attorney is coupled with interest makes the assessee is owner u/s 2(47) of the Act. Further there is no dispute with regard to the ownership and enjoyment of property. Sec. 2(47) of the Income tax Act provides for taxation of Power of attorney transactions. Right to exploit is a Capital asset as held by Hon’ble Madras High Court in the case of A.R.Krishnamurthy and A.R. Rajagopalan Vs. CIT (1980 (12) TMI 33 - MADRAS High Court).The assessee is entitled to maintain two different portfolios, one for “Stock in Trade” and another one for “Investment” as per the decisions of various High Courts. The intention of the assessee was to hold these agricultural lands as Investment only. The assessee has declared agricultural income in the returns of income filed by him. Further, the assessee has also filed certificates obtained from Village administrative officer to prove the fact of use as agricultural lands. Some of the lands sold by the assessee have been categorized as “residential land” by the Sub-registrar Office for the purpose of collection of Stamp duty and hence such classification would not determine the character of land. The fact remains that the assessee has cultivated the lands and has declared agricultural income, which is also supported by the certificate of the Village Administrative Officer.The assessee did not develop these lands by forming roads etc., but has sold as agricultural lands only in cents and acres and not in ‘square feet’, which is the normal case in case of housing plots. Lands have been sold in continuous stretches without creating any road for access. Future potential is not relevant and the Character of land as on the date of sale is more relevant as held by the Hyderabad bench of ITAT in the case of DCIT Vs. M. Kalyan Chakravarthy [2014 (11) TMI 338 - ITAT HYDERABAD]. In the case of Mrs. Sakunthala Vedachalam and Mrs. Vanitha Manickavasagam (2014 (9) TMI 3 - MADRAS HIGH COURT), the Hon’ble jurisdictional High Court has held that the manner in which the adjacent lands are used by the owner therein is not a ground to come to a conclusion that the assessees’ lands are not agricultural lands. The principle that the assessee can hold assets either as “Stock in trade” or as “Investment” is now recognized.Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to delete assessment of gain arising on sale of agricultural land. - Decided in favour of assessee. Disallowance of development expenses - CIT(A) deleted disallowance - Held that:- The fact remains that the assessee has developed the land, i.e., he has laid roads, divided the land into various plots after leveling etc. It is in the common knowledge of everybody that the assessee should have incurred huge expenditure, without which he could not have sold the plots.we are of the view that the ld CIT(A) was not correct in deleting the entire amount of disallowance by simply following the decision in the case of M/s Jubilee Plot and Housing Pvt. Ltd., assessee’s sister concern. Since there is failure on the part of the assessee also, we are of the view some disallowance is called for in order to cover up the deficiencies, if any and also to put this issue at rest. Accordingly, we are of the view this issue would meet the ends of justice, if the disallowance is restricted to a lump sum of ₹ 50.00 lakhs in order to cover up the deficiencies, if any. We order accordingly. - Decided partly in favour of revenue.
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