Income Tax Officer, Ward -3, Margao., Margao V. M/s Pisces Properties Developers., Margao

ITA 106/PAN/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1382 (ITAT-PANAJI)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 23-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMESH S MUTAGAR
• Assessee Lawyers: SHRINIVAS NAYAK
• Keywords: Capital asset; Business income; Cost of acquisition
• Section: 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 106 /PNJ/201 5 (ASST. YEAR : 200 9 - 1 0 ) ITO, WARD - 3, MARGAO GOA. VS. M/S. PISCES PROPERTIES DEVELOPERS, S - 5, CHANDAN BUILDING, ERASMO CARVALHO STREET, MARGAO. PAN NO. AAKFP 7314 G (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SHRINIVAS NAYAK C A DEPARTMENT BY : SHRI RAMESH S. MUTAGAR - D R DATE OF HEARING : 08 / 0 9 /2015 . DATE OF PRONOUNCEMENT : 08 / 0 9 /201 5 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 1 , PANAJI , DATED 15 / 12 /201 4 . 2. THE SOLE GROUND OF APPEAL TAKEN BY THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOWING RELIEF OF 61,81,013/ - BEING ADDITION MADE BY THE ASSESSING OFFICER UNDER THE HEAD PROFIT AND GAINS OF BUSINESS AS AGAINST THE CLAIM OF AGRICULTURAL INCOME CLAIMED TO BE EXEMPT BY THE ASSESSEE. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT IN THE RETURN OF INCOME, THE ASSESSEE CLAIMED INCOME OF 61,81,013/ - EXEMPT BEING INCOME RECEIVED ON TRANSFER OF AGRICULTURAL LAND DEFINED 2 ITA NO. 106 /PNJ/201 5 UNDER SEC. 2(1 A) OF THE ACT. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE FIRM CAME INTO EXISTENCE ON 04/11/2006 WITH THE OBJECT OF REAL ESTATE DEVELOPERS, BUILDING CONSTRUCTION AND SALE & PURCHASE OF PROPERTY. THE ASSESSEE HAD SOLD LAND IN THE YEAR RELEVANT TO THE ASSESSMENT YEAR WHICH WAS PURCHASE D IN FINANCIAL YEAR 2006 - 07 . NO IMPROVEMENT WAS MADE FOR DEVELOPING THE PROPERTY FOR AGRICULTURE. NO AGRICULTURAL OPERATION ON THE LAND ACQUIRED BY THE ASSESSEE WAS CARRIED OUT ANY T IME DURING THE RELEVANT PERI O D, WHICH IS EVIDENT FROM THE FACT THAT NO EXPENDITURE AND OR RECEIPTS ARE SHOWN. ACCORDING TO CLAUSE 2 OF PARTNERSHIP DEED, THE PARTNERSHIP SHALL COME INTO EFFECT FROM 4 TH DAY OF NOVEMBER 2006 WHICH LEADS TO THE INFERENCE THAT THE BUSINESS OF THE ASSESSEE FIRM HAS COMMENCED FROM THE DATE OF EXECUTION OF THE DEED. ACCORDING TO CL A USE 3 OF PARTNERSHIP DEED, THE BUSINESS OF THE FIRM SHALL BE THAT OF REAL ESTATE ACTIVITIES. ANY OTHER BUSINESS OR BUSINESS E S MAY BE CARRIED ON BY THE FIRM IF THE PARTNERS SO DECIDE FOR THEIR MUTUAL BENEFIT. THE WORD IS USED SHALL AND NOT MAY. THEREFORE, SALE AND PURCHASE OF PROPERTY IS ONE OF THE BUSINESS ACTIVITIES OF THE ASSESSEE FIRM. NO INFERENCE OTHER THAN THIS CAN BE DRAW N FROM THIS CLAUSE. THE ASSESSEE HAS NOT BEEN DEBARRED FROM TRADING OF ANY SPECIFIC KIND OF LAND. THE ENHANCEMENT IN MARKET PRICE OF AGRICULTURAL LAND WAS SIX TIMES TO THE COST OF ACQUISITION WITHIN THE SPAN OF 14 MONTHS. THIS CAN HAPPEN ONLY WHEN THE COMMERCIAL ANGLE IS INVOLVED. HE FURTHER OBSERVED THAT THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF MAHAVEER ENTERPRISES VS. UNION OF INDIA (2000) 244 ITR 789 (RAJ.) HAS HELD THAT THE DETAILED EXAMINATION OF THE FACTS , THE CHARACTER OF LAND AND THE MEM ORANDUM OF THE INCORPORATION OF THE FIRM CLEARLY HOLD OUT THAT THE PETITIONER FIRM WAS TO DO BUSINESS IN TH E SALE AND PURCHASE OF AGRICULTURAL LANDS AND THE AGRICULTURAL PRODUCE, ETC. THAT AGRICULTURAL ACTIVITIES WERE NOT DEFINED IN ITS PARTNERSHIP DEED AND IN THE TRADING ACCOUNT FILED BY THE FIRM, NO EXPENDITURE WAS SHOWN TO HAVE BEEN INCURRED ON ANY SUCH OPERATION WHICH SHOWS AGRICULTURAL OPERATIONS. THEREFORE, THE CHARACTER OF THE L AND HAS RIGHTLY BEEN HELD NOT TO BE OF 3 ITA NO. 106 /PNJ/201 5 AGRICULTURAL NATURE. HE FU R THER OBSERVED THAT THE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF BADRILAL B HOLARAM VS. CIT 139 ITR 207 HELD THAT WITH REGARD TO THE CONTENTION THAT THE PROFIT REALISED BY THE SALE OF LAND WAS REVENUE DERIVED FROM LAND AND HENCE WAS EXMEPT FROM TAXATION AS IT WAS AGRICULTURAL INCOME. THE HONBLE HIGH COURT PLACED RELIEANCE ON THE DECISION OF NAWABZADI MEHAR BANO KHANUM VS. SECRETARY OF STATE, AIR 1925 CAL. 929 (FB) AND MAHARAJADHIRAJ OF DARBHANGA VS. CIT AIR 1928 PAT. 468 AND OBSERVED THAT NOW CLAUSE (A) OF SEC. 2(1) OF THE ACT REQUIRES THREE CONDITIONS TO BE SATISFIED BEFORE AN INCOME CAN BE CALLED AGRICULTURAL INCOME, THE THREE CONDITIONS ARE : (I) THE RENT OR REVENUE SHOULD BE DERIVED FROM LAND, (II) THE LAND SHOULD BE SITUATED IN INDIA, AND (III) THE LAND SHOULD BE USED FOR AGRICULTURAL PURPOSES. BY NO STRETCH OF IMAGINATION IT COULD BE HELD THAT THE AFORESAID CONDITIONS ARE SATISF IED IN THE CASE OF INCOME RESULTING FROM THE SALE OF LAND. THEREFORE, THE SURPLUS IN QUESTION WAS NOT IN THE NATURE OF AGRICULTURAL INCOME EXEMPT FROM TAXATION. 4 . THE ASSESSING OFFICER FURTHER OBSERVED THAT THE PROPERTY WAS SOLD TO S. KANTILAL & CO. PVT. LTD. ENGAGED IN EXTRACTION OF IRON ORE. THE COMPANY WHICH IS OPERATING IN BHATI, CUMBARI & NEIGHBOURING VILLAGES OF TALUK A SANGUEM, STARTED ACQUIRING LANDS ONLY FROM 2005 - 06. THE PURSUIT OF THE MINING COMPANY IS VERY WELL EVIDENT FROM FIXED ASS ETS SCHEDULE OF FINAL ACCOUNTS OF S. KANTITAL & CO. PVT. LTD. WHICH CLEARLY INDICATES THAT ENTERPRISES ENGAGED IN MINING ACTIVITIES, M/S. S. KANTILAL, IN PARTICULAR, WERE ACQUIRING PRIVATE LANDS IN SANGUEM TALUKA DURING THE PERIOD WHEN MINING BOOM WAS PREVAILING FROM THE YEAR 2002 ONWARDS . IT IS FORMIDABLE TO BELIEVE THAT SUCH BUSINESSMEN, AS THE PARTNERS OF THE ASSESSEE FIRM, CAN FORM PARTNERSHIP ONLY TO ACQUIRE LAND SITUATED IN THE WESTERN GHANTS, IN THE NEAR VICINITY OF WILD LIFE SANCTUARY TO C ARRY ON AGRICULTURAL ACTIVITIES. IT IS THE INTENTION OF THE PARTNERS TO MAKE PROFIT THAT HAS INSPIRED TRADING IN LANDS AT SUCH AN AREA. HE FURTHER OBSERVED THAT IF THE LAND IN QUESTION WAS PURCHASED BY THE ASSESSEE AS THE 4 ITA NO. 106 /PNJ/201 5 MATTER OF INVESTMENT, THE ASSESS EE WOULD HAVE TRIED EITHER TO CULTIVATE THE LAND OR TO BUILD ON IT, BUT IT DID NEITHER . BY NAME ITSELF, ONE CAN MAKE OUT THAT THE VILLAGE CUMBARI OR KUMERI IS A HILLY TRACT OF PRIMITIVE KUMRI (SLASH AND BURN) CULTIVATION IN THE REMOTE PAST AND NOT A LAND SUITABLE FOR REGULAR CULTIVATION. THE VILLAGE COMPRISES MORE THAN 90% LAND UNDER FOREST COVER. THE ASSESSEE DID NOT CARRY OUT ANY AGRICULTURAL OPERATION IN ANY PORTION OF THE LAND FROM THE DATE OF PURCHASE TILL THEY SOLD. THIS CONDUCT OF THE ASSESSEE SH OWS THAT THE ASSESSEE WAS NOT INTERESTED IN OBTAINING ANY RETURN FROM THESE LANDS. THE ASSESSEE HAD NEVER CARRIED OUT AGRICULTURAL OPERATIONS ON THE LAND IN QUESTION AND THE INTENTION OF THE ASSESSEE WAS ONLY TO REALISE INCOME FROM THE LAND AS A VENTURE. 5. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE INTENTION OF THE ASSESSEE IS CLEAR WHEN THE LAND WAS SOLD WITHIN THE SPAN OF 14 MONTHS, THAT TOO AT A PRICE WHICH WAS SIX TIMES OF THE COST OF ACQUISITION. IT BECOMES CRYSTAL CLEAR THAT THE INTENTION WAS TO PURCHASE THE LAND AND SELL THE SAME AS BUSINESS ACTIVITY. IT CANNOT BE SAID THAT THE BUSINESS HAD NOT COMMENCED, WHEN THE SURPLUS WAS SHOWN AS PROFIT IN THE PROFIT & LOSS ACCOUNT DRAWN AND APPORTIONED AMONG THE PARTNERS BUT MADE AN ENDEAVOUR TO EXH IBIT THE SAME AS AGRICULTURAL INCOME. THEREFORE, THE ASSESSING OFFICER TREATED THE PROFIT EARNED FROM THE SAME AS BUSINESS INCOME AND BROUGHT TO TAX ACCORDINGLY. 6 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: - I HAVE GONE TH R OUGH ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT. THE APPELLANT PURCHASED AGRICULTURAL LAND SITUATED AT CUMBARI, SANGUEM FROM MR. ANTONIO ECA JOSE COUTINHO AND HIS WIFE MRS. PALMIRA COUTINHO F O R A CONSIDERATION OF RS.12,48,645/ - . IT, SUBSEQUENTLY SOLD THE SAID LAND TO M/S. S. KANTILAL & CO. PVT. LTD. FOR A CONSIDERATION OF RS.74,31,000/ - AND DISCLOSED A NET PROFIT OF RS.61,81,013/ - FORM THIS TRANSACTION AND CLAIMED IT AS 5 ITA NO. 106 /PNJ/201 5 EXEMPT AS IT WAS PROFIT FROM SALE OF AGRICUL TURAL LAND. THE A.O. HELD THAT THE APPELLANTS TRANSACTION IS BUSINESS TRANSACTION AND TREATED THE INCOME AS BUSINESS INCOME AND TAXED IT ACCORDINGLY. THE MAIN REASONS, WHY THE A.O. TREATED THE TRANSACTION AS BUSINESS TRANSACTION IS AS UNDER: I) THE FIRM CAME INTO EXISTENCE WITH A MOTIVE OF DOING BUSINESS AS REAL ESTATE DEVELOPERS. - II) THE SAID LAND WAS PURCHASED IN F. YR. 2006 - 07 AND SOLD IN F. YR. 2008 - 09, I.E. WITHIN TWO YEARS. III) NO EFFORTS WERE MADE TO CARRY OUT ANY AGRICULTURAL OPERATIONS. IV) THE LAND WAS SOLD AT SIX TIMES HIGHER THAN THE PURCHASE COST. THE A.O. RELIED ON THE DECISION OF HONOURABLE RAJASTHAN HIGH COURT IN THE CASE OF MAHAVEER ENTERPRISES VS. UNION OF INDIA [(2000) 244 ITR 789 (RAY)], WHEREIN THE HON. HIGH COURT OBSERVED THAT THE UNDERLYING OBJECT OF THE ACT TO EXEMPT AGRICULTURAL INCOME FROM INCOME TAX IS TO ENCOURAGE ACTUAL CULTIVATION OR DEF A CTO AGRICULTURAL OPERATIONS. IN THE CASE OF MAHARAJADHIRAJ OF DARBHANGA VS. CIT, AIR 1928 PAT 468, THE HON. PATNA HIGH COURT LAID THE RE TESTS FOR ANY INCOME TO QUA N TIFY AS AGRICULTURAL INCOME: I) THE RENT OR REVENUE SHOULD BE DERIVED FRO M LAND II) THE LAND SHOULD BE SITUATED IN INDIA, AND III) THE LAND SHOULD BE USE D FOR AGRICULTURAL PURPOSES. APPLYING THESE TESTS, THE A.O. HELD THAT INCOME EARNED BY THE ASSESS E E IS NOT AGRICULTURAL INCOME. THE OTHER CONTENTION OF THE A.O. IS THAT, THE LAND WAS SOLD TO M/S. S. KANTILAL AND CO. PVT. LTD., WHICH IS A MINING COMPANY, WHICH HAS NOTHING TO DO WITH AGRICULTURE. THE COMPANY PURCHASED TH E LAND TO DUMP ITS MINING WASTE ON THE SAID LAND. THE A.O. PLACED RELIANCE ON THE J UDGEMENT IN THE CASE OF G. VENKATASWARRI NAIDU & CO. VS CIT [(1959) 035 ITR 594 (SC) ] WHEREIN THE HONBLE APEX COURT OBSERVED AS UNDER: .... ......... THE LANDS WERE ADJACENT TO JANARDHANA MILLS, THE APPELLANT MUST HAVE PURCHASED THEM SOLELY WITH A VIEW TO SELL THEM TO THE SAID MILLS WITH A PROFIT. THAT IS WHY, THOUGH THE TRANSACTION WAS IN THE NATURE OF A SOLITARY TRANSACTION, IT WAS HELD THAT IT HAD ALL THE ELEMENTS OF A BUS INESS TRANSACTION AND WAS THUS, AN ADVENTURE IN THE NATURE OF TRADE. THE A.O. EXAMINED THE CONDUCT OF THE APPELLANT ON THE BASIS OF THE ABOVE DECISIONS AND REACHED CONCLUSION AS UNDER: 6 ITA NO. 106 /PNJ/201 5 I) THE LAND TRANSFERRED HAD NO CHARACTERISTIC OF AN AGRICULTURAL LAN D AND NO OPERATIONS WERE CAR R IED ON BY THE ASSESSEE TO DEVELOP IT FOR AGRICULTURE. II) THE PARTNERSHIP CAME INTO EXISTENCE ONLY TO DO BUSINESS OF REAL ESTATE ACTIVITIES AND ITS BUSINESS COMMENCED FROM THE DATE OF FORMATION ON 04.11.2006 THE LAND WAS PURCH ASED AS STOCK - IN - TRADE. THE PROFITS OF THE TRANSACTION WHICH IS AN ADVENTURE IN THE NATURE OF TRADE IN INCOME DERIVED FROM BUSINESS OF THE ASSESSEE FIRM . FROM THE READING OF THE ASSESSMENT ORDER, IT IS SEEN THAT IN ORDER TO FIT - IN THIS CASE IN THE FACTS OF THE CASES RELIED UPON BY HIM, THE A.O. HAS REACHED CONTRADICTORY CONCLUSION. IN THE INITIAL PARAGRAPHS, THE A.O. HAS MENTIONED THAT THE LAND IN AN AGRICULTURAL LAND AND AT THE END, HE REACHES A CONCLUSION THAT THE LAND IN NOT FIT FOR AGRICULTURE. THEN H E SAYS, THAT THE LAND WAS ACQUIRED BY THE APPELLANT AND HELD, AS STOCK - IN TRADE. THIS IS FACTUALLY INCORRECT. THE LAND WAS HELD BY THE APPELLANT FIRM AS INVESTMENT. THE A.O. REFERS THAT THE OBJECT OF THE APPELLANT FIRM IS TO CARRY ON BUSINESS IN THE REAL E STATE DEVELOPMENT AND THEN REACHES A CONCLUSION THAT THE TRANSACTION IS AN ADVENTURE IN THE NATURE OF TRADE. HOWEVER, BEFORE REACHING ANY CONCLUSION, IT WOULD BE PROPER TO APPRECIATE ALL THE UNDISPUTED FACTS, WHICH CAN BE SUMMARIZED AS UN DER: I) THE LAND IN QUESTION IS AN AGRICULTURAL LAND AND THE SAME IS REFLECTED AS AGRICULTURAL LAND IN THE LAND REVENUE RECORDS. II) IT IS MORE THAN 8 KMS. AWAY FROM THE NEAREST MUNICIPAL LIMITS III) IT WAS PURCHASED FROM MR. & MRS. COUTINHO IN F.YR. 2006 - 07 AND SOLD IN F. YR. 2008 - 09 TO M/S. S. KANTILAL AND CO. PVT. LTD. IV) DURING ITS HOLDING PERIOD OF THE LAND THE APPELLANT DID NOT CARRY OUT ANY AGRICULTURAL OPERATIONS ON THE LAND. V) IT WAS SOLD TO A COMPANY, WHICH IS NOT CONNECTED TO AGRICULTURE IN ANY WAY, AND IS BASICALLY ENGAGED IN MINING OPERATIONS. VI) THE LAND HAS BEEN CLASSIFIED IN LAND REVENUE RECORDS AS GARDEN AND CANNOT BE USED FOR THE PURPOSE OF CONSTRUCTION . THE APPELLANT CLAIMED THAT BEFORE BUYING THE LAND, THEY WERE AWARE OF THE STATUS OF LAND AND THEY DECIDED TO BUY THE LAND FOR CARRYING ON AGRICULTURAL ACTIVITY ONLY. THE LAND WAS FIT FOR AGRICULTURE IS ALSO PROVED BY THE EVIDENCE ATTACHED THAT THE 7 ITA NO. 106 /PNJ/201 5 PREVIOUS OWNERS WERE REGULARLY PAYING LAND REVENUE TAXES AND WERE REGULARLY CARRYING ON AGRICULTURAL OPERATIONS. MANY AGRICULTURAL FARMS ARE ALSO LOCATED IN THE VICINITY OF THE LAND AND THE SAID LAND IS VERY CLOSE TO FOREST AREA. IN FACT, NOTHING ELSE CAN BE CARRIED OUT AT THE LAND, APART FROM AGRICULTURE. THE APPELLANT COULD NOT CONTINUE WITH AGRICULTUR E FOR THE FACT THAT THEY DID NOT GET LABOURERS, UNABLE TO CARRY OUT AGRICULTURAL OPERATIONS THEMSELVES, THEY DECIDED TO SELL - OFF THE LAND. IN SUPPORT OF THEIR CONTENTION, THEY HAVE PLACED RELIANCE ON THE DECISION OF JURISDICTIONAL HIGH COURT OF BOMBAY AT GOA IN THE CASES OF DEBBI ALEMAO, MINGUEL CHANDRA PAIS AND H.V. MUNGALE. IN ITS BOOKS ALSO, THEY HELD IT AS INVESTMENT AND NOT AS STOCK - IN - TRADE. THUS, APPRECIATING OVERALL FACTS OF THE CASE AND THE LEGAL POSITION , IN MY OPINION, THE APPELLANT PURCHASED A GRICULTURAL LAND, WITH A PURPOSE TO CARRY ON AGRICULTURAL OPERATIONS, AS NOTHING ELSE WAS POSSIBLE ON THAT LAND, BECAUSE THE LAND WAS CLASSIFIED AS GARDEN LAND AND ITS CLOSE PROXIMITY TO FORESTS AND DISTANCE FROM URBAN CENTERS, CONSTRUCTION WAS NOT POSSI BLE ONLY. THUS, IN MY OPINION, THIS SOLITARY TRANSACTION CANNOT BE CAL LED BUSINESS AND THE INCOME CAN NOT BE TAXED AS BUSINESS INCOME. THE LAND CAN NOT BE TREATED AS CAPITAL ASSET IN TERMS OF S. 2(14) OF THE I.T. ACT. THEREFORE, RESPECTFULLY RELYING TH E DECISION IN THE CASE OF DEBBIE ALEMAO V S. CIT, GIVEN BY THE JURISDICTIONAL HIGH COURT OF BOMBAY AT GOA, THE A.O. IS DIRECTED TO DELETE THE ADDITION AMOUNTING TO 61,81,013/ - THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED ACCORDINGLY. 7 . DEPARTMENTA L REPRESENTATIVE VEHEMENTLY ARGUED AND SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 8 . AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND SUBMITTED THAT IT WILL BE SEEN FROM PAGE NO. 16 OF THE PAPER BOOK WHERE FORM I & XIV ARE PLACED WHICH IS DATED 23/05/2008 THAT THE LAND IN QUESTION WHICH WAS SOLD ON 30/04/2008 CONTINUED TO BE AGRICULTURAL LAND EVEN AFTER THE SAME WAS SOLD BY THE ASSES SEE. FURTHER, HE REFERRED PAGE NOS. 54 & 55 OF THE PAPER BOOK AND SUBMITTED THAT THESE ARE BALANCE SHEET S OF THE ASSESSEE AS ON 31/03/2007 & 31/03/2008 . FROM THE SAID BALANCE SHEET S , IT CAN BE SEEN THAT THE LAND IN QUESTION HAS BEEN SHOWN AS INVESTMENT ACQUIRED FOR 12,48,645/ - . THE ASSESSEE HAS NOT SHOWN THESE LANDS AS ITS STOCK IN TRADE , SO THAT IT C A N BE HELD TO BE A TRADING 8 ITA NO. 106 /PNJ/201 5 ASSET OF THE ASSESSEE AND PURCHASE AND SALE OF THE SAME CAN BE HELD AS BUSINESS INCOME OF THE ASSESSEE. THE INTENTION OF THE ASSESSEE F I RM AT THE TIME OF PURCHASE OF THE LAND TILL THE DATE OF ITS SALE WAS TO H O LD IT AS AN INVESTMENT . FURTHER HE SUBMITTED THAT THE ASSESSEE HAS FILED AT PAGE NOS. 23 TO 28 OF THE PAPER BOOK, AFFIDAVITS OF AGRICULTURAL LABOURERS, WHO HAVE STATED TH AT THEY CARRIED OUT AGRICULTURAL WORK ON THE SAID LAND. FROM THESE EVIDENCES, IT CAN BE SEEN THAT THE LAND IN QUESTION WAS AGRI CULTURAL LAND AND THE SALE PROCEEDS FROM THE SALE OF THE AGRICULTURAL LAND WAS EXEMPT FROM THE TAXATION , AND T HEREFORE, COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGHTLY DEL E TED THE ADDITION MADE BY THE ASSESSING OFFICER. 9. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE THEN RELIED ON A DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SMT. DEBBIE ALEMAO (2011) 331 I T R 59 (BOM.) AND SUBMITTED THAT THE HONBLE HIGH COURT H AS HELD THAT WHERE THE LAND IN QUESTION WAS ENTERED IN REVENUE RECORDS AS AN AGRICULTURAL LAND AND NO PERMISSION WAS EVER OBTAINED FOR NON - AGRICULTURAL USE BY THE ASSESSEE, THE PROFIT ON SALE OF SUCH LAND IS NON - TAXABLE AGRICULTU RAL INCOME. HE ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT, PANAJI BENCH IN THE CASE OF CIT VS. MINGUEL CHANDRA PAIS (2006) 282 ITR 618 (BOM.) WHICH IS ALSO TO THE SAME EFFECT AS THE EAR L IER DECISION OF THE HONBLE BOMBAY HIGH COURT. 10 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE PURCHASE D AN AGRICULTURAL LAND DURING THE FINANCIAL YEAR 2006 - 07 FOR 12,48,645/ - AND SOLD THE SAME IN THE FINANCIAL YEAR 2008 - 09 FOR 74,31,000/ - AND THE ASSESSEE IN ITS RETURN OF INCOME CLAIMED INCOME OF 61,81,013/ - DERIVED ON THE ABOVE TRANSACTION AS NON - TAXABL E AGRICULTURAL INCOME. THE ASSESSING OFFICER TREATED THE ABOVE TRANSACTION OF PURCHASE AND SALE AS BUSINESS TRANSACTION AND 9 ITA NO. 106 /PNJ/201 5 THEREBY THE RESULTANT INCOME AS TAXABLE BUSINESS INCOME. THE REASONS FOR THE ACTION OF THE ASSESSING OFFICER WAS MAINLY THAT THE ASSESSEE DID NOT CARRY OUT ANY ACTIVITY OF CULTIVATION ON THE SAID LAND DURING THE PERIOD IN WHICH IT WAS HELD BY IT. 11 . FURTHER, THE PERSON TO WHOM THE ASSESSEE SOLD THE LAND WAS A MINING COMPA NY , WHO HAS NO CONNECTION WITH AGRICULTURAL ACTIVITY. THE REASONS STATED BY THE ASSESSING OFFICER FOR TREATING THE ABOVE TRANSACTION AS BUSINESS TRANSACTION WAS ALSO THAT THE PURCHASE WAS DECLARED AS STOCK IN TRADE BY THE ASSESSEE. 12 . ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) ACCEPTED THE APPEAL OF THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO TREAT THE INCOME IN QUESTION AS NON - TAXABLE AGRICULTURAL INCOME. THE COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT THE CHARACTER OF THE LAND AS PER LAND RECORDS WAS AGRICULTURAL LAND TILL THE TIME THE LAND WAS SOLD BY THE ASSESSEE. 13 . FURTHER, HE FOUND THAT THE LAND AS PER THE APPLICABLE LAWS COULD NOT BE USED FOR ANY PURPOSE OTHER THAN AGRICULTURE. HE ALSO OBSERVED THAT THE PU RCHASE OF LAND WAS DISCLOSED BY THE ASSESSEE IN ITS RETURN OF INCOME AS INVESTMENT AND THE ASSESSING OFFICER WAS FACTUALLY INCORRECT IN STATING THAT THE LAND WAS DECLARED AS STOCK IN TRADE. 14 BEFORE US, THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER . 15 . WE FIND THAT THE DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY ERROR IN ANY OF THE FACTS FOUND BY THE COMMISSIONER OF INCOME TAX (APPEALS) . WE FIND THAT IT IS NOT IN DISPUTE THAT THE LAND IN QUESTION WAS CLASSIFIED A S AGRICULTURAL LAND IN GOVERNMENT RECORDS , BOTH AT THE TIME OF PURCHASE BY THE ASSESSEE AS WELL AS AT THE TIME OF ITS SALE BY THE ASSESSEE. 10 ITA NO. 106 /PNJ/201 5 16 . FURTHER IT IS ALSO NOT IN DISPUTE THAT THE SAID AGRICULTURAL LAND WAS SITUATED BEYOND 8 KM. FROM THE NEAREST MUNICIPALITY OR CANTONMENT AREA . 17 . WE FIND THAT THE REVENUE HAS BROUGHT NO MATERIAL ON RECORD TO SHOW THAT THE LAND WAS USED FOR ANY NON - AGRICULTURAL ACTIVITY BEFORE ITS SALE BY THE ASSESSEE , S O AS TO CHANGE ITS CHARACTER FROM AGRICULTURE TO NON - AGRICULTURE . 18 . IN THESE CIRCUMSTANCES, MERELY BECAUSE NO ACTUAL CULTIVATION COULD BE DONE BY THE ASSESSEE WILL NOT CHANGE THE CHARACTER OF THE LAND FROM AGRICULTURAL TO NON - AGRICULTURAL. OUR ABOVE VIEW FINDS SUPPORT FROM THE DECISION OF HONBLE C A LCU TT A HIGH COURT IN THE CASE OF CIT VS. BORHAT TEA CO. LTD. (1982) 138 ITR 783 (CAL.) . 19 . FURTHER , THE REVENUE HAS BROUGHT NO MATERIAL ON RECORD TO SHOW THAT THE COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT CORRECT IN OBSERVING THAT THE LAND IN QUESTION WAS DISCLOSED AS INVESTMENT BY THE ASSESSEE IN ITS RETURN OF INCOME AND NOT AS STOCK IN TRADE. 20 . FURTHER , NO MATERIAL WAS BROUGHT BEFORE US TO SHOW THAT THE FI ND ING OF THE COMMISSIONER OF INCOME TAX (APPEALS) THAT THE LAND IN QUESTION WAS SITUATED IN A REMOTE VILLAGE NEAR THE FOREST AND LEGALLY COULD NOT BE PUT TO ANY USE OTHER THAN AGRICULTURE WAS INCORRECT. 21 . IN THE ABOVE FACTS, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) THAT THE LAND WAS ACQUIRED BY THE ASSESSEE AS INVESTMENT AND NOT AS STOCK IN TRADE OF BUSINESS AND THE TRANSACTION OF HOLDING THE LAND FOR ABOVE 14 MONTHS BEFORE SALE CANNOT BE TREATED AS BUSINESS TRANSACTION OF THE ASSESSEE. 2 2 . W E F I N D T H A T I N T H E S I M I L A R F A C T S A N D C I R C U M S T A N C E S T H E HONBLE D E L H I HIGH COURT I N T H E C A S E O F H I N D U S T A N I N D U S T R I A L R E S O U R C E S LTD. VS. 11 ITA NO. 106 /PNJ/201 5 ACIT ( 2 0 1 1 ) 3 3 5 ITR 7 7 ( D E L . ) O B S E R V E D T H A T T H E ASSESSEE PURCHASE D A G R I C U L T U R A L L A N D W I T H A N I N T E N T I O N T O U S E T H E L A N D F O R I N D U S T R I A L P U R P O S E S . N O A G R I C U L T U R A L A C T I V I T Y W A S C A R R I E D O N T H A T L A N D B Y T H E ASSESSEE . T H E L A N D W A S A C Q U I R E D B Y T H E C O M P E T E N T A U T H O R I T Y U N D E R L A N D A C Q U I S I T I O N ACT F O R P L A N N E D D E V E L O P M E N T O F I N D U S T R Y . T H E A W A R D P A S S E D I N T H E A C Q U I S I T I O N P R O C E E D I N G S A L S O S H O W S T H A T T H E L A N D W A S A G R I C U L T U R A L L A N D . N O W , T H E I S S U E I S T H A T A S T H E ASSESSEE H A S N E V E R U S E D T H E S A I D L A N D F O R A G R I C U L T U R A L P U R P O S E S A N D T H E L A N D W A S I N T E N D E D T O B E U S E D F O R I N D U S T R I A L P U R P O S E S , B O T H B Y T H E ASSESSEE AS WELL AS B Y T H E A C Q U I R I N G A U T H O R I T Y , C A N I T B E S A I D T H A T I T I S A N A G R I C U L T U R A L L A N D A N D THEREFORE, G A I N O N T R A N S F E R T H E R E O F I S E X I G I B L E T O T A X . T H E HONBLE HIGH COURT O B S E R V E D T H A T T H E I N T E N T I O N D O E S N O T A L T E R T H E C H A R A C T E R A N D N A T U R E O F T H E L A N D . F U R T H E R T H E F A C T T H A T T H E ASSESSEE D I D N O T C A R R Y O U T A N Y A G R I C U L T U R A L O P E R A T I O N S A N D D I D N O T A L S O R E S U L T IN ANY CONVERSION OF THE AGRICULTURAL LAND INTO AN INDUSTRIAL LAND. T H E R E I S N O M A T E R I A L T O S H O W T H A T A N Y I N D U S T R I A L A C T I V I T Y O R A N Y O P E R A T I O N F O R S E T T I N G U P O F I N D U S T R Y W A S A C T U A L L Y CARRIED O U T O N T H E S A I D L A N D S O A S T O C H A N G E I T S C H A R A C T E R F R O M A G R I C U L T U R A L T O I N D U S T R I A L . I T I S T H E C H A R A C T E R O F T H E L A N D A T T H E T I M E O F S A L E T H A T I S R E L E V A N T A N D N O T T H E P U R P O S E F O R W H I C H I T W A S PURCHASE D B Y T H E ASSESSEE O R F R O M T H E ASSESSEE . T HEREFORE, I T W A S H E L D T H A T T H E L A N D R E T A I N E D I T S C H A R A C T E R A S A G R I C U L T U R A L A N D THEREFORE, N O T L I A B L E F O R C A P I T A L G A I N S T A X . 2 3 . WE THEREFORE, CONFIRM THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) AND DISMISS THE GROUND OF APPEAL OF THE REVENUE. 2 4 . IN THE RESULT, APPEAL OF THE R EVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON TUESDAY , THE 0 8 TH DAY OF SEPTEMBER , 201 5 AT GOA . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER D ATED : 0 8 TH SEPTEMBER , 201 5 . 12 ITA NO. 106 /PNJ/201 5 VR/ - COPY TO: 1 . THE ASSESSEE. 2 . 3 . THE REVENUE. 4 . THE CIT 5 . THE CIT(A) 6 . THE D.R . 7 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI 13 ITA NO. 106 /PNJ/201 5 DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 8/9 .0 9 .2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 09 .09 .2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 0 9 /0 9 /2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 09 /0 9 /2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 0 9 /0 9 /2015 SR.PS 6. DATE OF PRONOUNCEMENT 08 /0 9 /2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 09 /0 9 /2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER