TMI Blog2017 (12) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee could anticipate such substantial increase in the sale price of the land because of any policy introduced by the Government, no such factors have been brought on record. Facts are to be view keeping in view perspective the assessee, i.e. from where he belongs; whether he has ventured in any trading activities of similar nature; his educational background etc. Even the entire transaction is being looked into with that angle, then it would reveal that he has not traded in the land, rather it was a simplicitor investment for agriculture operation, but on account of getting good price land has been sold, and higher volume of land purchased at different places. Every agriculturist would like to enhance his land holding, if similar type of sale of land can result into a price, which can enable him to buy higher volume of other agriculture land. In view of the above discussion, we allow appeal of the assessee and direct the AO to treat the assessee as an investor in the agriculture land. Entire land sold to be treated as agriculture land and gain on sale of this land is beyond the purview of the capital gain under section 2(14) - Decided against revenue - ITA Nos. 260 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue, whether gain from sale of agricultural land is to be assessed as a business income or short term capital gain/long term capital gain, is a highly debatable issue. It always puzzled the adjudicator even after availability of large numbers of authoritative pronouncements by the Hon ble Supreme Court/Hon ble High Court. The reason for the puzzle is, one has to gather the intention of an assessee while he entered into the transaction. The expression intention as defined in Meriam Webster Dictionary means, what one intends to accomplish or attain, it implies little more than what one has in mind to do or bring out. It suggests clear formulation or deliberation. Thus, it is always difficult to enter into the recess of the mind of an assessee to find out the operative forces exhibiting the intention for entering into the transaction. This would give rise a debate. Nevertheless, we have to look into the curious features of this case which will goad us on just conclusion. 7. Before we embark upon an inquiry on the facts of present case so as to find out, whether assessee is to be termed as involving in the trading of land or to be treated as a simplicitor agriculturist. We would l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consideration 1. 567/1/1 Naru Kheraj Gadhvi 29.08.08 42,70,112 2. 564 Vejanand Vira Gadhvi 29.07.08 63,05,664 3. 568/3 Rana Parbat Gadhvi 22.07.08 24,00,088 4. 563/2 Vejanand Vira Gadhvi 29.07.08 29,42,672 5. 568/1 Rana Parbat Gadhvi 22.07.08 19,34,986 6. 560/3 Harsur Kheraj Gadhvi 22.07.08 72,00,115 7. 568/2 Rana Parbat Gadhvi 22.07.08 19,49,960 8. 567/2 Naru Kheraj Gadhvi 03.10.08 84,73,961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 5. Whether, the permission under Section 65 of the Bombay Land Revenue Code was obtained for the non-agricultural use of the land? If so, when and by whom (the vendor or the vendee)? Whether such permission was in respect of the whole or a portion of the land? If the permission was in respect of a portion of the land and if it was obtained in the past, what was the nature of the user of the said portion of the land on the material date? Not applicable as the land was converted into NA and was sold as agricultural land. 6. Whether the land, on the relevant date, had ceased to be put to agricultural use? If so, whether it was put to an alternative use? Whether such cesser and/or alternative user was of a permanent or temporary nature? Not applicable as the land was converted into NA and was sold as agricultural land. 7. Whether the land, though entered in Revenue records, had never been actually used for agriculture, that is, it had never been ploughed or tilled? Whether the owner meant or intended to use it for agricultural purposes? Yes the land has been used for agricultural purposes till the date of sale. 8. Whether the land was situated in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requency of such purchase and disposal in that particular item? If purchase and sale are frequent, or there are substantial transaction in that item, if would indicate trade. Habitual dealing in that particular item is indicative of intention of trade. Similarly, ratio between the purchases and sales and the holdings may show whether the assessee is trading or investing (high transactions and low holdings indicate trade whereas low transactions and high holdings indicate investment). (4) Whether purchase and sale is for realizing profit or purchases are made for retention and appreciation its value? Former will indicate intention of trades and latter, an investment. In the case of shares whether intention was to enjoy dividend and not merely earn profit on sale and purchase of shares. A commercial motive is an essential ingredient of trade. (5) How the value of the items has been taken in the balance sheet? If the items in question are valued at cost, it would indicate that they are investments or where they are valued at cost or market value or net realizable value (whichever is less), it will indicate that items in question are treated as stock-in-trade. (6) How th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermine as to whether an assessee can be said to be carrying on business. (a) The first test is whether the initial acquisition of the subject-matter of transaction was with the intention of dealing in the item, or with a view to finding an investment. If the transaction, since the inception, appears to be impressed with the character of a commercial transaction entered into with a view to earn profit, it would furnish a valuable guideline. (b) The second test that is often applied is as to why and how and for what purpose the sale was effected subsequently. (c) The third test, which is frequently applied, is as to how the assessee dealt with the subject-matter of transaction during the time the asset was the assessee. Has it been treated as stock-in-trade, or has it been shown in the books of account and balance sheet as an investment. This inquiry, though relevant, is not conclusive. (d) The fourth test is as to how the assessee himself has returned the income from such activities and how the Department has dealt with the same in the course of preceding and succeeding assessments. This factor, though not conclusive, can afford good and cogent evidence to judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing in the nature of business activity or adventure in the nature of trade. 7.19 However, the above logic cannot be applied in entirety to all pieces of land. This can he applied only to the six pieces of land which have been held for less than ten to fifteen months. The profit from sale of these six lands, are treated as business profit arising out of transactions by way of adventure in the nature of trade. In respect of the other two lands which have been held for more than three years, it cannot be said that their sale amounts to adventure in the nature of trade. Thus, the AO is directed to recompute the business profits as above. 17. Thus, an analysis of complete record would indicate that basic point which weigh with the ld.CIT(A) for treating the assessee partly as trader is the fact that the increase in sale price is 800%. In other words, volume of profit resulted to the assessee persuaded the ld.CIT(A) to habour a belief that the land purchased in the year of 2007 and sold after 15-16 months is to be treated as a trade asset. No doubt the profit on transfer of alleged agriculture land was quite high. But this is one of the corroborative evidences, amongst other, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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