TMI Blog2016 (5) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of land cannot be seen in isolation and if agricultural operations were carried out by the assessee, the appreciation in the price of land alone would not lead to the conclusion that the land is not an agricultural land. The objection of the Revenue that coconut plantation could not have been carried out on the soil which was present on the said land and the reliance placed on the letter of the Gram. Panchayat Secretary cannot be accepted in view of the clear report of the Village Officer. Thus, in view of the aforesaid, we hold that the land in question cannot be treated as capital asset u/s. 2(14) of the Act and therefore, capital gains cannot be assessed on the sale of the land. - Decided against revenue - I.T.A. No.456/Coch/ 2015 - - - Dated:- 6-1-2016 - SHRI B.P. JAIN, AM and GEORGE GEORGE K., JM For The Revenue : Shri K.P. Gopakumar, Sr. DR For The Assessee : Shri Iype Mathew, CA ORDER Per B.P.Jain, Accountant Member: This appeal of the Revenue arises from the order of the Ld. CIT(A), Kozhikode dated 10.06.2015 for the assessment year 2010-11. 2. The brief facts of the case are that the assessee filed its return of income for the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had not returned agricultural income from the transferred property in the earlier assessment years. 4. The conclusion reached by the Assessing officer regarding the nature of transferred property was not solely based on the report of the Income Tax Inspector but many other factors like the letter of the Secretary, Chelambara Grama Panchayath, dated 20-01-2011 addressed to the Income Tax Officer (Inv.), Kozhikode in which it was stated that as per the building assessment register and copies of the building tax receipt there were four buildings in the ownership of Sri K Faisal Rahiman bearing building numbers CPV/438,439,440,441 in the transferred property which were used as residential quarters and also the failure of the assessee to furnish any evidence regarding the agricultural activities carried out have been considered. In view of this, is not the decision of the Commissioner of Income Tax(Appeals) arrived at without appreciating the complete facts of the case? 5. For these and other grounds that may be urged at the time of hearing, it is requested that the order of the CIT(A) may be set aside and that of the Assessing officer restored. 5. We shall take u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no agricultural income was earned, it was submitted by the Ld. AR that the net agricultural income was meagre and was therefore. not declared, as under the Income Tax Act, the same was not required to be declared if the agricultural income was below ₹ 5000. The Ld. AR has further submitted that the only because the buyer has used the land for commercial purposes, cannot mean that the land in question was not agricultural in nature. 9. The Ld. AR has strenuously argued that the case of the assessee was squarely covered by the ITAT, Cochin Bench in the case of M.J. Joseph vs. Dy. CIT, Circle-2(2), Ernakulam in I.T.A. No. 224/Coch/2011 dated 06-06-2014. He further relied upon the order of the Ld. CIT(A) to support his submissions. 10. We have heard the rival submissions and perused the facts on record. The term Capital asset is defined u/s 2(14) of the Income-tax Act and the same is extracted below: (14) capital asset means (a) property of any kind held by an assessee, whether or not connected with his business of profession; (b) any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or cantonment board referred to in item (a) and which has a population of more than 10 lakh. Explanation, - For the purposes of this sub-clause, population means the population according to the land preceding census of which the relevant figures have been published before the first day of the previous year . (iv) 61/2 per cent Gold Bonds, 1977, or 7 per cent Gold Bonds, 1980, or National Defence Gold Bonds, 1980, issued by the Central Government. (v) Special Bearer Bonds, 1991, issued by the Central Government; (vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by the Central Government. (Explanation, - For the removal of doubts, it is hereby clarified that property includes and shall be deemed to have always included any rights in or in relation to an Indian company, including rights of management or control or any other rights whatsoever; 11. Under section 45 of the Act, there cannot be any levy of capital gains unless the asset transferred is a capital asset. The only question to be considered in the present appeal is whether the land in question is capital asset within the meaning of section 2(14) of the Act. It is not the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the state government for cultivation whether the material filed by the assessees would be sufficient to prove to show that the assessees were using the land for agricultural purpose / and the land in question has any connection with agricultural purpose. All the assessees are individual assessees. Agriculture in this country is unorganised. Normally illiterate citizens of this country are engaged in agricultural activities. Though the respective state governments are taking steps to sell the agricultural produce in the markets, still, the sale of agricultural produce is not regulated properly. The agricultural labourers, who are engaged for cultivation, are also illiterate. In those circumstances, expecting material evidences from the agriculturists for cultivation may be far-fetched. In respect of corporate companies that are engaged in cultivation, may maintain evidence for purchase of fertilizers, payment of wages to labourers and in respect of sale of agricultural produces. However, such kind of evidence may not be expected from individual farmers so long as the government does not regulate the cultivation of land and sale of agricultural produce in this country. This ground re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nore the certificate given by the Village Administrative Officer on the basis of his acquaintance with the field certifying that the subject lands were subjected to cultivation. 28. We have carefully gone through the judgment of the apex court in the case of Sarifabibi Mohmed Ibrahim And Others vs CIT (1993) 204 ITR 631 (SC). In the case before the Apex Court, the assessee sold a piece of land situated within the revenue limits of Navagaon village in the municipal limits of Surat municipality. In the year 1967, the assessee agreed to sell the land to a housing society. The assessee claimed the gain on transfer of such land as exempt u/s 2(14) of the Act. The Apex Court found that the assessee applying for permission to sell the land for non agricultural purpose and immediately after application for conversion of land, the land was not cultivated for a period of four year. In those factual circumstances, the Apex court found that the land in question is not an agricultural land. In the case before us, the assessee has not applied for conversion of land for non agricultural purpose. The land in question is classified as agricultural land and the village officer certified that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nguish the aforesaid judgment relied upon by the assessee by submitting that in the present case, the assessee had not returned any agricultural income from the transferred property in the earlier assessment years. The Ld. AR has rebutted the same by stating that the agricultural income was meagre and was below ₹ 5000 and therefore, the same was not declared in the return. We see no reason to disbelieve the submission of the assessee in view of the certificate of the Village Officer that actual agricultural operations were carried out by the assessee. 15. The reliance placed by the Assessing officer on the report of the Inspector of Income Tax to come to the conclusion that the land was not an agricultural land is misplaced. The Inspection was done by the Inspector after the transferee had constructed the building on the land. Even in the report of the Inspector, it is observed that there were some coconut trees on the land. Just because the transferee had not used the land for agricultural purposes, the land does not loose its character of being an agricultural land when the same is sold by the assessee. Moreover, the said inspection was done behind the back of the assess ..... 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