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TMI Blog2016 (11) TMI 1063X X X X Extracts X X X X X X X X Extracts X X X X ..... tate project, then definitely it is indicative of the intention that the assessee had some kind of an intent to enter into the business adventure. However, the impugned order is completely silent on this issue. Even if we agree that, it is an agricultural land in the light of various evidences filed, then same needs to be examined properly by the Assessing Officer or by the Ld.CIT(A) because, these evidences were not filed before the Assessing Officer and CIT(A) has refused to admit the same. Therefore, in the interest of justice, we feel this entire matter needs to be restored back to the file of the Assessing Officer to consider these evidences of land revenue records as well as Talathi Certificate to examine that at the time of sale, the land was actually an agricultural land. - ITA No. 5164/Mum/2014, CO No. 15/Mum/2015 - - - Dated:- 30-9-2016 - Shri R. C. Sharma, Accountant Member And Shri Amit Shukla, Judicial Member Appellant by : Dr. K Shivaram Respondent by : Shri Satyapal Kumar ORDER Per Amit Shukla, JM The aforesaid appeal has been filed by the Revenue and Cross Objection by the assessee against impugned order dated 30.05.2014, passed by Ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me instead of exempt income. The Appellant has also by oversight treated the said Income on Sale of said land as Capital Gains instead of treating the said income as exempt on account of section 10(1). 2 On the facts and in the circumstances of the case and in law, the LCIT(A) has erred in not allowing set off of the Short Term Capital Loss from shares of ₹ 88,35,265/- against the capital gains of the said year. 3 On the facts and in the circumstances of the case and in law, the LCIT(A) has erred in not allowing set off of the Short Term Capital Loss from land of ₹ 57, 40,228/- against the capital gains of the said year. 4 On the facts and in the circumstances of the case and in law, the LCIT(A) has erred in not allowing set off of brought forward Long Term Capital Loss (of AY: 2006- 2007) of ₹ 220,513/- against the capital gains of the current year. 5 On the facts and in the circumstances of the case and in law, the LCIT (A) has erred in not allowing the loss under Income from other source of ₹ 63,328/- against income under any other head. Your Honor is requested to direct the [CIT (A) to allow the said set off. 6 On the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place in preceding three years has been made. Attention is drawn to development agreement dated 15.05.2007 as signed by the assessee with M/s Sai Venkata Associates for land at Village Karla, Taluka Maval, district Pune. By the said agreement, assessee has given land for right to develop, construct and make sale. This land, Gut No.73 (9900 sq. mtr) and Gut No. 74 (10180 sq. Mtr) has Indrayani River to the south and on the north it has 30 mtr wide Road. It is stated in the copy of sale deed that this land has compound wall also. It may be noted that, Ld. Counsel for the assessee in his reply dated 21.12.2011 has categorically stated that, sale of land was a solitary transaction of the assessee and that 87% expenses on the same have been capitalized by the assessee in books for several previous years and that only ₹ 1.08 crores was spent on the land in the impugned assessment year and hence according to the assessee, his activity cannot be treated as business activity and conveniently forgot to mention regarding the development agreement with one M/s Sai Venkata Associates and has further failed to justify, why the whole improvement etc. was made systematically over the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opment claimed by the assessee and accordingly, the income was assessed at ₹ 6,73,80,173/- as business income from of sale of the land in the following manner: Sale consideration Rs.14,58,01,360/- Less: (i) Cost of acquisition Rs.1,91,75,874/- (ii) Cost of development (30% disallowed)Rs.5,92,45,303/- 7,84,21,177/- Rs.6,73,80,173/- 4. In the first appeal, the assessee besides challenging the action of the Assessing Officer for treating the LTCG on sale of the plot as business income, raised additional ground wherein it was contended that, the sale proceeds from such land is not taxable at all, because what has been sold is the agricultural land and any income/ gain arising from sale of said land is exempt under section 10 of the Income-tax Act. For the admission of the additional ground, it was submitted that, due to inadvertent mistake the gain was offered as LTCG instead of showing it as exempt income, therefore, being a legal ground same should be admitted. In sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum and substance of his contentions were as under:- (a) The assessee had purchased agricultural land; way back in the year 2003-04 (AY 2004-05) and to make the land worth usable, certain expenditures were incurred. The improvement of the land was necessary, because it was near the banks of the river Indrayani which was always prone to flood. Hence, for the purpose of soil conservation and saving if from erosion by the flood, the assessee had to incur huge expenditure of more than ₹ 8.46 crores over the period of time; (b) The agricultural land purchased was always shown as investment in the books of account and in the audited Balance sheet and such an investment in the agricultural land has been accepted by the Department in the earlier years even when the assessments were made under scrutiny proceedings under section 143(3) right from assessment years 2005-06 to 2008-09; (c) Assessee never had any intention for the commercial development and has neither carried out any sub-division of the plots nor created any structures on the said land. It remained in the same from, that is, as agricultural land. The land was properly registered in the name of the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted into nonagricultural land which fact has not been controverted by the Assessing Officer and it has been sold to one person only, namely, Shri Arun Kumar Jyantilal Michala. In the Balance Sheet, the assessee has always shown agricultural land as investment right from the year of purchase till the year of sale which fact has been accepted by the Department in the earlier years under scrutiny proceedings. In sum and substance, he accepted the entire contention of the assessee and adopted the same line and reasoning as canvassed by the assessee. He also noted that, assessee was entirely into different business, like textile manufacturing, ayurvedic and herbal formulations etc. from different companies based in Surat The assessee was never engaged in real estate business or construction of building. Thus, being a solitary transaction of sale of agricultural land, hence it cannot be treated as business transaction. 7. Regarding disallowance of expenditure also, Ld. CIT(A) observed that once 70% of the expenditure has been allowed and most of them have been incurred in the earlier years the balance amount cannot be disallowed. After detailed discussion, he directed the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trib): iv) Mrs. Sakunthal Vedachalam [2015] 369 ITR 558 (Mad); v) Supriya Kanwar v [2019] 149 ITD 1 (Jodhpur)(Trib)(TM). 10. On the issue of LTCG as raised in the Departmental appeal, he submitted that the Ld. CIT(A) has passed a very reasoned order after considering the submissions and evidences placed on record and hence the same should be upheld. On disallowance of expenditure also, he strongly relied upon the order of the CIT(A). 11. We have heard the rival submissions, perused the relevant finding given in the impugned order as well as material reffered to before us. It is an admitted fact that, the assessee had purchased 5 plots of land which were initially bought as agricultural land in the year 2003-04 for sums aggregating to ₹ 1,91,75,874/-. Thereafter, the assessee had incurred huge expenditure of ₹ 8,46,36,147/- on its improvement which included the following:- Beautification and leveling of land by filing it with sand; Getting Electricity connection; Building Elevated water-tank on the land; Planting trees; Building approach roads; and Building concert pond for natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his own finding given at para 3.3 to para 3.4. This can be highlighted from the relevant extract of his observation given in these paragraphs, which are as under:- It can be seen that appellant has purchased five piece of agricultural land in FY 2003-04 for ₹ 1,91,75,874/-. These lands are having Gut No.36, 41, 45, 36,46, 43, 69, 48,39, 44 28,29 34, 35 and 69 etc. situated in Villalge Bhaje Ta. Mawal, Dist., Pune. 7/12 extract submitted by the appellant reveals that at the time of purchase of and it was agricultural land. The search and title report of the land given by Advocate Prakash N Devmore reveals the fact that it was an agricultural land at the time of purchase. xxx As evident from the evidences on record submitted before the Assessing Officer that basic character of purchase land was of agriculture which was improved and developed for sale or for own utilization and there was no organized course of any business activities of purchase and sale of land nor was there any activity of doing plotting and selling it to the various purchaser or investor or developer. xxx It is also important to note that the Assessing Officer has not denied the g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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