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2009 (2) TMI 278 - AT - Income TaxDeduction u/s 54EC - Sale of agriculture land, after converting the land into plots - Transaction as an 'adventure in the nature of trade' or capital gain - assessee stated that errors committed by AO in assessing the entire sale proceeds as business income instead of considering it as having generated capital gains - CIT(A) held the same as transaction of sale of an asset resulting in capital gains for claiming deduction u/s. 54EC - He placed reliance on the High Court decision in the case of CIT vs. Suresh Chand Goyal [2007 (1) TMI 90 - MADHYA PRADESH HIGH COURT] which was almost identical on facts wherein the word 'business' defined u/s. 2(13) was considered which covered 'adventure in the nature of trade' was on sale of agriculture land and was sold after converting the land into plots for a better price that alone was the activity therefore could not come within the purview of 'adventure in the nature of trade' in business. HELD THAT:- The Supreme Court in G. Venkataswami Naidu & Co.[1958 (11) TMI 5 - SUPREME COURT] held that in each case it is the total effect of all relevant factors and circumstances that determines the character of the transaction. A cumulative consideration of the facts of the present case unmistakably points to the transaction of sale being a realization of the investment in land and consequently the gains are chargeable only to capital gains tax and not to be considered as gains of an adventure in the nature of trade. In coming to this conclusion we have duly taken note of the following facts: (a) The assessee was an agriculturist and did not carry on any business at any time. (b) The agricultural land was purchased in 1961 and the assessee did carry on agricultural operations thereon. (c) The land was held by the assessee for more than 40 years. (d) The assessee obtained the permission of the concerned authorities for conversion of the land into residential plots only because of the relevant laws requiring him to do so. (e) The assessee in these 40 years did not make any further purchase or sale of any land. (f) Though it may not be entirely relevant but we cannot ignore the fact that the sale proceeds were invested in approved bonds and were not invested in any business. Therefore, we are of the view that CIT(A) was right in holding that the sale proceeds should be assessed as capital gains and since they were invested in bonds approved u/s. 54EC, the assessee was entitled to the exemption under that section. The appeal is dismissed.
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