2022 (1) TMI 924 - AT - Income Tax

Gain on sale of land - Nature of land - agricultural land or capital asset or business receipts - main argument of the assessee is that all the purchases of the lands shown in the balance sheet are as a fixed asset and therefore, the same is treating as business income of the assessee is not correct - HELD THAT - The assessee has performed near about 70 transactions out of which only 20 transactions are not sold and the remaining 50 transactions are completed by the assessee - as gone through the Annexure attached to the assessment order at Page Nos. 1 to 7, it gives entire picture of purchases and sales of the lands from that it is very clear that the intention of the assessee is only to make a profit out of buying and selling of the properties and therefore, the income arising out of the sale of the land rightly treated by the A.O as business income Simply showing the land in the balance sheet as an investment is not sufficient. The activities carried by the assessee i.e., buying and selling of the properties are considered in this case and we are of the opinion that the intention of the assessee is not to carry out agricultural operations only but to earn the profit. Therefore, the A.O has rightly taxed the income arising out of the sale of the lands as income from business. A gricultural income shown by the assessee - total holding of the land by the assessee is 65 acres. The agricultural income shown by the assessee is only ₹ 3,12,500/-. From the above, it is very clear that the agricultural income shown by the assessee is very nominal not only that it can be safely concluded that the assessee has not carrying any major agricultural operations and the return of income is showing some agriculture income claimed as exempt. The assessee is not improving the land purchased but the intention of the assessee has to be seen to assess the income. In this case, by considering the facts and circumstances of the case, we are of the opinion that the frequent buying and selling of the land is to earn the profit and the intention of the assessee is only quick earning of the money and therefore, the income earned by the assessee out of sale of land is a business income. The A.O as well as Ld. CIT(A) has rightly treated the income earned by the assessee is business income. - Decided against assessee.

Issues Involved:
1. Whether the income from the sale of lands should be treated as business income or exempt agricultural income.
2. The nature of the transactions involving the purchase and sale of lands by the assessee.
3. The treatment of agricultural income shown by the assessee.
4. The relevance of case laws cited by the assessee.

Issue-wise Detailed Analysis:

1. Whether the income from the sale of lands should be treated as business income or exempt agricultural income:
The assessee claimed that the sale consideration of ?90,58,500/- from the sale of agricultural lands should be exempt from income tax as the lands were agricultural. However, the Assessing Officer (A.O) treated the transactions as an adventure in the nature of trade, thereby classifying the income as business income. The A.O highlighted that the assessee had a habit of continuous purchase and sale of lands, indicating a profit motive. The Ld. CIT(A) upheld the A.O’s decision, noting that the frequent transactions indicated the assessee’s intention to earn profits rather than hold the lands as investments.

2. The nature of the transactions involving the purchase and sale of lands by the assessee:
The A.O observed that the assessee had engaged in more than 75 transactions of purchasing and selling lands since 1995, suggesting an organized activity aimed at earning profits. The assessee argued that the lands were shown as investments in the balance sheet and were not treated as stock-in-trade. However, the A.O and Ld. CIT(A) concluded that the multiplicity and frequency of transactions demonstrated the essential features of trade, thus treating the income from these transactions as business income.

3. The treatment of agricultural income shown by the assessee:
The assessee reported agricultural income of ?3,12,500/- for the assessment year 2012-13, holding 65 acres of land. The A.O and Ld. CIT(A) found this income to be nominal, indicating that the assessee was not primarily engaged in agricultural activities. The authorities concluded that the primary intention behind the land transactions was to earn profits, not to carry out agricultural operations.

4. The relevance of case laws cited by the assessee:
The assessee cited various case laws to support the claim that the income from the sale of agricultural lands should be exempt. However, the Tribunal found that the case laws were not relevant to the specific facts and circumstances of the present case. The Tribunal emphasized that the decision was based on the facts and the nature of the transactions carried out by the assessee.

Conclusion:
The Tribunal upheld the orders of the A.O and Ld. CIT(A), concluding that the income from the sale of lands should be treated as business income. The frequent buying and selling of lands by the assessee indicated a profit motive, classifying the transactions as an adventure in the nature of trade. The appeals filed by the assessee for both assessment years 2012-13 and 2013-14 were dismissed.

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