Smt. Seema Kishan Mirpuri, Nagpur V. Income Tax Officer Ward -1(3), Nagpur

ITA 75/NAG/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1918 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 13-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR MILLND BHUSARI
• Assessee Lawyers: S C THAKKAR; C J THAKKAR
• Keywords: Capital asset; Business income

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR , BENCH , ( E - COURT), MUMBAI , BEFORE SHRI R.K.GUPTA , J M & SHRI RAJENDRA , A M / ITA NO. 75 / NAG /20 1 1 ( ASSESSMENT YEAR : 2007 - 08) SMT. SEEMA KISHAN MIRPURI, I/C CANAL ROAD, RAMDASPETH, NAGPUR - 10 VS. ITO, WARD 1(3), NAGPUR PAN/GIR NO. : A EDPM 9515 K ( APPELLANT ) .. ( RESPONDENT ) AND / ITA NO. 76 /NAG /20 11 ( ASSESSMENT YEARS :2007 - 08) SMT. KOKILA KISHAN MIRPURI, I/C CANAL ROAD, RAMDASPETH, NAGPUR - 10 VS. ITO, WARD 1(3), NAGPUR PAN/GIR NO. : A BXPM 1917 B ( APPELLANT ) .. ( RESPONDENT ) AND / ITA NO. 7 7 /NAG /20 11 ( ASSESSMENT YEAR :200 7 - 0 8 ) SMT. GEETA KISHAN MIRPURI, I/C CANAL ROAD, RAMDASPETH, NAGPUR - 10 VS. ITO, WARD 1(3), NAGPUR PAN/GI R NO. : A BXPM 191 8 C ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI C.J.THAKKAR & SHRI S.C.THAKKAR /REVENUE BY : DR. MILLND BHUSARI DATE OF HEARING : 1 8 TH DEC ., 2012 DATE OF PRONOUNCEMENT : 1 ST FEB. ,201 3 ITA NO S . 75,76 &77 /NAG /20 1 1 2 O R D E R P ER SHRI R.K.GUPTA, J.M : THE SE ARE THREE APPEALS BY THE THREE DIFFERENT ASSESSEE S AGAINST THE ORDER OF LEANED CIT(A) - I , NAGPUR (MAHARASHTRA) , RELATING TO ASSESSMENT YEAR 2007 - 08 . SINCE THE COMMON ISSUES ARE INVOLVED IN ALL THE CASES , THEREFORE, FOR THE SAKE OF CONVENIENCE , ALL THE CASES HAVE BEEN HEARD THROUGH E - COURT, MUMBAI AND DISPOSED OF BY THIS CONSOLIDATED ORDER TOGETHER . 2 . W E WILL DISCU SS THE FACTS IN THE CASE OF ASSESSEE SMT. SEEMA KISHAN MIRPURI IN ITA NO. 75 /NAG/201 1 AND THE OUTCOME OF THE SAME WILL BE APPLICABLE IN CASE OF TWO OTHER ASSESSEES I.E. SMT. KOKILA KISHAN MIRPURI & SMT. GEETA KISHAN MIRPURI IN ITA NO.76&77/NAG/2011, RESPECT IVELY OWING TO THE IDENTICAL FACTS . 3 . THE ASSESSEE IN HER APPEAL RAISES OBJECTION IN REGARD TO TREATING THE TRANSACTION OF SALE OF LAND BY THE ASSESSEE TO M/S VIDARBHA PREMIER COOP. SOCIETY LTD. AS AN ADVENTURE IN NATURE OF TRADE AND TAXING THE GAIN AS BUSINESS INCOME INSTEAD OF LONG TERM CAPITAL GAIN SHOWN BY THE ASSESSEE. 4. THE BRIEF FACTS IN THIS REGARD ARE THAT T HE RETURN OF INCOME WAS FILED BY THE ASSESSEE DECLARING A TOTAL INCOME OF RS.70,740/ - . IN THE RETURN OF INCOME ASSESSEE SHOWN SALE OF PLO TS AMOUNTING TO RS.58,39,237/ - . CAPITAL GAINS ON THIS WAS SHOWN AS NIL. THE ASSESSEE ALONGWITH HER MOTHER AND SISTER ARE PARTNERS IN A FIRM M/S S.K. ITA NO S . 75,76 &77 /NAG /20 1 1 3 DEVELOPERS WHICH IS ENGAGED IN THE BUSINESS OF LAND DEVELOPMENT & BUILDERS. THIS FIRM HAS CONSTITUTED ON 18 - 11 - 2003. AS PER THE DEED OF PARTNERSHIP THE PARTNERSHIP HAS BEEN ENTERED INTO WITH A VIEW TO DEVELOP THE LAND OWNED BY THE THREE PARTNERS NAMELY SMT. SEEMA K. MIRPURI, KU. KOKILA K. MIRPURI AND KU. GEETA K. MIRPURI. THE NATURE OF BUSINESS OF THE PARTNERSH IP WAS TO BE THAT OF BUILDER, DEVELOPER, CIVIL CONTRACTOR, TRANSPORTER, DESIGNER, GOVERNMENT CONTRACT, MATERIAL SUPPLIERS ETC. THE DEED OF PARTNERSHIP IS REGISTERED AS ON 18 - 11 - 2003. AO HAS NOTED IN THE ASSESSMENT ORDER THAT THE PART OF THEIR SHARE IN THE DEVELOPED PROPERTY WAS TRANSFERRED TO M/S VIDHARBHA PREMIER CO - OP. HOUSING SOCIETY LIMITED ON 06 - 03 - 2007 AFTER A GAP OF FOUR YEARS OF CONVERSION OF PLOTS INTO BUSINESS ASSETS. THE INCOME RECEIVABLE AND INCOME ASSESSABLE ON THE SALE OF THESE PLOTS WAS SHOW N UNDER THE HEAD CAPITAL GAINS BY THE ASSESSEE. AD WAS OF THE OPINION THAT SINCE THE ASSETS WERE ALREADY TREATED AS BUSINESS ASSETS, IT CAN NOT BE TAXABLE UNDER THE HEAD CAPITAL GAINS. TO ASCERTAIN THE FACTUAL POSITION AD HAS IN THE COURSE OF ASSESSMENT PR OCEEDINGS OBTAINED THE DETAILS OF BROKERAGE PAID, NATURE AND COST OF IMPROVEMENT OF LAND, DETAILS OF PERSONS WHO INCURRED EXPENDITURE ON DEVELOPMENT, DETAILS ABOUT THE FIRM M/S S.K. DEVELOPERS AND DETAILS ABOUT THE TRANSACTION ENTERED INTO WITH M/S VIDARBH A PREMIER CO - OP. SOCIETY LTD. NAGPUR. DURING THE ASSESSMENT PROCEEDINGS THE FOLLOWING FACTUAL SUBMISSIONS WERE MADE BY THE ASSESSEE AND THESE HAVE BEEN RECORDED IN THE ASSESSMENT ORDER. THE LAND ADMEASURING 343244 SQ.FT. WAS ORIGINALLY PURCHASED IN ITA NO S . 75,76 &77 /NAG /20 1 1 4 THE YEA R 1993. THE THREE INDIVIDUAL CO - OWNERS HAVE APPLIED FOR CONVERSION OF THE AGRICULTURAL LAND TO NON AGRICULTURAL LAND VIDE APPLICATION DATED 27 - 07 - 2001. APPROVAL IN THIS REGARD HAS BEEN OBTAINED ON 15 - 03 - 2002. THE PARTNERSHIP FIRM M/S S.K. DEVELOPERS WAS ES TABLISHED ON 18 - 11 - 2003 WITH A VIEW OF GETTING THE BEST PRICE OF THE LAND. EXPENDITURE INCURRED ON IMPROVEMENT OF THE LAND TO HAVE INCURRED BY M/S S.K. DEVELOPERS AND DEBITED TO THE PARTNERSHIP FIRM. IT HAS BEEN STATED THT THE LAND WAS BROUGHT IN AS CAPITA L CONTRIBUTION IN THE FIRM BY THE PARTNERS WHICH HAS BEEN DULY RECORDED IN THE BILLS OF THE FIRM. ON 02 - 03 - 2007 IT HAS CLAIMED THAT THE CO - OWNERS HAVE SOLD A TOTAL 119747 SQ.FT. OF LAND TO M/S VIDARBHA PREMIER CO - OP. HOUSING SOCIETY LTD. THE ASSESSEE KUM. GEETA MIRPURI HAS SOLD 2196 SQ.FT. OF LAND FOR A TOTAL CONSIDERATION OF RS. 58,39,237/ - . IT HAS ALSO BEEN CLAIMED BY THE ASSESSEE THAT FROM THE YEAR 1993 ONWARDS WHEN THE LAND WAS PURCHASED, AGRICULTURAL ACTIVITIES WAS CARRIED ON. THE PRODUCTS EITHER WAS SOLD OR CONSUMED. IT HAS BEEN CLAIMED BY THE APPELLANT THAT IT IS THE ONLY PART OF THE INDIVIDUAL LAND THAT HAS BEEN BROUGHT BY THE INDIVIDUAL OWNER TO THE PARTNERSHIP FIRM AS CAPITAL CONTRIBUTION. THE REMAINING LAND WHICH WAS NOT CONTRIBUTED AT ALL TO CAP ITAL OF M/S S.K. DEVELOPERS AND HELD AS A INDIVIDUAL ASSET WAS AGREED TO BE SOLD TO THE BUYER TO CARRY CERTAIN ACTIVITIES ON THE LAND AND TO GET THE BETTER PRICE OF THE FRONT SIDE LAND. HOWEVER, AO HAS HELD THAT FROM THE ASSESSEES REPLY AND THE COPY OF TH E PARTNERSHIP DEED FILED IT IS SEEN THAT THE WHOLE OF THE PROPERTY PURCHASED BY THE THREE LADIES WAS CONVERTED INTO THE ITA NO S . 75,76 &77 /NAG /20 1 1 5 BUSINESS ASSETS BY THE ASSESSEE. THE ASSESSEE HAD CONVERTED HER LAND HOLDING INTO BUSINESS ASSETS ON 18/11/2003 I.E. THE DATE OF PARTNER SHIP SO THE LAND HOLDINGS OF THE ASSESSEE WAS BUSINESS ASSETS AS ON 18/11/2003. THE ASSESSEE HAS SOLD THE PORTION OF HER SHARE OF LAND IN THE FIRM TO THE VIDHARBHA PREMIER CO - OP. HOUSING SOCIETY LTD., NAGPUR ON 06/03/2007. THE ASSESSEE HOLD LAND ADMEASURIN G ABOUT .84 HECTOR OF LAND IDENTIFIED AS LAND BEARING KH.NO. 71/2 AT MOUZA : BORI, NAGPUR. OUT OF THIS, SHE SOLD PLOTS TO THE VIDHARBHA PREMIER CO - OP. HOUSING SOCIETY LTD., NAGPUR FOR A CONSIDERATION OF RS. 58,39,237/ - . 4.1 THE AO ALSO STATED THAT FROM THE BALANCE SHEET OF M/S S.K. DEVELOPERS AS ON 31 - 03 - 2005 THE PARTNERS PERSONAL CONTRIBUTION IS SHOWN AS LAND AT BUTIBORI. ACCORDING TO THE AO THE AGRICULTURAL LAND WAS CONVERTED INTO THE NON AGRICULTURE LAND ON 15 - 03 - 2002. FURTHER, DEED OF PARTNERSHIP WA S MADE ON 18 - 11 - 2003 WHEREIN THE LAND HAS BEEN TREATED AS CAPITAL CONTRIBUTION. EXPENDITURE HAS BEEN INCURRED FOR COST OF IMPROVEMENT TOWARDS CONSTRUCTION OF INTERNAL TAR ROADS, WATER AND SEVERAGE SYSTEM, TRANSFORMER, LIGHT FITTING. THE EXPENDITURE INCURRE D BY M/S S.K. DEVELOPERS WERE DEBITED TO THE CAPITAL ACCOUNT OF THE THREE PARTNERS. SHRI KISHAN MIRPURI WHO HOLDS A GENERAL POWER OF ATTORNEY FROM ALL THREE PARTNERS HAS ENTERED INTO AN AGREEMENT WITH M/S. VIDARBHA PREMIER CO - OP. HOUSING SOCIETY LTD., NAGP UR ON 18/05/2006 AND THE PLOTS HAVE BEEN SOLD ON 06 - 11 - 2007. THEREFORE AO HELD THAT THE LAND WAS THE BUSINESS ASSETS OF THE FIRM AND THE PARTNERS HAVE WITHDRAWN THEIR SHARE OF THEIR LAND AND SOLD THE SAME INDIVIDUALLY ITA NO S . 75,76 &77 /NAG /20 1 1 6 AS THESE ASSETS SOLD WERE BUSINESS ASS ETS. INCOME IS THEREFORE TO BE ASSESSED ONLY AS INCOME FROM PROFITS AND GAINS OF BUSINESS AND NOT UNDER THE HEAD CAPITAL GAINS. FURTHER DEDUCTION U/S S4EC OF THE ACT HAS BEEN WRONGLY CLAIMED. 5 . ASSESSEE PREFERRED APPEAL B EFORE THE CIT(A) . DETAILED ARGUME NTS WERE ADVANCED ON BEHALF OF THE ASSESSEE BY FILING WRITTEN SUBMISSION. THE WRITTEN SUBMISSION FILED ON BEHALF OF THE ASSESSEE ARE TABULATED IN THE ORDER OF CIT(A) AT PAGES 4 & 5. IN A NUTSHELL THE ASSESSEE S CASE IS THAT ONLY A PART OF THE LAND WAS GIVE N TO M/S S.K. DEVELOPERS VIZ 18656 SQ.FT. LAND. BALANCE OF 29196 SQ.FT. WAS RETAINED BY APPELLANT AND SUBSEQUENTLY SOLD TO M/S VIDARBHA PREMIER HOUSING CO - OP. SOCIETY RESULTING IN CAPITAL GAINS. RELIANCE WAS PLACED O N VARIOUS CASES LAWS I.E GAJANAN ENTERPR ISES 314 ITR 247 (KARNATAKA) ; 261 ITR 570 (BOMBAY HC) ; 208 ITR 232 (BOMBAY HC) AND MANY OTHERS. THE SUBMISSIONS FILED ON BEHALF OF THE ASSESSEE WERE SENT TO AO FOR HIS REMAND REPORT. THE REMAND REPORT DATED 19 - 4 - 2010 WAS RECEIVED, WHICH IS ALSO TABULATED I N THE ORDER OF LEARNED CIT(A) AT PAGES 6 TO 10 . COPY OF THE REMAND REPORT RECEIVED FROM THE AO WAS SENT TO THE ASSESSEE AND IN RESPONSE TO THE SAME THE ASSESSEE HAS FILED COUNTER REPLY, WHICH IS ALSO TABULATED IN THE ORDER OF THE CIT(A) AT PAGES 10 TO 12. AFTER CONSIDERING THE SUBMISSION, REMAND REPORT OF THE AO AND COUNTER RELY FILED ON BEHALF OF THE ASSESSEE, LEARNED CIT(A) CAME TO THE CONCLUSION THAT THE LAND SOLD BY THE ASSESSEE WAS IN ITA NO S . 75,76 &77 /NAG /20 1 1 7 NATURE OF ADVENTURE IN TRADE AND ACCORDINGLY, THE ORDER OF AO WAS CO NFIRMED. NOW, THE ASSESSEE IS IN APPEAL HERE BEFORE THE TRIBUNAL. 6 . LEARNED COUNSEL OF THE ASSESSEE REITERATED THE CONTENTIONS RAISED BEFORE THE LOWER AUTHORITIES. IT WAS FURTHER SUBMITTED THAT THE SALE WAS MADE BY ASSESSEE TO M/S VIDARBHA PREMIER COOPE RATIVE HOUSING SOCIETY LIMITED. IT WAS FURTHER STATED THAT THE SALE WAS EFFECTED BY THE ASSESSEE INDIVIDUAL AND NOT AS A PARTNER. THE ATTENTION OF THE BENCH WAS DRAWN ON COPY OF T HE WRITTEN SUBMISSION PLACED IN THE PAPER BOOK. THE ATTENTION OF THE BENCH W AS ALSO DRAWN ON A COPY OF MAP OF THE LAND SOLD TO THE SOCIETY PLACED IN PAPER BOOK AT PAGE 46. THE RELIANCE WAS ALSO PLACED ON VARIOUS CASE LAWS ON WHICH THE RELIANCE WAS PLACED BEFORE THE CIT(A) . FURTHER RELIANCE WAS PLACED IN J.M MEHTA & BROS. (1995) 21 4 ITR 716 (BOM) . COPY OF THE DECISION IS ALSO PLACED ON RECORD. 7 . PER CONTRA , LEARNED DR STRONGLY PLACED ON THE ORDER OF AO AND THE CIT(A) . IT WAS EMPHASIZED THAT THE ASSESSEE HAS CONVERTED ITS LAND IN NON - AGRICULTURAL USE FOR THE PURPOSE OF DEVELOPING T HE SAME TO GET HIGHER PRICE. THEREFORE, WHETHER THE LAND WAS PART OF THEIR INVESTMENT IN PARTNERSHIP FIRM IS THE MO O T QUESTION, THE QUESTION IS AS TO WHETHER THE LAND HELD BY THE ASSESSEE WAS BUSINESS ASSET OR NOT. THIS LAND WAS PURCHASED BY THE ASSESSEE I N THE YEAR 1992 - 1993 AND WAS KEPT AS AN ASSET, HOWEVER, THE SAME WAS CONVERTED INTO NON - AGRICULTURAL USE IN THE YEAR 2002 AND THEREAFTER THE ASSESSEE CONSTITUTED THE PARTNERSHIP ALONG WITH OTHER TWO PARTNERS CONTRIBUTING THEIR LAND AS ITA NO S . 75,76 &77 /NAG /20 1 1 8 CAPITAL INVESTMENT IN THE PARTNERSHIP FIRM. THE PARTNERSHIP FIRM HAS INCURRED VARIOUS EXPENSES TO DEVELOP THE LAND IN QUESTION, HOWEVER, AT LATER STAGE, PART OF LAND WAS SOLD BY THE ASSESSEE ALONG WITH OTHER TWO PARTNERS TO THE SOCIETY. THE LAND IN QUESTION WAS SOLD AFTER DEMA RCATION OF THE LAND IN QUESTION IN PLOTS. THE SALE REGISTRY ENTERED BETWEEN THE ASSESSEE AND THE HOUSING SOCIETY IS VERY CLEAR THAT A BUSINESS ASSET WAS SOLD TO THE SOCIETY JUST TO FETCH THE HIGHER PRICE. IT WAS STATED THAT ALL THESE FACTS HAVE BEEN EXPLAI NED IN THE ORDER OF LEARNED CIT(A) MINUTELY . ATTENTION OF THE BENCH WAS DRAWN ON THE FINDING OF THE LEARNED CIT(A) . 8 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. AFTER CONSIDERING THE ORDER OF THE AO AND LEARNED CIT(A) AS WELL AS T HE ARGUMENTS OF BOTH THE PARTIES ALONG WITH VARIOUS CASE LAWS AND OTHER MATERIAL RELIED UPON AND PLACED ON RECORD BY BOTH THE PARTIES, WE NOTED THAT THE AO AND THE LEARNED CIT(A) REJECTED THE CLAIM OF THE ASSESSEE THAT THE SALE CONSIDERATION OUT OF SALE OF AGRICULTURE LAND WHICH WAS CONVERTED INTO NON - AGRICULTURE USE, IS ASSESSABLE AS CAPITAL GAIN AND NOT AT THE BUSINESS INCOME FOR THE REASON THAT THE ASSESSEE HAS CONVERTED ITS AGRICULTURE LAND INTO NON - AGRICULTURE USE. HOWEVER, BOTH THE LOWER AUTHORITIES I .E. LEARNED AO AS WELL AS LEARNED CIT(A) HAS NOT TAKEN INTO CONSIDERATION THAT THE LAND WAS CONVERTED INTO NON - AGRICULTURE USE IN THE YEAR 2002 AND THE SAME WAS KEPT AS A CAPITAL ASSET. THE SAME LAND WAS SOLD IN THE ASSESSMENT YEAR 2007 - 08 AFTER A PERIOD O F 5 YEARS FROM THE YEAR IN WHICH THE LAND WAS CONVERTED ITA NO S . 75,76 &77 /NAG /20 1 1 9 INTO NON - AGRICULTURE USE. MERELY ON THE GROUND THAT THE LAND IN QUESTION WHICH WAS PURCHASED IN THE YEAR 1992 AND THE SAME WAS CONVERTED INTO NON - AGRICULTURE USE, IN OUR CONSIDERED VIEW, THE CHARACTER OF THE ASSET IS NOT CHANGED. PART OF THE LAND WAS TRANSFERRED TO THE PARTNERSHIP DEED AS THE SHARE OF CAPITAL OF THESE THREE PARTNERS AND PART OF LAND WAS KEPT WITH THEM. HOWEVER, THE LAND WAS NOT SHOWN IN STOCK - IN - TRADE. SIMILAR ISSUE HAS BEEN DECIDED BY VARIOUS COURTS INCLUDING THE HONBLE BOMBAY HIGH COURT . THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. SOHAN KHAN, (2008) 304 ITR 194 ,HAS HELD THAT : - IN ORDER TO ARRIVE AT A CONCLUSION, AS TO WHETHER A TRANSACTION IS TO BE TAXED AS CAPITAL GAIN OR THE TRANSACTION IS TO BE TREATED TO BE AN ADVENTURE IN THE NATURE OF TRADE, THINGS CANNOT BE PUT IN ANY STRAIGHT JACKET FORMULA, AND IT IS DEPENDENT UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE, TO BE DECIDED ON THE BASIS OF RELEVANT CONSIDERATIONS. ONE OF THE MOST SIGNIFICANT CONSIDERATIONS WOULD BE, THE REGULARITY OF TRANSACTION OF PURCHASE AND SALE. MERE FACT THAT THERE WA S A SERIES OF TRANSACTIONS OF SALE ONLY, BY SELLING THE PART OF THE WHOLE LAND, PURCHASED IN ONE GO, OR PURCHASED ONCE UPON A T IM E , I N PIECEMEAL, WOULD NOT RENDER THE ACTIVITY OF S ALE TO BE AN ADVENTURE IN THE N ATURE OF TRADE . I N THE PRESENT CASE, THERE IS NOTHING TO SHOWN THAT THE LAND WAS PURCHASED WITH INTENTION TO SELL IT AT A PROFIT, OR WITH REQUISITE INTENTION TO BRING IT WITHIN THE PARAMETERS OF STOCK IN - TRADE. IT IS NOT SHOWN THAT THE ASSESSEE IS A REGULAR DEALER IN REAL ESTATE. IT APPEARS, THAT THE LAND WAS PURCHASED IN 1970, WHICH WAS UNDER CLOUD OF LAND CEILING LAWS, AND AFTER THAT CLOUD WAS - CLEARED, AND OTHER ADJO INING LANDS HAD BEEN DEVELOPED, AND SINCE THE LAND WAS NOT YIELDING ANY RETURN, IT WAS DECIDED TO BE SOLD IN PIECEMEAL, BY EARMARKING PLOTS BUT THEN NONETHELESS IT WOULD REMAIN A DISPOSAL OF THE CAPITAL ASSET ONLY, AND NOT A TRANSACTION OF ANY STOCK - IN - TR ADE SO AS TO BE D ESCRIBED AS ADVENTURE IN THE NATURE OF TRADE. OBVIOUSLY THEREFORE, IT IS LIABLE TO BE TAXED O NLY AS THE CAPITAL GAIN. G. VENKATASWAMI NAIDU & CO. VS. CIT (1959) 35 ITR 594 (SC) APPLIED. THE HONBLE RAJASTHAN HIGH COURT WHILE HOLDING A BOVE, HAS ASCERTAINED THE FACTUAL ASPECT THAT THE LAND WAS PURCHASED IN THE YEAR 1970 AND ASSESSEE WAS NOT DEALING IN FREQUENT SALE AND PURCHASE OF ITA NO S . 75,76 &77 /NAG /20 1 1 10 LAND. ON A LATER STAGE, THE LAND WAS SOLD AFTER CONVERTING INTO NON - AGRICULTURE USE. IT WAS ALSO NOTED BY TH E HONBLE HIGH COURT THAT THE LAND WAS NOT PURCHASED WITH AN INTENTION TO SALE IT IN A PIECEMEAL AND TO EARN A HIGH PROFIT. ACCORDINGLY, IT WAS HELD THAT THE SALE OF LAND WAS A SALE OF CAPITAL ASSET. WHILE HOLDING SO, THE DECISION OF THE HON BLE SUPREME CO URT IN THE CASE OF G. VENKATASWAMI NAIDU & CO. VS. CIT (1959) 35 ITR 594 (SC) WAS FOLLOWED. 8 .1 SIMILARLY IN THE CASE OF CIT & ANR. VS. GAJANANA ENTERPRISES, (2009) 27 ITR 247 , THE HONBLE KARNATAKA HIGH COURT HAS CONCLUDED AS UNDER : - ASSESSEE HAVING EN TERED INTO AN AGREEMENT TO PURCHASE A PIECE OF LAND BY PAYING AN ADVANCE AND I OBTAINED PERMISSION TO CONVERT THE LAND INTO AN INDUSTRIAL LAND AND SUBSEQUENTLY ENTERED INTO AN AGREEMENT WITH A COMPANY TO SELL THE SAID LAND AND THE COMPANY GOT THE LAND CON VERTED INTO RESIDENTIAL LAND, IT CANNOT BE SAID THAT THERE WAS AN INTENTION TO MAKE PROFIT AND THAT THE TRANSACTION WAS AN ADVENTURE IN THE NATURE OF TRADE AND, THEREFORE, THE PROFIT ARISING TO THE ASSESSEE ON PRE - EMPTIVE PURCHASE OF THE PROPERTY BY THE APPROPRIATE AUTHORITY UNDER THE PROVISIONS OF CHAPTER XX - C WAS ASSESSABLE UNDER THE HEAD CAPITAL GAINS AND NOT AS BUSINESS INCOME. IN THIS CASE ALSO THE LAND WAS PURCHASED AND THEREAFTER THE SAME WAS CONVERTED INTO NON - AGRICULTURE LAND. IN FACT, THIS LAND WAS PURCHASED IN THE YEAR 1989 AND THE LAND WAS CONVERTED INTO AN INDUSTRIAL LAND IN THE YEAR 1992. THEREAFTER THE SAME LAND WAS SOLD AND THE ASSESSEE HAS SHOWN CAPITAL GAIN ON ACCOUNT OF SALE OF LAND, HOWEVER, THE AO HELD THAT THIS TRANSACTION WAS A N ADVENTURE IN NATURE OF TRADE. ACCORDINGLY, PROFIT HAS EARNED AS BUSINESS INCOME. TRIBUNAL ALLOWED IN FAVOUR OF THE ASSESSE E. ON SECOND APPEAL, THE HONBLE KARNATAKA HIGH COURT HELD THAT THE PROFIT EARNED BY THE ASSESSEE IS UNDER THE HEAD CAPITAL GAINS ITA NO S . 75,76 &77 /NAG /20 1 1 11 AN D NOT UNDER THE HEAD BUSINESS INCOME AND, THEREFORE, CAPITAL GAIN IS TO BE PAID. 8 .2 SIMILAR FACTS ARE INVOLVED IN THE CASE IN HAND AS IN THE PRESENT CASE HE LAND WAS PURCHASED IN THE YEAR 1992. THEREAFTER THE ASSESSEE CONVERTED THE LAND IN NON - AGRICULTUR E USE IN THE YEAR 2002. THE LAND WAS KEPT AS THE CAPITAL ASSET AND IN THE YEAR 2007 THE SAME WAS SOLD TO A PARTY AND ACCORDINGLY CAPITAL GAIN WAS PAID ON SALE CONSIDERATION TREATING THE SAME AS SALE OF CAPITAL ASSET, HOWEVER, LEARNED AO AND LEARNED CIT(A) HELD THAT THE TRANSACTION WAS ADVENTURE IN NATURE, THEREFORE, THEY TREATED THE TRANSACTION AS BUSINESS INCOME AND ACCORDINGLY, THE SAME WAS TREATED AS BUSINESS INCOME. HOWEVER, AS STATED ABOVE, THE ASSESSEE HAS KEPT THE CONVERTED LAND AS A CAPITAL ASSET. N OTHING IS ON RECORD THAT THE ASSESSEE HAS SOLD THIS LAND IN PIECEMEAL TO EARN HIGH PROFIT. REMAINING PART OF THE AND WAS TRANSFERRED TO PARTNERSHIP FIRM. THEREFORE, IN OUR CONSIDERED VIEW, THE CAPITAL GAIN IS CHARGEABLE TREATING THE SAME AS SALE OF CAPITAL ASSET AND NOT THE SALE OF STOCK - IN - TRADE. 8 .3 SIMILAR VIEW HAS BEEN EXPRESSED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. V.A.TRIVEDI, (1988) 172 ITR 95 (BOM) , WHEREIN THE HON BLE BOMBAY HIGH COURT HAS HELD AS UNDER : - FOR A TRANSACTION TO BE TREATED AS AN ADVENTURE IN THE NATURE OF TRADE, THERE HAD TO BE AN INTENTION TO TRADE AT THE TIME OF PURCHASE AND THE ONUS LAY ON THE DEPARTMENT TO PROVE THAT A PARTIC ULAR TRANSACTION WAS IN THE NATURE OF AN ADVENTURE IN THE NATURE OF TRADE. THE FACT TH A T THE ASSESSEE HAD OBTAINED PERMISSION TO CHANGE THE USE OF LAND TO NON - AGRICULTURAL PURPOSES CANNOT BY ITSELF ESTABLISH THAT THE PURCHASE OF LAND WAS WITH A VIEW TO TRADING IN THEM ESPECIALLY AS THE ASSESSEE WAS AN AGRICULTURIST AND THE LAND WAS ITA NO S . 75,76 &77 /NAG /20 1 1 12 SOLD TO FORESTALL ACQUISITION. THEREFORE, THE SALE OF LAND CANNOT BE TREATED AS AN ADVENTURE IN THE NATURE OF TRADE AND THE PROFIT FROM THE SALE OF LAND CANNOT BE ASSESSED AS BUSINESS INCOME . WHILE HOLDING SO THE DECISION OF THE HON BLE SUPREME COURT IN 105 ITR 133, 81 ITR 446 (GUJ.), 29 CTR 85 (GUJ.) , 52 CTR 169 (BOM) AND ALSO 161 ITR 696 (BOM) , WERE RELIED UPON. THE FACTS BEFORE US IS ALSO SIMILAR AS THE ONUS LAY UPON TO PROVE THAT THE PARTICULAR TRANSACTION WAS IN THE NATURE OF AN ADVENTURE IN THE NATURE OF T RADE. ONLY BASIS THAT THE ASSESSEE HAS CONVERTED ITS AGRICULTURAL LAND INTO NON - AGRICULTURAL USE, DOES NOT PROVE THAT THE TRANSACTION OF SALE ARE ADVENTURE IN NATURE OF TRADE. THE ASSESSEE HAS SOLD ITS CAPITAL ASSET AND, THEREFORE, CAPITAL GAIN HAS TO BE L EVIED. 8 .4 IN THE CASE OF CIT VS. KASTURI ESTATES (P) LTD., (1966) 62 ITR 578 (MAD ) , THE HONBLE MADRAS HIGH COURT HAS HELD THAT THERE WAS NO ADVENTURE IN THE NATURE OF TRADE WHERE ASSESSEE COMPANY HOLDING LARGE ESTATES MAINLY DERIVED INCOME FROM LETTING OUT OF PROPERTIES PARCELED A PIECE OF LAND INTO PLOTS, DEVELOPED IT AND SOLD FOR A PROFIT, SALE OF LAND NOT BEING A FREQUENT FEATURE WITH THE COMPANY EVEN THOUGH ITS OBJEC TS INCLUDED DEALING IN PROPERTY. ACCORDINGLY, IT WAS HELD THAT THE CONSTRUCTION HAS TO BE TREATED AS SALE OF CONSTRUCTION OF CAPITAL ASSET AND ACCORDINGLY, CAPITAL GAIN IS TO BE LEVIED. THE DECISION IN THE CASE OF G. VENKATASWAMI NAIDU & CO. VS. C I T (1959) 35 ITR 594 (SC) , WAS FOLLOWED BY THE HONBLE MADRAS HIGH COURT. AGAIN AS STATED A BOVE, THE FACTS BEFORE US ARE SIMILAR AS THE ASSESSEE AFTER CONVERTING THE AGRICULTURAL LAND INTO NON - AGRICULTURAL USE SOLD THE LAND AFTER 5 YEARS ITA NO S . 75,76 &77 /NAG /20 1 1 13 OF CONVERSION. THIS WAS NOT A FREQUENT SALE IN PIECEMEAL AND, THEREFORE, CAPITAL GAIN HAS TO BE CHARGED ON TH E SALE CONSIDERATION INSTEAD OF HOLD THAT THE SAME IS ADVENTURE IN NATURE OF TRADE. THE HON BLE SUPREME COURT IN THE CASE OF JANKI RAM BAHADUR RAM VS. CIT, (1977) 106 ITR 538 (ALL) , HAS HELD THAT THE APPELLANT MADE A PROFITABLE BARGAIN WHEN HE PURCHASED TH E PROPERTY, AND GRANTING FURTHER THAT THE APPELLANT HAD WHEN HE PURCHASED IT A DESIRE TO SELL THE PROPERTY, IF A FAVOURABLE OFFER WAS FORTHCOMING, THESE COULD NOT WITHOUT OTHER CIRCUMSTANCES JUSTIFY AN INFERENCE THAT THE APPELLANT INTENDED BY PURCHASING TH E PROPERTY TO START A VENTURE IN THE NATURE OF TRADE. THE RATIO OF THE HON BLE SUPREME COURT IS SQUARELY APPLICABLE IN THE PRESENT FACTS OF THE CASE AS IN THIS CASE ALSO THE ASSESSEE PURCHASED AGRICULTURAL LAND IN THE YEAR 1992 AND THE SAME WAS CONVERTED I NTO NON - AGRICULTURAL USE IN THE YEAR 2002. THEREAFTER THE LAND WAS KEPT BY THESE THREE ASSESSEE S AS IT IS. THEY HAVE ALSO EARMARKED IN PLOT AT THE TIME OF SALE WHICH WERE SOLD IN THE YEAR 2007 FALLS UNDER THE ASSESSMENT YEAR 2007 - 08. THE PURCHASE AND SALE TRANSACTION CANNOT BE TREATED AS ADVENTURE IN NATURE OF TRADE AS THE ASSESSEE HAS KEPT THE LAND AS INVESTMENT AND NOT AS STOCK - IN - TRADE. THEREFORE, WE HOLD THAT THE LAND SOLD BY THE ASSESSEE WAS NOT ON ACCOUNT OF ADVENTURE IN NATURE OF TRADE BUT WAS ON ACC OUNT OF SALE OF CAPITAL ASSET AND, THEREFORE, CAPITAL GAIN HAS TO BE LEVIED. ACCORDINGLY , ITA NO S . 75,76 &77 /NAG /20 1 1 14 WE DIRECT THE AO TO TREAT THE SALE CONSIDERATION AS SALE CONSIDERATION ON ACCOUNT OF CAPITAL ASSET AND COMPUTE THE CAPITAL GAIN ACCORDINGLY. 9 . IDENTICAL FACTS ARE INVOLVED IN THE CASE OF SMT. GEETA KISHAN MIRPURI AND SMT. KOKILA KISHAN MIRPURI . THEREFORE, FOR THE SAME REASONS AS GIVE ABOVE WHILE DISCUSSION THE APPEAL IN THE CASE OF SMT. SEEMA KISHAN MIRPURI (ITA NO. 75/NAG/2011 ) , WE HOLD THAT THE SALE OF LAND WAS ON ACCOUNT OF SALE OF CAPITAL ASSET AND, THEREFORE, CAPITAL GAIN IS TO BE CHARGED. THE AO IS DIRECTED TO RECOMPUTED THE CAPITAL GAIN ACCORDINGLY. 10 . RESULTANTLY , ALL THE APPEAL S OF THE THREE ASSESSEES I.E. ITA NOS. 75 TO 77 /NAG/2011 ARE ALLOWED . I.E. ITA NOS. 75 TO 7 7 /NAG/2011 ORDER PRONOUNCED IN THE E - COURT ON THIS 1 ST DAY OF FEB. .2013. - 201 3 SD/ - SD/ - ( ) ( RAJENDRA ) ( ) ( R.K.GUPTA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 0 1 / 0 2 / 201 3 . /PKM , PS COPY OF THE ORDER FORWA RDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI / NAGPUR . 4. / CIT 5. / DR, ITAT, MUMBAI / NAGPUR . 6. GUARD FI LE. //TRUE COPY// / BY ORDER, ( DY./ASSTT. REGISTRAR) / ITAT, MUMBAI