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Income Tax Officer, Ward 15 (2) , Chennai Versus Shri M. Karthik,

2016 (3) TMI 1118 - ITAT CHENNAI

Addition made on account of capital gain worked out by assessee on account of sale of agricultural land - nature of land - Held that:- In the present case, the purchaser of the property was a company by name M/s. Olympia Infra Tech (P) Limited which is a registered company under the Companies Act, 1956. The property sold is situated in Navalur which is a suburb in Chennai, it is situated in Kanchipuram Districtt, Tamil Nadu, located south of the city of Chennai, along the Old Mahabalipuram Road. .....

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sold by the assessee is in the midst of development activities being carried out by builders in promoting housing/ Information Technology corridors, and no agricultural activities were being carried out either by the assesse nor by others in that area, the property is described as a mango grove as per the copy of the sale deed/patta, chitta adangal produced. In view of the same, the sale price received for the property has increased manifold which a normal agricultural land will not fetch. The .....

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nd 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. - I.T.A.No.16/Mds. /2015, CO No.16/Mds./2015 - Dated:- 24-3-2016 - SHRI CHANDRA POOJARI, ACCOU .....

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is contrary to the law and facts of the case. 2.1. The learned CIT(A) erred in directing the AO to delete the addition made on account of capital gain worked out by assessee on account of sale of agricultural land. 2.2 The learned CIT(A) erred in, the land sold was an agricultural land and the same was exempted u/s 2(14), when there is no agriculture income was offered ever since the purchase of the land. 2.3 The learned CIT(A) erred in, the land sold was an agricultural land though, the fact th .....

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ion by the Revenue Authorities in general terms that the lands are agricultural land does not in any way exempt the assessee from filing evidence showing that agricultural operations were in fact carried out during his tenure of ownership. 2.5 The CIT(A) has failed to note that the Assessing Officer had clearly established with detailed reasoning in the assessment order. 3 The CIT(A) ought to have considered the decision of Supreme Court in the case of Sarifa Bibi Md.Ibrahim reported in 2041TR 6 .....

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yat / Marg Ltd. Besides he is also the Prop. M/s Lakshmi Vinayakar Transports which is engaged in the business of Transport Agency & earns income by way of hire charges. He also earned Rental income on letting out the properties & other income during Financial Year 2010-11. The assessee filed the return of income on 30.09.2011 admitting total income of ₹ 8,87,100/- for assessment year 2011-12. In the return filed, the assessee admitted contract receipts and rental receipts only. As .....

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the return filed 2. Income from M/s Lakshmi Vinayakar Transports at ₹ 8,56,000/- As the assessee has not disclosed hire charges and net income earned on account gross hire receipts to the tune of ₹ 85,60,000/- (an estimated 10% of gross turnover admitted by the assessee is taken as income from Business) 10% of gross turnover i.e. ₹ 8,56,000I- was added to the total income of the assessee for AY 2011-12 on account of income from M/s Lakshmi Vinayakar Transports and capital gain .....

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e said land was acquired by the assessee vide sale deed dated 06.12.2006 for a cost of ₹ 18,63,900/- and the said property sold for consideration of ₹ 2.14 crores to M/s.Olympia Infra Tech (P) Ltd. According to the assessee, the property is an agricultural land, not liable for tax in view of the order of the Tribunal in the case of ITO Vs. Smt.Lalitha in ITA No.14/Mds./15 & CO No.15/MDS./2015 vide order dated 17thJuly, 2015, the property is not liable for capital gains tax. On th .....

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ital asset and so as to treat the same as capital gain for the following reasons: (i) Purchase and holding of land for a long period and subsequent sale thereof itself cannot be an indicator to hold it as non-agricultural land, the assessee was to carry on business with those assets. (ii) The assessee held land for considerable time. The asset acquired was agriculture land as per the evidence brought on record. Thus, the assessee held the agriculture land for more than 3 years. During that perio .....

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herefore disposal of the same would not convert, what was a capital accretion. 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. (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 .....

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cultural 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 submitted that the land always treated as investment and not at all converted into stockin- trade. The character of the land in the hands of the assessees has not changed. 4.3 Now the question as to whether a land is agricultural land or .....

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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. 4.4 The expression 'agricultural land' is not defined in the Act, and now, whether it is agricultural land or not has to be determined by using the tests or methods laid down by the Courts from time to time. 4.5 The Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim v. CIT [1993] 204 ITR 631/70 Taxman 301 h .....

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Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time? 3. Whether such user of the land was for a long period or whether it was of a temporary character or by any of a stopgap arrangement? 4. Whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land? 5. Whether, the permission under s. 65 of the Bombay Land Revenue Code was obtained for the non-a .....

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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, surrounding situation and use of the land in the adjoining area were such as would indicate that the land was agricultural? 9. Wh .....

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d 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 the land valuing it as a property yielding agricultural produce on the basis of its yield?" 4.6 We will therefore proceed to examine the question as to whether the property can be said to be Agricultural land or not. In the case of CWT vs. Officer-in- Charge (Court of Wards), Paigah 105 ITR 133 (SC .....

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cannot be given to mere "potentiality" of the land for use for agricultural purposes and what is really required to be shown is the connection with an agricultural purpose and user and not the mere possibility of user of the land, by some possible future owner or possessor, for an agricultural purpose. It is not mere potentiality, but its actual condition and intended user which has to be seen. One of the objects for exemption is to encourage cultivation or actual utilisation of land .....

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d) 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 presumpti .....

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. The Supreme Court disapproved the view that that land which is left barren but which is capable of being cultivated can also be agricultural land unless the. said land is actually put to some other non- agricultural purpose like construction of buildings, or an aerodrome runway, etc. thereon which alters the physical character of the land rendering it unfit for immediate cultivation and observed that minimal test of agricultural land was credible evidence of at least appropriation or setting a .....

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ld 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 arc carried on currently is a circumstance in favour of conclusion that land was agricultural land. However, this is not a decisive factor inasmuch as agricultural crop can be raised even on bui .....

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d. However this is subject to same rider as is mentioned in (ii) 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 nonagricultura .....

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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. 4.10 The claim of the Assessee that agricultural operations were carried out over the property and the property was actually used for agricultural purpose was sought to be established by relying on the classification of the property as agricultural land in the revenue records, ex .....

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been held by the Hon'ble Kerala High Court that the burden of proof that the land in question was agricultural land at the time of transfer to claim exemption was on the Assessee. As already observed the question whether the land was Agricultural land has to be decided on facts of each case and decided cases are only guidelines to be kept in mind. Facts and all the circumstances are to be considered as a whole and an overall view is to be taken in deciding whether the land was an agricultura .....

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t an Agriculturist. He has no background of agricultural activities. Strictly speaking it may not be necessary to have background of agricultural activates. We are making a reference to these circumstances only to weigh the cumulative circumstances to come to a conclusion whether the property can be regarded as Agricultural Land. No evidence of having spent human labour in the sense of preparing the land, filling, sowing seeds, planting on a regular basis has been produced by the Assessee. The p .....

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er 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 presum .....

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to allow the land to remain idle awaiting sale for non-agricultural purposes to a non-agriculturist by way of a stop-gap arrangement or in order to avoid payment of revenue at a higher rate or in order to avoid payment of capital gains tax. (iii) The fact that land is not converted to no agricultural user would be a circumstance indicating that it is an agricultural land. However this is subject to same rider as is mentioned in(ii) above. (iv) The following facts would indicate that land was not .....

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company under the Companies Act, 1956. The property sold is situated in Navalur which is a suburb in Chennai, it is situated in Kanchipuram Districtt, Tamil Nadu, located south of the city of Chennai, along the Old Mahabalipuram Road. Navalur is located between Sholinganallur and Siruseri and is around 6 kms. from Sholinganallur and comes under Thirporur taluk. The place was once a village but with the advent of Information Technology Companies and the rapid development of the Old Mahabalipuram, .....

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is described as a mango grove as per the copy of the sale deed/patta, chitta adangal produced. In view of the same, the sale price received for the property has increased manifold which a normal 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 de .....

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