TMI Blog2019 (1) TMI 1989X X X X Extracts X X X X X X X X Extracts X X X X ..... gricultural and not a capital asset coming within the meaning of Section 2(14) - The gains on sale thereof was not exigible to tax. Addition of agricultural income - HELD THAT:- Assessee could not bring in evidence to prove the earning of the agricultural income despite being required by the ld. Assessing Officer. Having not done so, ld. Commissioner of Income Tax (Appeals) in our opinion, erred in deleting the addition made for the claim of agricultural income We set aside the order of the ld. Commissioner of Income Tax (Appeals) on this aspect and re-instate the addition. Addition of term loan interest - - HELD THAT:- Commissioner of Income Tax (Appeals) clearly observed that loan were used for construction of Usman Road property and this was clearly indicated in the sanction letter. Also CIT-A accepted the claim of the assessee with a finding that it was utilized for repayment of an advance received from M/s. SSPDL, which was earlier used for repaying a loan taken from M/s. BOBL for construction of the building. Nothing has been brought on record by the ld. Departmental Representative to show that the findings of the ld. Commissioner of Income Tax (Appeals) were incorr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34A(1) is not something beyond debate. What can be rectified u/s.154 of the Act is only a glaring and apparent mistake and not one which requires long debates and interpretation of law. In taking this view, we are fortified in the case of ITO vs Volkhart Bros. [ 1971 (8) TMI 3 - SUPREME COURT] . We are therefore of the opinion that ld. Commissioner of Income Tax (Appeals) was justified in quashing the order of the ld. Assessing Officer. - I.T.A. No. 2337/CHNY/2016 & ITA Nos. 284 & 285/CHNY/2017 And I.T.A. Nos. 312 and 323/CHNY/2017 - - - Dated:- 18-1-2019 - Shri Abraham P. George, Accountant Member And Shri Duvvuru RL Reddy, Judicial Member For the Assessee : Shri. S. Sridhar, Advocate. For the Department : Shri Homi Raj Vansh, CIT. ORDER PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER Of the above appeals, tax effect in appeal No.284/CHNY/2017 of the Revenue for assessment year 2008-2009 is less than ₹20,00,000/-. Ld. Departmental Representative fairly agreed that the tax effect in the appeal mentioned (supra) was less than ₹20,00,000/- and by virtue of para 13 of CBDT Circular No.3/2018, dated 11.07.2018, appeals below the specified tax limit h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough a registered settlement deed dated 15.09.2009. By virtue of the above settlement deeds, assessees Smt. Syed Abdul Kader Aysthath Fasleen Amina, Shri. S.A. Mafaz Mohammed and Smt. Aysha got 1/3rd share in the following : Area of land (a) Survey No.14/2CA measuring 5.96 acres (b) Survey No.14/3A2 measuring 1.53 acres (c) Survey No.14/3B1B measuring 1.50 acres (d) Survey No.14/3B2B measuring 0.33 acres 9.23 acres 4. During the previous year relevant to assessment year 2010- 2011, to be precise, on 05.02.2010, both the assessees alongwith Smt. Aysha sold 1.85 acres out of the 9.32 acres to two entities through registered documents numbered as 663 and 664/2010. These two entities were one M/s. Interglobe Hotels Pvt. Ltd (in short IGH ) and one M/s. Accent Hotels Private Limited (in short Accent ) and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s after purchasing the land had obtained patta from the authorities, which again classified the land as agricultural land. Hence the intention of the buyer and seller was to purchase and sell agricultural land. i In the appeals of Mr. Aboobucker and Mrs. Ayisila, ld. Commissioner of Income Tax (Appeals) had held that the land was not a capital asset and hence the gain arising out of the same was not taxable . 6. On receipt of the above reply of the assessee, ld. Assessing Officer addressed a letter to the Commissioner, Town and Country Planning, Chennai for identifying the applicants who had applied for zone reclassification of the land. The said authority through a letter dated 11.02.2015 stated that the applicant was one M/s. SSPDL Infrastructure Developers (P) Limited (in short SSPDL ) represented by its Director. It seems in the said letter, it was also stated that assessees alongwith Smt. Aysha had given a power of attorney to M/s. SSPDL on 27.06.2007. Thereafter ld. Assessing Officer addressed a letter to M/s. SSPDL seeking details of the transactions it had with assessees. M/s.SSPDL furnished the following records in reply. (i) Joint Development Agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onut and mango trees cultivated in the land, it did not prove the claim of agricultural income. Relying on the judgment of Hon ble Supreme Court in the case of Smt. Sarifabibi vs. CIT, (1993) 204 ITR 631, he held that nature of the land mentioned in the Revenue records was not conclusive evidence for proving its character. Ld. Assessing Officer also noted that in the construction agreement entered between M/s. IGH and M/s. Accent with M/s. SSDPL, the property was shown as falling in urbanizable zone . He thus held that property did not fall within the exclusion given under clause (iii) of Section 2(14) of the Act and held the entire sale consideration as exigible to capital gains tax. Accordingly, an addition of ₹12,47,30,461/- was made in the hands of the assessee Smt. Syed Abdul Kader Aysthath Fasleen Amina and ₹12,49,11,769/- was made in the hands of the assessee Shri. S.A.Mafaz Mohammed. Ld. Assessing Officer also disallowed the claim of agricultural income of ₹1,80,000/- made by the assessee Smt. Syed Abdul Kader Aysthath Fasleen Amina and ₹75,000/- claimed by the assessee Shri. S.A.Mafaz Mohammed. 9. Apart from the above, in the assessment done o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l year 2007-08 (ie) on 25.6.2007 when the assessee entered into Joint Development agreement with M/s. SSPDL received as advance of Rs.5,00,00,000/ -, handed over the possession of the property to M/s. SSPDL and also executed a Registered Power of Attorney in favour of SSPDL. From the perusal of the records and the assessing officer's order and other details filed by the assessee, the lands under consideration were acquired by the assessee's sister from 1988 to 1992 by different documents from Smt. Saradambal. The assessee's sister settled 1/ 3rd undivided share in the said lands to her father Mr. S.A.Syed Abdul Kader, who in turn had settled the said 1/3rd undivided share in the land in favour of the assessee. As per the revenue records, the lands are agricultural lands. The assessee as well as the previous owners have been showing agricultural income from the said lands in their return of income filed from year to year up to 2010-11. Even the assessing officer has also accepted these facts. The assessee also submitted that he along with other 2 coowners entered into a Joint Development Agreement with SSPDL on 25.6.2007 based on the said Joint Development Agreement they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the developer executed a , Power of Attorney and received part of the consideration agreed upon. Therefore, in view of the provisions of clause (v) of Sec2(47) of the Act, the transfer of the property has been effected in the Financial year 2007-08 itself, irrespective of the date of registration. Registration is only legal requirements for the buyer and not for the seller. It is also important to see whether registration in the name of M/s. Interglobe l Iotels Private Limited and M/s. Accent Hotels Private Limited is a new transaction, or continuation of the transaction (Joint Development Agreement) already entered with SSPDL. M/s, SSPDL is a company carrying on business in Chennai had entered into Joint Development Agreement with the assessee and other Co owners on 25.6.2007 consequent to the Joint Development Agreement between the assessee and SSPDL, the assessee executed and power of attorney on 27.6.2007 in favour of SSPDL (vide Registered Document No.429 dated 2007) for obtaining various permissions and to develop the property. In fact based on the said General Power of Attorney, SSPDL obtained various permissions and sanctions from the state Government and local aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 2695/2008 respectively, at the office of the sub-Registrar, Thiruporur. Since the parties of the First Part and parties of the Second Part have mutually decided to cancel the said Agreement of Joint Development dated 25.06.2007, to protect the interest of M/s. Interglobe Hotels Private Limited and M/ s. Accent Hotels Private Limited, the parties of the First Part have agreed to convey a demarcated extent of land measuring 1.85 acres from the out of the schedule mentioned property directly to M/s. Interglobe Hotels Private Limited and M/s. Accent Hotels Private Limited. On this understanding the parties of the First Part, Second Part, M/s.Interglobe Hotels Private Limited and M/s.Accent Hotels Private Limited, have mutually decided to cancel the agreements of sale and construction registered as Document Nos.2694/08 and 2695/08. Thus the above facts clearly prove that M/s. Interglobe Hotels Private Limited and M/ s. Accent Hotels Private Limited only nominees of SSPDL and not a separate of independent buyer of the property from the assessee. Hence the registration deed dated 05.02.2010 cannot be construed as the date of sale of the land by assessee and other co-owners. Since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yisha Fathima, A.Y. 2009-10, ITA No.1371/Mds/2013, dated 17.08.2016, which has been relied on by the appellant to substantiate her claim that (i) the land sold by her was agricultural land (ii) and even if the same is treated as capital asset, it has to be considered in the A.Y. 2008-09, when the JDA was executed, the PAO was issued and the sale consideration was received and not in the A.Y. 2010-11, as assessed by the ld. Assessing Officer. In the light of these facts of the case, the case is discussed as under:- 17. Whether the impugned land was an agricultural land or otherwise, the observation and the findings made by the ld. Assessing Officer need to be discussed here. Durng the relevant year under consideration, the appellant along with the other two co-owners namely Mr. Mafaz Mohammed and Mrs. Aysha had sold 1.85 acres of acres of M/s. Interglobe Hotels Pvt Limited for a total consideration of ₹14,10,46,875/- on 05.02.2010. The remaining part of 62.39% of the undivided share of land out of 1.85 acres was sold to M/s. Accent Hotels Pvt Ltd for a total consideration of ₹23,39,53,125/- on 05.02.2010. The total sale consideration was ₹37.50 crores and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for sale and construction of the hotels and the impugned land and received a sum of RS.22.50 crores on 11/04/2008 and the sale deed and construction agreement were executed. 25. The above discussed JDA dated 25/06/2007 was cancelled on 04/02/2010 and in view of this cancellation of JDA, M/S SSPDL delivered the vacant possession of the impugned property to the appellant and other two shareholders. Accordingly, the impugned lands were sold by the appellant and other two shareholders on 05102/2010 to M/S IGH and M/S Accent for a total sale consideration of Rs. 37.50 crores, as discussed already at para 6 of the assessment order and at para 17 of this order. 26. Further, it was also notice from the Construction Agreement dated 05.02.2010 entered into between M/s. IGH and M/s. SSDPL, page 26 para 10.2.3 that the Schedule B property feel in the Urbanisable Zone as per the existing master plan of the DTCP. 27. From the above discussion, it is evidently clear that the impugned property sold by the appellant was in the midst of commercial development activities being carried out by builders in promoting housing and information technology corridors. In view of this, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove observations and the findings can further be substantiated with the following decisions of the Hon'ble Courts. While discussing the case of Sarifabibi Mohammad Ibrahim Oth vs CIT , reported in 204 ITR 631, the Hon'ble Apex Court has held that to decide whether a land is an agricultural land or not is essentially a question of fact. Several tests have been evolved in the decisions of the Supreme Court and the High Court, but all of them are more in the nature of guidelines. The question has to be answered in each case having regard to the facts and circumstances of that case. Theree may be factors both for and against the particular point of view. The Court has to answer the question on a consideration of all of them a process of evaluation. The interfere has to be drawn on cumulative consideration of all the relevant facts. 32.In the said decision, the Hon'ble Supreme Court has evolved the following 13 factors/indicators which can be applied to find out whether a particular land falls within the definition of capital asset or not. The 13 factors are the following: (1) Whether the land was classified in the revenue records as agricultural and whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduce on the. basis of its yield? Taking into account the above 13 factors, the Hon'ble Apex Court further observed 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. 34.Therefore, having regard to the facts and circumstances of the present case, it can be inferred that on cumulative consideration of the issues, the impugned land of the appellant fulfils all those relevant conditions which brings it within the ambit of capital asset. Out of the above 13 factors, almost 9 such reasons exist in the present case of the appellant which would render the impugned land as capital asset. These nine factors are discussed as under: I. Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time? In the present case, the appellant had failed to produce any such evidences which could prove that she was carrying on certain agricultural operations. The appellant had also failed to furnish the details of expenses incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usage of land was permanent in character VI. Whether the land was situate in a developed area? Whether its Physical characteristics, surrounding situation and use of the lands in the adjoining area were such as would indicate that the land was agricultural? The guideline value of the impugned land was RS.3.00 crores per acre which was sold roughly at the rate of RS.20.27 crores per acre. No agriculturist could purchase agricultural land of such high-value for agricultural purposes. Neither, any agricultural land would ever fetch such a high price. 35.From the perusal of the above facts of the case, the cumulative effect goes to prove that the impugned land was in the character of capital asset only which should have been subjected to capital gains tax by the appellant. 36. In the case of RAJA D. SESHAYYAMMA GARU vs. -CIT, reported in 156 ITR 820, the Hon'ble jurisdictional High Court has held that a mere intention as to the user of land was not conclusive in determining the character of the land as agricultural land. 37. In the case of CIT vs. Gemini Pictures Limited reported in (1996) 85 Taxman 594 (SC) while discussing the case the Hon ble Court observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has to complete the construction within 36 months handed over the assessee's share of the constructed portion of building to the assessee, otherwise it attracts damages, it shall be 2 lakhs per month till the delivery of the building. The assessee has also undertaken to register the property at the cost of developer or any person or nominated of the developer. Therefore, it is obvious that the physical possession of the property as well as management of the property was not in the hands of assessee . 40. In the present case of the appellant, the JOA was entered between M/S SSPOL and the appellant and the other shareholders on 25/06/2007 to develop the impugned property for construction of the multi-storied buildings. The POA was issued by the appellant and other to shareholders in favour of M/S SSPOL to get the approvals etc. from the government and other local authorities required for developing the impugned property. However, as per this JDA, the appellant and the other shareholders did not hand over the possession of the impugned property. Most importantly there was no sale consideration either discussed in the JDA or actually passed on the appellant and the two oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction of commercial building and the applicants for such notification was M/s. SSDPL. (iii) No Objection Certificate given by Chengalpet Tehsildar was prior to the sale and thus the assessees were aware that entire area was commercial in nature. (iv) M/s. SSDPL on cancellation of the JDA, had given vacant possession of the property to the assessee. (v) The sale price received was huge and not of a nature which an agricultural land would fetch. As per the ld. Authorised Representative, all the above reasons mentioned by the ld. Commissioner of Income Tax (Appeals) were irrelevant. According to him, ld. Commissioner of Income Tax (Appeals) never opposed the contention of the assessee that nature of the land was agricultural. Further, according to him, the intention of the assessee was to be seen from the point at which they acquired the land. 13. Continuing his submissions, ld. Authorised Representative stated that judgments of Hon ble Jurisdictional High Court in the case of Mrs. Sakunthala Vedachalam and Mrs. Vanitha Manickavasagam vs. ACIT, (2014) 369 ITR 558, CIT vs. Smt. Sakunthala Rangarajan, (2016) 389 ITR 103, CIT vs. KRN Prabhakaran (Huf) T.C.A. No.1189/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. Departmental Representative, only proved that there were some coconut and mango trees in the land. But this as per the ld. Departmental Representative could be seen in isolation. According to the ld. Departmental Representative, nothing was filed by the assessees to prove any agricultural operation being carried out nor any proof for sale of agricultural produce. Land as per the ld. Departmental Representative was situated in the close suburbs of Chennai city and was lying on the side of OMR. According to him, consideration received was ₹20,27,00,000/- per acre against the guideline value of ₹3,00,00,000/- and this by itself clearly indicated the commercial nature of the land. Thus, according to the ld. Departmental Representative, the land sold was non agricultural and commercial exigible to capital gains. Reliance was placed on the decisions of Coordinate Bench in the case of ITO vs. Aboobucker, (2016) 157 ITD 717, ITO vs. Vijay Shah, (2017) 165 ITD 348 and that of Cochin Bench in the case of Abdul Rahmin vs. DCIT, (2011) 30 CCH 555. 15. Ad libitum reply of the ld. Authorised Representative was that inability, if any of the assessees, in proving agricultural ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective returns for the years preceding the impugned assessment year. Ld. Commissioner of Income Tax (Appeals) who held in favour of the assessee Shri. S.A. Mafaz Mohammed also found that M/s. IGH and M/s. Accent were only nominees of the M/s. SSDPL and not independent buyers of the property. He also took a view that date of registration of the sale deeds viz 05.02.2010 could not be considered as the date of transfer, but only the date of the JDA which was in June, 2007. As against this, ld. Commissioner of Income Tax (Appeals) who went against the assessee Smt. Syed Abdul Kader Aysthath Fasleen Amina, held that though out of the thirteen determining factors identified by Hon ble Gujarat High Court in the case in the case of Siddharth J. Desai (supra), which found acceptance from the Hon ble Apex Court, assessee had satisfied four, the land still could not be considered as agricultural. Be that as it may be, it is not disputed that the co-ordinate Bench in the case of Ayisha Fathima (supra), where the question was exigibility to capital gains on sale of a piece of land measuring 6.21 acres, in the very same Egattur Village, had upheld the order of ld. Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50/2) Rs.75/- per sq.ft. 4. The owners agree to execute and register necessary Power of Attorney Jointly in favour of the Nominee of the Developer and the Nominee of the Owner for selling 73% of the Undivided share of the land. morefully described in the Schedule A hereunder to the Nominees of the Developer and a separate Power of Attorney in favour of the Nominee of the Developer for applying and obtaining Building sanction plan, Service connection etc., The Owners have this day handed over possession of the entire agricultural lands, subject matter of this agreement. 5. The Developer shall for the purpose of Development immediately be at liberty at its own cost of survey the said property, take measurements and to apply for sanctioning of a building plan from the municipal and other authorities, STPI, Chennai metropolitan The development authority and corporation of Chennai on such terms and conditions has may be agreed to the developer. The developer may in consultation with the owners, decide on the nature of the building to be constructed. 6. The developer shall commence construction of the new building within 30 days of obtaining sanctions from authorities c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction of any building whether storey3ed or otherwise, on the said property. 20. The Developer shall be entitled to correspond with and receive any correspondence or other intimation from the authorities concerned regarding the plans, sanctions, approvals or permits for construction of any building on the said property or for the provision of any amenities or facilities thereto. 21. The Developer shall be entitled to pay such fees, charges or levies and to furnish securities/ in money or otherwise as and when required by the authorities concerned for any demolition or construction activity to be carried out on the said property or for the provision of amenities or facilities thereto. 25. In the alternative, the Owners agree to execute a Power of Attorney in favour of the Nominee of the Developer, empowering the agent to apply, sign and get demolition plan approval, reconstruction plan sanctions, building permit and planning permit, service connections such as water, sewerage, electricity etc., and also to demolish the old building and to develop the property apart from empowering the agent to deal with the property in such manner as may be required for the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to get the permission for construction of the property. After getting permission for construction in the said property, the developer has to complete the construction within 36 months handed over the assessee s share of the constructed portion of building to the assessee, otherwise it attracts damages, it shall be two lakhs per month till the delivery of the building. The assessee has also undertaken to register the property at the cost of developer or anly person or nominated of the developer. Therefore, it is obivious that the physical possession of the property as well as management of the property was not in the hands of the assessee. 6.1 We have gone through the provisions of the section 2(47) of the Act which defines transfer . Under the common law, Transfer of immovable property valuing more than 100 rupees would be made only by executing registered sale deed. However, under Income Tax Act, Sec.2(47) defines Transfer in relation to capital asset. For the purpose of convenience we are extracting Sec.2(47) of the Act. S. 2(47) transfer , in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset ; or (ii) the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IT Act. 6.2 As seen from the above, there is a fair disclosure by the assessee regarding the sale of the impugned property. In that assessment year i.e.2006-07, it is said to be accepted by the Department that as there was no transfer of capital asset as an agricultural land. It is not the case of the Department that it was subject to any rectification or revision subsequently. Unless the Department disturbed the assessment for assessment year 2006-07, the Department has precluded from treating the transfer of same land as a transfer in terms of Sec.2(47)(v) of the Act in the assessment year 2009-10 for whatever reason stated by the AO. In our opinion, merely because an agreement of sale has not been registered, which otherwise in nature of agreement referred in Sec.53A of the Transfer of Property Act cannot be taken out of ambit of Sec.2(47)(v) of the Act when parting of the possession of immovable property has already taken place as enumerated in earlier para of this order. It is very clear that there is giving up of the possession to the builder/developer and he has given the substantial amount to the assessee in the form of refundable deposit and he has shown willing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agricultural land is not defined in the Act, and now, whether it is agricultural land or not has got to be determined by using the tests or methods laid down by the Courts from time to time. 6.5 The Hon ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim (204 ITR 631) has approved the decision of a Division Bench of the Hon ble Gujarat High Court in the case of CIT vs. Siddharth J. Desai (1982) 28 CTR (Guj) 148 : (1983) 139 ITR 628 (Guj) and has laid down 13 tests or factors which are required to be considered and upon consideration of which, the question whether the land is an agricultural land or not has got to be decided or answered. We reproduce the said 13 tests as follows: 1. Whether the land was classified in the Revenue records as agricultural and whether it was subject to the payment of land revenue? 2. Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time? 3. Whether such user of the land was for a long period or whether it was of a temporary character or by any of a stopgap arrangement? 4. Whether the income derived from the agricultural operations carried on in the land bore a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon ble Supreme Court has observed that the term agriculture is thus understood as comprising within its scope the basic as well as subsequent operations in the process of agriculture and raising on the land all products which have some utility either for someone or for trade and commerce. It will be seen that the term agriculture receives a wider interpretation both in regard to its operation as well as the result of the same. Nevertheless there is present all throughout the basic idea that there must be at the bottom of its cultivation of the land in the sense of tilling of the land, sowing of the seeds, planting and similar work done on the land itself and this basic conception is essential sine qua non of any operation performed on the land constituting agricultural operation and if the basic operations are there, the rest of the operations found themselves upon the same, but if the basic operations are wanting, the subsequent operations do not acquire the characteristics of agricultural operations. The Constitution Bench of the Hon ble Supreme Court in the aforesaid case observed that the entries in Revenue records were considered good prima facie evidence. 6.7 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may also refer to the case of Gopal C. Sharma vs. CIT (1994) 116 CTR (Bom) 377 : (1994) 209 ITR 946 (Bom), in which, the case of Smt. Sarifabibi Mohamed Ibrahim Ors. vs. CIT (supra) was referred to and relied, amongst other cases. In this case, the Division Bench of the Bombay High Court has stated that the profit motive of the assessee selling the land without anything more by itself can never be decisive for determination of the issue as to whether the transaction amounted to an adventure in the nature of trade. In other words, the price paid is not decisive to say whether the land is agricultural or not. 7.1 We may refer to a judgment of the Hon ble Madras High Court in the case of CWT vs. E. Udayakumar (2006) 284 ITR511 (Mad) where the Hon ble Madras High Court has referred to the decision of the Hon ble Punjab Haryana High Court in the case of CIT vs. Smt. Savita Rani (2004) 186 CTR (P H) 240 : (2004) 270 ITR 40 (P H) and has observed and held as under : 8. It is well settled in the case of CIT vs. Smt. Savita Rani (2004) 186 CTR (P H) 240 : (2004) 270 ITR 40 (P H), wherein it is held that the land being located in a commercial area or the land having been part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al land and there is no dispute regarding this issue and actual cultivation has been carried on this land and income was declared from this land in the return of income filed by the assessee for the earlier years as agricultural income. It is also an admitted fact that the assessee has not applied for conversion of this agricultural land for non-agricultural purposes and the assessee has not put the land to any purposes other than agricultural purposes. It is also an admitted fact that neither the impugned property nor the surrounding areas were subject to any developmental activities at the relevant point of time of sale of the land. 7.3 The State Government also prescribed the procedure for conversion of agricultural land into non-agricultural land. Being so, whenever the agricultural land to be treated as non-agricultural land, the same has to be converted in accordance with the provisions of State Government. If by a Government Notification, the nature and character of land changes from agriculture into non-agriculture then there is no question of conversion of this land for non- agricultural purposes by the Revenue authorities concerned. The land owners are required to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-agricultural purposes. We may also refer to a decision of the Hon ble Supreme Court in the case of N. Srinivasa Rao vs. Special Court (2006) 4 SCC 214 where it was observed that the fact that agricultural land in question is included in urban area without more, held not enough to conclude that the user of the same had been altered with passage of time. Thus, the fact that the land in question in the instant case is bought by Developer cannot be a determining factor by itself to say that the land was converted into use for non-agricultural purposes. 7.5 Recently the Karnataka High Court in the case of CIT vs. Madhukumar N. (HUF) (2012) 78 DTR (Kar) 391 held as follows: 9. An agricultural land in India is not a capital asset but becomes a capital asset if it is the land located under Section 2(14)(iii)(a) (b) of the Act, Section 2(14) (iii) (a) of the Act covers a situation where the subject agricultural land is located within the limits of municipal corporation, notified area committee, town area committee, town committee, or cantonment committee and which has a population of not less than 10,000. 10. Section 2(14)(m)(b) of the Act covers the situation where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital asset , the agricultural land situated in rural areas continues to be excluded from that definition. And as in the present case, admittedly, the agricultural land of the assessee is outside the Municipal Limits of Rajarhat Municipality and that also 2.5 KM away from the outer limits of the said Municipality, assessee s land does not come within the purview of section 2(14)(iii) either under sub clause (a) or (b) of the Act, hence the same cannot be considered as capital asset within the meaning of this section. Hence, no capital gain tax can be charged on the sale transaction of this land entered by the assessee. Accordingly, we quash the assessment order qua charging of capital gains on very jurisdiction of the issue is quashed. The cross objection of the assessee is allowed. 7.8 It was held in the case of CIT vs. Manilal Somnath (106ITR 917) as follows: Under the Income-tax Act of 1961, agricultural lend situated in India was excluded from the definition of capital asset and any gain from the sale thereof was not to be included in the total income of an assessee tinder the head capital gains . In order to determine whether a particular land is agricult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd and which has a population 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, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette; 8. It is very clear from the above that the gain on sale of an agricultural land would be exigible to tax only when the land transferred is located within the jurisdiction of a municipality. The fact that all the expressions enlisted after the word municipality are placed within the brackets starting with the words 'whether known as' clearly indicates that such expressions are used to denote a municipality only, irrespective of the name by which such municipality is called. This fact is further substantiated by the provisions contained under clause (b) wherein it has been clearly provided that the authority refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m such limits, for the purposes of this provision. Such notification will be issued by the Central Government, having regard to the extent of, and scope for, urbanisation of such area, and, when any such area is notified by the Central Government, agricultural land situated within such area will stand included within the term capital asset . Agricultural land situated in rural areas, i.e., areas outside any municipality or cantonment board having a population of not less than ten thousand and also beyond the distance notified by the Central Government from the limits of any such municipality or cantonment board, will continue to be excluded from the term capital asset . 8.3 Further it is nobody's case that the property falls within any area which is comprised within the jurisdiction of a municipality or cantonment board or which has a population of not less than 10,000 according to the last preceding Census of which the relevant figures have been published before the first day of the previous year. In other words, the land does not fall in sub-clause (a) of section 2(14)(iii) of the Act as the land is outside of any municipality including GHMC. Further we have to see wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of this land entered by the assessee. This is supported by the order of Kolkata Bench of this Tribunal in the case of ArijitMitra (cited supra), Harish V. Milani (supra) and M.S. SrinivasNaicker vs. ITO (292 ITR 481) (Mad). By borrowing the meaning from the above section, we are not able to appreciate that the land falls within the territorial limit of any municipality without notification of Central Government as held by the Karnataka High Court in the case of Madhukumar N. (HUF) (cited supra). 8.5. From the facts and circumstances of the case, as narrated before us, it is important to note that what was the intention of the assessees at the time of acquiring the land or interval action by the assessee between the period from purchase and sale of the land and the relevant improvement/development taken place during this time is relevant for deciding the issue whether transaction was in the nature of trade. Though intention subsequently formed may be taken into account, it is the intention at the inception is crucial. One of the essential elements in an adventure of the trade is the intention to trade; that intention must be present at the time of purchase. The mere circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss income. Accordingly, the ground raised by the Revenue is dismissed . 17. No doubt decision of Co-ordinate Bench in the case of Ayisha Fathima (supra) was for assessment year 2009-2010. However nothing has been brought on record by the Revenue which would show that there was any material change in the nature of land in the previous year relevant to impugned assessment year. Para 8.5 of the order of the Tribunal in this case, reproduced above, is in our opinion very apposite. The crucial factor is the intention of the assessee at the time of acquiring the land, though subsequent events can also be relevant. In other words, happenings between date of purchase and date will be of relevance only if such events clearly prove conversion of the land by the assessee for a different use other than agricultural. In other words, what was in the mind of the assessee at the time of acquisition is the most important aspect which is to be seen. The land in question was acquired by the assessee during the period 1988 to 1993 and all along, the assessees had claimed agricultural income therefrom. It was classified in the Revenue records as agricultural land with coconut and mango cultivatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h were considered as relevant and which were weighed against each other while determining the true nature and character of the land. It may be useful to extract from those decisions some of the major factors which were considered as having a bearing on the determination of the question. Those factors are : (1) Whether the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue? (2) Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time ? (3) Whether such user of the land was for a long period or whether it was of a temporary character or by way of a stop-gap arrangement ? (4) Whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land ? (5) Whether, the permission under section 65 of the Bombay Land Revenue Code was obtained for the nonagricultural use of the land ? If so, when and, by whom (the vendor or the vendee) ? Whether such permission was in respect of the whole or a portion of the land ? If the permission was in respect of a portion of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) in paragraph 11 that whether the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue has to be considered for grant of exemption. 14. Thus, it is evident from the above, which clearly states that any one of the above factors can be present in a case to qualify for the benefit of classification as agricultural lands. In this case, the assessees have qualified under clause 11(1) since as per the adangal records, these lands were classified as agricultural lands and the assessees have also paid revenue kist, namely, revenue payment. Therefore, the Tribunal has misconstrued the judgment of the Gujarat High Court (supra) that all conditions laid down in paragraph 11 should be satisfied, which is not a correct interpretation . A reading of the para 14 of the judgment clearly indicate that primary requirement is classification of land as agricultural in adangal records. Their lordships clearly held that it was not necessary to cumulatively satisfy all the conditions set out by Hon ble Gujarat High Court in the case of CIT vs. Siddharth J. Desai, (1983) 139 ITR 628. As to the relevance of the intention of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of agricultural income was accepted in the earlier years, would not mean that assessee should be perpetually allowed the claim. Assessee could not bring in evidence to prove the earning of the agricultural income despite being required by the ld. Assessing Officer. Having not done so, ld. Commissioner of Income Tax (Appeals) in our opinion, erred in deleting the addition made for the claim of agricultural income of ₹75,000/-. We set aside the order of the ld. Commissioner of Income Tax (Appeals) on this aspect and re-instate the addition. 21. Coming to the question of term loan interest of ₹43,87,541/- and ₹51,244/-, aggregating to ₹44,38,785/-, ld. Commissioner of Income Tax (Appeals) clearly observed that loan of ₹1,50,00,000/- were used for construction of Usman Road property and this was clearly indicated in the sanction letter. Viz-a-viz loan of ₹4,75,00,000/- from M/s.BOBL, ld. Commissioner of Income Tax (Appeals) had accepted the claim of the assessee with a finding that it was utilized for repayment of an advance received from M/s. SSPDL, which was earlier used for repaying a loan taken from M/s. BOBL for construction of the building. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how strong indication of a change of such intention, such events need to be considered. Once assessees sold 1.85 acres out of 9.32 acres, they became fully aware that the land sold was being commercially exploited. When they sold the first parcel of land, the initial intention at the time of purchase was very relevant. However, we cannot say assessees had the same intention in holding the balance land as they had initially. No doubt, they can bring in evidence to show the agricultural use in subsequent years, if they are convinced on the continuing agricultural nature of the land. However on question like nature of land sold, there can be no rule of resjudicate. Lower authorities had simply followed their decision for assessment year 2010-11 and held the land acquired by Government as non-agricultural, for assessment year 2012-2013 also. Considering the facts and circumstances of the case, we are of the opinion that the question regarding nature of the land, which was subject to acquisition during the previous year relevant to assessment year 2012-2013 requires re-visit by the ld. Assessing Officer. We therefore set aside the orders of the lower authorities below and remit this iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poses of this section. As per the ld. Assessing Officer intimation u/s.143(1) of the Act could not be considered as an assessment and therefore the assessment done pursuant to the notice under Section 148 of the Act could be considered as the first regular assessment. According to him, the assessment done under Section 147 of the Act had to be construed as a regular assessment for application of Section 234A of the Act. In our opinion, the question of interpretation of Explanation (3) to Section 234A(1) is not something beyond debate. What can be rectified u/s.154 of the Act is only a glaring and apparent mistake and not one which requires long debates and interpretation of law. In taking this view, we are fortified by the judgment of Hon ble Apex Court in the case of ITO vs Volkhart Bros (1971) 81 ITR 50. We are therefore of the opinion that ld. Commissioner of Income Tax (Appeals) was justified in quashing the order of the ld. Assessing Officer. We do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals). Appeal of the Department in ITA No.285/CHNY/2017 stands dismissed. 32. To summarize the results, the appeal of the Revenue in 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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