TMI Blog2013 (9) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... come - Following decision of Commissioner Of Income-Tax Versus V. A. Trivedi [1987 (1) TMI 12 - BOMBAY High Court] and Commissioner of Income-Tax (Central), Calcutta Versus Daulat Ram Rawatmall [1972 (9) TMI 9 - SUPREME Court] - Decided in favour of assessee. - ITA No.1745 /Ahd/2010 - - - Dated:- 30-8-2013 - SHRI MUKUL KR. SHRAWAT AND SHRI A.K. GARODIA, JJ. For the Appellant: Shri J.P. Jangid, Sr. D.R. For the Respondent: Shri M.R. Shah, A.R. ORDER PER SHRI MUKUL Kr. SHRAWAT, JUDICIAL MEMBER : This is an appeal filed by the assessee arising from an order of learned CIT(A), Valsad dated 11.12.2009. The grounds raised are hereby decided as follows: On the facts and in the circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer in treating the gain arising on sale of land as Business Income instead of Capital Gains as shown by assesse thereby, erred in disallowing assessee s claim for deduction u/s 54EC 54F of the Act totaling to Rs.37,50,409/-. 2. Facts in brief as emerged from the corresponding assessment order passed u/s. 143(3), dated 30.12.2008 were that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected the claim of the assessee after giving following reasons: The explanation of the assessee is considered very carefully. The contention put forth by the assessee is not accepted for the following reasons: 1) It is mentioned in the copy of Registered Document furnished by the assessee that according to permission granted by the District Panchyat Office, the assessee desired to divide alleged land into plots and sale it in the name of "Maninagar". Thus, it is very clear that the assessee has converted agricultural land into N.A. land with the intention to earn profit. 2) The assessee himself confessed that the alleged land was converted in Non-agricultural Land (N.A. Land) and sold out during the last three financial years after developing. 3) The assessee confessed that in order to make the land more attractive and salable, he has incurred expenses on basic requirements viz. Road, Fencing and drainage. 4) It can be seen that the assessee has sold out 17 plots during Financial Year 2003-04 and remaining plots were kept as stock-intrade which were sold out in the immediate two subsequent years. 5) The assessee has done all the activities which a person c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lot of land and the investment made by the appellant to claim the deduction u/s. 54EC and 54F of the Act. Considering the instances of sale rolling over various financial years, the activity carried out by the appellant is treated as business income and therefore, the addition made by the AO is upheld. 4. From the side of the assessee, learned AR, Shri M.R. Shah appeared. He has pleaded that the assessee-HUF was in possession of an ancestral agricultural land. The said agricultural land was adjacent to city of Navasari. The assessee was facing problem in maintaining the land as agricultural land, therefore, got it converted into non-agricultural land. Learned AR has placed reliance on the submissions made before the Revenue Authorities, relevant portion is extracted below: The facts of the case are as under : The assesses HUF was having agricultural land bearing survey no. 195, 196-197-198/paiki situated at Village Chhapra, Taluka and Dist. Navsari. This was inherited from Karta's father's HUF on his death. The assessee had not purchased the said land. The inherited land was an agricultural land. The agricultural activity was being conducted on this land till permission o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o business activity has been carried out by the assessee thereon. 4.1 Learned AR has also stated that no substantial development work was carried out by the assessee and the small amount of expenditure was incurred only to improve the value of the land as also to protect the property. Learned AR has also drawn our attention on few of the samples of sale deed executed by the assessee to various persons. He has pointed out that each and every sale deed has consisted the background of the land that the same was ancestral agricultural land. He has also emphasized that the assessee was not in the business of Real Estate . The assesse was also not in the business of purchase and sale of land. It was a single transaction of the land which was acquired through inheritance, however, sold in pieces. Because the assessee is not in any trade of land, therefore, the assessee has invested Rs.14,14,000/- in the bonds and claim the deduction u/s. 54EC of IT Act. The assessee has also invested Rs.25,00,000/- towards construction of a residential house. Hence, claimed deduction u/s. 54F of the IT Act. With these factual background, learned AR has placed reliance on the following orders: (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the year 1987, therefore, the period of holding of the land being substantial, hence, safely can be held that the land in question was within the definition of Long Term Capital Asset . (vi). The carving of the land into small plots can also not be held as a business activity because of the reason that a capital asset can be sold in portions; but by mere selling of a capital asset into pieces do not change the character/nature of the asset and the same always remain a Long Term Capital Asset. 6.1 In the light of the above reasoning, we have also examined the case laws cited by both the sides. The AO has placed reliance on the orders of Raja J. Ramashwaram 42 ITR 179 (SC) and a decision of M. Krishna Rao, 120 ITR 101 (AP). We have perused these orders. The facts of these cases have revealed that the land in question was acquired by the assessee; therefore, a clear cut distinction is that this appellant has not acquired the land but the land was inherited by the assessee, therefore, towards purchase of land no investment was made by this assessee. Hence, there was no question of examining the intention of the assessee at the time of acquisition of this asset. In the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f business, but to consider the question of business, there must be regular activity of purchasing and selling. The assessee received agricultural land as gift. He took steps for converting it to non-agricultural purposes. Thereafter, the land was converted into plots. The Assessing Officer noted that apart from the approval of map, deposit of tax and other activities for developing the plots like making of roads etc., were also taken up and in two out of the three assessment years, expenditure had been claimed for such development activity. The Assessing Officer held that the activity amounted to an adventure in the nature of trade. He assessed the gains as business profits. This was upheld by the Commissioner (Appeals). The Tribunal however held that the gains were assessable as capital gains. On appeal by the Revenue a preliminary objection was raise that the appeal was not competent in view of the CBDT circular: Held, (i) that the land had been received as gift and the land was developed and was sold after converting into the plots with a view to secure a better price, therefore, the isolated activity could not come within the purview of adventure in the nature of trade and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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