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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI RAM LAL NEGI, JM
O R D E R Per Shamim Yahya, A. M.: This appeal by the Revenue is directed against the order by the Commissioner of Income Tax (Appeals) dated 02.12.2015 and pertains to the assessment year 2010- 11.
The issue raised is that the ld. Commissioner of Income Tax (Appeals) erred in treating the business income of Rs.1,34,00,500/- as long term capital gain.
(A.Y. 2010-11) Asst. CIT vs. Subhash Ratilal Parekh (HUF) 3. In this case, the assessment was reopened by the Assessing Officer on the ground that the assessee had converted his ancestral agricultural property into non agricultural property and developed the same into 40 plots with the intention of making it as business income. The assessee’s plea that it was long term capital gain was not accepted by the Assessing Officer. He held as under:
By the very act of going through the process of getting the land converted from agricultural to non-agricultural land also plotting of the said land itself confirms that assessee intended to carry out activity other than that of agriculture. This is further strengthened by the fact that assessee spent his time and energy to get the plan for construction of residential houses on the said land approved on 19.1.1998. The assessee's contention that if the land is converted from agricultural to non-agricultural to fetch a better price is farfetched as the process of converting agricultural land to non-agricultural land does not cost much. It is further seen that the assessee is a agriculturalist having a huge land bank. Further as the property boom started in the late nineties, it is apparent that the assessee has thought of taking advantage of his huge land bank and develop the same. The assessee's act is basically an adventure in the nature of trade. The assessee had every intention to commercially exploit the huge land bank for commercial venture by way plotting the land and getting the plan approved for development of the same. 4.3 Therefore, the said land is treated as assessee's stock in trade from 19.1.1998 and the assessee's claim of treating the transaction as Long term capital gain is rejected and the same is treated as business profit. Therefore sale consideration of Rs.1,34,00,500/- is treated as business income of the assessee.
The assessee challenged before the ld. Commissioner of Income Tax (Appeals) the reopening as well as merits of the case. The ld. Commissioner of Income Tax (Appeals) upheld the validity of reopening but deleted the treatment as business income by holding as under:
(v) After considering the above facts of the case, I am of the opinion that the AO is not correct to treat the LTCG from sale of land as business income on the following grounds a) the only main reason for the AO to treat the LTCG on (A.Y. 2010-11) Asst. CIT vs. Subhash Ratilal Parekh (HUF) sale of land as business profit is due to the conversion of agricultural land to Non agricultural land but this does not lead to adventure in the nature of trade or business, b) besides this, there is no other evidence to prove that the transaction is within the purview of adventure in the nature of trade or business, £l after conversion from agricultural to non-agricultural in 1997-98, the appellant sold the land after almost 10 years without any improvement or development of the land d) the judicial pronouncements relied upon by the AR of the appellant squarely covered in favour of the appellant, therefore, the appeal of the appellant on this ground is allowed.
Against the above order, the Revenue is in appeal before us.
We have heard both the counsel and perused the records. We find that in this case the assessee has sold his ancestral land. Though the assessee has got the land converted from agricultural land to non agricultural land in 1998, the sale was done after almost 10 years during the current assessment year. The assessee had inherited the land from his father. The Assessing Officer has taken adverse inference only on the ground that the land was converted into non agricultural almost 10 years ago and plotting was done. The ld. Commissioner of Income Tax (Appeals) has found this not to be reason good enough for treatment of long term capital gain as business income.
He has found that the family of the assessee was holding the land for almost 75 to 100 years. He also found that none of the family members of the assessee was in any way connected with the real estate development business. He has found that since the agricultural land can be purchased by only a farmer, plotting was done and the land was converted into non agricultural for fetching better income. That even after that the sale was done after almost 10 years to single buyer in a single transaction. Hence,
(A.Y. 2010-11) Asst. CIT vs. Subhash Ratilal Parekh (HUF) there is no cogent evidence on record to treat the assessee as dealer in land. In these circumstances, we are of the opinion that there is no infirmity in the order of the ld. Commissioner of Income Tax (Appeals). The above proposition also gets support from the Hon'ble jurisdictional High Court decision in the case of CIT vs. Administrator of the Estate of Shri E.F. Dinshaw [2012] 22 taxmann.com 57 (Bom) and also the Hon'ble jurisdictional High Court decision in the case of CIT vs. Principal Officer Laxmi Surgical (P.) Ltd. [1993] 202 ITR 601 (Bom). Hence, we confirm the order of the ld. Commissioner of Income Tax (Appeals).