Amount received from transfer of agricultural land eligible for tax exemption

G.N. Venugopal Vs ACIT (ITAT Bangalore)

Conclusion: Merely because of the fact that the land was sold for profit, it could not be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade. Where land was not subjected to any conversion as non-agricultural land by assessee transferred such agricultural land as it was and where it was basis, in such circumstances, such transfer could not be considered as a transfer of capital asset or the transaction relating to sale of land was not an adventure in the nature of trade so as to tax the income arising out of this transaction as business income.

Held: AO treated the net consideration received on the sale of agricultural land as business income though assessee had declared agricultural income, which was exempt income u/s.2(14). During the course of search proceedings, it had found some documents, and based on that AO had initiated the proceedings u/s. 153A. Appellant submitted that the land was always an investment and not at all converted into stock in-trade. There was no material on record to show that he carried on activities of buying and selling of land in a systematic manner so as to justify the action of the AO in treating the activities of the appellant as adventure in the nature of trade. The land was sold by him in acreage and not by making plots.  It was held that the intention of assessee from the inception was to carry on agricultural operations and even there was no intention to sell the land in future at that point of time. It was due to the boom in real estate market came into picture at a later stage, the assessee had sold the land. Merely because of the fact that the land was sold for profit, it could not be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade. The period of holding should not suggest that the activity was an adventure in the nature of trade. Further, it was cleared that when the land which did not fall under the provisions of section 2(14)(iii) and an assessee who was engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land was not subjected to any conversion as non-agricultural land by assessee or any other concerned person, transferred such agricultural land as it was and where it was basis, in such circumstances, such transfer could not be considered as a transfer of capital asset or the transaction relating to sale of land was not an adventure in the nature of trade so as to tax the income arising out of this transaction as business income.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

These five appeals by the assessee directed against the order of the CIT(A)-11, Bengaluru for the AYs.2010-11 to 2014-15. Since, certain issues in these appeals are common, these appeals are clubbed together and disposed-of, by way of this common order for the sake of convenience.

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