TMI Blog2008 (5) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... e: "4. In this case, to begin with an assessment order under section 143(3) was completed on 28-3-1995 determining total income at Rs. 23,80,720 along with agricultural income of Rs. 80,000. Thereafter the appeal filed by the appellant against the said assessment order which was disposed of by the CIT(A)-II, Pune and after giving effect of the said appellate order total income of the appellant was recomputed at Rs. 8,33,820. Thereafter the CIT, Pune had passed the order under section 263 on 31-3-1997 setting aside the earlier assessment order passed on 28-3-1995 in limited sphere with a direction to verify all aspects relating to the land account of the assessee as the details of the same were not filed during the course of assessment proceedings. The CIT, Pune, had passed another order on 2-4-1997 rectifying the order passed earlier under section 263 on 31-3-1997, thereafter in accordance with the directions of CIT, Pune, the Assessing Officer has completed the assessment under section 143(3) on 23-6-1999 determining total income at Rs. 7,03,02,127 along with agricultural income of Rs. 80,000. Later on, the CIT(A), Thane had set aside the said assessment order vide his appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o had passed the first assessment order. He also gave a finding that the assessee is a builder and is engaged in the construction businesses is apparent from the past record and that the assessee carries out his construction business both in his proprietary capacity and also as a partner in the firm. He also gave a finding that the very intention of the assessee in acquiring the land, which was subsequently sold for a housing project of a society was to carry on business of development and resell the land and the intention was never that of an agriculturist who owns the land for farming. He further held that there is nothing on record to show that the assessee is an agriculturist or that he comes from an agricultural background. He recorded the history of the assessee by finding that the assessee started with an employment in Larsen Toubro Ltd. and thereafter jumped into construction business when he floated a partnership firm under the name and style "M/s. Pereira Builders Developers" with his wife as a partner. He also recorded that later on the assessee has set up his proprietary construction business. After scrutinising the transactions between the assessee and Citizen Co-o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the sale of this 60 acres of land was the solitary transaction entered into by the assessee and that the balance land purchased was still with the assessee. He also gave a finding that the agricultural land as such was purchased by the assessee from the assessment year 1987-88 itself and right from that assessment year, the assessee had declared agricultural income. He gave a finding that right from the time of purchase of the agricultural land, the assessee had no intention to sell the agricultural land with an objective of earning business profits. He also observed that the assessee had given evidences during the assessment proceedings, to the effect that he had earned agricultural income in all these years and also recorded that such agricultural income was continuously accepted by the Assessing Officer. He distinguished all the judgments relied upon by the Assessing Officer and after considering the judgments relied upon by the assessee s counsel he held that the judgment of the Hon ble Bombay High Court in the case of CIT v. V.A. Trivedi [1988] 172 ITR 95 is applicable to the facts of the case. He also held that the judgment of the Hon ble Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of agricultural land; when in fact the Assessing Officer was right in treating the said transaction of sale of land as business activity since the assessee s conduct was in the nature of adventure in the trade considering the correspondence between the assessee and the Citizens Co-operative Housing Society (proposed) and the facts that (1) the assessee is a builder and is engaged in the construction business (2) there is nothing on record to show that the assessee is an agriculturist or he comes from an agricultural background (3) the assessee has not purchased the lands in question by way of an outright conveyance, but the popularly known in local language as "Sathe Khat" and has taken over the possession of the lands. (2) Whether on the facts and in the circumstances of the case and in Law, the CIT(A)-II, Thane, erred in holding that the lands in question were beyond 8 km. of Municipal limits and as such not covered in the definition of capital asset and hence there is no liability or capital gain also on the surplus arisen to the assessee relying on the certificate dated 30-9-1991 issued by the competent authority stating that the lands involved in the transaction was be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment or an adventure in the nature of trade was the purchase commodity and its resale allied to the assessee s business or incidental to it. In the present case, the assessee is a builder and is engaged in construction business. There is nothing on record to show that the assessee is an agriculturist or he comes from an agril. background. The assessee has invested few crores of rupees for purchase of all these lands by even borrowing the funds and as against this investment the agril. income earned by the assessee is very meagre. The assessee has not acquired any agril. equipments for his agril. activities." 6. Shri Mohnish Verma, the learned CIT (DR) submitted that the assessee is a real estate developer and a dealer in lands and buildings and hence the purchase and sale of agricultural land was very much with an intention to make a profit and that it was an adventure in the nature of trade and thus taxable as income arising from business. He referred to page 48 at para 22 of the assessment order wherein the Assessing Officer summarised his findings and relied on the same. He emphasised on 18 points made out by the Assessing Officer justifying the treatment of this income as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... green zone and the assessee had not applied for or got the same converted into non-agricultural land. Thus he argues that the profit arising out of this transaction cannot be considered as income from business or profession as it is not an adventure in the nature of trade. 10. On the issue whether the land can be considered as a capital asset he submitted that under the Income-tax Act only certain municipalities have been notified and only land falling within 8 kms. of these notified municipalities would be within the definition of "capital asset" under section 2(14). He produced a copy of the CBDT circular as per which in Maharashtra only areas within the distance of 8 kms. from municipal limits of Greater Mumbai and New Mumbai have been notified. It is noticed that at Item No. 53 Thane Municipal Corporation limits are mentioned whereas at item No. 56 is Vasai Municipal Corporation limits are specified. He further referred to assessee s paper book pages 296 and 297 wherein certificate of the Office of the PWD Engineer, PWD Sub Division, Vasai to show that the distance from Vasai Municipality (Office of the Tehsildar) to Juchandra Village is 18.4 kms. and the distance from Nav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne by him cannot be business activity. Each transaction has to be evaluated on its own merits. The impugned transaction is the purchase of agricultural land over a period of time in Juchandra village, Tal : Vasai, Distt: Thane. The question is whether the purchase of land is an investment or a trading asset. The Assessing Officer has not treated the balance land as the stock in trade of the assessee. The land is in green zone and has not been converted into non-agricultural land by the time of the sale. The reliance placed by the learned departmental representative on the judgment of the Hon ble Gujarat High Court in the case of Arundhati Balkrishna ( supra ) does not come to its rescue. The criteria specified therein for determining whether the land in question is agricultural land are ( i )The intention of the owner to put it to any particular user is one of the criterions though not the sole or exclusive criterion. ( ii )The actual user may ordinarily furnish a prima facie evidence of the nature and character of the land. If it is lying idle, the question may assume more complexity. ( iii )The development and situation of land in the adjoining area or surroundings wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as correct in relying on the judgment of the jurisdictional High Court in the case of V.A. Trivedi ( supra ) and Court in the case of Smt. Indramani Bai ( supra ). In that judgment the Hon ble Supreme Court held that the transaction in the land was an adventure in the nature of trade only due to the fact that after the purchase the assessee had carved out plots and sold the same within a few months and this was coupled with certain other circumstances and whereas in the instant case the land was not even converted into non- agricultural land. The admitted position being that the land is in the green zone there is no gainsaying that this cannot be considered as non- agricultural land. We also hold that the first appellate authority was right in applying the judgment of the Hon ble Madras High Court in the case of CIT v. A. Mohammed Mohideen [1989] 176 ITR 393 1 wherein it is held that in order to hold an activity to be in the nature of an adventure in the nature of trade, there must be positive material to prove that the assessee intended to trade in such an activity and in the absence of evidence, sale of immovable property consisting of land could give rise only to capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny improvements to the land to make it readily marketable. Thus he held that the assessee has not purchased the land with an intention to trade in the land but merely has invested all the surplus earned was not assessable as business income. Applying the criteria laid down by the jurisdictional High Court to the facts of this case, we have to necessarily hold that the transaction in question cannot be said to be an adventure in the nature of trade and the surplus thereon thus cannot be assessed under the head "Income from business". 12.4 The decision of the Hon ble Supreme Court in the case of Dalmia Cement Ltd. v. CIT [1976] 105 ITR 633 was a case where an assessee had owned some factories in various parts of India and it had imported certain cement plants and resold the same. The court held that there was an intention to resale almost from the beginning and this was clearly the dominant intention in importing the machinery after partition of the company and therefore it was held that the transaction was in the nature of trade. This case law is not applicable to the facts of the case as there was no intention to do trade in this case as is apparent from the facts and circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or surrounding the impugned land and that an appeal on such conclusion is pending before the higher authorities. The first appellate authority, after considering the additional evidence furnished by the assessee called for a remand report from the Assessing Officer. The first appellate authority had also written a letter dated 11-12-2001 addressed to the Deputy Collector Competent Authority, Office of the Collector, seeking clarification, on the contradictory certificates issued by the State Government. The contents of the letter are at page 45 of the CIT(A) s order. The State Government authorities have admitted that they have issued a letter dated 30-9-1991 to the Citizen s Co-operative Housing Society with various survey numbers involved in the land under transaction was beyond 8 kms. periphery of Greater Mumbai Urban Agglomeration. They had also admitted that in and around those survey numbers the Competent Authority has passed the statutory orders under section 8(4) of the Urban Land Ceiling Act and the said land was beyond the periphery of 8 kms. from the Greater Mumbai Urban Agglomeration area. The first appellate authority took cognizance of this letter dated 30-9-1991 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 28-12-2001 accepted that there was apparent contradictions in the clarification issued to the ACIT on 3-3-1999 and the letter issued to the purchaser, Citizen s Co-operative Housing Society on 30-9-1991 and the matter was referred to the State Government for appropriate decision. No doubt in the absence of any positive clarification on this issue by the State Government, it would be the duty of the revenue authorities to consider the evidence available on record by way of orders of the Urban Land Ceiling Authorities, certificates issued by the PWD authorities, etc. The assessee also claims that the ULC authorities have not initiated any action under section 34 of the ULC Act on any of the adjoining lands. This fact is not contradicted by the revenue authorities. The impugned assessment year is 1992-93. The notification No. 80, 10(E), dated 6-1-1994, came into effect on 6-1-1994 as clearly specified in that notification. Hence the same is not applicable to the impugned assessment year; though the same applies both to section 2(1A) as well as section 2(14). The earlier notification applicable to this case is Notification No. 80, 77(E) dated 6-2-1973 reported in (1973) 89 ITR ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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