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2015 (10) TMI 1275 - ITAT PANJI

2015 (10) TMI 1275 - ITAT PANJI - TMI - Addition under the head 'profit and gains of business' as against the claim of agricultural income claimed to be exempt by the assessee - CIT(A) delted the addition - Held that:- In the similar facts and circumstances the Hon'ble Delhi High Court in the case of Hindustan Industrial Resources Ltd. Vs. ACIT (2009 (1) TMI 1 - HIGH COURT DELHI ) observed that the assessee purchased agricultural land with an intention to use the land for industrial purposes. No .....

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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 .....

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ired 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 Petitioner : Shri Shrinivas Nayak - CA For the Respondent : Shri Ramesh S Mutagar - DR ORDER Per: N S Saini, Accountant Member This is an appeal filed by the Revenue against t .....

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e, the assessee claimed income of ₹ 61,81,013/- exempt being income received on transfer of agricultural land defined under sec. 2(1A) of the Act. According to the Assessing Officer, the assessee firm came into existence on 04/11/2006 with the object of real estate developers, building construction and sale & purchase of property. The assessee had sold land in the year relevant to the assessment year which was purchased in financial year 2006-07. No improvement was made for developing .....

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the business of the firm shall be that of real estate activities. Any other business or businesses may be carried on by the firm if the partners so decide for their mutual benefit. The word is used 'shall' and not 'may'. Therefore, sale and purchase of property is one of the business activities of the assessee firm. No inference other than this can be drawn from this clause. The assessee has not been debarred from trading of any specific kind of land. The enhancement in market p .....

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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 .....

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n be called agricultural income, the three conditions are :(i) the rent or revenue should be derived from land,(ii) the land should be situated in India, and (iii) the land should be used for agricultural purposes. By no stretch of imagination it could be held that the aforesaid conditions are satisfied in the case of income resulting from the sale of land. Therefore, the surplus in question was not in the nature of agricultural income exempt from taxation. 4. The Assessing Officer further obser .....

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e lands in Sanguem Taluka during the period when 'mining boom' was prevailing from the year 2002 onwards. It is formidable to believe that such businessmen, as the partners of the assessee firm, can form partnership only to acquire land situated in the Western Ghants, in the near vicinity of wild life sanctuary to carry on agricultural activities. It is the intention of the partners to make profit that has inspired trading in lands at such an area. He further observed that if the land in .....

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n of the land from the date of purchase till they sold. This conduct of the assessee shows that the assessee was not interested in obtaining any return from these lands. The assessee had never carried out agricultural operations on the land in question and the intention of the assessee was only to realise income from the 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 .....

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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 ₹ 74,31,00 .....

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ased in F. Yr. 2006-07 and sold in F. Yr. 2008-09, i.e. within two years. iii) No efforts were made to carry out any agricultural operations. iv) The land was sold at six times higher than the purchase cost. The A.O. relied on the decision of Honourable Rajasthan High Court in the case of Mahaveer Enterprises Vs. Union of India [(2000) 244 ITR 789 (Ray)], wherein the Hon. High Court observed that the underlying object of the Act to exempt 'agricultural income' from income tax is to encou .....

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the A.O. is that, the land was sold to M/s. S. Kantilal and Co. Pvt. Ltd., which is a mining company, which has nothing to do with agriculture. The company purchased the land to dump its mining waste on the said land. The A.O. placed reliance on the judgement in the case of G. Venkataswarri Naidu & Co. Vs CIT [(1959) 035 ITR 594 (SC)] wherein the Hon'ble apex Court observed as under: ".............the lands were adjacent to Janardhana Mills, the appellant must have purchased them so .....

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see 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 .....

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reaches a conclusion that the transaction is an adventure in the nature of trade. However, before reaching any conclusion, it would be proper to appreciate all the undisputed facts, which can be summarized as under: i) The land in question is an agricultural land and the same is reflected as agricultural land in the land revenue records. ii) It is more than 8 Kms. away from the nearest municipal limits iii) It was purchased from Mr. & Mrs. Coutinho in F.Yr. 2006-07 and sold in F. Yr. 2008-0 .....

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nd they decided to buy the land for carrying on agricultural activity only. The land was fit for agriculture is also proved by the evidence attached that the previous owners were regularly paying land revenue taxes and were regularly carrying on agricultural operations. Many agricultural farms are also located in the vicinity of the land and the said land is very close to forest area. In fact, nothing else can be carried out at the land, apart from agriculture. The appellant could not continue w .....

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the appellant purchased agricultural land, with a purpose to carry on agricultural operations, as nothing else was possible on that land, because the land was classified as 'garden' land and its close proximity to forests and distance from urban centers, construction was not possible only. Thus, in my opinion, this solitary transaction cannot be called business and the income cannot be taxed as business Income. The land cannot be treated as capital asset in terms of S. 2(14) of the I.T. .....

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nd 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 .....

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tural labourers, who have stated that they carried out agricultural work on the said land. From these evidences, it can be seen that the land in question was agricultural land and the sale proceeds from the sale of the agricultural land was exempt from the taxation, and therefore, Commissioner of Income Tax (Appeals) has rightly deleted the addition made by the Assessing Officer. 9. Authorized Representative of the assessee then relied on a decision of Hon'ble Bombay High Court in the case o .....

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.) which is also to the same effect as the earlier decision of the Hon'ble Bombay High Court. 10. We have heard rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, the assessee purchased an agricultural land during the financial year 2006-07 for ₹ 12,48,645/- and sold the same in the financial year 2008-09 for ₹ 74,31,000/- and the assessee in its return of income claimed income of ₹ 61,81,013/- derived on .....

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onnection with agricultural activity. 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 .....

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g 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 classified as agricultural land in government records, both at the time of purchase by the assessee as well as at the time of its sale by the assessee. 16. Further it is also not in dispute that the said agricultural land was situated beyond 8 km. from the nearest municipali .....

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h Court in the case of CIT Vs. Borhat Tea Co. Ltd. (1982) 138 ITR 783 (Cal.). 19. Further, the Revenue has brought no material on record to show that the Commissioner of Income Tax (Appeals) was not correct in observing that the land in question was disclosed as investment by the assessee in its return of income and not as stock in trade. 20. Further, no material was brought before us to show that the finding of the Commissioner of Income Tax (Appeals) that the land in question was situated in a .....

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