9911796707
TMI Blog2016 (9) TMI 1002X X X X Extracts X X X X X X X X Extracts X X X X ..... come declared is not commensurate with the quantum of land holding and thereby inferring that appellant is not agriculturist. 3. On the facts and in the circumstances of the case CIT(A) has erred in holding that since the part of the agricultural land is under cultivation and not the entire land and therefore it is not an agricultural land. 4. On the facts and in the circumstances of the case CIT(A) has erred in holding that there were frequencies of sale transactions of agricultural lands totally ignoring the fact that upto Assessment Year under consideration there were only two transactions which lands were purchased on 05.07.1990 and 13.05.2003 clearly proving the predominant intention of acquiring and holding the agricultural lands as investments. The above grounds of appeal may kindly be allowed to be altered, amended, and modified, etc in the interest of natural justice." 3. The relevant facts, in short, are that the assessee is an Advocate by profession. During the year under consideration, the assessee has shown professional receipts of Rs. 5,77,280/- on which net profits have been shown at Rs. 1,89,522/-. The case of the assessee was selected for scrutiny assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer observed that since the land so acquired was not a capital asset at the first place, there is no merit in the contention of the assessee that said parcel of agricultural land were to be excluded from the definition of the capital asset and consequently income from sale thereof was not liable to be taxed. The Assessing Officer simultaneously with reference to the Revenue records (7/12 extracts) observed that the major portion of these agricultural lands were 'Pad' (not useful for cultivation) and in the remaining portion of land, the cultivation of crop was 'Jowar'. The Assessing Officer next observed that assessee is mainly engaged in legal profession as a Lawyer and his occupation is not primarily as an agriculturist. The Assessing Officer thereafter observed that the aforesaid land has been acquired out of borrowed funds. The Assessing Officer went on to observe that assessee has shown a meager income of Rs. 1,01,845/- derived from existing agricultural land held by him which is too low compared to the land holdings of the assessee. On the totality of these facts, the Assessing Officer concluded that entire activity of purchase and immediate sale of land by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return their loan and since it was immediately not possible, the assessee first attempted to sell other existing parcel of lands, without any avail nonetheless. Therefore, it was proposed to sell the impugned land purchased by him on 17.10.2008 to Porwal brothers for which the Porwal brothers agreed. The Ld. AR asserted that it was in these changed circumstances that the land had to be reluctantly sold on 26.11.2008 but insisted that there was no intention to earn profits by its sale at the time of its purchase and therefore the transactions cannot be treated as an 'adventure in the nature of trade' as wrongly held by the revenue authorities. 5.1 Apart from the aforesaid argument, the Ld. AR also contended that the land in question cannot be treated as a 'capital asset' being agricultural land located more than 8 kilometers away from Shirur Municipality, which is nearest municipality to the land in question nor is the land located at any cantonment or such similar bodies. 5.2 Thus, firstly, the impugned land so purchased is a capital transaction and profit arising therefrom on sale is in the nature of capital gains and secondly, the land in this case is an agricultural land which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rongly observed by the CIT(A). He next submitted that the CIT(A) proceeded on yet another incorrect assumption of fact that the land has already been plotted and roads and others facilities are provided. 5.4 He, thus, in nutshell submitted that the order of the CIT(A) is marred with grave factual errors and therefore deserves to be set-aside and reversed. The Ld. AR also relied on certain judicial precedents to prop up his case which we shall deal with at appropriate place. 6. The Ld. Departmental Representative (DR) for the Revenue, on the other hand, referred to and relied upon the orders of the authorities below and contended that it is a glaring case for chargeability of income to tax in the facts of the case. The Ld. DR noted that the profits on sale of land in question by the assessee along with his wife is apparently a business activity and thus liable to be taxed under head 'business income'. The Ld. DR thus contended that no interference with the order of the CIT(A) is called for. 7. We have heard the parties and perused the materials on record as well as the orders of the revenue authorities. We have also applied our mind to the decisions placed before us. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under S. 28 of the Act. 7.2 The question of determination of other issues namely whether the land is agricultural land and if so whether the impugned land is outside the definition of 'capital asset' to claim exemption from applicability of S. 45 will arise only if the impugned transaction do not bear the trappings of adventure in the nature of trade or commerce etc. Thus, in the context of case in hand, first and foremost controversy that calls for our adjudication is whether the impugned transaction is a business transaction or a capital transaction. 7.3 In this context, we note that there is a qualitative difference between profits arising from sale of capital assets and that of trading assets under the Act. Section 2(13) defining 'business' and S. 2(14) defining capital assets operates in mutual exclusion. To put it differently, capital assets and trading assets or stock in trade are treated differently under the scheme of the Act. They can not be compared on par with each other as a similar class of assets. Section 2(13) of the Act defines the expression 'business' in an inclusive manner and further embraces any adventure in the nature of trade or commerce etc. within its sw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te an adventure in the nature of trade. Therefore, neither respective nor continuity of similar transaction is necessary to constitute a transaction as an adventure in the nature of trade. Once there is a continuity of transaction then it is nothing but carrying on a business and in such situation, the question of adventure in the nature of trade can hardly arise. To supplement as also to further elaborate this discussion, it can be added that the word 'adventure' may be in the realms of travel, voyage, hunting, etc. but it is attached with other words i.e. adventure in the nature of trade, then the motive of adventure is attached with the motive of trade. In the face of its own evidence a case has to be decided but the motive can never be irrelevant to be inferred by surrounding circumstances and the intention behind the said activity. The motive of the seller, his intention behind sale, his overall activity of accomplish, the desired goal are all in conjunction with the conduct of the assessee so as to establish that the adventure as taken by him was within the sphere of trade activity. Though these facts can also not be ruled out that not one of the consideration mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 ½ (one and half) months. We are alive to the contention on behalf of the assessee that assessee intended to sale other agricultural land in his possession to return the money borrowed from Porwals which did not fructify. For this purpose, some Memorandum agreement was referred to by way of an additional evidence. However, there is nothing on record to show justify the circumstances which prevented the assessee to produce the impugned agreement before revenue authorities. No perceptible reasons have been assigned. Notwithstanding, we were informed at the bar that purported agreement for sale of other agricultural land was not acted upon at all. No advance was received against such purported agreement either. The entire explanation for initial intention to return borrowed money which failed is thus bald and unverifiable. It also does not coincide with a normal behavior of a person of ordinary prudence. The entire explanation based on a dumb document not acted upon, thus, has no rational probative value of the purported intention to return friendly borrowals. Whether the value of existing land recorded in the purported agreement was capable of matching the borrowals is also n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtained and in the process, abnormal and exorbitant gains were earned. The pattern of sequential events clearly suggests that the fund received in advance for such purchase served as an assurance for the transaction to sail through. Notably, initial funds of Rs. 1 crore were provided to the assessee by Porwals by way of a demand draft unlike cheque transactions. Reasons for friendly loan given by way of a demand draft without any discernible emergency is best known to the parties involved. The governing factors in the form of purchase financed entirely by the ultimate buyer and consequent transfer of land to the ultimate buyer almost immediately on its acquisition cannot be simply brushed aside. Clearly, the assessee was interested in exploiting commercial opportunity for quick gains in a very short time horizon. The attendant facts also points out that the purchase of land was far beyond the earning capacity of the assessee and thus claim of the Assessee that the land was intended for personal use and its exploitation and for appreciation with efflux of time is utterly improbable and thus is devoid of merits. A combined reading of all connected facts warrant for an inescapable c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and circumstances proved therein and which determine the character of the transaction. 7.9 Thus, the cumulative facts and circumstances seen holistically and read in conjunction the tests or parameters laid down by judicial precedents provides sound basis to infer the intention of commercial gain in the impugned transaction. 8. Having regard to the totality of facts and circumstances, we have no hesitation to hold that the impugned land was purchased with an intention to sell the same to the identified buyers to achieve commercial objectives outright. As noted earlier, section 2(13) of the Act seek to explain the term of 'business' by way of inclusive definition. As per section 2(13) expression 'business' include not only trade or commerce, etc. but definition further extends to encompass within its ambit an 'adventure in the nature of trade'. The entire gamut of action of the assessee in engaging in such big ticket land purchase without employing any fund of his own and almost immediate re-sale thereof clearly demonstrates the implicit intention of the assessee that the transaction entered was nothing but an 'adventure in the nature of trade' i.e. a business transaction under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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