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TMI Blog2010 (11) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... g term capital gains was shown at Rs.43,35,520. After claiming deduction for Rs.13,85,000 under section 54F, taxable long term capital gains was shown at Rs.29,50,520. During scrutiny of the return, the assessing officer noted that the house plots sold by the assessee were in the nature of sock-in-trade, since as per the Pahanis enclosed only with the return which relates to the year 1993-94, the description of the property is shown as 'Platlu' in telugu language. According to the assessing officer, the lands were converted as plots and stock-in-trade in the year 1993- 94. The assessing officer was of the view that conversion of the land into plots constitutes activity of adventure in the nature of trade and the assessee is not eligible for deduction under section 54F of the Act. Accordingly, vide letter dated 13-10-2005, while asking the assessee for furnishing evidences in support of the expenses claimed under different heads, he has asked the assessee to explain as to why the profit from sale of land should not be taxed as business income. 3. In response to this, the assessee has submitted that agricultural lands were allotted in her name jointly with Shri G. Laxma Reddy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn of income the assessee claimed for payment of Rs.4,50,000 to the previous owners for securing uninterrupted right over the land and the assessee has added the above amount for computing the indexed cost of acquisition of the land. However, as the assessee has not furnished details of such payments namely, mode and particulars of payment, including the cheque Number, Bank A/c etc., the assessing officer has disallowed the claim of the assessee for making such payments. The assessing officer considered the transactions in the hands of the assessee as adventure in the nature of trade and taxed the entire amount of 50% share in the sale of consideration amounting to Rs.70,78,350 without allowing any deduction and completed the assessment accordingly. Aggrieved against the order of assessing officer, the assessee went in appeal before the CIT (A). On appeal, the CIT (A) after considering the issues elaborately in his order held that the profit arising from the sale of the land in question has to be taxed under the head 'capital gains' and not under the head 'business income' and disallowed the expenditure claimed by the assessee and partly allowed the appeal of the assessee. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 82 ITR 794 ii) Brij Bhushan Lal Parduman Kumar vs CIT (115 ITR 524) 6. On the other hand, the learned Departmental Representative by relying on the orders of the authorities below opposed the contentions of the learned counsel for the assessee. 7. We have considered the submissions of the rival parties and perused the material available on record. It is an undisputed fact that the assessee in fact converted the agricultural land into plots by making a lay out. The assessee also submitted a valuation report obtained from MCH Engineer valuing the expenditure at Rs.23,08,891 and also furnished a copy of statement showing expenditure incurred for providing basic amenities in the layout done by the assessee along with his co-owner. It is obvious that the assessee would have expended the said expenditure to get better price from the market for her property. Without making such expenditure, it is not practicable to make out a layout by converting agricultural land into plots. However, the assessee not maintained vouchers, bills etc., for the above work done. She has furnished only statement of such expenditure from an approved Engineer. In our considered view, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said land for which the assessee produced copies of receipts issued by the sons of previous owners and they have admitted that their fathers have received full sale consideration from the purchasers and paid the said amount in view of their poor financial condition. It is common practice that while securing the uninterrupted title over the property, the land owners made the payment to the possessors of the said land and the department did not bring anything on record to controvert the contention of the learned counsel for the assessee that no one possessed the land under discussion. After going through the submissions of the learned counsel for the assessee and considering the totality of facts and the circumstances of the case, we find force in the arguments of the learned counsel for the assessee that the assessee has paid Rs.4,50,000 to the sons of the previous owners towards improving the title of the land and to avoid further litigation in this matter. In view of the above, we allow the claim of the assessee on this issue. 7. Fourth ground of appeal is with regard to the disallowance of stamp duty of Rs.17,00,387 and registration fee of Rs.68,365 under section 48( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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