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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-II, Rajkot [Ld.CIT(A) in short] dated 11/02/2014 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here- in-after referred to as "the Act") dated 12/12/2011 relevant to Assessment Year (A.Y) 2009-2010.
The assessee has raised the following grounds of appeal:
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The order u/s.143(3) is bad in law. 2. The learned Assessing Officer has erred in law as well as on facts in making addition of Rs.28,12,000/- on account of gain on sale agricultural land treating the same as adventure in nature of trade. The learned CIT(A) erred in confirming the order of the A.O.
The issue raised by the assessee in ground No. 1 is general, and therefore no separate adjudication is required. Accordingly, we dismiss the same.
The 2nd issue raised by the assessee in ground No. 2 is that the learned 3. CIT-A erred n confirming the order of the AO by treating the income under the head capital gain of Rs. 28,12,000.00 as income from business and profession.
Briefly stated facts are that the assessee in the present case is an individual and engaged in the business of trading in plastic cotton and the steel. The assessee in the year under consideration has also sold the agricultural land and earned the profit of Rs. 28,12,000 which was claimed as exempted on the reason that the agricultural land is not a capital asset within the meaning of section 2(14) of the Act.
4.1 However, the AO was of the view that such income from the sale of agricultural land is not exempted from tax due to the reasons as detailed under: i. The assessee has purchased many more lands which evidences that the assessee is into the business of land dealings. ii. The assessee held the impugned land for a short period of 18 months only. Therefore, it cannot be said that the assessee used the land for
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agricultural operations. As such, there has to be nexus between the agricultural land, agricultural operations, and the agricultural income for the long duration. iii. The assessee has earned a huge profit on the sale of such agricultural land which was purchased recently for ₹60,000 only.
In view of the above, the AO held that the income declared by the assessee under the head capital gain is an adventure in the nature of trade. Therefore the same is taxable under the head business and profession.
The aggrieved assessee preferred an appeal to learned CIT-A who has confirmed the order of the AO.
Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.
The learned AR before us filed a paper book running from pages 1 to 279 and submitted that the assessee is not carrying out any activity which can be regarded as an adventure in the nature of trade for his land deal transactions. The learned AR in support of his claim submitted as under:
An individual, filed return of income for A.Y. 2009-10 on 09.12.2009 declaring total income at Rs.6,57,149/-. Derives income from trading in plastics, cotton and steels. 2. In the year under appeal, the appellant sold an agricultural land to the extent of 80% of his share at village 'Sirachi' for Rs.28,72,000/- on 1-12-2008 and resultant gain of Rs.28,12,000/- was claimed as exempt as the land sold was not a capital asset within the meaning of section 2(14) of the Act. Land was purchased at Rs. 60,000 on 17/05/2017. 3. The said land was under cultivation by the appellant. Copy of For. 7/12 showing the same is placed on record.
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An agriculturist and regularly derived income from agriculture. 5. Copy of accounts and return of income for year under appeal and preceding 3 years and succeeding years are placed on record. 6. Even in latest return of income for A.Y. 2012-13, the agricultural income is declared. 7. This is solitary transaction of sale of agricultural land. 8. No other transaction of sale of agricultural land in the year under appeal or preceding 3 years or succeeding year. 9. The agricultural land was a yielding asset to the appellant and not any trading asset or stock in trade. It is shown as fixed assets in Balance Sheet. 10. The other agricultural lands purchased by the appellant are also held for agricultural purpose. 11. As per the provisions of Bombay Tenancy and Agricultural Lands Act, 1948 as applicable to Gujarat, there is a restriction on purchasing and holding Agricultural Lands in Gujarat. A non agriculturist cannot hold agricultural land. 12. In Gujarat, only agriculturist can have agricultural lands and that too for agricultural purpose. In view of this, there cannot be .any business, trade or commerce of agriculture lands in Gujarat and consequently there cannot be any adventure in the nature of trade in case of agricultural lands in Gujarat. 13. The said land was used for the purpose of agricultural from the time of purchase to the time of sale and hence it was not a case of any stop gap arrangement. Further, the said land was sold as agricultureal land only and there was no change in its character at the time of sale.
On the other hand, the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that in the identical facts and circumstances this Tribunal in the case of DCIT versus Shri Pramod Suresh Goel in ITA no. 328/RJT/2014 vide order dated 22nd August 2017 has
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decided the issue in favor of the assessee. The relevant extract of the order is reproduced as under: 8. We have considered rival submissions. We find that the CIT(A) has dealt in length on the various aspects while determining the issue in favour of assessee. We find ourselves in complete agreement with the observation made by the CIT(A) and therefore do not wish to repeat the same. The CIT(A), in our view, has rightly appreciated the facts in perspective and accepted the pleas of the assessee that the agricultural land sold in question was of capital nature and outside the ambit of the definition of capital asset under s.2(14) of the Act. As a corollary, no capital gains arising from such asset was chargeable to tax. We find that in the facts of the case where the assessee is an agriculturist and acquired a land only at one instance and sold the aforesaid land in same form and having regad to the agriuclural produce generated on such agricultural land cannot be held to be an asset of trading nature. As a result, we do not find any merit in the appeal of the Revenue.
The facts of the case are identical to the facts of the case, as discussed above. Therefore respectfully following the same, we reverse the order of the authorities below and direct the AO to delete the addition made by him by treating the income of the assessee as income on the sale of agricultural land which is not a capital asset as defined under section 2(14) of the Act. Hence, the ground of appeal of the assessee is allowed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Court on 25/06/2019 at Ahmedabad.
-Sd- -Sd- (Ms MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 25/06/2019 manish