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The Income-Tax Officer Ward-3 (5) Nagpur Versus Shri Manohar Jairamji Wankhede

Gain out of sale of agricultural lands - nature of land - transfer - Held that:- Assessing Officer has drawn adverse inference on account of lack of appreciation of the facts. The Assessing Officer has relied upon the description in the 7/12 extracts to hold that the land was not agricultural. He has also drawn adverse inference on account of the agreement of sale executed by the assessee and the period for which the land was held by the assessee. The learned CIT(Appeals) has elaborately conside .....

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Yahya, Accountant Member Appellant by : Shri A.R. Ninawe Respondent by : Shri Madhao Vichore ORDER This appeal by the Revenue is directed against order of Learned CIT(Appeals)-II, Nagpur dated 01/04/2016 and pertains to assessment year 2009 - 10. The grounds of appeal read as under : 1. On the facts and circumstances of the case, the W. CIT(A) erred in holding that the gain out of sale of agricultural lands has wrongly been treated as adventure in nature of trade by the Id. AO and deleting the a .....

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ances of the case the Ld. CIT(A) erred in observing that the assessee is an agriculturist who was engaged in agricultural activities in the said agricultural lands without appreciating that the land at Kirmiti was used only for grazing purpose and an activity of growing grass would not make the assessee an agriculturist. 4. On the facts and in the circumstances of the case the Ld. CIT(A) erred in observing that the assessee is an agriculturist who was engaged in agricultural activities in the sa .....

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IT reported in 35 ITR 594 to the facts of this case which gain was derived out of the sale of agricultural lands was an adventure in the nature of trade. 2. Brief facts of the case are as under : 2. Information was received by the AO that the assessee, along with one Shri Naushanl, acted as a consenter in a transaction relating to transfer of land situated at Mauza Kirmiti and had received an amount of ₹ 12,50,000/- with regard to the same on 21/06/2008. The AO further noted that no return .....

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. Value Remarks. 1. Abhay Nimje. Mouza: Kirmiti Tehsil: Hingna, District: Nagpur. 50,00,000 50% 2. Vivek Kunawar Etc. Mouza : Tumdi Tehsil :Nagpur District: Nagpur. 93,00,000 1/3 Share. 3. The details of purchase party and sale party and details relating to the agreement to sale have been duly reproduced by the AO on Pg. 2 of the assessment order. On perusal of the said details it was noted by the AO that the assessee had received a consideration of ₹ 43,50,000/- in his capacity as a conse .....

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sessee had taken possession of the properties, he was the de facto owner of the said properties and had executed the sale deed in his capacity as a consenter. It was a contention of the assessee that since he (along with co- owners) had taken possession of the properties, the lands stood transferred to the assessee. He further submitted that and since he was the owner of the said lands, and also since the said lands were rural agricultural land beyond 8 kms. from the municipal limits, no tax was .....

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bmissions of the appellant. I have also perused the remand report and the response of the appellant to the remand report. It is noted that the Ld. AO has added the said amount of ₹ 43,50,000/- to the income of the appellant for the following reasons: (a) That the land situated in Mouza Kirmiti is not agricultural land and has been categorized as "Barren and Charai" as per the 7/12 extracts. (b) That the assessee is not the owner of the lands sold and that he has not executed the .....

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", It Is. seen that the Id. AO came to the said conclusion as per the 7/12 extracts submitted by the appellant for assessment year 2007- 08 & 2008-09. The appellant subsequently furnished 7/12 extracts from FY 1998-99 to FY 2009-10 evidence to establish that the said land Is basically agricultural land though it was used for the purpose of Charai (grazing) during the year under consideration. 6.1 On perusal of the 7/12 extracts as well as the remand report of the Ld. AO it becomes evide .....

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ctivity in part of the said agricultural land and since no income has been earned from the said agricultural activity, the same has not been shown in the return of income. 6.2 Further as pointed out by the appellant, there is significant difference between the word 'Padit' (as mentioned in the 7/12 extracts) and the word 'Barren' (as used by the Ld. AD). The word barren means land that is physically unfertile while the word Padit means land that is capable for cultivation but whi .....

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refore admittedly agricultural in nature and is also situated beyond 8 kms. from the municipal limits. 6.4 Thus it may be concluded that both the lands in question are agricultural lands situated beyond 8 kms from the municipal limits. 7. With regard to the second issue it is seen that as per section 2{ 14) of the Income Tax Act, "capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include ... Thus the de .....

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for following two methods: where conveyance deed is registered and where conveyance deed is not registered. 7.1 Where the conveyance deed is not registered the transfer would be governed by provisions of section 2(47)(v). It is not disputed hat certain amounts have been paid by the appellant in respect of the said lands. It is also undisputed that the possession of the land in question was handed over to the appellant during the year under consideration. In the light of these facts, it is perti .....

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r transfer of an immovable property, the purchaser has paid the price and has taken possession of the property, but the conveyance is either not executed or if executed it is not registered. In such cases, the transferor is debarred from agitating his title to the property against the purchaser. 7.3 As per the provisions of Section 2(4 7)(v) r. w .s. section 53A of the Transfer of property Act, 1882, it is seen that when possession has been allowed of any immovable property in part performance o .....

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ad been transferred to the appellant and. he is now the owner of the property and consequently possesses the right to sell it. Thus there is no merit in the contention of the Ld. AO and the appellant has not executed the sale deeds and that therefore the appellant is merely a consenter and that the appellant was not the owner of the said agricultural lands. 7.4 Thus since the said agricultural land stands transferred to the appellant, any surplus arising to the appellant on transfer of such agri .....

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trade, the said issue has been a matter of much debate and Is now settled by various case laws. There are various judicial pronouncements wherein it had been held that the sale consideration out of sale of agricultural land is not assessable as business income when such agricultural land Is situated beyond 8 kms. and that it is not Important whether there was any agricultural income or not and that the moot question to decide the Issue Is whether the character of the land is agricultural or not .....

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t the lands in question are agricultural lands. The fact that the appellant took delivery of the said land is not disputed and hence it is an accepted fact that the said agricultural land stood transferred in the name of the appellant. Thus clearly, at the time of taking possession and at the time of sale, the said lands were classified as agricultural land in the revenue records. It is also an admitted fact that neither the appellant nor any earlier owner ever sought any conversion of the said .....

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