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TMI Blog2022 (11) TMI 1030X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that the asset was not agricultural land, arguments raised vis- -vis distance beyond municipal limit, is wholly irrelevant since the assesses fails to fulfill the criteria of being an agricultural land for not qualifying as a capital asset. Disallowance of expenditure incurred on the acquisition of the land made in cash u/s 40A(3) - We are in agreement with the finding of the ld.CIT(A) that the income from sale of the land was not exempt as it was not agricultural land. Further the assessee has nothing to say against holding the transaction as business income of the assessee. The income from the transaction having been assessed under the head income from business , disallowance made by invoking provisions of section 40A(3) has been rightly made by the lower authorities. The only argument of the ld.counsel for the assessee that the income was not taxable under the head income from business or profession having already been rejected and the income having been held taxable under the head income from business or profession the disallowance under section 40A(3) of the Act, we hold, has been rightly made. Appeal of assessee dismissed. - ITA No.1792/AHD/2019 - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed exemption of Rs.28,49,662/- under section 10 of the Act taking the plea that he had sold agricultural land and sale proceeds of the agriculture land were exempt under section 10 of the Act. The ld.AO however conducted detailed inquiry during the course of assessment proceedings, and found as a matter of fact that the assessee along with two other persons viz. Shri Ajay Shah and Sh.Ambalal B. Patel, had acquired block of land for the purpose of selling the same to a company viz. KEC International Ltd. (KECIL) which was on the lookout for a suitable block of land for setting up industries in around the city of Baroda; that KECIL had identified block of land situated in Village-Godhampura (Samlaya), Taluka-Savli, Dist. Baroda, and the assessee along with his associates thereafter facilitated the purchase of this land by KECIL by first acquiring them from the original land owners, and thereafter transferring them to KECIL and in the process completing all necessary formalities required for smooth acquisition of the land by KECIL which included converting the agricultural lands into nonagriculture land, since the laws of the State of Gujarat prohibited acquisition of agricultur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.3,38,02,857/-. The said payment includes janti Value amounting to Rs. 86,80,460/- and additional payment to the farmers of Rs. 2,51,22,397/-. I and my father jointly made payment to farmers amounting to Rs. 2,14,99,440/-. The total profit from sale of six plots amounted to Rs. 56,25,208/-. We both were owners of those plots and so had equal share in profit and loss from the sale of plots. Hence, the share of us has amounting to Rs. 28,12,604/-. However, the learned assessing officer had made addition amounting to Rs.89,94,290/-being income from sale of agriculture land situated outside the specified limits, not a capital asset without considering the provision u/s 2(14) of the Income Tax act, 1961. Further, I sold agricultural land situated at Samlaya and claimed exemption under section 10 (37) of the Income Tax Act, 1961, the extract of which is reproduced below for your ready reference: in this case , being an individual or a Hindu undivided family and any income chargeable under the head Capital gains arising from the transfer of agricultural land, where (i) such land is situate in any area referred to in item (a) or item (b) of sub-clause (iii) of clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. capital assets u/s 2(14) of the Act. iv) Purchaser was a non agriculturist - M/s. KECI Ltd. v) Sale deed for original land owner made on 05.08.2010. Appellant made excited sale deed on 18.08.2010. This shows intention of the appellant was only to invent agriculture land with non agriculture and derive profit out of it. 6.1 It is pertinent to mention that Collector is the sole authority to grant conversion of land from agriculture to non agriculture. Admittedly, Collector permission was granted after the registration of deed but fact is that it was a precondition of the sale deed. Hence, the Ld. AR's argument that at the time of sale, land was an agricultural land is half truth. Truth is that the sale deed was considered matured only when agriculture land was converted into N.A. and of course the seller i.e. the appellant has agreed to these terms mentioned in the sale deed therein. 6.2 Further, the Ld. AR also agreed that a company cannot buy an agricultural land until and unless the nature of land is N.A. Agricultural land cannot used for industrial purpose as also mentioned in sale deed itself. M/s. KECI Ltd. i.e. the purchaser has categorically affirme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering the facts of the case that it is not a business income but gain from the sale of agriculture land we would like to submit as follows: The learned A.O had not allowed the deduction for full payment made to farmers amounting to Rs. 2,14,99,440/- and instead allowed Rs. 91,35,920/- only and considered the applicability of Section 40A(3) of the Act. Further, I have submitted the full details of payment made to original land owners during the course of assessment proceedings, the copy of which is enclosed for your ready reference and marked as Annexure 2. The payment includes: 1. Amount of Registered Deed 2. Additional Payment made to original land owners Regarding the same, I would like to state that we have sold an agricultural land and the profit raised from said land which has been exempt under Section 2(14) of the Act. Section 40A(3) comes into picture once a person is undertaking any business activity. I helped my father who is a farmer, in the agricultural activities. My father was serving in Canara Bank and was retired pensioner during the assessment year. Hence, I have not carried out any business activity in past except helping my father in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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