Decided on May 13,2014



HARI OM MARATHA, JM. - (1.) THE difference of opinion between the Id. A.M and the Id. J.M. was regarding the nature of piece of land sold. As per the Id. J.M. this land was agricultural one and not a 'capital asset'. The Id. A.M. has taken a different view and has held this land sold as a 'capital asset'. The Id. Third Member has agreed with the view of the Id. J.M. and, therefore, in majority view the piece of land sold is not a 'capital asset'. Hence, according to the opinion of majority of the Members of the Appellate Tribunal, we answer this ground [issue] in the favour of the assessee. As a result, the appeal of the assessee stands allowed. D. MANMOHAN, VP. (THIRD MEMBER): - 1. On account of difference of opinion between Hon'ble Judicial Member and the Hon'ble Accountant Member, the Hon'ble President was pleased to nominate me as Third Member in the instant case with a direction to resolve the issue, if necessary, by framing the point of difference to bring out the controversy appropriately and to render decision on those question(s).
(2.) THE assessee herein purchased certain agricultural land and sold in the previous year relevant to assessment year under consideration. The case of the assessee was that the income arises from the transaction of agricultural land and hence it is exempt under section 10(1) r.w.s. 2(1A)(a) of the Act. Even otherwise the income arising therefrom is not assessable to capital gains tax in view of the provisions of section 2(14)(iii)(a)(b). On the other hand, the case of the Revenue is that it was an adventure in the nature of trade and the income from the impugned land is business income. The AO as well as the CIT(A) were of the opinion that the amount received by the assessee on sale of the impugned land deserves to be treated as profit from adventure in the nature of trade and assessable as business income. When the case was heard by the Division Bench at ITAT Jodhpur, the learned Judicial Member observed that (a) the impugned land was purchased on February, 2006 and it was sold on 23.03.2007, (b) the land is situated beyond the prescribed municipal limits (beyond 8 kms from the municipal limits) in a village of Alwar District, Rajasthan, and (c) it being agricultural land the sale proceeds thereon are not assessable to tax as business income. The learned Judicial Member recorded that the impugned land was purchased and sold alongwith standing crops and the Department accepted the return of income wherein agricultural income on sale of standing crops was shown. He has also taken into consideration the plea of the assessee that at no point of time the assessee sought for conversion of land use by making an application with the respective authorities. Though the assessee was dealing in sale and purchase of plots in urban areas, so far as this land is concerned, the intention was not to convert into plots and in fact the agricultural land with standing crops was sold to single party, i.e. Vedic Village Developers Pvt. Ltd.
(3.) THE learned Judicial Member observed that the assessee purchased five pieces of agricultural land adjoining each other through different sale deeds and the land was registered on different dates from - 7th February, 2006 to 5th April, 2006. The assessee showed the purchase of agricultural land as 'fixed asset'. In the preceding year the assessee earned Rs.70,000/ - on sale of crops which was shown as agricultural income in the return filed by the assessee, which was accepted by the Revenue. In this year Rs.22,000/ - was declared on sale of standing crop and accepted by the AO. In fact, another crop was standing at the time of sale which was passed on to the purchaser of the land and hence no agricultural income from this crop was shown in the return as the land was sold along with the crop though the same was declared for rate purposes, for computing tax liability. If the intention of the assessee was to cany on an adventure in the nature of trade she would have applied for conversion of land use and drawn up the requisite plotting scheme, engaged professional architects for preparing site plan approval and would have commenced preliminary development works whereas no such activity was undertaken by the assessee which shows that the intention of the assessee at the time of purchase of land was only to retain the land and it was not purchased for the purpose of resale as an adventure in the nature of trade. He also observed that undoubtedly the land is situated beyond 8 kms from the municipal limit and hence the land has to be considered as agricultural land. So long as the land is capable of agricultural operations, the sale of agricultural land by itself would not make it business income. He also relied upon several precedents apart from analysing the facts of the case to come to the conclusion that the impugned land is Barani land admeasuring only seven Bighas with standing crop which in itself prove that it was not purchased with an intention to utilise the land for any other purpose. He thus concluded that the impugned land is out of the purview of the definition of "capital assets" and hence income therefrom cannot be assessed to tax by treating it as adventure in the nature of trade. The learned Accountant Member was not agreeable with the view taken by the learned Judicial Member. Having regard to the peculiar factual matrix of the case, which was highlighted in his order, he concluded that the assessee sold the land to make profit. He observed that the assessee was not having any agricultural background since she was deriving income by way of salary from Ashapurna Buildcon Ltd. She purchased five pieces of contiguous agricultural land from five different persons. Some amount was spent on levelling the land and also on fencing the land. The land was purchased alongwith standing crop and the said standing crop was sold in the earlier year. It was claimed that two crops were raised in this year and the first crop was sold resulting in agricultural income. The learned Accountant Member stressed upon the fact that both the lower authorities have given concurrent findings that the transactions of purchase and sale of agricultural land constitute adventure in the nature of trade mainly on account of the fact that the assessee never intended to carry on agricultural operations on the land; the lands were neither irrigated nor any tube well facility was available earlier or installed by the assessee and in fact they were sold within a period of 12 to 13 months of purchase deriving a huge return of 558 percent. He also observed that the land is situated at a distance of more than 500 kms from the place where the assessee usually resides and therefore he drew a conclusion that these lands were not purchased for the purpose of cultivation. Since she was engaged in the business of real estate development the impugned purchase was with the full knowledge that the values are likely to appreciate rapidly as these fall within the new town of National Capital Region (NCR), the global city, on national highway No. 8. He also observed that the investment was made out of borrowed funds.;

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