TMI Blog2015 (4) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... ny evidence to suggest that there was ever any intention to sell the said agricultural land as such. On the contrary, the assessee obtained the permission from the Collector, Kolhapur for the conversion of landholding from agricultural to nonagricultural and also plotting and development activities were carried out over the years which establish the intention of the assessee to enter into trading activities. In the absence of the assessee having failed to substantiate its intention to carry out the agricultural activities on the said land and / or the circumstances which prevented him from carrying on the said activity and / or the claim of scarcity of water and labour having been established by the assessee, we are in agreement with the inference drawn by the Revenue authorities. The continued organized efforts of the assessee and the value addition to the agricultural land is sufficient proof of the intention of the assessee to venture into trading activity in land. - Decided against assessee. - ITA No.2085/PN/2012 - - - Dated:- 13-2-2015 - Shri g.s. Pannu And MS. Sushma Chowla JJ. For the Appellant : Deepa Khare For the Respondent : Aseem Sharma ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sizes of plots. The assessee had purchased the agricultural land and thereafter, converted into non-agricultural land after obtaining permission from the Collector of Kolhapur, who vide order dated 31.12.2002 had given permission to convert the agricultural land into non-agricultural land for residential use purpose. The assessee pursuant to the permission received, had started the development activities and incurred development expenses including plumbing charges, labour charges, supervision charges, expenditure on murum purchases, sand purchases, M.S. Pipe purchases, road development expenses, etc. The assessee in view of the said activities being carried on, was show caused to explain as to why the income arising therefrom should not be assessed as business income and not income from capital gain. In response, the assessee explained that the intention to trade should be seen at the time of purchase. Further, as per the assessee, the transaction was of investment in assets and not in the course of trade carried on by the assessee. It was further explained by the assessee that the said land was purchased with the intention to carry out agricultural activities but due to scarcity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the CIT(A) that the change in use was due to the efforts of the assessee and not because of the decision of the administration and such efforts to change an asset into a marketable commodity resulted in the benefits. The CIT(A) further observed that in this case agricultural land was purchased, sub-divided, the face of land altered and treated by way of laying of road, drainage, carving out of smaller plots, converted into a different commodity by acquisition of non-agricultural status by the assessee and then sold for profits. This was a case where the intention of the assessee, in the words of the Hon ble Supreme Court in the case of Janki Ram Bahadur Ram Vs. CIT (1965) 57 ITR 21 (SC), to launch upon an adventure in the nature of trade may readily be inferred. The CIT(A) vide para 11 observed as under:- 11. In the end reference should also be made to the effort on the part of the appellant to make a case that the development and sale of land was due to a later realisation that there was scarcity of labour and water, and therefore the land was not cultivable profitably. This contention cannot be accepted. As held in the case of Janab Abubucker Suit v. CIT [1962] 45 ITR 37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer is directed to inquire into the nature of balance land held by the appellant i.e. whether it is a business asset or a personal asset. The issue of its valuation and its inclusion as stock in trade will also be required to be looked into. The assessing officer is directed to take appropriate steps m this regard. 6. The assessee is in appeal against the order of CIT(A). 7. The learned Authorized Representative for the assessee pointed out that as the agricultural land purchased by the assessee was not cultivable, he developed land by leveling it and converted into smaller plots of land. It was further pointed out by the learned Authorized Representative for the assessee that the Assessing Officer had held the transaction to be an adventure in the nature of trade as the assessee had not furnished any proof that it had carried on agricultural activities and also because the land was developed and hence, it was an adventure in the nature of trade. It was stressed by the learned Authorized Representative for the assessee that initial intention of entering into business at the time of purchase of the said land was missing and the Assessing Officer also recognized the same in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trading activity is to be determined from the intention of the person at the time of purchase. However, the case of the Revenue before us was that because of series of steps taken by the assessee in a systematic manner establishes that though initial landholding was agricultural land, on its conversion and development thereafter, the surplus arising therefrom is to be assessed as business income. 11. The plea of the assessee before the Revenue authorities was that it had purchased agricultural land on 26.08.1997 and because of scarcity of water and man power, it was realized that the agricultural activities would not result into profits. Hence, the assessee obtained permission from the Collector of Kolhapur vide order dated 31.12.2002 to convert the agricultural land into non-agricultural land. The assessee from financial years 2001-02 to 2008-09 started development activities on the said land and incurred expenses such as plumbing, road development expenses, gutter expenses, cement pipe expenses and also incurred expenditure on labour supervision, murum purchases, sand purchases, etc. The land of the assessee was situated in Kolhapur and out of this big chunk of land i.e. 1,69 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has failed to furnish any evidence of any agricultural activity being undertaken before the land was put to development and plotting. Both before the Assessing Officer or the CIT(A) and even before us, the assessee has not furnished any evidence in this regard. Further, the assessee has not even disclosed the location of land. Though the claim of the assessee was that it was not receiving a good price for the agricultural land, but the assessee has failed to bring on record any evidence to suggest that there was ever any intention to sell the said agricultural land as such. On the contrary, the assessee obtained the permission from the Collector, Kolhapur for the conversion of landholding from agricultural to nonagricultural and also plotting and development activities were carried out over the years which establish the intention of the assessee to enter into trading activities. In the absence of the assessee having failed to substantiate its intention to carry out the agricultural activities on the said land and / or the circumstances which prevented him from carrying on the said activity and / or the claim of scarcity of water and labour having been established by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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