2018 (10) TMI 1110 - AT - Income Tax

Profit earned on sale of agricultural land - Taxing the gain arising on transfer of agricultural land as claimed as exempt - lower authorities for treating profit on sale of plot of land as business income - Held that - From the record we found that six plots of agriculture land was bought by the assessee with eight other persons. These plots of land were held for lease by owner and thereafter sold and profit accruing there on was claimed as exempt being income from sale of agricultural land. After analyzing the factual position, the lower authorities reached to the conclusion that intention of the assessee was to earn profit rather than investing in the agricultural land to be used for agricultural purposes. Assessee was not at all interested in carrying out any agricultural activity. If it all in case that intention of assessee was to embark on a venture in the nature of trade as distinguished from a capital investment. CIT(A) has discussed the various judicial pronouncements and also the criteria laid down in case of Mahaveer Enterprises 1997 (4) TMI 21 - RAJASTHAN HIGH COURT to the facts of the instant case and reached to the conclusion that assessee alongwith 8 other persons entered into transaction for sale and purchase of land. Intention was not to carry out any agricultural activity as because sale was carried out barely within few months of the acquisition. CIT(A) also observed that area of land located is being developed for the purpose of Holiday Homes, Farm houses located near to Karjat. The detailed findings so recorded by lower authorities by applying various judicial pronouncements have not been controverted by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the order of lower authorities for treating profit on sale of plot of land as business income. - decided against assessee.

Summary

Issues:
Taxability of gain arising on transfer of agricultural land claimed as exempt.

Analysis:
The appeal was filed by the assessee against the order of CIT(A)-2, Pune for AY 2012-13 regarding the taxing of gain from the sale of agricultural land claimed as exempt. The Assessing Officer noted that the assessee earned ?11,07,499 from the sale of land not shown in the income return, claiming it as exempt under Section 2(14) of the IT Act. However, the AO treated the income as earned from an adventure in the nature of trade.

The CIT(A) upheld the AO's decision, emphasizing that the intention of the assessee was profit-oriented rather than agricultural. The CIT(A) referred to various judicial precedents, including the criteria laid down by the Rajasthan High Court, indicating that the transaction was an adventure in the nature of trade. The CIT(A) also highlighted that the land was located in an area developed for Holiday Homes and Farmhouses, not for agricultural purposes.

The appellant argued that the land was agricultural and therefore not taxable under Section 2(14) of the IT Act. However, the CIT(A) applied the tests laid down by the Rajasthan High Court and concluded that the transaction was not for agricultural purposes. The appellant's claim of agricultural income was also considered, but the authorities found the intention was profit-driven, leading to the dismissal of the appeal.

The Tribunal, after considering all contentions and judicial pronouncements, affirmed the lower authorities' decision to tax the profit from the sale of land as business income. The Tribunal concurred with the findings that the transaction was for profit and not agricultural purposes, thereby dismissing the appeal of the assessee.

In conclusion, the Tribunal upheld the taxability of the gain from the sale of agricultural land as business income, based on the intention of profit-making and the nature of the transaction as an adventure in the nature of trade. The decision was made after thorough consideration of the facts, arguments, and relevant legal principles.