Income Tax Appellate Tribunal - Jaipur
Acit, Jaipur vs Shri Sunil Bansal, Jaipur on 6 November, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES "B", JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 523/JP/2012
fu/kZkj.k o"kZ@Assessment Year :2008-09
Assistant Commissioner cukeSunil Bansal,
of Income Tax, Vs. P/o- M/s S.S. Consultant,
Circle-3, Jaipur. B-31 & 36, Keshav Path, Suraj
Nagar (West), Civil Lines, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAZPB 8922 H
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by : Shri J.C. Kulhari (JCIT)
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Rajiv Sogani (CA)
lquokbZ dh rkjh[k@ Date of Hearing : 14/09/2018
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 06/11/2018
vkns'k@ ORDER
PER: VIJAY PAL RAO, J.M. This appeal by the revenue is directed against the order dated 12/03/2012 of ld. CIT(A)-I, Jaipur for the A.Y. 2008-09. The revenue has raised following grounds of appeal:
"Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) is justified in:-
(i) Deleting the addition of Rs. 2,22,38,555/- on account of business profit from sale of land, even though the assessee was engaged in the business of real estate development.
(ii) Holding that no capital gain was chargeable as the asset referred was agricultural land, ignoring the facts that the assessee was not
2 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal performing any agricultural activities and no agricultural income was shown in the return."
2. The assessee is individual and engaged in the business of trading of export and import scrips and brokerage under the name and style of M/s S.S. Consultants. The assessee also derives income from salary and house property. The assessee filed his return of income on 19/3/2009 declaring total income of Rs. 68,91,170/-. The assessee is working as Director of M/s Grass Field Farms and Resorts Pvt. Ltd. and M/s Grass Field Fire Capital Developers Pvt. Ltd.. During the assessment proceedings, the Assessing Officer noted that the assessee has purchased 16 lands and also sold 16 lands during the year under consideration. Thus, the Assessing Officer found that during the year under consideration, the assessee has purchased land amounting to Rs. 1,32,98,540/- and sold the lands amounting to Rs. 2,69,85,258/-. The assessee appended a note to the computation of income and expenditure that he has sold the agricultural land situated in different villages to M/s Grass Field Fire Capital Developers Pvt. Ltd. and M/s Grass Field Fire Land Developers Pvt. Ltd. for a consideration of Rs. 2,29,01,000/- which was purchased for a sum of Rs. 34,29,000/-. The assessee claimed that the lands sold during the year does not fall in the ambit of capital asset as per Section 2(14) of the Income Tax Act, 1961 (in short the Act) and therefore, surplus of Rs.
3 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal 1,94,72,000/- generated from the transfer of the land is exempt from income tax. The Assessing Officer did not accept this contention of the assessee and noted that the assessee has purchased these lands in his own names and individual capacity and thereafter sold the same to the company i.e. M/s Grass Field Fire Capital Developers Pvt. Ltd. and M/s Grass Field Fire Land Developers Pvt. Ltd. by executing separate sale deeds. Since there are series of transactions of purchases as well as sales, therefore, the Assessing Officer treated the activity of purchase and sale of land by the assessee as business of the real estate, accordingly, the surplus earned by the assessee from the sale of the land was treated by the Assessing Officer as business income and assessed to tax. Hence, the Assessing Officer has made an addition of Rs. 2,22,38,555/- as profit earned from the business activity of purchase and sale of land.
3. The assessee challenged the action of the Assessing Officer before the ld. CIT(A) and contended that the lands purchased by the assessee is in the nature of investment and therefore, surplus/gain arising from sale of these lands is capital gain, however, since these agricultural lands are situated beyond 8 k.m. from the municipal limits, therefore, the same does not fall in the definition of capital asset and consequently the surplus arising from sale of these lands is not chargeable to tax. The ld. CIT(A) accepted the claim of the assessee and treated the transaction as 4 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal investment in the lands and consequently the addition made by the Assessing Officer was deleted by the ld. CIT(A) on the ground that the agricultural lands in question are situated beyond 8 k.m. from the municipal limits and therefore, the lands transferred by the assessee during the year were not capital asset U/s 2(14)(iii) of the Act.
4. Aggrieved by the impugned order of the ld. CIT(A), the revenue has filed the present appeal.
5. Before us, the ld DR has submitted that the assessee has purchased as many as 16 lands during the year under consideration and an equal amount of transaction of sale, therefore, the activity of purchase and sale of the land by the assessee is systematic and with the motive to sell for earning profits. He has further contended that the assessee being the Director of M/s Grass Field Farms and Resorts Pvt. Ltd. and M/s Grass Field Fire Capital Developers Pvt. Ltd. has purchased these lands with the purpose to sell the same to the companies owned by the assessee. Therefore, the entire exercise of purchase and sale was to inflate the cost of acquisition in the hand of these two companies to avoid the tax liability as the assessee has claimed the huge surplus in the transaction of purchase and sale as exempt from tax. Thus, this is a device to avoid the tax by inflating the cost of acquisition in the hand of the companies and 5 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal claiming the surplus as exempt in the hand of the assessee. The ld DR has submitted that the ld. CIT(A) has committed an error while holding that the lands in questions are held by the assessee as capital asset and not converted into stock in trade wherein the assessee has not been maintaining regular books of account and therefore, the question of holding these lands as capital asset and not as a stock in trade cannot be decided based on the books of the assessee. He has further contended that when the assessee has claimed the income as exempt then the onus is on the assessee to prove that the activity carried out by the assessee is not business activity. In support of his contention, he has relied upon the decision of the Hon'ble Supreme Court in the case of Khan Bahadur Ahmed Alladin & Sons Vs. Commissioner of Income-tax 68 ITR 573 and submitted that when the activity of purchase and sale is well planned and under calculated scheme of profit making with the intention to exploit the properties then the transaction constitute an adventure in the nature of trade and any surplus got by sale of the property is liable to tax as business income. He has also relied upon the decision of Pune Benches of the Tribunal in the case of Dilip Battu Karanjule Vs ITO 161 ITD 172 (Pune Trib) as well as decision of Mumbai Benches of the Tribunal dated 18/7/2012 in the case of ITO Vs. Ratanshi Mulji Patel in ITA No. 5499/Mum/2011. The ld. DR has relied upon the decision of the Hon'ble 6 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal M.P. High Court in the case of Bhagirath Prasad Bilgaiya Vs CIT 139 ITR 916 (MP) and the decision of the Hon'ble Gujarat High Court in the case of Hemachand Hirachand Shah Vs CIT 206 ITR 55 (Guj). Hence, the ld DR has submitted that when the activity of purchase and sale of land is systematic and well planned with the motive to earn the profit by sale of the lands on a higher price to the companies then it is not an investment but it is in the nature of adventure and therefore, the Assessing Officer has rightly treated the same as business activity and assessed the surplus arising from the same as business income of the assessee. 5.1 As regards the land in question not capital asset U/s 2(14)(iii) of the Act, the ld. DR has submitted that when the assessee has purchased the land for resale purpose then the lands loses its character of agricultural lands. Further the assessee has not produced any evidence to show that the assessee has carried out agricultural operations on these lands as no agricultural income disclosed by the assessee. Even otherwise, the assessee is in the business of trading and not an agriculturist then the very purpose of purchase of a agricultural land was to sell on a higher price to the company for non-agricultural purpose. Once the land was purchased for resale and non-agricultural purposes then the benefit for exemption U/s 2(14) of the Act cannot be claimed on such land though it is shown as agricultural land in the revenue record.
7 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal The ld DR has relied upon the decision of the Hon'ble Supreme Court dated 19/11/1997 in the case of State of U.P. Vs. Nand Kumar Aggarwal & Ors. and submitted that the Hon'ble Supreme Court has held that it is not enough if the land is entered in revenue record as agricultural land but it is being used for the purpose of agriculture and mainly used for the purpose of agriculture to hold that the land is agricultural land. He has also relied upon the decision of Hon'ble Supreme Court in the Union of India Vs S. Muthyam Reddy 106 Taxman 501 (SC) and submitted that the decisions which were relied upon by the assessee as well as by the ld. CIT(A) while passing the impugned order were set aside by the Hon'ble Supreme Court. Thus, he has submitted that when the assessee purchased the lands not for carrying the agriculture operations but to resale the same for non-agricultural purposes then the land in question cannot be treated as agricultural land and therefore, even if the lands are situated beyond a distance of more than 8 k.m. from the municipal limits, it will not get the benefits of Section 2(14)(iii) of the Act. He has supported the order of the Assessing Officer.
6. On the other hand, the ld AR of the assessee has submitted that the lands sold by the assessee during the year under consideration were agricultural land and situated beyond 8 k.m. from the municipal limits and therefore, the same were not capital asset within the meaning of Section 8 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal 2(14) of the Act. The ld AR has further contended that the assessee sold the lands to the companies against the equity shares allotted and not against the cash consideration, therefore, one capital asset and investment was converted into another investment and hence the activity of purchase and sale is not business activity but it was investment in the capital asset by the assessee. He has further contended that the assessee paid stamp duty at the time of purchase and therefore, it shows the intention of the assessee to purchase the land as an investor as against the trader who generally does not pay the stamp duty but acquired the lands on the basis of the agreement to sell and then the sell the same without payment of stamp duty twice. Therefore, it is an investment in land. The ld AR has pointed out that the Assessing Officer has accepted the sale of agricultural land by the company M/s Grass Field Farms & Resorts Pvt. Ltd. while passing the assessment U/s 143(3) dated 27/12/2010 for the A.Y. 2008-09. Therefore, in a similar nature of transaction, the Assessing Officer has accepted the transaction as sale of agricultural land not liable to tax. The assessee has been consistently made investments in the land for the F.Y. 2003-04 and retained a portfolio of land. The assessee did not borrow fund to make the investment in land, therefore, it was an investment from assessee's own funds. The revenue has not disputed that the lands in question are 9 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal situated beyond 8 k.m. from the municipal limits and were not converted into stock in trade by the assessee in his books of account as per P&L account. The investment in land has no connection whatsoever with the ordinary course of business of the assessee, which was that of consultancy of import and export licenses, therefore, the transactions were not ordinary line of assessee's business. The assessee has not carried out any improvement or development work prior to the sale of the land and even the conversion charges were paid subsequently by the company i.e. the purchaser. When the assessee has not done any act for enhancement of the value of the land then it is a simple transaction of investment and the surplus arising from the sale of the lands is capital gain which is not chargeable to tax in view of Section 2(14)(iii) of the Act. In support of this contention, the ld AR has relied upon the following decisions:
1. J. Raghottama Reddy Vs. ITO (1988) 169 ITR 174.
2. Harrisons Malayalam Ltd. Vs. ACIT (2009) 32 SOT 497.
3. Agri Gold Foods & Farm Products Ltd. Vs CIT, ITA No. 451/Vizag/2012 order dated 30/07/2014.
4. ACIT Vs. Nilgiri Tea Estate Ltd. (2014) 47 taxmann.com 329 (Cochin Trib).
5. Singhai Rakesh Kumar Vs Union of India (2001) 115 Taxman 101 (SC).
10 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal
6. Manubhai A. Sheth Vs N.D. Nirgudkar, Second ITO 128 ITR 87 (Bom).
7. ACIT Vs. M/s Focal Point Builders & Promoters Pvt. Ltd. ITA No. 759/JP/2012 order dated 31/03/2016.
8. Raja Bahadur Kamakhya Narain Singh Vs CIT (1970) 77 ITR 253 (SC)
9. CIT vs. Smt. Debbie Alamao (2011) 196 Taxman 230 (Bom).
10. ACIT Vs Atma Ram Gupta ITA No. 529/JP/2012 order dated 29/05/2015.
He has further submitted that even otherwise the income arising from sale and transfer of agricultural land is an agricultural income as per Section 2(1A) of the Act. Thus, the ld AR has submitted that the Hon'ble Bombay High Court in the case of Manubhai A. Sheth Vs. N.D. Nirgudkar (supra) has held that profit or gain arising from transfer of land used for agricultural purposes is an agricultural income not to be included in the total income. A similar view has been taken by the Hon'ble Andhra Pradesh High Court in the case of J.Raghottama Reddy Vs ITO (supra). Thus, the Hon'ble High Courts have held that the capital gains made on sale of lands used for agricultural purposes would be revenue derived from such land and therefore, agricultural income within the meaning of Section 2(1A) of the Act. Consequently, the said income is not liable to income tax. The ld AR has further submitted that the decisions relied upon by the ld DR are distinguishable on facts and not applicable to the 11 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal facts of the assessee when the assessee has not done any improvement or development of the land before sale. He has further submitted that even the Hon'ble Supreme Court in the case of Union of India Vs. S. Muthyam Reddy (supra) has considered only the amendment brought to Section 2(1A) of the Act by way of insertion of explanation by the Finance Act, 1989 and therefore, only to the extent, the agricultural lands falling within the municipal limits or within 8 k.m. from the municipal limits will not be treated as agricultural income. Thus, the ld AR has submitted that the said decision of the Hon'ble Supreme Court does not upset the finding on the point that the lands which are situated beyond the distance of 8 k.m. from municipal limit as per Section 2(14)(iii) of the Act are not capital asset and consequently the income from sale of such lands are not taxable being agricultural income. He has supported the impugned order of the ld. CIT(A).
7. We have considered the rival submissions as well as relevant material on record. The first issue arises for our consideration and adjudication is whether the transaction of purchase and sale carried out by the assessee during the year under consideration are in the nature of trade and consequently the surplus/gain arising from sale of the lands is in the nature of business income or it is capital gain. The details of 12 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal purchase and sale of the lands are given by the Assessing Officer in para 2 of the assessment order as under:
S. Name of the seller Date of Amount Description of land No. registration purchased of purchase deed
1. Ramniwas, Rampal 17/05/2007 Rs. 21,50,200/- Khasra No. 424/5
2. Rambabu Kasana 04/06/2007 Rs. 6,04,900/- Khasra No. 424/5
3. Ramkaran 11/04/2007 Rs. 4,63,450/- Khasra No. 42/65
4. Shri Raj Kishor Gothwal 28/05/2007 Rs. 90,75,000/- Khasra No. 825/1/6/7/8
5. Kirtiraj Handia 25/05/2007 Rs. 9,65,790/- Khasra No. 522/4
6. Rajkishore Gothwal 25/05/2007 Rs. 2,86,180/- Khasra No. 365
7. Dinanath/Sitaram 31/05/2007 Rs. 57,275/- Khasra No. 542 Nagar
8. Dinanath/Sitaram 31/05/2007 Rs. 1,93,455/- Khasra No. 553 Nagar
9. Tej Singh 13/08/2007 Rs. 1,08,040/- Khasra No. 1504
10. Bhagwat 24/10/2007 Rs. 1,40,200/- Khasra No. 1505
11. Rajkishore Gothwal 28/05/2007 Rs. 32,30,025/- Khasra No. 825/1/6
12. Rajkishore Gothwal 28/05/2007 Rs. 32,30,025/- Khasra No. 825/1/7
13. Rajkishore Gothwal 28/05/2007 Rs. 32,30,030/- Khasra No. 825/1/8
14. Ramniwas/Rampal 31/05/2007 Rs. 21,50,200/- Khasra No. 424/5
15. Rambabu 04/06/2007 Rs. 6,04,900/- Khasra No. 424/5
16. Ladi & Chittar 09/06/2005 Rs. 10,04,990/- Khasra No. 825/1/3 S. Name of the purchaser Date of Amount Description of land No. registration sold of sale deed
1. M/s Grass Field Fire 13/06/2007 Rs. 70,50,000/- Khasra No. 424/5 Capital Developers Pvt.
Ltd.
2. M/s Grass Field Fire 13/06/2007 Rs. 24,46,362/- Khasra No. 47 Capital Developers Pvt.
Ltd.
3. M/s Grass Field Fire 13/06/2007 Rs. 11,04,808/- Khasra No. 52 Capital Developers Pvt.
Ltd.
4. M/s Grass Field Fire 13/07/2007 Rs. 18,18,832/- Khasra No. 520/-
Capital Developers Pvt.
Ltd.
5. M/s Grass Field Fire 13/07/2007 Rs. 6,21,477/- Khasra No. 501 Capital Developers Pvt.
Ltd.
13 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal
6. M/s Grass Field Fire 13/07/2007 Rs. 1168151/- Khasra No.504 Capital Developers Pvt.
Ltd.
7. M/s Grass Field Fire 13/07/2007 Rs. 973459 Khasra No. 446 Capital Developers Pvt.
Ltd.
8. M/s Grass Field Fire 13/07/2007 Rs. 973459/- Khasra No. 446 Capital Developers Pvt.
Ltd.
9. M/s Grass Field Fire 13/07/2007 Rs. 614816/- Khasra No. 448 Capital Developers Pvt.
Ltd.
10. M/s Grass Field Fire 13/07/2007 Rs. 6,14,816/- Khasra No. 448 Capital Developers Pvt.
Ltd.
11. M/s Grass Field Fire 13/07/2007 Rs. 6,66,250/- Khasra No. 73 Capital Developers Pvt.
Ltd.
12. M/s Grass Field Fire 13/07/2007 Rs. 21,05,350/- Khasra No. 74 Capital Developers Pvt.
Ltd.
13. M/s Grass Field Fire 13/07/2007 Rs. 1,33,250/- Khasra No. 75 Capital Developers Pvt.
Ltd.
14. M/s Grass Field Fire 17/08/2007 Rs. 14,58,571/- Khasra No. 42 Capital Developers Pvt.
Ltd.
15. M/s Grass Field Fire 17/08/2007 Rs. 11,51,504/- Khasra No. 65 land Developers Pvt.
Ltd.
16. M/s Grass Field Fire 30/05/2007 Rs. 40,83,750/- Khasara No. 825/1/3 Capital Developers Pvt.
Ltd.
There is no dispute that there are 16 transactions of purchase of the lands during the financial year relevant to the assessment year under consideration and equal number of transactions of sale by the assessee. On careful analysis of these details, it could be noted that some of the lands purchased during the year were also sold during the same year and even within a period of less than one month. It is evident from these 14 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal details that the land purchased during the year bearing khasra No. 424/5 on 31/5/2007 was sold on 30/6/2007. Therefore, the said sale was within a period of 13 days from the date of purchase. Similarly some of the other transactions of land bearing khasara No. 42 and 65 were also sold within a period of four months from the date of purchase. Thus, it is discernable from the number of transactions carried out by the assessee one after another during the year under consideration and the period of holding is less than month and in some cases within few months which cannot be on the face of it regarded as investments made by the assessee in agricultural lands. The intention of the assessee for purchase of the land is also not in dispute that it was for resale and within a short period of time though the sale is only to the companies of which the assessee is a Director. Thus, it is apparent that the assessee was acting as an interface to purchase the lands from the land owners and then converted in non- agricultural use and sold to these companies who are in the business of real estate. The ld AR has relied upon the decision of the Hon'ble Supreme Court in the case of Raja Bahadur Kamakhya Narain Singh Vs CIT (supra) and submitted that when the assessee has received the consideration in the shape of equity shares of these companies then it is a conversion of investment in land into investment in shares and cannot be treated as business activity, however, in our considered view the said 15 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal decision cannot be applied to the facts of the present case as in the said case, the assessee initially purchased the government securities and on sale of the government securities, the assessee deposited the amount in the bank and the gain arising from the said sale of government securities was assessed by the Assessing Officer as business income. However, the Tribunal reversed the finding by holding the same as sale of capital asset. Subsequently the assessee in the said case purchased shares and debentures out of the sale proceeds of government securities and thereafter those shares were also sold and gold was purchased. The transactions run through the years from 1938-39 to 1941-42 and for initial years, the Tribunal has held that the surplus amount was capital gain and not business profits. However, when the assessee subsequently sold the securities and gold within a short span of time then the Tribunal has held that the assessee was dealing in shares and so as in gold and confirmed the orders of the Income Tax Officer rejecting the assessee's case that the gold was purchased by him owing to the war crisis and sold by him on the account of pressing necessities. Thus, considering all these peculiar facts of the said case, the Hon'ble Supreme Court has held that the transactions were in the nature of mere change in the investment carried out from one form to another form. In the case in hand, it is not a single investment and then the same investment was changed in another 16 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal investment but the assessee has carried out repeated transactions of purchase and sales and not the transaction of entire purchase and then entire sale. The details of the purchase and sale clearly manifest the patron in which the assessee has carried out the transactions with the sole purpose of selling the land purchased one after another and in between purchasing another lands, therefore, these transactions are not in the nature of investment made by the assessee in one lot and then after a considerable period of time, the assessee has sold the land and earned the profit/gain but these are regular and systematic transactions of purchase and sale without having any intention to retain these lands or to carry out any agricultural operations on the same. Further the assessee has also taken a plea that the assessee has not treated these lands as stock in trade in the books, however, it is also not a disputed fact that the assessee is not maintaining regular books of account and therefore, the books of account cannot be relied upon in support of the claim of investment or stock in trade. The nature of transaction has to be determined only by looking into the bare details of the transactions and intention of the assessee for purchase of agricultural land. The consideration received in the form of share capital of the companies owned by the assessee would not change the character of transaction as the lands were purchased by the assessee from the agriculturists then 17 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal those lands were converted to non-agriculture at the time of sale to the company. The assessee has contended that conversion charges were paid by the company and not by the assessee, however, it is not relevant once the assessee being the Director of those companies then the payment of conversion charges shown by these companies are also in furtherance of the purpose to be achieved by inflating the cost of acquisition in the hands of the company and maximum gain in the hand of the assessee so as to avoid the tax liability on the entire series of transactions by the assessee as well as by the companies.
7.1 In order to determine the real nature of transaction whether it is adventurous being business transactions or investment, various factors are to be taken into consideration. The intention of the assessee at the time of purchase, treatment of the land in question, holding period, actual use of land, location of land, surrounding circumstances and near future use of land etc. are the relevant criteria for the purpose of determining the nature of transaction. In the case in hand, there is no dispute that the assessee has purchased the lands in question with the intention to sell without holding it for a considerable period of time. The actual use of land and the intended future use of land is also not in dispute as it was not for agriculture purpose as subsequently the lands were converted for non- agricultural use. The location of the land and the area surrounding the 18 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal land are also in the process of development of real estate for non- agricultural purpose and therefore, the entire exercise of purchase and sale of agricultural lands in questions were to use the same for development of real estate. Hence, the lands have no more retained the character of agricultural land. When the entire surrounding area was under real estate development and already developed area then the transaction of purchase and sale of said agricultural land not a isolated single transaction but a systematic repeated transactions are with the motive and view to earn profit on resale. The Pune Benches of the Tribunal in the case of Dilip Battu Karanjule Vs ITO (supra) has considered an identical issue in para 7.8 to 10 as under:
"7.8 Pertinent to note here that the Hon'ble Supreme Court in the case of Dalmia Cement Ltd. v. CIT [1976] 105 ITR 633 held that it is not possible to evolve any single legal test or formula which could be applied in determining whether a transaction is an adventure in the nature of trade and that the answer to the question must depend in each case on the total impression and effect of all the relevant factors and circumstances proved therein and which determine the character of the transaction. 7.9 Thus, the cumulative facts and circumstances seen holistically and read in conjunction the tests or parameters laid down by judicial precedents provides sound basis to infer the intention of commercial gain in the impugned transaction.
8. Having regard to the totality of facts and circumstances, we have no hesitation to hold that the impugned land was purchased with an intention to sell the same to the identified buyers to achieve commercial objectives outright. As noted earlier, section 2(13) of the Act seek to explain the term of 'business' by way of inclusive definition. As per section 2(13) expression 'business' include not only trade or commerce, etc. but definition further extends to encompass within its ambit an 'adventure in the nature of trade'. The entire gamut of action of the assessee in engaging in such big ticket land purchase without employing any fund of his own and almost immediate re-sale thereof clearly demonstrates the implicit
19 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal intention of the assessee that the transaction entered was nothing but an 'adventure in the nature of trade' i.e. a business transaction under extended definition of S. 2(13) of the Act. Consequently, profits arising therefrom acquires the character of 'business income' chargeable under S. 28 of the Act.
9. Several judicial precedents were quoted on behalf of the assessee to support his case. As already noted, the issue is essentially factual and thus inference would vary from case to case depending on its own facts. The decision of co-ordinate bench of Tribunal in Anil R. Bihani v. ITO [IT Appeal No. 2502 (PN) of 2012, dated 11-4-2016] relied upon by assessee was rendered in its own set of facts and is clearly distinguishable. There is no reference to any borrowed funds for acquisition of asset in that case. The purchase was thus out of its own resources which fact serves as one of the crucial indicators of the intention read in conjunction with other facts in the present case. Similarly, decisions in the case of Marigold Merchanise (P.) Ltd. v. Dy. CIT [2015] 55 taxmann.com 358 (Delhi - Trib.); Surendra Keshavlal Shah v. Dy. CIT [IT Appeal No. 1308 (PN) of 2011, dated 24-7-2015] & ACIT v. Alpana Surendra Sancheti [IT Appeal No. 1081 (PN) of 2011 order dated 22/03/2013] referred to and relied upon at the time of hearing were perused and found to be materially different in facts qua the facts of this case in terms of borrowals, capacity to hold the property acquired, time horizon of holding, exploitation for cultivation of crop etc. where each of these facts may have material bearing in the determination of intention at the time of acquisition of a property. Thus, we are unable to reconcile the facts of the present appeal with the precedents quoted at the bar. Suffice it to say that in none of these judgments cited, the action of purchase of land were found to be in concert with the ultimate and identified buyers and ownership were transferred in such a short span of time without putting the purported agricultural land for its use at any point of time. It is settled position in law that the decision of the Court has to be read in the context of the facts involved therein and not on the basis of what logically flows therefrom as held by the Supreme Court in Ambica Quarry Works v. State of Gujarat [1987] 1 SCC 213. In this view of the matter, we concur with the view of the Assessing Officer and the CIT (A) in bringing the income arising on sale of land under the head 'business income'.
10. In view of the aforesaid discussion, we do not consider it necessary to go into the other aspects of controversy as to whether the impugned land was agricultural land or otherwise as these aspects are relevant only for the purpose of taxability under the head 'capital gain' in the light of section 2(14) of the Act."
Even otherwise the decisions relied upon by the ld AR of the assessee cannot be straightway applied but the question of nature of transaction 20 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal has to be decided depending upon the relevant facts and circumstances of each case. Thus there cannot be a single criteria which can be applied to each and every case for determining the question of nature of transaction whether it is adventurous in nature or merely an investment. This is a mixed question of law and facts and the principle of law can be applied depending upon the facts of each case. In the case in hand when the facts clearly revealed the intention and patron of the transaction which is nothing but adventurous in nature then the large number of transactions were entered into within a short period of time shows that it was an organized business activity and there was no intention of the assessee to hold these lands as an investment. It appears that it was predetermined between the parties as the assessee has to play the role of an intermediary in these transactions of purchase and subsequently transferred to the companies and in this process, the assessee has earned a huge profit, which is not possible in the normal transaction of investment in such a short span of time. Therefore, in the totality of the facts and circumstances of the case, we are of the considered view that the transactions are carried out with a clear intention to earn the profit in a short period of time with a preplanned organized manner and activity, which is nothing but nature of business. The Hon'ble Gujarat High Court in the case of Hemachand Hirachand Shah Vs CIT(supra) while 21 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal considering the issue of purchase and sale of land is a business or an adventure in nature of trade or investment as held in para 4to 8 as under:
"4. On the facts of the case and from the material on record we find that the explanations offered by the assessee for disposing of the lands soon after his purchase are just not acceptable. The explanation of the assessee in most of the cases is that the lands were 'dabhada' lands, on which considerable expenditure would have to be incurred in order to develop them and make them fit for agricultural operations. It should be noted that the assessee who professes to be an agriculturist would be aware of the nature and character of the land he is purchasing particularly when he professes to purchase the said lands for the purpose of agriculture. We cannot accept a situation where such agriculturist would purchase a land for the purpose of agriculture, on an assumption or an observation that it would be fit for agriculture, and immediately after the purchase, arrive at a conclusion that it would be uneconomical to develop the same for agriculture and would, therefore, be required to dispose of the same. We find the assessee to have entered into a series of transactions of purchase and sale, and in each case, the sale was within a reasonably short time of the purchase. Thus, the very fact that large number of such transactions was entered into within a reasonably short period of time enables us to reach a conclusion that it was an organised business activity on the part of the assessee.
5. The contention raised on behalf of the assessee before the Tribunal to the effect that his explanation ought to have been accepted as aforesaid, is unreasonable and has rightly been rejected by the Tribunal.
6. On a totality of the assessment of the facts and circumstances of the case and on the material on record we find that the conclusion arrived at by the Tribunal is correct. In this context we also find that the assessee was, at least so far as the transactions in question are concerned, carrying on business or an adventure in the nature of trade, and that, therefore, the profit which accrued from such transactions would be taxable as business income.
7. In view of our observations made hereinabove we do not propose to enter into a detailed discussion as to the treatment given by the Tribunal on the material on record and the appreciation of such evidence. Suffice it to say that the conclusions drawn by the Tribunal on the basis of such material is eminently reasonable and sustainable and it cannot be said that the Tribunal erred in law in arriving at such conclusion.
8. In the aforesaid premises, the question before us would be required to be answered in the affirmative. Accordingly, we hold that the Tribunal was right in law in holding that the assessee was carrying on a business or an adventure in the nature of trade when he purchased and sold certain agricultural lands."
Accordingly, in view of the above discussion and following the decisions of Hon'ble Gujarat High Court (supra) we set aside the impugned order of 22 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal the ld. CIT(A) qua this issue and restore the finding of the Assessing Officer.
7.2 On the alternative plea that even if the activity of the assessee considered as business, the income derived from sale of the agricultural land is an agricultural income, we find that before going into the said issue whether the sale of agricultural land results in agricultural income or capital gain not liable to tax U/s 2(14)(iii) of the Act, the expression agricultural land itself has to be taken into consideration. The question whether a particular land is agricultural land was first considered by the Constitutional Bench of the Hon'ble Supreme Court in the case of Commissioner of Wealth Tax Vs. Officer in Charge (Court of Wards) 105 ITR 133. The definition of agricultural land within the meaning of Section 2(e) of Wealth Tax Act was considered and it was observed by the Hon'ble Supreme Court that to determine the character of land according to the purpose for which it is meant or set apart and can be used, is a matter which ought to be determined on the facts of each particular case. What is really required to be shown is the connection with an agricultural purpose and user and not the mere possibility of user of land, by some possible future owner or possessor, for an agricultural purpose. It is not the mere potentiality, which will only affect its valuation as part of "assets", but its actual condition and intended user which has to be seen 23 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal for purposes of exemption from wealth-tax. The Hon'ble Supreme Court in a subsequent decision in the case of Smt. Sarifabibi Mohmed Ibrahim v. Commissioner of Income-tax 204 ITR 631 has referred to the decision of the Constitution Bench in the case of Commissioner of Wealth Tax Vs. Officer in Charge (Court of Wards) (supra) at page 637 and 638 as under:
"Whether a land is an agricultural land or not is essentially a question of fact. Several tests have been evolved in the decisions of this Court and the High Courts, but all of them are more in the nature of guidelines. The question has to be answered in each case having regard to the facts and circumstances of that case. There may be factors both for and against a particular point of view. The Court has to answer the question on a consideration of all of them--a process of evaluation. The inference has to be drawn on a cumulative consideration of all the relevant facts.
The first decision of this Court which considered the meaning of the expression 'agricultural land' is in CIT v . Raja Benoy Kumar Sahas Roy [1957] 32 ITR 466. But the question there was whether the income from forest land derived from sal and piyasal trees, 'not grown by human skill and labour' constitutes agricultural income? The decision that directly considered the issue, though under the Wealth-tax Act, 1957 is in CWT v. Officer-in-charge ( Court of Wards) [1976] 105 ITR 133 (SC) (hereinafter referred to as the Begumpet Palace case). It was an appeal from a Full Bench decision of the Andhra Pradesh High Court. The High Court had taken the view, following a decision of the Madras High Court in T. Sarojini Devi v. T. Sri Krishna AIR 1944 Mad. 401, that the expression 'agricultural land' should be given the widest meaning. It held that the fact that the land is assessed to land revenue as agricultural land under the State Revenue Law is a strong piece of evidence of its character as an agricultural land. On appeal, a Constitution Bench of this Court held that; (a) Inasmuch as agricultural land is exempted from the purview of the definition of the expression 'assets', it is 'impossible to adopt so wide a test as would obviously defeat the purpose of the exemption given'. The idea behind exempting the agricultural land is to encourage cultivation of land and the agricultural operations. "In other words this exemption had to be necessarily given a more restricted meaning than the very wide ambit given to it by the Full Bench of the Andhra Pradesh High Court", (b) What is really required to be shown is the connection with an agricultural purpose and user and not the mere possibility of user of land by some possible future owner or possessor, for an agricultural purpose. It is not the mere potentiality but its actual condition and intended user which has to be seen for purposes of exemption, (emphasis supplied) (c) "The person claiming an exemption of any property of his from the scope of his assets must satisfy the conditions of the exemption", (d) "The determination of the character of land,
24 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal according to the purpose for which it is meant or set apart and can be used, is a matter which ought to be determined on the facts of each particular case", (e) The fact that the land is assessed to the Land Revenue as agricultural land under the State Revenue Law is certainly a relevant fact but it is not conclusive." Whether a land is an agricultural land or nor is essentially a question of fact and several tests has to be applied as laid down by the Hon'ble Supreme Court and Hon'ble High Courts though all of them are mere in the nature of guidance. The question has to be answered in each case having regard to the facts and circumstances of the case. As it is clear that the Hon'ble Supreme Court has held that the land is assessed to land revenue as an agricultural land is not a conclusive fact and the question is to be decided by considering various factors including whether the land is used for cultivation and agriculture operations are carried out. Thus what is really required to be seen in connection with an agricultural land is the connection with agricultural purpose and user and not the mere possible of user of land by some possible future owner. The Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim v. Commissioner of Income-tax (supra) has also considered the decision of Hon'ble Bombay High Court in the case of CIT Vs. V.A. Trivedi 172 ITR 95 and observed at page 641 as under:
" The Bench observed that to ascertain the true character and the nature of the land, it must be seen whether it has been put to use for agricultural purposes for a reasonable span of time prior to the relevant date and further whether on the relevant date the land was intended to be put to use for agricultural purposes
25 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal for a reasonable span of time in the future. Examining the facts of the case from the said point of view, the Bench held that the agreement entered into by the assessee with the Housing Society is the crucial circumstance since it showed that the assessee agreed to sell the land to Housing Society admittedly for utilisation for non-agricultural purposes. The sale-deeds were executed four months after the agreement of sale and even if any agricultural operations were carried on within the said span of four months, - the Bench held - it was evidently in the nature of a stop-gap arrangement. On the date the land was sold, the Bench held, the land was no longer agricultural land which is evident from the fact that the assessee had obtained permission even in August 1966 to convert the said land to non-agricultural purposes." The Hon'ble Bombay High Court in the case of CIT Vs. V.A. Trivedi (supra) has laid down the principle for ascertaining the true character and nature of the land that it must be seen whether it has been put to use for agricultural purposes for a reasonable span of time prior to relevant date and further the land was intended to be put to use for agricultural purpose for a reasonable time period in future. If the principles laid down by the Hon'ble Supreme Court as well as the Hon'ble High Court are to be applied in the facts of the present case then one can safely say that the land purchased by the assessee, who is not an agriculturist for the intention to resale it to the company as per their predetermined plan loses its character the moment the assessee purchased the lands with the intention to be used in future for non-agricultural purposes. Hence, the land was no longer agricultural land when the assessee purchased it for resale and was converted to non-agricultural use at the time of sale to the company. The Hon'ble Supreme Court after considering the various 26 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal decisions on the point as well as the facts as held at page 642 and 643 as under:
" Now, we may consider the various circumstances appearing for and against the appellant's case. The facts in their favour are: land being registered as agricultural land in the Revenue records; payment of land revenue in respect thereof till the year 1968-69; absence of any evidence that it was put to any non- agricultural use by the appellants; that the land was actually cultivated till and including the agricultural year 1964-65; that there were agricultural lands abutting the said land and that the appellants had no other source of income except the income from the said land. As against the above facts, the facts appearing against their case are: the land was situated within the municipal limits
- it was situated at a distance of one kilometer from the Surat railway station; the land was not being cultivated from the year 1965-66 until it was sold in 1969; the appellants had entered into an agreement sale with a Housing Co-operative Society to sell the said land for an avowed non-agricultural purpose, namely, construction of houses; they had applied in June 1968 and March 1969 for permission to sell the said land for non-agricultural purposes under section 63 of the Bombay Tenancy and Agricultural Lands Act and obtained the same on 22-4- 1969; soon after obtaining the said permission they executed sale-deeds in the following month, i.e., in May 1969; the land was sold at the rate of Rs. 23 per sq. yd. and the purchaser-society commenced construction operations within three days of purchase. What is the inference that flows from a cumulative consideration of all the aforesaid contending facts? This question has to be answered keeping the criteria evolved in Begumpet Palace's case (supra) set out hereinbefore. In our opinion, the entering into the agreement to sell the land for housing purposes, the applying and obtaining the permission to sell the land for non-agricultural purposes under section 63 and its sale soon thereafter and the fact that the land was not cultivated for a period of four years prior to its sale coupled with its location, the price at which it was sold do outweigh the circumstances appearing in favour of the appellants' case. The aforesaid facts do establish that the land was not an agricultural land when it was sold. The appellants had no intention to bring it under cultivation at any time after 1965-66 certainly not after they entered into the agreement to sell the same to a Housing Co-operative Society. Though a formal permission under section 65 of the Bombay Land Revenue Code was not obtained by the appellants, yet their intention is clear from the fact of their application for permission to sell it for a non-agricultural purpose under section 63 of the Bombay Tenancy Agricultural Lands Act.
We are, therefore, of the opinion that the High Court was right in holding that the said land was not an agricultural land at the time of its sale and that the income arising from its sale was not exempt from the capital gains tax. The appeals, accordingly, fail and are dismissed. No costs."
27 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal It was considered by the Hon'ble Supreme Court that the assessee entered into an agreement to sell the land for housing purpose after applying and obtaining the permission to sell the land for non-agricultural purpose and therefore, when the land was neither cultivated prior to the sale nor to be cultivated in future coupled with the factors of its locations and prices established that the land was not an agricultural land when it was sold. This issue was again considered by the Hon'ble Bombay High Court in the case of Gopal C Sharma Vs CIT 209 ITR 946 and by following the decision of Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim v. Commissioner of Income-tax (supra), the Hon'ble High Court has observed and held in para 13, 24 to 26 as under:
"13. The expression 'agricultural land' is not defined under the Act. The question as to whether the land in question was liable to be considered as agricultural land for purpose of income-tax is liable to be decided with reference to the criteria laid down by judicial decisions of the Supreme Court and High Courts. The underlying object of the Act to exempt 'agricultural income' from income-tax is to encourage actual cultivation or de factoagricultural operations. Actual user of the land for agricultural purpose or absence thereof at the relevant time is undoubtedly one of the crucial tests for determination of the issue. It is well settled that the nature and character of land may undergo a change depending upon its situation, growth of locality, zone in which it is situate and its potentiality. According to recent decisions of the Supreme Court, the fact that the land is sold or transferred to a non-agriculturist for a non- agricultural purpose or that it is likely to be used for non-agricultural purpose soon after its transfer is also a relevant factor germane to the determination of the issue. Merely because the land was used for
28 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal agricultural purpose is remote past or it continue to be assessed to land revenue on the footing of agricultural land is not decisive. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
24. The learned counsel for the assessee mainly relied upon the Division Bench judgment of this Court in the case of CWT v. H.V. Mungale [19841145ITR 208, ratio of judgment of the Division Bench of this Court in the case of Wealth-tax Reference No. 5 of 1964 decided on 4-12-1973 and the judgment of this Court in CIT v. P.C. Joshi and B.C. Joshi [1993] 202 ITR 1017 . The thrust of the argument of the learned counsel for the assessee is that the fact that the land was lying vacant and not used for cultivation for several years was not of any legal consequence. The learned counsel for the assessee submitted that the Court must presume that the vacant land continued to be 'agricultural land' in nature and character once it was shown that the land was assessed to land revenue as an agricultural land. The learned counsel for the assessee relied upon the last two paragraphs from the judgment of Chandurkar, J. as his Lordship then was from H.V. Mungale's case (supra) wherein it was observed that unless the land was allowed to be converted for non-agricultural purpose by the order of Collector under the provisions of the Land Revenue Act, the initial presumption to the effect that the land was agricultural in nature would continue to operate. To some extent, some of the observations appear to be in conflict with the view now taken by the Supreme Court in Smt. Sarifabibi Mohmed Ibrahim's case (supra). It is far too obvious to us that the view taken by the Supreme Court inSarifabibi Mohmed Ibrahim's case (supra) would prevail. In our opinion, the principles laid down by the Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim (supra) and by this Court in V.A. Trivedi's case (supra) do emphasise the factor of non-user of the land for cultivation for reasonable span of time prior to the date of transfer as a crucial factor for determination of the issue. Applying the ratio of the Supreme Court judgment in Smt. Sarifabibi Mohmed Ibrahim's case (supra) to the facts of the case, we hold that the reference lands could not be considered as 'agricultural lands' on the date of transfer.
25. The AAC and the Tribunal were more than justified in highlighting the fact that the reference lands were situate in heavy industrial zone and that the said lands were not in fact used or intended to be used for agricultural purpose at the relevant time since several years. The AAC 29 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal also recorded finding of fact based on relevant evidence that at least 10 acres of the land out of 25 acres was in fact used for non-agricultural purposes by Larsen & Toubro Ltd. since the year 1960, i.e., for 7 years prior to the date of transfer of the land. If the relevant tests laid down by the Supreme Court in Smt Sarifabibi Mohmed Ibrahim's case (supra) and the test laid down by this Court in V.A. Trivedi's case (supra) are to be applied to this case as they ought to be, it would become obvious that the finding of fact arrived at by the ITO, the AAC and the Tribunal cannot be characterised as perverse or unsupported by evidence or erroneous in law. It is not possible to accept the submission made by the learned counsel for the assessee that the authorities below did not apply the correct test or misdirected themselves in law or that the finding of fact arrived by the Tribunal was not supported by evidence.
26. In view of the above discussion we do not think it necessary to refer to the other authorities cited at the Bar. We uphold the finding of the Tribunal to the effect that the reference lands were not agricultural lands."
It is held by the Hon'ble Bombay High Court that the future use of land was non-agricultural purpose and therefore, the same cannot be categorized as agricultural land at the time of sale. This fact of future use of land is not in dispute in the case before us even the assessee not an agriculturist and has no intention to carry out the agricultural operations on the lands in question clearly established the intended future use for non-agricultural purpose. Therefore, in facts and circumstances of the present case and applying the test as laid down by the Hon'ble Supreme Court and the Hon'ble Bombay High Court we have no hesitation to hold that the land in questions does not fall under the exclusion clause (iii) of Section 2(14) of the Act being the agricultural land. Accordingly, the profit 30 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal earned by the assessee of sale of such land cannot be regarded as exempt income U/s 2(14) or as an agricultural income in terms of definition U/s 2(1A) of the Act. The ld AR of the assessee has given much emphasis on the explanation to Section 2(1A) of the Act and also relied upon the decision of Hon'ble Bombay High Court in the case of Manubhai A. Seth Vs N.D. Nirgudkar, Second ITO as well as decision of Hon'ble Andhra Pradesh High Court in the case of J. Raghottama Reddy Vs ITO (supra). Since these decisions were based on the fact that the lands were undisputedly agricultural lands, therefore, once we hold that the land in questions cannot be regarded as agricultural land as the same loses its character of agricultural land the moment the assessee purchased the lands for the sole purpose of reselling to the companies in which the assessee is a Director and to be used for non-agricultural purposes. Therefore, these decisions cannot be applied in this case. Secondly those decisions were challenged by the revenue before the Hon'ble Supreme Court and the Hon'ble Supreme Court in the case of Union of India Vs. S. Muthyam Reddy (supra) has held as under:
"1. This appeal is by special leave against an order passed by the High Court of Andhra Pradesh in a batch of cases. By that order, the High Court considered the effect of a combined reading of sections 2(1A) and 2(14 ) of the Income-tax Act, 1961 ('the Act') and has held that (i) capital gains arising from sale of land used for agricultural purposes would be revenue derived from such land and, therefore, 'agricultural income' within the definition under section 2(1A) with the result that Parliament would have no legislative competence to tax such agricultural income; and (ii) amended
31 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal section 2( 14)(iii) should be read down to preserve its constitutionality. All land used for agricultural purposes whether situated in areas mentioned in section 2(14)( iii)(a) and (b) should be held to be excluded from the definition of 'capital asset'. Thus section 2(14)( iii) should read as excluding from capital asset agricultural land in India, not being land situated in the areas mentioned therein. Upon such interpretation, section 2(14)(iii ) does not enable levy of tax on capital gains arising from transfer of land which is used for agricultural purposes wherever it may be situated.
2. In this appeal, challenge to this order is based on many grounds and our attention has been drawn to several decisions not only taking similar but also a contrary view. The respondents having remained ex parte, we requested Shri Dhruv Mehta, the learned advocate, to assist the Court as amicus curiae. We are beholden for the valuable assistance rendered by him to the Court.
3. By the Finance Act, 1989, Explanation to section 2(1A) is inserted with effect from 1-4-1970 to supersede the view expressed in the order under appeal and several decisions setting out similar ratio. This declaratory amendment having retrospective operation though coming into force during the pendency of this appeal must be given effect to. The said Explanation clearly declares that the revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in section 2(14)( iii)(a) or (b). The upshot of the same is that income derived from sale of such agricultural lands cannot be treated as 'agricultural income'. Thus, the whole basis of the decision has been lost and, therefore, the order under appeal cannot be sustained and deserves to be set aside.
4. Shri Dhruv Mehta pointed out that by an artificial definition introduced into the Act what is agricultural income cannot be treated otherwise. He also sought to explain the scheme of the entries in the different lists of the Constitution in support of his contention.
5. The learned counsel for the appellants pointed out that under article 366(1) of the Constitution 'agricultural income' has the same meaning as defined under enactments relating to income-tax.
There is divergence of opinion amongst the High Courts as to the effect of section 2(14)(iii ) as amended by the Finance Act, 1970, and hence the Parliament introduced the Explanation by the Finance Act, 1989 stating the meaning thereto which is in conformity with the view expressed by some High Courts. He submitted, therefore, doubts arising as to interpretation by reason of conflict of decisions of the High Courts is resolved by law and such a provision cannot be invalid.
6. Inasmuch as there is no challenge to the validity of the Explanation to section 2(1A) inserted into the Act by the Finance Act, 1989, we are afraid, we cannot examine the correctness of the said submission. We leave open this question to be raised for consideration in an appropriate proceeding.
32 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal
7. In the result, we allow this appeal and set aside the order of the High Court.
No order as to costs."
Thus, the decisions were set aside by the Hon'ble Supreme Court as it is held in para 3 of the Hon'ble Supreme Court's order (supra). Accordingly, the decisions relied upon by the ld AR would not help the case of the assessee. The ld AR has also relied upon the various decisions of this Tribunal on this point, however, all those decisions were on different set of facts and were passed without considering the decision of the Hon'ble Supreme Court in the case of Union of India Vs. S. Muthyam Reddy (supra). Accordingly, those decisions are no more a binding precedent. 7.3 It is pertinent to note that incentive of exempting the agricultural land from definition of capital asset and consequently from chargeability of income tax is to encourage the cultivation of land and preserve the character of agricultural land to be used for cultivation and agricultural operations. Therefore, the scheme and the object of providing these incentives to keep the income arising from agricultural land exempt from tax is to promote more and more agricultural operations by the agriculturists and the sole object of this incentive is not to tax the agriculturists who is dealing, cultivating and carrying out the agricultural operations on the agricultural land and then in case if the said land is sold the same is excluded from the purview of income tax either on capital 33 ITA 523/JP/2012_ ACIT Vs. Sunil Bansal gain or agricultural income. Therefore, claiming the said exemption by business person merely because he has purchased the land and then sold it would be defeating the very purpose of the incentive which is only for the genuine cultivator of the land. Hence, in view of the above discussion, various decisions and facts and circumstances of the case, we hold that the income arising on sale of the lands in question is not exempt from income tax either as a capital gain U/s 2(14)(iii) or as an agricultural income U/s 2(1A) of the Act. This issue is decided against the assessee and in favour of the revenue.
8. In the result, appeal of the revenue is allowed.
Order pronounced in the open court on 06/11/2018
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vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- The ACIT, Circle-3, Jaipur.
2. izR;FkhZ@ The Respondent- Shri Sunil Bansal, Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 523/JP/2012) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar