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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
आदेश / ORDER PER ANIL CHATURVEDI, AM :
This appeal filed by the assessee is emanating out of the order of 1. Commissioner of Income Tax (A) – 12, Pune dated 31.03.2015 for the assessment year 2007-08.
The relevant facts as culled out from the material on record are as under :-
Assessee is an individual. A search action u/s 132 of the Act was conducted on 30.04.2010 at the residential / business premises of different members / associates / business concerns of Ashoka Buildcon Group, Nashik. Assessee was also covered by the search
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action. Accordingly, notice u/s 153A of the Act was issued on
25.02.2011 and served on the assessee on 07.03.2011. In response to
the notice, assessee filed the return of income on 17.10.2011 declaring
total income of Rs.10,34,372/- and agricultural income of
Rs.4,07,000/-. Thereafter, the case was taken up for scrutiny and
assessment was framed vide order dated 26.03.2013 passed u/s
143(3) r.w.s. 153A of the Act and the total income was determined at
Rs.1,27,07,120/-. Aggrieved by the order of AO, assessee carried the
matter before Ld.CIT(A), who vide order dated31.03.2015 (in appeal
No.PN/CIT(A)-12/NSK CIT(A)-I/339/2013-14) granted partial relief to
the assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in
appeal before us and has raised the following grounds :
“1. The appellant had acquired agricultural land at Hinjewadi in the financial year 1999-2000. The appellant had sold the said agricultural land vide sale deed dated 31st August 2006 and 18th December 2006. The appellant had claimed the surplus arising on sale as exempt as according to the appellant the said agricultural land was not the asset within the meaning of section 2(14) of the I. T. Act. The learned AO did not accept the contention of the appellant and brought to tax the surplus under the head "Profit & Gains of Business" instead of Long Term Capital Gain. The honourable CIT(A) confirmed the action of the learned AO treating the surplus as Profits and Gains of Business.
On the facts and in the circumstances of the case and in law the honourable CIT(Appeals) - Pune erred in confirming the action of the learned AO in treating the surplus/profit on sale of agricultural land at Hinjewadi Rs. 1,04,94,502/- as "Profits and Gains of Business" instead of "Long Term Capital Gain" without appreciating the facts of the case in the proper perspective. The appellant hereby prays that the surplus/profit arising on sale of agricultural land may please be treated as long term capital gain.
2.On the facts and in law the honourable CIT(A) erred in confirming the addition of Rs. 4,33,745/- made by the learned AO by treating the long term capital gain / arising from sale of land at "Mann" as Profits & Gains of Business and treating the claim of the appellant of Long Term Capital Gain/Loss as incorrect without appreciating the facts of the case in the proper perspective. The appellant hereby prays that the addition may please be deleted.
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On the facts and in law the honourable CIT(A) erred in confirming the addition made by the learned AO of the agricultural income to the tune of Rs.4,07,000/- treating it as income of the appellant from undisclosed sources introduced in the guise of agricultural income without appreciating the facts of the case in the proper perspective. The appellant thereby prays that the addition may please be deleted.”
At the outset, Ld.A.R. submitted that he does not wish to press
ground No.3. In view of the aforesaid submission of Ld.A.R., ground
No.3 is dismissed as not pressed. Ground Nos.1 and 2 being inter-
connected are considered together.
During the course of assessment proceedings, AO noticed that
assessee had sold land at Hinjewadi on a profit of Rs.1,04,94,502/-
and claimed it as exempt. The assessee was asked to justify his
contention. Assessee inter-alia submitted that the land was
agricultural land and was beyond 8 Kms from the boundaries of Pune
Municipal Corporation (PMC) apart from other submissions. The
submissions made by the assessee were not found acceptable to the
AO. AO noted that assessee along with other persons had entered into
deed of conveyance along with Indoglobal Erectors Pvt. Ltd., Pune for
sale of land at Hinjewadi resulting into profit of Rs.1,04,94,502/-
which was claimed as exempt. He noted that in the sale deed nowhere
the land has described as ‘agricultural land’. He also noted that
assessee had not substantiated his stand that the land is an
agricultural land. The submission of the assessee that the distance of
Hinjewadi is beyond 8 Kms from the boundaries of PMC was also not
accepted by the AO. He accordingly considered the profit on sale of
land of Rs.1,04,94,502/- as business income of the assessee.
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AO also noted that assessee sold land at Maan on 30.30.2007 for
consideration of Rs. 7 lac. The cost of acquisition was shown at
Rs.3,89,014/- and the cost of improvement was shown as
Rs.2,86,500/- which was claimed to have been done in 2001-02. AO
also noticed that on sale of land, assessee had shown to have incurred
capital loss of Rs.38,060/-. AO noted that in the Balance-Sheet the
land was shown as under current asset as on 31.03.2005. AO
therefore held that since the land was shown as current asset the profit
on its sale was business income. He further noted that assessee had
not furnished the details with respect to cost of improvement of
Rs.2,86,500/-. In the absence of these details, he concluded that
improvement cost was to reduce the income. He accordingly re-worked
the income on the sale of land and worked out the profits at
Rs.3,95,685/- and added it as business income.
Aggrieved by the order of AO, assessee carried the matter before
Ld.CIT(A), who granted partial relief to the assessee. Aggrieved by the
order of Ld.CIT(A), assessee is now before us.
Before us, Ld.A.R. reiterated the submission made before AO and
Ld.CIT(A) and further submitted that assessee was engaged in the
business of dealing in cement under the name and style of “Shubham
Agencies”, the Proprietary concern of the assessee. During the year
under consideration assessee had sold agricultural land situated at
Hinjewadi, Pune and shown the surplus on the sale of land as exempt.
But AO treated the profits received on transfer of land as business
income. He submitted that the observation of the AO that assessee has
been dealing in land is incorrect as assessee is not dealing in lands. He
submitted that assessee had acquired the land from Waghmare family
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by separate registered conveyance during the Financial Year 2000-01
by paying full stamp duty applicable to the transaction. The land was
sold by two separate registered sale deeds during the financial year
2006-07 to Indo Global Erectors Pvt. Ltd., and Base Reality Pvt. Ltd.
He submitted that assessee did not carry out any development work in
the land and the addition to the cost of the land was only on account of
capitalization of the interest. He submitted that the land was held for
around 6 years and it is was a Mahar Vatan land and could not be used
for the development or any other purpose mentioned in grant of Mahar
Vatan without payment of Nazarana. He submitted that he did not pay
any najarana and it was paid by Base Reality and Indigo Global
Erectors on 27.06.2007 i.e., after the transfer of land. He further
submitted that the land was not converted into an agricultural land
from the date till it was sold. In respect of sale of second land at Mann,
he submitted that though the land was shown under current asset in
the Balance-Sheet as on 31.03.2005 but the entries in the books of
accounts were not conclusive for determination of character of asset
and for which he placed reliance on the decision of Hon’ble Apex Court
in the case of Kedhrnath Jute Manufacturing Co., Vs. CIT reported in
82 ITR 363. He further submitted that Hon’ble Ld.CIT(A) did not
decide as to whether the profit has arisen from the sale of land was
capital gain or profits and gains from the business but mixed the issue
of fresh claim in the original return vis-à-vis returns submitted and in
response to notice u/s 153A of the Act. He further submitted that
Ld.CIT(A) did not consider several contentions of the assessee in
response of the status of agricultural land. He further submitted that
since assessee was never engaged in the land dealing, the gains arisen
on sale of transaction being the solitary transaction, cannot be
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considered to be adventure in nature of trade and for which he placed
reliance on the decision of Hon’ble Bombay High Court in the case of
Ashok Kumar Jalan Vs. CIT reported in 187 ITR 316. CIT Vs. Jalan
Kumar 316 (Bom). He further placed reliance on the decision of
Hon’ble Apex Court in the case of G. Venkata Swami Naidu & Co. Vs.
CIT reported in 35 ITR 594. Ld.D.R. on the other hand, supported the
order of AO and Ld.CIT(A).
We have heard the rival submissions and perused the material on
record. The issue in the present ground is with respect to the
treatment of profit on sale of land. It is Revenue’s contention that the
profit is business income whereas it is assessee’s contention that it is
exempt income. Before us, assessee submitted that the land at
Hinjewadi which has been sold is a Mahar Vatan land and the same
cannot be used for development or any other purpose under the grant
of Mahar Vatan and assessee had also not paid any nazarana to the
Government till its sale for converting the purpose of land. It is further
assessee’s contentions that assessee has also not taken any action for
development of land. The aforesaid contention of the assessee has not
been controverted by Revenue. The land held by assessee for number of
years is investment made by assessee and its sale cannot be held to be
adventure in nature of trade as assessee was not engaged in land
dealing. Further, merely because the land has been shown under the
head current assets, it cannot be considered to be business asset, in
view of the ratio of the decision of the Hon’ble Apex Court in the case of
Kedarnath Jute Manufacturing Co., (supra) wherein it has been held
that entries in the books are not conclusive proof for determining the
character of the asset. We further find that the Hon’ble Apex Court in
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the case of G. Venkatswami Naidu (supra) has held that various
factors which are to be considered in deciding the nature of
transaction. When the facts of the present case are seen in the light of
the factors stated in the decision of Hon’ble Apex Court in the case of
Kedarnath Jute Manufacturing Co., (supra) and in view of the
submissions of the assessee, we find force in the submission of the
assessee that assessee is not in the business of dealing of land more so,
when no business from sale of land has been shown by the assessee in
earlier years. Further assessee has not converted the land into non-
agricultural land. The so called addition in asset is on account of
capitalization of interest. Considering the totality of the aforesaid facts,
we are of the view that AO was not justified in holding the income on
sale of land at Hinjewadi and Mann as business income. Accordingly,
we hold that gain arising from sale of land is to be assed as Long Term
Capital Gains. However, AO may verify the claim of assessee that land
was beyond 8 Kms., from municipal limits. The assessee is directed to
file necessary evidence in this regard and AO shall decide the taxability
of Long Term Capital Gains in accordance with the law, after giving
reasonable opportunity of hearing to assessee. Thus, the grounds of
the assessee are partly allowed.
In the result, the appeal of assessee is partly allowed.
Order pronounced on 18th day of April, 2019.
Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER
पुणे Pune; �दनांक Dated : 18th April, 2019. Yamini
ITA No.737/PUN/2015
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to :
अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A)-12, Pune. 4. CIT(Central), Nagpur. 5 �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” / DR, ITAT, “B” Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार/ BY ORDER
// True Copy // व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.