TMI Blog2015 (10) TMI 1275X X X X Extracts X X X X X X X X Extracts X X X X ..... intention does not alter the character and nature of the land. Further the fact that the assessee did not carry out any agricultural operations and did not also result in any conversion of the agricultural land into an industrial land. There is no material to show that any industrial activity or any operation for setting up of industry was actually carried out on the said land so as to change its character from agricultural to industrial. It is the character of the land at the time of sale that is relevant and not the purpose for which it was purchased by the assessee or from the assessee. Therefore, it was held that the land retained its character as agricultural and therefore, not liable for capital gains tax. We do not find any good reason to interfere with the findings of the Commissioner of Income Tax (Appeals) that the land was acquired by the assessee as investment and not as stock in trade of business and the transaction of holding the land for above 14 months before sale cannot be treated as business transaction of the assessee. - Decided in favour of assessee. - ITA No. 106/PNJ/2015 - - - Dated:- 8-9-2015 - N S Saini, AM And George Mathan, JM For the Petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of Mahaveer Enterprises Vs. Union of India (2000) 244 ITR 789 (Raj.) has held that the detailed examination of the facts, the character of land and the memorandum of the incorporation of the firm clearly hold out that the petitioner firm was to do business in the sale and purchase of agricultural lands and the agricultural produce, etc. That agricultural activities were not defined in its partnership deed and in the trading account filed by the firm, no expenditure was shown to have been incurred on any such operation which shows agricultural operations. Therefore, the character of the land has rightly been held not to be of agricultural nature. He further observed that the Hon'ble Madhya Pradesh High Court in the case of Badrilal Bholaram Vs. CIT 139 ITR 207 held that with regard to the contention that the profit realised by the sale of land was revenue derived from land and hence was exmept from taxation as it was agricultural income. The Hon'ble High Court placed relieance on the decision of Nawabzadi Mehar Bano Khanum Vs. Secretary of State, AIR 1925 Cal. 929 (FB) and Maharajadhiraj of Darbhanga Vs. CIT AIR 1928 Pat. 468 and observed that now clause (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land as a venture. 5. The Assessing Officer further observed that the intention of the assessee is clear when the land was sold within the span of 14 months, that too at a price which was six times of the cost of acquisition. It becomes crystal clear that the intention was to purchase the land and sell the same as business activity. It cannot be said that the business had not commenced, when the surplus was shown as profit in the profit loss account drawn and apportioned among the partners but made an endeavour to exhibit the same as agricultural income. Therefore, the Assessing Officer treated the profit earned from the same as business income and brought to tax accordingly. 6. On appeal, Commissioner of Income Tax (Appeals) allowed the appeal of the assessee by observing as under:- I have gone through assessment order and submission of the appellant. The appellant purchased agricultural land situated at Cumbari, Sanguem from Mr. Antonio Eca Jose Coutinho and his wife Mrs. Palmira Coutinho for a consideration of ₹ 12,48,645/-. It, subsequently sold the said land to M/s. S. Kantilal Co. Pvt. Ltd. for a consideration of ₹ 74,31,000/- and disclosed a net pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) The land transferred had no characteristic of an agricultural land and no operations were carried on by the assessee to develop it for agriculture. ii) The partnership came into existence only to do business of real estate activities and its business commenced from the date of formation on 04.11.2006 the land was purchased as stock-in- trade. The profits of the transaction which is an adventure in the nature of trade in income derived from business of the assessee firm. From the reading of the assessment order, it is seen that in order to fit-in this case in the facts of the cases relied upon by him, the A.O. has reached contradictory conclusion. In the initial paragraphs, the A.O. has mentioned that the land in an agricultural land and at the end, he reaches a conclusion that the land in not fit for agriculture. Then he says, that the land was acquired by the appellant and held, as stock-in trade. This is factually incorrect. The land was held by the appellant firm as Investment. The A.O. refers that the object of the appellant firm is to carry on business in the real estate development and then reaches a conclusion that the transaction is an adventure in the natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be treated as capital asset in terms of S. 2(14) of the I.T. Act. Therefore, respectfully relying the decision in the case of Debbie Alemao vs. CIT, given by the Jurisdictional High Court of Bombay at Goa, the A.O. is directed to delete the addition amounting to ₹ 61,81,013/- This ground of appeal of the appellant is allowed accordingly. 7. Departmental Representative vehemently argued and supported the order of the Assessing Officer. 8. Authorized Representative of the assessee supported the order of the Commissioner of Income Tax (Appeals) and submitted that it will be seen from page No. 16 of the paper book where Form I XIV are placed which is dated 23/05/2008 that the land in question which was sold on 30/04/2008 continued to be agricultural land even after the same was sold by the assessee. Further, he referred page Nos. 54 55 of the paper book and submitted that these are balance sheets of the assessee as on 31/03/2007 31/03/2008. From the said balance sheets, it can be seen that the land in question has been shown as investment acquired for ₹ 12,48,645/-. The assessee has not shown these lands as its stock in trade, so that it can be held to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity. The reasons stated by the Assessing Officer for treating the above transaction as business transaction was also that the purchase was declared as stock in trade by the assessee. 12. On appeal, the Commissioner of Income Tax (Appeals) accepted the appeal of the assessee and directed the Assessing Officer to treat the income in question as non-taxable agricultural income. The Commissioner of Income Tax (Appeals) found that the character of the land as per land records was agricultural land till the time the land was sold by the assessee. 13. Further, he found that the land as per the applicable laws could not be used for any purpose other than agriculture. He also observed that the purchase of land was disclosed by the assessee in its return of income as investment and the Assessing Officer was factually incorrect in stating that the land was declared as stock in trade. 14 Before us, the Departmental Representative supported the order of the Assessing Officer. 15. We find that the Departmental Representative could not point out any error in any of the facts found by the Commissioner of Income Tax (Appeals). We find that it is not in dispute that the land in question was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cultural purposes and the land was intended to be used for industrial purposes, both by the assessee as well as by the acquiring authority, can it be said that it is an agricultural land and therefore, gain on transfer thereof is exigible to tax. The Hon'ble High Court observed that the intention does not alter the character and nature of the land. Further the fact that the assessee did not carry out any agricultural operations and did not also result in any conversion of the agricultural land into an industrial land. There is no material to show that any industrial activity or any operation for setting up of industry was actually carried out on the said land so as to change its character from agricultural to industrial. It is the character of the land at the time of sale that is relevant and not the purpose for which it was purchased by the assessee or from the assessee. Therefore, it was held that the land retained its character as agricultural and therefore, not liable for capital gains tax. 23. We therefore, confirm the order of Commissioner of Income Tax (Appeals) and dismiss the ground of appeal of the Revenue. 24. In the result, appeal of the Revenue is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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