2015 (6) TMI 480 - AT - Income Tax

Income from sale of Land - Capital Gain or business income Whether land sold by assessee was agricultural land or capital asset Whether the transaction was an adventure in the nature of Trade ? - Held that - As relying on case of Smt. M. Vijaya and others 2014 (6) TMI 587 - ITAT HYDERABAD we uphold the impugned order of the Ld. CIT(A) holding that the land in question being agricultural land situated beyond 8 K.Ms from the limits of Hyderabad Municipal Corporation is not a capital asset within the meaning of section 2(14) and the profit arising from the said land is not chargeable to tax in the hands of the assessee as capital gains. We also uphold the impugned order of the Ld. CIT(A) holding that the activity of the assessee of purchase and sale of the said land was not an adventure in the nature of trade as alleged by the Assessing Officer. - Decided in favour of assessee.

Summary

Issues:
1. Whether the transaction was an adventure in the nature of trade?
2. Whether the land sold was agricultural land?
3. Whether the land was located within 8 KM from the Municipal Limits of Hyderabad?

Issue 1: Adventure in the Nature of Trade
The Revenue contended that the transaction was an adventure in the nature of trade, leading to the income being assessed as business income. The Assessing Officer found no evidence of agricultural activity on the land and concluded that the assessee invested in anticipation of real estate market growth. However, the Ld. CIT(A) disagreed, stating that the mere sale of two lands did not establish the assessee as a real estate dealer. The absence of development activity or plotting indicated no business intention. The Tribunal, citing precedents, held that the transaction was not an adventure in the nature of trade.

Issue 2: Agricultural Land Classification
The second issue revolved around whether the land sold by the assessee was agricultural. The Ld. CIT(A) examined the revenue records, crop details, and sale deeds to determine the land's classification. Comparing with similar cases, the Tribunal found that the land was indeed agricultural, as evidenced by the revenue records and the absence of conversion applications. The Tribunal upheld that the land was classified as agricultural.

Issue 3: Distance from Municipal Limits
The final issue concerned the distance of the land from the Municipal Limits of Hyderabad. The appellant provided a certificate confirming the land's location 14 km away from the local limits. Accepting this certificate, the Ld. CIT(A) ruled in favor of the appellant on this matter. The Tribunal upheld this decision, stating that the land being beyond 8 KM from the Municipal Corporation limits exempted it from being a capital asset, as per the relevant section.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s order. The Tribunal found that the land was agricultural, located beyond the specified distance from the Municipal Corporation limits, and the transaction was not an adventure in the nature of trade. Citing a previous case with similar circumstances, the Tribunal supported the decision that the profit from the land sale was not taxable as capital gains.