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TMI Blog2019 (10) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... issued show cause notice asking the assessee, as to why the sale consideration should not be treated as income under the head 'business ' as per provisions of section 45(2) of the Act and as to why the exemption claimed u/s 54F should not be disallowed? Since, the assessee did not satisfy the conditions for allowing the deduction u/s 54F of the Act. In response there to, the assessee filed a letter stating that he is an agriculturist and not having any residential house, sold the agricultural lands and with the advances/sale proceeds received from the vendees, constructed the residential house at Tanuku for a sum of Rs. 36,14,170/- and maintained the books of accounts for the construction. The assessee further submitted that he has not carried on any business, therefore, requested to accept the income returned. The AO did not accept the contention of the assessee that he is not engaged in the real estate business and did not carry on any business. As the assessee has converted the agricultural land into plots and sold in bits and pieces, such conversion of plots and sales was considered business activity. 3. With regard to second contention of the assessee that he did not own any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... junudupalem 2,79,500 2. 11.09.2008 01.09.2008/3603/2008 140-00 V.Sivarama Krishna Sai Vara Prasad S/o Naga Krishna Murthy Tanuku 50,000 3. 01.09.2008 01.09.2008/3459/2008 140.00 S.V.S.Satyanarayana Alias Venkayya S/o Rattayya Tanuku 2,77,500 4. 01.09.2008 01.09.2008/3462/2008 134-44 Mrs K.L.Naramadaa W/o Rama Krishna Reddy, Moyyuru 2,66,500 5. 11.09.2008 11.09.2008/3604/2008 225.75 Ch.Nagaraju and Ch.Sastri, Tanuku 2,00,000 6. 22.09.2008 22.09.2008/3759/2008 394.20 K.Rama Mohan S/o Krishna Murthy Peravali 7,81,000 7. 21.09.2008 22.09.2008/3757/2008 402.35 Akkina Bapineedu S/o Venkata Rao, Tanuku 4,00,000 8. 22.09.2008 22.09.2008/3758/2008 464.77 B.Venkateswara Rao S/o Appa Rao, Tanuku 9,20,500 9. 01.09.2008 01.09.2008/3461/2008 177.45 N.Srinivas S/o Krishna, Tanuku 3,51,502 5.1. Out of the sale consideration of Rs. 36,26,502/-, the assessee has spent for construction of residential building at Tanuku for Rs. 36,14,170/- in the financial year 2007-08 to 2008-09. Thus, the assessee argued that the assessee has commenced the construction on 03.12.2007 and completed the same by 31.03.2009. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmenced prior to the transfer of the asset. With regard to the first issue, whether the assessee's income required to be taxed as business income or capital gains. In the instant case, the assessee carried on the agricultural activity till 31.03.2008 and subsequently sold the land in plots. Though the assessee has taken permission for conversion of land for plotting into various units, no evidence was brought on record by the AO that the assessee has carried on any developmental activity. The assessee has not incurred any other expenditure except for payment of conversion fees, transport charges, labour charges etc. From the assessment order, we observe that the AO did not make out a case that the assessee has carried on the business activity. Therefore, the assessee being the agriculturist, not carried on any business activity except conversion of land into plots and disposing them without being developed there is no business activity involved and the income required to be taxed as capital gains, but not business income. The assessee relied on the various decision as under: (i) CIT Vs. Suresh Chand Goyal reported in 298 ITR 277 (MP) "In the case of CIT Vs. A.Mohammed Mohidee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd therefore, the income from the sale of the land is to be considered as capital gains and not as business income as sought to be held by the AO. By taking note of the following facts, ITAT, Hyderabad held that the CIT(A) erred in holding that the sale proceeds should be assessed as business income after recording certain factual findings. a) In the present case, assessee is an agriculturist and did not carry on any business b) The land was purchased as agricultural land way back in 1979; c) Agricultural operations were carried on for more than 20 years and the land was inherited by assessee which is in the process of development; d) Necessary permission for conversion of land into residential plots was sought by assessee's mother and just because assessee stepped into his mother's shoes, it cannot be considered that assessee is in the business of purchasing and selling of plots, whereas, assessee has only sold inherited land, therefore, intention to purchase for business was absent, and ITA No.82of 2015 B.Venu Madhav, Hyderabad." 7. "The Tribunal also relied on the circumstances that, neither in the past, nor subsequently, the assessee had ventured in such tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt footing, - as we think, only because it is a company which has among its objects power to trade or traffic in land. There is here no evidence of a venture or venture The transaction involved no risk or speculation, nor can it be truly said that it is a "plunge in the waters of trade" It is a transaction which any prudent owner of land will engage in and which is, therefore, no more than realization of capital investment, conversion of land into money, not a venture in the nature of trade." 8.1. We have gone through the decisions relied upon by the Ld.AR and we are of the opinion that the case laws relied upon by the Ld.AR supports the assessee's case. Therefore, we hold that the assessee has not carried on any business and the income received on sale of plots required to be taxed as capital gains, but not business income. Incidentally, the AO also has taxed the sale consideration under the head long term capital gains, but not under the head 'business income'. Therefore, it is established that the department also has accepted the assessee's contention that the sale consideration on account of sale of plots to be brought to tax under the head long term capital gains. Accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oordinate Bench of this Tribunal, under similar circumstances has held that the Act does not prescribed any condition as to the date of commencement of construction of new house property and only condition is that construction of house property should be completed within three years from the date of transfer of original asset. The date of commencement of construction is irrelevant and the construction may be commenced even before the date of transfer of original asset. A similar view has been expressed by the Hon'ble Delhi High Court, in the case of Bharathi Mishra (supra), wherein the Hon'ble High Court observed that sub-section (4) of section 54F prescribes appropriation of sale consideration of original asset towards purchase of new asset made within one year before the date of transfer of original asset, two years from the date of transfer or construction of new house property, within three years from the date of transfer of original asset. The Act does not prescribe any condition as to the date of commencement of construction of house property which may even commenced before the date of transfer of original asset. The Hon'ble Karnataka High Court in the case of J ..... X X X X Extracts X X X X X X X X Extracts X X X X
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