TMI Blog2007 (1) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... outside the scope of section 45. Thus, we do not find any reason to accept the plea of the respondents/Revenue that the asset in question is a capital asset and it attracts levy of capital gains tax, it having shed its character as an agricultural land on the sale effected. As admitted by the Revenue that as on the date of sale, the agricultural operations were in fact carried on in the lands, it is difficult to accept the view of the Tribunal, considering the law was to proceed from the point of how the purchaser had intended to use. It is not disputed by the Revenue that the land in question does not fall within the restricted clause to make it a capital asset for purposes of levy u/s 45. Consequently, Appeal is partly allowed and the first question is in favour of the assessee and the second one is held against the assessee. - P. D. Dinakaran And Mrs. Chitra Venkataraman JJ. For the Appellants : R. Vijayaraghavan For the Respondent : J. Narayanasami JUDGMENT MRS. CHITRA VENKATARAMAN J. 1. These appeals are filed at the instance of the assessees. 2. The question of law raised in T. C. Nos. 139 to 141 of 2003 is as follows : Whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... area. 7. With the abovesaid facts in the background, the assessing authority viewed that the lands in question were not possessing the character of agricultural lands. However, he noted the facts in favour of the assessee that the lands were registered as agricultural lands, land revenue was paid; that there was no evidence that the lands in question were not put to any other purposes other than agriculture and that there was, in fact, cultivation till the date of sale. However, the Assessment Officer rejected the claim of the assessee that the lands in question were agricultural only based purely on the intention of the intending purchasers that the assessee was liable to pay tax on the gains on the sale of these lands. In the course of his order, the officer also noted that there was no doubt that the lands in question were situated outside the notified area. Yet, considering the fact that the purchaser, namely, Madurai Automobile Co-operative Industrial Estate Limited had purchased the same for non-agricultural purpose at Rs. 1,500 per cent. the land had lost its agricultural character. The assessing authority also noted that the assessee was a member in the purchaser' s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of gross profit was not supported by any material, we do not find any ground to interfere with the order of the Tribunal. Consequently, the appeal on this ground stands rejected. 12. On the question of treatment given to the lands as non-agricultural lands, it is an admitted case that till the date of sale, agricultural operations were carried on by the assessee. The land was put to use only for agricultural purposes and not for anything else. The lands in question were also registered as agricultural lands and assessed to land revenue. Consequently, learned counsel for the assessee submits that going by the decision of the Supreme Court in Sarifabibi Mohmed Ibrahim v. CIT reported in [1993] 204 ITR 631, the assessment could not be sustained. He further placed reliance on the decision of the Gujarat High Court in CIT v. Smt. Lilavati Thakorelal Patel reported in [1985] 152 ITR 565, that the purposes to which the purchase of lands was put subsequent to the sale has no relevance as regards the character of the land at the hands of the vendor as on the date of sale. Consequently, the fact that the purchaser has put it for a totally different purpose from that of the assessee ough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 45. 16. We have gone through the orders passed by the authorities below, confirming the assessment on the capital gains, arising out of the sale of the lands. 17. The contention of the appellants herein merits acceptance by this court. It is an admitted fact that till the assessee sold the lands, agricultural operations, in fact, were carried out by the assessee. The assessing authority, in its order, in paragraph 11, states that the land was actually under cultivation till the date of sale. 18. A perusal of section 45 shows that the requirement as on the date of sale or transfer is that the asset must be a capital asset, considering the description under the Act. The chargeability to tax under section 45 arises only if on the date of sale, the land in question retained its character as a capital asset, which means, an asset which does not answer the definition of a capital asset and which is an agricultural land falling within the definition of section 2(14) would automatically be outside the scope of section 45. 19. In the decision in M. Venkatesan v. CIT reported in [1983] 144 ITR 886, this court, referring to the scope of section 45, held t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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