2019 (6) TMI 304 - HC - Income Tax

Characterization of land - Nature of sale of land - agricultural income or capital asset - whether the properties sold were to be excluded from the meaning of capital asset as they were agricultural land as defined by Section 2(14) ? - HELD THAT - Referring to the intention of assessee with regard to the specific transactions is to be ganged not merely from what he or the concerned entity contends but rather on an appreciation of the overall facts and circumstances presented to the Court at the time of proceeding. This Court is of the opinion that the ITAT s conclusions with rejecting the assessee s arguments that the intention was always to retain the properties acquired as agricultural land and not treat them as capital assets for the purposes of business cannot be characterised as unreasonable or unsound. Moreover the analysis of facts and application of mind by the ITAT is with respect to the facts; the findings are essentially on an application mind based upon the factual material. In the opinion of the Court no substantial question of law is involved which calls for interpretation. - Decided against assessee.

Summary

Issues:
1. Whether the properties sold were to be excluded from the meaning of capital asset as they were agricultural land as defined by Section 2(14) of the Income Tax Act, 1961.

Analysis:
1. The appellant contended that the lands sold were agricultural and should be excluded from taxable income under Section 2(14)(iii) of the Act. The appellant relied on a certificate from the Tehsildar stating the land was situated away from city limits. The Assessing Officer (AO) rejected this claim, stating the lands were intended for non-agricultural purposes. The CIT(A) accepted the appellant's contention, but the ITAT allowed the revenue's appeal.

2. The appellant argued that the lands were purchased for investment purposes and not for sale, emphasizing that the primary income source was from house properties, not business. Case laws were cited to support the argument that intention should be determined from the nature of transactions. The ITAT analyzed the purchase and sale activities over time, concluding the lands were bought for resale, not as investments in agricultural lands.

3. The ITAT found that the lands were sold shortly after purchase, some within days, indicating a pattern of quick turnover not consistent with agricultural land investment. The ITAT concluded that the lands were purchased for resale and converted to non-agricultural use before being sold to real estate companies. The Court upheld the ITAT's decision, stating that the findings were based on factual analysis and did not raise any substantial legal questions.

4. The Court dismissed the appeal, affirming the ITAT's decision that the lands were not retained as agricultural but sold for business purposes. The Court found the ITAT's conclusions reasonable and based on factual analysis, with no need for further interpretation of the law.