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2016 (8) TMI 81

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..... hat such lands are not agricultural land. Therefore, we find no force in the argument of the ld. DR that the assessee has not shown any agricultural activities. Moreover, the ld. CIT(A) has relied on various decisions and came to a right conclusion that the addition on account of treating the amount of ₹.3,04,01,161/-, which is the margin/gains to the assessee on sale of lands, as business income is not sustainable, since the lands under reference were held to be agricultural lands, and the activities of purchase and sale of such agricultural land, in our opinion did not constitute business. Thus, we find no reason to interfere with the order passed by the ld. CIT(A) - Decided against revenue - I T.A. No. 1263/Mds/2015 - - - Dated:- 15-7-2016 - Shri A. Mohan Alankamony, Accountant Member and Shri Duvvuru RL Reddy, Judicial Member For The Appellant : Dr. B. Nischal, JCIT For The Respondent : Dr. Anita Sumanth, Advocate ORDER PER DUVVURU RL REDDY, JUDICIAL MEMBER: This appeal filed by the Revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals), Tirupati, dated 23.03.2015 relevant to the assessment year 2010-11. In this ap .....

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..... eing the difference as per bank account [₹.99,23,530/-] and balance sheet [₹.1,02,89,780/-] as unexplained income. 3. The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee, the ld. CIT(A) partly allowed the appeal of the assessee. 4. On being aggrieved, the Revenue is in appeal before the Tribunal. The ld. DR submits that it is clear from the balance sheet that the assessee had received huge advances for sale of land to the extent of ₹.3.21 crores and also advance money to land owners to the extent of ₹.8.58 crores for purchase of lands and held agricultural lands worth of ₹13,78 cores during the year. The break-up of land advances [₹.8.58 crores] received from as many as 54 persons were analysed and the Assessing Officer concluded that the assessee is carrying on the business of purchase and sale of lands, but not agricultural activity as claimed by the assessee. Therefore, the ld. DR has pleaded that the order of the ld. CIT(A) should be set aside and restored that of the Assessing Officer. 5. The ld. Counsel for the assessee submits that the assessee has produced certificate .....

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..... . Sai Care India Ltd., M/s. Laryan Builders and not in the name of the assessee. From this the Assessing Officer concluded that the credit for carrying on the agricultural activity goes to owners and not the assessee who made investment on this land. (b) Inspector of Income Tax has been deputed by the Assessing Officer to inspect the lands sold by the assessee claiming them as agricultural lands, to which the Inspector reported that the land is full of thorny bushes and were densely covering the land as such held that these are never been cultivated for the last 10 years. (c) To the exemption claimed by the assessee under section 2(14) of the Act on the ground that the land is situated at Pudupakam Panchayat away from the nearest township by more than 10 kms from Chennai, the Assessing Officer rejected the same stating that the lands sold are nearer to Software Companies Park, Chennai and Rajiv Gandhi Information Technology Express Highway on which many multinational software companies have set up their offices and which are landmarks in the greater city of Chennai. In this regard, the Assessing Officer relied on the order of the ITAT, Chennai in I.T.A. No. 794/Mds/2011 i .....

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..... of the land for carrying on the agricultural activity. In this regard it may be relevant to refer to the judicial decisions in the case of CIT Vs Borhat Tea Company Ltd (138 ITR 783) where in Hon ble Calcutta High Court held that for the purpose of land being agricultural land, actual agricultural operation or cultivation of the land is not necessary, and what is to be seen is whether such land is capable of agricultural operation being carried on. 5.6.2 Potential of non-agricultural use is not material for determining the question whether the land was agricultural land or not. In the case of CIT Vs Officer-in-charge (105 ITR 133) Hon ble Supreme Court held that agricultural land must be a land which could be said to be either actually used or ordinarily used or meant to be used for agricultural purposes, and determination of the character of land, according to the purpose for which it is meant or set apart and can be used, is a matter of which have to be determined on the facts of each particular case. In the case under reference there was no doubt whatsoever, on the nature of the land being agricultural land, except doubts raised on carrying on the agricultural operations o .....

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..... ricultural operation being carried thereon. Potential of non-agricultural use is not material for determining the question whether the land was agricultural land or not. The case-law relied upon by the lower authorities is distinguishable and material available on record and also in view of the ratio of the decisions discussed above, it has to be concluded that the assessee s land in question has to be held be of agricultural nature, notwithstanding the fact whether the agricultural operation was actually carried on, on the said land or not during the relevant period. 7. Further, the ld. CIT(A) has observed as under: 5.6.5 However, Hon ble Supreme Court had stated that whether a land is an agricultural land or not essentially a question of fact, and such question has to be answered in each case having regard to the facts and circumstances of that case. It was also stated that there may be factors both for and against particular point of view and court has to answer the question on a consideration of all of them by a process of evaluation and reference has to be drawn on a cumulative consideration of all relevant facts. Reverting to the facts of the case, the cumulative fa .....

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..... ctivity, where it is a known fact that appellant/assessee is not established to be carrying on any business activity. 5.7.1 The other reasons stated and quoted by the AO was that, the assessee incurred an amount of ₹ 9,58,419/- towards development cost, to indicate the business activity, if the assessee In this regard, it may be relevant to mention that such expenses was claimed in computing the gains on sale of lands, but neither debited to P L A/c nor claimed as business expenses. In fact it has been admitted and clarified by the appellant that said expenses were incurred to improve the said lands, from the point of view of access, bunding and other infrastructure, but not with the intention of treating the lands as business / commercial assets. This probably clarifies the position on the matter. The other reason cited by the AO for treating the transaction of sale of three pieces of land as business / adventure in nature of trade, was the repeated transaction of sale of lands. 8. In the appellate order, the ld. CIT(A) considered each and every aspects and passed a detailed speaking order and also distinguished the case law relied on by the Assessing Officer and c .....

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