TMI Blog2017 (1) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... r is perverse or there is no direct nexus between the conclusion of fact and the primary fact upon which that conclusion is based. But it is not possible to turn a mere question of fact into a question of law by asking whether as a matter of law the authority came to the correct conclusion on a matter of fact. In M.Janardhana Rao v. Joint CIT reported in (2005 (1) TMI 14 - SUPREME Court ), the Hon'ble Supreme Court held that in exercise of the powers under Section 260A, findings of fact of the Tribunal cannot be disturbed. Going through the material on record, we are of the considered view that the concurrent findings of fact, rendered by the CIT (Appeals) and the Income Tax Appellate Tribunal, do not call for any interference, as no substantial question of law, is involved. - T. C. A. No. 483 of 2016 - - - Dated:- 1-9-2016 - S. Manikumar And D. Krishna Kumar, JJ. For the Petitioner : Mr. T. R.Senthil Kumar ORDER ( Order of the Court was made by S. Manikumar, J. ) Tax Case Appeal is directed against the order dated 20.11.2015 made in I.T.A.No.1560/Mds/2015, for the assessment year 2011-2012, in the matter of M/s.Mansi Finance Chennai Ltd., Chennai, by whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 25.03.2014, completed the assessment, as hereunder: (i) Treatment of profit on sale of agricultural land of ₹ 3,56,73,957/- as long term capital gains arising out of sale of capital assets. (b) The AR has also raised an additional ground vide letter dated 26.09.2014 (which was admitted as the omission of the said ground from the appeal form, was not willful or unreasonable), pleading that agricultural income of ₹ 8,03,730/- returned by it, was treated as 'Income from Other Sources. (c) Levy of interest u/s 234B. 6. Reasons for the above conclusion of the assessing officer, are as follows: (i) In the agreement for sale, the impugned lands were mentioned as Land and not Agricultural Land . (ii) As per the Memorandum of Association the main object and object ancillary/incidental to the attainment of main object was money lending and not dealing with agricultural land. (iii) The appellant was registered as Non-Banking Finance Company with RBI for carrying out money business and not agricultural operations. (iv) Appellant had not filed evidence for income and expenditure from the agricultural operations. (v) Tahsilda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entifying the numbers, measurement of each land, evidence of crop cultivation etc., and though Chitta, Patta, Adangal, Fasali and other evidences were also produced before the assessing officer, he had failed to appreciate the same, in proper perspective. 10. It was further contended before the appellate authority that the intention of the assessee, at the time of purchasing the land, was to use the same for agricultural purpose and it was subsequently, leased out. Therefore, the gain from the agricultural land, cannot be treated as capital gains, on sale of capital assets, in the hands of the assessee. Reliance was also placed on a decision of the ITAT, Hyderabad, in Tulla Veerender vs ACIT reported in (2014) 160 TTJ (Hyd) 435, wherein, it has been held: It is important to note what was the intention of the assessee at the time of acquiring the land or interval action by the assessee between the period from purchase and sale of the land and the relevant improvement/development taken place during this time is relevant for deciding the issue whether transaction was in the nature of trade. Though intention subsequently formed may be taken into account, it is the intention at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Ram Saroop Saini, HUF v. ACIT reported in (2007) 15 SOT 470 (Del.), wherein, the Delhi Tribunal, relying on the case of Kishanchand Chelaram vs. CIT reported in (19801 19 CTR (SC) 360, held as follows: In so far as the reliance placed by the Revenue on the statement of K, the said statement has been collected at the back of the assessee. Other feature that has been noted by the CIT(A) is the lack of opportunity to the assessee for cross-examining the said witness and for that reason the said evidence deserves to be ignored. 15. Therefore, before the appellate authority, a contention has been made that the assessee was denied an opportunity to cross-examine the Village Administrative Officer, who has given a contrary statement and that vitiates the action of the assessing officer. Further contention has also been made that there was no necessity to mention the lands as agricultural lands, in the agreement of sale, so long as it is classified as agricultural lands in the revenue records. Further contention has been made that under the sale deed, the subject lands have been categorically described as agricultural lands in the schedule. Reliance has been made on M.J. Thoma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any, there is merit in the ARs contention that as a non-banking financing company, the assessee was entitled to purchase or deal with any property in whichever way it deemed fit for the purpose of making investments and there was no limitation or restriction on the nature of assets that the company could hold as investment which fact becomes clear from the following clauses in the Memorandum of Association of the assessee company: Under objects incidental or ancillary to the attainment of the main objects: 12. To invest and deal with the money of the company not immediately required in such manner and upon such security or without security at all as the company may from time to time think fit Under other objects: 8. To invest the funds of the company in any manner as the company may think fit and/without prejudice to the said generally a. In the purchase of lands and buildings, or any interest therein or on ground rents or where else in the world. 13. To develop and turn to account any land acquired by the company or in which it is interested, and in particular by laying out and preparing the same for building purposes, constructing, pulling down de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use it for non-agricultural purposes, it is difficult to accept the stand of the Department. Therefore correlating the ratio of the above jurisdictional High Court judgement to the facts of the instant assessee, it was submitted that the intention of the purchaser of the land from the assessee was not really relevant in determining whether the impugned land was agricultural land or capital asset in the hands of the assessee. Further, the Commissioner of Income Tax (Appeals) observed that the instant assessee purchased lands in 2005-06 spread over 64 survey Nos. in Thandalam Village, Sriperumbudur Taluk classified in the revenue records as wet agricultural land as certified by the jurisdictional Tahsildar and VAO extracts which is reproduced at para 7 of the assessment order. The VAO had also certified vide certificate dated 18.11.09 that it was also fit for cultivation. Secondly as seen from the records furnished at the time of appellate hearing that the' said lands were given on lease with specification that the said lands were to be used only for agricultural purpose which it was indeed used for and also the assessee had shown lease rentals received from the said agricul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as capital assets and its sale of long term capital gains in the foregoing paragraphs which has considerable merit, the four undisputed facts obtained in the case as discussed immediately above as also the ratio off the jurisdictional court cited supra is persuasive enough in treating the impugned properties as agricultural lands and therefore, the profits of its sale as profits derived by the transfer of agricultural lands and not of capital assets as held by the AO. The AO is therefore directed to treat the sale of impugned lands as sale of agricultural lands, exempt from tax and allowed the claim of the assessee. Further, he also treated the agricultural land as lease rent of B8,03,730/- as income from agriculture as against claim of the Assessing Officer as income from other sources. 17. Being aggrieved by the order of the Commissioner of Income-Tax (Appeals), dated 25.03.2014, the revenue has filed an appeal before the Income Tax Appellate Tribunal in I.T.A.No.1560/Mds/2015 and made contentions as follows: 05. The ld. Departmental Representative submitted that Tahsildar reported that lands in question was not used for agricultural purposes for the last eight years i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d would automatically be outside the scope of sec.45. It is no doubt that the purpose for which the purchaser had purchased was totally different from what the transferor had intended to use the land in question but with the admitted finding that the lands in questions were under agricultural operation on the date of sale for the purpose of considering the meaning of capital assets, it matters very little how the subsequent purchaser intended the land in question to the put to use. In the circumstances, there is no reason to accept the plea of the Revenue that the asset in question is a capital asset and attracts levy of capital gains tax, it having shed its character as an agricultural land on the sale effected. In the absence of any contra indication that the assessee was using it or intending to use it for non agricultural purposes, it is difficult to accept of the Department. Further, he submitted that the assessee cannot be denied exemption from capital gains tax once it has been accepted by Revenue authorities that the classification of lands as per the Revenue records was agricultural lands and it satisfies other conditions of Sec.2(14) of the Income Tax Act in this regard. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carry on business with those assets. The intention cannot be presumed unless supported by evidence. In this case the treatment given by the assessee for this asset in the account books clearly indicate that the intention of the assessee is to hold the same as capital asset to have good returns from the same. (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 land by leasing for agricultural purpose. 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) The expression adventure in the nature of trade occurs in the definition of business under section 2(13) but the expression adventure in the nature of trade has not been defined in the Act. It may be pertinent to mention here that a specific transaction partake the character of business or an adventure in the nature of trade or realizati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations in the said agriculture land by leasing to Shri. D. David. (viii) By leasing the above agriculture land the assessee earned agriculture income which were brought into the account books of the assessee. Such income was offered to income tax. 7.2 From the above, it is clear that: (a) The assessee purchased agriculture land now under consideration situated beyond 8 km from the municipal limits. (b) The assessee treated the same as fixed asset in their books along with other agriculture land which was already acquired by them in the earlier years. (c) The land was identified as agriculture land in the revenue records. (d) The assessee carried on routine agriculture operations through Shri. D. David and the land was used for agriculture operations. (e) The assessee did not carry on any commercial activity with reference to that land such as getting of approval for converting into sites, plotting of the same into sites etc. Thus, the character of the land i.e., agriculture nature was continuing till the same was sold by the assessee company. (f) Because of favourable market conditions the assessee sold the land and the same fetched th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 such lesser and/or alternative user was of a permanent or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ential sine qua non of any operation performed on the land constituting agricultural operation and if the basic operations are there, the rest of the operations found themselves upon the same, but if the basic operations are wanting, the subsequent operations do not acquire the characteristics of agricultural operations. The Constitution Bench of the Supreme Court in the aforesaid case observed that the entries in Revenue records were considered good prima facie evidence. 7.9 The Gujarat High Court in the case of Dr. Motibhai D. Patel v. CIT [1981] 127 ITR 671/5 Taxman 147 referring to the Constitution Bench of the Supreme Court had stated that if agricultural operations are being carried on in the land in question at the time when the land is sold and further if the entries in the Revenue records show that the land in question is agricultural land, then, a presumption arises that the land is agricultural in character and unless that presumption is rebutted by evidence led by the Revenue, it must be held that the land was agricultural in character at the time when it was sold. The Division Bench of the Gujarat High Court further held that there was nothing on record to show th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT v. Smt. Savita Rani [2004] 270 ITR 40/[2003] 133 Taxman 712and has observed and held as under : 8. It is well settled in the case of CIT v. Smt. Savita Rani (2004) 186 CTR (P H) 240: (2004) 270 ITR 40(P H), wherein it is held that the land being located in a commercial area or the land having been partially utilised for nonagricultural purposes or that the vendees had also purchased it for non-agricultural purposes, were totally irrelevant consideration for the purposes of application of s. 54B. 9. In the abovesaid case, the assessee an individual sold 15 karnals, 18 marlas of land out of her share in 23 karnals, 17 marlas land during the financial year 1990-91, relevant to the asst. yr. 1991-92, the sale was effected by three registered sale deeds. While filing her return of income, she claimed exemption from levy of capital gains under s. 54B of the Act on the ground that the land sold by her was agricultural land and the sale proceeds were invested in the purchase of agricultural land within two years. The AO rejected the claim of the assessee holding that the land sold by the assessee was not agricultural land and this was upheld by the CIT(A). On further ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... becomes a capital asset if it is the land located under Section 2(14)(iii)(a) (b) of the Act, Section 2(14) (iii) (a) of the Act covers a situation where the subject agricultural land is located within the limits of municipal corporation, notified area committee, town area committee, town committee, or cantonment committee and which has a population of not less than 10,000. 10. Section 2(14)(m)(b) of the Act covers the situation where the subject land is not only located within the distance of 8 kms from the local limits, which is covered by Clause (a) to section 2(14)(iii) of the Act, but also requires the fulfilment of the condition that the Central Government has issued a notification under this Clause for the purpose of including the area up to 8 kms, from the municipal limits, to render the land as a Capital Asset. 11. In the present case, it is not in dispute that the subject land is not located within the limits of Dasarahalli City Municipal Council therefore, Clause (a) to section 2(14][iii] of the Act is not attracted. 12. However, though it is contended that it is located within 8 knits,, within the municipal limits of Dasarahalli City Municipal Counci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion by the assessee between the period from purchase and sale of the land and the relevant improvement/development taken place during this time is relevant for deciding the issue whether transaction was in the nature of trade. Though intention subsequently formed may be taken into account, it is the intention at the inception is crucial. One of the essential elements in an adventure of the trade is the intention to trade; that intention must be present at the time of purchase. The mere circumstances that a property is purchased in the hope that when sold later on it would leave a margin of profit, would not be sufficient to show, an intention to trade at the inception. In a case where the purchase has been made solely and exclusively 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 fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the ITAT was correct in law in ignoring the findings of the AO that though such land purchased by the assessee, were stated to be agricultural lands, the assessee had not carried out any agricultural operation on the same for the past 8 years i.e., from the year 2005 as per the revenue records. Therefore, byvirtue of not carrying on agricultural activities for a quiet long time in the past, the character of the land occupied by the assessee has been naturally converted into a non-agricultural land and hence the profit on sale of the impugned land is exigible to capital gains tax? 3. Whether on the facts and circumstances of the case and in law, the ITAT was correct in not appreciating and ignoring the ratio of decision wherein it is held that in the absence of any evidence to show that the land was put to any agricultural use at any particular point of time even in the past, it could not be held that the lands could be treated as agricultural lands? 21. Though, reiterating the very same submissions made before the appellate authority, Mr.T.R.Senthil Kumar, learned senior standing counsel for the Income-Tax Department, assailing the correctness of the orders stated supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale, then the land has to be treated as non-agricultural land and liable to capital gain tax. and prayed for an answer on the substantial question of law in favour of the revenue, going through the material on record and the orders of both the appellant authority and tribunal, we do not find any manifest error or illegality. On the other hand, we are of the considered opinion that orders of the appellate authority and the tribunal, are in accordance with the principles of law, considered. All the contentions now raised before this Court, have been considered in detail. There is no rebuttal on the evidences produced before the appellate authority. No contra material is produced by the revenue, before the final fact finding authority, the Income Tax Appellate Tribunal. 22. From the material on record, it could be deduced that the respondent has discharged his burden and proved that the lands were agricultural lands, at the time of transfer. Sufficient evidence has been adduced by the respondent, to prove that the subject lands have been put to agricultural operations before sale. Classification of the lands, in the revenue records, as agricultural lands, is not varied and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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