TMI Blog2015 (3) TMI 887X X X X Extracts X X X X X X X X Extracts X X X X ..... issue in favour of the assessee, holding that the land sold by the said assessees were agricultural lands, and therefore, the profits arising from the transfer of such lands, was not chargeable to tax in the hands of the assessee. In the present case, considering the facts and circumstances of the case it cannot be considered as an adventure in the nature of trade. The intention of the assessee from the inception was to carry on agricultural operations. Merely because of the fact that the land was sold in a short period of holding, it cannot be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade or capital gain. The period of holding should not suggest that the activity was an adventure in the nature of trade. Further, we make it clear that when the land which does not fall under the provisions of section 2(14)(iii) of the IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as non-agricultural land by the assessee or any other concerned person, transfers such agricu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. in Sy. No.668 (Ac 0.12 gts), Sy. No.669 (Ac.1.09 guntas) Sy. No.670(Ac.2.10 gts) and Sy.No.671 (Ac 0.09 gts) to M/s Varun constructions through the sale cum GPAdated5.03.2008 in document no.2794/.20098 for an amount of Rs..2,00,00,000/-. (c) The appellant had purchased and transacted in the land which was contiguous to the land purchased and similarly transacted by M/s Bhavya Constructions Pvt Ltd (BCPL), Sri V Ananda Prasad (MD of BCPL), and other individuals, who all, like the assesseeappellant, were the investors in M/s Bhavya Cements Pvt Ltd, a company set up by Sri V Ananda Prasad. All these persons had shown the sources of investment in the share capital of M/s Bhavya Cements as sale proceeds of these lands. (d) The detailed investigation and the evidences found relating to the claim of Bhavya Construction and Sri V Ananda Prasad were narrated in full from page 2 of the asst. order onwards. The Assessing officer relied upon the evidences gathered by the investigation wing like state of land, blank bill of a fertilizer vendor and seed company with the soft copy of this bill available in the hard disk, the nature of business of M/s Bhavya Construction, the revenue r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of time in an established manner along with other associates. He, therefore, held that the activity carried on by the assessee has to be treated as carrying out of business and the income from sale of land should be treated as an adventure in the nature of trade. Accordingly, he brought it to tax under section 28 of the Act (Page 19 20 of asst. order). (i) In course of the assessment proceedings, the assessee stated that agricultural land was purchased from one Sri G.Srinivasa Rao and acres were sold to M/s. Varun Construction as agricultural land. The assessee also submitted the following in support of the claim that the land is agricultural - (i) Purchase and sale deed describing land as agricultural land, (ii) Pattadar pass book issued by the MRO, (iii) Certificate of Deputy Collector and MRO Qutubullapur Mandal stating that the land is agricultural land and that the assessee was raising crops like paddy, cattle feed, maize, Jowar and vegetables etc. And (iv) Certificate of Town Planning Officer, GHMC Qutubullapur Circle in G/1240/2008 dated 04.10.2008 stating that the said lands are not falling under GHMC limit. (v) The entire transaction was through Sub-Register o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee as her business income in the assessment completed under S.143(3) read with S.153C of the Act, vide order dated 23.11.2011. 4. Against the order passed by the Assessing Officer under S.143(3) read with S.153C, an appeal was preferred by the assessee before the learned CIT(A) and detailed submissions were made by her before the learned CIT(A) in support of the stand that the land in question was agricultural land. The submissions made by the assessee in this regard, as summarized by the learned CIT(A) in the impugned order, were as under- (i) The asset transferred is agricultural land located beyond 8 kms of any notified municipality. It is therefore, not a capital asset u/s. 2(47) of the I.T. Act. (ii) The evidence on which the AO placed reliance and rested his conclusion were actually the findings in the asst. order in the case of M/s. BCPL which owned another patch of land contiguous to the land owned by the appellant. The observations and the conclusions drawn therein were utilised against the appellant, which is incorrect. The appellant had nothing to do with those findings. (iii) The appellant submitted that she is an agriculturist and the family as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure. It is the presence of absence of such element in a particular transaction in a question that would decide whether it is in the nature of trade or not. There is no such attribute or element in this transaction of sale of land by the appellant. The appellant never carried on any business in real estate. The word business connotes some real, substantial and systematic cause organized course of activity or conduct with a said purpose. An element of frequency is associated with business which is absent in this case. (b) Decisions of the Hon'ble SC in the case of G.Venkata Swamy Naidu Co. (35 ITR 594) and Sree Meenakshi Mills Ltd (31 ITR 28) were cited. In the case of G.Venkata Swamy Naidu it was held that - If a person invest money in land intend to hold it, enjoys it for some time and sell for profit, it would be a clear case of capital accretion and not profit derived -from an adventure of trade. Cases of realization of investment consisting of purchase and resale, though profitable, are clearly outside the domain of adventure in the nature of trade. (c) It is not uncommon that due to rapid growth of urban area, agricultural lands in the vicinity of city are commandi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 The MRO Certificate issued in 2005 states the land as agricultural and also the crops grown. The Hon'ble Supreme Court in the case of Sharifabibi had clearly stated that the description of land in revenue record does not matter. It is to be seen whether the land was used, is being used and whether it will be used for agriculture as it is this continued use for agriculture which is the rationale for giving exemption. 2 The pahanis indicate land as Metta - i.e. dry lands The Govt. classifies lands only into either those with irrigation facility or those which do not have irrigation facility i.e. Metta lands . This classification by itself would not indicate whether any crop is grown. The crops cultivated are mentioned separately in the pahani. The Pahani does not indicate any crop grown. 3 The purchase deed of 2004 as well as the sale deed of 2007 classify the land as agriculture. The assessee in its first statement stated that she has grown maize. The photographic evidence available in the asst order indicates that the land wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of CIT V/s. Smt. Anjana Sehgal (supra) that the expression from the local limits of any municipality used in section 2(14)(iii)(b) of the Incometax Act denotes any municipality or municipality of the District in which the land is situated No evidence of any agricultural income. In fact, though the Assessing Officer had not mentioned this aspect, it is noted that the appellant assessee has not shown any agricultural incoe or any agricultural expenditure. The income tax records of the assessee do not indicate any income even in the tax returns filed after the search in response to notice u/s. 153C 7. Keeping in view the above factors, the learned CIT(A) held that the land in question sold by the assessee was not agricultural land by summarizing his observations in paragraph 17 as under- 17.0 Thus, on summation of facts and circumstances both favourable and against the assessee/appellant, as per the above table, it is clear that other than its assertion and an MRO Certificate issued in a routine manner that too in 2005, the appellant really does not have anything real and substantiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT(A) ought to have deleted the addition allowing relief to the appellant on which issue appeal was preferred without treating the same under the head capital gain . 5. The learned CIT(A) ought to have appreciated that his powers to decide an appeal are circumscribed as provided in section 251 which stipulates that the CIT(A) can confirm, reduce, enhance or annul the assessment. In the light of this, CIT(A) ought not have changed the head of income as determined by the AO as falling under adventure in the nature trade to capital gain 6. It is not a fact that the appellant claimed that the income is assessable under the head capital gain as a ground to change the head of income. The claim of appellant was that the land being agricultural, the same cannot enter into computation under section 45 under the head capital gain . This claim cannot be construed to mean that the appellant wanted the income to be assessed under capital gain to change the head of income. The learned CIT(A) ought to have appreciated that such a claim by the appellant does not fall under any specific head as provided under section 14. 7. In the light of above, the addition made unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue records but also in the pahanis. It is also a fact on record the assessee has shown income from agricultural operations carried on over the said land in the return of income filed for the impugned assessment year as well as the preceding assessment year which has been accepted by AO. In fact the AO has not totally ruled out agricultural operation, though according to him it is not substantial. In these circumstances, when the nature of land sold by the assessee still remains to be agricultural in the revenue records and the assessee has not applied for conversion of the land to non-agricultural it cannot be treated as non-agricultural land only because the AO was of the view that agricultural operation on the said land is not possible to the extent shown by the assessee. In this context it is to be noted that the certificate issued by the Dy. Collector and Mandal Revenue Officer, Qutubullapur Mandal (at page 99 of assessee s paper book) clearly indicate that the land under the same survey nos. situated at Bowrampet Village are under cultivation by raising crops of paddy, cattle feed, maize, jowar etc. Further the pahanis also indicate the crops grown over the said land. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to mention here that earlier a bench of this Tribunal had an occasion to examine similar nature of dispute arising out of similar nature of transaction relating to sale of agricultural land located in the same area in case of some other assessees, namely, Smt. M. Vijaya and others Vs. DCIT (ITA Nos.306, 307, 309 311/Hyd/13 order dated 06/06/2014) who also sold their land to M/s Varun constructions. The Tribunal after examining the contentions of the parties and referring to a number of judgments held as under: 23. Adverting to the facts of the present case, the land inquestion 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 AY as agricultural income. It is also an admitted fact that the assessee has not applied for conversion of this agricultural land for non-agricultural purposes before sale of this property and the assessee has not put the land to any purposes other than agricultural purposes. It is also an admitted fact that neither the impugned property nor the surroundi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es has been brought on record. The nature of the crop and the person who cultivated the land are duly mentioned in the revenue records shows that at the relevant point of time the land was used for agricultural purposes only and nothing is brought on record to show that the land was put in use for nonagricultural purposes by the assessees. In view of the decision of the Hon ble High Court in the case of Gopal C. Sharma vs. CIT (209 ITR 946) (Bom), it is also clear that the profit motive of the assessee in selling the land without anything more by itself can never be decisive to say that the assessee used the land for non-agricultural purposes. We may also refer to a decision of the Hon ble Supreme Court in the case of N. Srinivasa Rao vs. Special Court (2006) 4 SCC 214 where it was observed that the fact that agricultural land in question is included in urban area without more, held not enough to conclude that the user of the same had been altered with passage of time. Thus, the fact that the land in question in the instant case is bought by Developer cannot be a determining factor by itself to say that the land was converted into use for non-agricultural purposes. 26. Recently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h powers has issued the above notification, as amended latest by Notification No. 11186 dated 28.12.1999 clearly clarifies that agricultural land situation in rural areas, areas outside the Municipality or cantonment board etc., having a population of not less than 10,000 and also beyond the distance notified by Central Government from local limits i.e. the outer limits of any such municipality or cantonment board etc., still continues to be excluded from the definition of 'capital asset'. Accordingly, in view of sub-clause (b) of section 2(14)(iii) of the Act even under the amended definition of expression 'capital asset', the agricultural land situated in rural areas continues to be excluded from that definition. And as in the present case, admittedly, the agricultural land of the assessee is outside the Municipal Limits of Rajarhat Municipality and that also 2.5 KM away from the outer limits of the said Municipality, assessee's land does not come within the purview of section 2(14)(iii) either under sub clause (a) or (b) of the Act, hence the same cannot be considered as capital asset within the meaning of this section. Hence, no capital gain tax can be charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detract from its character as agricultural land at the date of the sale. The land in question was, therefore, agricultural land. 29. Further the word Capital Asset is defined in Section 2(14) to mean property of any kind held by an assessee, whether or not connected with his business or profession, but does not include (iii) agricultural land in India, not being land situate- (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette; 30. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 distance of 8 kilometres from such limits, for the purposes of this provision. Such notification will be issued by the Central Government, having regard to the extent of, and scope for, urbanisation of such area, and, when any such area is notified by the Central Government, agricultural land situated within such area will stand included within the term capital asset . Agricultural land situated in rural areas, i.e., areas outside any municipality or cantonment board having a population of not less than ten thousand and also beyond the distance notified by the Central Government from the limits of any such municipali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, in view of sub-clause (b) of section 2(14)(iii) of the Act even under the amended definition of expression 'capital asset', the agricultural land situated in rural areas continues to be excluded from that definition. And as in the present case, admittedly, the agricultural land of the assessee is outside the Municipal Limits of Hyderabad Municipality and that also 8 km way from the outer limits of this Municipality, assessee's land does not come within the purview of section 2(14)(iii) either under sub clause (a) or (b) of the Act, hence the same cannot be considered as capital asset within the meaning of this section. Hence, no capital gain tax can be charged on the sale transaction of this land entered by the assessee. This is supported by the order of Kolkata Bench of this Tribunal in the case of Arijit Mitra (cited supra), Harish V. Milani (supra) and M.S. Srinivas Naicker vs. ITO (292 ITR 481) (Mad). By borrowing the meaning from the above section, we are not able to appreciate that the land falls within the territorial limit of any municipality without notification of Central Government as held by the Karnataka High Court in the case of Madhukumar N. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltural land, hence, it is not liable for taxation. Accordingly, the addition made on this count is deleted in all the appeals under consideration. No evidence suggests that Dundigal village falls within Qutubullapur Municipality and also this Qutubullapur Municipality has not notified in the year under section 2(14)(iii) of the I.T. Act and Qutubullapur Municipality abolished and merged with Municipal Corporation of Hyderabad with effect from 16/04/2007. We have also gone through the record placed in the paper book at pages 76 77. At page 76, a copy of the intimation is placed issued by the Town Planning Officer, Quthbullapur , Circle - 15, GHMC vide Ref. No. G/1240/2008, dated 04/10/2008 informing that the land is not falling in the GHMC limits. At page 77, a copy of the agricultural land certificate is placed, issued by the Deputy Collector Mandal Revenue Officer, Qutubullapur Mandal vide Ref. No. A/13607/2005, dated 20/08/2005 stating that the lands are under cultivation by raising crops i.e. paddy, cattle feed, maize, jowar, vegeteables etc. 37. Further, we make it clear that when the land which does not fall under the provisions of section 2(14)(iii) of the IT Act and a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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