I.T.O. WARD -3(5), NAGPUR vs. SHRI SHRI MANOHAR JAIRAMJI WANKHEDE, NAGPUR

On the facts and circumstances of the case, the W. CIT(A) erred in holding that the gain out of sale of agricultural lands has wrongly been treated as adventure in nature of trade by the Id. AO and deleting the addition made of Rs.43,50,OOO/-.

On the facts and in the circumstances of the case the Ld. CIT(A) erred in observing that the agriculture lands in question had been transferred to the assessee and he is now the owner of the agricultural lands and consequently possesses the right to sell it without appreciating that parting of possession on the basis of agreements to sell did not tantamount to parting of ownership which remained with the original owners.

On the facts and in the circumstances of the case the Ld. CIT(A) erred in observing that the assessee is an agriculturist who was engaged in agricultural activities in the said agricultural lands without appreciating that 2 ITA No. 399/Nag/2016. the land at Kirmiti was used only for grazing purpose and an activity of growing grass would not make the assessee an agriculturist.

On the facts and in the circumstances of the case the Ld. CIT(A) erred in observing that the assessee is an agriculturist who was engaged in agricultural activities in the said agricultural lands without appreciating that the land at Tumudi as mentioned in the agreement was given to carry out development activity and to obtain permission from Town Planning for developing a layout of Plots and no proof of any agricultural activity was submitted by the assessee on this land.

On the facts and in the circumstances of the case the Ld. CIT(A) erred in not applying the ratio of the decision of Hon’ble Supreme Court given in the case of G. Venkatswami Naidu and Co. vs. CIT reported in 35 ITR 594 to the facts of this case which gain was derived out of the sale of agricultural lands was an adventure in the nature of trade.

Brief facts of the case are as under :

Information was received by the AO that the assessee, along with one Shri Naushanl, acted as a consenter in a transaction relating to transfer of land situated at Mauza Kirmiti and had received an amount of Rs. 12,50,000/- with regard to the same on 21/06/2008. The AO further noted that no return of income had been filed by the assessee for A.Y. 2009-10 and he therefore issued a notice u/s 148 of the Income Tax Act. The assessee filed the return of income for assessment year 2009-10 on 25/03/2014 declaring Nil income. The AO required the assessee to furnish details relating to. land transactions entered into during the year under consideration. It was seen that the assessee had entered into two land transactions as per the details below:

The AO considered the submissions of the assessee but did not agree with the same and added the said amount of Rs. 43,50,000/- to the income of the assessee and held the said activity to be an adventure in the nature of business. Aggrieved by the same the assessee appealed before the learned CIT(Appeals).

Upon assessee's appeal Learned CIT(Appeals) elaborately considered the issue. He observed as under :

2 Section 5.3A of the Transfer of Property Act envisages situations where under a contract for transfer of an immovable property, the purchaser has paid the price and has taken possession of the property, but the conveyance is either not executed or if executed it is not registered. In such cases, the transferor is debarred from agitating his title to the property against the purchaser.

3 As per the provisions of Section 2(4 7)(v) r. w .s. section 53A of the Transfer of property Act, 1882, it is seen that when possession has been allowed of any immovable property in part performance of a contract, then it amounts to transfer of capital asset. In the present case, the possession has been given to the appellant in the present year, contract has been entered into with the seller as per which price had been fixed and significant payment was also been made by the appellant and hence all the requirements of Section 2( 47)(v) of Income tax Act, 1961 as well as Section 53A of Transfer of Property Act are fulfilled and therefore, it has to be concluded that the property in question had been transferred to the appellant and. he is now the owner of the property and consequently possesses the right to sell it. Thus there is no merit in the contention of the Ld. AO and the appellant has not executed the sale deeds and that therefore the appellant is merely a consenter and that the appellant was not the owner of the said agricultural lands.

4 Thus since the said agricultural land stands transferred to the appellant, any surplus arising to the appellant on transfer of such agricultural land would be subject to capital gain if the same is situated within 8 kms. from the municipal limits and alternatively would be exempt from capital gain if the same is situated beyond 8 kms. from the municipal limits. In the case under consideration, the said property is admittedly situated beyond 8 kms. from the municipal limits and would therefore be exempt from capital gain tax.

With regard to the third contention of the Id. AO of treating the income as adventure in the nature of trade, the said issue has been a matter of much debate and Is now settled by various case laws. There are various judicial pronouncements wherein it had been held that the sale consideration out of sale of agricultural land is not assessable as business income when such agricultural land Is situated beyond 8 kms. and that it is not Important whether there was any agricultural income or not and that the moot question to decide the Issue Is whether the character of the land is agricultural or not. It has also not been held that any consideration received out of sale of agricultural land cannot be treated as business income.”

As against the above order Revenue is in appeal before the ITAT

I have heard both the counsel and perused the records. I find that the Assessing Officer has drawn adverse inference on account of lack of appreciation of the facts. The Assessing Officer has relied upon the description in the 7/12 extracts to hold that the land was not agricultural. He has also drawn adverse inference on account of the agreement of sale executed by the assessee and the period for which the land was held by the assessee. The learned CIT(Appeals) has elaborately considered all the aspects of the Assessing Officer's adverse inference. His elaborate findings are cogent and fully

In the result this appeal filed by the Revenue stands dismissed. Order pronounced in the Open Court on this 11th day of January., 2017. ( SHAMIM YAHYA) ACCOUNTANT MEMBER.