TMI Blog2016 (9) TMI 1063X X X X Extracts X X X X X X X X Extracts X X X X ..... land only and sale of said land cannot go rise to any taxable capital gains and it is to be considered as agricultural land in terms of Sec.2(14)(iii)(b) of the Act and Ld.CIT(A) has taken a correct view to hold that the said land is an agricultural land and in our opinion that the judgement relied upon by ld.A.R in the case of Mr.N.Jayamurugan (2016 (6) TMI 518 - ITAT CHENNAI) is squarely applicable to the facts of the case and we have no hesitation in confirming the order of CIT(A). - Decided against revenue. - I.T.A. No. 763/Mds./2016 - - - Dated:- 24-6-2016 - Shri Chandra Poojari, Accountant Member And Shri Duvvuru RL Reddy, Judicial Member Appellant by : Mr. P. V. Sreekanth, JCIT, DR Respondent by : Mr. D. Anand, Advocate ORDER Per Chandra Poojari, Accountant Member This appeal of the Revenue is directed against the order of the Commissioner of Income-tax (Appeals)-3, Chennai dated 22.01.2016 pertaining to assessment year 2010-11. 2. The grievance of the Revenue is with regard to treatment of sale of land as agricultural land, though assessee did not produce any evidence for carrying agricultural activities in the said land and only ₹ 50,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral in nature. The case does not fall under the exception provided u/s. 2(14). The transaction is therefore, treated to be a transfer resulting in taxable capital gains. The resultant capital gains is computed by AO as below: Sales consideration received on 26.08.2009 - ₹ 5,31,02,160 Less: Cost of acquisition on 11.09.2007 - ₹ 2,57,55,000 Short term capital gain - ₹ 2,73,47,160 Thus, A.O has brought to tax under the head capital gains an amount ofRs. 2,73,47,160. Aggrieved by the addition assessee had filed appeal before CIT(A). 3.1 On appeal, the CIT(A) observed that the sale of said land is not a capital asset, chargeable for capital gains and it is an agricultural land in term of sec.2(14)(iii) of the Act. Against this, the Revenue is in appeal before us. 4. The Departmental Representative placed reliance on the order of Tribunal in the case of M.Karthik vide order dated 24.03.2016 in ITA No.16/Mds./2015 for assessment year 2011-12 wherein held as follows:- 4.1 We have heard both the parties and perused the material on record. In his case the vacant land situated at Navalur Village, Chengalpet Taluk, Kanchipuram District measuring 95 cents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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. (v) Whether a transaction in respect of an asset is capital or not depends on the facts and circumstances of the case. The mere fact that the person has purchased a land and subsequently sold it, giving rise to a substantial profit cannot change the character of the transaction. It is the general human tendency to earn profit out of capital asset. No one invests to incur a loss. If the market condition suddenly goes up or down, it is always the tendency of a person to take a quick decision so that the realization on the investment is maximum or the loss is minimum. He submitted that in the present case there is no dispute that the assessees acquired agricultural land. 4.2 The Departmental Representative submitted that the amount received on sale of this property is nothing but on account of sale of capital asset and the same was brought into income from capital gain. In this case, the Authorised Representative submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Whether, the permission under s. 65 of the Bombay Land Revenue Code was obtained for the non-agricultural use of the land? If so, when and by whom (the vendor or the vendee)? Whether such permission was in respect of the whole or a portion of the land? If the permission was in respect of a portion of the land and if it was obtained in the past, what was the nature of the user of the said portion of the land on the material date? 6. Whether the land, on the relevant date, had ceased to be put to agricultural use? If so, whether it was put to an alternative use? Whether such lesser and/or alternative user was 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, surr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of land for agricultural purposes and hence if there is neither anything in its condition, nor anything in the evidence to indicate the intention of its owners or possessors so as to connect it with an agricultural purpose, the land could not be agricultural land . 4.7 In the case before the Supreme Court the following circumstances were emphasised viz. (i) area was Very large (108 acres) and was abutting a lake, (ii) there were two wells on it (iii) it was capable of being used (though not actually used) for agricultural purposes, (iv) it had not been put to any use which could change its character by making it unfit for immediate cultivation; and (v) it was classified and assessed to land revenue as agricultural land under the relevant revenue enactment. The Supreme Court held that first four circumstances relating to absence of non-agricultural user were neutral circumstances and only fifth circumstance .was good prima facie evidence of land being agricultural land but presumption arising there from could be rebutted by other circumstances. In that case the assessee had not led any evidence about intended user because assessee was under mistaken impression that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above. (iv) The following facts would indicate that land was not agricultural land: (a) The land is situated (even in the year prior to asst. year 1970-71 when amendment came in force) in an urban area in the proximity of building sites. (From Asst. year 1970-71, agricultural lands situate within municipal limits are not outside the ambit of capital assets ). (b) The land is sold to a non-agriculturist for non- agricultural purpose. (c) The land is sold on a per square yard basis at a comparable to the price fetched by building sites. (d) The price is such that no bona fide agriculturist purchase the same for genuine agricultural operations. (e) When the price is such that no prudent ownerit at a price worked out on the capitalisation taking into account its optimum yield in the favourable circumstances. 4.9 The above decision of Gujarat High Court has been affirmed in appeal by the Supreme Court in Sarifabibi Mohmed Ibrahim vs. CIT 204 ITR 631 (SC) in which the Supreme Court emphasised that all the circumstances were required to be weighted and that High Court has reached a correct conclusion. 4.1 The claim of the Assessee that agri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng. There was Real estate activity in the area where the property is situated. The sale of the property by the Assessee is to a commercial organisation. The sale consideration paid would show that no bona-fide agriculturist would pay such a huge price of ₹2.14 crores for 95 cents for acquiring of land which works out ₹2.25 crores per Acre.. 4.12 We will now apply the tests laid down by the Hon'ble Gujarat High Court in the case of Sarifabibi Mohammed Ibrahim (supra) which was approved by the Hon'ble Supreme Court, to the facts and circumstances of the case:- . (i) The fact that 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 an agricultural land. However, this would raise only a prima facie presumption and said presumption can be destroyed by other circumstances pointing to the contrary conclusion. (ii) The fact that agricultural operations were carried on in the past or are carried on currently is a circumstance in favour of conclusion that land was agricultural land. However, this is not a decisive factor inasmuch as agricu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l agricultural land will not fetch. The price is in accordance with the development activities and changes happening in the nature of the land from agricultural to that of housing. 4.14 If we consider the above facts and circumstances of the present case as a whole and an overall view is to be taken in deciding whether the land was an agricultural land, we would come to a conclusion that the property cannot be considered as Agricultural land, though the circumstance that the land is classified as Agricultural in the revenue records and the Village Panchayat President, Navallur, has certified that the land is away from municipality. In our view the other circumstances pointed out above outweighs all of the circumstances in favour of the Revenue and on the basis of those circumstances, we are inclined to conclude that the property was not an agricultural land as there is no proof carrying on agricultural activities in the said land. 5.1 Furhter, Jurisdictional High Court in the case of CIT v. Hi Tech Arai Ltd. reported in [2010] 321 ITR 477(Mad.) wherein held that:- 3. We are not in a position to appreciate either of the contentions of the learned counsel for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g so, in our opinion the above land is to be treated as agricultural land only and sale of said land cannot go rise to any taxable capital gains and it is to be considered as agricultural land in terms of Sec.2(14)(iii)(b) of the Act and Ld.CIT(A) has taken a correct view to hold that the said land is an agricultural land and in our opinion that the judgement relied upon by ld.A.R in the case of Mr.N.Jayamurugan (supra) is squarely applicable to the facts of the case and we have no hesitation in confirming the order of CIT(A). Regarding reliance placed by the Departmental Representative on the judgment of the Tribunal in the case of M.Karthik cited supra, in that case, the Tribunal held that capital gains earned from sale of landed property would be taxable under the head capital gains , since there was no agricultural operations carried on by the assessee and also no agricultural income earned by the assessee from the said land. However, in the present case, the assessee carried on the agricultural operations and earned agricultural income, the same was also disclosed to the Department in his return of income. Being so, the order of Tribunal in the case of M.Karthik cannot be app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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