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2016 (11) TMI 1063 - ITAT MUMBAI

2016 (11) TMI 1063 - ITAT MUMBAI - TMI - Capital gain - nature of land - Held that:- CIT(A) cannot take such an inconsistent stand to reject one ground and to allow another ground. This approach cannot be upheld. He has to give a specific and categorical finding as to whether the land which was purchased was an agricultural land and also continued to be an agricultural land afterwards and the nature of the land has not been changed at all. Nothing further is borne out from the record or has been .....

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develop the land which ultimately is to be developed by himself or to be handed over to the developer for the development of any real estate project, then definitely it is indicative of the intention that the assessee had some kind of an intent to enter into the business adventure. However, the impugned order is completely silent on this issue. Even if we agree that, it is an agricultural land in the light of various evidences filed, then same needs to be examined properly by the Assessing Offi .....

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. C. Sharma, Accountant Member And Shri Amit Shukla, Judicial Member Appellant by : Dr. K Shivaram Respondent by : Shri Satyapal Kumar ORDER Per Amit Shukla, JM The aforesaid appeal has been filed by the Revenue and Cross Objection by the assessee against impugned order dated 30.05.2014, passed by Ld. CIT(Appeals)-20, Mumbai for the quantum of assessment passed under section 143(3) for the assessment year 2009-10. In the revenue s appeal, following grounds have been raised:- 1. Whether on the fa .....

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ssessee was a long term capital gains instead of being an adventure in the nature of trade without appreciating the facts that the facts of the case laws relied on were different from the facts of the present case? 3. Whether on the facts and in the circumstances of the case and in law, the Learned CIT (A) was justified in deleting the additions, holding that the sale of plot of land by the assessee was a long term capital gains instead of being an adventure in the nature of trade without apprec .....

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lid reason with A.O. to disallow the same without appreciating the fact that the A.O. has categorically mentioned in the assessment order that no map, no comments of architect or engineer and not usage/ construction and other factual details have been given by the assessee linking the expenditure to the land concerned?" 5. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored . 2. Whereas in the cross Objection, the .....

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he Short Term Capital Loss from shares of ₹ 88,35,265/- against the capital gains of the said year. 3 On the facts and in the circumstances of the case and in law, the LCIT(A) has erred in not allowing set off of the Short Term Capital Loss from land of ₹ 57, 40,228/- against the capital gains of the said year. 4 On the facts and in the circumstances of the case and in law, the LCIT(A) has erred in not allowing set off of brought forward Long Term Capital Loss (of AY: 2006- 2007) of .....

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o direct the assessing officer to grant deduction under chapter VI-A as per the provisions of the Act . 3. Brief facts of the case are that, the assessee had purchased five plots of land situated in Village Karla, Taluka Maval, district Pune, during the financial year 2003-04 for sums aggregating to ₹ 1,91,25,874/-. Assessee claimed that he has incurred development expenditure of ₹ 8,46,36,147/- on the said plots over the period of time. During the previous year, the assessee had sol .....

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includes the following:  Beautification and leveling of land by filing it with sand;  Getting Electricity connection;  Building Elevated water-tank on the land;  Planting trees;  Building approach roads; and  Building concert pond for natural storage of water. The AO s further observation on the facts and analysis of the submissions of the assessee are as under:- It is to be noted that the assessee has himself shown that part of land was purchased .....

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mpugned case assessee has been engaged activity in management and development of properties with the idea of selling the same at future profit. A fabricated statement that, no sale / development has taken place in preceding three years has been made. Attention is drawn to development agreement dated 15.05.2007 as signed by the assessee with M/s Sai Venkata & Associates for land at Village Karla, Taluka Maval, district Pune. By the said agreement, assessee has given land for right to develop, .....

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veral previous years and that only ₹ 1.08 crores was spent on the land in the impugned assessment year and hence according to the assessee, his activity cannot be treated as business activity and conveniently forgot to mention regarding the development agreement with one M/s Sai Venkata & Associates and has further failed to justify, why the whole improvement etc. was made systematically over the years if assessee himself has not set out to make profit from sale of the said parcel of l .....

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considering the facts and material on record the Assessing Officer spelt out the following factors and tests to show that, the entire conduct of the assessee was in the form of adventure in the nature of trade . 9. The key points emerging but of above are which will be relevant in this case are (a) That improvement and increase in marketability itself indicated intention to trade. (b) That conduct of assessee if it was as conduct of normal business engaged in that trade will indicate adventure i .....

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se it is simply a case of sale and resale of property." (f) Whether prior conduct of assessee shows a design and plan and what was the initial intention of the assessee when he entered this business transaction this will give a strong presupposition that this was an adventure in nature of trade AINOT). It may be seen that all the above indicators are found in this case All the indicia mentioned in summary above are present in this transaction of the sale of land by the assessee and hence th .....

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evelopment (30% disallowed)Rs.5,92,45,303/- 7,84,21,177/- Rs.6,73,80,173/- 4. In the first appeal, the assessee besides challenging the action of the Assessing Officer for treating the LTCG on sale of the plot as business income, raised additional ground wherein it was contended that, the sale proceeds from such land is not taxable at all, because what has been sold is the agricultural land and any income/ gain arising from sale of said land is exempt under section 10 of the Income-tax Act. For .....

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ting it to be agricultural land in terms of definition of capital asset under section 2(14). The Ld. CIT(A), at the first instance held that the said additional grounds are not admissible and then he proceeded to decide the said grounds on merits for rejecting the claim of the assessee. His observation and finding in this regard was as under:- On merit also, this additional grounds of appeal deserves dismissal reason is very obvious. It can be seen from the evidences available on record that app .....

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s Sai Venkata and Associates vide development agreement dated 15.07.2007. Against parting of development rights appellant has received ₹ 2.25 crores as advance from the Developers who has got the right to develop, construct and sell the property. By letter dated 21.12.2011, A.R. of the assessee has submitted before the Assessing Officer that land was sold as a solitary transaction and 87% expenses on the same has been capitalized by the appellant in its books of account during the precedin .....

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and was still an agricultural land . 5. On the issue of LTCG, the assessee made very detailed submissions. The sum and substance of his contentions were as under:- (a) The assessee had purchased agricultural land; way back in the year 2003-04 (AY 2004-05) and to make the land worth usable, certain expenditures were incurred. The improvement of the land was necessary, because it was near the banks of the river Indrayani which was always prone to flood. Hence, for the purpose of soil conservation .....

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9; (c) Assessee never had any intention for the commercial development and has neither carried out any sub-division of the plots nor created any structures on the said land. It remained in the same from, that is, as agricultural land. The land was properly registered in the name of the assessee and the assessee has made the Stamp duty and registration charges as agricultural land; (d) Since, the assessee has held major part of land for substantial period of time, which is more than 3 years, ther .....

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e Department to be capitalized in the scrutiny proceedings under section 143(3); (g) This is only a solitary transaction of sale of the land in the block of three preceding years and two subsequent years and hence one solitary transaction cannot be treated as in the nature of business, as there is no systematic activity of purchase and sale of plot/ land; and (h) Reliance was placed on various decisions, which has been noted by the CIT(A) in his impugned order in detail. 6. The Ld. CIT(A) after .....

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purchase of land, it was agricultural land. Thereafter, the assessee had merely carried out incurred some expenditure for improvement and development. Hence it cannot be held that, assessee was involved in any business activity of purchase and sale of land nor was there any activity of doing plotting and selling to various purchasers or investors or developer. Most of the expenditure incurred was mainly to improve the quality of the land and to ensure the safety of the land, which was situated n .....

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fact has been accepted by the Department in the earlier years under scrutiny proceedings. In sum and substance, he accepted the entire contention of the assessee and adopted the same line and reasoning as canvassed by the assessee. He also noted that, assessee was entirely into different business, like textile manufacturing, ayurvedic and herbal formulations etc. from different companies based in Surat The assessee was never engaged in real estate business or construction of building. Thus, bei .....

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the Ld. DR strongly relied upon the order of the Assessing Officer and submitted that, once assessee has bought various plots of land and incurred huge expenditure which is more than 3 to 5 times of the cost of the land purchased, then it can be inferred that assessee had the intention to develop the plot of land for earning gain as he was doing very organized work of development on the land which has to be reckoned in the nature of trade or business. He further submitted that, the assessee s i .....

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rder and reasoning of the AO should be affirmed. 9. On the other hand, Ld. Counsel for the assessee on the issue raised in the cross objections submitted that, in fact, the land was acquired as an agricultural land which continued to be the agricultural land and was sold as such. Once it has been sold as agricultural land then, under the Income Tax Act such an agricultural land cannot be taxed at all either as a business income or as LTCG. In support, he also drew our attention to the certificat .....

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1] 331 ITR 59 (Bom). Further reliance placed on the following decisions:- i) CIT v Nitish Rameshchandra Chordia [2015] 374 ITR 531 (Bom); ii) CIT v Lal Singh [2010] 325 ITR 588 (Punjab & Haryana); iii) ITO v Amrutilal B Shah [2013] 22 ITR (T) 668 (Mumbai - Trib): iv) Mrs. Sakunthal Vedachalam [2015] 369 ITR 558 (Mad); v) Supriya Kanwar v [2019] 149 ITD 1 (Jodhpur)(Trib)(TM). 10. On the issue of LTCG as raised in the Departmental appeal, he submitted that the Ld. CIT(A) has passed a very reas .....

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g to ₹ 1,91,75,874/-. Thereafter, the assessee had incurred huge expenditure of ₹ 8,46,36,147/- on its improvement which included the following:-  Beautification and leveling of land by filing it with sand;  Getting Electricity connection;  Building Elevated water-tank on the land;  Planting trees;  Building approach roads; and  Building concert pond for natural storage of water The said land has been sold in the relevant assessment yea .....

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it falls within the ambit of being treated as agricultural land. This plea was taken for the first time before the CIT(A). From the perusal of the CIT(A) order, we find that there is an inherent consistency in his finding. First of all, he holds that additional ground whereby, this issue has been raised is not liable to be admitted and accordingly, he has rejected the additional ground for being admitted only. After rejecting the admission of additional ground, he proceeds to decide the addition .....

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er recording these facts, he held that there was no agricultural activity carried out by the assessee at all and therefore, it is not an agricultural land. Once he gives such a categorical finding in para 3.3 (which has been reproduced above in the earlier part of our order), he also rejects additional evidences filed by the assessee which goes to show that, these were agricultural land. Thereafter, while deciding the issue on merits on LTCG, he takes contrary stand and holds that, it is an agri .....

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appellant has purchased five piece of agricultural land in FY 2003-04 for ₹ 1,91,75,874/-. These lands are having Gut No.36, 41, 45, 36,46, 43, 69, 48,39, 44 28,29 34, 35 and 69 etc. situated in Villalge Bhaje Ta. Mawal, Dist., Pune. 7/12 extract submitted by the appellant reveals that at the time of purchase of and it was agricultural land. The search and title report of the land given by Advocate Prakash N Devmore reveals the fact that it was an agricultural land at the time of purchase. .....

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the expenditure. Further, it is very important to note that agricultural land has not been converted into non agricultural land. Assessing Officer has not controverted this fact. 12. The Ld. CIT(A) cannot take such an inconsistent stand to reject one ground and to allow another ground. This approach cannot be upheld. He has to give a specific and categorical finding as to whether the land which was purchased was an agricultural land and also continued to be an agricultural land afterwards and t .....

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