T.R. MEENA, A.M. This is an appeal filed by the Revenue against the order dated

23.03.2012 passed by the Ld. CIT(A)-I, Jaipur for A.Y. 2008-09. The respective grounds of appeal are as under:- ITA 529/JP/2012_ ACIT Vs. Atma Ram Gupta 2

Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) is justified in:- i) deleting the addition of Rs. 1,20,52,755/- on account of business profit from sale of land, even though the assessee was engaged in the business of real estate development. ii) Holding that no capital gain was chargeable as the asset referred was agricultural land, ignoring the facts that the assessee was not performing any agricultural activities and no agricultural income was shown in the return.

2. Both the grounds of revenues appeal are against deleting the addition of Rs. 1,20,52,755/- on account of business profit from sale of land and no capital gain was chargeable as the asset referred was agricultural land. The ld Assessing Officer observed that the assessee filed his return on 24/11/2009 declaring total income of Rs. 70,68,740/-. The case was scrutinized U/s 143(3) of the Income Tax Act, 1961 (in short the Act). The assessee is a Chartered Accountant and is partner in M/s A.R. Gupta & Company. He is also a working director in the following companies:- i) M/s A.R.G. Developers Pvt. Ltd. ii) M/s Grass Field Farms and Resorts Pvt. Ltd. iii) M/s Grass Field Fire Capital Developers Pvt. Ltd. During the year the assessee purchased following lands:- ITA 529/JP/2012_ ACIT Vs. Atma Ram Gupta 3 S. No. Name of the seller Date of registration of purchase deed Amount Description of land purchased 1 Shri Ramu S/o Shri Mangu Reswident of Bukni, Tehsil Phagi, dist. Jaipur 20/04/2007 (as per registered purchased deed) Rs. 23,11,450/- Khasra No. 519 measuring 7 Bigha 5 Biswa 2 Shri Sita Ram Meena, S/o Shri Banna Ram Meena, village Hingonia, Tehsil Phagi, dist.- Jaipur. 10/05/2007 (As per registered purchased deed) Rs. 1,05,00,000/- Khasara No. 825/4 measuring 6 Bigha 5 Biswa, Khasra No. 825/1/13 measuring 3 Bigha, khasra No. 825/2 measuring 15 Bigha. The above lands were sold by the assessee as under:- S. No. Name of the purchaser Date of registration of sale deed Amount Description of land sold 1 M/s Grass Field Fire Capital Developers Pvt. Ltd. 28/01/2008 (Through registered sale deed) Rs. 1,35,93,750/- Khasra No. 519 measuring 7 Bigha 5 Biswa 2 M/s Grass Field Fire Capital Developers Pvt. Ltd. 01/06/2007 (through registered sale deed) Rs. 2,14,39,685/- Khasara No. 825/4 measuring 6 Bigha 5 Biswa, Khasra No. 825/1/13 measuring 3 Bigha, khasra No. 825/2 measuring 15 Bigha. The Assessing Officer further observed that during the assessment proceedings, the AR of the assessee submitted that the sales as discussed in table No. 2 have been made by the assessee on behalf of and under instructions from M/s Grass Field Farms & Resorts Pvt. Ltd. in which the assessee is a working director. However, the assessee has ITA 529/JP/2012_ ACIT Vs. Atma Ram Gupta 4 sold the lands as enumerated in table No. 1 to M/s Grass Field Farms & Resorts Pvt. Ltd. in his individual capacity as under:- Khasra No. Purchased from & date of purchase Amount Sold to & date of sale Amount Profit/Gain Khasra No. 519 measuring 7 Bigha 5 Biswa Shri Ramu S/o- Shri Mangu Resident of Bukni, Tehsil Phagi, Dist.- Jaipur Dated 20/04/07 Rs. 23,11,450/- M/s Grass Field Farms & Resorts Pvt. Ltd. Dated 23/09/07 (Through unregistered sale deed) Rs. 77,12,456/- Rs. 54,01,006/- Khasara No. 825/4 measuring 6 Bigha 5 Biswa, Khasra No. 825/1/13 measuring 3 Bigha, khasra No. 825/2 measuring 15 Bigha. Shri Sita Ram Meena, S/o Shri Banna Ram Meena, village Hingonia, Tehsil Phagi, dist.- Jaipur Dated 05/09/06 (Un-register purchase deed) Rs. 1,05,00,000/- M/s Grass Field Farms & Resorts Pvt. Ltd. Dated 25/10/06 (Through unregistered sale deed) Rs. 1,71,51,749/- Rs. 66,51,749/- The assessee had earned net profit on sale of above two lands to M/s Grass Field Farms & Resorts Pvt. Ltd. at Rs. 1,20,52,755/- and had claimed exempt from income tax U/s 2(14)(iii) of the Act. The profit earned on sale of these lands further to M/s Grass Filed Fire Capital Developers Pvt. Ltd for and on behalf of M/s Grass Filed Farms & Resorts Pvt. Ltd. at Rs. 1,01,69,231/- had been disclosed in the hands ITA 529/JP/2012_ ACIT Vs. Atma Ram Gupta 5 of the company and had been included in the taxable income. As the profit/gain earned on sale of land to M/s Grass Filed Farms & Resorts Pvt. Ltd. amounting to Rs. 1,20,52,755/- has been claimed exempt and not disclosed in the return of income. The assessee was given reasonable opportunity of being heard on this issue, which was replied vide letter dated 29/09/2010, 07/10/2010 and 27/12/2010. After considering the assessees reply, the ld Assessing Officer observed that the assessee had purchased the above land in his own name and in individual capacity. He sold these lands to the company by executing separate registered sale deed on high price as is evident from the sale/purchase amount as stated above. Further the assessee was carrying the business of real estate. In sale deed dated 01/6/2007 at page No. 2, the assessees name of business has been stated that

whereas the seller is in the business of real estate trade and development and other real estate activities and the seller own and possesses large chunks of lands in village Khatwad, Khatwad, Tehsil Mujamabad, dist. Jaipur.

Thus, as per the Assessing Officer, the said land was his stock in trade was sold by him within very short time after purchase of the same. Therefore, the surplus/profits earned by him at ITA 529/JP/2012_ ACIT Vs. Atma Ram Gupta 6 Rs. 1,20,52,755/- is treated his business income and the same is added in his taxable income.

3. Being aggrieved by the order of the AO, the assessee carried the matter before the Ld. CIT(A), who had allowed the appeal by observing that the assessee is a Chartered Accountant by profession. He gets remuneration from the firm M/s A.R. Gupta and Company alonwith interest income, consultancy income and income from salary from the companies in which he is director. He does not maintain a personal capital account or balance sheet. The assessee is consistently investing in land from F.Y. 1989-90 and retained a portfolio of land of Rs. 3,92,49,208/- as on 31/3/2008. There was a survey U/s 133A of the Act at the business premises of M/s Grass Filed Farms & Resorts Pvt. Ltd. (GFFR) from 26/2/2008 to 28/02/2008. During the course of survey incriminating documents were found on which the assessee company had declared additional income and paid the tax on it. Agricultural land at village Khatwad was purchased on 05/09/2006 through sale agreement for Rs. 1,05,00,000/-. On the date of signing of the agreement the assessee paid Rs. 42,000/- to the seller. The assessee sold the land to GFFR on 25/10/2006 vide an agreement of sale and ITA 529/JP/2012_ ACIT Vs. Atma Ram Gupta 7 received a sum of Rs. 20 lakhs at the time of the sale. GFFR got the use of land converted from agricultural to residential U/s 90A of the Rajasthan Land Revenue Act, 1956 vide order dated 30/12/2006 and 29/12/2007. The conversion expenses were paid for by the company. GFFR sold the land vide sale deed dated 01/6/2007 to M/s Grass Field Fire Capital Developers Pvt. Ltd. vide registered sale deed for Rs. 2,14,39,685/-. 50% of the payment was made though allotment of shares as disclosed in the returns of both the companies. The appellant purchased agricultural land at village Bukini vide sale deed dated 20/04/2007 from Shri Ramu Jat for Rs. 21,50,000/-. The payment for this land was made through his personal bank account with UCO bank. The appellant purchased the land through registered sale deed and the expenses of Rs. 1,61,450/- for registration were incurred by the assessee. The appellant sold this land to GFFR on 23/09/2007 for Rs. 77,12,456/-. GFFR got the use of land converted from agricultural to residential and subsequently sold the land to M/s Grass Filed Fire Capital Developers Pvt. Ltd. on 28/01/2008 in lieu of which it was granted shares by the company. The land transacted during this assessment year was beyond 8 kms of the municipal limits. Land was not converted into stock in trade by the appellant in his books of ITA 529/JP/2012_ ACIT Vs. Atma Ram Gupta 8 accounts. The ld CIT(A) held that the land at village Khatwad do not pertain to this year. In fact even the Assessing Officer in his order on page 2, table-3 has mentioned the date of sale of land by the appellant to GFFR to be 25/10/2006, which clearly the gain of Rs. 66,51,749/- on the transaction of land at Khatwad does not pertain to this assessment year and cannot be added to the income of the assessee in this assessment year. Therefore, she deleted the addition of Rs.66,51,749/-. She further held that whether the transaction in land under taken by the appellant during the year was business transaction or adventure in the nature of trade or capital accretion is a vexed question that is required to be decided on the facts and law applicable to these facts. It is not possible to evolve any legal test or formula which can be applied in determining whether a transaction is an adventure in nature of trade or business or not. The answer to the question must necessarily depend in each case on the total impression and effect of all the relevant factors and circumstances, which determine the character of the transaction and the legal principles that have evolved over a period of time through the judicial pronouncements made by the various High Courts and the Honble Supreme Court on this issue. Business as defined in section 2(13),

includes any trade commerce or manufacture ITA 529/JP/2012_ ACIT Vs. Atma Ram Gupta 9 or any adventure or concern in the nature of trade, commerce or manufacture.

After considering the definition of business and legal position on this issue, she inferred as under:-

1. If for instance a transaction is related to the business which is normally carried on by the assessee, though not directly part of it, an intention to launch upon an adventure in nature of trade may readily be inferred.

2. A similar inference would arise where a commodity is purchased and sub divided, altered, treated or repaired and sold, or is converted into different commodity and then sold.

3. Magnitude of the transaction of purchase, the nature of commodity, subsequent dealings and the manner of disposal may be such that the transaction may be stamped with the character of trading venture.

4. It was enunciated that transactions of purchaser of land cannot be assumed without more to be a venture in the nature of trade since by its very nature land is not a commercial commodity. The Honble Supreme Court referred to the findings to the judicial pronouncements in the following cases: * Commissioner of Inland Revenue Vs Reinhold (1953) 34 TC 389 (C Sess) * Saroj Kumar Mazumdar Vs. CIT (1959) 37 ITR 242 (SC) ITA 529/JP/2012_ ACIT Vs. Atma Ram Gupta 10 * Leeming Vs. Jones (1930) 15 Tax Cas. 333 (HL). It was observed that these are cases in which the commodity purchased and sold was land which was not ordinarily commercial and the manner of dealing with the commodity did not stamp the transaction as a trading venture.

5. Profit motive in entering into a transaction is not decisive, for an accretion to capital does not become taxable income merely because as asset was acquired in the expectation that it may be sold at profit. After considering the legal position on purchase and sale of land, she held that the appellant had purchased and sold land which is inherently/ordinarily not a commercial commodity. The assessee derived income from salary as a Director and partner of various companies and firm respectively. Some of these companies and firms are engaged in the business of development real estate but the assessee has not engaged in the business of real estate development in his personal capacity. She further held that land had not been sub-divided, cut into plots or developed prior to sale. In fact, even the conversion charges were paid subsequently by the company that is purchaser. The frequency of transaction also less as there was no sale of land in subsequent assessment year. During the year also there is only one ITA 529/JP/2012_ ACIT Vs. Atma Ram Gupta 11 transaction. She further considered the business definition provided U/s 2(13) of the Act. The gains from these transactions were accepted by the Assessing Officer in the hands of the company GFFR. Both the entities are distinct the case of the assessee in his individual capacity cannot be vitiated by his activities conducted in his capacity as Director of the company. The assessee did not spend any money in developing the land and assessees activity was not systematic. She further relied on the decision by the Honble Allahabad High Court in the case of CIT Vs. Mohakampur Ice and Cold Storage (2006) 281 ITR 354 (All.) wherein it has been held that intention of purchase of land is to be guiding factor to decide the nature of transaction. The ld Assessing Officer had not given any findings regarding use of land i.e. whether it was agricultural or not. However, the assessee had submitted that the land was agricultural land in record of the land revenue. Thus, she decided that land was agricultural in nature and was not a capital asset as per Section 2(14)(iii) as it was situated beyond 8 km of municipal limit. Therefore, the gain on transfer of agricultural land is not part of taxable income U/s 45 of the Act. Accordingly, she deleted the addition of Rs. 54,01,006/-. ITA 529/JP/2012_ ACIT Vs. Atma Ram Gupta 12

5. Now the revenue is in appeal. The Ld. DR vehemently supported the order of the AO and argued that there was no agricultural activity on the said land and assessee is in the real estate business individually or through companies. The main intention to purchase of the land was to make good profit from this transaction. Therefore, it is an adventurous in nature. Therefore, she prayed to confirm the order of the ld A.O.

6. At the outset, the Ld. AR of the assessee submitted that the only issue in the present case is whether the agriculture land sold by the assessee to Grass Field Farms and Resorts Pvt. Ltd. is held by him as a business asset or as a capital asset. Whether an asset is held as investment or as stock in trade is a matter of intention of the buyer at the time of purchase of assets. The A.O. has considered the agricultural land sold by the assessee as stock in trade only on the basis of recital in the ale deed dated 01/6/2007 executed in favour of M/s Grass Field Fire Capital Developers Pvt. Ltd. for and on behalf of Gross Field Farms and Resorts Pvt. Ltd. and for the reason that within a short period assessee has sold the land at very high prices. This cannot be a reason to threat an asset as business asset as explained here in after. ITA 529/JP/2012_ ACIT Vs. Atma Ram Gupta 13 As explained in the facts of the case the assessee in this individually capacity only invest in the immovable properties. As on 31/3/2008, he owned various immovable properties which includes flat at Jaipur, farm house at Jaisinghpura and agricultural land at village Basada which were acquired in the assessment year under consideration. Therefore, two pieces of agricultural land at village Khatwad and Village Bukni cannot be said to be purchased by the assessee as business assets only because they were sold within a short period. The agricultural land at village Khatwad was purchased through sale agreement dated 05/09/2006 from Shri Sitaram Meena, which was executed on 10/05/2007 and incurred expenditure on registration at Rs. 12,55,590/-. In sale agreement there is no recital that the assessee was engaged in the business of real estate. The payment of registration expenses indicates that the assessees intention to purchase of land was investment not to deal in business of land. The transfer of this land was made through sale agreement dated 25/10/2006 U/s 2(47) of the Act, which falls in A.Y. 2007-08 not in A.Y. 2008-09. Therefore, gain on sale of this land is otherwise not taxable in the hands of assessee in the year under consideration. Subsequent to sale deed dated 01/6/2007 executed by the assessee in favour of M/s Grass Field Fire Capital ITA 529/JP/2012_ ACIT Vs. Atma Ram Gupta 14 Developers Pvt. Ltd. is for and on behalf of GFFR and not in the individual capacity of the assessee. The assessee sold this land in individual capacity to GFFR and thereafter for and on behalf of GFFR to M/s Grass Field Fire Capital Developers Pvt. Ltd.. This land was beyond 8 kms from the municipal limits and therefore the capital gain was exempted in the hands of the assessee. The agricultural land used was changed on 30/12/2006 and 29/03/2007 and converted the land was sold by GFFR to M/s Grass Field Fire Capital Developers Pvt. Ltd. vide sale deed dated 01/6/2007. Therefore, in sale deed dated 01/6/2007, the seller being engaged in the business of real estate trade has been mentioned. The same was company not as individual assessee. The company GFFR had disclosed business income at Rs. 42,87,937/- on sale of land, this has been accepted by the Assessing Officer. Agricultural land at village Bukni was purchased through sale deed dated 20/04/2007 from Shri Ramu Jat on which registration expenses of Rs. 1,61,450/- was incurred. In sale deed also, there is no mention that the assessee was engaged in the business of land trading. The facts of this sale transaction are similar as first this land was sold to GFFR on 23/09/2007 and on 28/01/2008 this land was again for or on ITA 529/JP/2012_ ACIT Vs. Atma Ram Gupta 15 behalf of the company i.e. GFFR transferred to M/s Grass Field Fire Capital Developers Pvt. Ltd. in capacity of Director. The land is also beyond 8 kms from the municipal limit. N.A. was got done by the company on 07/12/2007. GFFR has shown business income on sale of this land at Rs. 58,81,294, which has also been accepted by the Assessing Officer. It is further submitted that there is no dispute as to the fact that land purchased by the assessee as above were agricultural land. The assessee has also sold these lands as agricultural land to GFFR. These land were beyond 8 km of the municipal limit and the population of these villages is also less than ten thousands. The land sold were shown in the revenue records as agricultural lands and no permission was taken by the assessee for conversion of the land use prior to its sale by the assessee to GFFR. The permission for change in the land use was obtained subsequently and expenditure in relation thereto was born by GFFR to whom the assessee sold these agricultural lands. Hence the amount received by the assessee from GFFR is a capital receipt not liable for tax. He has placed reliance on the following case laws:- (i) Hindustan Industrial Resources Ltd. Vs. ACIT (2011) 335 ITR 77 (Delhi). ITA 529/JP/2012_ ACIT Vs. Atma Ram Gupta 16 (ii) CIT Vs. Smt. Debbje Aleno (2011) 331 ITR 59 (Bom) . He, therefore, prayed to confirm the order of the ld CIT(A).

7. We have heard the rival contention of both the parties and perused the material on record. It is a fact that the assessee purchased a land in individual capacity from Shri Sitaram Meena and Shri Ramu Jat as agricultural land on agreement to sale. Thereafter the assessee had sold this land to GFFR on agreement to sale as per Section 2(47) of the Act. The NA was got done by GFFR in both the cases. Thereafter land was transferred to M/s Grass Field Fire Capital Developers Pvt. Ltd. The land was beyond 8 kms from the municipal limit which has not been controverted by the ld DR as well as by the ld Assessing Officer. The ld CIT(A) had given detailed findings on it. The assessee claimed this gain on transfer of these lands as exempted. As the use as per land revenue record was agricultural land. Thereafter GFFR has disclosed the income on transfer of this land to M/s Grass Field Fire Capital Developers Pvt. Ltd.. The assessee had purchased these lands for investment not for trading. The frequency of transactions showed that the assessee was not in trading of land. The land transaction of village Khatwad was not ITA 529/JP/2012_ ACIT Vs. Atma Ram Gupta 17 even pertained to year under consideration. Therefore, we confirm the order of the ld CIT(A).

8. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 29/05/2015. Sd/- Sd/- vkj-ih-rksykuh Vh-vkj-ehuk (R.P.Tolani) (T.R. Meena) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 29 th May, 2015 *Ranjan vknsk dh izfrfyfi vxzsfkr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- The A.C.I.T., Circle-3, Jaipur

2. izR;FkhZ@ The Respondent- Shri Atma Ram Gupta, Jaipur.

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDrvihy@The CIT(A)

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No. 529/JP/2012) vknskkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar