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TMI Blog2015 (12) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... etter dated 31.12.2013 and as per the letter No.R.C.No.1097/2013 B1 received on 12.03.2014 from Tahsildar stated that the above land are not cultivated for the past 8 years. Consequent to this, the Assessing Officer called for the comments of the assessee on this report. The assessee submitted as under:- 1. As per Main Object and Ancillary /incidental to attainment of main object is to money lending business and not dealing with Agricultural activities. As per Agreement for sale, dated 03.07.2008 with M/s.Rajalakshmi Education Services Pvt Ltd, it was mentioned only as "Land" and not Agricultural land. Chitta Patta Adangal produced. In "pasali", it was mentioned as "uzhavu" in the column for nature of crop. Purpose of buying Agricultural land was not explained nor reflected in MOA. The assessee admitted Net Agricultural income at Rs. 8,03,730/- for which breakup of Gross receipt, expenditure made with bills/vouchers for sowing, ploughing, seeding, etc., and harvesting the crops cultivated and sold. 2. At the time of purchase, it was mentioned in the sale deed as "Land or vacant Land". The assessee's claim of profit on sale of Agricultural land by carrying agricultural a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of profit on sale of agricultural lands was contrary to the MOA of the assessee company, there is merit in the AR's contention that as a non-banking financing company, the assessee was entitled to purchase or deal with any property in whichever way it deemed fit for the purpose of making investments and there was no limitation or restriction on the nature of assets that the company could hold as investment which fact becomes clear from the following clauses in the Memorandum of Association of the assessee company: Under objects incidental or ancillary to the attainment of the main objects: "12. To invest and deal with the money of the company not immediately required in such manner and upon such security or without security at all as the company may from time to time think fit" Under other objects: "8. To invest the funds of the company in any manner as the company may think fit and/without prejudice to the said generally a. In the purchase of lands and buildings, or any interest therein or on ground rents or where else in the world." "13. To develop and turn to account any land acquired by the company or in which it is interested, and in particular by laying out and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any contra indication that the assessee was using if or intending to use it for non-agricultural purposes, it is difficult to accept the stand of the Department. Therefore correlating the ratio of the above jurisdictional High Court judgement to the facts of the instant assessee, it was submitted that the intention of the purchaser of the land from the assessee was not really relevant in determining whether the impugned land was agricultural land or capital asset in the hands of the assessee. Further, the Commissioner of Income Tax (Appeals) observed that the instant assessee purchased lands in 2005-06 spread over 64 survey Nos. in Thandalam Village, Sriperumbudur Taluk classified in the revenue records as "wet agricultural land" as certified by the jurisdictional Tahsildar and VAO extracts which is reproduced at para 7 of the assessment order. The VAO had also certified vide certificate dated 18.11.09 that it was also fit for cultivation. Secondly as seen from the records furnished at the time of appellate hearing that the' said lands were given on lease with specification that the said lands were to be used only for agricultural purpose which it was indeed used for and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AR to the AO's reasoning for treating the impugned properties as capital assets and its sale of long term capital gains in the foregoing paragraphs which has considerable merit, the four undisputed facts obtained in the case as discussed immediately above as also the ratio off the jurisdictional court cited supra is persuasive enough in treating the impugned properties as agricultural lands and therefore, the profits of its sale as profits derived by the transfer of agricultural lands and not of capital assets as held by the AO. The AO is therefore directed to treat the sale of impugned lands as sale of agricultural lands, exempt from tax and allowed the claim of the assessee. Further, he also treated the agricultural land as lease rent of B8,03,730/- as income from agriculture as against claim of the Assessing Officer as income from other sources. Against this, the Revenue is in appeal before us. 05. The ld. Departmental Representative submitted that Tahsildar reported that lands in question was not used for agricultural purposes for the last eight years i.e from 2005 and filed objection with proof on 21.03.2014. When it is put to the assessee by Assessing Officer he has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the lands in questions were under agricultural operation on the date of sale for the purpose of considering the meaning of capital assets, it matters very little how the subsequent purchaser intended the land in question to the put to use. In the circumstances, there is no reason to accept the plea of the Revenue that the asset in question is a capital asset and attracts levy of capital gains tax, it having shed its character as an agricultural land on the sale effected. In the absence of any contra indication that the assessee was using it or intending to use it for non agricultural purposes, it is difficult to accept of the Department. Further, he submitted that the assessee cannot be denied exemption from capital gains tax once it has been accepted by Revenue authorities that the classification of lands as per the Revenue records was agricultural lands and it satisfies other conditions of Sec.2(14) of the Income Tax Act in this regard. The manner in which adjacent lands are used by the owner therein is not a ground to come to a conclusion that the assessee's land are not agricultural in nature and further Authorised Representative relied on the judgments of jurisdictional High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record. Thus, the assessee held the agriculture land for more than 3 years. During that period the assessee carried on regular agricultural operations in the land by leasing for agricultural purpose. In the light of favourable market conditions the assessee thought it good to sell the asset to realize a good amount. Realization of better price in a booming market cannot be considered as an adventure in trade (iii) The expression adventure in the nature of trade occurs in the definition of business under section 2(13) but the expression adventure in the nature of trade has not been defined in the Act. It may be pertinent to mention here that a specific transaction partake the character of business or an adventure in the nature of trade or realization of capital asset or a mere conversion of asset has to be decided depending upon facts of each case. (iv) In deciding as to whether a particular transaction is an adventure in the nature of trade, the Assessing Officer must consider all the relevant and proved facts and circumstances. Realization of investments consisting of purchase of agricultural land and resale, though profitable are clearly outside the domain of adventure in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset in their books along with other agriculture land which was already acquired by them in the earlier years. (c) The land was identified as agriculture land in the revenue records. (d) The assessee carried on routine agriculture operations through Shri. D. David and the land was used for agriculture operations. (e) The assessee did not carry on any commercial activity with reference to that land such as getting of approval for converting into sites, plotting of the same into sites etc. Thus, the character of the land i.e., agriculture nature was continuing till the same was sold by the assessee company. (f) Because of favourable market conditions the assessee sold the land and the same fetched them a good price. 7.3 Therefore, in the present case there is no dispute that the assessees acquired agricultural land. There is also no dispute that there was agricultural operation in this land before sale of this land. 7.4 The Assessing Officer was of the opinion that the amount received on sale of this agricultural property is nothing but on account of adventure in the nature of trade and the same was brought into income from business. In this case, the assessee held the lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment made in purchasing the land? 5. Whether, the permission under s. 65 of the Bombay Land Revenue Code was obtained for the non-agricultural use of the land? If so, when and by whom (the vendor or the vendee)? Whether such permission was in respect of the whole or a portion of the land? If the permission was in respect of a portion of the land and if it was obtained in the past, what was the nature of the user of the said portion of the land on the material date? 6. Whether the land, on the relevant date, had ceased to be put to agricultural use? If so, whether it was put to an alternative use? Whether such lesser and/or alternative user was of a permanent or temporary nature? 7. Whether the land, though entered in Revenue records, had never been actually used for agriculture, that is, it had never been ploughed or tilled? Whether the owner meant or intended to use it for agricultural purposes? 8. Whether the land was 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? 9. Whether the land itself was developed by plotting and providi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 ITR 671/5 Taxman 147 referring to the Constitution Bench of the Supreme Court had stated that if agricultural operations are being carried on in the land in question at the time when the land is sold and further if the entries in the Revenue records show that the land in question is agricultural land, then, a presumption arises that the land is agricultural in character and unless that presumption is rebutted by evidence led by the Revenue, it must be held that the land was agricultural in character at the time when it was sold. The Division Bench of the Gujarat High Court further held that there was nothing on record to show that the presumption rose from the long user of the land for agricultural purpose and also the presumption arising from the entries of the Revenue records are rebutted. 7.10 The Bombay High Court in the case of CWT v. H.V. Mungale [1984] 145 ITR 208/12 Taxman 201 held that the Supreme Court had pointed out that the entries raised only a rebuttable presumption and some evidence would, therefore, have to be led before taxing authorities on the question of intended user of the land under consideration before the presumption could be rebutted. The Court further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnals, 18 marlas of land out of her share in 23 karnals, 17 marlas land during the financial year 1990-91, 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. 54B 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 land 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 for relief. On further appeal to the High Court, the Punjab & Haryana High Court found that the finding that the land 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 the preceding two years. The land being located in commercial area or the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t also requires the fulfilment of the condition that the Central Government has issued a notification under this Clause for the purpose of including the area up to 8 kms, from the municipal limits, to render the land as a "Capital Asset. 11. In the present case, it is not in dispute that the subject land is not located within the limits of Dasarahalli City Municipal Council therefore, Clause (a) to section 2(14][iii] of the Act is not attracted. 12. However, though it is contended that it is located within 8 knits,, within the municipal limits of Dasarahalli City Municipal Council in the absence of any notification issued under Clause (b) to section 2(14)(iii) of the Act, it cannot be looked in as a capital asset within the meaning of Section 2(14)(iii)(b) of the Act also and therefore though the Tribunal may not have spelt out the reason as to why the subject land cannot be considered as a 'capital asset' be giving this very reason, we find the conclusion arrived at by the Tribunal is nevertheless the correct conclusion." 7.16 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufficient to show, an intention to trade at the inception. In a case where the purchase has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding the property for himself or otherwise enjoying or using it, the presence of such an intention is a relevant factor and unless it is offset by the presence of other factors it would raise as strong presumption that the transaction is an adventure in the nature of trade. Even so, the presumption is not conclusive and it is conceivable that, on considering all the facts and circumstances in the case, the court may, despite the said initial intention, be inclined to hold that the transaction was not an adventure in the nature of trade. The presumption may be rebutted. 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 and even there was no intention to sell the land in future at that point of time. It was due to the boom in real estate market came into picture at a later stage, the assessee has sold the la ..... X X X X Extracts X X X X X X X X Extracts X X X X
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