2023 (1) TMI 322 - AT - Income Tax

Gain on sale of land - Short Term Capital Gain OR business income - CIT(A) treated the sale transaction as an adventure in the nature of trade - HELD THAT - The assessee purchased the piece of land on 06.02.2014 for a consideration of Rs. 1.53 crores and within a period of six days thereafter the assessee entered into a sale agreement dated 12.02.2014 with Agarwalla Teak International Pvt. Ltd. for a consideration of Rs. 1.86 crores. This clearly proves that the assessee has no intention of carrying out any agricultural activity in the land. It clearly proves that the assessee converted the agricultural land into non-agricultural purpose and sold it to M/s. ATIL. As further seen from the registered sale deed that the entire sale consideration was funded by M/s. ATIL to the assessee to buy the above piece of land. Further it is seen from the ld. CIT(A) s order CIT(A) directed the AO to delete the claim of Long Term Capital Gain offered by the assessee in the Return of Income filed for the subsequent Assessment Year 2016-17. Thus there is no question of double taxation of the very same sale transaction. The above transaction is to be treated as an adventure in the nature of trade as the assessee converted the above land as non-agricultural and for the purpose of industrial use and sold it to M/s. Agarwalla Teak International Pvt. Ltd. for a consideration of Rs. 1.86 crores. We do not find any infirmity in the orders passed by the Lower Authorities and therefore does not require any interference. Thus the grounds raised by the assessee is devoid of merits and the same is liable to be rejected. Appeal filed by the Assessee is hereby dismissed.

Summary

Issues involved:
1. Taxation of gain on sale of agricultural land as Short Term Capital Gain.
2. Treatment of the transaction as an adventure in the nature of trade.
3. Double taxation on the same transaction in different assessment years.

Issue 1: Taxation of gain on sale of agricultural land as Short Term Capital Gain:
The appellant, engaged in the trading of timber, purchased agricultural land and subsequently sold it to a non-agriculturist, claiming the gain as exempt under section 2(14)(iii) of the Income Tax Act. The Assessing Officer treated the transaction as Short Term Capital Gain, asserting that the intention was not agricultural but commercial, leading to taxation for the Assessment Year 2014-15. The Commissioner of Income Tax (Appeals) upheld the assessment, considering the sale as an adventure in the nature of trade, despite the appellant's arguments. The appellant contended that the sale was completed in the subsequent assessment year and should not be taxed twice. The Tribunal affirmed the lower authorities' decision, emphasizing the conversion of the land and the commercial nature of the transaction, dismissing the appeal.

Issue 2: Treatment of the transaction as an adventure in the nature of trade:
The Tribunal analyzed the timeline of events, noting the quick sale after purchase, conversion of the land, and financial involvement of the buyer in the transaction. It observed the appellant's actions and intentions, concluding that the transaction was indeed an adventure in the nature of trade. The Tribunal agreed with the lower authorities' findings, emphasizing the commercial motive behind the land transaction and the subsequent conversion for industrial use. The Tribunal held that the sale to a non-agriculturist and the financial arrangements supported the characterization of the transaction as a trade venture, leading to the dismissal of the appeal.

Issue 3: Double taxation on the same transaction in different assessment years:
The appellant raised concerns about potential double taxation due to the treatment of the sale in two different assessment years. However, the Tribunal clarified that the subsequent deletion of the income offered in the following assessment year by the Commissioner of Income Tax (Appeals) prevented any double taxation. The Tribunal highlighted the directive to remove the Long Term Capital Gain claim in the subsequent year, ensuring no overlap in taxation for the same transaction. Consequently, the Tribunal rejected the appellant's argument on double taxation and upheld the decision to tax the transaction in the initial assessment year.

In conclusion, the Tribunal affirmed the taxation of the gain on the sale of agricultural land as Short Term Capital Gain, considering it an adventure in the nature of trade, and addressing concerns of double taxation by deleting the income offered in the subsequent assessment year. The appeal by the Assessee was dismissed, and the decision was pronounced on 06-01-2023.