TMI Blog2013 (2) TMI 770X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer. - I.T.A.No. 2118/Mds/2012 And C.O.Nos. 1 & 19/Mds/2013 - - - Dated:- 20-2-2013 - Dr. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI S.S.GODARA, JUDICIAL MEMBER For the Appellant : Dr. S. Moharana, IRS, CIT For the Respondent : Shri Anil Nair, CA ORDER PER Dr. O.K. NARAYANAN, VICE-PRESIDENT The appeal is filed by the Revenue. The cross objections are filed by the assessee. The relevant assessment year is 2009-2010. The appeal and the cross objections are directed against the order of the Commissioner of Income-tax(Appeals)-IX at Chennai, dated 17.8.2012 and arise out of the assessment completed under sec.143(3) of the Income-tax Act, 1961. 2. The assessee is an individual having income from house property and other sources. In the previous year, relevant to the assessment year under appeal, the assessee had sold twelve pieces of land belonging to him to M/s. Pallanishamy Properties Pvt. Ltd. for a consideration of ₹ 26,40,00,000/-. All the parcels of land are contiguously situated at Padur Village, Chengalpet Taluk, Kancheepuram District. The parcels of land sold by the assessee in the previous year relevant to the assessment year under appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds and this classification establishes that the lands were agricultural in nature. After the sale of lands, the purchasers might have developed the lands but that does not alter the character of the lands before its sale. The assessee explained that when the lands were sold by him, they were agricultural in nature and, therefore, the lands did not partake the character of capital asset. 6. It is to be seen that the Assessing Officer had also made local inspection of the property. 7. To make the long story short, the Assessing Officer rejected the objections raised by the assessee and held that the properties sold by the assessee were not agricultural in nature. Accordingly, he computed the long term capital gains at ₹ 26,16,06,595/- arising out of the sale of lands made by the assessee for a consideration of ₹ 26,40,00,000/-. 8. The matter was carried in first appeal before the Commissioner of Income-tax(Appeals). He accepted the contentions of the assessee and held that the properties sold by the assessee were agricultural in nature. Therefore, he cancelled the capital gains assessment. The appeal filed by the assessee was allowed. 9. The Revenue is aggrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 24.06.2011) has not become final and the department has filed appeal before the Hon ble High Court. 11. We heard Dr. S. Moharana, the learned Commissioner of Income-tax appearing for the Revenue. The learned Commissioner contended that the Assessing Officer has treated the properties as non-agricultural, after conducting extensive enquiries including site inspection. The Assessing Officer had collected the details from the Village Administrative Officer through a sworn statement. The evidences collected by the Assessing Officer showed beyond doubt that no agricultural activities were carried on in the properties sold by the assessee. The Assessing Officer found that the entire area has become a semi-urban area with a lot of real estate development and educational institutions coming around. The Assessing Officer has established the fact that agricultural activities were not carried out, not only in the properties owned by the assessee, but also in the surrounding areas. Even though the properties were agricultural properties in the long past, no agricultural activities were being carried on in that area for so many years in the past because of the urbanization and real ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon ble Supreme Court in the case of CIT vs. All India Tea Trading Co. Ltd. (219 ITR 544), the decision of the Hon ble Madras High Court in the case of M.S.Srinivasa Naicker (291 ITR 481) and also the order of the Tribunal, Chennai B Bench in the case of ACIT vs. Shri Sherit Dyan in ITA No.2088/Mds/2010 dated 24.6.2011. The Commissioner of Income-tax(Appeals) has also relied on a number of judicial pronouncements in his order for coming to this conclusion. 16. We heard both sides in detail and gone through the orders of the lower authorities, the arguments of the parties as well as the various decisions relied on by them. 17. The anchor of the arguments advanced by the assessee in the present case is that the lands sold by him were shown as agricultural land in revenue records. The Hon ble Gujarat High Court in the case of CIT vs. Sarifabibi Mohamed Ibrahim (136 ITR 621) has held that, the fact that the 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 a an agricultural land. However, this would raise only a prima facie presumption and the said presumpt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial buildings are constructed. Because of the boom of the real estate development, the entire contingent of that land has become subject matter of transactions intended for the purpose of real estate development. In that background no agricultural activities were being carried out in that area. The case of the assessee is also not an exception. 19. The statement given by the Village Administrative Officer has categorically established the finding of the Assessing Officer that the lands sold by the assessee in the previous year relevant to the assessment year under appeal were not agricultural land. The past history of the land alone is not the deciding factor. Once upon a time the land might have been used for agricultural operations. In that way of speaking, almost all parts of Chennai Metropolis might be agricultural or marshy land in good old past. Therefore, history is not the only test to be applied to decide the character of the land at the time of sale. A temporary stoppage in the agricultural activities carried on by an assessee also should not go against an assessee. For one or other reason, an assessee may not be carrying on agricultural operations for one or two year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icultural activities carried on by the assessee as a hobby or casual or incidental, it is very difficult to hold a view that the land is agricultural in nature. India is pre-dominantly an agricultural economy where agricultural activities are major part of economic activities of our country. Therefore, the activities carried on by the assessee must be meaningful and result-oriented towards generating reasonable income from such operations. As far as the present case is concerned, there was no such economic utilization of the land for earning income by carrying on agricultural operations. 23. It is, in this context that we have to refer the arguments of the assessee that the assessee had reported agricultural income in his returns of income for assessment years 2004-05 to 2008- 09. The agricultural income returned by the assessee for those assessment years are very small amounts like ₹ 28,800/-, ₹ 27,000/-, ₹ 21,000/-, 15,500/- and ₹ 20,450/- respectively. The above agricultural income returned by the assessee is not from the land of 4.43 acres sold by the assessee but from the land still owned and occupied by him. When this is considered, it is obvious th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the past. 26. In these circumstances, it is our considered view that the Assessing Officer has conclusively established that the lands sold by the assessee in the previous year relevant to the assessment year under appeal for a consideration of ₹ 26,40,00,000/- were not agricultural in nature, but, on the other hand, they are nonagricultural land. Therefore, it definitely comes under the category of capital asset . Accordingly, the gains arising out of transfer of that capital asset is exigible to capital gains tax. 27. When the basic nature of the land itself found to be nonagricultural, the arguments regarding status of the property, whether within metropolis or outside the limit of the metropolis, is irrelevant. A non-agricultural property, whether inside the municipality or outside the municipality or even in a remote village is a capital asset and transfer of the same may generate income liable for capital gains taxation. In the facts and circumstances of the case, we set aside the order of the Commissioner of Income-tax(Appeals) on this point and restore the order of the Assessing Officer. 28. Now, we will consider the cross-objections filed by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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