TMI Blog2017 (10) TMI 387X X X X Extracts X X X X X X X X Extracts X X X X ..... tapping of rubber trees. This income was not gained from agricultural operations, but was only from exploitation of standing trees at the end of its useful life. Thereafter, the assessee had converted the land into housing plots leaving out common areas for roads and other purposes. Before that assessee would have cut and removed rubber trees. The asset was brought in as the stock-in-trade of the assessee. Thereafter, gradually the plots were sold to several people and agreements were entered into with many of the buyers for construction of villas. This, therefore, would establish beyond any doubt that though the property was once an agricultural land, its acquisition was for non-agricultural purposes, the assessee did not carry on any agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Panchayat and is beyond eight kilometres radius of the nearby Municipality. The land was purchased for expansion of the assessee's factory. However, local people objected to the expansion of the factory and therefore, the assessee dropped its proposal for expansion and decided to convert the land into residential plots with an intention to develop and sell a residential villa project. The land was converted into plots and in the previous year relevant to the Assessment Year 2007-08, the assessee sold 188 cents of land to various parties. In the subsequent years also, the remaining area of the land was sold and in some cases, the assessee entered into agreements with the buyers for construction of villas. The assessee claimed that gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g agricultural land, according to the learned counsel, the nature of the land would continue to be agricultural land and therefore, the gain of income on the sale of land would still be income from the sale of agricultural land, exempt from capital gains. 6. These contentions were refuted by the learned Senior Counsel appearing for the Revenue and according to him, though the land, originally, was agricultural land, assessee purchased it for non-agricultural purposes. Thereafter, converted the land into plots and brought it in as the stock-in-trade of the assessee. According to the learned Senior Counsel, when such land is sold, the income gained by the assessee did not qualify to be income from agricultural land to claim exemption from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it, would qualify to be income from the sale of agricultural land. 9. Section 45 of the Income Tax Act provides for levy of capital gains. Under sub-section 1, any profit or gain arising from the transfer of a capital asset effected in the previous year shall, subject to the exemptions provided therein, be chargeable to income tax under the head of capital gains and shall be deemed to be the income of the previous year in which the transfer took place. The term capital asset has been defined in Section 2(14). By subsection (iii) thereof, agricultural land in India has been exempted, including the land situated in Panchayat. Transfer has been defined in Section 2(47) of the Act and it includes, in a case where the asset is converte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the land was once an agricultural land at the time of its acquisition and that the assessee should further prove that it was agricultural land at the time of transfer. 11. This question came for the consideration of the Apex Court in Smt.Sarifabibi Mohmed Ibrahim and others v. Commissioner of Income Tax, Gujarat [1993] 204 ITR 631 (SC)] . In that case, taking into account the agreements entered into by the assessee with housing co-operative society, to sell the land for construction of houses; also the permission that it had obtained to sell the land for non-agricultural purposes, its sale soon thereafter; and also the fact that the land was not cultivated for a period of four years prior to the sale, the Apex Court accepted the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sale of the land is from the sale of agricultural land entitling it to exemption from levy of capital gains. This precisely is the concurrent conclusion of the statutory authorities. 13. Before the Tribunal, one document that was relied on by the assessee to substantiate its contention that the land was an agricultural land, was the certificate dated 20.10.2010 issued by the Village Officer Aikkaranadu North Village. By this document, the Village Officer has certified that the properties mentioned in the survey were agricultural land as per the village records and that it is being used for agricultural operations. Insofar as this certificate is concerned, first of all, this document is purported to have been issued based only on the v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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