Sri.V.A.Jose, Thrissur V. DCIT, Trichur

ITA 484/COCH/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81377 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 24-07-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR CIT SHRI K K JOHN
• Assessee Lawyers: NARAYANAN POTTI
• Keywords: Business income
• Section: 6

Judgement Text

1 ITA NO.484/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI CHANDRA PO OJARI (AM) I.T.A NO. 484/COCH/2013 (ASSESSMENT YEAR 2009-10) SHRI V.A. JOSE VS DY.CIT, CENT.CIR. VAIDYAKARAN HOUSE TRICHUR PALISSERY, PO PALIKKAL, TRICHUR PAN : ALBPJ0942N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NARAYANAN POTTI RESPONDENT BY : SHRI M ANIL KUMAR, CIT / SHRI K.K. JOHN, SR DR DATE OF HEARING : 11-09-2014 DATE OF PRONOUNCEMENT : 14-11-2014 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF CIT(A)-I, KOCHI DATED 04-03-2013 AND PERTAINS TO ASSESSMENT Y EAR 2009-10. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS CLASS IFICATION OF INCOME ON SALE OF AGRICULTURAL LAND. 2 ITA NO.484/COCH/2013 3. SHRI NARAYANAN POTTI, THE LD.COUNSEL FOR THE ASS ESSEE SUBMITTED THAT THE ASSESSEE PURCHASED 1 ACRE AND 64.75 CENTS OF LA ND AT AVINISSERY ON 16-08-2006 AND SOLD THE SAME ON 20-08-2008. THE AS SESSEE CLAIMED THE PROFIT ON SALE OF THE AGRICULTURAL LAND AS CAPITAL GAIN. HOWEVER, THE ASSESSING OFFICER CLASSIFIED THE SAME AS BUSINESS I NCOME ON THE GROUND THAT THE ASSESSEES ACTIVITY AMOUNTS TO ADVENTURE I N THE NATURE OF TRADE. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LAND IS AN AGRICULTURAL LAND. IT WAS SUBJECTED TO CULTIVATION. THEREFORE, THE PROFIT ON SALE OF SUCH AGRICULTURAL LAND HAS TO BE TREATED AS CAPITAL GAIN WHICH IS EXEMPTED FROM TAXATION. THE LD.COUNSEL FURTHER SUBMITTED THAT TH E ASSESSEE CULTIVATED THE LAND AND HE NEVER INTENDED TO ENGAGE HIMSELF IN BUS INESS ACTIVITY. THEREFORE, ACCORDING TO THE LD.COUNSEL, THE ASSESSI NG OFFICER IS NOT JUSTIFIED IN CLASSIFYING THE PROFIT AS BUSINESS INCOME. ACCO RDING TO THE LD.COUNSEL, THE ASSESSEE NEVER ENGAGED IN AN ACTIVITY WHICH IS ADVENTURE IN THE NATURE OF TRADE. THE LD.COUNSEL SUBMITTED THAT THERE WAS AN ELECTRICITY CONNECTION FOR AGRICULTURAL PURPOSE. THE ASSESSEE WAS ALSO IS SUED LABOUR CARD UNDER NATIONAL RURAL EMPLOYMENT GUARANTEE ACT, 2005. THE AGRICULTURAL OFFICER, PALISSERY HAS ALSO ISSUED A CERTIFICATE SAYING THAT THE ASSESSEE WAS CULTIVATING COCONUT, BANANA, VEGETABLE, ETC IN THE LAND BELONGING TO HIM AT PALISSERY. THIS MATERIAL, ACCORDING TO THE LD.COUN SEL WOULD ESTABLISH THAT THE ASSESSEE IS AN AGRICULTURIST AND THE SUBJECT LA ND WAS SUBJECTED TO 3 ITA NO.484/COCH/2013 CULTIVATION. THEREFORE, ACCORDING TO THE LD.COUNSE L, THE ACTIVITY OF THE ASSESSEE IS NOT AN ADVENTURE IN THE NATURE OF TRADE . 4. ON THE CONTRARY, SHRI K.K. JOHN, THE LD.DR SUBMI TTED THAT THE ASSESSEE WAS A NON RESIDENT INDIAN UPTO ASSESSMENT YEAR 2008-09. THE LAND AT AVINESSERY VILLAGE WAS PURCHASED ON 16-08-2 006 WHEN THE ASSESSEE WAS A NON RESIDENT. REFERRING TO FOREIGN E XCHANGE MANAGEMENT (ACQUISITION & TRANSFER OF IMMOVABLE PROPERTY IN IN DIA) REGULATION, 2000, THE LD.DR SUBMITTED THAT A PERSON RESIDENT OUTSIDE INDIA CANNOT INVEST / ACQUIRE ANY AGRICULTURAL PROPERTY IN INDIA. IT IS NOT THE CASE OF THE ASSESSEE THAT ANY SPECIAL PERMISSION WAS OBTAINED BY HIM FOR ACQUIRING AGRICULTURAL LAND IN INDIA. EVEN IF THE ASSESSEE PURCHASED THE AGRICULTURAL LAND IT CANNOT BE HIS INTENTION TO CULTIVATE THE SAME SINCE HE IS NOT AVAILABLE IN INDIA FOR CULTIVATING THE LAND. THE LD.DR FURTHER SUBMITTED THAT AFTER PURCHASE OF THE LAND, THE ASSESSEE CLAIMS THAT HE H AS SPENT NEARLY RS.1,75,000 FOR LEVELLING THE LAND BEFORE SELLING T HE SAME TO ST. ANTONYS TIMBER MART. PURCHASING THE LAND, LEVELING THE SAM E, TO MAKE IT A MARKETABLE PRODUCT / COMMODITY, THEN EXECUTING SALE DEED CLEARLY ESTABLISHES THAT THE ACTIVITY OF THE ASSESSEE IS IN THE NATURE OF TRADE. ACCORDING TO THE LD.DR MERELY BECAUSE CERTAIN COCON UT TREES WERE STANDING ON THE LAND AT THE TIME OF PURCHASE THAT W OULD NOT ESTABLISH THAT THE ASSESSEE SUBJECTED THE LAND FOR CULTIVATION. T HE LD.DR FURTHER 4 ITA NO.484/COCH/2013 SUBMITTED THAT TRADING CAN BE DONE IN PURCHASE AND SALE OF AGRICULTURAL LAND ALSO. THEREFORE, THE ASSESSING OFFICER HAS RI GHTLY CLASSIFIED THE INCOME AS BUSINESS INCOME. THE CIT(A) HAS RIGHTLY CONFIRMED THE SAME. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NO T IN DISPUTE THAT THE LAND WAS PURCHASED BY THE ASSESSEE AT AVINESSERY VILLAGE ON 16-08-2006. THE ASSESSEE ADMITTEDLY WAS A NON RESIDENT INDIAN AT TH AT POINT OF TIME. THE FACT THAT THE LAND IS AN AGRICULTURAL LAND IS NOT I N DISPUTE. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THE ASSESSEE EN GAGED HIMSELF IN ANY ACTIVITY WHICH IS AN ADVENTURE IN THE NATURE OF TRA DING? AS RIGHTLY SUBMITTED BY THE LD.DR, A PERSON CAN ALSO ENGAGE HIMSELF IN P URCHASE AND SALE OF AGRICULTURAL LAND. WHEN SUCH AN ACTIVITY WAS UNDE RTAKEN IN THE PURCHASE AND SALE OF AGRICULTURAL LAND THEN THE INCOME / PRO FIT ARISING FROM SUCH ACTIVITY HAS TO BE NECESSARY CLASSIFIED AS INCOME F ROM BUSINESS. 6. IT IS WELL SETTLED PRINCIPLES OF LAW THAT FOR TH E PURPOSE OF FINDING OUT THE NATURE OF THE ACTIVITY UNDERTAKEN BY THE ASSESS EE THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF THE PROPERTY NE EDS TO BE ASCERTAINED. IF THE ASSESSEE PURCHASES THE AGRICULTURAL PROPERTY AS AN INVESTMENT, THEN NATURALLY PROFIT ARISING FROM SALE OF SUCH LAND CAN NOT BE TREATED AS PROFIT FROM BUSINESS. BUT IF THE INTENTION IS TO EARN PRO FIT BY ENGAGING HIMSELF IN 5 ITA NO.484/COCH/2013 BUSINESS ACTIVITY, THEN NATURALLY IT HAS TO BE CLAS SIFIED AS INCOME FROM BUSINESS. TO FIND OUT THE ACTUAL NATURE OF THE ACTI VITY, THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF THE PROPERTY HA S TO BE ASCERTAINED. 7. THE MATERIAL AVAILABLE ON RECORD SHOWS THAT THE ASSESSEE PURCHASED THE PROPERTY ON 16-08-2006. THE ASSESSEE HIMSELF C LAIMS THAT AN AMOUNT OF RS.1,75,000 WAS INCURRED FOR LEVELING THE LAND B EFORE SELLING. THE ASSESSEE ENTERED INTO AN AGREEMENT FOR SALE WITH ON E FALGUNAN ON 22-08- 2007. ULTIMATELY, THE SALE DEED WAS EXECUTED ON 20 -08-2008 IN FAVOUR OF ST. ANTONYS TIMBER DEPOT, CHEVOOR. DURING THE COU RSE OF EXAMINATION THE ASSESSEE CLARIFIED THAT THE LAND WAS LEFT IDLE AND THERE WAS NO INCOME FROM THIS LAND. HE ALSO CLARIFIED THAT NO CULTIVATION W AS DONE. THEREFORE, IT IS OBVIOUS THAT IMMEDIATELY AFTER PURCHASE THE ASSESSE E HAS INCURRED ABOUT RS.1,75,000 FOR LEVELLING TO MAKE THE LAND A GOOD M ARKETABLE COMMODITY. IF THE INTENTION WAS TO RETAIN THE LAND AS AGRICULT URAL LAND, THEN THERE CANNOT BE ANY NECESSITY FOR THE ASSESSEE TO LEVEL THE LAND BY INVESTING RS.1,75,000. THE VERY ACT OF LEVELLING THE LAND BY SPENDING ABOUT RS.1,75,000 IMMEDIATELY AFTER PURCHASE ESTABLISHES THAT THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE WAS TO INDULGE IN AN ACTIVITY IN THE NATURE OF TRADE. FURTHERMORE, FOREIGN EXCHANGE MAN AGEMENT (ACQUISITION & TRANSFER OF IMMOVABLE PROPERTY IN INDIA) REGULATI ON, 2000, FRAMED BY THE RESERVE BANK OF INDI IN EXERCISE OF ITS STATUTO RY POWERS CONFERRED U/S 6 ITA NO.484/COCH/2013 47 OF FOREIGN EXCHANGE MANAGEMENT (ACQUISITION & TR ANSFER OF IMMOVABLE PROPERTY IN INDIA) ACT, 1999 PROHIBITS AC QUISITION OF AGRICULTURAL LAND BY AN NRI. IN VIEW OF THE ABOVE, IT CLEARLY S HOWS THAT THE INTENTION OF THE ASSESSEE WAS TO TRADE IN AGRICULTURAL LAND, THE REFORE, THE PROFIT ON SALE OF AGRICULTURAL LAND HAS TO BE NECESSARILY CLASSIFI ED AS INCOME FROM BUSINESS. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONF IRMED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH NOVEMBER, 2014. SD/- SD/- (CHANDRA POOJARI) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 14 TH NOVEMBER, 2014 PK/- COPY TO: 1. SHRI V.A. JOSE, VAIDYAKARAN HOUSE, PALLISSERY, P O PALAKKAL, THRISSUR 2. THE DY.CIT, CENT.CIR., THRISSUR 3. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI 4. THE COMMISSIONER OF INCOME-TAX(A)-I, KOCHI 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH