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TMI Blog2014 (11) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) of the Act, and, it qualifies to be an agricultural land excludible from the expression "capital asset" – thus, the matter is restored to the return of income filed by the assessee regarding the surplus on sale of agricultural land at village Dhamane – Decided in favour of assessee. Nature of income arising on the sale of plot at Kondhwa – Onus discharged or not - Held that:- The aspect that a taxpayer can have two portfolios i.e. investment portfolio comprising of assets which are to be treated as capital assets and a trading portfolio comprising of stock-in-trade which are to be treated as trading asset has already been noted by us in the earlier paras - merely because assessee is dealing in purchase and sale of land also cannot be a conclusive factor in holding that the impugned sale of land was a business transaction - the land has been disclosed in the account books as an 'Investment' and not as a stock-in-trade - the land has been held for a period of 9 to 10 years by the assessee - there is no charge made by the Revenue against the assessee that any steps were undertaken by the assessee for development of the land during the period it has been held by him – the transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was on two aspects. Firstly, the assessee had sold agricultural land at Dhamane village, the surplus whereof was treated as not liable to be taxed as it was not a 'capital asset' within the meaning of section 2(14)(iii)(b) of the Act. The Assessing Officer, however, treated the transaction of the sale of agricultural land as a 'business profit' and accordingly added a sum of ₹ 1,40,21,140/- to the returned income. Secondly, the assessee had earned gain on sale of a piece of land at Kondhwa which was treated as a long term capital gain, but it has been treated by the Assessing Officer as a business transaction thereby adding a sum of ₹ 40,11,300/- to the returned income. Both the aforesaid actions of the Assessing Officer have since been affirmed by the CIT(A). Not being satisfied with the order of the CIT(A), assessee is in further appeal before us challenging the aforesaid action of the Assessing Officer by way of aforestated Grounds of Appeal. 5. In so far as the first Ground of Appeal is concerned, it relates to surplus earned by the assessee of ₹ 1,40,21,140/- out of the sale of agricultural land situated at Dhamane village. In the return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction. It has been pointed out that even a person carrying on business can have an investment portfolio in the same commodities and the investment portfolio was to be treated as 'capital asset'. In this context, reliance has also been placed on the CBDT Circular No.4 of 2007 dated 15.06.2007. It has been pointed out that between the date of purchase of agricultural land and sale thereof assessee has not changed the land use and in-fact, the land has been ultimately sold to agriculturists only. Reference has also been made to 7/12 extracts of the land to show that in the land revenue records the character of the land was an agricultural land. For all the above reasons, it has been sought to be made out that the lower authorities erred in treating the purchase and sale of land at village Dhamane to be a business transaction. 8. On the other hand, the learned Departmental Representative appearing for the Revenue has submitted that assessee being a land developer, it is a natural corollary that the impugned gain is liable to be taxed as business income. Furthermore, it has been pointed out that the action of the assessee of having given the land for cultivation to Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orming part of the sale-deed, a copy of which has also been placed in the Paper Book filed before us. All the aforesaid features pertaining to the land are not in dispute. However, the stand of the Revenue is that assessee being an individual engaged in the business of purchase and sale of lands, the intention to purchase the impugned land was a business proposition and not merely investment. 10. In our considered opinion, the issue as to whether impugned transaction is an activity in the nature of trade or an investment is a question which is required to be addressed having regard to the peculiar facts of the case. In the present case, one of the businesses of the appellant is purchase and sale of lands. The income from such activity in the past has been offered as business income. So however, the aforesaid factor ipso facto cannot be conclusive to establish that the purchase and sale of agricultural land at Dhamane village is also to be assessed as a business transaction. We say so for the reason that it is possible for a taxpayer to have two portfolios i.e. an investment portfolio comprising of commodities which are to be treated as capital assets and a trading portfolio comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to purchase of the land in question assessee has done land consolidation and development activity so as to improve the quality of land. The discussion made by the Assessing Officer in this regard read as under :- 5. Whether there was any act subsequent to the purchase to improve quality of the commodity purchased? Though it is not known as to whether there was any act subsequent to the purchase to improve quality of the land purchased, but the fact that the assessee has got a sale consideration of ₹ 1,53,50,000/- for a purchase cost of ₹ 13,28,860/- within a span of just one and a half year points to the fact that there must be a land consolidation and land development activity on the part of the assessee on the said land to improve its quality. 12. On this aspect, the CIT(A) has also noted that the entire land comprising of 106 acres was purchased by assessee alongwith other coowners by four separate agreements. 13. In this context, we find that assessee submitted that the land was purchased for holding as investment and to carry on agricultural activity as a pride cultivation of Medicinal Plant and Horticulture. By way of detailed submissions, which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be in the nature of agricultural land even after it sale. 14. In view of the aforesaid discussion, it is quite clear that the land in question has been disclosed by the assessee as 'Investment' and not as stock-in-trade. It is also clear that no steps were undertaken by the assessee for development of property during the period it held the same. Of-course, in the case of other agricultural lands owned by the assessee the period of holding is quite substantial. The circumstances explained by the assessee for having sold the agricultural land within a span of 17 months have also not been found to be false. Considering the aforesaid circumstances, in our view, the lower authorities erred in assessing the gain on sale of such land as a business income. 15. At this point, we may refer to the judgement of the Hon'ble Bombay High Court in the case of CIT vs. Baguio Investment Pvt. Ltd. vide Income Tax Appeal No.998 of 2011 dated 24.01.2013 which has been relied upon by the assessee before us. The issue before the Hon'ble High Court was relating to income on sale of land which was treated by the Assessing Officer as a sale of stock-in-trade and taxed under the head in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a part of his 'Personal Assets', being 'investments' and not as 'Business Assets' in the Balance Sheet filed alongwith the respective returns of income. At this point, we may also make a reference to a plea raised before the lower authorities which is to the effect that assessee was undertaking agricultural activities. In this context, assessee furnished an agreement with the Military Farm Kirkee, Pune for the period 07.07.2005 to 06.07.2008, a copy of which has been placed at pages 381 to 392 in the Paper Book. In terms of the said agreement, assessee was leased out the sowing rights of crops in the lands owned by Military Farm Kirkee. Assessee further submitted that due to certain difficulties the aforesaid agreement could not be completed but the same was furnished before the lower authorities to demonstrate that assessee was indeed undertaking agricultural activities also. 18. Considering the aforesaid factors and having regard to the judgements of the Hon'ble Bombay High Court in the cases of Baguio Investment Pvt. Ltd. (supra) and Minguel Chandra Pais Anr. (supra), we hold that the lower authorities erred in treating the income arising on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rading activity. 21. On the other hand, the learned Departmental Representative has pointed out that the plea of the assessee that the land at Kondhwa is shown as 'Personal assets' in the books of account does not match with the action. The treatment in the books of account does not show the intention because assessee was indeed dealing in purchase and sale of lands and therefore the said transaction has been rightly assessed as business transaction. 22. We have carefully considered the rival submissions. The aspect that a taxpayer can have two portfolios i.e. investment portfolio comprising of assets which are to be treated as capital assets and a trading portfolio comprising of stock-in-trade which are to be treated as trading asset has already been noted by us in the earlier paras. Therefore, merely because assessee is dealing in purchase and sale of land also cannot be a conclusive factor in holding that the impugned sale of land was a business transaction. We may hasten to add here that the onus under such circumstance is on the assessee to show that the impugned transaction was not a business transaction because the assessee is otherwise engaged in the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to the sale of land at village Dhamane are identical to those considered by us in the earlier paragraphs by way of Ground of Appeal No.1 in the case of Shri Krishnakumar K. Goyal. The present assessee is one of co-owners of the land which was purchased at village Dhamane alongwith Shri Krishnakumar K. Goyal. Therefore, our decision in Ground of Appeal No.1 in the case of Shri Krishnakuma K. Goyal shall apply mutatis-mutandis on this aspect also. Therefore, the surplus on sale of agricultural land at village Dhamane is directed not to be treated as business income. 29. In so far as the sale of land at village Sanswadi is concerned, the CIT(A) notes that the said transaction is more or less identical to the transaction relating to the land at Dhamane village. Considering the aforesaid finding of the CIT(A), to which there is no controversion before us, our decision in relation to the land at Dhamane would apply mutatis-mutandis with respect to the sale of land at Sanswadi village also. In view of the aforesaid, we therefore, allow the said Ground of Appeal raised by the assessee. 30. In the result, appeal in ITA No.1300/PN/2012 in the case of Shri Vinit K. Goyal is als ..... X X X X Extracts X X X X X X X X Extracts X X X X
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