Income Tax Appellate Tribunal - Pune
Hemant B. Motadu,, Pune vs Income-Tax Officer,, on 30 May, 2017
आयकर अपीलीय अिधकरण,
अिधकरण पुणे यायपीठ "बी
बी"
बी पुणे म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
ी डी.
डी. क णाकरा राव , लेखा सद य
एवं ी िवकास अव थी,
अव थी याियक सद य के सम
BEFORE SHRI D.KARUNAKARA RAO, AM
AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA No. 283/PUN/2014
िनधा रण वष / Assessment Year : 2009-10
Sri Hemant B. Motadu, .......... अपीलाथ /
No.2394, Solapur Road, Appellant
Pulgate, Camp,
Pune - 411 001
PAN : AAXPM9935D
बनाम v/s
ITO, Ward-4(5),
Pune .......... यथ /
Respondent
Assessee by : Shri Pawan Chakrapani
Revenue by : Shri Sudhanshu Shekhar
सुनवाई क तारीख / घोषणा क तारीख /
Date of Hearing :25.05.2017 Date of Pronouncement: 30.05.2017
आदेश / ORDER
PER D. KARUNAKARA RAO, AM :
This appeal filed by the Assessee is directed against the order of the Commissioner of Income Tax (Appeals)-II, Pune, dated 25-10-2013 for the Assessment year 2009-10.
2. Ground Nos.1 and 9 to 11 are said to be either general in nature or consequential in nature. Accordingly, the same are dismissed. Rest of the grounds raised by the assessee are extracted as under :
"2. The appellant denies himself liable to be assessed in respect of gains arising from sale of agricultural land amounting to Rs.58,21,520/- as business income under the facts and circumstances of the case.2 ITA No.283/PUN/2014
3. The learned authorities below are not justified in treating the agricultural land as business asset under the facts and circumstances of the case.
4. The learned authorities ought to have considered the fact that the lands sold are agricultural lands & do not even partake the character of Capital assets u/s.2(14)(iii) of the Act much less Business assets, under the facts and circumstances of the case.
5. The learned authorities below are not justified in applying the ratio adventure in the nature of trade for sale of agricultural land under the fact and circumstance of the case.
6. The learned authorities below ought to have considered the fact that as per the no person other than a agriculturist can own agricultural land in the State of Maharashtra & purchase & sale of the same cannot be done as a business transaction.
7. The learned authorities below are not justified in treating the agricultural land as business asset when it is mentioned as agricultural land as per the revenue records under the facts and circumstances of the case.
8. The learned authorities below are not justified in stating that no agricultural operations were carried out even when the appellant has submitted that the appellant carried out agricultural operations under the facts and circumstances of the case."
3. Briefly the relevant facts are that the assessee is a Tailor-cum-Real Estate Agent. He earns not only the tailoring charges but also the commission income for arranging properties for rentals. During the year the assessee offered income out of (1) Tailor receipts - Rs.7,87,517/- and (2) Commission receipts - Rs.5,89,572/-. Further, the assessee entered into transactions of purchase and sale of properties for development located at Sus Village, Kondhwa Khurd, Hinjewadi and Bhivari. Assessee filed the return of income declaring total income of Rs.5,50,710/-. Assessment was completed determining the assessed income at Rs.70,00,250/-. With regard to the business transactions involving the properties located at Sus Village, Kondhwa Khurd and Hinjewadi, there is no dispute before us. The incomes earned from the related transactions were taxed as Business income. However, with regard to the purchase and sale of transaction of land at Bhivari, the assessee claimed 3 ITA No.283/PUN/2014 exemption considering the agricultural nature of the lands at Bhivari. The relevant facts are given at pages 5 and 6 of the assessment order which read as under :
"Sale of land at Bhivari The assessee has sold agricultural land admeasuring 3.80 R at village Bhivri, Tal. Haveli, Dist. Pune for consideration of Rs.1,38,75,000/- vide agreement dt. 3-6-2008. This land was purchased on 5-12-2006 for a consideration of Rs.19,42,500/-. This was purchased jointly with Shri Tushar Atmaram Kalate. The assessee has claimed sale commission of Rs.4,62,500/- out of pocket expenses from purchase cost. Except self made cash vouchers no other supporting evidence has been produced to prove the nexus of these expenses with the above transaction. However, 1,85,000/- is allowed as deduction based on the vouchers. The profit on sale of this transaction is worked out as under :
Sale consideration Rs.13875000
Less Commission Paid Rs. 185000
----------------
Rs.13690000
Less : Purchase price including
Stamp duty registration charges
(104660) Rs.2046960
----------------
Rs.11643040
Assessee's share 50% Rs. 5821520
It is evident from the series of transaction as above the purchase and sale of this land is within the intention of earning profit. Therefore profit on sale of this land of Rs.58,21,520/- is considered as business income of the assessee."
4. Aggrieved with the above conclusions of the Assessing Officer the assessee filed appeal before the CIT(A). Before him, assessee submitted that the above land was purchased by the assessee at Bhivari on 5-12-2006 with an intention to cultivate the land for Botanical and Medicinal Plantation jointly with Shri Tusharam Atmaram Kalate. Mr. Tushar Atmaram Kalate owns the other agricultural land adjacent to the impugned land. They undertook the cultivation of plantation of the medicinal plants. However, the said cultivation was not successful as expected. There were many other problems with regard to the 4 ITA No.283/PUN/2014 cultivation of the said land. Eventually, both the owners of the said land decided to sell the lands. Accordingly, the said admeasuring 3.80 R, which was purchased for a sum of Rs.19,42,500/- excluding commission charges and the same was sold for a sum of Rs.1,38,75,000/- on 03-06-2008 after holding the land for 18 months.
5. Considering the fact the same is an agricultural land and located beyond 8 kms of the Pune Municipality, the assessee claimed the exemption on the profits (i.e. Rs.1,36,90,000 - Rs.20,46,960/- X 1/2). In the assessment, the claim of the assessee was denied and Assessing Officer treated the same as a transaction Adventure in the nature of Trade. Accordingly, his share of income amounting to Rs.58,21,520/- is considered as business income of the assessee. The said conclusion of the Assessing Officer was confirmed by the CIT(A) as per the discussion given in Para Nos. 3.4 to 3.9. In those paragraphs, the CIT(A) discussed the facts of the case and the transaction and held the assessee with the background of the business transactions, has a business mind and intention at the time of purchase of the said agricultural land admeasuring 3.80 R. Assessee submitted that the conclusion of the Assessing Officer by invoking the provisions of section 2(14) with reference to the transaction of 'Adventure in the nature of Trade' is not proper. Assessee relied on various decisions to support his case. However, the CIT(A) relied on the decision of Hon'ble Supreme Court in the case of G. Venkataswami Naidu & Co. Vs. CIT 35 ITR 594 (SC). The assessee's argument that the agricultural land, with agricultural operations in it, is outside the scope of taxation and the agricultural income should not be taxed under the statute. However, the CIT(A) is of the view that in short span of time the investment of Rs.19,42,500/- has grown upto a sum of Rs.1,38,75,000/-. Such increase is possible only with a commercial asset and not with agricultural asset. As the CIT(A) is of the view that the assessee 5 ITA No.283/PUN/2014 acquired the said agricultural land solely and exclusively with the intention of re-sale at a profit and has no intention of holding the property for himself or otherwise. He further held that the presence of such intention is a relevant and crucial factor for determining the particular transaction constitutes an 'Adventure in the nature of Trade'. However, there is no finding of fact by the CIT(A) as to how the purchase and sale of an agricultural land held by the assessee is not exempt despite the provisions of section 2(14)(iii) of the Act relating to Agricultural land in India. Eventually, the CIT(A) confirmed the addition made by the Assessing Officer.
6. Before us, Ld. Counsel for the assessee argued that this is a case of an exempt agricultural land acquired by the assessee along with Shri Tushar Atmaram Kalate purely for agricultural operations, i.e. growing medicinal plants on the principles. In support of the same, Ld. Counsel for the assessee brought our attention to the 7/12 extracts, duly translated and also brought our attention to the fact that the Revenue records bear witness to the fact of growing of medicinal plants in the said lands. Further, giving the reasons for sale of the land in 2008, Ld. Counsel for the assessee submitted that the said sale was required to be sold in view of the pressures from the other co-owner of the agricultural land. Assessee being a non-local, could not continue the agricultural operations in an adverse climatic conditions. Considering the fact that the investment is yielding good earning due to market conditions, it was decided to sell the agricultural land for a sum of Rs.1,38,75,000/-.
7. Bringing our attention to the written submissions placed at pages 1 to 18 of the paper book, Ld. Counsel for the assessee read out the relevant extracts from the decisions of the Hon'ble Supreme Court in the case of G. Venkataswami Naidu & Co. Vs. CIT (Supra) and also from the written submissions. Thus, it is a case of the assessee that the assessee did not have 6 ITA No.283/PUN/2014 an intention to resale at the time of purchase of the said agricultural land. Explaining the meaning of the 'Adventure in the nature of Trade', Ld. Counsel for the assessee relied on the decisions relevant for the proposition that intention of trade is a crucial factor at the very time of purchase of the asset. It is the contention of the assessee the intention to resale is a subsequent event and not related to the timing of the purchase. Therefore, it is not a case of 'Adventure in the nature of Trade'. Without prejudice, he also submitted that the agricultural land with recorded agricultural activities in it, on sale, it will never yield the taxable income in view of the exemptions available to the transactions of sale of agricultural land. Ld. Authorised Representative argued that the other co-owner of the land left out by the Revenue without taxing the other 50% of the sale proceeds. In such circumstances, it is the demand of Ld. Authorised Representative that the addition made by the Assessing Officer in the hands of the assessee is not sustainable in law. For this proposition, Ld. Authorised Representative for the assessee relied on Honble' Madras High Court judgment in the case of S. Murthukarupan 290 ITR 0154 (Mad.)
8. Per contra, Ld. Departmental Representative for the Revenue narrated the above referred facts of the case and mentioned that the assessee, apart from being a Tailor and Real Estate Agent, is also a full pledged businessman engaged in purchase and sale of land. For this, he relied on the transactions entered into by the assessee with regard to the properties at Sus Village, Kondhwa Khurd, Hinjewadi etc. A person with a business mind is obviously engaged in the purchase and sale of the impugned agricultural land with a business motive. In such case, the order of the AO/CIT(A) is proper and the same should not be disturbed.
7ITA No.283/PUN/2014
9. We have heard both the sides and perused the orders of the Revenue and the Paper Book filed before us. So far as the nature of the agricultural land is concerned, we find the land is located around 60 to 70 kms away from the Municipal Limits of Pune City. Further, it is borne on the Revenue records that there was medicinal plants cultivation on the said agricultural land during the year under consideration. This fact is undisputed and the Revenue has not brought anything on record to rebut the claim of the assessee.
10. Now coming to the meaning of the expression "Adventure in the nature of Trade', it is decided legal proposition that the intention to resale is a crucial fact at the time of purchase of the asset. If in case of the existence of such intention, subsequent to the point of purchase, the 'Adventure in the nature of Trade' does not arise to such transaction. It is relevant to mention that the assessee is engaged in the business activities with his properties located at Sus Village, Kondhwa Khurd, Hinjewadi. The same is undisputed. However, when comes to the property at Bhivari, the assessee retained the said land for a period of 1 ½ years by the time it is eventually sold. During the period, attempts were made to use the land for agricultural activities. However, the said attempts did not yield results. In any case, it is decided proposition of law that the use of land for agricultural activities is not a relevant factor for determining the nature of land as Agricultural in nature. However, the fact cultivation of medicinal plants on the land suggests the intention of the assessee.
11. Further, it is the case of claim of exemption from tax the income earned by the assessee on the transactions of sale of agricultural land. Normally, in such cases, the primary onus is on the assessee. In this case, assessee gave the required details on the purchase and sale transaction, details of the buyer, details of the 7/12 extracts showing the details of crop grown (medicinal plants) 8 ITA No.283/PUN/2014 in the said lands, details of original intention to use the said land for growing the medicinal plants, reasons for sale etc., whereas the Assessing Officer merely disbelieved the assessee and Assessing Officer does not bring any iota of evidence to the records to substantiate his disbelief. In our view, the onus has shifted to the side of the Revenue/Assessing Officer. It is settled legal proposition in law that, for holding a particular transaction as an 'Adventure in the nature of Trade', the intention of the assessee at the time of purchase of land is a crucial factor. Subsequent genesis of intention, which led to the sale transfer of land, does not help the Assessing Officer to hold a particular transaction as the transaction as an "Adventure in the nature of Trade'. In our view, it is the case of genesis of intention to trade the asset subsequent to the timing of purchase of land. Therefore, we are of the opinion, despite the assessee's background as businessman, this particular transaction is outside the scope of an 'Adventure in the nature of Trade. Thus, the core issue raised by the assessee in the appeal stand allowed in favour of the assessee. As such, the Madras High Court in the case of S. Murthukarupan (supra) hold that no addition could be made in case of assessee where no such addition was made in assessments of other co-owners. Hence, the grounds raised by the assessee are allowed.
12. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on this 30th day of May, 2017.
Sd/- Sd/-
(VIKAS AWASTHY) (D. KARUNAKARA RAO)
याियक सद य /JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
पुणे Pune; दनांक Dated : 30th May, 2017.
सतीश
9
ITA No.283/PUN/2014
आदेश क ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2.
यथ / The Respondent
3. The CIT(A)-II, Pune
4. CIT-II, Pune
5. िवभागीय
ितिनिध, आयकर अपीलीय अिधकरण, "B Bench"
पुणे / DR, ITAT, "B Bench" Pune;
6. गाड फाईल / Guard file.
आदेशानुसार/ BY ORDER,स
//True Copy//
स यािपत
ित
//True Copy//
सहायक रिज ार/Assistant Registrar
आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune