TMI Blog2017 (2) TMI 1364X X X X Extracts X X X X X X X X Extracts X X X X ..... we direct the AO to consider gain on sale of impugned land as exempted from capital gain and to treat as Agricultural income only. - Decided in favour of assessee. - I.T.A.No: 2657/Mad/2016 - - - Dated:- 17-2-2017 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND Shri Duvvuru RL Reddy, JUDICIAL MEMBER Appellant by : Mr.S.Sridhar,Advocate Respondent by : Mr.Supriylo Pal, JCIT, D.R O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal of the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-2,Chennai dated 23.08.2016 pertaining to assessment year 2011-12. 2. The assessee has raised the ground that CIT(A) erred in sustaining the taxation of ₹ 4,75,10,880/- being the profit worked out on sale of properties/lands rejecting the claim of transfer/sale of agricultural lands in the computation of taxable total income and the gain on sale of such land was liable for capital gains tax. 3. The facts of the case are that the assessee is builder and flat promoter, director in infrastructure Development Company. During the financial year 2009-10, the assessee purchased land admeasuring 1 acre and 55.70 cents at Thalamb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain stake holder and (iii) No agricultural activities whatsoever have been carried on in the lands in question. Accordingly, Ld.CIT(A) sustained the addition made by the ld. Assessing Officer. Against this, the assessee is in appeal before us. 5. We have heard both the parties and perused the material on record. It is the contention of the AR that the land was held by the assessee as a capital asset. Further contention is that it is intended to retain the agricultural land acquired as a capital asset. The assessee reflected the same in the Balance Sheet as on 31-3-2010 as a fixed asset by showing the same as Land at Thalambur at ₹ 4,24,74,120/- and for the assessment year under consideration it was also shown agricultural income at ₹ 25,000/- in his return of income. The assessee intents to carry on agricultural operations. This agricultural land is situated beyond the municipal limits. The Assessee has not taken any permission from the Government for making plots, as the assessee company never had any intention to make the land into plots and carry on real estate business in respect of the land. The assessee has sold land as it is condition. Copies of Sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets as investment in agricultural land. Therefore disposal of the same would not convert, what was a capital accretion, to an adventure in the nature of trade. To make it more clear, sale of agricultural land by the assessee and realisation of good price would not alter the basic nature and characteristic of the transaction. There was no element of trade attached to the activity of the assessee in purchase and sale of the land. A continuous business requires more activity and greater organization. This is absent in the transaction of sale of land by the assessee. Therefore, although there is profit in the transaction the transaction cannot be characterized as an adventure in the nature of trade. vi) Whether a transaction in respect of an asset is capital or business income being adventure in the nature of trade depends on the facts and circumstances of the case. There are many factors like frequency of transactions, period of holding, intention for resale etc, which determine whether the gain arising of a transaction is in the process of realisation of investment or in the course of business. The mere fact that the person has purchased a land and subsequently sold it, giving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al on record in respect of this land to show that the assessee 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 assessee as adventure in the nature of trade. The assessee is not in the business of Real Estate as alleged by the lower authorities. On the other hand, the assessee is engaged in the business of Builder and flat Promoter and Director in an Infrastructure Development Company as evidenced by From 3CD attached to the Audit report issued U/S 44 AB of the Act. The land was sold by the assessees in acreage and not by making plots. 5.5. Now the question as to whether a land is agricultural land or not is essentially a question of fact. The question has to be answered in each case having regard to the facts and circumstances of that case. There may be factors both for and against a particular point of view. We have to answer the question on a consideration of all of them, a process of evaluation and the inference has to be drawn on a cumulative consideration of all the relevant facts. It may be stated here that not all the factors or tests would be present or absent in any case a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s situated in a developed area? Whether its physical characteristics, surrounding situation and use of the land in the adjoining area were such as would indicate that the land was agricultural? (ix) Whether the land itself was developed by plotting and providing roads and other facilities? (x) Whether there were any previous sales of portions of the land for non-agricultural use? (xi) Whether permission under s. 63 of the Bombay Tenancy and Agricultural Land Act, 1948, was obtained because the sale or intended sale was in favour of a non-agriculturist? If so, whether the sale or intended sale to such non-agriculturists was for nonagricultural or agricultural user? (xii) Whether the land was sold on yardage or on acreage basis? (xiii) Whether an agriculturist would purchase the land for agricultural purposes at the price at which the land was sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield? 6. In the present case, there is no dispute that the assessee's lands were classified as agricultural land in the Revenue Records. As held by the Apex Court, when the land is assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made to the case of CWT vs. Officer-in- charge (Court of Wards) (105 ITR 138) (SC) wherein the Constitution Bench of the Hon'ble Supreme Court stated that the term 'agriculture' and 'agricultural purpose' was not defined in the Indian IT Act and that we must necessarily fall back upon the general sense in which they have been understood in common parlance. The Hon'ble Supreme Court has observed that the term 'agriculture' is thus understood as comprising within its scope the basic as well as subsequent operations in the process of agriculture and raising on the land all products which have some utility either for someone or for trade and commerce. It will be seen that the term 'agriculture' receives a wider interpretation both in regard to its operation as well as the result of the same. Nevertheless there is present all throughout the basic idea that there must be at the bottom of its cultivation of the land in the sense of tilling of the land, sowing of the seeds, planting and similar work done on the land itself and this basic conception is essential sine qua non of any operation performed on the land constituting agricultural operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used for agricultural purpose at the relevant time. 6.5. We may also refer to the case of CIT vs. Manilal Somnath (1977) 106 ITR 917 (Guj), wherein the Division Bench of the Hon'ble Gujarat High Court observed that the potential non- agricultural value of the land for which a purchaser may be prepared to pay a large price would not detract from its character as agricultural land on the relevant date of sale. 6.6. We may also refer to the case of Gopal C. Sharma vs. CIT (1994) 116 CTR (Bom) 377 : (1994) 209 ITR 946 (Bom), in which, the case of Smt. Sarifabibi Mohamed Ibrahim Ors. vs. CIT (supra) was referred to and relied, amongst other cases. In this case, the Division Bench of the Bombay High Court has stated 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. 6.7. We may refer to a judgment of the Hon'ble Madras High Court in the case of CWT vs. E. Udayakumar (2006) 284 ITR 511 (Mad) where the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such, the assessee owned agricultural land within the limits of Tirunelveli Corporation and he had not put up any construction thereon, the assessee is entitled to claim exemption from the WT Act for the assessment of wealth-tax. That the land in question is adjacent to the hospital is totally irrelevant. 7. Adverting to the facts of the present case, the land in question is classified in the Revenue records as agricultural land and there is no dispute regarding this issue and actual cultivation has been carried on this land and income was declared from this land in the return of income filed by the assessee for the assessment year as agricultural income. It is also an admitted fact that the AO has not brought on record any evidence to show that the agricultural land was used for non-agricultural purposes and the assessee has not put the land to any purposes other than agricultural purposes. 8. It is also an admitted position that mere inclusion or proximity of land to any development area without any infrastructure development thereupon or without establishing and proving that the land was put into use for nonagricultural purposes by the assessee does not and cannot conver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the provisions of Finance Act, 1970, whereby s. 2(14) was amended so as to include the agricultural land located within the jurisdiction of a municipality in the definition of the expression 'Capital Asset'. The relevant portion of the said memorandum is reproduced hereunder: 30. ... The Finance Act, 1970 has, accordingly, amended the relevant provisions of the Income-tax Act so as to bring within the scope of taxation capital gains arising from the transfer of agricultural land situated in certain areas. For this purpose, the definition of the term capital asset in section 2(14) has been amended so as to exclude from its scope only agricultural land in India which is not situate in any area comprised within the jurisdiction of a municipality or cantonment board and which has a population of not less than ten thousand persons according to the last preceding census for which the relevant figures have been published before the first day of the previous year. The Central Government has been authorised to notify in the Official Gazette any area outside the limits of any municipality or cantonment board having a population of not less than ten thousand up to a maximum di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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