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2016 (7) TMI 185 - ITAT BANGALORE

2016 (7) TMI 185 - ITAT BANGALORE - TMI - Agricultural land or Non agricultural land - nature of land - Gain on sale of agricultural lands exempt from tax as per the provisions of section 2(14) - Held that:- The purchase and sale of land within a short span of period is not in dispute and further, the assessee got converted the land in question from agriculture to non-agricultural industrial purpose with the sole purpose and intent to sell the land for industrial purpose. - When the land wa .....

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ime of sale. - Considering the fact that the land in question were held by the assessee for a very short period of time and the intended future use is undisputedly for non- agriculture industrial purpose as the land was sold to the purchaser with the condition for non-agricultural use clearly established that the assessee did not intend to use the land in question for agriculture purpose in the past as well as in future. Thus we have no hesitation to hold that the land in question does not .....

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irected against the order dated 22/2/2011 of CIT( appeals) for the assessment year 2007-08. The revenue has raised the following grounds: 1. The order of the CIT (Appeals) is contrary to the facts of the case. 2. The CIT (Appeals) has erred in holding the lands sold as agricultural lands when the lands have been sold as industrially converted land. 3. The CIT (Appeals) erred on relying on the decision of the Madras High Court is the same is distinguishable from the present case. 4. For these and .....

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examined the said issue and found that the properties have been converted from agricultural land to non- agricultural lands for a non-agricultural use prior to the sale by the assessee. Thus, the AO noted that as on the date of sale, the properties were capital asset as per the definition under section 2(14) of the income tax act. The AO was of the view that the sale proceeds and gain thereon are required to be treated under the head capital gain. Accordingly, the AO brought to tax the long term .....

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age Panchayat, Nelamengala Taluk dated 2/12/2009 to the effect that the lands in question was situated about 12 km away from Nelamengala nearest town having population of more than 10,000. The assessee also furnished revenue record to show that the land in question were used for agricultural purposes till the date of sale. The CIT(appeals) accepted the contention and claim of the assessee on the ground that at the time of sale lands in question is continued to be agricultural land as evidenced b .....

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ted 29/04/2005. Thus, undisputedly prior to sale of the land in question the assessee converted the land from agriculture for non-agriculture use and therefore, on the date of sale the lands in question were non-agricultural lands. The Learned DR has contended that the intention of the assessee was clear to convert the land from agricultural to non-agricultural purpose that it is only for re-sale of the land in question. It was converted to non-agricultural industrial purpose. The Learned depart .....

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agriculture to non-agriculture however, the same continued to be agricultural lands as the assessee was using the same for agriculture purpose. The assessing officer has accepted the agriculture income offered by the assessee from agricultural operations therefore, the AO accepted the lands in question as agricultural land for the purpose of assessing the income offered by the assessing. Since the lands were continued to be agricultural land on the date of transfer/sale, it will not lose its cha .....

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ollowing decisions: i. M.S. Srinivasa Naicker & Others Vs. ITO 292 ITR 481 (Mad). ii. Hindustan Industrial Resources Ltd Vs. ACIT 180 taxman 114 (Delhi) iii. Order dated 28/11/2006 in case of H S Vijay Kumar Vs. CIT in ITA No.108/Bangalore/2005. iv. Order dt.13/06/2040 in case of Sri M.R. Seetharam Vs. ACIT in ITA No.1654/Bang/2012 and C.O. No.43/Bang/2014. v. Order dt.12/11/2013 in case of Shri Alampalli Sathyanarayana Vs. ITO in ITA No. 21/Bang/2013. 5. We have considered the rival submiss .....

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ion are given by the CIT(appeals) at page 4 of the impugned order as under: Date of Sale Extent of land Date of Conversion Date of purchase 18.07.2006 (Mr. Sunil Pai) Survey No. Acre Malonagathihally 13.5.2005 7 0.30 10.07.2006 80/1 0.25 80/2 0.23 80/3 1.12 80/4 1.34 80/5 0.29 85/2 1.40 120/3 0.20 120/4 0.20 81 11P-10 1.00 81 11P-13 1.00 ₹ 80,00,000 Sale Considertion 3.2.2006 7 1.10 Byranahalli 16.07.1999 (Mr. Pai) Ashok 28.4.2005 29.04.2008 03.07.1999 03.07.1999 84 2.40 Re-Sy.No.84 1.14 ( .....

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rial use on 10/07/2006, and immediately thereafter sold on 18/07/2006. The intention and purpose of purchase of the lands on 13/05/2005 is clear from its period of holding which is about one year and further the lands were converted from agriculture to non-agricultural industrial use just 8 days prior to the sale. Even otherwise, when the assessee is engaged in the purchase and sale of the agricultural lands then the intention and purpose of purchase of the agricultural land by the assessee neve .....

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. We further note that the lands in question were sold in terms of the agreement of sale dated 1/04/2005. There was a condition under clause 3 of the agreement that the buyer would buy the property only if the Seller would convert the property into non-agricultural i.e. industrial. For ready reference we reproduce clause 3 of the agreement as under: 3. The Buyer insisted to buy the property only if the seller get the property converted into non-agriculture i.e. industrial. In case the seller con .....

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he seller within a period of six months from the date of execution of sale deed. There is no denial of the fact that the lands in question were got converted from agriculture to non-agricultural industrial use to satisfy the condition of the agreement for sale and therefore, the very intention of conversion was to sell the properties for non-agricultural use. The term capital asset has been define under section 2(14) of the income tax act however, agricultural land has been excluded from the mea .....

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Court in case of CIT versus Raja Binoy Kumar Sahas Roy Kumar Sahas Roy 32 ITR 466. The constitution bench of Hon ble Supreme Court has considered the meaning of the expression agricultural land which was again considered by the Hon ble Supreme Court in case of Smt. Sarifabibi Mohmed Ibrahim Vs. CIT 204 ITR 631 as under : On an appeal, a Constitution Bench of this Court held that: Inasmuch as agricultural land is exempted from the purview of the definition of the expression assets , it is imposs .....

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ibility of user of land, by some possible future owner or possessor, for an agricultural purpose, It is not the mere potentiality, but its actual condition and intended user, which have to be seen for purposes of exemption. (emphasis * added). (c) The person claiming an exemption of any property of his from the scope of his assets must satisfy the conditions of the exemption. (d) The determination of the character of land, according to the purpose for which it is meant or set apart and can be us .....

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icultural operations. The actual use and the intended use of land has to be seen for the purpose of exemption. The Hon ble Supreme Court has also considered the decision of Hon ble Bombay High Court in case of CIT versus V.A Trievedi 172 ITR 95 at page no. 6 41 in case of Smt. Sarifabibi Mohmed Ibrahim (supra)as under: The Bench observed that to ascertain the true character and the nature of the land, it must be seen whether it has been put to use for agricultural purposes for a reasonable span .....

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The sale deeds were executed four months after the agreement of sale and even if any agricultural operations were carried on within the said span of four months-the Bench held -it was evidently in the nature of a stop-gap arrangement. On the date the land was sold, the Bench held, the land was no longer agricultural land which is evident from the fact that the assessee had obtained permission even in August, 1966, to convert the said land to non-agricultural purposes. 6. The criteria laid down .....

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d that the sale was for utilisation of the land for non- agricultural purposes and accordingly held that the land was no longer agricultural land, when the assessee had obtained permission to convert the said land to non-agriculture land prior to sale. After considering the various criteria and principles as laid down in the earlier decisions, the Hon ble Supreme Court in case of Smt. Sarifabibi Mohmed Ibrahim held as under: Now, we may consider the various circumstances appearing for and agains .....

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om the said land. As against the above facts, the facts appearing against their case are: the land was situated within the municipal limits-it was situated at a distance of one kilometer from the Surat railway station; the land was not being cultivated from the year 1965-66, until it was sold in 1969; the appellants had entered into an agreement with a housing co- operative society to sell the said land for avowed non-agricultural purposes, namely, construction of house; they had applied in June .....

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cumulative consideration of all the aforesaid contending facts? This question has to be answered keeping in mind the criteria evolved in the Begumpet Palace case (1976) 105 ITR 133 (SC) se5t out herein before. In our opinion, the entering into the agreement to sell the land for housing purposes, the applying and obtaining the permission to sell the land for non-agricultural purposes under section 63 of the Bombay Tenancy and Agricultural Lands Act and its s ale soon thereafter and the fact that .....

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ugh formal permission under section 65 of the Land Revenue Code was not obtained by the appellants, yet their intention is clear from the fact of their application for permission to sell it for a non-agricultural purpose under section 63 of the Bombay Tenancy and Agricultural Lands Act. We are, therefore, of the opinion that the High Court was right in holding that the said land was not an agricultural land at the time of its sale and that the income arising from its sale was not exempt from cap .....

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idered this aspect of agricultural land and has observed at pages 956-957 as under: The expression agricultural land is not defined under the Income Tax Act, 1961. The question as to whether the land in question was liable to be considered as agricultural land for purposes of income-tax is liable to be decided with reference to the criteria laid down by judicial decisions of the Supreme Court and High Courts. The underlying object of the Act to exempt agricultural income from income-tax is to en .....

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d or transferred to a non- agriculturist for a non-agricultural purposes or that it is likely to be used for non-agricultural purposes in the remote past or it continues to be assessed to land revenue on the footing of agricultural land is not decisive. The Hon ble High Court has decided the issue of agricultural land at pages 963 and 964 as under : In our opinion, the principles laid down by the Supreme Court in the case of Smt. Sarifabibi Mohamed Ibrahim V. CIT (1993) 204 ITR 631 and by this c .....

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than justified in highlighting the fact that the reference lands were situate in a heavy industrial zone and that the said lands were not in fact used or intended to be used for agricultural purposes at the relevant time since several years. The Appellate Assistant Commissioner also recorded a finding of fact based on relevant evidence that at least 10 acres of the land out of 25 acres was in fact used for non-agricultural purposes by Larsen and Toubro Limited since the year 1960, i.e., for seve .....

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ssee that the authrorities below did not apply the correct test or misdirected themselves in law or that the finding of fact arrived by the Tribunal was not supported by evidence. In view of the above discussion we do not think it necessary to refer to the other authorities cited at the Bar. We uphold the finding of the Income- tax Appellate Tribunal to the effect that the reference lands were not agricultural lands. Thus, it is settled proposition of law that merely showing the land as agricult .....

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n to the expression agricultural land as contemplated under section 2(14) (iiib) of the act. In the case in hand, the purchase and sale of land within a short span of period is not in dispute and further, the assessee got converted the land in question from agriculture to non-agricultural industrial purpose with the sole purpose and intent to sell the land for industrial purpose. When the land was already converted from agriculture to non-agricultural industrial use then merely it was wrongly sh .....

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