TMI Blog2016 (10) TMI 1231X X X X Extracts X X X X X X X X Extracts X X X X ..... o capital gains. The said land could not be considered as capital asset by virtue of Sec. 2(14)(iii) of the Act. Assessee was justified in claiming that surplus arising out of sale of land as not exigible to capital gains tax. - Decided in favour of assessee. - I.T.A. No. 804/Mds/2016 - - - Dated:- 28-10-2016 - SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER For the Appellant : Shri. Saroj Kumar Parida, Adv For the Respondent : Shri. Sasikumar, IRS, JCIT. ORDER PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER In this appeal filed by the assessee, it is aggrieved on his gains from sale of land being taxed under the head Income from business and also treating one such sale as not of an agricultural land. Assessee had considered all the gains, except that arising on sale of a land claimed as agricultural, under the head capitals gains, whereas the ld. Assessing Officer considered the surplus as income from business. 2. Fact apropos are that assessee carrying on business of manufacturing and selling transformers, had filed his return for the impugned assessment year disclosing total income of ₹ 27,34,885/- and agricul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was in the business of purchasing and selling land. 4. Assessing Officer did not accept the contention of the assessee that land at Othakalmandapam sold to M/s. Hindusthan Educational and Charitable Trust was agricultural in nature. According to him, this land was not ordinarily used for agricultural purpose and the income derived from agricultural operations did not bear any reasonable proportion to the investment. As per the Assessing Officer, this land was situated in developed area and nature of the surrounding land indicated that it was non agricultural in nature. Further, as per Assessing Officer this land was ready for development and guideline value of the land was fixed by the Registration department on square foot basis not on acreage basis. In the opinion of ld. Assessing Officer, no person would have purchased a land at the price at which it was sold, for doing any agricultural operation. Relying on the Hon ble Apex Court decision in the case of Smt. Saarifabibi Mohamed Ibrahim and Others vs. CIT (1993) 204 ITR 631, the Assessing Officer held that the land sold by the assessee to M/s. Hindustan Educational and Charitable Trust at Othakalmandapam was not agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was clear that land sold was agricultural in nature. According to him, Assessing Officer had committed a factual mistake. 7. As for the view taken by the ld. Assessing Officer that the transactions were in the nature of business, assessee submitted before ld. Commissioner of Income Tax (Appeals) that the series of transactions in earlier years highlighted by the Assessing Officer for reaching the above conclusion, was either factually incorrect or wrongly interpreted. According to the assessee though it had attempted to make certain investments in the land of M/s. Standard Motors Ltd during the previous year relevant to assessment year 2006-07, it did not fructify since the sale was cancelled by High Court. Further, as per assessee advance of ₹ 241.11 lakhs given for purchase of property during the previous year relevant to assessment year 2007-2008 was not be reckoned since there was no actual purchase. Coming to the sale of land of M/s.Ganesha Ginning Company Limited to M/s. DLF Retail Developers submission of the assessee was that there was no transaction of land but only transfer of equity shares. Assessee also pointed out to the ld. Commissioner of Income Tax (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sailing the orders of the lower authorities below submitted that land at Othakalmandapam was well beyond 8Km periphery of Coimbatore Corporation. As per ld. Authorised Representative adangal, chitta as well as other Revenue records clearly proved the land to be agricultural. Reliance was placed on paper book page no.102 to 111 in this regard. Further, as per ld. Authorised Representative, the Registration department had never classified the land as industrial in nature. Reliance was placed on certificate of Registration department placed at page no.101 in this regard. The main thrust of the argument of the ld. Authorised Representative was that the land was all along used for agricultural purpose and certificate from revenue authorities confirmed this. As per ld. Authorised Representative assessee had held the land for long period of sixteen years before selling it. It was not a case of purchase and sale of land in a continuing series of transactions. The transactions of land highlighted by the Assessing Officer, were not a part of any pre-conceived series. As per ld. Authorised Representative, without verifying the location of the land Assessing Officer had come to a wrong conclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of land was rightly taxed by the ld. Assessing Officer as business income. 12. We have considered the rival contentions and perused the orders of the authorities below. The first issue that is to decided is whether the sale of land done by the assessee during the relevant previous year is to be considered as part of a business activity or not. Assessee had sold two pieces of land during the relevant previous year. First piece of land at Sowripalayam on which assessee returned long term capital gains ₹ 33,52,365/-. Obviously, the land was more than three years old since its purchase. Second piece of land sold by assessee at Othakalmandapam, claimed by the assessee as agricultural in nature, measured 4.34 acres. It s location was beyond fourteen kilometers from Coimbatore Corporation limits. The said land was sold by the assessee to a Charitable Trust of which assessee was the Managing Trustee, for a price of ₹ 5,26,80,000/-. Apart from these two transactions, there were certain other land transactions entered by the assessee in previous years relevant to assessment years 2006- 2007, 2007-08 and 2009-10. In the previous year relevant to assessment year 2006-2007, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ially so, since assessee was in the business of manufacturing transformers. Thus, according to us, surplus arising out of sale of land during the relevant previous year could not have been considered under the head income from business but only under the head capital gains . 13. This takes us to second issue as to whether 4.34 acres land sold by the assessee at Othakalmandapam to M/s. Hindustan Educational and Charitable Trust, was agricultural or not. If it was agricultural land assessee would not be exigible to capital gains tax, since Section2(14)(iii) of the Act excluded agricultural land from the definition of capital assets . Claim of the assessee was that the said land was classified by Revenue Department as agricultural in revenue records. Ld. Assessing Officer himself has stated that in the assessment order that the land sold was classified in the Revenue records as agricultural and it was subject to payment of land revenue. However, as per Assessing Officer, the land was not actually used for agricultural purpose. In our opinion this conclusion was reached by the Assessing Officer without any material evidence. The land was owned by assessee since 1995 and was purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mand report of the Assessing Officer in this regard reads as follows : During the time of assessment proceedings itself, a confirmation was obtained from the headquarters Deputy Tahsildar, Thiruka zhukundram, who has certified in his letter dated December 23, 2010, referred to at 2 above, that in the lands in question casuarinas are grown for the past one and a half year and hence the same are agri cultural lands. He has also confirmed in the said letter that the lands are situated at one kilometre distance from the town panchayat of Mamallapuram (i.e., within the specified distance from the outer limits of the nearest municipality/town panchayat) and the popula tion of the Mamallapuram town panchayat as per the 2001 census was 12,345. 11. The assessee has also produced a copy of the adangal and the letter from the tahsildar, which showed that the lands were agricultural in nature and the Revenue has also accepted that the lands are falling within the restricted zone in terms of section 2(14) of the Income-tax Act. 12. Hence, the only point that has to be considered is that whether the test as laid down in the decision reported in CIT v. Siddharth J. Desai [1983] 139 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the land for nonagricultural use Rs. (11) Whether permission under section 63 of the Bombay Tenancy and Agricultural Lands Act, 1948, was obtained because the sale or intended sale was in favour of a non-agriculturist Rs. If so, whether the sale or intended sale to such non-agriculturist was for non-agricultural or agricultural user Rs. (12) Whether the land was sold on yardage or on acreage basis Rs. (13) Whether an agriculturist would purchase the land for agricultural purposes at the price at which the land was sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield Rs. At the risk of repetition, we may mention that not all of these factors would be present or absent in any case and that in each case one or more of those factors may make appearance and that the ultimate decision will have to be reached on a balanced consideration of the totality of circumstances. 13. According to the Tribunal, that if the above tests are applied, the assessees could not satisfy any of the conditions except conditions Nos. 1, 5, 11 and 12. The Tribunal held that the assessees could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mittee, town committee, or by any other name) or a cantonment board and which has a popu lation of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year ; or (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette ; (iv) 6 per cent. Gold Bonds, 1977, or 7 per cent. Gold Bonds, 1980, or National Defence Gold Bonds, 1980, issued by the Central Government ; (v) Special Bearer Bonds, 1991, issued by the Central Government ; (vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999, notified by the Central Government. 16. Once the Tribunal has accepted that the classification of lands as per the revenue records are agricultural lands, which are evidenced by the adangal and the letter of the tahsildar and satisfies other conditions of section 2(14) of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions are closed . Their lordship had clearly held that nature of use of adjacent land was not relevant in deciding the nature of land sold by an assessee. Their lordship had also held that a presumption could never be taken regarding the purpose for which the buyer purchased the land. Lordship also observed that nature of classification of land by the Revenue authorities in the revenue record was of prime importance in determining the nature of land sold by the assessee. Considering the facts and circumstances of the case and also applying the law laid down by Hon ble Jurisdictional High Court in the case of Sakunthala Vedachalam vs. Vanitha Manickavasagam (supra), we are of the opinion that lower authorities fell in error in considering the land measuring 4.34 acres at Othakalmandapam sold by the assessee to M/s. Hindustan Educational and Charitable Trust as non agricultural in nature and exigible to capital gains. The said land could not be considered as capital asset by virtue of Sec. 2(14)(iii) of the Act. Assessee was justified in claiming that surplus arising out of sale of land as not exigible to capital gains tax. 14. In the result, the appeal of the assessee stands ..... X X X X Extracts X X X X X X X X Extracts X X X X
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