TMI Blog2016 (6) TMI 518X X X X Extracts X X X X X X X X Extracts X X X X ..... are dismissed. Addition towards difference in turnover between the seized material and turnover declared in the finance statement - main plea of the assessee is that the turnover mentioned in the seized material does not tally with the books of accounts as on the date of search, since it requires reconciliation - Held that:- The observation of the CIT(A) is that the assessee has not reconciled properly while completing the proceedings before him. The assessee filed above statement reconciling the turnover in seized material with the books of account maintained by the assessee. In the interest of justice, it is appropriate to go through it by the AO, decide the issue afresh. Accordingly, the issue relating to addition towards difference in turnover between seized material and turnover with books of accounts is remitted back to the file of ld. Assessing Officer for fresh consideration after giving adequate opportunity of hearing , the AO shall decide the issue afresh. Addition made in respect of income from sale of agricultural land by treating it as real estate business - Held that:- It is an admitted fact that the land was held by the assessee as a capital asset from the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sale of land was not an adventure in the nature of trade so as to tax the income arising out of this transaction as business income. Levy of interest u/s.234A & 234B - period of charging of interest - Held that:- The period of charging of interest should be from the date of determination of income under section 143(1) or 143(3) to the determination of enhanced income under section 143(3) r.w.s. 153A of the Act. - I.T.A.Nos.2356 to 2362 /Mds./2015, I.T.A.Nos.480 to 486/Mds. /2016 - - - Dated:- 27-4-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND Shri Duvvuru RL Reddy, JUDICIAL MEMBER For The Assessee : Mr.S.Vidhya,C.A For The Revenue : Mr.Sundar Rao,CIT, D.R ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER: These seven cross appeals are directed against the common of the Ld.CIT(A)-18,Chennai dated 07.12.2015 for assessment years 2007-08 to 2013-14 passed u/s.143(3) r.w.s. 153A of the Income Tax Act, 1961. Since issues involved in all these cross appeals are common in nature, these appeals are clubbed together, heard together, disposed off by this common order for the sake of convenience. 2. The facts of the case are that the assessee is an indiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013-14 5,96,250 The assessee has taken the plea before the AO that assessee is owning 150 acres of agricultural land in and around Sripeurambudur Taluk, Chengalpet Kancheepuram district which was purchased mainly during the period 2003-04. The agricultural income received from cultivation of crops such as coconuts, mangoes, vegetables, seeds and paddy from the said agricultural land. The assessee said that the assessee has sold the agricultural produce in local market and the assessee also submitted proof for owning the agricultural land for all the assessment years. According to the ld. Assessing Officer, assessee has not given specific details like, which land was cultivated, what was the crop on that land, what was the expenditure of that crop, what was the gross yield from that particular crop, how many crops are cultivated in a year, in a particular piece of land and its period, if all the land was cultivated or only few land is cultivated, as such it is not possible to ld. Assessing Officer to conclude the income declared by the assessee as agricultural income. Thus, he treated the agricultural income declared by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f agricultural land owned by the assessee and agricultural operations carried on by the assessee, it is not possible to hold in all assessments completed u/s.143(3) r.w.s.153A of the Act, the assessee s income not from agricultural income and it is from other sources as there is no evidence found during the search to say otherwise. Hence, in our opinion, when no incriminating material found at the time of search to suggest that the assessee shown nonITA agricultural income as agricultural income and arbitrarily disallowing the same by the AO and confirming the CIT(A) at 50% of that disallowed by the AO, is not justified. Accordingly, the agricultural income declared by the assessee has to be accepted in toto. This ground in all these appeals of the assessee is allowed and the ground raised by the Revenue in all its appeals are dismissed. 6. The next ground in assessee s appeal for all the assessment years is with regard to addition towards difference in turnover between the seized material and turnover declared in the finance statement, in spite of the fact that difference was properly explained before he AO by way of reconciliation statement along with evidence. 7. The brief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciliation. To this effect, he has filed statement showing the reconciliation of turnover which is as follows:- Assessment year 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Turnover as per material seized Add: Mistaken in A.O page 6.Point No. 6.4(Page no. of loose sheet No. 48-Jan Feb only taken-March, 12 not taken) 237,37,902 279,54,365 289,80,082 285,89,426 305,53,905 324,25,987 (A) 237,37,902 279,54,365 289,80,082 285,89,426 305,53,905 337,82,968 LESS: Luxury tax paid 9,55,513 10,30,783 10,64,178 9,96,689 10,64,669 12,40,053 Discount 4,40,461 5,39,941 8,33,280 8,03,485 12,35,582 15,68,774 Bar Room-Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO in respect of income from sale of agricultural land by treating it as real estate business. 10. We consider the facts in appeal No.482/Mds./16.(A.Y.2009-10) The facts of the case are that in the computation of income, the assessee had claimed exemption from Income tax for the sale proceeds received from sale of land measuring 50.84 acres situated at Navaliur, Srlperumbudur. Taluk, Kancheepuram District. The assessee had claimed that the total cost of purchase was ₹ 12,56,02,4411- and the total sale consideration was ₹ 50,49,54,375/- and the assessee had claimed the net proceeds of ₹ 37,93,51,934/- is exempted for the AY 2009-10 as the assessee has treated the sale proceed as receipt from sale of agriculture land. In this respect, the purchase and sale deeds were called for from the assessee. On verification of the sale deeds, It was found by the AO that the land was sold after converting the land into residential plots with the approval of Department of Town and Country Planning vide approval dated 26-02-2008. It was found that the Land was purchased as agricultural land and was sold as agricultural land and the land was under actual cultivation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gar Housing Society Ltd. The assessee was not in real estate business for all the assessment years under consideration, he did not develop any agriculture land. The assessee never did any real estate business till today. 10.1 According to A.O, the land purchased by the assessee cannot be for agricultural land since he cannot hold so much land which against the Land ceilIing Act. The assessee is inreal estate business. The assessee had aggregated the lands by purchasing from 38 parties and brought them under single ownership and all the lands were made and became a single unit after purchase/ aggregation. The assessee had taken steps to convert the agricultural lands in to residential plots simultaneously with the purchase of lands .The assessee had taken steps and completed a substantial amount of work even before entering into a Memorandum of Agreement to sell with Mr. R.Ramesh on 1.12.2007. The appellant continued his effort to get approval for the lay out from DTCP and finally the assessee got approval and conveyed the approved lay out land to the ultimate purchaser M/ S Gandhi Nagar Housing Society Ltd. Thi is evident from the fact that not only before the date of sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferred. The appellant did not provide evidence to show that he did agriculture activity in these lands. On the contrary, enough evidence was found to prove that the assessee did not cultivate the land. The same was mentioned in the assessment order. It is a mistake on the part of the assessee to keep it as capital asset. He should have kept the land purchased for trading purpose as stock in trade. For stock in trade, the criteria of distance from city limit are irrelevant. There are two VAO certificates dated 30.09.2008 and 06.06.2009. It is to be noted that it is mentioned that the assessee is owner of the land in question on those dates arid the nature of land is Agricultural. 10.2 It is submitted that both the facts are wrong. Before these dates, the residential plots were transferred to M/s Gandhl Nagar Housing Society Limited through sale deed dated 14.05 2008 in the sale deed. It is mentioned that residential plots were developed. It was contention of assessee that the land was not transferred to Mr. R.Ramesh and the A.O continued to be the land owner till 14.05.2008. Moreover, the assessee recognised the sale proceeds only on transfer of lands to M/s Gandhi Nagar Hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention; in what period was held as agricultural land is important factors. The timeline is more important. Everything cannot be swept under a single blanket by saying it was assessed to land revenue. The approved layout adjacent to the land in question is an important factor that allured the assessee to jump into the venture of Navallur project. 10.4 The assessee has not produced any proof to show that the cultivated the land. The nature of land was changed before the date of sale by converting it into residential plots. The company SNJ Distillers Pvt. Ltd. vas not incorporated on 17.04.2008. A business will not be started all of a sudden. It would have been in the mind of the assessee for quite some time. Identification of land for the factory and other preparatory work must start much earlier. He would have estimated the investment needed. It can be construed very well that the assessee ventured into Navallur project to generate money for investment. This clearly shows that the intention of the assessee was to trade in the land and not to do cultivation. It is not a mere appreciation of land price. If land appreciates with reasonable time interval it is quite normal. Appreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... municipality as evidenced by as the certificate issued by Village Administrative Officer, Sriperambattur Taluk. These documents were produced before the assessing officer. The assessee also produced Chitta/Adangal copies before the assessing officer. It is submission of the assessee that the land was never put to the use for non-agricultural purpose before or at the time of sale. It is fact that the land was sold to a buyer, Mr Ramesh and handed over the possession of the property on the date of agreement which is evidenced by the sale agreement dated 01-12-2007 and also affidavit filed before the assessing officer by Mr Ramesh. As per page no 4 of the sale deed registered on 14th May 2008, clearly mentioned that, Mr.Ramesh had made development and promoted the property more fully described in the schedule hereunder. Extract of the same is reproduced herein below: Mr. Ramesh, in pursuance to the agreement dated .01-12- 2007 entered into with the vendor herein, had made development, and promoted the property more fully described In the schedule-A hereunder by incurring his money for promotion and development of the said property into a Layout after leveling the land surface, de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad taken the possession of the land on the very same day. He also mentioned that, he has developed the said land and to manage the financial consideration, he approached M /s Gandhi Nagar Housing Society Ltd for sale of land and as per the sale agreement the assessee executed the sale deed in favour of the M/s Gandhi Nagar Housing Society Ltd. The said agricultural land is not regarded as capital assets by legal prescription under section 2(14) and its sale or transfer would not give raise to taxable capital gain. Since the entire gain on sale of agricultural land is not taxable as per section 2(14) of the Act, as agricultural land is not a capital asset, declaring such transaction either in the assessment year 2008-09 or 2009-10, do not make any difference. Mr. Ramesh developed the agriculture land into lay out for housing purpose which is irrelevant for the Issue under consideration. As per all the revenue records, the land sold by appellant is agricultural land. 11.2 The conditions lay down in section 2(14) of IT Act were fulfilled. Details of expenditure incurred for cultivation of crop were available with the appellant and was lost in the month of May, 2008 as evidenced by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, an inference has been drawn that the appellant also should be deemed to be engaged in real estate business The assumption f the assessing officer is amounts to a pure guess work and conjecture The assessing officer holding that, the assessee was into adventure of nature of trade, the statutory provisions should be given a go bye and assessee is to be somehow held as engaged in the adventure of nature of trade .and taxed on non-taxable income. It is found that, so long as the assessee holds the specified agricultural land in terms of section 2(14) i.e, not being a capital asset, its transfer will neither attract capital gain tax nor can be treated as business income. 11.4 The assessee did not sell approved lay out to M/s Gandhi Nagar Housing Society Ltd. The appellant was not in the real estate business for his entire life time and he did not develop any land in his life time. He never offered any Income of the real estate business for his entire life. Even the department not assessed any real estate business income in his scrutiny assessment done under section 143(3) of the Act, for the assessment year 2004-2005 and 2005- 2006. The appellant owns more than 200 Acres of the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Income Tax Act. On the date of transfer, the assessee sold only the agricultural land and nothing else. The surplus arising out of the sale of the agricultural land Is not taxable either under section 45 of the Act or under section 28 of the Act. 11.6 Even though the Assessing Officer mentioned in his letter dated 13.11.2005 that he had received the affidavit of Mr.Ramesh, on 24th March 2015, but for the reasons known to him, he did not discuss the affidavit in his assessment order dated 30th March, 2015. This, affidavit is a strong piece of evidence to prove that the appellant sold the agricultural land to Mr. Ramesh. Mr. Ramesh is in the business of real estate and he developed several layouts in and around Navallur, not only in the assessee s agriculture land but also adjacent to the appellant s land. 11.7 Ld.CIT(A) observed that there is no dispute that the appellant acquired the agriculture land of 50.84 acres as evidenced by purchase deeds As per all revenue records, namely, Chitta, agricultural land to Mr. Ramesh. Mr. Ramesh is in the business of real estate and he developed several layouts in and around Navallur, not, only in the appellant agriculture land but a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In other words, the price paid is not decisive to say whether the land is agricultural or not. 11.8 In the present case, the land in question was classified in the Revenue records as agricultural land, actual cultivation has been carried on this land as evidenced by Chitta/Adangal and Income was declared from this land in the return of income filed by the appellant for the assessment year as agricultural income. In the Revenue records, the land is classified as agricultural land and has not been changed from agricultural land to non-agricultural land at the relevant point of time when the land was sold by the assessee. It is also not in dispute that there was no activity undertaken by the assessee of developing the land by plotting and providing roads and other facilities and there was no intention also on the part of the appellant to put the same for non-agricultural purposes at time of their ownership that land. In view of the decision of the Hon ble High Court In the case of Gopal C Sharma (supra), it is also clear that the profit motive of the assessee in selling the land without anything more by itself can never be decisive to say that the assessee used the land for non-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, considering the facts and circumstances of the case, it cannot be considered as an adventure In the nature of trade. The intention of the appellant from the Inception was to carry on agricultural operations. It was due to certain compelling circumstances came into picture at a later stages, the assessee sold the land. Merely because of the fact that the land was sold in a short period of holding, it cannot be held that income arising from the sale of land as taxable as profit arising from the adventure in the nature of trade. The period of holding should not suggest that the activity was an adventure in the nature of trade. Further, when the land which does not fall under the provisions of section 2(14)(iii) of the IT Act and an assessee who is engaged in agricultural operations In such agricultural land and also being specified as agricultural land in Revenue records, the land Is not subjected to any conversion as non-agricultural land by the assessee, transfers such agricultural land, as is where is basis, in such a circumstances, such a transfer in the Instant case cannot be considered as a transfer of capital asset, or the transaction relating to sale of land was not an ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded over the possession of the agricultural land on the same day to Mr. Ramesh. As per Chitta/Adangal, the paddy crop. was cultivated In the month of September, 2006 and harvested in the month of January, 2007 as evidenced by Adangal issued In the name of Mr Varathappa Nayekar. As per the sale agreement all the approvals is to be obtained by Mr. Ramesh. The assessee is only signatory to the applications filed for layout permission. As per the sale agreement, the buyer of the land is Mr. Ramesh. As per the sale deed dated 14.05.2008, Mr. Ramesh had developed the land and he ultimately sold the land to Gandhi Nagar Housing Society. If the appellant is in the business of the real estate, there is no need to sell the land to Mr. Ramesh. The appellant would have developed the agriculture and into residential layout on his, own. The intension of the appellant is not to do real estate business as he sold the agriculture land to Mr. Ramesh as agriculture land only. Buying other lands simultaneously along with Naallur land cannot alter the nature of the land under discussion. Assessmert to land revenue as agricultural land is a strong piece of evidence of its character. Approved layout adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aggregation and not for the purpose of agricultural activities and converted the agricultural land into residential plot with the sole intention of real estate business. The assessee got approval for the layout for DTCP and sold the land to M/s.Ganhi Nagar Housing Society Ltd., for the purpose of residential layout and sale was made on 14.05.2008, which is less than one year from the date of purchase of the land. However, he submitted that:- 1. The time gap between purchases of land and Memorandum of Agreement for sale dated 1.12.2007 is less than eight months. In some cases it is less than two months and in one case it is just one day. 2. The appreciation in land value is 300 % and in one case it is 653 %. While entering into sale agreement with Mr. Ramesh the assessee had negotiated the price on square feet basis. 3. The assessee had the intention to develop the land into residential plots and the assessee converted the intention into action by getting NOC to put the Agricultural land to residential purpose periodically even before finding a mediator to sell and a buyer to buy. Finally the assessee got the necessary approval from DTCP and sold approved and developed lay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat, Mr.Ramesh had made development and promoted the property more fully described in the schedule hereunder. Extract of the same is reproduced herein below: Mr. Ramesh, in pursuance to the agreement dated 01-12-2007 entered into with the vendor herein, had made development and promoted the property more fully described in the schedule-A hereunder by incurring his money for promotion and development of the said properly. into a layout after leveling the land surface, demarking into several plots, laying boundary stones for each plot area, providing Tar Road approaches, providing circles on the junction of Roads, common Park place, 2 Well and 2 Water Tanks with pipe connections to each plot area and other common amenities etc which Layout is known and termed as Green Grove Jayam Nagar in the aforesaid land, and has obtained Layout Approval from the competent Authority of Town and Country Planning Department in their Approval No. LP/DTCP No.25/2008 dated 26-02-2008) The agreement between the assessee and Mr.Ramesh was incorporated in the registered sale deed also on which the learned assessing officer relying on. Copy of page no.4 of the sale deed is enclosed herewith. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (14) of the Act, as agricultural land is of a capital asset, declaring such transaction either in the assessment year 2008-09 or 2009-10, do not make any difference. Mr. Ramesh developed the agriculture land into lay out for housing purpose which is irrelevant for the issue under consideration. As per all the revenue records, the land sold by assessee is agricultural land. The conditions lay down in section 2(14) of. IT Act were fulfilled. Details of expenditure incurred for cultivation of crop were available with the assessee and was lost in the month of May, 2008 as evidenced by police complaint. It is the submission of the assessee that different prices were paid to different parties depending on the quality of the agricultural land and availability of irrigation facility. The paddy crop was cultivated in the month of September, 2006 and harvested in the month of January, 2007 as evidenced by Adangal issued in the name of Mr. Varathappa Nayekar. 12.4 All the approvals were obtained by Mr. Ramesh in the name of the assessee as per agreement. The learned assessing officer pointed out that some approvals were taken before the date of agreement. During the course of appeal procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer will neither attract capital gain tax nor can be treated as business income. The assessee did not sell approved lay out to M/s. Gandhi Nagar Housing Society Ltd. The assessee was not in the real estate business for his entire life and he did not develop any land in his life time. He never offered any income of the real estate business for his entire life. Even the department not assessed any real estate business income in his scrutiny assessment done under section 143(3) of the Act, for the assessment year 2004-2005 and 2005- 2006. 12.7 The assessee owns more than 200 Acres of the Land in and around Sriperumbattur, Chengalpet and Kanchipuram District in the year under consideration. He only sold around 50 Acres of land to Mr.Ramesh for the purpose of expanding his business activity and he is still continuing agricultural operation in the balance 150 Acres of Land. This clearly shows that, the intention of the assessee is to do agricultural activity only. 12.8 As per section 2[47](v) of the IT Act, any transaction involving of the possession of any immovable property to be taken or retained in part performance of the contract of the nature referred to in section 53A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to prove that the assessee sold the agricultural land to Mr.Ramesh. Mr. Ramesh is in the business of real estate and he developed several layouts in and around Navallur, not only in the assessee s agriculture land but also adjacent to the assessee s land. Hence, we request your honor to confirm the order of the CIT-A on this issue. 13.1 We have heard both the parties and perused the material on record. It is an admitted fact that the land was held by the assessee as a capital asset from the date of purchase till the date of sale. There is no evidenced brought on record by Revenue to show that the land was held by assessee as stock-in-trade. The assessee's contention is that it is intended to retain the agricultural land acquired as a capital asset. The assessee never treated the land as stock in trade. The assessee carried on agricultural operations. This agricultural land is situated beyond 8 km from the municipal limits of Chennai. The land was sold to Mr.Ramesh, against sale agreement dated 01.12.2007. The land was under cultivation till the date of sale. The assessee also produced Chitta/Adangal which was issued by the State Revenue Authority before lower Assessing Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the nature of trade. (v) The assessee treated the assets as investment in agricultural land. Therefore disposal of the same would not convert, what was a capital accretion, to an adventure in the nature of trade. 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 fixed-assets. The assessee never treated the land as stock-in-trade and reflected in profit and loss account (closing stock). There was no element of trade attached to the activity of the assessee in purchase and sale of the land. A continuous business requires more activity and greater organization. This is absent in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame fetched them a good price. 13.4. 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. 13.5 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 land always as investment (fixed assets) and not at all converted into stock-in-trade. The character of the land in the hands of the assessees has not changed. There is no material on record to show that the assessee carried on activities of buying and selling of land in a systematic manner so as to justify the action of the AO in treating the activities of the assessee as adventure in the nature of trade. The land was sold by the assessees in acreage and not by making plots. 13.6 Now the question as to whether a land is agricultural land or not is essentially a question of fact. The question has to be answered in each case having regard to the facts and circumstances of that case. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 providing roads and other facilities? 10. Whether there were any previous sales of portions of the land for nonagricultural use? 11. Whether permission under s. 63 of the Bombay Tenancy and Agricultural Land Act, 1948, was obtained because the sale or intended sale was in favour of a non-agriculturist? If so, whether the sale or intended sale to such non-agriculturists was for non-agricultural 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arat 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. 13.1.2 The Hon'ble Bombay High Court in the case of CWT v. H.V. Mungale [1984] 145 ITR 208/12 Taxman 201held that the Hon'ble 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 held that the Supreme Court had clearly pointed out that the burden to rebut the presumption would be on the Revenue. The Hon'ble Bombay High Court held that the ratio of the decision of the Supreme Court was that what is to be determined is the character of the land according to the purpose for which it was meant or set apart and can be used. It is, therefore, obvious that the assessee had abundantly proved that the subject land sold by them was agricultural land not only as classified in the Revenue records, but also it was su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected 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 having been partially utilised for non-agricultural purposes or that the vendees had also purchased it for nonagricultural purposes, were totally irrelevant consideration for the purposes of application of s. 54B. 10. It is seen from the aforesaid decision that the agricultural land sold by the assessee with an intent to purchase another land within two years had also been permitted to claim exemption under s. 54B of the IT Act, 1961. In the instant case, ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also clear that the profit motive of the assessee in selling the land without anything more by itself can never be decisive to say that the assessee used the land for non-agricultural purposes. We may also refer to a decision of the Hon'ble Supreme Court in the case of N. Srinivasa Rao v. Special Court [2006] 4 SCC 214 where it was observed that the fact that agricultural land in question is included in urban area without more, held not enough to conclude that the user of the same had been altered with passage of time. Thus, the fact that the land in question in the instant case is bought by Developer cannot be a determining factor by itself to say that the land was converted into use for nonagricultural purposes. 13.1.8 Recently the Karnataka High Court in the case of CIT v. Madhukumar N. (HUF) [2012] 208 Taxman 394/23 taxmann.com 341held as follows: 9. An agricultural land in India is not a capital asset but becomes a capital asset if it is the land located under Section 2(14)(iii)(a) (b) of the Act, Section 2(14) (iii) (a) of the Act covers a situation where the subject agricultural land is located within the limits of municipal corporation, notified area commit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or cantonment board etc., still continues to be excluded from the definition of 'capital asset'. Accordingly, in view of sub-clause (b) of section 2(14)(iii) of the Act even under the amended definition of expression 'capital asset', the agricultural land situated in rural areas continues to be excluded from that definition. And as in the present case, admittedly, the agricultural land of the assessee is outside the Municipal Limits of Rajarhat Municipality and that also 2.5 KM away from the outer limits of the said Municipality, assessee's land does not come within the purview of section 2(14)(iii) either under sub clause (a) or (b) of the Act, hence the same cannot be considered as capital asset within the meaning of this section. Hence, no capital gain tax can be charged on the sale transaction of this land entered by the assessee. Accordingly, we quash the assessment order qua charging of capital gains on very jurisdiction of the issue is quashed. The cross objection of the assessee is allowed. 14.1 It was held in the case of Manilal Somnath (supra) as follows: 'Under the Income-tax Act of 1961, agricultural lend situated in India was excluded from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette; 14.3 It is very clear from the above that the gain on sale of an agricultural land would be exigible to tax only when the land transferred is located within the jurisdiction of a municipality. The fact that all the expressions enlisted after the word municipality are placed within the brackets starting with the words 'whether known as' clearly indicates that such expressions are used to denote a munic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y such municipality or cantonment board etc., still continues to be excluded from the definition of 'capital asset'. Accordingly, in view of sub-clause (b) of section 2(14)(iii) of the Act even under the amended definition of expression 'capital asset', the agricultural land situated in rural areas continues to be excluded from that definition. And as in the present case, admittedly, the agricultural land of the assessee is outside the Municipal Limits of Chennai City Corporation and that also 8 km away from the outer limits of this Municipality, assessee's land does not come within the purview of section 2(14)(iii) either under sub clause (a) or (b) of the Act, hence the same cannot be considered as capital asset within the meaning of this section. Hence, no capital gain tax can be charged on the sale transaction of this land entered by the assessee. This is supported by the order of Kolkata Bench of this Tribunal in the case of Arijit Mitra (supra), Harish V. Milani v. Jt. CIT [2008] 114 ITD 428(Pune) and M.S. Srinivas Naicker v. ITO [2007] 292 ITR 481/169 Taxman 255(Mad.). By borrowing the meaning from the above section, we are not able to appreciate that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The period of holding should not suggest that the activity was an adventure in the nature of trade. 15.3 Further, we make it clear that when the land which does not fall under the provisions of section 2(14)(iii) of the IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as nonagricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, in such circumstances, in our opinion, such transfer like the case before us cannot be considered as a transfer of capital asset or the transaction relating to sale of land was not an adventure in the nature of trade so as to tax the income arising out of this transaction as business income. 16.1 In ITA Nos.481 485/Mds./2016 for assessment year 2008-9 ITA No.482/Mds./2016 for assessment year 2012-13, the Revenue has raised similar ground with regard to deletion of addition made by the AO towards income from business in real estate. 16.2 The facts of the issue for assessment year 2008-09 are that the assessee had purchas ..... 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