INCOME-TAX OFFICER,, AURANGABAD vs. SHRI RAJENDRA MATHURDAS RATHI,, AURANGABAD

The facts of the case as emanating from records are: The assessee is a salaried person. The assessee and 13 other persons purchased individual plot of land at Aurangabad from M/s. Ferry Fax Farms Pvt. Ltd. „Agreement to Sale‟ between the vendor and all the vendees qua the land was executed on 30-03-2005. The sale deed in respect of plot purchased by the assessee was executed on 26th April, 2010. Subsequently, the assessee sold the plot to M/s. Navratna Infraestate LLP vide Sale Deed dated 14th June, 2011. The assessee offered gain arising from sale of aforesaid plot as Long Term Capital Gain and also claimed deduction u/s. 54F of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). During the course of scrutiny assessment proceedings, the Assessing Officer after analyzing the terms and conditions of the Agreement to Sale dated 30-03-2005 held that the assessee along with 13 other persons (friends and relatives) had purchased land with an intention to trade. Therefore, the subsequent sale of land by the assessee is adventure in the nature of trade. The Assessing Officer not only disallowed assessee‟s claim of deduction u/s. 54F but also assessed the gain arising from sale of land as business income.

Shri Mukesh Jha representing the Department vehemently supporting the findings of Assessing Officer submitted that the terms and conditions of the Agreement to Sale dated 30-03-2005 executed by the assessee along with other 13 persons clearly indicate that the intention of the vendees was to purchase the land for business purpose.

On the other hand Smt. Deepa Khare appearing on behalf of the assessee supported the findings of Commissioner of Income Tax (Appeals) in treating the gain arising from sale of plot of land as Long Term Capital Gain and also granting the benefit of deduction u/s. 54F of the Act. The ld. Counsel for the assessee submitted that M/s. Ferry Fax Farms Pvt. Ltd. owned a large chunk of land in Gut No. 66, Itkheda, Aurangabad, admeasuring 5756 sq. mtrs. The assessee along with 13 persons approached the said company for purchase of land for construction of residential house. An Agreement to Sale dated 30-03-2005 was executed between M/s. Ferry Fax Farms Pvt. Ltd. and the vendees of the land (14 in number). As per the terms and conditions of the said agreement, the vendor was to divide the land in small plots as per requirements of vendees and would also prepare the layout plan of the residential area. The said company was also required to get the layout plan approved from Aurangabad Municipal Corporation. The total consideration for purchase of land was fixed at Rs.85,14,650/-. Rs.60,00,000/- was collectively paid by the vendees at the time of execution of „Agreement to Sale‟ and the

We have heard the submissions made by the representatives of rival sides and have perused the orders of authorities below. The solitary issue in appeal is, Whether gain arising from sale of plot by the assessee is „Business Income‟ or „Long Term Capital Gain‟ eligible for exemption u/s. 54F of the Act. The facts of the case as stated above clearly indicate that the assessee along with 13 other persons had purchased their respective plot of land for residential purpose from M/s. Ferry Fax Farms Pvt. Ltd. It is an undisputed fact that a composite Agreement to Sale was executed. It was a single piece of land admeasuring 5756 sq. mtrs. The vendees had requested the vendor to divide the land in small plots as per their

We find that one Shri Shivprasad Hiralal Jaju who had also purchased plot of land from M/s. Ferry Fax Farms Pvt. Ltd. along with the assessee had also sold his plot of land to M/s. Navratna Infraestate LLP and offered the income arising there from as Long Term Capital Gain. The Assessing Officer in his case accepted the same and allowed claim of deduction u/s. 54F of the Act. We find that the case of assessee is at par with Shri Shivprasad Hiralal Jaju. Thus, the facts of case do not indicate that intention of the assessee was to trade in land. Accordingly, we uphold the findings of Commissioner of Income Tax (Appeals) and dismiss the appeal of Revenue.

In the result, appeal of the Revenue is dismissed.