Case Law Details
ITO Vs Kanubhai M. Patel (ITAT Ahmedabad)
Pune Tribunal in the case of Dilip Battu Karanjule v. ITO [2016] 74 taxmann.com 12 (Pune – Trib.) held that where assessee identified land on behalf of existing and known persons and entire money towards purchase of land had been financed by such persons to whom land was ultimately sold within a short span of its acquisition without putting land for agricultural use at any point of time, it was to be held that activities carried out by assessee towards purchase and sale of impugned land was adventure in nature of trade and thus a business activity chargeable to tax.
In the case of Harshadkumar Amrutlal Patel v. DCIT [2019] 111 taxmann.com 31 (Ahmedabad – Trib.), the Ahmedabad ITAT held that where assessee had purchased agricultural land and immediately thereafter converted said land into non-agricultural land for commercial use, etc., driving force for purchase of land was to exploit it commercially, and, thus, profit arising on sale being nearly 30 times of investment in a period of 3-4 years owing to such concerted and planned transaction of purchase and sale of land had been rightly regarded as business activity by Assessing Officer.
The Kerala High Court in the case of N.A. Baby v. DCIT [2015] 62 taxmann.com 22 (Kerala) held that where assessee having purchased agricultural land, converted same into barren land and thereupon sold it within short period of purchase, said activity was to be regarded as adventure in nature of trade and, consequently, profit earned on sale of land was to be taxed as business income.
Now, in the facts of the present case, the assessee bought four plots of land, consolidated the same into a single plot, converted their use from agricultural to non-agricultural and sold the same to SPIL at a profit. It is evident from contents of letter dated 15-09-2007, that the intention at the time of purchase of land was to sell the same to SPIL at a profit, and assessee has no intention to hold the land as an investment or utilize for any other purpose. In our view, the case is directly covered by facts in the case of G. Venkataswami Naidu & Co. v. CIT 35 ITR 594 (SC) and also Pune ITAT in the case of Dilip Battu Karanjule v. ITO [2016] 74 taxmann.com 12 (Pune – Trib.) wherein on identical facts, the Courts held that the intention at the time of purchase has to be seen and if the intention at the time of purchase was to sell land at a profit the transaction would qualify as ‘adventure in the nature of trade’. In the instant facts. the assessee took an interest-bearing unsecured loan (which was arranged by SPIL) to give effect to the transaction. The assessee did not make any improvements to the land and as soon the land use was converted to non-agricultural, the assessee sold the same to SPIL for a profit, as was intended from the beginning. Thus, in our view, though the assessee was acting as a full time employee and acted on the request of his employer to undertake the present transaction, still in our considered view, the present engagement qualifies as an adventure in the nature, by applying the ratio of the above decisions.
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