Profits from sale of agricultural land taxable as 'business income' if main object of co. is real estate business.

The main object clause in the Memorandum of Association of assessee-company's included doing real estate business. During the relevant year, the assessee had claimed that income from sale of agricultural lands would be exempt from tax by virtue of section 2(14) of the Act. However, the AO rejected assessee's claim and treated such income as business income. On appeal, CIT(A) upheld order of AO. On further appeal, the Tribunal held in favour of revenue as under: 1) The land was registered as agricultural land in revenue records and payment of land revenue and leasing of the land for agricultural purposes were in favour of the assessee; 2) However, the assessee-company having the main object of dealing in real estate had not actually carried on the agricultural operations in the said land; 3) Even if it was accepted that the land was leased for agricultural purposes, it was only a stop gap arrangement and the evidence brought on record is not enough to show there was actual agricultural operation; and 4) The land was sold for non-agricultural purposes at heavy price and the intention of the assessee was to deal in the land and earn profit. Therefore, it was held that income arising out of this activity was nothing but business income and it had to be taxed accordingly because assessee was carrying on business of real estate and the said land was held as stock-in trade - G.K. PROPERTIES (P.) LTD. v. ITO [2012] 25 taxmann.com 197 (Hyderabad - Trib.)