TMI Blog2016 (9) TMI 704X X X X Extracts X X X X X X X X Extracts X X X X ..... ly with the intention to resell at a profit and the purchaser has no intention of holding the property for himself or otherwise enjoying or using it, the presence of such an intention is a relevant factor and unless it is offset by the presence of other factors it would raise as strong presumption that the transaction is an adventure in the nature of trade. Even so, the presumption is not conclusive and it is conceivable that, on considering all the facts and circumstances in the case, the court may, despite the said initial intention, be inclined to hold that the transaction was not an adventure in the nature of trade. The presumption may be rebutted. In the present case, considering the facts and circumstances of the case it cannot be considered as an adventure in the nature of trade. The intention of the assessee from the inception was to carry on agricultural operations and even there was no intention to sell the land in future at that point of time. It was due to certain compelling circumstances came into picture at a later stages, the assessees were forced to sell the land. Merely because of the fact that the land was sold in a short period of holding, it cannot be held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 4,45,13,280/- received in the form of 5,56,416 shares of ₹ 10 each at premium of ₹ 70 each. iii) ₹ 7,78,87,000/- received as debentures of 77,887 ₹ 1,000/- each 56,503.44 Sq. ft. ₹ 5,31,99,720/-, i) ₹ 56,00,000/- received as advance ii) ₹ 1,73,10,720/- received as 2,16,384/- shares of ₹ 10 each with premium of ₹ 70/-. iii) ₹ 3,02,89,000/- received as 30,289 Debentures of ₹ 1,000/- each. The assessee claimed that the said property was sold, which is an agricultural land and there is no liability of capital gains tax. More so, the assessee originally entered into JDA with M/s.Allied Majestic Promoters on 09.07.2005 and according to the assessee, the transfer took place in the assessment year 2006-07 and not in the assessment year 2009-10. The AO disagreeing with the contention of the AO observed that the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in the name of M/s.OMR Mall Developers P Ltd is not a separate transaction of transfer of property . It is only the continuation and culmination of the transaction already entered with M/s. Allied Megistic Promotors. This can further be visualized from the following facts:- The GPAs executed as per the Joint Development Agreement on 09.07.2005 are still in force and in fact they were being used even after the final registration of the lands in the name of M/s.OMR Mall Developers P Ltd. The advance of ₹ 2 00 00000 June 2005 (by M/s.Allied Megistic Promotors) was shown as the advance paid by M/s.OMR Mall Developers P Ltd. M/s.OMR Mall Developers P Ltd. is only nominee of Megistic Promotors and has been nominated by M/s.Ailied Megistic Promotors. Further, the ultimate beneficiaries of M/s.Allied Megistic Promotors and M/s.OMR Mall Developers P Ltd are one and the same. When the developer M/s.Allied Megistic Promotors nominated M/s.OMR Mail Developers P Ltd for the purpose of registration, the assessee has no option but register the lands in the name of the said nominee. Ld.CIT(A) observed that M/s. Allied Megistic Promoters, has never failed to delive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as no transfer as on the date of JDA. Ld.D.R further submitted that the subject land was agricultural land as the nature of land has changed subsequent to the JDA and at the time of transfer on 01.04.2008, it was non-agricultural land. Further, ld.D.R contended that the sale deed executed on 01.04.2008 mentioned the property as vacant site and not agricultural land. Ld.D.R pointed out that the Developer had not fulfilled his part of the agreement viz. handing over the 27% of the constructed area and hence no consideration could be said to have passed on to the owner as on the date of JDA to invoke the provisions of the section 2(27)(v) of the Act. Ld.D.R submitted that there was no transfer in terms of Section 2(47)(v) of the Act in respect of impugned property, though the registration was done on 01.04.2008 which was in continuation of the Joint Development Agreement (JDA) entered by the assessee on 09.07.2005 with the developer. Ld.D.R relied on the decision of the Tribunal, Hyderabad Bench in the case of Ms.K.Radhika Vs. CIT (2011)(13 Taxmann 92) and Hon ble Apex Court in the case of Sardar Govindrao Mahadik Vs. Devi Sahal (AIR 1982-SC-989) and argued in support of the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferring or enabling the enjoyment of immovable property also treats as transfer. In this case, the assessees in exchange of 27% of the constructed area, transferred 73% of the land to the builder and handed over the physical possession. Therefore, it is an exchange of property between the parties. In other words, the assessees exchanged 73% of the landed area for 27% of the constructed area. According to A.R, there is a transfer within the meaning of Section 2(47) (i) of the Act on the date on which the agreement dated 09.07.2005 was executed. Even otherwise, the joint venture agreement has the effect of transferring 73% of the landed area to the builder. The assessee cannot take back 73% landed area on which the builder has commenced construction. At the best, the assessees would get only 27% of the constructed area and 27% landed area proportionate to the constructed area. He contended that the transaction between the assessees and the builder is by way of arrangement or agreement which has the effect of transferring the landed property for enjoyment of the builder. In other words, the assessees transferred 73% of the land area to the builder for its enjoyment. He stated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall pay refundable deposit of ₹ 1,20,00,000/- (One Crore and Twenty Lakhs only) to the Owners in the following manner: a) ₹ 60,00,000/- (Rupees Sixty Lakhs only) on signing this agreement. - b) ₹ 60,00,000/- (Rupees Sixty Lakhs only) on the plans being approved. 3. The Developer further agrees that out of the 73% builtup area retained by the Developer, the Developer have agreed to share equally with the Owners the sale proceeds over and above at ₹ 2,350/- per sq.ft. That is, if for example, the Developer sells out of their 73% builtup plint area to any prospective buyer at the rate of ₹ 2500/- per sq.ft. then the Developer shall share (2500-2350= 150/2) ₹ 75/- per sq.ft. 4. The owners agree to execute and register necessary Power of Attorney Jointly in favour of the Nominee of the Developer and the Nominee of the Owner for selling 73% of the Undivided share of the land. morefully described in the Schedule A hereunder to the Nominees of the Developer and a separate Power of Attorney in favour of the Nominee of the Developer for applying and obtaining Building sanction plan, Service connection etc., The Owners have this day handed ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er has the right to enter into the necessary agreements and deal with and sell its portion allotted under this agreement as an undivided or divided share of land or as land and building or in any other manner deemed fit by the developer, Subject only to the condition that the developer shall construct and deliver to the owner the 27% share in the built up area. The allotment of exact spaces for the developer and the owners would be mutually agreed upon after the approved drawings are obtained from the concerned authority. 15. The Developer shall be entitled to apply to the authorities concerned for the necessary approvals, sanctions and permits in respect of plans for construction of any building whether storey3ed or otherwise, on the said property. 20. The Developer shall be entitled to correspond with and receive any correspondence or other intimation from the authorities concerned regarding the plans, sanctions, approvals or permits for construction of any building on the said property or for the provision of any amenities or facilities thereto. 21. The Developer shall be entitled to pay such fees, charges or levies and to furnish securities/ in money or otherwise as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till the completion of the construction of the project and after the completion of construction, the said original title deeds in respect of A schedule property shall be delivered to The Owner s Association to be formed after the completion of construction. As per above, the possession is given by the assessee vide this JDA dated 09.07.2005 and also authorized the developer to get necessary approvals for the purpose of construction. The assessee also received substantial amount of ₹ 120 lakhs as refundable deposit. The time is essence of the contract within 30 days from the date of giving vacant position of the property. The Developer has to get the permission for construction of the property. After getting permission for construction in the said property, the developer has to complete the construction within 36 months handed over the assessee s share of the constructed portion of building to the assessee, otherwise it attracts damages, it shall be two lakhs per month till the delivery of the building. The assessee has also undertaken to register the property at the cost of developer or anly person or nominated of the developer. Therefore, it is obivious that the physica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for assessment year 2006-07, assessee disclosed the transactions as a Note in her return of income stating as follows:- Note: The assessee has entered into a joint development agreement with Allied Magistic Promoters during the assessment year in respect of Development of agricultural lands at Ekattur Village and handed over the possession of the property. She has also executed a Power of Attorney in favour of the Developers though the deemed sale is complete during the assessment year. As per the para it is exempted as it is an agricultural lands and it is not a capital asset as per the sec.2(24) of the IT Act. 6.2 As seen from the above, there is a fair disclosure by the assessee regarding the sale of the impugned property. In that assessment year i.e.2006-07, it is said to be accepted by the Department that as there was no transfer of capital asset as an agricultural land. It is not the case of the Department that it was subject to any rectification or revision subsequently. Unless the Department disturbed the assessment for assessment year 2006- 07, the Department has precluded from treating the transfer of same land as a transfer in terms of Sec.2(47)(v) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having regard to the facts and circumstances of that case. There may be factors both for and against a particular point of view. We have to answer the question on a consideration of all of them, a process of evaluation and the inference has to be drawn on a cumulative consideration of all the relevant facts. It may be stated here that not all the factors or tests would be present or absent in any case and that in each case one or more of the factors may make appearance and that ultimate decision will have to be reached on a balanced consideration of the totality of the circumstances. The expression agricultural land is not defined in the Act, and now, whether it is agricultural land or not has got to be determined by using the tests or methods laid down by the Courts from time to time. 6.5 The Hon ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim (204 ITR 631) has approved the decision of a Division Bench of the Hon ble Gujarat High Court in the case of CIT vs. Siddharth J. Desai (1982) 28 CTR (Guj) 148 : (1983) 139 ITR 628 (Guj) and has laid down 13 tests or factors which are required to be considered and upon consideration of which, the question whether the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes at the price at which the land was sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield? 6.6 A reference could be made to the case of CWT vs. Officer- in-charge (Court of Wards) (105 ITR 138) (SC) wherein the Constitution Bench of the Hon ble Supreme Court stated that the term agriculture and agricultural purpose was not defined in the Indian IT Act and that we must necessarily fall back upon the general sense in which they have been understood in common parlance. The Hon ble Supreme Court has observed that the term agriculture is thus understood as comprising within its scope the basic as well as subsequent operations in the process of agriculture and raising on the land all products which have some utility either for someone or for trade and commerce. It will be seen that the term agriculture receives a wider interpretation both in regard to its operation as well as the result of the same. Nevertheless there is present all throughout the basic idea that there must be at the bottom of its cultivation of the land in the sense of tilling of the land, sowing of the seeds, plantin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y as classified in the Revenue records, but also it was subjected to the payment of land revenue and that it was actually and ordinarily used for agricultural purpose at the relevant time. 6.9 We may also refer to the case of CIT vs. ManilalSomnath (1977) 106 ITR 917 (Guj), wherein the Division Bench of the Hon ble Gujarat High Court observed that the potential non- agricultural value of the land for which a purchaser may be prepared to pay a large price would not detract from its character as agricultural land on the relevant date of sale. 7. We may also refer to the case of Gopal C. Sharma vs. CIT (1994) 116 CTR (Bom) 377 : (1994) 209 ITR 946 (Bom), in which, the case of Smt. Sarifabibi Mohamed Ibrahim Ors. vs. CIT (supra) was referred to and relied, amongst other cases. In this case, the Division Bench of the Bombay High Court has stated that the profit motive of the assessee selling the land without anything more by itself can never be decisive for determination of the issue as to whether the transaction amounted to an adventure in the nature of trade. In other words, the price paid is not decisive to say whether the land is agricultural or not. 7.1 We may refer to a jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permitted to claim exemption under s. 54B of the IT Act, 1961. In the instant case, even though there was no sale as such, the assessee owned agricultural land within the limits of Tirunelveli Corporation and he had not put up any construction thereon, the assessee is entitled to claim exemption from the WT Act for the assessment of wealth-tax.That the land in question is adjacent to the hospital is totally irrelevant. 7.2 Adverting to the facts of the present case, the land in question is classified in the Revenue records as agricultural land and there is no dispute regarding this issue and actual cultivation has been carried on this land and income was declared from this land in the return of income filed by the assessee for the earlier years as agricultural income. It is also an admitted fact that the assessee has not applied for conversion of this agricultural land for non-agricultural purposes and the assessee has not put the land to any purposes other than agricultural purposes. It is also an admitted fact that neither the impugned property nor the surrounding areas were subject to any developmental activities at the relevant point of time of sale of the land. 7.3 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land are duly mentioned in the assessment order shows that at the relevant point of time the land was used for agricultural purposes only and nothing is brought on record to show that the land was put in use for non-agricultural purposes by the assessees. In view of the decision of the Hon ble High Court in the case of Gopal C. Sharma vs. CIT (209 ITR 946) (Bom), 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 nonagricultural purposes. We may also refer to a decision of the Hon ble Supreme Court in the case of N. Srinivasa Rao vs. 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 non-agricultural purposes. 7.5 Recently the Karnataka High Court in the case of CIT vs. Madhukumar N. (HUF) (2012) 78 DTR (Kar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11186 dated 28.12.1999 clearly clarifies that agricultural land situation in rural areas, areas outside the Municipality or cantonment board etc., having a population of not less than 10,000 and also beyond the distance notified by Central Government from local limits i.e. the outer limits of any 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, agricultural land. 7.9 Further the word Capital Asset is defined in Section 2(14) to mean property of any kind held by an assessee, whether or not connected with his business or profession, but does not include- (iii) agricultural land in India, not being land situated- (a) in any area which 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; 8. It is very clear from the above that the gain on sale of an agricultural land would be exigible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mprised within the jurisdiction of a municipality or cantonment board and which has a population of not less than ten thousand persons according to the last preceding census for which the relevant figures have been published before the first day of the previous year. The Central Government has been authorised to notify in the Official Gazette any area outside the limits of any municipality or cantonment board having a population of not less than ten thousand up to a maximum distance of 8 kilometres from such limits, for the purposes of this provision. Such notification will be issued by the Central Government, having regard to the extent of, and scope for, urbanisation of such area, and, when any such area is notified by the Central Government, agricultural land situated within such area will stand included within the term capital asset . Agricultural land situated in rural areas, i.e., areas outside any municipality or cantonment board having a population of not less than ten thousand and also beyond the distance notified by the Central Government from the limits of any such municipality or cantonment board, will continue to be excluded from the term capital asset . 8.3 Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 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 ArijitMitra (cited supra), Harish V. Milani (supra) and M.S. SrinivasNaicker vs. ITO (292 ITR 481) (Mad). By borrowing the meaning from the above section, we are not able to appreciate that the land falls within the territorial limit of any municipality without notification of Central Government as held by the Karnataka High Court in the case of Madhukumar N. (HUF) (cited supra). 8.5. From the facts and circumstances of the case, as narrated before us, it is important to note that what was the intention of the assessees at the time of acquiring the land or interval a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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