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2016 (4) TMI 1157 - ITAT PUNE

2016 (4) TMI 1157 - ITAT PUNE - TMI - Sale of land - nature of land - adventure in the nature of trade - whether the land sold by assessee in GAT No. 41 situated at village Sate as ‘Capital Asset’ u/s. 2(14) of the Income Tax Act, 1961? - agricultural land - municipal limits - Treatment to the surplus arising from sale of land as business income - Held that:- Land sale transaction undertaken by the assessee is not adventure in the nature of trade. The Revenue has not been able to show that the l .....

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(1992 (9) TMI 45 - BOMBAY High Court ), the onus is on the Revenue to prove that the land was part of business assets. The Department has not been able to show that the assessee was engaged in the organized activity of sale and purchase of land or property dealing. Further, there is no document on record to show that the assessee had developed the land or has divided the land into plots. The Department has failed to controvert the assertions of the assessee that there has been no change of land .....

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within 8 Kms or beyond 8 Kms from the Municipal limits of Talegoan? - Held that:- Since, the certificate has been issued by the Govt. Department reliance can be placed on the same. However, a perusal of the certificate shows that the distance mentioned is between Talegaon and Sate. The certificate does not mention that village Sate is 10 KM from the Municipal limits of Talegaon. There is a difference between the distance from the Municipal limits and distance between to town/cities whih is gener .....

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issued by the PWD, we deem it appropriate to remit the file back to the Assessing Officer for the limited purpose of ascertaining the distance of the land in question form the Municipal limits of Talegaon. The Assessing Officer may seek clarification on this issue from PWD or seek fresh certificate from any Government Agency other than village Talathi. The second issue raised in the appeal of the assessee is accordingly allowed for statistical purpose. - ITA No. 2502/PN/2012 - Dated:- 11-4-2016 .....

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situated at village Sate as Capital Asset u/s. 2(14) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). The assessee has further assailed the order of Commissioner of Income Tax (Appeals) in confirming the findings of Assessing Officer in treating the surplus arising from sale of land as business income. 2. The brief facts of the case as emanating from records are: The assessee is an individual and has filed his return of income for the assessment year 2009-10 on 06-05-2010 decl .....

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osed the income from said transaction in his return of income. The contention of the assessee is that the land sold is an agricultural land situated more than 8 Kms. away from the nearest Municipal limits of Talegaon. Hence, the land is not assessable to tax and therefore, the income from sale of land was not disclosed in the return of income. The Assessing Officer disregarding the submissions of the assessee made addition of ₹ 66,53,223/- as profit from sale of land by treating the transa .....

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;ble Commissioner of Income Tax (Appeals) has erred in confirming the addition made by Assessing Officer and assessing the income at ₹ 70,70,383/- against Returned Income of ₹ 4,17,160/- Appellant prays to accept the Returned income. 2. Hon'ble CIT(A) has erred in rejecting Appellants claim that surplus on sale of land at GAT No. 41 Sate village is exempt being agricultural land not falling within the definition of 'Capital Asset' u/s 2(14) of Income Tax Act, 1961. Appell .....

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234B & 234C. Same be cancelled. 6. Appellant prays for just and equitable relief. 7. Appellant prays to add, alter, amend, modify, explain and / or withdraw the Ground/s as occasion may demand. 4. Shri Sunil Ganoo appearing on behalf of the assessee filed an application for placing on record additional evidence. The assessee filed two documents as additional evidence: (i) copy of registered consent deed dated 14-05-2008; and (ii) a copy of letter dated 02-06-2015 issued by Dy. Engineer Publ .....

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me Tax (Appeals). The ld. DR strongly opposed the additional evidence filed by the assessee. The ld. DR stated that sufficient opportunity was given by the authorities below to the assessee to substantiate his submissions despite that the assessee choose not to file the documents which were available with him. 4.1 The ld. AR of the assessee further submitted that the assessee had purchased agricultural land in January, 2007 for a consideration of ₹ 15,50,000/- against Visar Pavati . Howeve .....

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The authorities below have erred in coming to the conclusion that the surplus arising from the sale of land in question is the business income of the assessee. The assessee is an agriculturist and has sold the land to M/s. Kohinoor Development Corporation on 23-05-2008 a partnership firm through its partner Shri Rajesh Krishnakumar Goyal who is also an agriculturist. As per the provisions of section 63 of the Bombay Tenancy and Agricultural Lands Act, 1948 (hereinafter referred to as the Bombay .....

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nd is more than 8 Kms away from the nearest Municipal limit of Talegaon. The assessee has also placed on record a certificate from the Gram Panchayat to show that as per the census of 2001 the population of the village is far below than 10000. From the facts of the case and documents on record it is quite evident that the agricultural land sold by the assessee does not fall within the ambit of definition of capital asset defined u/s. 2(14) of the Act. The ld. AR pointed out that the Assessing Of .....

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te in present appeal. The ld. AR submitted that the onus is on the Department to show that the assessee is carrying on the activities which are adventure in the nature of trade. The sale of land was an isolated transaction therefore it cannot be considered as an activity in the adventure of trade. The onus is on the Department to show that the land was a business assets. In support of his submissions, the ld. AR placed reliance on the judgment of Hon'ble Bombay High Court in the case of CIT .....

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land of assessee at Sate village is at a distance of 10 Kms. from the nearest Municipal limits of Talegaon. Since, the Talathi has given two contradictory certificates, the assessee has obtained a certificate from the office of Public Works Department (PWD) Vadgaon, Maval. The measurement given in the said certificate are based on more scientific method of measuring the distance between Talegaon and Sate. In the said certificate the Dy. Engineer, Public Works Department Sub Division, Vadgaon Mav .....

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the Department vehemently supported the findings of Commissioner of Income Tax (Appeals) and prayed for dismissing the appeal of the assessee. The ld. DR submitted that the land sold by the assessee is less than 8 Kms from the Minicipal limits of Talegaon. Thus, the land fall within the definition of capital asset as defined u/s. 2(14) of the Act. The ld. DR further submitted that the contention of the ld. AR that the assessee has carried out agricultural activity is not substantiated by any sup .....

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5,00,000/-. The intention of the assessee was not to purchase the land for carrying out any agricultural operation but to earn huge profits from the sale of land. The facts of the present case clearly indicate that the activity carried by the assessee was adventure in the nature of trade. The ld. DR in support of his submissions placed reliance on the decision of Co-ordinate Bench of the Tribunal in the case of Abhijit Subhash Gaikwad Vs. The Dy. Commissioner of Income Tax in ITA No. 699/PN/2013 .....

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e facts. In the said case the Assessing Officer had conducted detailed enquiry. However, in the present case no enquiry was conducted by the Assessing Officer. The land in the case of Abhijit Subhash Gaikwad Vs. The Dy. Commissioner of Income Tax (supra) was Pad (not cultivable) as per 7/12 extracts, whereas in the case in hand a perusal of Revenue records would clearly indicate that the land is cultivable and there was cultivation of crop on the land during and after the sale of land by the ass .....

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essing Officer in open remand. Authorities cannot be given second innings where the facts are clearly evident and only certificate, documents are required be verified which are produced before the appellate authority as additional evidence. In support of his submissions the ld. AR placed reliance on the following decisions : i. Zuari Leasing & Finance Corporation Ltd. Vs. ITO, 112 ITD 205 (Delhi)(TM); ii. Smt. Neena Syal Vs. Asstt. CIT, 70 ITD 62 (Chandigarh); iii. Asstt. CIT Vs. Anima Inves .....

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of the authorities below. We have also considered the decisions on which both the sides have placed reliance. From the grounds raised in the appeal and the submissions made by the rival sides two issues have emerged for adjudication. i. Whether the sale of land by assessee is an adventure in the nature of trade? ii. Whether the land sold by the assessee is a capital asset within the meaning of section 2(14) of the Act being within 8 Kms from the Municipal limits of Talegaon? 9. The contention of .....

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ner Shri Rajesh Krishnakumar Goyal for a consideration of ₹ 85,00,000/-. Shri Rajesh Krishnakumar Goyal is also an agriculturist. The land was used by the assessee for agricultural purposes and even after sale Shri Rajesh Krishnakumar Goyal is cultivating the land. Neither the assessee, nor the purchaser of the land had ever applied for change of land use for converting the land from agricultural to non-agricultural purpose. The land in questions is situated 10 Kms. away from the Municipal .....

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se earning a huge profit on sale of land. The assessee never disclosed any agricultural income in his return of income. The intention of the assessee was not to retain the land for agricultural purpose but to earn quick profit by trading in land. The Assessing Officer held that the land is situated only 6-7 Kms from the Municipal limits of Talegaon. Therefore, it falls within the definition of capital assets. The findings of the Assessing Officer were upheld by the Commissioner of Income Tax (Ap .....

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of consideration in January, 2007. These contentions of the assessee have been disbelieved by the authorities below. After perusal of the documents on record we find that there is no document on record to show that the assessee had in fact purchased the land in January, 2007. The assessee has neither placed on record the Visar Pavati against which the land was allegedly purchased nor any other document such as bank statement etc. to substantiate his contentions. However, the Revenue has not con .....

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port of his submissions that onus is on the Revenue to show that land was a business asset. The Hon'ble High Court in the aforesaid case has held that 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 evidence, the presumption would be that the land was held as capital asset by the assessee. The relevant facts and the findings of the Hon'ble High Court are as under: The controversy may now be examined from the .....

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the members of the assessee association of persons, had also entered into similar deals in their individual capacity and that the land in question was sold by the assessee within three months from the date of purchase. The Tribunal did not accept this contention of the Revenue. 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 case of the assessee was that all its members were agriculturists and they never i .....

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ry to go into an elaborate discussion on the point as to when a transaction will fall within the definition of business as being an adventure in the nature of trade. As in the instant case, there is no evidence at all of any trading activity in the isolated transaction of purchase and sale of land by the assessee, the transaction cannot 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 is on the .....

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eported as 208 ITR 232 (Bom) while dealing with the case wherein an isolated sale transaction of land was held to be adventure in the nature of trade by the Revenue authorities. The Hon'ble High Court after placing reliance on the decision of Hon'ble Supreme Court of India in the case of Venkataswami Naidu (G.) and Co. Vs. CIT reported as 35 ITR 594 (SC) and Khan Bahadur Ahmed Alladin And Sons Vs. CIT reported as 68 ITR 573 (SC) and the facts of the case held that there is a material dis .....

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l was justified in holding that the purchase and sale of Fort property in the hands of the assessee company was a purchase and sale of a capital asset and the assessee company was, therefore, liable to be assessed under the head 'Capital gains' under section 45 of the Income tax Act, 1961 ? The Hon'ble High Court answered the said question as under : We may, therefore, turn to the facts of the case and the findings of the Tribunal to decide whether the Tribunal was justified in holdi .....

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for a consideration of ₹ 60 lakhs. This property was a capital asset of the holding company acquired by it in the year 1933 for a sum of ₹ 2,21,501. (iii) The sale consideration of ₹ 60 lakhs was payable as follows: ₹ 20 lakhs before execution of the deed of conveyance and the balance ₹ 40 lakhs within two years thereafter without any interest. (iv) The sale deed in favour of the assessee was executed on September 30, 1966, and it was presented for registration on .....

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dispose of all or any of such lands, buildings, structures of hereditaments . . . . ; To let or under let all or any of such lands, buildings, structures, hereditaments and premises either upon lease or otherwise ; To purchase for investment or resale and to traffic in land and house or other property of any tenure. . . . ;" The above clause clearly goes to show that the object of the assessee company is not only to purchase for resale but also purchase immovable property, to hold, maintain .....

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of purchase and sale of property by the assessee. The purchase of two other open plots of land for small amounts is of no relevance in deciding the nature of activity of the assessee. Those plots had not been sold nor any expenditure incurred for developing the same in the previous year or later years. (ix) The Tribunal recorded a clear finding that the assessee was not a dealer in real estate at all. (x) It was acquired by the assessee as a capital asset and sold as such. (xi) It was not conver .....

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in the nature of trade. On a careful consideration of the cumulative effect of the above facts in the light of the tests laid down by the courts, we find ourselves in agreement with the Tribunal that the transaction of sale of the Fort property by the assessee in the instant case is not an adventure in the nature of trade. It is a transaction of transfer of a capital asset. We are, therefore, of the clear opinion that the transaction of the purchase and sale of the property in question by the a .....

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l be deemed to be the cost for which the previous owner of the property had acquired it. In view of the foregoing discussion, the first question referred to us is answered in the affirmative, that is, in favour of the Revenue and against the assessee. 13. Thus, in view of the facts of the present case and the judgments discussed above, we hold that the land sale transaction undertaken by the assessee is not adventure in the nature of trade. The Revenue has not been able to show that the land was .....

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, the onus is on the Revenue to prove that the land was part of business assets. The Department has not been able to show that the assessee was engaged in the organized activity of sale and purchase of land or property dealing. Further, there is no document on record to show that the assessee had developed the land or has divided the land into plots. The Department has failed to controvert the assertions of the assessee that there has been no change of land use i.e. conversion from Agricultural .....

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ultural or capital asset? The Department has placed reliance on the decision of Co-ordinate Bench of the Tribunal in the case of Mr. Abhijit Subhash Gaikwad Vs. The Dy. Commissioner of Income Tax (supra). As per contentions of the Department the assessee has neither carried out any agricultural activity on the land nor the assessee has shown any agricultural income in his return of income. The assessee has also not substantiated from the documents on record that the assessee has cultivated the l .....

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the Revenue record the land in the said case was not cultivable. Further, the assessee had himself admitted the land to be capital asset. The assessee had claimed deduction u/s. 54 of the Act on the capital gains arising from the said land. Whereas, in the present case no specific enquiry was conducted by the Assessing Officer with regard to the nature of land. As per Revenue records the land is cultivable and there is no admission by the assessee to treat the land as capital asset. The Departm .....

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f the Bombay Tenancy Act would show that the transfer of agricultural land to non-agriculturist is barred in the State of Maharashtra. The term agriculturist as defined u/s. 2(2) of Bombay Tenancy Act means, a person who cultivates land personally . And the term used in section 2(2) to cultivate personally is defined in sub-section (6) to section 2 of the Bombay Tenancy Act which is reproduced here-in-below: (6) "to cultivate personally" means to cultivate land on one's own account .....

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ided that, the restrictions contained in clauses (a), (b) and (c) shall not apply to any land:- (i) which does not exceed twice the ceiling area; (ii) upto twice the ceiling area, if such land exceeds twice the ceiling area. Explanation 1:- A widow or a minor, or a person who is subject to physical or mental disability, or a serving member of the armed forces shall be deemed to cultivate the land personally if such land is cultivated by servants, or by hired labour, or through tenants. A perusal .....

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ents rendered in the case of Arundhati Balkrisha Vs. CIT reported as 138 ITR 245 (Guj) and in the case of CIT Vs. Siddharth J. Desai reported as 139 ITR 628 (Guj) has held as under : In our opinion, what is required to be considered is : Was it agricultural land when it was sold ? If the land is recorded as agricultural land in the revenue records and if till the date of its sale it is used and exploited as agricultural land, and if the owner of the land had not taken any step, which would indic .....

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f a stop gap arrangement. So far as the facts of this case are concerned, there is no dispute that the land, till it was sold, was classified as agricultural land in the revenue records. In the village Forms Nos. VII and XII, popularly known as "record of rights", it is mentioned that the whole of the land was cultivated till the year 1967- 68. The land was cultivated personally by the assessee. The said land belonged to the family and he got it by way of inheritance and not by way of .....

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the corporation limits of Ahmedabad city. It is, therefore, not possible for us to say that the view taken by the Tribunal is unreasonable or erroneous in law. Even if we have to consider the intention of the assessee, when he decided to sell the land, it becomes clear that he wanted to sell the land as agricultural land. In the agreement dated December 18, 1963, it is in terms stated that the assessee was selling the land as agricultural land only and, therefore, was not going to sign any appli .....

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5 ITR 133, wherein the Supreme Court has held that the expression, " agricultural land" for the purpose of the Wealth tax Act would mean the land actually used for agricultural purpose, has held that the land in question is an agricultural land. It is, therefore, not possible to accept the contention raised on behalf of the Revenue that the Tribunal committed an error in holding that the land in question was agricultural land. In this view of the matter, we answer the question in the a .....

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The contention of the assessee that post sale, the purchaser of land has not converted the land for no-agricultural purpose and as per revenue records the land in question is still under cultivation has not been rebutted by the Department. 17. Now, the only point of contention is, Whether the land is situated within 8 Kms or beyond 8 Kms from the Municipal limits of Talegoan. Initially, the assessee had obtained a certificate from village Talathi to substantiate his submissions that the land in .....

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