Income Tax Appellate Tribunal (ITAT), Lucknow bench consisting of A. D. Jain, Vice President and T. S. Kapoor, accountant member held that profit from sale of agricultural land, not a ‘capital asset’, cannot be included for the purpose of computing book profit under section 115JB of IT Act.
The assessee, M/s Ishwar Dewllings Pvt. Ltd filed the appeal aggrieved against the order of the Commissioner of Income Tax (CIT). The Counsel for appellant, Shweta Mittal submitted that CIT grossly erred in passing the order under section 263 even though the assessment order under section 143(3) was passed by the Assessing Officer (AO) after extensive enquiry and was neither erroneous nor prejudicial to the interest of the Revenue and that CIT has erred in law and on facts by ignoring the relevant evidence and material on record, e.g. certificate from the Tehsildar in question which clearly showed that the owner of land was doing agricultural activities itself on the land and copy of crop inspection report maintained by the head of the village which clearly showed the name of crops grown on the land in last four years. The Counsel for the appellant also submitted that since the CIT has erred in law and on facts in wrong appreciation of few words in the sale deed and the assessment order of earlier year to hold that the land sold was not agricultural land at the time of sale of land and no agricultural activities were ever carried on by the appellant upon said land since its purchase. Because the order passed by the CIT is based on the irrelevant and biased considerations and without appreciating the facts and evidences on record.
The Tribunal Observed” that the profit motive of the assessee selling the land without anything more by itself can never be decisive for determination of the issue as to whether the transaction amounted to an adventure in the nature of trade. In other words, the price paid is not decisive to say whether the land is agricultural or not and henceprofit from sale of agricultural land, not a ‘capital asset’, cannot be included for the purpose of computing book profit under section 115JB of IT Act .”
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