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TMI Blog2013 (12) TMI 1256X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts and in the circumstances of the case, Hon'ble ITAT is justified in upholding the order of ld. CIT (A) in directing the AO to ascertain the cost of land as on 1.4.74 and deduct the same to work out the capital gain?" 4. Brief facts giving rise to this reference are that Late Shri Devendra Pal Singh-the respondent assessee was owner of agricultural lands, inherited by him as ancestral properties. He entered into a registered agreement dated 9.5.1989 with M/s Konark Builders for transfer of the agricultural lands for a sale consideration of Rs.1,04,28,000/-. The assessee declared an income of Rs.3,98,180/-, as capital gain on sale of the agricultural land. 5. The Assessing Officer observed that during the relevant assessment year 1991-92 the assessee had sold the area of 3846.73 sq. mtr. out of the area involved of 6516 sq. mtrs. in the land. The assessee had declared the total sale consideration received as Rs.11,31,536, after deducting the cost of land as on 1.1.1974 at the rate of Rs.28.71 per sq. mtr. The assessee had worked out capital gain at Rs.9,36,350/- after claiming deduction under Section 48 and under Chapter VI A. The income was shown as Rs.3,98,180/-. 6. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elopers and the assessee had paid required expenses for the development and plotting of the land. 8. The A.O. mentioned that the transaction was not a one time transaction but an on going one in which a major portion of the receipts were to be received in asstt. year 1992-93. He also observed that the plots were not capital assets of the assessee but were stock in trade which the assessee would be selling as and when the buyers are available. He also observed that the entire holding was neither to be sold as one unit nor it was to be transferred as one unit and till the plots are transferred, they continue to remain in the possession of the assessee. He held that the transaction entered into by the assessee with M/s Konark Builders was an adventure in the nature of trade. He thus brought the total sale consideration of Rs.13,43,106/- in respect of plots, whose sale deeds were registered during the year, to tax as income from business. 9. In first appeal, CIT (A) found that the assessee had agreed to sell his agricultural land measuring 23 bighas and 16 biswas in Khasra No.509 to 514 to the colonisers for consideration of Rs.1,04,28,000/-, and thereafter the assessee had nothing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of land is taxable under the head "capital gains" and that in the present case the transactions could not be termed as an adventure in the nature of trade. This ground is, therefore, rejected." 11. The Income Tax Appellate Tribunal confirmed the order of CIT (A) and held in Para 5.4 as follows:- "5.4 We have carefully considered the rival submissions on this issue and in view of our decision upholding the orders of the ld. CIT (A) that the sale proceeds received by the assessee from sale of agricultural land is taxable under the head "capital gains", we see nothing wrong in the directions of the ld. CIT (A) to the AO to ascertain the cost of land as on 1.4.74. This ground is, therefore, rejected." 12. Shri Shambhu Chopra, learned counsel for the revenue submits that the assessee had not sold the land as agricultural land by way of one time transaction, he sold the plots after getting the land developed from the coloniser. The assessee sold the plots by separate sale deeds on which he paid registration charges. The activity of getting the plots sold after development through coloniser even if it is a one time activity, is adventure, which falls within the meaning of definiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the view taken by the Tribunal. The finding was on question, which was a mixed question of law and facts. The High Court would no doubt have to accept the findings of the Tribunal on the primary question of fact, but it is open to the High Court to examine whether the Tribunal had applied the relevant legal principles correctly or not. 15. The Supreme Court further held that where the question is whether a transaction is in the nature of trade, even if the conclusion of the Tribunal about the character of the transaction is treated as a conclusion on the question of fact, the Tribunal had undoubtedly and necessarily to address itself to the legal requirement associated with the concept of trade or business. 16. Shri Chopra has relied upon CIT v. Sutlej Cotton Mills Supply Agency Ltd., 1975 Vol.100 ITR 706 (SC). In this case the respondent company, a public limited company controlled by Birlas was interested in another company Gwalior Rayon. It subscribed to 3.49 lacs shares in the new issue of Gwalior Rayon and paid the application and call moneys. During the accounting period ending on March 31, 1956, the respondent sold 1,58,200 out of these shares at a profit of Rs.2,13,150 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT (A) held that the first and foremost element necessary for constituting adventure in the nature of trade is that the transaction must be in the line of business; the second condition is the intention of the purchaser on the inception of the transaction and not one formed subsequently, that is of development of the land and dividing it into smaller plots. The assessee was not doing any business. He had never dealt with purchase or sale of land. When he thought it to sell away the ancestral agricultural land without any development, he entered into a contract with the coloniser. Such transaction cannot be termed as adventure in the nature of trade. 19. The CIT (A) relied upon CIT v. Kasturi Estages Pvt. Ltd., 62 ITR 578 in which the Madras High Court held that developing land into building sites with a view to realise best price without anything more, is consistent with the realisation of capital investment. If a land owner develops his land into housing sites, with a view to get better price, it could hardly be said that the transaction is anything other than realisation of capital investment or conversion of one form of asset into another. The surplus in such a case will not be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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