2016 (4) TMI 1157 - AT - Income Tax

Sale of land - nature of land - adventure in the nature of trade - whether the land sold by assessee in GAT No. 41 situated at village Sate as Capital Asset u/s. 2(14) of the Income Tax Act, 1961? - agricultural land - municipal limits - Treatment to the surplus arising from sale of land as business income - Held that - Land sale transaction undertaken by the assessee is not adventure in the nature of trade. The Revenue has not been able to show that the land was held as a trading asset. The authorities below have drawn inference only from the proximity of alleged date of purchase and sale of land to form a presumptive opinion that the transaction was a business transaction. Merely for the reason that land was held by the assessee for short duration, it cannot be said that the land purchased and sold by the assessee is in the adventure in the nature of trade. As has been held in the case of CIT Vs. Dhable, Bobde, Parose, Kale, Lute and Choudhari (1992 (9) TMI 45 - BOMBAY High Court ), the onus is on the Revenue to prove that the land was part of business assets. The Department has not been able to show that the assessee was engaged in the organized activity of sale and purchase of land or property dealing. Further, there is no document on record to show that the assessee had developed the land or has divided the land into plots. The Department has failed to controvert the assertions of the assessee that there has been no change of land use i.e. conversion from Agricultural to non-Agricultural use. Rather, the assessee has been able to show from records that the land has been sold to an agriculturist in compliance with the provisions of section 63 of the Bombay Tenancy Act. In our considered view the Revenue has failed to discharge its onus to show that the sale of land by the assessee was a business transaction. Thus, the first question raised before us is answered in favour of the assessee. Whether the land is situated within 8 Kms or beyond 8 Kms from the Municipal limits of Talegoan? - Held that - Since, the certificate has been issued by the Govt. Department reliance can be placed on the same. However, a perusal of the certificate shows that the distance mentioned is between Talegaon and Sate. The certificate does not mention that village Sate is 10 KM from the Municipal limits of Talegaon. There is a difference between the distance from the Municipal limits and distance between to town/cities whih is generally measure from the center of the town were bus stand/railway station is situated. PWD being engaged in the construction of roads and bridges, for the purpose of measuring distance between the two cities generally measures the distance from bus stand/railway station of one city to the bus stand/railway station of the other. The certificate issued by PWD does not mention that whether the distance is from Municipal limits or any other point/landmark. Thus, in view of ambiguity in the certificate issued by the PWD, we deem it appropriate to remit the file back to the Assessing Officer for the limited purpose of ascertaining the distance of the land in question form the Municipal limits of Talegaon. The Assessing Officer may seek clarification on this issue from PWD or seek fresh certificate from any Government Agency other than village Talathi. The second issue raised in the appeal of the assessee is accordingly allowed for statistical purpose.

Summary

Issues Involved:
1. Whether the sale of land by the assessee is an adventure in the nature of trade.
2. Whether the land sold by the assessee is a capital asset within the meaning of section 2(14) of the Income Tax Act, being within 8 Kms from the Municipal limits of Talegaon.

Detailed Analysis:

Issue 1: Whether the sale of land by the assessee is an adventure in the nature of trade.

The assessee contended that the land sold was agricultural, purchased for agricultural operations, and was not intended for business purposes. The land was sold to another agriculturist, and no steps were taken to convert it to non-agricultural use. The Revenue argued that the land was sold within a short span for a significant profit, indicating an intention to trade. The Tribunal found no evidence of the assessee engaging in regular business of land sale or development. Citing the Hon'ble Bombay High Court's decision in CIT Vs. Dhable, Bobde, Parose, Kale, Lute, and Choudhari, the Tribunal held that the onus was on the Revenue to prove the land was a business asset. The Tribunal concluded that the sale transaction was not an adventure in the nature of trade, as the Revenue failed to show the land was held as a trading asset.

Issue 2: Whether the land sold by the assessee is a capital asset within the meaning of section 2(14) of the Income Tax Act, being within 8 Kms from the Municipal limits of Talegaon.

The assessee argued that the land was agricultural and situated more than 8 Kms from the Municipal limits of Talegaon, supported by a certificate from the village Talathi and a certificate from the Public Works Department (PWD). The Revenue contended that the land was less than 8 Kms from the Municipal limits and no agricultural activity was substantiated. The Tribunal noted the conflicting certificates from the village Talathi and relied on the PWD certificate, which stated the distance between Talegaon and Sate as 10 Kms. However, the Tribunal found ambiguity in the PWD certificate regarding whether the distance was from the Municipal limits. The Tribunal remitted the file back to the Assessing Officer to ascertain the exact distance from the Municipal limits, seeking clarification from the PWD or another Government Agency.

Conclusion:

The Tribunal concluded that the sale of land by the assessee was not an adventure in the nature of trade. The case was remitted back to the Assessing Officer to verify the distance of the land from the Municipal limits of Talegaon to determine if it qualifies as a capital asset under section 2(14) of the Income Tax Act. The appeal was partly allowed for statistical purposes.