TMI Blog2017 (6) TMI 1117X X X X Extracts X X X X X X X X Extracts X X X X ..... atus of the property, whether within metropolis or outside the limit of the metropolis, is irrelevant. A non-agricultural property, whether inside the municipality or outside the municipality or even in a remote village is a “capital asset” and transfer of the same may generate income liable for capital gains taxation. - Decided in favour of revenue - ITA No. 2496/Mds/2016, And ITA No. 2495/Mds/2016, CO No. 172/Mds/2016, And CO No. 173/Mds/2016. - - - Dated:- 26-4-2017 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER, AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER For The Appellant : Shri Shiva Srinivas, JCIT, D.R For The Respondent : Shri Samarendra Kumar Behera, FCA ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER The appeals filed by the Revenue and the cross objections filed by different assesses are directed against the orders of the Commissioner of Income-tax (Appeals) for the assessment year 2012-13. 2. The only ground in Revenue s appeal is with regard to the finding of the CIT(A) that the land sold by the assessee is an agricultural land, thereby deleting the long term capital gains without giving proper opportunity to the Assessing Officer to counter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge. Agricultural income from eucalyptus trees were not grown by human skill and labour could constitute agricultural income and the test applied was whether there was some integrated activity which could be described as agricultural operations yielding income. It is pertinent to note that a mere wild or spontaneous growth of trees, not involving the employment of any human labour or skill for raising them could not be agricultural income. The CIT(Appeals) further observed that in order to come in the category of agricultural land, according to the AO, the land can be said to be either actually used or meant to be used for agricultural purpose. The essential requirement for an agricultural land is that there should be cultivation of land in the sense of feeling the land, sowing the seeds, planting and similar work on the land itself. If there is neither anything in its condition, nor anything in the evidence to indicate that the intention of its owner or possessor so as to connect it with an agricultural purpose, the land could not be agricultural land. The CIT(Appeals) observed that according to the AO the VAO certificate indicates that eucalyptus trees were around 300 standing on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue, whether the agricultural land is a capital asset or not, the CIT(Appeals) observed that according to the AO, the agricultural land in question is situated within 8 kms from the boundary of Corporation limit, municipality, town panchayat, cantonment board for any other notified area by the state or central government. The AO has mentioned that from 19.7.2011 the Government of Tamil Nadu has notified municipality administration and extended Chennai city municipal Corporation Limit. The same was further revised by GOMS No.......dated 12.09.2011 and accordingly, the Chennai city municipal Corporation Limit was not extended upto Uthandi Village on ECR Road. The assessee produced before him various government records to support his contention that the land in question is beyond 8 kms from the Chennai city municipal Corporation Limit. The AO disregarded the reports and certificates given by the Government Authority and stepped into the shoes and deputed Inspector to physically measure the distance. The Inspector travelled a motorable road in a car and gave his report that the distance between the Uthandi village boundaries end at the beginning of Kannathur Village which comes imme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulation 8500 as per last census. Finally, the Block Development Officer, Thiruporur Village certifies as under : this is to certify that the ECR 8.30 acres, Survey No.26/1A at 45 K under KUNDKADRU Village, Chengalpatt Taluk, Kanchipuram Dist is an Agricultural Land and is situated in Rural area. The above referred land is situated at Kovalam panchayat union office, i.e. block development office Thiruporur there is no municipality office The population in this area is approximate 8500 person The above referred land is situated at a distance of 13 km from the local limits of Thiruporur panchayat union. In view of the above, the CIT(Appeals) treated the agricultural land in question as agricultural land and observed that as per sec.2(14)(iii) of the Act, sale proceeds of agricultural land are exempt under the Income-tax Act. Accordingly, the CIT(Appeals) directed the AO to delete the addition made for ₹ 11,760/- by treating agricultural income as other source. Against this, the Revenue is in appeal before us. 11. We have heard both the parties and perused the material on record. The learned D.R contended that the Assessing Officer has treated the properties as non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f sale, the properties were having Eucalyptus trees, as the assessee had planted these trees as part of its agricultural operations. He submitted that the Commissioner of Incometax( Appeals) has examined all these aspects in a detailed manner and, therefore, the appeal filed by the Revenue be dismissed. 14. The Revenue has relied on the decision of the Hon ble Supreme Court in the case of Sarifabibi Mohamed Ibrahim vs. CIT (204 ITR 631) to hold that the properties sold by the assessee were not agricultural in nature. He has also relied on the decision of the Income-tax Appellate Tribunal B Bench, Chennai rendered in the case of M/s. Pallava Resorts P. Ltd. in ITA No.794/Mds/2011dated 11.10.2012. 15. The A.R has relied on the following decisions:- a) in the case of Mrs.Sakunthala Vedachalam Others Vs. ACIT in Tax case (Appeal) No.566 and 567 of 2013 of jurisdictional High Court. b) in the case of Byalappa Vs. State (Karnatka)(DB) in 1982 AIR (Karnataka) 99 and also c) in the case of Raja Benoy Kumar Sahas Roy in 32 ITR 466(SC) d) in the case of CIT Vs.K.E.Sundara Mudaliar And Ors. On 02.2.1050 e) in the case of Mrs. Sakunthala Vedachalam Vs. ACIT 6th August ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has been explained by the Tahsildar in unequivocal terms in his letter given under sec.133(6) of the Act before the assessing authority. The Tahsildar has stated that not only for the impugned previous year but also for past 3 earlier previous years, no agricultural activities were carried out in that area. The assessee as well as the owners of surrounding properties was not in fact carrying on any agricultural activities. The letter given by the Tahsildar is very important. He has stated the reasons as to why the agricultural activities were not being carried out on those properties. Because of urbanization, the properties being in the peripheral of Chennai Metropolis, real estate development has started taking place in that area as well. A lot of private and commercial buildings are constructed. Because of the boom of the real estate development, the entire contingent of that land has become subject matter of transactions intended for the purpose of real estate development. In that background no agricultural activities were being carried out in that area. The case of the assessee is also not an exception. 19. The letter given by the Tahsildar has categorically establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein. For earning income from casuarina plants, the assessee need not purchase land by investing crores of rupees. Investment and return do not have any comparison. Even though the above observation of the Tribunal in the case of M/s. Pallava Resorts P. Ltd. is not exactly applicable to the present case, it shows, if circumstance so permits, the frivolousness of the arguments usually made by the assessees that they have carried on agricultural activities by planting casuarina. 22. In the context of agricultural operations, it is necessary to see that the agricultural operations carried on by the assessee must be activity of economic gain. It must generate meaningful income to the person who is carrying on agricultural activities. If the agricultural activities carried on by the assessee as a hobby or casual or incidental, it is very difficult to hold a view that the land is agricultural in nature. India is pre-dominantly an agricultural economy where agricultural activities are major part of economic activities of our country. Therefore, the activities carried on by the assessee must be meaningful and result-oriented towards generating reasonable income from such operations. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying on any agricultural operations in the lands for so many years in the past. 26. In these circumstances, it is our considered view that the Assessing Officer has conclusively established that the lands sold by the assessee in the previous year relevant to the assessment year under appeal for a consideration of `11,66,00,000/- were not agricultural in nature, but, on the other hand, they are non-agricultural land. Therefore, it definitely comes under the category of capital asset . Accordingly, the gains arising out of transfer of that capital asset is exigible to capital gains tax. 27. When the basic nature of the land itself found to be nonagricultural, the arguments regarding status of the property, whether within metropolis or outside the limit of the metropolis, is irrelevant. A non-agricultural property, whether inside the municipality or outside the municipality or even in a remote village is a capital asset and transfer of the same may generate income liable for capital gains taxation. In the facts and circumstances of the case, we set aside the order of the Commissioner of Income-tax(Appeals) on this point and restore the order of the Assessing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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