TMI Blog2016 (3) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 conclusion that the property cannot be considered as Agricultural land. Though the circumstance that the land is classified as Agricultural in the revenue records and the Village Panchayat President, Navallur, has certified that the land is away from municipality. In our view the other circumstances pointed out above outweighs all of the circumstances in favour of the Revenue and on the basis of those circumstances, we are inclined to conclude that the property was not an agricultural land. - Decided in 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: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltural land is not taxable under the Act. However, the Assessing Officer rejected the assessee s claim for the following reasons. (i). Since the assessee has not carried out any agricultural activities, the lands are to be treated as non-agricultural lands. (ii) The lands are located in a expensive and commercial areas of 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. Hence, the Assessing Officer held that the sale proceeds of the above lands are liable for capital gains tax and accordingly, determined the taxable long term capital gains at D1,20,00,000/- being the assessee s share and while doing so, the Assessing Officer also relied on various judicial pronouncements including the decision of the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee 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 be considered as an adventure in trade (iii) Realization of investments consisting of purchase of agricultural land and resale, though profitable are clearly outside the domain of capital gain. (iv) The assessee treated the assets as investment in agricultural land. Therefore disposal of the same would not convert, what was a capital accretion. 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 628 and has laid down 13 tests or factors which are required to be considered and upon consideration of which, the question whether the land is an agricultural land or not has to be decided or answered. We reproduce the said 13 tests 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 rational proportion to the investment 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 por ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possibility of user of the land, by some possible future owner or possessor, for an agricultural purpose. It is not mere potentiality, but its actual condition and intended user which has to be seen. One of the objects for exemption is to encourage cultivation or actual utilisation of land for agricultural purposes and hence if there is neither anything in its condition, nor anything in the evidence to indicate the intention of its owners or possessors so as to connect it with an agricultural purpose, the land could not be agricultural land . 5.7 In the case before the Supreme Court the following circumstances were emphasised 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 of non-agricultural user were neutral circumstances and only fifth ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... higher rate or in order to avoid payment of 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 situate within municipal limits are not outside the ambit of capital assets ). (b) The land is sold to a non-agriculturist for nonagricultural purposes (c) The land is sold on a per square yard basis 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 (e) When the price is such that no prudent owner would sell it at a price worked out on the capitalisation method taking into account its optimum yield in the most favourable circumstances. 5.9 The above decision of Gujarat High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be necessary to have background of agricultural activates. We are making a reference to this circumstances only to weigh the cumulative circumstances to come to a conclusion whether the property can be regarded as Agricultural Land. No evidence of having spent human labour in the sense of preparing the land, filling, sowing seeds, planting on a regular basis has been produced by the Assessee. The property is situated in fast developing area of Chennai. The property is located 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 in the case of Sarifabibi Mohammed Ibrahim (supra) which was approved by the Hon'ble Supreme Court, to the facts and circumstances of the case:- (i) The fact that land is entered as agricultural land in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 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. In view of the same, the sale price received for the property has increased manifold which a normal agricultural land will not fetch. The price is in accordance with the development activities and changes happening in the nature of the land from agricultural to that of housing 5.14 If we consider the above facts and circumstances of the present case as a whole and an overall view is to be taken in deciding whether the land was an agricultural land, we would come to a conclusion that the property cannot be considered as Agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X
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