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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI V. DURGA RAO & SHRI G. MANJUNATHA
आदेश / O R D E R Per V. Durga Rao, Judicial Member: These two appeals filed by the assessee are directed against the orders of the Learned Commissioner of Income Tax (Appeals)-2, Coimbatore dated 04.12.2018 relevant to the Assessment Years 2012- 13 & 2013-14, respectively.
& 03/Chny/2019 :- 2 -: 2. The brief facts of the case for Assessment Year 2012-13 are that the assessee has sold land for the year under consideration for a sale consideration of ₹. 90,58,500/- and claimed the consideration received by the assessee is an exempt income as the lands were agricultural lands. The Assessing Officer (A.O) has asked the assessee to produce details of the land sold and details of lands purchased. The assessee has produced the details, which is extracted as under:
Sl. Purchaser Date of Sale Particulars Sale Value No. 1. Mr. Jayanthilal.G. Bafna 29.12.11 S.F.No.666/2 6,90,000/- 2. Mr. Arunkumar.G. Bafna 29.12.11 S.F.No.678/2 30,25,000/- 3. Mr.Jayanthilal.G.Bafna 29.12.11 S.F.No.660/1 20,37,000/- 4. Mr.Jayanthilal.G.Bafna 29.12.11 S.F.No.678/7 31,72,000/- S.F.No.660/4 S.F.No.678/5 5. K.Sampath 09.03.12 S.F.No.894/6 1,34,500/- Details of purchase of the above sold property: Date of Property purchase Land situated Nature of Purchase purchase from at land value 26/05/2008 B.Palanisamy Pilichi Village, Agricultural 45,760/- Peiyanaicken Land Palayam 27-10-09 B.Dhandapani Pilichi Village, Agricultural 45,760/- Peiyanaicken Land Palayam 15-12-05 R.Chandraganthi Pilichi Village, Agricultural 80,900/- Peiyanaicken Land Palayam 10-08-07 K.V.Hemavathi Pilichi Village, Agricultural 3,60,943/- Peiyanaicken Land Palayam 08-08-07 Sivakumar.J Pilichi Village, Agricultural 86,690/- Peiyanaicken Land Palayam 03-09-06 Valliammal, Pilichi Village, Agricultural 32,930/- A.Kanakaraj Peiyanaicken Land Palayam 01-06-10 Angan, Palanal, Maruthur Agricultural 1,34,370/- Karupathal.Sivaraj, Village, Land Rai, Chinnasamy & Mettupalayam Sadayan & 03/Chny/2019 :- 3 -: 3. The A.O by considering the above, he has noted that the assessee is in a habit of continuous purchase and sale of lands.
Hence, the transactions to be treated as adventure in the nature of trade and the income should be treated as business income and the A.O has asked the assessee to explain why the land transactions should not be treated as adventure in the nature of trade.
The assessee in his reply vide letter dated 28.03.2015 has submitted that the lands sold by him are situated more than 8 KM away from the corporation limits and are not covered in notified area. Since, it is not a capital asset as per s. 2(14) of the Income Tax Act, 1961 (hereinafter "the Act"). Hence, the assessee has claimed exemption as it is not a taxable income. He further noted that all the purchases of agricultural lands have been shown as investments in his balance sheet.
The assessee has not treated the above agricultural lands as stock in trade. In these agricultural lands, the assessee also earning agricultural income and the income has been included in the taxable total income of his assessment from the financial year 1994-1995 onwards and further submitted that he is not a frequent trader in agricultural lands, the agricultural lands purchased and sold were very few and he has not made any improvement to the agricultural lands & 03/Chny/2019 :- 4 -: sold by him, the purchases of the agricultural lands were on account of surplus generated out of his personal savings and not through borrowings, the sale of agricultural lands were stand alone activity not associated with any other similar activities and submitted that the activities of the assessee selling of the agricultural land cannot be treated as an adventure in the nature of trade.
The A.O considered the explanation of the assessee and in the assessment order, the A.O has noted that the assessee has a habit of purchase and selling of lands on a regular basis for a number of years.
The land transactions were entered into with the profit motive only. The assessee is selling land at such exorbitant rates continuously. He further noted that the details of purchase and sale of lands by the assessee for number of years as submitted by the assessee provided as Annexure-1 (7 pages) to the assessment order. On perusal of the above table, it is evident that the assessee is purchasing and selling the lands from the year 1995 onwards. The assessee has performed more than 75 transactions which is clearly shows that the assessee is purchasing lands not to hold them as investment but sell them to quick returns in an organized manner. The buying and selling activity of land was characterized by multiplicity of transactions. All these facts clearly establish the presence of essential features of trade and intention of the & 03/Chny/2019 :- 5 -: assessee to earn the profits out of these transactions. All these transactions clearly establish that the assessee was engaged in adventure in nature of trade by purchase and sale at profit. He further noted that the intention of the assessee while purchasing the above lands was not an investment in the agricultural land but only stock in trade for re-sale and profit. It is immaterial whether the said lands were agricultural lands or not. Hence, the profit on sale of these lands assessed as business income and completed the assessment.
On appeal before Ld. CIT(A), it was submitted by the assessee that the lands purchased by the assessee were agricultural lands and agricultural income offered for taxation. Therefore, the A.O is not correct in treating the land sold by the assessee as a business income.
He further submitted that the assessee has purchased an agricultural land and sold it as an agriculture land without improving the land.
Therefore, the land sold by the assessee is an agricultural land it cannot be treated as a business income. The Ld. CIT(A) after considering the explanation of the assessee, he has observed that the agricultural income offered by the assessee for A.Y 2012-13 was only of ₹.3,12,500/- and the total holdings of the assessee is 65 acres and he observed that the assessee has not carried out any agricultural operations. He further observed that from the Annexure attached to & 03/Chny/2019 :- 6 -: assessment order, the assessee has purchased lands frequently and selling the same frequently and it shows that the purchase and sale of the lands only adventure in the nature of the trade therefore, the income arising out of the sale of the lands has to be taxed as business income. He further observed that the intention of the assessee is only to make the profit that is the reason the assessee is buying and selling the property frequently and therefore, the income arising out of sale of land has to be treated as income from business and upheld the order of the A.O.
On appeal before us, the main argument of the ld. counsel for the assessee is that all the purchases of the lands shown in the balance sheet are as a fixed asset and therefore, the same is treating as business income of the assessee is not correct.
The ld. counsel for the assessee has submitted that the lands purchased by the assessee are agriculture lands and income generated from the lands were shown as agricultural income.
Therefore, the lands sold by the assessee are to be treated as agriculture lands.
The ld. counsel for the assessee has further submitted that the assessee has purchased the agriculture lands and sold it as agriculture land without improving the lands and therefore, the lands sold by the & 03/Chny/2019 :- 7 -: assessee are in the nature of the agriculture lands and it cannot be treated as a business income of the assessee.
He further submitted that the assessee has done total 70 transactions out of which 20 transactions are unsold and therefore, it has to be concluded that the intention of the assessee is only to invest in agriculture land not to carry the business.
On the other hand, the Ld. D.R has submitted that the assessee has shown the agriculture land purchased by the assessee by way of investment in the balance sheet. Simply showing in the balance sheet as an investment is not sufficient. From the activities carried by the assessee i.e., frequent selling and buying of the agriculture lands is adventure in the nature of the trade and submitted that the A.O has rightly taxed the income earned by the assessee as a business income.
So far as agriculture income shown by the assessee is concerned, the Ld. D.R has submitted that the assessee is having 65 acres of land and the year under consideration, agricultural income shown by the assessee is only ₹.3,12,500/-. From the above, it is very clear that the assessee is not carrying any agricultural activities, only buying and selling the properties and the A.O has rightly taxed the same as business income. & 03/Chny/2019 :- 8 -: 14. The Ld. D.R further submitted that the assessee is carrying the activity of buying and selling agriculture land as a continuous business activity therefore, the income arising out of sale of those lands has to be treated as an adventure in the nature of the trade and consequently, the income has to be treated as business of the assessee.
We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. The assessee filed its return of income declaring total income of ₹.40,38,570/- and also shown agricultural income for the assessment year under consideration at ₹. 3,12,500/-. The case of the assessee is that the for the assessment year under consideration i.e., 2012-13, the assessee has sold agriculture lands for a sale consideration of ₹. 90,58,500/- claimed as an exempt income as lands were agriculture lands. The A.O has asked the assessee to file details of the lands purchased and sold. The assessee filed all the details of purchase and sale of lands which is Annexure-I to assessment order consisting of 7 pages. The A.O by considering the entire details and also by considering the explanation of the assessee, he came to the conclusion that the assessee has performed more than 70 transactions which shows that the purchasing of the lands not for investment but to sell them for quick returns and he further observed that the assessee is continuously & 03/Chny/2019 :- 9 -: buying and selling the lands, it is a business activity of the assessee and therefore, the income arising out of sale of lands treated as a business income of the assessee. On appeal, the Ld. CIT(A) confirmed the order of the A.O by considering the entire facts of the case.
The case of the assessee before us is that all the lands purchased by the assessee shown in the balance sheet as an investment, therefore, the A.O cannot treat it as stock-in-trade and the income arising out of the sale of the transaction is a business income.
We have considered the above submissions of the assessee, we find that the assessee has performed near about 70 transactions out of which only 20 transactions are not sold and the remaining 50 transactions are completed by the assessee. We have gone through the Annexure attached to the assessment order at Page Nos. 1 to 7, it gives entire picture of purchases and sales of the lands from that it is very clear that the intention of the assessee is only to make a profit out of buying and selling of the properties and therefore, the income arising out of the sale of the land rightly treated by the A.O as business income. We, further find that simply showing the land in the balance sheet as an investment is not sufficient. The activities carried by the assessee i.e., buying and selling of the properties are considered in this case and we are of the opinion that the intention of the assessee is not & 03/Chny/2019 :- 10 -: to carry out agricultural operations only but to earn the profit.
Therefore, the A.O has rightly taxed the income arising out of the sale of the lands as income from business.
In so far as the agricultural income shown by the assessee is concerned, the total holding of the land by the assessee is 65 acres. The agricultural income shown by the assessee is only ₹.3,12,500/-.
From the above, it is very clear that the agricultural income shown by the assessee is very nominal not only that it can be safely concluded that the assessee has not carrying any major agricultural operations and the return of income is showing some agriculture income claimed as exempt.
So far as another argument submitted by the assessee is concerned, the lands purchased as an agriculture land and sold as agriculture land therefore, the sale of agriculture land is an exempt. We have considered the above argument of the assessee and find that though the assessee is not improving the land purchased but the intention of the assessee has to be seen to assess the income. In this case, by considering the facts and circumstances of the case, we are of the opinion that the frequent buying and selling of the land is to earn the profit and the intention of the assessee is only quick earning of the money and therefore, the income earned by the assessee out of sale of & 03/Chny/2019 :- 11 -: land is a business income. The A.O as well as Ld. CIT(A) has rightly treated the income earned by the assessee is business income. In view of the above, we uphold the order passed by the Ld. CIT(A).
Thus, the appeal filed by the assessee in for A.Y 2012-13 is dismissed.
We have considered one of the argument of the ld. counsel for the assessee and we find that the Ld. CIT(A) has committed a mistake by observing that the assessee has purchased lands from Mr. Arunkumar G. Bafna and sold the same to Mr. Arunkumar B. Bafna on 30.04.2010. As per the assessment order, the assessee has sold the lands to Mr. Arunkumar B. Bafna on 29.12.2011. We find that this mistake has committed by the Ld. CIT(A) has no bearing so far as order passed on merits. Answered accordingly.
We have also considered the written submissions filed by the assessee and case laws relied by him, we find that the case laws relied by the counsel for the assessee are not relevant to the facts and circumstances of the present case and therefore, the case laws relied by him has no application to the present case. This case has been decided by considering facts and circusmtances of the case. In view of the, the appeal filed by the assessee is dismissed.
I.T.A Nos.02 & 03/Chny/2019 :- 12 -: 21. So far as the appeal in for A.Y 2013-14 is concerned, the facts are similar for A.Y 2012-13 therefore, no separate adjudication is required in view of our earlier decision in ITA No.02/Chny/2019 for A.Y 2012-13 as the appeal filed by the assessee is dismissed for the same reasons. Hence, the appeal filed by the assessee in ITA No.03/Chny/2019 for A.Y 2013-14 is also dismissed.
In the result, both the appeals filed by the assessee are dismissed.