TMI Blog2014 (3) TMI 1193X X X X Extracts X X X X X X X X Extracts X X X X ..... 7) - - - Dated:- 28-3-2014 - Shri N.R.S. Ganesan (JM) And Shri B.R. Baskaran(AM) Appellant by : Shri K.K. John Respondent by : Shri R Krishna Iyer ORDER Per N.R.S. Ganesan (JM) This appeal of the revenue is directed against the order of CIT(A)-II, Kochi dated 19-08-2011 for the assessment year 1996-97. 2. The only issue arises for consideration is whether the land sold by the assessee is agricultural land and exempt from capital gain tax. 3. Shri K.K. John, the ld.DR submitted that the assessee sold land situated in Kinalur and Kanthalad village in Quilandi Taluk, Kozhikode District. The assessee claimed that the property was agricultural land subjected to cultivation, therefore, exempt from capital gain tax. However, the assessing officer found that the land was sold for non agricultural purpose for construction of industrial estate to Kerala State Industrial Development Corporation (KSIDC, hereinafter), therefore, the subject matter of the land may not be treated as agricultural land. Referring to the agreement said to be executed by the assessee and KSIDC, the ld.DR submitted that the subject matter of land is a rubber estate and that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed order dated 19-08-2011 the CIT(A) found that the subject of the land is agricultural land within the meaning of section 2(14) of the Act, therefore, not liable for capital gain. The present appeal is filed against the order of the CIT(A) wherein it is held that the subject land was agricultural land. 5. According to the ld.representative, on the date of sale the land in question was agricultural land. The assessee agreed to give possession of land immediately after sale to the purchaser. The subject land is not situated within the municipal limits or within the area notified by the Central Government. The subject land is actually used for agricultural purpose till the date of the sale. All these facts were disclosed in the financial statement and other material filed before the lower authorities. According to the ld.representative, the property was situated in a village and it was agricultural land as on the date of sale as it was a rubber plantation. The ld.representative placed his reliance on the judgment of the Gujarat High Court in CIT vs Manilal Somnath 106 ITR 917 (Guj). The ld.representative further submitted that the land was registered as agricultural land in the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the connection with an agricultural purpose and user and not the mere possibility of user of land by some possible future owner or possessor for an agricultural purpose. The Supreme Court further found that it is not the mere potentiality which will only affect its valuation as part of asset. But it is actual condition and intended user which has to be seen for the purpose of exemption. The Apex Court has also found that the object of exemption is to encourage cultivation or actual utilisation of the land for agricultural purpose and the entries in revenue records are good prima facie evidence. In view of the above judgment of the Apex court, the land in question has to be used earlier for agricultural activities and agricultural purpose. The possibility of using the land for agricultural purpose by a future owner cannot be a reason to treat the land as agricultural land. It should be actually used on the date of sale of the property. 8. The Apex Court in the case of Sarifabibi Mohmed Ibrahim Ors (supra) examined the matter elaborately and found that whether a land is agricultural land or not is essentially a question of fact. Several tests evolved by the High Courts and S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricultural land. In other words, the assessee used the land for agricultural purposes continuously till he entered into agreement for sale. The assessee intended to sell the land after removing the standing trees on the land. Therefore, one of the conditions attached to the sale was the standing trees were to be removed before 29-02-1996. It is not in dispute that the subject land is in a village beyond 8 kms radius of any municipality. It is not the case of the revenue that the assessee applied for permission to sell all the land for non agricultural purpose. The assessee simply transferred the agricultural land after removing the standing trees. In such situation, can we say that the subject land is agricultural land or not? In the judgment of the Apex Court in the case of Sarifabibi Mohmed Ibrahim Ors (supra), the land was sold to housing cooperative society. The assessee applied for permission to transfer the land for non agricultural purpose before the sale of the land. The subject matter of the land was not cultivated four years before the date of the sale. The land was situated in Surat Municipality. The land was sold at square yard rate. In these circumstances, the Apex C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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