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2016 (3) TMI 491 - ITAT CHENNAI

2016 (3) TMI 491 - ITAT CHENNAI - TMI - Agricultural lands in terms of Sec 2(14) - treatment to land sold - Held that:- In the present case, the purchaser of the property was a company by name M/s. Menakur Infrastructure Private Limited which is a registered company under the Companies Act, 1956, incorporated on 04/08/2004 vide registration No.U45204TN2004PTC053884 with an intention to develop housing projects, Information Technology Buildings and family housing construction in and around Chenna .....

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The property sold by the assessee is in the midst of development activities being carried out by builders in promoting housing/ Information Technology corridors, and no agricultural activities were being carried out either by the assesse nor by others in that area, the property is described as a mango grove as per the copy of the sale deed/patta, chitta adangal produced.

An overall view is to be taken in deciding whether the land was an agricultural land, we would come to a conclusio .....

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favour of revenue - ITA No.1793/Mds/2013. - Dated:- 31-12-2015 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER For The Appellant : Dr. B. Nischal, IRS, JCIT. For The Respondent : Shri. S. Sridhar, Advocate ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This appeal by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-IV, Chennai, dated 19.04.2013 for the assessment year 2006-2007. 2. The grievance of the Revenue in this appeal .....

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ee sold his property for D6,09,60,0000/- and investment of D1,20,00,000/- in the form of share application money in M/s. Menakur Infrastructure P Ltd was made. Hence, the Assessing Officer reopened the assessment u/s.147 of the Act by issuing a notice u/s.148. The assessee alongwith his mother Smt. Ayishath Jailani owner a piece of land measuring 7 acres at Navaloor Village, Chennai. The assessee and his mother are the joint owners of the land. During the financial year relevant to the assessmen .....

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05 and handed over the possession. The assessee also submitted that since it was an agricultural land, he claimed exemption u/s.2(14) of the Act, as the lands sold were not capital asset . Further, during the course of assessment proceedings, it was also submitted that the land, which was sold by the assessee, is an agricultural land and situated beyond the distance of 8kms from the outer limits of Chennai Municipal Corporation or from any other municipality of cantonment board. Hence, the land .....

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f Old Mahabalipuram Road (OMR) where IT companies, engineering colleges, Tech parks etc are located. (iii). The lands are sold for very high price of D86 lakhs per acre, which are comparable to the prevailing rates of Chennai. (iv) The lands are sold to a which is engaged in the development of housing projects and IT parks etc . 3.1 The Assessing Officer concluded that the lands under consideration are not agricultural lands and fall under the category of capital assets u/s.2(14) of the I.T. Act .....

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me Tax (Appeals). 4. On appeal the Commissioner of Income Tax (Appeals) observed that the lands under consideration are agricultural lands, as per the Revenue records and also under cultivation of agricultural crops till the assessee sold them to M/s. Menakur Infrastructure P. Ltd. on 28.10.2005. Even in the sale deed the lands were shown as agricultural lands with standing crops. Thus, he observed that (i) The lands are Agricultural lands (as per revenue records) (ii) The lands are under contin .....

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valuation and included for stamp duty purpose. According to Commissioner of Income Tax (Appeals), the land will not constitute capital asset for the purpose of Sec. 2(14) of the Act. The lands under consideration are clearly agricultural lands falling outside the definition of capital asset u/s.2(14) of the Act and accordingly, he deleted the addition made by the Assessing Officer. Aggrieved by the order of the Commissioner of Income Tax (Appeals), the Revenue is in appeal before us. 05. We have .....

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assessee was to carry on business with those assets. (ii) The assessee held land for considerable time. The asset acquired was agriculture land as per the evidence brought on 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 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 .....

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e transaction. In the case of the assessee, land was acquired by the assessee and treated as fixedassets. (v) Whether a transaction in respect of an asset is capital or not depends on the facts and circumstances of the case. The mere fact that the person has purchased a land and subsequently sold it, giving rise to a substantial profit cannot change the character of the transaction. It is the general human tendency to earn profit out of capital asset. No one invests to incur a loss. If the marke .....

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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. 5.2 The Departmental Representative submitted that the amount received on sale of this property is nothing but on account of sale of capital asset and the same was brought into income from capital gain. In this case, the Authorised Representative submitted that the land always treated as investment and not at all converted i .....

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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 and that in each case one or more of the factors may make appearance and that ultimate decision will have to be reached on a balanced consideration of the totality of the circumstances. 5.4 The expression 'agricultural land' is not defined in the Act, and now, whether it is agricultural land or not has to be determined by using the tests or me .....

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ests as follows: "1. Whether the land was classified in the Revenue records as agricultural and whether it was subject to the payment of land revenue? 2. Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time? 3. Whether such user of the land was for a long period or whether it was of a temporary character or by any of a stopgap arrangement? 4. Whether the income derived from the agricultural operations carried on in the land bore any ration .....

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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 i .....

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agriculturist? If so, whether the sale or intended sale to such non-agriculturists was for nonagricultural or agricultural user? 12. Whether the land was sold on yardage or on acreage basis? 13. 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?" 5.6 We will therefore proceed to examine the quest .....

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hat expression which occurred in the definition of "asset" in section 2(e) of the WT Act, 1957. The Hon'ble Supreme Court held that much weight cannot be given to mere "potentiality" of the land for use for agricultural purposes and what is really required to be shown is the connection with an agricultural purpose and user and not the mere possibility of user of the land, by some possible future owner or possessor, for an agricultural purpose. It is not mere potentiality, .....

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viz. (i) area was Very large (108 acres) and was abutting a lake, (ii) there were two wells on it (iii) it was capable of being used (though not actually used) for agricultural purposes, (iv) it had not been put to any use which could change its character by making it unfit for immediate cultivation; and (v) it was classified and assessed to land revenue as "agricultural land" under the relevant revenue enactment. The Supreme Court held that first four circumstances relating to absence .....

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ored the matter to Tribunal to record a finding on the question of intended user and then decide the point whether the land in question was agricultural land. The Supreme Court disapproved the view that that land which is left barren but which is capable of being cultivated can also be agricultural land unless the. said land is actually put to some other nonagricultural purpose like construction of buildings, or an aerodrome runway, etc. thereon which alters the physical character of the land re .....

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summed up as follows:- (i) The fact that land is entered as agricultural land in revenue records and is assessed as such under the Land Revenue Code would be a circumstance in favour of conclusion that it is an agricultural land. However, this would raise only a prima facie presumption and said presumption can be destroyed by other circumstances pointing to the contrary conclusion (ii) The fact that agricultural operations were carried on in the past or arc carried on currently is a circumstanc .....

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f capital gains tax. (iii) The fact that land is not converted to non-agricultural user would be a circumstance indicating that it is an agricultural land. However this is subject to same rider as is mentioned in (ii) above. (iv) The following facts would indicate that land was not agricultural land: (a) The land is situated (even in the year prior to asst. year 1970-71 when amendment came in force) in an urban area in the proximity of building sites. (From Asst. year 1970-71, agricultural lands .....

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taking into account its optimum yield in the most favourable circumstances. 5.9 The above decision of Gujarat High Court has been affirmed in appeal by the Supreme Court in Sarifabibi Mohmed Ibrahim vs. CIT 204 ITR 631 (SC) in which the Supreme Court emphasised that all the circumstances were required to be weighted and that High Court has reached a correct conclusion. 5.10 The claim of the Assessee that agricultural operations were carried out over the property and the property was actually us .....

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'ble Kerala High Court in the case of Kalpetta Estates Ltd. 185 ITR 318 (Ker) it has been held by the Hon'ble Kerala High Court that the burden of proof that the land in question was agricultural land at the time of transfer to claim exemption was on the Assessee. As already observed the question whether the land was Agricultural land has to be decided on facts of each case and decided cases are only guidelines to be kept in mind. Facts and all the circumstances are to be considered as a .....

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was not Agricultural land had been arrived at. The case laws cited by the parties are therefore are hot specifically considered. As we have already observed, the conclusion has to be arrived at based on consideration of all circumstances cumulatively as laid down by the Hon'ble Supreme Court in the decisions referred to in the earlier paragraphs. 5.11 The Assessee in the present case is not an Agriculturist. He has no background of agricultural activities and he is a non-resident. Strictly s .....

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in developed/ developing area and has access to all modern amenities/living. There was Real estate activity in the area where the property is situated. The sale of the property by the Assessee is to a commercial organisation. The sale consideration paid would show that no bona-fide agriculturist would pay such a huge price of D 6,09,60,000/- for 7.12 acres for acquiring of land which works out D86,00,000/- per acre. 5.12 We will now apply the tests laid down by the Hon'ble Gujarat High Court .....

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y conclusion. (ii) The fact that agricultural operations were carried on in the past or are carried on currently is a circumstance in favour of conclusion that land was agricultural land. However, this is not a decisive factor inasmuch as agricultural crop can be raised even on building site land (even on desert land as observed by the Supreme Court in said case) and sometimes, a crop is grown in order not to allow the land to remain idle awaiting sale for non-agricultural purposes to a non-agri .....

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. (b) The land is sold to a non-agriculturist for non-agricultural purposes. (c) The land is sold at a price comparable to the price fetched by building sites. (d) The price is such that no bona fide agriculturist would purchase the same for genuine agricultural operations. 5.13 In the present case, the purchaser of the property was a company by name M/s. Menakur Infrastructure Private Limited which is a registered company under the Companies Act, 1956, incorporated on 04/08/2004 vide registrati .....

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s once a village but with the advent of Information Technology Companies and the rapid development of the Old Mahabalipuram, it has become a bustling suburban. Navalur is an upcoming residential area with many number of Flats coming up, mostly professionals from Information Technology companies renting and buying apartments. As detailed above, the property sold by the assessee is in the midst of development activities being carried out by builders in promoting housing/ Information Technology cor .....

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