9911796707
TMI Blog2015 (3) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... mar and Shri G.C.Subbanaidu, the coordinate bench of this Tribunal vide its order [2014 (9) TMI 85 - ITAT HYDERABAD] decided similar issue in favour of the assessee, holding that the land sold by the said assessees were agricultural lands, and therefore, the profits arising from the transfer of such lands, was not chargeable to tax in the hands of the assessee. In the present case, considering the facts and circumstances of the case it cannot be considered as an adventure in the nature of trade. The intention of the assessee from the inception was to carry on agricultural operations. Merely because of the fact that the land was sold in a short period of holding, it cannot be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade or capital gain. The period of holding should not suggest that the activity was an adventure in the nature of trade. The land is not situated within the Qutubullapur municipality, but, the same situated in the Dundigal village and the evidence brought on record suggest that the land is an agricultural land, hence, it is not liable for taxation. Further, we make it clear that when the land wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant had purchased 5 acres in survey no.664/2 and Survey no.673/1 situated at Dundigal, RR Dist, for an amount of ₹ 6,05,000/- through registered sale deed dated 01/11/2004, in document no.15107/2004. (b) Assessee sold 2 acres out of the above 5 acres to M/s Varun constructions through the sale cum GPA dated 12.03.2007 in document no.4963/2007, for an amount of ₹ 2,00,00,000/-. (c) The appellant had purchased and transacted in the land which was contiguous to the land purchased and similarly transacted by M/s Bhavya Constructions Pvt Ltd (BCPL), Sri V Ananda Prasad (MD of BCPL), and other individuals, who all, like the assesseeappellant, were the investors in M/s Bhavya Cements Pvt Ltd, a company set up by Sri V Ananda Prasad. All these persons had shown the sources of investment in the share capital of M/s Bhavya Cements as sale proceeds of these lands. (d) The detailed investigation and the evidences found relating to the claim of Bhavya Construction and Sri V Ananda Prasad were narrated in full from page 2 of the asst. order onwards. The Assessing officer relied upon the evidences gathered by the investigation wing like state of land, blank bill of a ferti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in price of the land was around 100 times is less than 3 years. This fact only confirmed the intention of the investment. The AO had also held that the assessee has done a systematic activity in this period of time in an established manner along with other associates. He, therefore, held that the activity carried on by the assessee has to be treated as carrying out of business and the income from sale of land should be treated as an adventure in the nature of trade. Accordingly, he brought it to tax under section 28 of the Act (Page 16 ,17 18 of asst. order). (i) In course of the assessment proceedings, the assessee stated that agricultural land was purchased from one C.Yadaiah on 1/11/04 and on 12/3/2007, 2 acres was sold to M/s. Varun Construction as agricultural land. The assessee also submitted the following in support of the claim that the land is agricultural - (i) Purchase and sale deed describing land as agricultural land, (ii) Pattadar pass book issued by the MRO, (iii) Certificate of Deputy Collector and MRO Qutubullapur Mandal stating that the land is agricultural land and that the assessee was raising crops like paddy, cattle feed, maize, Jowar and vegetables etc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Against the order passed by the Assessing Officer under S.143(3) read with S.153C, an appeal was preferred by the Assessing Officer before the learned CIT(A) and detailed submissions were made by her before the learned CIT(A) in support of the stand that the land in question was agricultural land. The submissions made by the assessee in this regard, as summarized by the learned CIT(A) in the impugned order, were as under- (i) The asset transferred is agricultural land located beyond 8 kms of any notified municipality. It is therefore, not a capital asset u/s. 2(47) of the I.T. Act. (ii) The evidence on which the AO placed reliance and rested his conclusion were actually the findings in the asst. order in the case of M/s. BCPL which owned another patch of land contiguous to the land owned by the appellant. The observations and the conclusions drawn therein were utilised against the appellant, which is incorrect. The appellant had nothing to do with those findings. The counsel however rebutted these evidences also as summarized in the table given below: Sl. No. Evidence on which Assessing Officer placed reliance to draw adverse conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the appellant. Inspection was made in 2009 whereas the land was sold in 2007-08. The repot is therefore not contemporious evidence to draw inference against the appellant inv view of the certificate granted by the competent authority MRO. It was admitted in the report of Inspecting Officer and also in the asst. order that in the said land, some nominal agricultural operations were carried out in small fragment which actually corroborates the appellant s claim. 6. Lands fall within urban agglomeration of Hydera bad city and discounting the appellant s submission at the time of assessment regarding Qutubullapur Mandal. The nearest municipality is Qutubullapur which is not a notified municipality. Even otherwise, the land was sold on 12.03.2007 and GHMC was notified w.e.f. 16.04.2007. In support of the above submissions, the assessee once again filed before the learned CIT(A), copies of the pattadar pass book, MRO certificate dated 28.8.2005, certificate dated 4.10.2005 issued by the Town Planning Officer, Qutubullapur Circle; Certificate dated 4.2.2005 issued by the Deputy Tahsildar and Qutubullapur stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealization of investment consisting of purchase and resale, though profitable, are clearly outside the domain of adventure in the nature of trade. (c) It is not uncommon that due to rapid growth of urban area, agricultural lands in the vicinity of city are commanding a high price. The pace of urbanization is not in the control of holders of agricultural land. If large profits are made it does not become business income . (d) Neither the profit motive nor the large profit does not change the transaction to a business transaction (Janakiram Bahadurram Vs CIT (57 ITR 21)(SC)} and CIT Vs. Sutlej Cotton Mills Supply Agency {100 ITR 706(SC)}. (e) Extent of land held as investment cannot be criteria cannot be held as same was held as stock in trade -Indian Hume Pipe Co. Ltd. 107 ITR 179 Para 8(Bom) (f) Appellant also relied upon the following judicial decisions (i) B Narsimha Reddy Vs. ITO (47 ITD 398)(Hyd) (ii) CIT Vs Radhesham Morarka 127 ITR 111) (iii) K.Radhika Vs DCIT {47 SOT 180 (Hyd)} (iv) A Mohd. Mohideen - Madras High Court (g) The appellant also stated that if an income falls under two heads, it cannot be shifted from one head to another head merely bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The photographic evidence available in the asst order indicates that the land was not put to use for cultivation at all. The assessee in the statement also stated that the crop was destroyed and does not remember any agriculture expenses. 4. The AO has also stated that certain vegetables and crops were grown by watchman, signifying that land was agricultural (Not applicable to appellant s case specifically) The photographic evidence available in the sale deed itself wherein, the photograph of the land is made part of the sale deed. This contemporaneous evidence also does not indicate any agricultural activity on the land. It is evident that the land was idle and some wild bushes were seen. Agricultural activity at any point of time is absolutely invisible. 5. Land was sold in acres and not in sq. yds. The Hon'ble SC in the case of Sarifabibi had clearly stated that the description of land in revenue record does not matter. It is to be seen whether the land was used, is being used and whether it will be used for agriculture as it is this continued use for agriculture whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assertion and an MRO Certificate issued in a routine manner that too in 2005, the appellant really does not have anything real and substantive to claim that the land was really agricultural. The Hon ble SC had already stated that the revenue record, though, important is not conclusive evidence. The photographic evidence gathered by the investigation wing may be in 2009. But the pictures clearly show that the land was left idle and there is really no attempt to bring it under cultivation in whatsoever manner. More importantly, the purchase and sale deeds also have photographs pasted as part of sale deed. These are contemporaneous. They too do not differ from the picture that the investigation wing took. The environment of the entire chunk of land -not only appellant s but the other related investors of Bhavya cements is identical. Further, the proximity to city, the merger within GHMC within a month of sale (when the proposal for such merger and the drafting of such bill must have been in news much before ) clearly show the development activity taking place around and which is a key factor in assessing the general environment around the land and its use. 8. The learned CIT(A) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim by the appellant does not fall under any specific head as provided under section 14. 7. In the light of above, the addition made under head capital gain by CIT(A) is liable to be deleted. 8. The appellant craves leave to add/alter/modify any of the grounds as may be necessary for adjudication of the case. 10. We have heard the arguments of both the sides and also perused the relevant material on record. It is observed that by an Agreement of sale with possession-cum-Irrevocable power of attorney dated 12th March, 2007, the land in question was transferred by the assessee to M/s. Varun Constructions alongwith other 13 land owners who were owners of the adjacent lands. The said thirteen parties had also claimed the profit arising from the transfer of their land to M/s. Varun Constructions as exempt on the ground that their lands, being agricultural lands, were not capital assets within the meaning of S.2(14). In their cases also, the claim was not allowed by the Assessing Officer and when the matter reached the Tribunal in the case of six of the said assessees, namely, M/s.Bhavya Constructions Pvt. Ltd., Shri M.S.Raghava Reddy, Shri R.Srinivasa Rao, Shri R.Uma Mahesw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the crops grown over the said land. When certificate has been issued by govt. authorities certifying cultivation of agricultural produce the AO was not correct in rejecting them without proper evidence. Moreover, certificate dt.04/02/2009 issued by Dy. Collector and Tahsildar Qutubullapur Mandal ( at page 100 of assessee s paper book) and certificate dt. 04/10/2008 of Town Planning Officer, GHMC (at page 101 of paper book) clearly indicate that Bowrampet village where assessee s land is situated is beyond the limit of GHMC. It is a fact on record, in the original assessment order passed u/s 143(3) of the Act, the AO has examined the nature of transaction by conducting necessary enquiry and after proper application of mind had accepted the claim of the assessee that the asset being sold being agricultural land will not attract capital gain tax. The department has not brought any cogent evidence or material on record to disprove assessee s claim either in respect of agricultural income earned through agricultural operation conducted on the said land or the fact that the land is situated beyond the prescribed limit of the nearest municipality notified by the Central Government. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned property nor the surrounding areas were subject to any developmental activities at the relevant point of time of sale of the land as per the evidence brought on record. 24. The provisions of Andhra Pradesh Agricultural Land (conversion for nonagricultural purposes) Act, 2006 also prescribed the procedure for conversion of agricultural land into non-agricultural land. Being so, whenever the agricultural land to be treated as nonagricultural land, the same has to be converted in accordance with the provisions of Andhra Pradesh Agricultural Land (conversion for nonagricultural purposes) Act, 2006. If by a Government Notification, the nature and character of land changes from agriculture into non-agriculture then there is no question of conversion of this land for non-agricultural purposes by the Revenue authorities concerned. To our understanding nature of land cannot be changed by any State Government notification and the land owners are required to apply to the concerned Revenue authorities for the purpose of conversion of the agricultural land into nonagricultural land and there is no automatic conversion per se by State Government notification. 25. In the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -agricultural purposes. 26. Recently the Karnataka High Court in the case of CIT vs.Madhukumar N. (HUF) (2012) 78 DTR (Kar) 391 held as follows: 9. An agricultural land in India is not a capital asset but becomes a capital asset if it is the land located under Section 2(14)(iii)(a) (b) of the Act, Section 2(14) (iii) (a) of the Act covers a situation where the subject agricultural land is located within the limits of municipal corporation, notified area committee, town area committee, town committee, or cantonment committee and which has a population of not less than 10,000. 10. Section 2(14)(m)(b) of the Act covers the situation where the subject land is not only located within the distance of 8 kms from the local limits, which is covered by Clause (a) to section 2(14)(iii) of the Act, but also requires the fulfilment of the condition that the Central Government has issued a notification under this Clause for the purpose of including the area up to 8 kms, from the municipal limits, to render the land as a Capital Asset. 11. In the present case, it is not in dispute that the subject land is not located within the limits of Dasarahalli City Municipal Council therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, no capital gain tax can be charged on the sale transaction of this land entered by the assessee. Accordingly, we quash the assessment order qua charging of capital gains on very jurisdiction of the issue is quashed. The cross objection of the assessee is allowed. 28. It was held in the case of CIT vs. Manilal Somnath (106 ITR 917) as follows: Under the Income-tax Act of 1961, agricultural lend situated in India was excluded from the definition of capital asset and any gain from the sale thereof was not to be included in the total income of an assessee tinder the head capital gains . In order to determine whether a particular land is agricultural land or not one has to first find out if it is being put to any use. If it is used for agricultural purposes there is a presumption that it is agricultural land. If it is used for non-agricultural purposes the presumption is that it is non-agricultural land. This presumption arising from actual use can be rebutted by the presence of other factors. There may be cases where land which is admittedly non-agricultural is used temporarily for agricultural purposes. The determination of the question would, therefore, depend on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Official Gazette; 30. It is very clear from the above that the gain on sale of an agricultural land would be exigible to tax only when the land transferred is located within the jurisdiction of a municipality. The fact that all the expressions enlisted after the word municipality are placed within the brackets starting with the words 'whether known as' clearly indicates that such expressions are used to denote a municipality only, irrespective of the name by which such municipality is called. This fact is further substantiated by the provisions contained under clause (b) wherein it has been clearly provided that the authority referred to in clause (a) was only municipality. 31. We also perused the meaning of the term local authority as referred in section 10(20) of the Act. (20) the income of a local authority which is chargeable under the head Income from house property , Capital gains or Income from other sources or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service [(not being water or Electricity) within its own jurisdictional area or from the supply of water or electricity within or outside its ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imits of any such municipality or cantonment board, will continue to be excluded from the term capital asset . 33. Further it is nobody's case that the property falls within any area which is comprised within the jurisdiction of a municipality or cantonment board or which has a population of not less than 10,000 according to the last preceding Census of which the relevant figures have been published before the first day of the previous year. In other words, the land does not fall in sub-clause (a) of section 2(14)(iii) of the Act as the land is outside of any municipality including GHMC. Further we have to see whether the land falls in clause (b) of section 2(14)(iii). This section prescribes that any area within such distance, not being more than 8 km from the local limit of any municipality or cantonment board as referred to in sub-clause (a) of section 2(14)(iii) of the Act, as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette. 34. We have carefully gone through the notification issued by the Central Government u/s. 2(1A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Madhukumar N. (HUF) (cited supra). 35. From the facts and circumstances of the case, as narrated before us, it is important to note that what was the intention of the assessees at the time of acquiring the land or interval action by the assessee between the period from purchase and sale of the land and the relevant improvement/development taken place during this time is relevant for deciding the issue whether transaction was in the nature of trade. Though intention subsequently formed may be different, it is the intention at the inception is crucial. One of the essential elements in an adventure of the trade is the intention to trade; that intention must be present at the time of purchase. The mere circumstances that a property is purchased in the hope that when sold later on it would leave a margin of profit, would not be sufficient to show, an intention to trade at the inception. In a case 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 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14)(iii) of the IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as non-agricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, in such circumstances, in our opinion, such transfer like the case before us cannot be considered as a transfer of capital asset or the transaction relating to sale of land was not an adventure in the nature of trade so as to tax the income arising out of this transaction as business income. 14. On going through the aforesaid order of the coordinate bench, we find the facts dealt upon by the tribunal is identical to the facts in the present case. Therefore, ratio laid down therein also equally applies to the facts of the present case as the land sold is not only agricultural in nature but is also situated beyond 12 kms from the limit of a municipality notified by the central govt. Hence, land sold by assessee not being a capital asset, the gain derived there from is not taxable at the hands of the assessee. Accordingly, we uphold t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
