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TMI Blog2016 (9) TMI 1002X X X X Extracts X X X X X X X X Extracts X X X X ..... and the CIT(A) in bringing the income arising on sale of land under the head ‘business income’. - Decided against assessee. - ITA No.1960/PN/2014 - - - Dated:- 12-8-2016 - SHRI VIKAS AWASTHY, JM AND SHRI PRADIP KUMAR KEDIA, AM For The Appellant : Shri S. N. Doshi For The Respondent : Shri P. L. Kureel and Shri Hitendra Ninawe ORDER PER PRADIP KUMAR KEDIA, AM : The captioned appeal filed by the assessee is against the order of CIT(A)-III, Pune dated 17.09.2014 relating to assessment year 2009-10 passed under section 143(3) of the Income-tax Act, 1961 (in short the Act ). 2. In this appeal, the assessee revised and filed concise Grounds of Appeal, which is reproduced hereunder :- 1. On the facts and in the circumstances of the case the learned CIT(A) has erred in holding that the gain arose on sale of the rural agricultural lands constitute Business Income overlooking the fact that appellant being an agriculturist acquired those lands with the predominant intention of making investments and cultivating those agricultural lands. 2. On the facts and in the circumstances of the case the CIT(A) has erred in holding that the agricultural income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Realtors Pvt. Ltd. through its Directors aforementioned. It was noticed by the Assessing Officer from the sale deed that out of total consideration of ₹ 2,00,00,000/-, the purchasers (Porwals) had advanced ₹ 1,00,00,000/- through demand draft on 13.08.2008 i.e. two months before the assessee ventured to purchase the properties on 17.10.2008. The assessee took a stand that these lands sold were agricultural land and situated beyond 8 kilometers of the municipal limits/cantonment area etc. and therefore, not being a capital asset is exempt from capital gains. The Assessing Officer, however, discredited the claim of the assessee for exemption of the alleged capital gains. The Assessing Officer observed that these parcels of lands acquired by the assessee were not with any intention to hold it for capital accretion, enjoyment and own use but were purchased with the sole motive of earning huge profits on immediate sale thereof as a trading asset. As per Assessing Officer, since the lands were not purchased with the intention of holding it but held as business asset only with sole intention of earning profits from sale thereof, the provisions of section 2(14) of the Act w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is in second appeal before the Tribunal. 5. The Ld. Authorized Representative (AR) for the assessee Shri S. N. Doshi contended that the assessee had purchased the impugned agricultural land in question primarily for the purposes of cultivation. He sought to argue that some part of the land was possibly Pad but that does not necessarily mean that the land could not be used for the purposes of cultivation such as cultivation of trees. The Ld. AR for the assessee vociferously contended that the land was not purchased with the intention of selling it immediately for profits although the circumstances led to such eventuality. It was explained that the directors, Shri Shriprakash Ramgopal Porwal and Shri Vijayprakash Ramgopal Porwal were good friends of the assessee and at the request of the assessee, they advanced him ₹ 1,00,00,000/- from their company in which they were directors to enable the assessee to purchase the impugned agricultural land. It was further explained that with this loan amount, the assessee purchased the land and was intending to put it to the agricultural use, similar to other lands held by him for agricultural purposes. It was stated that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that another observation of the CIT(A) that the assessee was not engaged in actual agricultural activity and thus not an agriculturist is again contrary to the material on record. He submitted that admittedly a sum of ₹ 1,01,845/- was declared in the return of income under assessment towards the agricultural income. With reference to para 4.1.2 of the CIT(A) order, the Ld. AR for the assessee pointed out that the CIT(A) has wrongly observed that a permission for a non-agricultural use of land has been obtained. He stressed that no such permission has been obtained. He next submitted that no activity of development was carried out on the land in question. He thereafter controverted another observations of the CIT(A) that the assessee has never used any land for agricultural purposes. The Ld. AR submitted that in the context of the fact that land was barely held for a period of one month or so, such adverse inference for not putting the land for agricultural use is unwarranted. He extended his submission that there is no basis for such an observation that the land held by the assessee were not put to agricultural operations. He thereafter contended that the impugned land sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus outside the purview of definition of capital asset defined under S 2(14) of the Act in view of the exclusions provided in sub-clause (iii) therein. Fourthly, there being no transfer of capital asset per se in view of the exclusions for rural agricultural land as noted above, gain arising therefrom is not taxable under S. 45 at all. In essence, the Assessee claims that the gain arising on sale of agricultural property not being a capital asset is not subject to tax at all in view of the mandate of law in this regard. 7.1 Under section 45 of the Act, there cannot be any levy of capital gains unless the asset transferred is a capital asset as defined under S. 2(14) of the Act. It is the case of the assessee that the transaction is capital in nature and the impugned land not being a capital asset , the gain arising on sale of property not being a capital asset is not chargeable to tax all. The revenue on the other hand disputes capital nature of transaction as claimed by the Assessee. It is the case of the revenue that the sequence of events in the impugned transaction lends credence to the impression of an adventure in the nature of trade referred to in S. 2(13) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venture, a commercial enterprise. The work 'venture' in its turn is defined as a commercial activity in which there is a risk of loss as well as a chance of gain. During the course of hearing before us, this question has also been cropped up whether the impugned activity had fallen under the terminology 'trade'. A 'trade' in the context of the definition of the expression 'business' is a wider concept and once this term is associated with the term 'adventure' the scope has further enlarged. The adventure in the nature of trade is allowed to transaction that constitutes a trade or business but may not be a business itself. We are saying so because the business has characterized by some of the essential ventures such as respective transactions, holding of stockin- trade, dealing with the customers and implied intention between the parties etc. But, contrary to this even an isolated transaction can satisfy the description of an adventure in the nature of trade. For an adventure, it is not necessary that there should be a series of transactions i.e. both of purchase and of sales. To our humble understanding based upon the above discussion, a sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has also purchased some parcels of adjacent land for a consideration of ₹ 46,64,000/- on 17.10.2008. The combined land area is stated to be nearly 18 hectares and 45 R equivalent to 45 acres and 28 gunthas. The aforesaid land were sold altogether by the assessee jointly with his wife for a combined consideration of ₹ 2,00,00,000. The share of profit of the assessee is stated to be ₹ 35,86,980/- on account of transaction of such purchase and sale. Immediately after the impugned purchase, a sale deed was executed on 26.11.2008 between Porwals and the assessee and his wife jointly. The land is claimed to be an agricultural land by the assessee. Pertinently, the buyer (Porwals) had earlier advanced a sum ₹ 1,00,00,000/- to the Assessee through Demand Draft (DD) dated 13.08.2008 i.e. two months before assessee had purchased the property i.e. on 17.10.2008. Evidently, assessee did not possess any own liquid funds at his disposal to enable him to acquire the impugned land. The entire purchase cost is funded by the Porwals. Thus, apparently, the entire money towards purchase of land has been financed by the persons to whom the land was ultimately sold in a v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find such explanation to be shallow and superficial. The return of income filed by the assessee shows that the source of regular income is not commensurate with the magnitude of the land transaction. A person intending to hold a land of this value for its own exploitation and enjoyment and not investing any money of his own are quite contradictory conduct. The assessee seeks to explain that he was wholly dependent of sale of existing agricultural land to substitute the money financed by the lender by his own is without any tangible evidence showcasing the aforesaid intention. On the other hand, here is a financier who has given money of formidable amount purportedly on a friendly consideration without any corresponding commercial benefit and then suddenly turns heat for return of money and thereafter conveniently agrees to acquire the same land without any demur which was purchased from the aforesaid money and that too at a very large differentials in such a very short span. These facts when combined together gives a common thread to belief that entire transaction was systematic and pre ordained one, ventured into with a clear trappings of commercial spirit where the assessee ident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and thus be viewed a capital transaction. We observe that nothing turns on this act of the assessee either. The purchase in a pre-ordained transaction could be registered with a motive to gain proximity to and for overriding control over the sale transaction. The encumbrance if any, thereon can also be weighed by the ultimate buyer for his comfort in purchase. Also, by registration prior to sale, the huge potential of gain can be harnessed without any possible interference. This has all been done with the money of the ultimate buyer without any commitment of his own. The transaction is clearly driven by commerce. The intention to exploit the land for its own agricultural use is not borne out on these facts. As per records, the assessee has reflected meager income from cultivation of existing land. The occupation of the assessee as noted by the revenue is pre dominantly leaned towards legal profession. 7.8 Pertinent to note here that the Hon ble Supreme Court in the case of Dalmia Cement Ltd. vs. CIT 1976 CTR (SC) 442 held that it is not possible to evolve any single legal test or formula which could be applied in determining whether a transaction is an adventure in the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011 order dated 22/03/2013 referred to and relied upon at the time of hearing were perused and found to be materially different in facts qua the facts of this case in terms of borrowals, capacity to hold the property acquired, time horizon of holding, exploitation for cultivation of crop etc. where each of these facts may have material bearing in the determination of intention at the time of acquisition of a property. Thus, we are unable to reconcile the facts of the present appeal with the precedents quoted at the bar. Suffice it to say that in none of these judgments cited, the action of purchase of land were found to be in concert with the ultimate and identified buyers and ownership were transferred in such a short span of time without putting the purported agricultural land for its use at any point of time. It is settled position in law that the decision of the Court has to be read in the context of the facts involved therein and not on the basis of what logically flows therefrom as held by the Supreme Court in Ambica Quarry Works Vs. State of Gujarat, 1987(1) SCC 213. In this view of the matter, we concur with the view of the Assessing Officer and the CIT(A) in bringing th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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