TMI Blog2016 (3) TMI 1118X X X X Extracts X X X X X X X X Extracts X X X X ..... ers 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 price is in accordance with the development activities and changes happening in the nature of the land from agricultural to that of housing. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s order in ITA No.808/Mds/2011 dated 17.10.2012 in the case of Pallavaram Kothandararnan in instant transaction is liable of capital gain. 2.2 The assessee has filed Cross-objections in support of the impugned order. 3.1 The brief facts of the case are that the assessee is a contractor engaged in the business of undertaking Construction Contracts at Karapakkam Panhayat / 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 he had sold an immovable property for ₹ 2.14 crores during FY 2010-11 for which no LTCG was offered to tax this case was taken up for scrutiny by CASS by the AO to examine the taxability of the sale of property as reported in AIR Notice u/s 143(2). The assessment was completed u/s 143(3) on 19.02.2014 by making the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, 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 period the assessee carried on regular agricultural operations. In the light of favourable market conditions the assessee thought it good to sell the asset to realize a good amount. Realization of better price in a booming market cannot be considered as an adventure in trade (iii) Realization of investments consisting of purchase of agricultural land and resale, though profitable are clearly outside the domain of capital gain. (iv) The assessee treated the assets as investment in agricultural land. Therefore 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cided or answered. We reproduce the said 13 tests as follows: 1. Whether the land was classified in the Revenue records as agricultural and whether it was subject to the payment of land revenue? 2. 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-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 suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be seen. One of the objects for exemption is to encourage cultivation or actual utilisation 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icultural land. 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 nonagricultural purposes (c) The land is sold on a per square yard basis at a price comparable to the price fetched by building sites (d) The price is such that no bona fide agriculturist would purchase the same for genuine agricultural operations (e) When the price is such that no prudent owner would sell it at a price worked out on the capitalisation method taking into account its optimum yield in the most 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 H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s located in developed/ developing area and has access to all modern amenities/living. 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 ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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