TMI Blog2021 (3) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... ess or profession. Additions deleted. - I.T.A.No.2841/Chny/2019 - - - Dated:- 10-3-2021 - Shri V. Durga Rao, Judicial Member And Shri G. Manjunatha, Accountant Member For the Appellant : Mr.S.Sridhar, Advocate For the Respondent : Mr.G.Chandrababu, Addl CIT ORDER PER G.MANJUNATHA, AM: This appeal filed by the assessee is directed against order of the learned CIT(A), Coimbatore dated 22.08.2019 and pertains to assessment year 2013-14. 2. The assessee has raised following grounds of appeal:- 1) The order of the learned CIT (A) is bad and erroneous in law and against the principles of natural justice. 2) The learned CIT (A) erred in not considering the written submissions in proper perspective. 3) The learned CIT (A) erred in not adjudicating Gr.No:8, dealing with disallowance of Electricity tax and charges by the Assessing Officer. 4) Taxability under Adventure in the nature of Trade a) The learned CIT (A) erred in simply endorsing the views of the Assessing Officer in the assessment order as well as those in the remand report, called for by him, as well as nature ofthe subject land. b) The learned CIT (A) erred in no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 50,13,300/-. The said property has been sold during the assessment year 2013-14 by way of registered power of attorney for a consideration of ₹ 24.40 lakhs per acre. The Assessing Officer called upon the assessee to justify claim of exemption on profit on sale of land for which the assessee stated that it has purchased agricultural lands for the purpose of growing cotton, but due to unavoidable reasons lands could not be used for the purpose and hence, the same has been sold. The assessee further stated that said transaction has been completed through unregistered sale agreement dated 05.06.2012 coupled with registered power of attorney in favour of purchaser . Since the land was agricultural land, when it was purchased and remained agricultural land when it was sold, profit derived from sale of such land has been treated as non-taxable under the Act. 4. The Assessing Officer was not convinced with the explanation furnished by the assessee and according to her, land purchased by the assessee company on 06.10.2009 was never used for agricultural activities. Further, even before purchase there was no agricultural activities on the land and the land was not fit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being agricultural land sale, Whether a particular land is agricultural or not is a bone of contention, In the case of Mahaveer enterprises Vs Union of a(2000) 244 ITR 789 (Raj) it was pointed out that the mere fact land was appearing in the revenue records as agricultural land and land revenue was paid in respect of such land does not make it agricultural. 14. The Locus classicus on the subject is the decision rendered by the Supreme Court in the case of CWT Vs Officer-in-charge (court of wards), Paigah (1976) 105 ITR 133 (SC). There have been further clarifications on the subject from the Apex Court in G M Omer Khan Vs. AddI. CIT (1992 ) 196 ITR 269 (SC) and Smt. Sarifabibi Mohammed IbrahimVs CIT(1993) 204 ITR 631(SC). In these cases Apex Court had laid down following tests to treat a land as agricultural or non agricultural. 1] The proximity of the and to building and building sites. 2) Sole of land for non agricultural purposes. 3) Sale of land by a measure with reference to square yards and not acres. 4) Price being such as to be non-volatile, if the land is put to agricultural use by the purchases, while its more consistent with the price fetched for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat quality. This is the next stage on expansion with backward integration of an integrated textile unit. The assessee took the assistance of Dr.P.Sivasubramanian, Head of the Department of Entomology, Tamilnadu Agricultural University, Coimbatore, for the said object. As suggested by him a piece of land, the soil of which best suited for growing of cotton was purchased in the name of the company. The land purchased is a rain-fed area with black cotton soil, most suited for cultivation of cotton crop. (Please see a certificate attached). Accordingly, the assessee company purchased 54.89 acres of agricultural land at Pongalur Madapur villages, Tirupur Taluk, for ` 50,13,300/- video sale deed dated 06/10/2009. The Company has further incurred a sum of ₹ 4,01,064/- on stamp duty and a sum of ₹ 50,585/- on registration fee. Thus, the cost of the land to the Assessee was ₹ 54,64,949/-. The Assessee was advised to dig 10 bore-wells on the land so that each bore-well can cater to 5 acres of land. The Assessee approached TNEB for power connection. However, since the entire State of Tamilnadu was reeling under terrific power shortage, no new power connec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is almost like an Orthopedic surgeon doing an open heart surgery. 20. Original certificate issued by Dr. P. Sivasubramanian was submitted. This certificate seems to be quite fresh, may be about a few days old only. But due to paucity of time, reference could not be made to forensic department to verify the age of this certificate. However, this certificate is not legally tenable as it is an unofficial one and issued by a non authorized person. 21. In the above said certificate dated 28 February, 2009 issued by Dr. P.Sivasubramanian, has mentioned that presently, no electric power is available in the nearby area . A letter enclosing this certificate was submitted to the bank on 23rd March, 2009, seeking the possibility of agriculture loan and availability of subsidy for purchase of agricultural land digging of bore-wells. The Chief Manager State Bank of Mysore, Tirupur Branch had replied to this letter on 30th March 2009, requesting the Managing Director of the assessee company to approach their specialized agricultural banking department at Bangalore. In this letter, The Chief Manager had mentioned the following: since the certificate that you have attached ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar agriculture was entertained. Also, since the power connection was far agriculture operations, which have to be provided free of cost, TNEB already under severe financial losses was not committing for the same. Hence assessee was not in a position to dig borewells and commence agricultural operations. - This claim made by the AR is also baseless as the assessee was aware of non availability of power much before the purchase of land which is evident from the certificate of the agricultural expert as well as the letter of the Chief Manager, State Bank of Mysore. c) During 2011 one Mr.K.Maruthupandian and Mr.Raja from Virudhunagar approached the company and other adjoining Agricultural land owners with on offer to purchase their lands at a very attractive price, with intent to develop a major township in about 200 acres. They have acquired the adjoining lands of the assessee and only then approached the assessee. They paid ₹ 6 crates (during Oct, 2011 to Jan,2012) to Mr.C.Udhayasankar, who was holding adjoining lands on power, and ₹ 2 croes to the company during As per the learned Apr.2012 to June, 2012 as advance for purchase of the property of the agricultural l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale agreement was made for this but a sale receipt dated 14.10.2011 was obtained for payment of advance of ₹ 2 crores. Subsequently, a further sum of ₹ 0.50 crores on 28.04.2012, a sum of ₹ 2.50 Crores on 02.01.2012, a sum of ₹ 1.50 Crores on 06.01.2012, a sum of ₹ 1.25 crores on 23.04.2012 and a sum of ₹ 0.25 crores on 05.06.2012, all totalling to ₹ 6 crores was paid as advance towards the said sale agreement by party cited in (1] above, i.e. M/s. Shri Santhosh Meenakshi Textiles P. Ltd. Since there was a long delay in paying the agreed sale consideration, we also agreed for enhancement in sale consideration by ` 3 crores. on 05.06.2012, we formally entered into a sale agreement. The above statements shows that ₹ 8 crores were paid to the Company only and not to Mr.C.Udhayasankar, in his individual capacity, It also paints to the fact that there was an earlier agreement prior to the one dated 05.06.2012, may be not a formal one. Had this agreement dated 05.06.2012 was the first agreement, then why the enhancement of rate? Even in this agreement there is a mention that due to delay from the earlier agreed date, ₹ 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the land as housing plots and selling it. f) AR has also mentioned in his letter that Mr.C.Udayasankar received ₹ 2 crores as a Power Agent for Sumitra and Raghavan on 14.10.2011 and not received on behalf of the company. This is also a false statement. The AR himself has submitted a copy of sale agreement between Mr.C.Udayasankar and Sumitra and Raghavan dated 24.09.2012, wherein it was mentioned that a power of Attorney was given to Mr,C,Udayasankar on 31.10.2011 which is registered in the Registrar s Office Tirupur in No.2918/2011. Therefore Mr.C.Udayasankar cannot receive ₹ 2 crores on 14.10.2011 as power agent for Sumitra and Raghavan. g) Along with the letter from the AR 8Nos. Of Adangal extracts which cover the SF nos, Under consideration was enclosed. Land converted as housing plots are in S.F No. 281, 282 and S.F No. 284 of Pongalur village Madhapur village ,where as the adangal extracts relates to some other S.F Nos. Only S.F. No.282 of Madhapur village is appearing in these Adangal copies and is mentioned as nadapathai meaning pathway. 23. From the above discussions it is clear that the AR s submissions are contradictory to the evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciating the fact that the assessee has all along been showing the subject land being agricultural in its balance sheet right from the date of purchase under the head fixed assets thereby making its intention clear that land in question was asset and the same has been acquired for the purpose of agricultural operations. The learned AR further submitted that learned CIT(A) has erred in not considering the very fact that as per revenue records, the land was agricultural land and further, the assessee has filed a certificate from the agricultural scientist to prove that land was fit for agricultural operations, more particularly, for growing cotton which is main raw material for business of the assessee. The AR further submitted that learned CIT(A) has erred in arriving at the conclusion that transactions of purchase and sale of land is in the nature of adventure in the nature of trade, without considering the fact that assessee has made a solitary single transaction of purchase and sale of land, that too after a period of more than two years, therefore, it is incorrect on the part of authorities below to come to the conclusion that the assessee is indulged in the activity of busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or agricultural operations, as per which there was no electricity connection available and no water facility was available to carry out agricultural operations. In fact, the land is a dry land and not suitable for carrying out any agricultural operations. Further, the assessee has purchased the land with an intention to commercially exploit it which is evident from the fact that immediately after purchase in the year 2009, the company has entered into oral agreement with the developer for development of the land. Although, power of attorney was executed in the year 2012, substantial amount has been received in the year 2011-12 itself. From the above, it is very clear that the assessee has engaged in systematic activity of business of developing of lands and thus, profit derived from sale of land is assessable under the head income from business. The Assessing Officer as well as the learned CIT(A) has rightly assessed the income under the head income from business and their orders should be upheld. 9. We have heard both the parties, perused materials available on record and gone through orders of the authorities below along with various case laws cited by the learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer and arguments advanced by the assessee in light of various facts including revenue records, certificate issued by agricultural scientist and letter addressed to the banker. As per the details, especially the evidences submitted by the assessee, there is no doubt of whatsoever with regard to nature of land being agricultural land, when it was purchased in the year 2009 and remains agricultural land, when it was sold in the impugned assessment year. In fact, revenue records adangal extract clearly shows the land was an agricultural land and was under cultivation. The assessee has produced various evidences to prove that intention of purchase of land was for the purpose of cultivation of cotton which is main raw material for the business of the assessee. The assessee has also produced necessary evidence to prove that land is black soil, which is suitable for growing cotton. The assessee has also furnished letter from agricultural scientist, where he had clarified that the land is suitable for growing cotton. Therefore, when it comes to nature of land and purpose of purchase of land, the observation made by the Assessing Officer that land was not suitable for agricultural opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onnected with water and electricity facility. Therefore, when the impugned land is situated in a remote and far off place from nearest municipality and further there is no commercial developments in and around the land, then it is difficult to accept the findings of the Assessing Officer that land was purchased for the purpose of commercial exploitation. Further, the Assessing Officer has relied upon statement of proposed purchaser without confronting statement to the assessee for its rebuttal, even though the assessee has demanded for cross examination vide letter dated 21.03.2016. Therefore, any statement made by a person, who entered into agreement for sale of land with the assessee and for sale of other adjacent land owners should not be taken on record, unless an opportunity of cross examination was provided to the assessee. Further, as per evidences produced before us, purchaser of the land has committed fraud on gullible investor and was booked by Economic Offences Wing of police department. In fact, the assessee has returned the advance to the investors. Therefore, based on the statement of proposed buyer, no adverse inference can be drawn against the assessee to conclude t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u apply ratio of the Hon'ble Supreme Court to the facts of the present case, none of the reasons given by the Assessing Officer to arrive at a conclusion that land in question was not agricultural land and purpose of purchase and sale of land is to derive profit is not unfounded under law. In fact, the Assessing Officer herself admitted the fact that land is situated in remote place and beyond 8 kms from nearest municipality and further, there are no buildings for more than 3 to 4 kms on either side. Further, no power and water connection for any residential or commercial operations. The land was sold as agricultural land only. It is the buyer who tried to sell it as house sites, but grossly failed in his venture, since the land and its location is not suitable for human habitation. The land was sold in acres, but not in measure with reference to square yards or meters. The land is in remote location and there is no market for it and developers have landed up in economic offence wing for the frauds committed to buyers. The characteristic of land is agricultural land in the records of the revenue and further, certified as fit for cotton cultivation by agricultural scientist. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individual sold 15 karnals, 78 marlas of land out of her share in 23 karnals 17 marlas land during the financial year l990-91, relevant to the asst. yr. 1991-92, the sale was effected by three registered sale deeds. While filing her return of income, she claimed exemption from levy of capital gains under s. 548 of the Act on the ground that the land sold by her was agricultural land and the sale proceeds were invested in the purchase of agricultural arid within two years. The AO rejected the claim of the assessee holding that the land sold by the assessee was not agricultural land and this was upheld by the CIT(A). On further appeal, the Tribunal accepted the claim of the assessee holding that the transaction in question duly fulfilled the conditions specified tor relief On further appeal to the High Court the Punjab Haryana High Court found that the finding that the and had been used for agricultural purposes was based on cogent and relevant material. The Revenue record supported the claim- Even the records of the IT Department showed that the assessee had declared agricultural income from this land in her returns for he preceding two years. The land being located in commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed claim made by assessee with regard to long term capital gain being an exempt income - II was noted that Tahsildar while submitting report to Assessing Officer had enclosed copies of Patta which clearly showed that said land was wet land - Patta was a document which proved possession and classification of land - Copy of patta issued was a computerized patta - There was a presumption to validity of such official document there was no allegation made by Assessing Officer that said patta was a bogus patta - Merely because an agricultural activity could not be carried on for various reasons including natural causes, it would not cease to be an agricultural land - Further, Commissioner (Appeals) and Tribunal had done an elaborate exercise, assessed documents placed before it and given a categorical finding that land continued to remain an agricultural land - Whether, on facts, impugned land sold by assessee was to be considered as agricultural land and capital gain arising from same was exempt from tax - Held, yes [Paras 13 and 16] [In favour of assessee] 15. In this view of the matter and by respectfully following case laws discussed herein above, we are of the considered view t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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