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TMI Blog1999 (11) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... e decided to sell the said land by plotting the same. The total sale consideration received by the assessee in this year was Rs. 12,23,721. Since this land was held for more than 3 years, the assessee declared the long-term capital gain of Rs. 4,96,182 in the return filed by it. 3. The Assessing Officer examined the nature of transaction with reference to the facts on the record and explanation of the assessee and came to the conclusion that activity of the assessee of purchase and sale of land was in the nature of trade and therefore, the same was assessed by him as business income amounting to Rs. 11,01,808. This issue has been discussed by him in paras 6 to 9. In coming to this conclusion, he took into consideration various facts namely - (1) that the land was sold in plots in order to earn the maximum amount of profits which is one of the aspects of the commercial transaction, (2) the sales transactions were repeated from time to time as is apparent from the fact that plots were sold on different occasions in different years, (3) the price initially offered by the assessee for sale did not attract any customer and therefore, it was reduced later on, (4) the purchase of land a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered the land to the Government or sold the same to any other co-operative society. In his view, the decision of the Society to sell the land in plots constituted the activity of the assessee in the nature of trade. He, then distinguished the decision of the Supreme Court in the case of Saroj Kumar Mazumdar v. CIT [1959] 37 ITR 242 and in the case of G. Venkataswami Naidu Co. v. CIT [1959] 35 ITR 594 and other decisions of High Courts relied upon by the assessee. Aggrieved by the aforesaid decisions of the CIT(A), the assessee preferred this appeal before the Tribunal. 5. The ld. counsel for the assessee Mr. Joshi has vehemently assailed the order of CIT(A). He took us through the factual aspects relating to the transactions of purchase and sale of land. He drew our attention to the various resolutions passed by the assessee for acquiring the land for the purpose of erecting a cattle feed plant. It was also submitted by him that the assessee could not purchase or sell the land of its own without obtaining the approval of the Registrar of Co-operative Societies. He also drew our attention to the permission granted by the Registrar of Co-operative Societies for the purchase and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of P.M. Mohammed Meerakhan v. CIT [1969] 73 ITR 735 :--- "It is not possible to evolve any single legal test or formula which can be applied in determining whether a transaction is an adventure in the nature of trade or not. The answer to the question must necessarily depend in each case on the total impression and effect of all the relevant facts and circumstances proved therein and which determine the character of the transaction." 7. It is also the settled law that in deciding such issue one has to consider that the onus is on the Department to prove that particular transaction is an adventure in the nature of trade and therefore exigible to tax. Reference can be made to the decision of Hon'ble Supreme Court in the case of Saroj Kumar Mazumdar and the decision in the case of Janki Ram Bahadur Ram. In the later case, the following observations were made :--- "It is for the revenue to establish that the profit earned in a transaction is within the taxing provision and is on that account liable to be taxed as income. The nature of the transaction must be determined on a consideration of all the facts and circumstances which are brought onthe record of the income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se a piece of art, hold it for some time and if a profitable offer is received sell it. During the time that the purchaser had its possession he may be able to claim pride of possession and aesthetic satisfaction; and if such a claim is upheld that would be a factor against the transaction being in the nature of trade. The presence of all these relevant factors may help the court to draw an inference that a transaction is in the nature of trade, but it is not a matter of merely counting the number of facts and circumstances pros and con; what is important to consider is their distinctive character. In each case, it is the total effect of all relevant factors and circumstances that determines that character of the transaction. In cases where the purchase has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding the property for himself or otherwise enjoying or using it, the presence of such an intention is a relevant factor and unless it is offset by the presence of other factors it would raise a strong presumption that the transaction is an adventure in the nature of trade. Even so, the presumption is not conclusiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Reserve by transfer in the next three years. 4. Balance of the amount be raised by the Sangh. 5. There should be no discrepancy between the price paid for the land the market rate of land in the area. 6. The price of the land be paid to the owner of the land (institution) by crossed cheque. 7. The land be got registered in the name of the Sangh and its entry be made in the property register of the Sangh. 8. The land purchased should not be sold/transferred without the permission of this office. 9. After purchase of the land, a Compliance Report be sent to this office by the Sangh within 3 months of the date of the purchase." The land was finally purchased on 28th July, 1985 as is apparent from the copy of the Revenue record filed at page 21 of the paper-book. The perusal of the above material clearly established that the intention of the assessee in purchasing the land was to erect a cattle-feed plant in order to expand its business and not with the intention to re-sale the same in future. 11. The perusal of the material on record further shows that the land had to be sold on account of certain circumstances which came into existence subsequently. The Govt. of Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the prior approval of the Revenue authorities as well as Co-operation Deptt. 12. From the above discussion, following facts emerge :--- 1 . The assessee was not dealer in land. Its main activity was to collect milk from its primary members and supply the same to Government of Maharashtra. In addition it was dealer in animal medicines and cattle-feed. 2. The activities of the assessee were regulated by the Registrar, Co-operatives, Maharashtra Government. 3. The land was purchased to construct a factory for installing cattle- feed plant in order to expand its business. 4. The purchase of land is fully supported by various resolutions passed by its Board from time to time. 5. Prior approval was obtained from the Registrar of Co-operative Societies without which it could not purchase the land. 6. The permission was granted subject to certain conditions. Some of the important conditions were that land was to be used for expansion of the assessee's business and the same could not be sold without the prior permission of that office. 7. Later on, a dairy was established by the Maharashtra Government at village Malegaon and it was thought better to purchase land at Mal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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