TMI Blog2017 (12) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... at they have anticipated many fold rise of agriculture land price, and therefore, ventured into trade. Therefore, we allow the appeal of the assessee and rejected appeal of the Revenue. We direct the AO to treat the profit earned by the assessee on sale of agriculture land as exempt under section 2(14) of the Income Tax Act, 1961. - Decided against revenue - ITA Nos. 486 & 496/RJT/2013 - - - Dated:- 4-12-2017 - Shri Pramod Kumar, Accountant Member And Shri Rajpal Yadav, Judicial Member Assessee by : Shri Kalpesh Doshi, CA Revenue by : Shri C.S. Anjaria, DR ORDER Per Rajpal Yadav, Judicial Member The assessee and Revenue are in Cross Appeal against order of ld. Commissioner of Income Tax (Appeals)-II, Rajkot dated 30.09.2013 passed for Assessment Year 2009-10. 2. The Grounds taken by both the appellants are not in consonance with Rule 8 of ITAT Rules, they are descriptive and argumentative in nature. In brief short common question involved in both the appeals relates to determination of nature of income derived by the assessee on sale of land, i.e. whether the profit on sale of land is to be assessed as business income or under the head capital gain. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 5. 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 like to refer the three basic questions formulated by ld. first appellate authority for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricultural land in revenue records. . b. whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time; In the appellant's case, the land was actually used for agricultural purpose at the time of purchase as well as sale. c. whether such user of the land was for a long period or whether it was of a temporary character or by way of stop-gap arrangement; In the appellant's case, the three pieces of land were held for 14 months 3 years 2 months, respectively. It is therefore difficult to say that this was by way of a stop-gap arrangement. d. whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land; , The agricultural income shown by the appellant is proportional to the investment made by the appellant considering the terrain and the lack of irrigation facilities. e. whether the permission under section 65 of the Bombay Land Revenue Code, was obtained for the non-agricultural use of the lands: if so, when and by whom; whether such permission was in respect of the whole or a portion of the land; if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the declared intention of using it for non-agricultural purpose. 9. It is pertinent to observe that ITAT Lucknow Bench in the case of Sarnath Infrastructure (P) Ltd. v. ACIT (2009) 120 TTJ 216 has also considered issue, whether an assessee deserves to be treated as a trader or investor . Though the issue involved in that case relates to investment/trading in shares, but broad principle carved out by the ITAT is applicable on all sorts of transactions, where adjudicator is required to find out whether transaction was entered into by the assessee with a pre-dominant intention of trading or investment. The following tests are worth to note: 13. After considering above rulings we cull out following principles, which can be applied on the facts of a case to find out whether transaction(s) in question are in the nature of trade or are merely for investment purposes: (1) What is the intention of the assessee at the time of purchase of the shares (or any other item). This can be found out from the treatment it gives to such purchase in its books of account. Whether it is treated stock-in-trade or investment. Whether shown in opening/closing stock or shown separately as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding the shares (or the items in question) for investment. 9. One has to find out what are the legal requisites for dealing as a trader in the items in question and whether the assessee is complying with them. Whether it is the argument of the assessee that it is violating those legal requirements, if it is claimed that it is dealing as a trader in that item? Whether it had such an intention (to carry on illegal business in that item) since beginning or when purchases were made? 10. It is permissible as per CBDT s Circular No. 4 of 2007 of 15th June, 2007 that an assessee can have both portfolios, one for trading and other for investment provided it is maintaining separate account for each type, there are distinctive features for both and there is no intermingling of holdings in the two portfolios. 11. Not one or two factors out of above alone will be sufficient to come to a definite conclusion but the cumulative effect of several factors has to be seen. 10. The Hon ble Gujarat High Court had also an occasion to consider this issue in the case of Commissioner of Income Tax vs. Riva Sharkar A Kothari reported in 283 ITR 338. Hon ble court has made reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... highlighting position of law laid down in various judgment viz. G. Venkataswami Naidu Co. Vs. CIT, 35 ITR 594 (SC) and Janki Ram Bahadur Ram Vs. CIT, 57 ITR 21 (SC). Conclusions briefly drawn by the CIT(A) are on page no.35 of the impugned order. It reads as under: 1. The appellant's case is required to be broken into two parts to get the correct perspective. 2. The appellant has purchased three pieces of land. The first one (Land- A) was purchased in May, 2005 while the other two (Land-B C) were purchased in May, 2007 adjacent to Land-A. The three pieces of land were sold in July, 2008. 3. The appellant has sold the Land-A after 3 years 2 months and Land- B C after 14 months. There has been a massive increase of about 800% in the price of the land within a very short span of time. There are two possibilities. Either the purchase price has been doctored or there are some exceptional circumstances leading to such an abnormal increase in price. The first possibility cannot be commented upon as no efforts have .been done by the A.O. in this regard. However, there has been a substantial change about the location of the land. This is the land in whose vic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting a higher volume of sale consideration, then it could not be construed that transaction would take colour of a business transaction. The assessee is basically an agriculturist; purchases land at a distance of more than 20 kms. away from municipality and close to his native village. After sale of this land, he has again purchases agriculture land. He has not entered into any sale/purchase of land in earlier period of time or in subsequent period of time. He has not borrowed money for purchase of land and incurred interest expenditure. There might be reasons for all of a sudden spurt in the price of land in the area. There could be change of policy of Government level; introduction of some project, but that type of change in the policy whether, was in the notice of the assessee ? No such factors have been brought on record by the AO. It is also pertinent to observe that whether 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 viewed keeping in view perspective the assessee, i.e. from where he belongs; whether he has ventured in any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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