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2016 (1) TMI 79 - ITAT MUMBAI

2016 (1) TMI 79 - ITAT MUMBAI - TMI - Gain arising on sale of agricultural land - exemption u/s 2(14) denied - Held that:- In the instant case, it is an admitted fact that the land was an agricultural land. The absence on the part of the assessee to carry on agricultural activities shall not support the case that the assessee intended to hold the same as trading asset. Accordingly, we are of the view that the absence of agricultural activity, per se, will not be useful to determine the intention .....

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the assessee has initially declared the same as short term capital gain, yet the same is required to be corrected, since there is no estoppels against the law.

Accordingly, we set aside the order of Ld CIT(A) and direct the AO to exclude the gains arising on sale of impugned land from the total income of the assessee for the year under consideration. - Decided in favour of assessee - I.T.A. No. 2736/Mum/2013 - Dated:- 16-12-2015 - Shri B. R. Baskaran (AM) And Sanjay Garg, (JM) For th .....

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e are stated in brief. The assessee is engaged in the business of trading in Iron & Steel and other Ferrous/Non-ferrous metals. He has sold certain agricultural lands during the year under consideration and earned a gain of ₹ 232.23 lakhs. The assessee declared the same as short term capital gains in his return of income. However, during the course of assessment proceedings, the assessee realized that the agricultural land sold by him does not fall in the category of Capital asset as d .....

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A), the assessee raised a ground relating to this issue. The Ld CIT(A) directed the AO to furnish a remand report on the grounds raised as well as on the written submissions filed by the assessee. The assessing officer, in his remand report, expressed the view that the plea of the assessee cannot be accepted, since the assessee has not raised the claim by filing revised return of income. The AO placed reliance in this regard on the decision rendered by Hon ble Supreme Court in the case of Goetze .....

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ational Thermal Power Co. Ltd (229 ITR 383). The Ld CIT(A) agreed that the lands sold by the assessee are agricultural lands and they shall not fall in the category of Capital assets as they are situated outside the prescribed limits. However, he noticed that the assessee has purchased and sold the lands within short period of six months to one year. Hence he proceeded to examine the issue from the angle as to whether the same constitutes the agricultural activity or business activity of the ass .....

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ctivity. He further noticed that the assessee has not carried out any agricultural activities on the land. He also observed that the assessee has failed to clarify as to why he has sold the sold within a short span of time. He further noticed that the assessee has been purchasing the land continuously in installments. Accordingly he came to the conclusion that the intention of the assessee was to trade in agricultural land‟ in order to earn quick profits. Accordingly he held that the profi .....

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the real estate market has boomed in and around that area. He then referred to the recitals given in an agreement dated 02-07-2007 entered with Shri Ravi Gehi (purchaser), wherein it is stated that the land is capable of being converted into non-agricultural land and the purchaser is in the business of developing residential township. Some more recitals were also referred to by Ld CIT(A), wherein the action that are going to be taken by the buyer to convert the land for non-agricultural use wer .....

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was also rejected by the Ld CIT(A). He further referred to certain instances, wherein the lands were seen as having been sold prior to the purchase. Hence, on a cumulative consideration of the facts prevailing in the case, the Ld CIT(A) came to the conclusion that the profit arising on sale of agricultural land is required to be assessed as business income of the assessee. Accordingly he ordered and further initiated penalty proceedings u/s 271(1)(c) of the Act. Aggrieved, the assessee has filed .....

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ders of Ld CIT(A), we notice that the Ld CIT(A) has come to such a conclusion on the following reasoning:- (a) The power of attorney executed by the assessee states that the assessee is in the business of purchase and sale of properties. (b) The lands have been sold to a person who proposed to use the same for non-agricultural purposes. (c) The assessee did not carry on any agricultural activity and did not generate any agricultural income. (d) The lands have been sold within a short period of s .....

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these factual aspects were not controverted by the revenue. 7. The Ld CIT(A) also placed reliance on the decision rendered by Hon ble Bombay High Court in the case of Gopal Ramnarayan Kasat (supra). We notice that, in the case of Gopal Ramnarayan Kasat, the assessee therein aggregated the land in series of transactions of purchase of lands. It was further noticed that the said lands have been notified for acquisition by the Government and the compensation was seen at a higher level. Therefore it .....

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there should not be any dispute that the facts and surrounding circumstances prevailing in each case have to be independently examined in order to resolve this kind of disputes. 8. In the instant case, nothing was brought on record to show that the assessee was in possession of some information prior to its purchase that the lands could be sold at a higher price. Hence, in our view, the decision rendered in the case of Gopal Ramnarayan Kasat are distinguishable on facts. However, whether the ra .....

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cipal limits and hence they shall not fall under the definition of Capital asset in terms of sec. 2(14) of the Act. As noticed earlier, the Ld CIT(A) rejected the claim of the assessee that the lands were purchased to hold them as investments and not as business assets for the reasons stated above. The first reason cited by the Ld CIT(A) is that the Power of Attorney executed by the assessee mentions that the assessee is engaged in the business of purchase and sale of assets. At the time of hear .....

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aterial was brought on record to show that the assessee was engaged in the business of the real estate. Hence, we are of the view that the same cannot be taken as a determinative factor, though the same can be used to support the other materials, if any brought on record. 10. The next reason given by Ld CIT(A) is that the land was proposed to be used by the buyer for non-agricultural use. We have already noticed that the lands in question are agricultural lands and they remained as agricultural .....

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be the agricultural land at the time of sale. Hence the nature of land as to whether it was agricultural or non-agricultural has to be seen from the perspective of the assessee as held by Hon ble Bombay High Court in the case of CIT Vs. Smt. Debbi Alemao (2011)(331 ITR 59). Identical views have been expressed in the following cases also:- (a) ITO Vs. P.Prakasam (2014)(41 taxmann.com 79)(Chennai Trib) (b) Tulla Veerender Vs. Addl CIT (2013)(36 Taxmann.com 545)(Hyd Trib) (c) Smt. M. Vijaya Vs. DC .....

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nce the land situated beyond the prescribed municipal limit and recorded as agricultural land in revenue record is to be considered as agricultural land untile proved otherwise. 12. The Hon ble Bombay High Court has observed in the case of CWT Vs. H.V. Mungale (1984)(145 ITR 208) that the land which is recorded as agricultural land in the revenue paper cannot be used for a non-agricultural purpose by the owner, unless the land is allowed to be converted to non-agricultural purposes by the Collec .....

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Mumbai bench of Tribunal has observed in the case of Mr. Vijay D Motiwala Vs. ITO (ITA No.1063/Mum/2014 dated 26.10.2015) as under:- 5. We have noticed earlier that the AO has considered the fact that the assessee did not carry on any agricultural activity. In our view, the absence of agricultural activity cannot be considered to be the sold ground to determine the intention of the assessee. The question relating to presence or absence of agricultural activity may be relevant to determine the c .....

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nd is to be gathered from the surrounding circumstances, of which the sale of land within short span of time is one of the factor, but the same cannot be conclusive one. The Ld A.R submitted that the assessee has held and disclosed the same as Investment in its books of account. We have earlier noticed that the Ld CIT(A) has not brought on record any material to show that the assessee has been indulging in continuous purchase and sale of lands. In the instant case, the assessee has purchased the .....

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an intention of doing business . However no material could be brought on record in support of this stand except the allegation that some of the members of the assessee- association of persons, had also entered into similar deals in their individual capacity and that the and in question was sold by the assessee within three months from the date of purchase. The fact of purchase and sale of the land by the members of the assessee- association of persons was also contradicted by the assessee. The T .....

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land by the assessee, the transaction could not be treated, without more, to be a venture in the nature of trade. The onus of proving that the land formed part of the business assets of the assessee was on the department and in the absence of any evidence to that effect the presumption would be that the land was held as a capital asset by the assessee and the income from transfer thereof was not income from business. In the instant case also, the Ld CIT(A) has not brought any material on record .....

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