ACIT, CHENNAI V. P N A MANI SUNDAR, CHENNAI

ITA 2096/CHNY/2015

AI Insights

The case involves multiple appeals by the Revenue against the orders of the Ld. CIT(A) which had deleted the additions made by the AO on account of long-term capital gains from the transfer of land at OMR, Chennai. The land was initially classified as agricultural but was later developed for commercial purposes under a Joint Development Agreement (JDA) with M/s Olympia Infratech Pvt Ltd. The Tribunal examined whether the land could be considered agricultural based on its use, the nature of the agreements, and the surrounding developments. The Tribunal concluded that the land was not agricultural and thus, the gains from its transfer were taxable under capital gains.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 39383 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Other Referred Cases: Sarifa Bibi Mohamed Ibrahim v. CIT, M.S. Srinivasa Naicker & Others v. ITO, Gemini Pictures Circuit Pvt. Ltd. v. CIT, Fazalbhoy Investment Co. (P.) Ltd. v. CIT, Rajiv Dass v. Dy. CIT, CIT Vs GRK Reddy & Sons HUF, CIT Vs Debbie Alemao, CIT Vs M C Pais, Pallava Resorts (P.) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NILAY BARAN SOM
• Assessee Lawyers: G. BASKAR; ISSUE OF NOTICE US. OF
• Keywords: Set aside; Capital asset; Question of law; Fair market value; Cost of acquisition; Capital receipt; Gift; Capital Gains; Assessment record; Reason to believe
• Section: 148; 143(3); 263; 43; 22; 13; 63; 2(14)

Judgement Text

" आयकर अपीलीय अधिकरण, ‘ए’ न्याय पीठ,चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI श्री एबी टी. वर्की, न्यायिर्क सदस्य एवं श्री जगदीश, लेखा सदस्य क े समक्ष BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.2095 /Chny/2015 & आयकर अपील सं./ITA No.22/Chny/2021 धििाारण वर्ा/Assessment Year: 2012-13 The ACIT/DCIT, NCC-7(1), Chennai-34. v. Mr. N.S.Srinivasan, No.61-A, Block-G, Inner Plot No.X-4, 12th Street, Anna Nagar, Chennai-600 102. [PAN: AAZPS 2129 K] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) आयकरअपीलसं./ITA No.2096/Chny/2015 & आयकरअपीलसं./ITA No.7/Chny/2021 धििाारणवर्ा/Assessment Year: 2012-13 The DCIT, NCC-7(1), Chennai-34. v. Mr.P.N.Mani Sundhar, No.61-A, Block-G, Inner Plot No.X-4, 12th Street, Anna Nagar, Chennai-600 102. [PAN: AALPM 6843 J] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) आयकरअपीलसं./ITA No.8/Chny/2021 धििाारणवर्ा/Assessment Year: 2012-13 The DCIT, NCC-7(1), Chennai-34. v. Mr.P.S.Saravanan, G-16, 12th Street, Anna Nagar West, Chennai-600 040. [PAN: AUCPS 1628 J] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::2 :: आयकरअपीलसं./ITA No.475/Chny/2018 धििाारणवर्ा/Assessment Year: 2012-13 The ACIT, NCC-9, Chennai-34. v. Mr.P.S.Mohan, Old No.161, Bells Road, Triplicane, Chennai-600 005. [PAN: AJPPM 4380 B] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थीकीओरसे/ Appellant by : Mr. Nilay Baran Som, CIT Mr. ARV Srinivasan, Addl.CIT प्रत्यर्थीकीओरसे /Respondent by : Mr. G. Baskar, Advocate सुिवाईकीतारीख/Date of Hearing : 26.12.2024 घोर्णाकीतारीख /Date of Pronouncement : 03.03.2025 आदेश / O R D E R PER JAGADISH, AM: These are appeals preferred by the Revenue against the orders of the Learned Commissioner of Income Tax (Appeals)-7, Chennai, (hereinafter referred to as ‘Ld.CIT(A)‘), Chennai in the matters of the above captioned four (4) assessee’s for the Assessment Year (hereinafter referred to as ‘AY‘) 2012-13. 2. It is noted that the appeals in ITA Nos.7 & 8/Chny/2021 were filed with a delay of ‘34’ days and also ITA No.22/Chny/2021 was filed with a delay of ‘60’ by the Revenue. We find that the reasons for delay were ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::3 :: bona fide and excusable, accordingly, the delay in filing these appeals are condoned. 3. Both the parties agreed that the facts &issues involved in all these six (6) appeals are common, therefore, they are being taken up together for adjudication. Hence, we take up the Revenue’s appeals in ITA Nos. 2095/Chny/2015 & ITA No. 22/Chny/ 2021 of Shri N.S. Srinivasan (hereinafter referred to as ‘assessee’) as lead cases and the result of which will be applicable mutatis mutandis in other appeals. 4. We first take up appeal of Revenue in ITA No. 2095/Chny/2015. Ground No. 1 of the appeal is noted to be general in nature and therefore does not warrant any specific adjudication. 5. Ground No. 2 of the appeal is against the Ld. CIT(A)’s action of deleting the addition of Rs.7,24,57,320/- made by the AO on account of assessee’s share in long term capital gains upon transfer of land at OMR, Chennai holding it to be agricultural land within the meaning of Section 2(14)(iii) of the Act and therefore not liable to tax. The background facts as noted are that, the assessee along with his brothers, Shri P S Maniundar, Shri P S Mohan & Shri P S Saravanan initially held 2.31 acres of land in Old Mahabalipuram Road (hereinafter in short ‘OMR’) Chennai, since 1973. According to assessee, they had further acquired land of 5.08 ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::4 :: acres in the years 1982-1983. Subsequently, the assessee along with his brothers is noted to have acquired adjoining large parcels of land in a systematic and organized manner from 2006 onwards, whose details are as follows:- Date of Acquisition Extent of land (in acres) Cost of acquisition 17.04.2006 6.96 Rs 13,08,00,280 29.01.2007 0.85 Rs 92,65,180 22.05.2007 0.46 Rs 50,14,240 6. Pursuant to the above acquisitions, the assessee along with his co- brothers held 15.66 acres of land in OMR Chennai. It is noted that, immediately post this acquisition, the assessee along with his co-brothers is noted to have entered into MOU dated 11.02.2008 with M/s Olympia Infratech Pvt Ltd to develop IT Park or SEZ or mixed residential cum commercial building based on the prevailing market conditions. The AO is noted to have observed that, the sharing between the Developer and the land owners was initially agreed at 40:60 of the super built-up area. Further, in addition to the constructed area, the Developer had to pay the land owners, an additional sum of Rs.10 crores as additional monetary consideration for acquiring the development rights. Apart from the foregoing, a sum of Rs.3.75 crores was given by the Developer to the land-owners as non-refundable security deposit. The AO noted further that, as per Clause (8) of Page 10 of the MOU, the land owners agreed to ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::5 :: handover all the title deeds to the Developer upon getting approval from the competent authorities and that the land owners also agreed to hand over the vacant possession of the land in question to the Developer to start the work of soil testing, taking measurements etc. 7. The above agreement dated 11.02.2008 is noted to have been followed by a supplementary agreement with the Developer on 07.09.2009 which retained the essence of the original JDA, and also made some changes in the Floor Space Index (FSI) requirements. In light of these agreements, the AO noted that, the Developer had applied to the District Town and Country Planning Authority vide letter dated 21.07.2010 requesting for approval of the proposal to construct ground, first and second floor residential apartment and also club house in the properties in question. It is observed that, the District Town and Country Planning Authority had accorded their approval vide letter dated 22.11.2010 F.No.20260/2010CP. Pursuant thereto, the assessee and other co-owners gave a General Power of Attorney (GPA) on 12.05.2011 and handed over the possession of the lands vide documents no.641/2011 to one M/s. ABN Infratech Pvt Ltd, having its office at No.1, SIDCO Industrial Estate, Guindy, Chennai, which is the parent company of M/s. Olympia Infratech Pvt Ltd. The General Power of attorney appointed one M/s. Opaline Hotels ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::6 :: Pvt Ltd, which is a subsidiary of M/s. ABN Infratech Pvt Ltd to develop the proposed project. Thereafter, it is noted that, the assessee and other co- owners along with M/s. ABN Infratech Pvt Ltd, which was a party to the original agreement dated 11.02.2008 had entered into joint development agreement (‘JDA’) on 18.05.2011 with M/s. Opaline Hotels Pvt Ltd to develop the vacant land of 15.66 acres situated at OMR, Chennai after retaining the clauses as appearing in the original JV dated 11.02.2008. In terms of the said agreement, the Developer was to construct residential villas under the brand name “PANACHE”. 8. Later on, the assessee and co-owners are noted to have entered into a supplementary agreement dated 20.05.2011 wherein the terms of consideration was modified / increased towards the land owners, which is noted to be as follows: - “1. The Land Owners No.1 to 4 have been allotted apartments in OPALINE, a Residential Complex at Navalur (‘Apartments’) developed by the erstwhile developer M/s. Olympia Infratech Private Limited as additional consideration, which is detailed in Annexure A- hereunder. 2. As per the understanding reached between the parties, the LAND OWNERS 1 to 4 have become entitled to an additional extent of land amounting to 18,807.77 sq.ft. for which the Developer has agreed to pay a sum of Rs.3,89,89,194/- (Rupees Three Crore Eighty Nine Lakh Eighty Nine Thousand One Hundred and Ninety Four only) calculated at Rs.9 crores per acre to the LAND OWNERS 1 to 4 towards the cost of this additional extent of land. ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::7 :: 3. The LAND OWNERS’ collective entitlement to Corner Villas is arrived as 9 and the additional price for the same @ Rs.5,00,000/- per villa is credited to their common account. 4. The Land Owners No.1 to 4 have also decided to surrender to the Developer an extent of 17,309 sq. ft. of built-up area out of their entitlement and the Developer has agreed to purchase the said built-up area at the rate of Rs.5,500/- per sq. ft. totalling to Rs.9,51,99,500/- (Rupees Nine Crore Fifty One Lakh Ninety Nine Thousand Five Hundred only.” 9. The Developer, thereafter, is noted to have applied for other permissions / approvals and thereafter commenced construction activity. It is not in dispute between the parties in the present case, upon execution of this JDA dated 18.05.2011, there was a ‘transfer’ within the meaning of Section 2(47) of the Act pursuant to which the land parcels of 15.66 acres stood transferred from the assessee & his brothers to the Developer. According to the land owners, however, the impugned land in question was in the nature of ‘agricultural land’ andnot in the nature of capital asset as defined u/s 2(14)(iii) of the Act and therefore, it was their case that no capital gains was taxable qua this transfer of agricultural land in AY 2012-13. 10. Accordingly, for AY 2012-13, the assessee Shri. N.S. Srinivasan, had filed his return of income on 29.09.2012 admitting total income of Rs.32,07,352/- which inter alia included income from house property Rs.10.74 lakhs; capital gains of Rs.17.93 lakhs in relation to sale of ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::8 :: property at Trichy, interest income from other sources at Rs.9,583/-. The case of the assessee was selected for regular scrutiny. In the course of assessment, the AO noted that, his office was in receipt of AIR information that, the assessee had sold immovable property situated at Navalur and Egathur in OMR, Chennai jointly with eight (8) other parties to the tune of Rs.18 crores by way of 16 sale transactions between February, 2012 and March 2012, which were registered at RO, Tiruporur. The AO, however noted that, the return of income did not contain any income relating to these sale transactions. Accordingly, the AO is noted to have enquired into the relevant facts, and wondered as to, if there was sale of assessee’s immovable property, then why capital gains was not offered in his return of income and also asked the assessee to furnish sale documents/purchase deeds of the above said property. Pursuant to this enquiry, the above noted background facts were brought to the notice of the AO. The assessee is noted to have reiterated his contention that, the impugned land parcel was in the nature of ‘agricultural land’ and therefore the capital gains derived therefrom was not liable to tax. 11. Taking note of the above narrated facts, the AO is found to have observed that, the assessee had systemically and in an organized manner acquired parcels of adjoining land in addition to their previous land ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::9 :: holdings from 2007 onwards, in order to exploit the same commercially. Within a short span of time, the AO noted that, the assessee had entered into a MOU with the Developer for undertaking development of real estate on this land parcel. The said MOU is noted to have been supplemented by several agreements, already discussed above. The AO further noted that, the Developer had taken steps/filed application before the competent authority for approval of the proposal for developing the land with necessary drawings as early as in May 2010 itself. These chronology of events, according to the AO showed that, the land in question cannot be stated to be an agricultural land and that, as early as in May 2010, the land in question got converted into urban land. Further, the AO noted that as per the notification of the town planning authorities, the survey numbers in which the property in question which was located at Navalur and Egathur at OMR were classified under urbanized zone. Thereafter, the AO conducted a spot enquiry along with Inspector on 06.02.2015 in the area where the property is located and noted that the property situated next of assessee’s property in question was of M/s. Cognizant Technology Solutions –IT Major. The AO also noted that, the property in question was on a six-lane road, strategically located close to the famous SIPCOT IT Park, in OMR, Chennai, which according to the AO is at the heart of Chennai’s IT corridor and also home to IT majors such as TCS, Polaris etc. ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::10 :: The AO further noted that the Chettinad Hospital is 5 minutes’ drive and the American International School and other educational institutions are located in this vicinity. The AO also noted that, the land was being developed by Opaline Hotels Pvt Ltd and construction was in a brisk pace consisting of 123 villas and UDS of land of the said villas are in the range of 4000 sq.ft. to 5000 sq.ft. and that, out of 123 villas, 33 were earmarked for the landlords.The AO also noted that, within 100 metres from the scheduled property, a large-scale residential apartment consisting of several blocks of Skyscrapers of Stilt + 19 floors was under construction by the developer of the same group namely M/s. Olympia Group, and the Phase 1 was completed; and that the said projects work was started in the year 2007 and project got completed in the year 2011. 12. The AO is also noted to have issued summons to the Village Administrative Officer[VAO] and verified the details regarding the chitta, adangal extracts of the said land where the property is developed and in response, the VAO stated that as per the notification issued by the Government of Tamilnadu in GO No. 256 dated 26.12.2009 Semmanchery, OMR is a place where the Corporation limit ends. The VAO also additionally stated that, from Semmanchery, the property in question, is situated within 2 kms from the Chennai Corporation limit. ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::11 :: The AO also noted from the notification issued by the Local Planning Authority of Mamallapuram and noted inter alia that, Navalur&Egattur (where the property in question is situated) was notified as urbanized zone and not under any agricultural zone. According to the AO, it was clarified by the Town Planning Authority that, urbanizable zone is meant for developing plots and flats for developing commercial parties. Thereafter, the AO took note of the chitta and adangal extracts obtained from the Thashildar, Tiruporur and noted the following:- “3.6.4 Further, during the course of spot enquiry, it was ascertained from the chitta and adangal extracts obtained from the Thashildar, Tiruporur who explained that the year mentioned is Thiruvalluvar Year for e.g. 1421. In this connection, in order to find out the English calendar year, the Pasali year requires to be added by the number 590 to arrive at the calendar year i.e. 1421 pertains to the Calendar Year 2011 (590 is the indexation number and pasali year is period from July of one calendar year to June of the next calendar year). Thus, the chitta and adangal extracts obtained from the. Thashildar, Tiruporur for Egathur and Navalur for the pasali year 1421 pertains to the calendar year 2011, where the chitta and adangal extracts pertaining to Navalur mentions the activities carried out, in Column (18a from page numbers 73 to 99 Refer Annexure -2) in the said lands as 'Construction of residential apartments, residential plots, hotels, TS Office, TASMAC shop etc.'. For this Pasali year, nowhere it is mentioned that the activities carried out are agriculture in nature. 3.6.5 Similarly, for Egathur, vide Pasali 1421, pertaining to the Calendar year 2011, obtained from the Thashildar, Tiruporur, the extracts vide column No.18a, the activities carried out in the lands are shown as multi-storey residential apartments, Government buildings, buildings under construction, residential plots - in page number 41 & 42. For this locality also, in the chitta and adangal extracts provided by the. Thashildar, Tiruporur no agricultural activity is reported. ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::12 :: 3.6.6 However, the assessee during the course of hearing filed a letter claiming that the pasali year 1420 pertains to the financial year 2011- 12, which is incorrect. But, it is ascertained from the Revenue Authorities that pasali year 1420 pertains to F.Y.2010-11. A close verification of the chittaadangal of 1420 relied on by the assessee, also shows the nature of land as per column 18a, the impugned survey numbers reported as residential plots, a packing company, compound wall, buildings, construction and their progress with a mention of Eucalyptus Trees. Even going by the assessee's claim of chittaadangal, there is no mention of any Eucalyptus Tree cultivation but reporting the existence of such trees.” 13. In view of the above, the AO is accordingly noted to have show- caused, the assessee to explain as to why the impugned land parcels should not be treated as a ‘capital asset’ and that the capital gains derived upon execution of JDA be brought to tax. Rejecting the explanation offered by the assessee, the AO is noted to have observed as under: “4.2 The arguments of the assessee are summarised below. 4.3 The assessee mainly relying on the fact as per the chittaadangal extract for the year 2010-11, conveniently omitting the chittaadangal extracts for t, financial year 2011-12 relevant to the Assessment Year 2012-13, has stat, that the property conveyed was agricultural land only. The A.R also stated that the distance of the land was 14 kms from the city limits as per the CBD notification issued in the year 1994. He also argued that the extend notification of Govt. Of Tamil Nadu published in the Gazette only after the entered by the assessee and others on 18.5.2011. 4.4 The AR of the assessee further submitted that, eucalyptus trees w cultivated on their land and consequent to entering into a JDA, the trees w cut and sale proceeds were admitted in the hands of Shri N Srinivasan (assessee's brother) for Asst. Year 2012-13. The AR further submitted that the classification of land by the Sub-registrar concerned is for the purpose of collecting stamp duty whereas the correct classification of ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::13 :: Land is reflected in the revenue records. The patta and chittaadangal and a certificate from the VAO clearly state that the land given for development was agricultural in nature and that the same requires to be adopted. Thus, the assessee contended that the land given by him and his brothers M/s. Opaline Hotels Pvt. Ltd. for Joint Development was not a 'Capital Asset' on the date of JDA/PO and hence does not attract any capital gains tax. The assessee filed his last written submission on 28.2.2015, which was placed on record. 5. Findings of the Assessing Officer: 5.1 With increasing prosperity, people living in cities have been buying se homes (which are often farmhouses) and agricultural land in the vicinity of cities. Capital gain is chargeable to tax on the transfer of a capital asset definition of \"capital asset\" excludes agricultural Land. There are two excer, to this exclusion. The first is agricultural Land that is located within munict] cantonment board limits, where the population of the municipality/ canton l is at least 10,000. The second is land which is within certain notified dis (which can be up to 8km) from the limits of notified municipalities/ canto, boards. Agricultural land that is situated in these areas would be a capital and the sate of such land would, therefore, be subject to capital gains tan only in the case of agricultural land located outside these areas that capital gains tax liability would not arise on sate. In the assessee's case as per the Notification issued by Government of Tamil Nadu in G.O.No.256 dt. 26.12.2009 (Refer Annexure 1); Semmancherg' on OMR is the place where the corporation limit ends as per the above GO of Government of Tamil Nadu. It was also stated by the VAO that from Semmenchery to the impugned land where the property is being developed for villas is situated within two kilometre from the extended corporation limit. 5.2 For most major Cities, the maximum permissible distance of 8km has been notified. How is this distance from the municipal limits to be computed - the distance as the crow flies (direct distance) or the distance by road? The road distance is always normally more than the direct distance as roads rarely follow a straight path. One high court decision indicates that the measurement is to be of direct distance, as the crow flies, and not on the basis of the road distance. 5.3 For this purpose, a panchayat would not be regarded as a municipality, as a panchayat and a municipality are quite distinct. However, town committees and notified area committees would be ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::14 :: considered on a par with municipalities and cantonment boards for the purpose. 5. 4 The other more important aspect is - what exactly is meant by agricultural land? Is it sufficient for agricultural land to be classified so in land revenue records? Or does it actually have to be cultivated? The Hon'ble Courts have generally taken a view that it is not merely the land revenue classification as agricultural or non-agricultural that matters. but various other factual aspects need to be taken into account to determine whether the land that is sold is agricultural or not. The matter has to be decided by looking at the cumulative effect of all the facts and not on the basis of any one fact. Some of the factors considered by courts are: (1) the classification of the land in official records, (2) whether the land is assessed to land revenue (tax) or not, (3) whether the land is capable of being used for cultivation, (4) whether the land is actually being used for cultivation by the owner, (5) most importantly, the intention of the owner in holding the land and the character of the adjoining land-agricultural, residential, commercial or industrial. 5. 5 For instance, in a case where land is located in an important and busy thoroughfare, surrounded by industrial and commercial buildings, no agricultural activity was carried out in the vicinity but vegetables were being grown on the land, the Hon'ble Supreme Court has taken the view that mere cultivation would not change the character of the land from non-agricultural to agricultural. In another decision, a high court has held that the fact that the land is being sold for non-agricultural purposes is one of the factors that is to be considered for the purpose of determining whether the land is agricultural or not. 5.6 If agricultural land is being held by an investor to reap the benefit of capital appreciation and is not being cultivated or intended for cultivation, sale of such agricultural land automatically attracts capital gains tax. 5.7 A genuine agriculturist cultivating agricultural land, in the specified areas, in any case is entitled to an exemption if he reinvests the capital gains on sale of agricultural Land in acquisition of agricultural land. ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::15 :: 5.8 In the instant case, as per classification of lands in official records, the Tahsildar, Tiruporur vide Letter dt. 27.02.2015 (Refer Annexure 2 containing pages 1 to 19) reported that for the Financial Years 2009-10, 2010-11 and 2011-12 stating that Tax on Agriculture Income was not levied for the properties held by the assessee and his brother. Thus the said land is not assessed to land revenue (tax) on account of agricultural activities. The assessee has reported only a megre agricultural income of Rs.2.08 lakhs for the year under consideration. In this regard, the failed support any documentary proof such as Income and Expenditure for earning such agricultural income, copy of sale bills for sale of agricultural produce, purchase of any fertilizer and other related expenses. For having generated agricultural lands. Therefore, the assessee's claim of Rs.2. 08 Lakhs as income under the head agricultural income is rejected and the same is brought to tax under the head income from other sources. 5.9 Regarding whether the land is capable of being used for cultivation or not, a verification of the chittaadangal of Revenue Department for the financial year 2010-11 (pasali year 1420) reveal that the existence of Eucalyptus Trees was only reported. On perusal of Columns 11 to 18 of the chitta adangal extracts, which categories the percentage of cultivation, month in which such cultivation was done etc. have all been left blank. For the financial year 2011-12 (pasali year 1421), the revenue authorities have categorised the said lands as non-agricultural lands. 5.10 Regarding the next test a.s to whether the land is actually being used for cultivation by the owner, going by the facts of the case, assessee along with his brothers stated to have inherited agricultural lands at Navalur and Egathur during 1980s and in the FY 2006-07, sold substantial portion of the lands for a substantial consideration of Rs.16.50 crores and from the same FY i.e. 2006-07 to 2007-08, the assessee and his brothers acquired lands in the same area to the extent of 8. 85 acres. 5.11 Thus, the assessee and his brothers bought the lands in the period 200607 to 2007-08 to the extent of 8.85 acres with an intention to reap the booming growth in the real estate market in the said area. It may be noted here the area Egattur-Navalur on OMR, Chennai, where the assessee is situated, was developing in to a software hub or IT corridor of Chennai due to the fact the Govt. of Tamil Nadu set up a TIDEL PARK (construction started in 1999 and ended in 2000) which is an information technology park, largest in Asia inaugurated on 4th July ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::16 :: 2000. As a consequence, on OMR, various multinational software companies, BPOs and other related services companies have established and that the employees of such organisations were relocating to nearby areas and the properties in Navatur and Egathur were fetching a premium price owing to escalation of demand 5.12 The entire scenario clearly shows that the intention of the assessee and his brothers was not to carry on any agricultural activities and knowing that such activities would not yield the expected results. The assessee's intention of making such investments only to tap the booming real estate market in Egatur & Navatur. 5.13 It is pertinent to point out here that the assessee had already enjoyed the tax benefit of sale of lands as agriculture in nature in the year 2006 for the sale consideration of Rs.16.50 crores, it is not justifiable on the part of the assessee to make a further claim of exemption on the sale of lands as agriculture, as the intention of the assessee and others was only to reap the fruits of real estate market which is further established by the short duration of holding, as the assessees after purchase of the lands during the periods 2006 and 2007, started negotiating with a developer for converting the property/lands into villas/ flats/ apartments etc. in the year 2008 vide agreement as mentioned supra. 5.14 As regards, the character of the adjoining lands, the enquiry report of the Inspector of Income Tax, attached to this office, clearly shows that the assessee's lands on which the builder is promoting/ developing villas is situated right on the next door of M/s. Cognizant Technology Solutions (a leading software company acronym CTS). Further, within a radius of 200 metres, the JV developer/builder of the assessee is promoting a. skyscrapers (residential apartments) called \"OPALINE\" as discussed supra and the assessee also has got a share in the skyscrapers as an additional offer vide supplementary agreement dt. 20.05.2011 and accordingly he got a. flat in Flat NO.13A, Sky Villa, 5209 square feet of constructed/ carpet area. Further, it is strategically located close to the famous SJPCOT IT Park, on 6 Lane OMR, Chennai, which is the heart of Chennai's IT Corridor and is also the home to IT majors such as TCS, Polaris etc. In addition to the above, Chettinad Hospital located there is a mere 5-minute drive and the American International School and other educational institutions are also located in the vicinity. Therefore, it is very clear that the character of the adjoining land is not agriculture in nature but only residential, commercial or industrial. Keeping the above cumulative effects of facts ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::17 :: in view, the assessee's A.R stand that extended Corporation limits of Chennai not applicable in the assessee's case, has no relevance as the land itself lost the character of an agricultural land. 6. The sum totality of the above discussions would clearly establish that the lands loose the character of agricultural in nature and it is a fact that the said property is situated on a 6-lane Road (OMR) IT Corridor which is a busiest thoroughfare in city and which is well surrounded by IT parks and skyscrapers/ residential multi-storey apartments and it is also a fact that no agricultural operations is being carried on any land nearby. In this connection, the decision of the country Apex Court in the case of Gemini Pictures Circuit Pvt. Ltd. reported in 220 ITR 43 (SC) wherein it was held that where certain lands were located in most important and busiest thoroughfare in city and the land was surrounded on all sides by industrial and commercial buildings and no agricultural operations were being carried on any land nearby, the mere fact that vegetables were being raised thereon at the time of sale or for· some years prior thereto, could not change the nature and character of the land from non- agricultural to agricultural. 6.1 Accordingly, the asset transferred by the assessee is treated as capital asset as per the provisions of Sec.2(14) of the Income-tax Act, 1961 as the possession was handed over by the assessee and others in May, 2011, vide a power of attorney, the gains arising out of transfer of such capital asset being property as defined in the said section and as the transfer tool place during the year 2011-12, the same is brought to tax in the Assessment Year 2012-13 as per the provisions of Sec. 45 of the Income-tax Act, 1961.” 14. In light of the above observations, the AO is noted to have framed the impugned assessment order dated 02.03.2015 u/s 143(3) of the Act, wherein he computed the taxable value of capital gains in the following manner: - ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::18 :: “7. Subject to the above, the total income is computed as under: Consolidated working of Capital gain in the hands of Shri P.N Manisundar& Brothers Capital Gains Sale Consideration Rs. Rs. - Non Refundable Deposit 8,00,00,000 -Buyback value of Land owners Share 13,85,56,35321,85,56,353 Less: Commission paid to Hanu Reddy Realty 70,00,000 21,15,56,353 Cost of Construction of villas to Land owners share (1,60,026.12 sq.ft @Rs2,5001- per sq.ft) 40,00,35,300 61,16,21,653 Long Term Capital Gain 39,05,55,880 Long term Capital Gain to the Share of: Shri P. NManisundhar 9,61,44,120 Shri N.S Srinivasan 7,24,57320 15. Aggrieved by the aforesaid action of the AO, the assessee is noted to have preferred an appeal before the Ld.CIT(A), who was pleased to allow the same inter-alia by order dated 18.05.2015 as under: “4.2.40 Subsequently the provisions. of section 2(14) of the Income Tax Act are / amended by the Finance Act, 1970, by introducing the present amendments at clause (iii). As a result, for the purpose of Income Tax Act, the agricultural lands have been classified in to three types, i.e. (i) those located within the territorial limits of municipality or cantonment boards; ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::19 :: (ii) those located within the distance of not exceeding 8 kms from the outer limits of the nearest municipality or cantonment board, as notified in the official gazette; and (iii) all other agricultural lands, i.e. other than those mentioned in (i) and (ii) above. The agricultural lands which are mentioned at (i) and (ii) above are specifically brought into the, definition of the capital asset u/s.2(14), w.e.f. 1970. All other agricultural lands are excluded from the ambit of capital asset from 1970 onwards. 4.2.41 All the 13 factors/indicators postulated by the Bupreme Court in the case of Sarifa Bibi Mohamed Ibrahim v. CIT (204 ITR 632)(SC), can be basically divided into 3 broad classifications, i.e. (i) location of the lands; (ii) nature of the lands and their use; and (iii) nature of the sale of the lands. 4.2.42 As a result of the amendment to section 2(14)i) by the Finance Act, 1970, all the factors/indicators of Sarifa Bibi Molhamed Ibrahim v. CIT (204 ITR 632)(SC), relating to the location of the lands, the developmental activities, extent of urbanization of the area in which the lands are located, etc, arc taken care of by the statutes itself. This leaves only two other major criteria to be seen, i.e.: (i) Whether the lands are agricultural lands as per the revenue records and are actually under agricultural use by the assessee as on the date of sale; (ü) The nature of the sale, i.e. whether the land was sold as an agricultural land to one or few persons or sold to various persons by converting into non-agricultural purposes and/or by dividing into plots, etc. 4.2.43 In the instant case, as detailed above, the lands are agricultural lands as per the revenue records and are under agricultural use till the lands are transferred by the assessee on 18.05.201l under the JDA. Further, the assessee transferred the Lands as agricultural lands only, that too, to one person only. Therefore, both of the above criteria are fulfilled in favour of the assessee. ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::20 :: 4.2.44 As held by the Supreme Court and also other Courts, a balanced consideration of totality of the circumstances has to be taken into account before deciding whether a particular land is an agricultural land or not for the purpose of section 2(14) of the Act. In the instant case, almost all the 3 factors/indicators given by the Supreme Court, in the case of Sarifa Bibi Mohamed Ibrahim v. CIT (204 ITR 632)(SC), are fulfilled in favour of the assessee. Therefore, the land transferred by the assessee is an agricultural land and does not constitute a capital asset within the meaning of section 2(14) of the Act. Further, the decision of Jurisdictional High Court in the case of M.S. Srinivasa Naicker & Others v. IT0, 2007] (292 ITR 481)01ad), is squarely applicable in the instant case. 4.2.45 In view of the above, the lands under consideration arc clearly agricultural lands falling outside the definition of \"capital asset\" u/s.2(14) of the Act. The sale proceeds of the assessee's agricultural land are, therefore, not liable for capital gains tax in the hands of the assessee/other co-owners. Therefore, the Assessing Officer's action of bringing the sale proceeds of the said agricultural lands to tax under the head 'capital gains', is not justified. Accordingly, the addition of long term capital gains of Rs.7,24,57,320/-, made by the Assessing Officer, is deleted. 4.2.46 It is also not out of context to mention here that though the above lands are agricultural lands as on the date of JDA with M/ s. Opaline Hotels P Ltd (i.e. 18.05.2011), the lands lost their character of 'agricultural' as soon as their possession was handed over to the developer. Further, there is a substantial time gap between the date of JDA (date of transfer of lands) and the receipt of the consideration in the form of constructed (built-up) area. The value of the constructed area might have been appreciated during this time gap. Even the cost of construction might have escalated during the period. Hence, neither the cost of construction of the constructed (built-up) area nor the sale/market value of the constructed (built-up) area can be considered as the 'value' of the consideration received in kind' for the lands transferred under the JDA. The fair and the most realistic method will be to adopt the fair market value of the lands as on the date of JDA, as the value of consideration received in 'kind' for transferring the lands to the developer as on the date of JDA. The sub-registrar's GLR is the best fair market value for this purpose. The sub-registrar's GLR of the assessee's lands as on 18.05.2011, as furnished by the assessee are as under: ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::21 :: DETAILS OF AGRICULTURAL LAND GIVEN FOR JOINT DEVELOPMENT (i) Navalur Village, Tiruporur Taluk, Kancheepura, District Survey No Extent ( in Acres) Guideline value Per Acre Total Value 46/2 2.31 3,50,00,000 8,08,50,000 55 1.49 2,00,00,000 2,98,00,000 56 1.47 2,00,00,000 2,94,00,000 47 0.47 2,00,00,000 94,00,000 60 0.62 2,00,00,000 1,24,00,000 61 0.91 2,39,58,000 2,18,01,780 45/ 2A 0.06 2,00,00,000 12,00,000 45/2B 0.06 2,00,00,000 12,00,000 54 1.31 2,00,00,000 2,62,00,000 57 0.95 200,00,000 1,90,00,000 58 0.70 2,00,00,000 1,40,00,000 46/1 0.38 3,50,00,000 1,33,00,000 46/2G 0.47 3,50,00,000 1,64,50,000 46/2F 0.46 3,50,00,000 1,61,00,000 Total 11.66 29,11,01,780 (ii) Egattur village, Tiruporur Taluk, Kancheepuram District Grand Total 15.66 41,11,01,780 4.2.47 Thus, the above amount of Rs.41,11,01,780/- (being the GLR of the 15.66 acres of land) would have been the consideration the assessee (and other co-owners) would have received on 18.05.2011 if they had gone for an outright sale, instead of JDA. Therefore, the Assessing Officer is directed to verify the correctness of the above GLR of the agricultural lands of 15.66 acres as on the date of JDA with M/s. Opaline Hotels P Ltd (i.e. as on 18.05.2011), and adopt the same (Rs.+1,11,01,780/-) as the deemed consideration for transfer of agricultural lands under JDA. The assessee, together with other co-owners, is eligible for exemption on this value of GLR Survey No Extent ( in Acres) Guideline value Per Acre Total Value 8/2 4.00 3,00,00,000 12,00,00,000 Total 4.00 12,00,00,000 ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::22 :: (Rs.41,11,01,780/-) of the total agricultural lands of 15.66 acres which are the subject matter of the JDA. 4.2.48 Next, when the assessee gets the constructed (built-up) area, the above GLR (of the total lands of 15.66 acres), as reduced by the non- refundable cash component (together with the amount received under buyback/ surrendered additional land) received from the developer, forms the deemed cost of the constructed (built-up) area of 1,60,026 sq.ft., received by the assessee and its proportionate UDS of the land. As and when the assessee sells this constructed area (received under JDA), the difference between 'the sale value of the constructed area (or a part, as the case may be) and the proportionate deemed cost (as mentioned above) will be taxable 'capital gains'. The period from the date of JDA with M/s. Opaline Hotels P Ltd and the date of sale of the constructed area will be the criteria to decide whether the capital gains are short term or long term. ….. 4.2.49 In view of the above discussions, the assessee's lands are agricultural lands and their transfer is not liable for capital gains tax. Further, the receipt of constructed (built-up) area is one of the modes of receiving the consideration for the transfer of the agricultural lands under JDA and hence not liable for tax. Therefore, the Assessing Officer is not justified determining the taxable 'capital gains' from the transfer of agricultural lands under JDA. The 'long term capital gains' of Rs.7,24,57,320/-, determined by the Assessing Officer, based on the JDA with M/s. Opaline Hotels P Ltd is, therefore, deleted.” 16. Aggrieved by the action of the Ld.CIT(A), the Revenue is in appeal which is numbered as ITA No. 2095/Chny/2015. 17. During the pendency of this appeal, the AO is noted to have reopened the assessment of the assessee by issue of notice u/s. 148 of the Act dated 28.02.2019. The reasons recorded for reopening the assessment is noted to be as follows:- ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::23 :: “In the assessment completed under scrutiny, in respect of the lands transferred in Egattur and Navalur villages of Chinglepet District, under a Joint Development Agreement by the assessee and his brothers, the assessing Officer computed a Long Term Capital Gain of Rs.72457320 for the assessee as under: Consolidated working of capital gain in the hands of the assessee & his brothers Non refundable deposit Rs. 80000000 Buy back value of land owners share Rs. 138556353 Rs. 218556353 Less: Commission paid to Hanu Reddy Realty Rs. 70000000 Rs. 211556353 Cost of construction of villas to land owners share (160826.12 sq.ft. 2500 per sq.ft) Rs. 400035300 Rs. 611621653 Less: Indexed coat of acquisition of 15.94 acres of land Rs. 221065773 Long Term capital Gain Rs. 390555880 Assessee share of capital gain Sale consideration Cash consideration (1/4th share) Rs. 52889088 Cost of construction (29933.87 sq.ft @Rs.2500 per sq.ft) Rs. 74834675 Rs. 127723763 Less: Indexed cost of acquisition (1/4th share) Rs. 55266443 Long Term Capital Gain Rs. 72457320 It is observed from the assessment record that originally, the assessee and the co-owners entered into a joint development agreement for the development of the lands belonged to them with the sharing ratio of 40:60 of the super built-up area. However, the agreement was varied at various stages and at last, a fresh joint development agreement was entered into by the assessee and his relatives along with adjacent landowners on 18.05.2011 with M/s. Opaline Hotels Pvt. Ltd (Developer) in supersession of the original agreement dated 11.02.2008. The possession of the property were also handed over by the land owners to the developer on this date of agreement. A general power of attorney was executed on 12.05.2011 for sale of undivided share of land. According to para 4.3 of the JDA dated 18.05.2011, the deposits and the apartments such values as specified in annexure-c along with the cost of the construction of the villas allotted to the land owners shall be the consideration paid by the developer/ confirming party to the land owners towards the transfer of the undivided share of land allotted to the developer by the land owners in the scheduled property. The area of schedule property to be developed was 22.18 acres (including 15.86 acres of land which belonged to the assessee and his relatives), out of which an extent of 2.22 acres of land was gifted to Navalur panchayats toward open space reservation and the balance area of 19.96 acres war available for development. In de JDA, the assessee and his three relatives were allotted the following extent of built up area of villas and lands as their share in addition to a villa each in Sky Villa Project of M/s. Opaline: Olympia Panache Villa residences Chennai total urea statement. Total No. of plots (1) Villa type(2) Built-up villa area in sq.ft(3) Plot area in sq.ft(4) Common area in sq.ft (5) Total land area allotted in sq.ft (4) + (5)-(6) 123 Elite 599434.07 605648.94 253064.63 858713.57 ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::24 :: Assessee and his relatives share S. no Name of the land owner No. of villas allotted Built up villa area in sq.ft Plot area in sq.ft Common area in sq.ft Total land allotted in sq.ft 1 Sri. P,N. Manisundar 6 28073.14 25003.77 11851.73 36855.50 2 Sri. N.S. Srinivasan 5 23327.87 20814.52 9848.43 30662.95 3 Sri. P.S. Mohan 0 42338.46 43147.11 17874.12 61021.23 4 Sri. P.S Saravanan 7 35133.20 34024.04 14832.24 48826.28 Total 27 128872.67 122989.44 54406.52 177395.96 However, It is seen from the supplemental agreement dated 20-05-2011 that the assessee and his relatives were entitled to an additional extent of land amounting to 18807.77sq.ft for which the developer had agreed to pay a sum of Rs.38989194 calculated at Rs.9.00 crore per acre to the assessee and his relatives. So, the total land area allotted to the land owners in the project comes tο 196203.73 sq.ft (177395.96 +18807.77). Finally, the area of land divided by the assessee and his relatives with the developer worked out to be in the ration of 31.82: 68.18 as detailed below: - Total area of land developed in the project 22.18 acres Less: land gifted so panchayat 2.22 acres Land available for development 19.96 acres Therefore, overall proportionate land area allotted to the assessee and his relatives 966952 X 196203.73 866264 = 219008.97 sq.ft. Total area of land surrendered by the assessee and his relatives =15.86 acres or 688324 sq.ft As such, ratio of sharing of the land between the assessee and his brothers with the developers = 219008.97 sq.ft X 100 688324 sq.ft = 31:82 : 68:18 According to section 48, the income chargeable to \"Capital Gain\" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital assets the following amounts: - (i) Expenditure incurred wholly and exclusively in connection with such transfer; (ii) The cost of acquisition of the asset and the cost of any improvement thereto; In this case, according to the assessee, on the date of the joint development agreement dated 18.05.2011. Since the possession of the property was handed over and the power of attorney executed, the sale got completed on 18.05.2011. The assessee had also contended that the sale of UDS in land made by the developer subsequently as POA and the consideration received thereon by the developer is not relevant to the assessee and his brothers. As already referred, the assessee and his brothers were entitled to an additional extent of land amounting to 18807.77 sq.ft for which the developer had agreed to pay a sum of Rs.38989194 calculated at Rs.9.00 crore per acre to the assessee and his relatives. So, for the purpose of computation of Long Term Capital gain, the full value of consideration received by the assessee and his brothers needs to be computed as under:- ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::25 :: Non-refundable deposit received Rs. 10,00,00,000 Cost of 68.1896 of 15.86 acres of land transferred to the developer @ Rs.9.00 crore per acre Rs. 97,32,01,320 Add: Cost of four villas allotted to the assessee and his brothers in Opaline project (20502.51 sq. ft @ Rs.4000 per sq.ft) Rs. 8,20,10,040 Full value of consideration received Rs. 115,52,11,360 S. No Name of the land owner No. of villas allotted Built – up villa area in sq.ft Plot area in sq.ft Common area in sq.ft Total land allotted in sq. ft. 1. Sri. P.N Majumder (assessee) 6 28073.14 25003.77 11851.73 36855.50 2. Sri N.S. Srinivasan 5 23327.87 20814.52 9848.43 30662.95 3. Sri. P.S. Mohan 9 42338.46 43147.11 17874.12 61021.95 4. Sri. P.S. Saravanan 7 35133.20 34024.04 14832.24 48856.28 Total 27 128872.67 122989.44 54406.52 177395.96 However, it is seen from the supplemental agreement dated 20-05-2011 that the assessee and his relatives were entitled to an additional extent of land amounting to 18807.77sq.ft for which the developer had agreed to pay a sum of Rs.38989194 calculated at Rs.9.00 crore per sere to the assessee and his relatives. So, the total land area allotted to the land owners in the project comes tο 196203.73 sq.ft (177395.96 + 18807.77). Finally, the area of land divided by the assessee and his relatives with the developer worked out to be in the ration of 31.82: 68.18 as detailed below:- Total area of land developed in the project 22.18 acres Less: land gifted to panchayat 2.22 acres Land available for development 19.96 acres Therefore, overall proportionate land area allotted to the assessee and his relatives 966952 X 196203.73 866264 = 219008.97 sq.ft. Total area of land surrendered by the assessee and his relatives = 15.86 acres or 688324 sq.ft As such, ratio of sharing of the land between = 219008.97 sq. ft X 100 the assessee and his brothers with the developers 688324 sq. ft = 31.82: 68.18 According to section 48, the income chargeable to \"Capital Gain\" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts:- (i) Expenditure incurred wholly and exclusively in connection with such transfer; (ii) The cost of acquisition of the asset and the cost of any improvement thereto; In this case, according to the assessee, on the date of the joint development agreement dated 18.05.2011. Since the possession of the property was handed over and the power of attorney executed, the sale got completed on 18.05.2011. The assessee had also contended that the sale of UDS in land made by the developer subsequently as POA and the consideration received thereon by the developer is not relevant to the assessee and his brothers. As already referred, the assessee and his brothers were entitled to an additional extent of land amounting to 18807.77 sq.ft for which the developer had agreed ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::26 :: to pay a sum of Rs.38989194 calculated at Rs.9.00 crore per acre to the assessee and his relatives. So, for the purpose of computation of Long Term Capital gain, the full value of consideration received by the assessee and his brothers needs to be computed as under- Non-refundable deposit received Rs. 10,00,00,000 Cost of 68.1896 of 15.86 acres of land transferred to the developer @ Rs.9.00 crore per acre Rs. 97,32,01,320 Add: Cost of four villas allotted to the assessee and his brothers in Opaline project (20502.51 sq.ft @ Rs.4000 per sq.ft) Rs. 8,20,10,040 Full value of consideration received Rs. 115,52,11,360 Whereas, it is seen from the assessment order that the Assessing Officer had computed a sale consideration of Rs.61,16,21,653, resulting in the short computation of Long Term Capital Gain to the assessee and his brothers to the extent of Rs. 54,35,89,707(Rs.115,52,11,360 - Rs.61,16,21,653). The assessee's share of LTCG escaping assessment at 1/4th share amounted to Rs. 13,58,97,427. I have reason to believe, although substantial question of law not involved and for perversely of facts mentioned above that the income chargeable to tax has escaped assessment and I solicit the approval for issue of notice u/s. 148 for the assessment year: 2012-13.” 18. Reading of the above reasons shows that, according to AO, the assessee had only referred to the JDA dated 18.05.2011 pursuant to which the ‘transfer’ took place and in terms of which the long term capital gains was computed. The AO however noted that, there was a supplemental agreement dated 20.05.2011 entered into between the assessee and his brothers and the Developer, in terms of which the terms of consideration was modified / increased. The facts relating to this supplemental agreement has already been taken note of earlier at Para 8 of this order. The AO accordingly observed that, the additional area received by the assessee and his brothers pursuant to the supplemental agreement as well as the correct value of non-refundable deposit was not brought on record and accordingly, due to absence of these correct facts, ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::27 :: the correct value of LTCG was not computed. In light of this tangible material, the AO is noted to have observed that the original assessment was framed on perverse facts and accordingly recorded the above reasons to reopen the assessment and compute the correct value of LTCG. In response, the assessee is noted to have objected to the reopening of assessment on the primary ground that, when the Ld. CIT(A) while deciding the appeal against the original assessment order had already held that the land in question was in nature of ‘agricultural land’ and therefore, the assessee was not liable to capital gains tax, the impugned reopening for re-computation of LTCG was unjustified. The assessee further objected to the determination of the value of the non-refundable security deposit. The AO is noted to have objectively dismissed these objections by observing as under:- “For this the assessee replied and they are dealt with point wise: 1. At the outset it is to be stated that non refundable deposit was only Rs.8 crore and not Rs.10 crore in the letter. 2. Assessee has referred to the CIT(A) order in ITA No.63 and 81 /CIT(A)-7/2014-15 dated 18.05.2015 for A Y 2010-11 and 2012-13, wherein it was held that the LTCG assessed at Rs.7,24,57,320/- based on the JDA with M/s Opaline Hotels Pvt. Ltd. was to be deleted by determining the nature of lands transacted being agricultural and no CG was liable for tax. This submission is true and accepted but a second appeal has been before the ITAT and the matter had not reached finality. 3. The consideration received is only Rs.8 crores and not Rs.10 crores, which is proved by evidences obtained from the entity M/s Opaline Hotels Pvt Ltd. ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::28 :: …. The assessee's submissions are carefully considered. Nowhere and at any point of time a refusal or rejection has been mentioned that the assessee and his brothers were not at all entitled additional extent of land. It is also to he mentioned here that scrutiny assessment was made on the facts submitted during that proceedings, but the issue of entitlement of assesse and his brothers of an additional extent of land was not submitted and considered. Hence, it is to be stated here that there is no assumption and presumption. It is also to be reiterated that at any point of time the assessee or the other entity has not rebutted that no additional allotment of extent of land was made or the reconciliation of actual land development, superstructure has been made. As per para 4.3 of the JDA dated 18.05.2011, the assessee entity and other co-owners are entitle to additional extent of land measuring 18807.77 sq. ft. will be divided in the hands of assessee and co-owners….” 19. The AO is noted to have primarily observed that, the assessee and his brothers were entitled to an additional extent of land of 18,807.77 sq.ft. for which the Developer, which had not been taken into consideration and that, having regard to the value of Rs.9 crore per acre agreed with the Developer in the supplemental agreement, the actual capital gains to be assessed in the hands of the assessee would be Rs.20,83,54,747/- [Rs.13,58,97,427/- (+) Rs.7,24,57,320/-]. 20. Being aggrieved by this order passed u/s 147/143(3) of the Act dated 31.12.2019, the assessee carried the matter in appeal. The Ld. CIT(A) is noted to have simply cut pasted the order of his earlier predecessor dated 18.05.2015 (Supra) and allowed the appeal by reiterating that the land transferred was agricultural in nature and ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::29 :: therefore not liable to income-tax. The relevant findings of Ld. CIT(A) taken note of by us, is as follows:- “From the perusal of the above order, it is considered that the then CIT(A)-7, after taking into consideration various materials and facts, has given a factual finding that the lands transferred under JDA by the appellant and his brothers are agricultural in nature. In completing the re-assessment proceedings, the AO has not brought on record any material to rebut the factual findings of the CIT(A). Further, there is no reason to interfere with the decision of the predecessor since, as on date, there is no order passed by a higher appellate authority overriding the factual findings therein. Placing reliance on the discussions of the predecessor, it is held that the lands to the extent of 15.66 acres transferred under JDA, by the appellant and his brothers are agricultural in nature and accordingly are not liable for capital gains tax. Accordingly, the addition of long-term capital gains of Rs.20,33,54,747/- (a) Rs.7,24,57,320/- as per 143(3) order dated 02.03.2015 and (b) Rs.13,08,97,427/- as per re-computation on amount relating to additional entitlement of land in the appellant's hands and other i.e. ¼ of Rs.52,35,89,707 made by the AO in the impugned re-assessment proceedings, is deleted. In the result, the grounds of the appellant are allowed. The A.O. is directed to give effect to this appellate order.” 21. Aggrieved by the above order of the Ld. CIT(A), the Revenue is in appeal before us which is numbered 22/Chny/2021. 22. Assailing the action of the Ld. CIT(A), the Ld. DR took us through the detailed findings recorded by the AO in the assessment/re- assessment orders holding the land in question to be a non-agricultural land and urged that the AO had rightly brought the same to tax by way of capital gains. In support of the AO’s contention, the Ld. DR has placed on record inter-aliapaper book comprising of 54 pages which have been ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::30 :: taken on record. He took us through the Notification GO Nos. 256 dated 26.12.2009 & 280 dated 09.11.2010 and showed us that, the municipal limits of Chennai had been extended to include Semmanchery (also known as Chemmenchery) within the municipal limits and thus argued that, the land in question could not be classified as agricultural. He further relied upon the notification of the town planning authorities, wherein the survey numbers in which the property in question was located was classified under urbanized zone. He also relied upon the Inspector’s report and the enquiries made from VAO by the AO. 23. The Ld. DR further showed us that, the assessee never had any intention of carrying out any agriculture on this land and that majority of the parcels were acquired in 2007 and onwards in a systematic and organized manner, which according to him, showed that the assessee and his brothers always intended to undertake real estate development on this land. He further argued that, the argument of the assessee that, he was carrying on agriculture on the land was not backed by any material or evidence. He submitted that, the alleged agricultural income of Rs.2,08,000/- shown by the assessee from sale of eucalyptus trees was not genuine and that this was done in this year only to give a colour of agriculture to the impugned transaction. He further argued that, no ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::31 :: prudent person would acquire land worth in excess of Rs.14.50 crores to carry out agricultural operations of only Rs.2 lacs. According to him therefore, this was simply a concocted story made up by the assessee having no basis whatsoever. The Ld. DR also filed written submissions in support of his contentions, which have been taken on record. 24. Per contra, the Ld. AR for the assessee vehemently supported the orders of the Ld. CIT(A). He referred to the findings recorded by the Ld. CIT(A) at Paras 4.2.16 to 4.2.21 which, according to him, established that the land was agricultural in nature. He submitted that, the Semmanchery (also known as Chemmenchery) was included in the municipal limits only by Notification GO No. 97 dated 19.07.2011, which was after the date of the JDA viz., 08.05.2011 and therefore since the land at the material time was not situated within the municipal limits, it was to be regarded as agricultural land. He further raised a new argument that, even otherwise, for the purposes of Section 2(14)(iii)(b), the AO was required to reckon the municipal limits as notified by the Central Government on 06.01.1994 and not the subsequent extensions/delimitations done by the respective State Government / municipal corporations. He showed us that, having regard to the Notification dated 06.01.1994, the land in question fell outside the prescribed 2kms/8kms of the municipal limits and therefore ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::32 :: the Ld. CIT(A) had rightly treated the land in question to be agricultural land. In this regard, the Ld. AR has relied upon several decisions, which have been elaborately set out in his written submissions taken on record. 25. In his rejoinder, the Ld. DR objected to this new argument raised by the assessee stating that the assesse could not raise this altogether new argument at this stage, because the assessee is not in appeal before this Tribunal. The Ld. DR further contended that, the new argument being advocated by the AR would result in frustrating the subordinate legislation. According to him, the intent of Parliament cannot be that, the urbanization from 1994 to 2011 viz., across two decades, has to be ignored, and that, even if the land in question is now situated within the prescribed limits from municipal limits, then also such land is to be classified as agricultural because it was so, two decades ago in 1994. In this regard, the Ld. DR has also relied upon several decisions, which have been elaborately set out in his written submissions, placed on our record. 26. We have heard both the parties, gone through the rival submissions and perused the material placed on our record. The principal dispute in these appeals are that, whether the Ld. CIT(A) was justified in holding that, the land in question transferred by the assessee and his brothers, pursuant to the JDA dated 18.05.2011, was an agricultural land or not. ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::33 :: Before adverting to the facts of the case, let us first have a look at the relevant legal provisions and the prevailing position of law. It is noted that, Section 2(14) of the Act, as it stood then, defined the term ‘capital asset’ to not include the following: “(iii) “agricultural land in India, not being land situate— (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board 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, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette.” 27. From the above definition, it shall be noted that where the assessee owns any agricultural land which is situated outside the limits of the municipal/cantonment board as prescribed above, it shall not be regarded as a ‘capital asset’ for the purposes of Section 2(14) of the Act. Consequent thereto, any proceeds received from sale of such agricultural land would be in the nature of capital receipt not liable to income-tax. Reading of the above provision therefore suggests that, the primary criterion to qualify as an agricultural land is not only functional but also ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::34 :: geographic. In order to avail the exclusion/exemption set out in Section 2(14)(iii) of the Act, the two pre-requisites are as follows: i. The land must be agricultural; and ii. The land must be situated outside the area of the municipal limits/cantonment board, as prescribed therein; 28. In respect of the first condition, we find that the jurisdictional Hon’ble Madras High Court in the case of CIT Vs GRK Reddy & Sons HUF (277 Taxman 127) has held that, it is necessary for the assessee to establish that agricultural operations were carried on prior to his purchase and after purchase, in order to claim the land to be agricultural in nature. In the decided case, the assessee is noted to have only shown before the AO that, the land was classified as agricultural in land revenue records and therefore according to the assessee, it was sufficient proof to hold the land to be agricultural in nature. The Hon’ble High Court is noted to have held that, mere classification of the land in the revenue record, as agricultural land, does not conclusively prove that the nature of the land is an agricultural land. Further, the High Court also took note of the fact that, the lands were transferred to non-agriculturists for non-agricultural purpose and held that this would also be one of the relevant factors to ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::35 :: hold the same to be non-agricultural. The relevant observations of the Hon’ble High Court is as follows: - “4. The assessee declared an agricultural income of Rs. 1,80,000/-for rate purposes. The regular assessment in the assessee's case was completed under section 143(3) of the Act by order dated 28-12-2010. Subsequently, the proceedings were initiated by the Commissioner of Income-tax under section 263 of the Act dated 28-3-2013 and the show cause notice was issued to the assessee calling upon them to explain as to why the subject capital asset should not be considered as 'not being an agricultural land'. Inspite of opportunity, the assessee did not appear before the Commissioner of Income Tax. The authority proceeded to decide the matter on merits and passed an order on 28-3-2013 held the assessment order dated 28-12-2010 suffers from errors and it is prejudicial to the interest of the revenue and accordingly, the same was set aside and the assessing officer was directed to cause necessary enquiry giving reasonable opportunity to the assessee and to redo the assessment. This direction was complied by the assessing officer and notices were issued to the assessee, who appeared through the authorised representative, though belatedly, questionnaires were prepared and issued to the assessee and after considering all the aspects, the assessment was completed by order dated 14-3-2014 treating the land as 'non-agricultural land' and would come within the category of 'capital asset' under section 2(14) of the Act, chargeable to tax under the head 'capital gains'. Aggrieved by such order, the assessee preferred appeal to Commissioner of Income-tax (Appeals)-14, Chennai (CITA), who by order dated 26-4-2018 dismissed the assessee's appeal. Aggrieved by the same, the assessee preferred the appeal before the Tribunal, which was allowed by the impugned order, challenging the order passed by the Tribunal, assessee is before us, by way of this Appeal. 5. The Tribunal reversed the order passed by the CITA, who confirmed the order of assessment only on the ground that the lands were shown as agricultural lands in the revenue record during the relevant period and therefore, would not fall within the purview of the definition of 'capital asset' under the Act. Unfortunately, the Tribunal applied the wrong test and ignored the settled legal position, as held in the case of Smt. Sarifabibi Mohmed Ibrahim v. CIT [1993] 70 Taxman 301/204 ITR 631 (SC)…. ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::36 :: 9. ….That apart, the lands were held by the assessee only for a short period of one year, sold to a company, in which the Kartha of the assessee was the Chairman. The land was put to use for construction of a special economic zone. The assessee offered in the assessment a sum of Rs. 1,80,000/- stated to be agricultural income, this plea was unsubstantiated. 10. The Village Administrative Officer, who had been examined by the assessing officer stated that the land are barrel land, therefore, a decision cannot be taken merely based on entry in the revenue record. To be noted that the revenue records were not mutated in the name of the assessee, but stood in the name of the assessee's vendor. The holding period by the assessee is very crucial in the case, as it is only one year, all these factors were rightly taken note of by the assessing officer and held that the land is not an 'agricultural land'. … 15. We also take note of the decision relied on by Ms.V.Pushpa, learned standing counsel for the appellant in the case of Fazalbhoy Investment Co. (P.) Ltd. v. CIT [1989] 42 Taxmann 22 (Bom) to hold that the finding of the Tribunal in the impugned order is utterly perverse. It has totally brushed aside the evidence, which was brought on record by the assessing officer, which was re-appreciated by the CITA to hold against the assessee. We also refer to the decision relied on by the revenue in the case of Rajiv Dass v. Dy. CIT [2019] 103 taxmann.com 192/264 Taxman 40/414 ITR 37 (Delhi), wherein the Tribunal took note of the facts and held that the assessee therein had undertook the agricultural activities for two years on sharing basis through a person on crop sharing (batai) basis. In the instant case, nothing was brought on record by the assessee to establish that the agricultural operations were carried on prior to his purchase and after purchase. 16. Further, the conduct of the assessee in selling the property within a short period of one year and the property being used to develop the SEZ ought to have taken note of by the Tribunal while deciding the character of the land, as mere classification of the land in the revenue record, as agricultural land, does not conclusively prove that the nature of the land is an agricultural land. As noted above, the lands were transferred to non-agriculturists for non-agricultural purpose and this would also be one of the relevant factors to test the case of the assessee. The Tribunal relied on the decision in the case of M.S. Srinivasa Naicker v. ITO [2008] 169 Taxman 255/[2007] 292 ITR 481 (Mad.), the said Judgment could not have been applied to the case on hand because in the said decision ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::37 :: on examining the facts and as admitted by the revenue, on the date of sale, agricultural operations were carried on in the lands, which is not so in the case of the assessee. Thus, for all the above reasons, we find that the Tribunal erred in interfering the order passed by the CIT[A] affirming the order of assessment dated 14-3-2014. In the result, the present Tax Case Appeal is allowed and the impugned order passed by the Tribunal is set aside and the substantial questions of law are answered in favour of the revenue. No costs.” 29. We also find the decision of Hon’ble Bombay High Court in the case of Lilavati M Amin Vs CIT (201 ITR 193) to be of relevance. In the decided case, the assessee had acquired the land in 1945 and later on sold the same in 1966. According to the assessee, the land was agricultural and therefore no liable to capital gains tax. On appeal the Hon’ble Bombay High Court held that, the test in order to decide whether the land is agricultural or not, depends upon the actual condition of the land at the date of valuation and its intended use. The Hon’ble High Court noted that, in the instant case, although in the revenue records, the land was classified as agricultural land and land revenue was paid, but there was no positive evidence to show that, the land was ever used for agricultural purpose. It is further noted that, the land was situated in non- agricultural area and being exploited for non-agricultural purposes. Also, the land was sold for a price much higher than the price which an agricultural land would fetch. Accordingly, the Hon’ble High Court held ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::38 :: that, the capital gains arising from sale of land in question could not be excluded under section 2(14)(iii) of the Act. 30. In light of the above decisions (supra), we note that the first pre- requisite for availing the benefit of exclusion set out in Section 2(14)(iii) of the Act is that, the assessee is required to demonstrate that the land in question was indeed agricultural. Reverting back to the facts of the present case, we observe that, the assessee along with his brothers initially held 2.31 acres of land in OMR, Chennai since 1973. They had further acquired land of 5.08 acres in the years 1982-1983 taking the aggregate holding to 7.39 acres. Subsequently, the assessee along with his brothers is noted to have acquired adjoining large parcels of land in a systematic and organized manner from 2006 onwards of 8.27 acres for aggregate consideration of Rs.14.50 crores. Hence, it is noted that the majority of the land transferred in question was acquired just one-two years prior to the year in which the assessee entered into MOU with the Developer in the year 2008. The assessee is noted to have been involved in protracted negotiations with the Developer and thereafter finally entered into formal JDA on 18.05.2011 in terms of which, the land was handed over to the Developer for a mix of non-refundable deposit, cash consideration and constructed space, which was later modified on ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::39 :: 20.05.2011. The land acquired and held by the assessee is found to have remained always vacant and at no time, was any active agricultural operations conducted thereupon. The conduct of the assessee and his brothers therefore, in our considered view, shows that the land was acquired and being all along held for non-agricultural purposes and that neither the assessee nor his brothers ever intended to carry out any agricultural activities on the said land. In view of the above decisions (supra), we find merit in the AO’s finding that, the land in question cannot be said to be agricultural. 31. It is also not disputed by the assessee that, the land was given for development of residential real estate to commercial developer. The said land is noted to have been physical inspected by the AO and he found that, the land was situated in an already developed and urbanized area of OMR, Chennai on a six-lane road. The land in question was situated in the IT corridor of Chennai. It was next to IT major - M/s. Cognizant Technology Solutions and in close proximity to the SIPCOT IT Park. There were full-fledged hospitals and educational institutions in the vicinity of this land. Also, within 100 meters of the land, another real estate group, M/s Olympia Group, had developed Phase I of their project, which began in 2007 and was completed in 2011. The Ld. AR for the assessee was ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::40 :: unable to controvert these factual findings made in the Inspector’s report. Having regard to these facts, we observe that, there were rapid developmental activities and the land was situated in a bustling urban area and that the impugned land in question was clearly non-agricultural. This is also supported by the fact that, the Developer had computed the consideration by adopting value of Rs.9 crore per acre which was several times higher than the guideline value for agricultural land, as provided by the Ld. AR himself. 32. We also observe that, the AO had made enquiries from the official records of Tahasildar and found that for FYs 2009-10, 2010-11 & 2011- 12, the land was not assessed to land revenue on account of agricultural activities. This particular material fact corroborates our above findings in as much as the land was not classified as agricultural in official records. According to us, the Ld. DR has also rightly referred to the contents of the letter of the District Town and Country Planning Authority bearing number F.No.20260/2010CP dated 22.11.2010 wherein they had accorded approval for development of the impugned vacant land as early as in May 2010. We find ourselves in agreement with the AO that, this particular approval also showed that, the land had already been converted into urban land and that it was situated in an urbanized zone meant for ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::41 :: development of plots and flats, much prior to the execution of Development Agreement dated 18.05.2011. Hence, we agree with the AO that the land was non-agricultural in nature. 33. The Ld. CIT(A) is noted to have controverted the same by relying upon a subsequent certificate issued by one Village Administrative Officer[VAO] to the effect that, the assessee had much later paid the land revenue in respect of the above lands, which according to Ld. CIT(A), now substantiated that the land was agricultural in nature. As already held above, mere classification of land as agricultural in land revenue records is not sufficient to hold it to be agricultural land for the purposes of Section 2(14)(iii) of the Act. Further, according to us, the enquiries made from the official records of Tahasildar would hold precedence over a certificate issued by a Village Administrative Officer, particularly when the VAO’s jurisdiction to issue the same is in doubt. Also, if that be the case, the VAO ought to have confirmed the same, during the enquiries made by the AO in summons from him, which we find was absent in his response. 34. Before us, the Ld. AR for the assessee also vehemently relied upon the assessee’s act of carrying on agricultural operation by way of growing Eucalyptus trees to contend that the land was being used for agricultural purposes and was therefore agricultural in nature. We, however, are in ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::42 :: agreement with the Ld. DR that, the assessee has not brought on record any cogent evidence to show that it was engaged in this particular activity. Rather, we are in agreement with him that, this meagre agricultural income was evidently shown only as a smokescreen to give the transaction a colour of sale of agricultural land. The assessee has relied upon the recitals in the JDA and a confirmation given by Developer that Eucalyptus trees were grown on that land, which we find to be self- serving and not a sufficient or credible evidence. Moreover, in the permissions/approvals obtained from authorities, there is no mention of any activity of cultivation of Eucalyptus trees on the said land, which in our considered view, supports the AO’s case that, there was no purported agricultural activity on this land. 35. The Ld. CIT(A) is also noted to have relied upon the chittaadangal of fasil year 1420 wherein, there was a mention of eucalyptus trees on the said land to hold that the assessee was engaged in active agricultural operations. In this regard, we find that, this Tribunal in the case of Pallava Resorts (P.) Ltd. (ITA No. 794/Mds/2011) has held that, the cultivation of casuarina plants for a short period of time does not alter the basic character of the land. As noted above, the land was completely vacant and was not used for any normal agricultural activities. According ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::43 :: to assessee, he had sold plants which were naturally grown there. Clearly there was no efforts or expenses incurred by the assessee for the same. It also cannot be said that, the assessee had invested crores of rupees in the land to cultivate these trees. On the given facts before us, we find that the investment value and the purported agricultural income shown by the assessee did not have any correlation. Naturally, the agricultural operations carried on by the assessee must be an activity of economic gain. It must generate meaningful income to the person. In this context, we note that, the assessee in this AY had shown meagre income of Rs.2,08,000/-, which as noted above, is found to be unexplained. It is obvious that, the agricultural income returned by the assessee was just for namesake and it was not the result of any agricultural operations carried on by the assessee. We thus find force in the Ld. DR’s argument that, this was only a ploy carried out by the assessee to give an impression that the assessee's land was agricultural in nature, so that the assessee can claim the benefit of agricultural land, at the time of transfer. For the reasons discussed in the foregoing, we hold that, the land was not actually or ordinarily used for agricultural operations on or around the relevant time of sale. ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::44 :: 36. It is further noted that the Ld. CIT(A) had relied on decisions of Hon’ble Bombay High Court in the case of CIT Vs Debbie Alemao (331 ITR 59), CIT Vs M C Pais (282 ITR 618) to hold that carrying on agricultural activities was not decisive to ascertain whether the land is agricultural or not, for the purposes of Section 2(14)(iii) of the Act. However, as noted above, the jurisdictional High Court in their later judgmentsin the cases of CIT Vs GRK Reddy & Sons HUF (supra) and Chemmancherry Estates Co Vs ITO (268 Taxman 29) have held otherwise, which we are bound to follow. 37. We also note that, this particular issue had travelled before the Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim v. CIT (204 ITR 631) wherein 13 tests was laid down, and upon consideration of which, the question whether the land is an agricultural land or not, was to be decided. The relevant questions and the answers in the context of the facts of the present case, according to us, is 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? The official records of Tehshidar showed the land to be not assessed to land revenue for agricultural activities. 2. Whether the land was actually or ordinarily used for agricultural purposes at No. ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::45 :: 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? Majority of the land was recently acquired by the assessee and his brothers, which shows that the intent was to systemically exploit for non-agricultural purposes. 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? No. 5. Whether, the permission under s. 65 of the Bombay Land Revenue Code was obtained for the non-agricultural 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 the land and if it was obtained in the past, what was the nature of the user of the said portion of the land on the material date? The Developer had obtained permission in the year 2010, i.e., prior to date of transfer viz., 18.05.2011. 6. Whether the land, on the relevant date, had ceased to be put to agricultural use? If so, whether it was put to an alternative use? Whether such user and/or alternative user was of a permanent or temporary nature? Yes 7. Whether the land, though entered in Revenue records, had never been actually used for agriculture, that is, it had never been ploughed or tilled? Whether the owner meant or intended to use it for agricultural purposes? It was not used for agricultural purposes. 8. Whether the land was situated in a developed area? Whether its physical The Inspector’s report and data available in public ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::46 :: characteristics, surrounding situation and use of the lands in the adjoining area were such as would indicate that the land was agricultural? domain clearly shows that the land was situated in a urban area. 9. Whether the land itself was developed by plotting and providing roads and other facilities? NA 10. Whether there were any previous sales of portions of the land for non-agricultural use? No 11. Whether permission under s. 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? If so, whether the sale or intended sale to such non-agriculturists was for non-agricultural or agricultural user? Yes 12. Whether the land was sold on yardage or on acreage basis? Acres 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? No, the pricing of land was done for JDA at Rs.9 crores per acre, which cannot be for agricultural purpose. 38. In light of our above observations, we find that, the Ld. CIT(A) had clearly misinterpreted the tests laid down in the above decision (supra) and was factually unjustified in holding that the land was agricultural in nature, when it is clear from the above that, the assessee had ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::47 :: predominantly failed in the above tests laid down by the Hon’ble Supreme Court (supra). 39. We further observe that, the similar facts and circumstances were involved in the case before the coordinate bench of this Tribunal at Chennai in the case of ITO Vs Vijay Shah (82 taxmann.com 77). In the decided case also, the AO had held the land in question to be non- agricultural and his decision was reversed by the Ld. CIT(A) observing that growing of eucalyptus trees was sufficient to show that the land was agricultural and that once it was classified as agricultural in land revenue records, then the AO could not dispute the same. We observe that the reasoning given by the Ld. CIT(A) in that case was somewhat identical to the present case. This Tribunal is noted to have allowed the Revenue’s appeal and restored the order of the AO, by observing as under:- “12. In the present case, as already stated, the core of the arguments of the assessee is on the classification of the land in revenue records. But, that alone does not conclusively prove the nature of the land sold by the assessee, as other evidences are shadowing the said presumption prima facie created by the entry made in the revenue records. The properties were in fact, inherited by the assessee. At the time of purchase of these parcels of land, they might have been agricultural lands. That is why the land parcels are classified in the revenue records as agricultural lands. That position was continued in a religious manner without any annual verification of the nature of the property. But, the character of the land sold by the assessee has been explained by the Tahsildar in unequivocal terms in his letter given under sec.133(6) of the Act before the assessing authority. The Tahsildar has stated that not only for the impugned previous year but also for past 3 earlier previous years, no ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::48 :: agricultural activities were carried out in that area. The assessee as well as the owners of surrounding properties was not in fact carrying on any agricultural activities. The letter given by the Tahsildar is very important. He has stated the reasons as to why the agricultural activities were not being carried out on those properties. Because of urbanization, the properties being in the peripheral of Chennai Metropolis, real estate development has started taking place in that area as well. A lot of private and commercial buildings are constructed. Because of the boom of the real estate development, the entire contingent of that land has become subject matter of transactions intended for the purpose of real estate development. In that background no agricultural activities were being carried out in that area. The case of the assessee is also not an exception. 13. The letter given by the Tahsildar has categorically established the finding of the Assessing Officer that the lands sold by the assessee in the previous year relevant to the assessment year under appeal were not agricultural land. The past history of the land alone is not the deciding factor. Once upon a time the land might have been used for agricultural operations. In that way of speaking, almost all parts of Chennai Metropolis might be agricultural or marshy land in good old past. Therefore, history is not the only test to be applied to decide the character of the land at the time of sale. A temporary stoppage in the agricultural activities carried on by an assessee also should not go against an assessee. For one or other reason, an assessee may not be carrying on agricultural operations for one or two years, he might be carrying on agricultural operations for all the years in a consistent manner. In such cases, it is not possible to hold that non carrying on agricultural operations for one or two years permanently changes the character of the land. 14. But, here the case is still different. The assessee has not been carrying on agricultural operations for so many years continuously and consistently. It is not a case of intermittent stoppage of agricultural operations. It is a case of permanent stoppage of agricultural operations in the light of real estate development taking place in the particular area. Therefore, by virtue of not carrying on agricultural activities for a quiet long time in the past, the character of the land occupied by the assessee has been naturally converted into a non-agricultural land. 15. In this regard, we have to apply our mind to one more vital question, whether the assessee was carrying out agricultural operations or not. The case of the assessee in the present case is that even at the ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::49 :: time of sale of these parcels of land, the assessee had been carrying on agricultural operation by way of growing Eucalyptus trees. The effect of cultivating these trees was considered by the Tribunal, Chennai 'B' Bench in the case of Pallava Resorts (P.) Ltd. (supra). In paragraph 22 of the said order, the Tribunal has held that cultivating casuarina plants for a short period of time does not alter the basic character of the land. The land purchased by the assessee was not useful for carrying on any normal agricultural activities. Only plants like casuarina grown therein. For earning income from casuarina plants, the assessee need not purchase land by investing crores of rupees. Investment and return do not have any comparison. Even though the above observation of the Tribunal in the case of Pallava Resorts P. Ltd. (supra) is not exactly applicable to the present case, it shows, if circumstance so permits, the frivolousness of the arguments usually made by the assessees that they have carried on agricultural activities by planting casuarina. 16. In the context of agricultural operations, it is necessary to see that the agricultural operations carried on by the assessee must be activity of economic gain. It must generate meaningful income to the person who is carrying on agricultural activities. If the agricultural activities carried on by the assessee as a hobby or casual or incidental, it is very difficult to hold a view that the land is agricultural in nature. India is pre- dominantly an agricultural economy where agricultural activities are major part of economic activities of our country. Therefore, the activities carried on by the assessee must be meaningful and result-oriented towards generating reasonable income from such operations. As far as the present case is concerned, there was no such economic utilization of the land for earning income by carrying on agricultural operations. 17. It is, in this context that we have to refer the arguments of the assessee that the assessee had reported agricultural income in his returns of income for assessment year at Rs. 11,760/-. When this is considered, it is obvious that the agricultural income returned by the assessee was just for namesake and it was not the result of any agricultural operations carried on by the assessee, in an economic way. There was no economic utilization of land for the purpose of earning agricultural income. We cannot rule out that this was only a ploy carried out by the assessee to make an impression before the tax authorities that the assessee's land was agricultural in nature, so that the assessee can claim the benefit of agricultural land, when the lands are sold, in view of high demand of land in the area and in view of hectic activities of real estate development. Therefore, we are of the opinion that these ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::50 :: small amounts of agricultural income returned by the assessee for few assessment year do not go to change the character of the land. 18. In the facts and circumstances of the case, we find that the land was not actually or ordinarily used for agricultural operations on or around the relevant time of sale. It is also to be seen that the income returned from agricultural operations carried on in the land was just for namesake and does not have any proportion to the efforts usually that would have been made by a true agriculturist. At the time of sale of land also no agricultural activities were carried on by the assessee. 19. It could be only an exotic argument to say that the agricultural land of 3.92 acres owned by the assessee was sold in the previous year relevant to the assessment year under appeal for a fabulous consideration of Rs. 11,66,00,000/-. It means the agricultural land sold by the assessee had a market value of about Rs. 3 crores per acre. It is unheard of. It clearly illustrates that the land has become an non- agricultural land with high market potential for real estate development, not all of a sudden in the previous year relevant to the assessment year under appeal but over a period of long years in the past. This aspect really co-relates the argument of the Revenue that the assessee had not been carrying on any agricultural operations in the lands for so many years in the past. 20. In these circumstances, it is our considered view that the Assessing Officer has conclusively established that the lands sold by the assessee in the previous year relevant to the assessment year under appeal for a consideration of Rs. 11,66,00,000/- were not agricultural in nature, but, on the other hand, they are non-agricultural land. Therefore, it definitely comes under the category of \"capital asset\". Accordingly, the gains arising out of transfer of that capital asset is exigible to capital gains tax.” 40. Having regard to our above findings, when the land in question itself is held to be non-agricultural, the first pre-requisite for seeking exclusion u/s 2(14) of the Act is not met and therefore the land in question is in the nature of ‘capital asset’ and thus, rightly assessed to ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::51 :: capital gains tax by the AO. Accordingly, the order of the Ld. CIT(A) on this aspect is reversed and the AO’s order stands restored. 41. Although in view of our above findings, we are not required to go into the next condition (ii) i.e. whether the land was within the municipality or outside, but for the sake of completeness, we look into this aspect as well. As noted above, clause (a) & (b) of Section 2(14)(iii) of the Act provides the geographical limits to determine as to whether an agricultural land will be classified as a capital asset or not. Section 2(14)(iii)(a) of the Act provides that, if the agricultural land is situated with the municipal limits, then it shall be regarded as capital asset. Further, Section 2(14)(iii)(b) of the Act states that, if the agricultural land is situated within specific limits/kms of the municipal limits, then also it shall be regarded as capital asset. 42. Before us, the Ld. DR has argued that, the land in question fell both under Section 2(14)(iii)(a) & (b) of the Act. The first argument of the Ld. DR is that, the Chennai Municipal Corporation by Notification GO Nos. 256 dated 26.12.2009 had extended the corporation limits and accordingly included the Chemmancherry area within the municipal limits. The relevant extracts of the Notification as taken note of is as follows:- ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::52 :: ABSTRACT Extension - Amalgamation of some local bodies within the Chennai Metropolitan Limits with the Chennai Corporation and extension of Limit- orders issued. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ MUNICIPAL ADMINISTRATION AND WATER SUPPLY DEPARTMENT (ELECTION) G.O.Ms.No.256 Date: 26.12.2009 1. G.O.(Ms)No.30, Municipal Administration and Water Supply Department dated 20.02.2007. 2. The Letter from Deputy Chairman of the Metropolitan Development authority D.O.No.C1/3893/07 dated 30.05.2008. 3. G.O.(Ms)No.182, Municipal Administration and Water Supply Department dated 19.09.2008. 4. Letter from Additional Executive Secretary of Chennai Metropolitan Development Authority D.O.No.C1/3893/07 dated 19.08.2009. ORDER The Chennai Corporation is at present spread over 174 Sq.Mt. The boundaries of Chennai City was fixed 30 years ago in the year 1978, The Chennai Metropolitan Area is fast developing. Taking into account the growing demands the plans are to be designed to provide infrastructure of quality roads Water Supply, Street Lighting removal of drainage water and Solid Waste Management. The service of the local bodies within the Metropolitan area are widely varied. Moreover they are not sufficient. It is felt that for extending the Chennai Corporation limits comprising of local bodies there is sufficient scope and necessity. On this basis the following local bodies can be amalgamated with the Chennai Corporation and expansion effected. …. (c) Other Local Bodies ….. S.No Panchayat Panchayat Union District 24 Chemmancherry St Thomas Mount Kanchipuram ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::53 :: 43. The above Notification is noted to be supplemented by Notification No. 280 dated 09.11.2010 wherein the Governor of Tamil Nadu had included certain areas within the Chennai City limited under the Chennai City Municipal Corporation Act, which included Semmencheri (also known as Chemmancherry) and the same was also published in the Official Gazette. The relevant portion of the Notification along with the publication in Official Gazette is as follows:- Part II—Section 2 Notifications or Orders of interest to a section of the public issued by Secretariat Departments. _______ NOTIFICATIONS BY GOVERNMENT _______ MUNICIPAL ADMINISTRATION AND WATER SUPPLY DEPARTMENT PROPOSAL FOR INCLUSION OF CERTAIN AREAS WITHIN THE KANCHEEPURAM MUNICIPALITY LIMITS UNDER THE TAMIL NADU DISTRICT MUNICIPALITIES ACT. No. II(2)/MAWS/679(a-1)/2010. In exercise of the powers conferred by clause (c) of sub-section (1) of Section 4 of the Tamil Nadu District Municipalities Act, 1920 (Tamil Nadu Act V of 1920), the Governor of Tamil Nadu hereby declares his intention to include within the jurisdiction of Kancheepuram Municipality, the areas comprised in the local authorities. PROPOSAL FOR INCLUSION OF CERTAIN AREAS WITHIN THE CHENNAI CITY LIMITS UNDER THE CHENNAI CITY MUNICIPAL CORPORATION ACT. [G.O. Ms. No. 280, Municipal Administration and Water Supply (Election), 9th November 2010.] No. II(2)/MAWS/679(a-4)/2010. Under clause (9) of Section 3 of the Chennai City Municipal Corporation Act, 1919 (Tamil Nadu Act IV of 1919), the Governor of Tamil Nadu hereby declares that the areas comprised within the Municipalities, Town Panchayats, Village Panchayats specified in the Schedule below shall be included within the Chennai City limits and shall form part of the city of Chennai. SCHEDULE Sl.No. Name of the local authorities District/Panchayat Whether full or part of the area Union of thelocal authority proposed to be included. (1) (2) (3) (4) 41 Semmancheri St. Thomas Mount/Kancheepuram Full Based on the above inclusion, territorial division will be divide for the next ordinary election to be held. ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::54 :: ABSTRACT Jurisdiction-Chennai Corporation-Incheon of certain areas within the Corporation Limits Ordered Notification – lssued Municipal Administration and Water Supply (Election) Department G.O.(Ms) No 280 Dated:9.11.2010. Read: 1. GO (Ms) No.256. Municipal Administration & Water Supply Department dated 26.12.2009 2. From the Commissioner, Chennai Corporation, Letter No. L&E.D.C.No. LE12/5605/2009, dated 4. 10.2010. ORDER: - In the G.O. read above, orders have been issued for the proposed inclusion of Kathivakkam, Thiruvotliyur, Manali, Madhavaram, Ambattur, MaduravoyalValasaravakkam, Alandur, Ullagararn-Puzhuthivakkem Municipalities, ChinnasekaduPuzhal, Porur, Nandambakkam, Meenambakkam, Perungudi, Pallikaranal and Sholinganallur Town Panchayats, Edayanchavadi, Sadayankuppam, Kadappakkam. Theeyambakkam, Mathur. Vedaperumbakkam, Surappaltu, Kathirvedu, Puthagaram, Nolamour, Karambakkam, Nerkundram, Ramapuram, Mugalivakkam, ManappakkamKottivakkam, Palavakkam, Neelangaral, Injambakkam, Karappakkam, Okkiyam-Thuraipakkam, Madipakkam, Jalladampettai, Semmancheri and Uthandi Panchayats, within the jurisdiction of Chennai Corporation. 2. The Commissioner, Chennai Corporation, in his letter second read above, has sent the draft Notification to be published under Clause (9) of section 3 of the Chennai City Municipal Corporation Act, 1919. 3. The Government after careful examination, decided to accept the same and accordingly, the appended Notification will be published in the Tamil Nadu Government Gazette Extra-ordinary, dated the 9th November 2010. APPENDIX. NOTIFICATION. Under clause (9) of section 3 of the Chennai City Municipal Corporation Act, 1919 (Tamil Nadu Act IV of 1919), the Governor of Tamil Nadu hereby declares that the areas comprised within the Municipalities, Town Panchayats. Village Panchayats specified in the Schedule below shall be included within the Chennai city limits and shall form part of the city of Chennai. Sl.No Name of the Local authority District/ Panchayat Union Whether full or part of the area of the local authority proposed to be included. 41 Semmancheri St. Thomas Mount / Kancheepuram Full 44. We find that it is evidently clear from the above Notifications that, the impugned land which is situated in Semmencheri (also known as Chemmancherry) was brought within the municipal limits and therefore there is no doubt that, even geographically, the land in question was to be regarded as capital asset in terms of Section 2(14)(iii)(a) of the Act. 45. The Ld. AR, on the other hand, has argued that, it was actually the later Notification No.97 dated 19.07.2011 which had brought this land ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::55 :: within the municipal limits and therefore at the material time, when JDA was executed i.e. 18.05.2011, the land was not covered under Section 2(14)(iii)(a) of the Act. The Ld. CIT(A) is noted to have acceded to this contention of the assessee. According to us however, this particular contention does not hold any water. There is nothing on record to show that the above Notifications issued by the Chennai Municipal Corporation as well as the Governor of Tamil Nadu had not come into effect and therefore, we agree with the Ld. DR that, the land in question was indeed within the municipal limits of Chennai. Also, having perused the Notification No.97 dated 19.07.2011, it is observed that, this was a delimitation of certain divisions under the Chennai Municipal Corporation Act for the purposes of election of 200 councillors and the boundaries of the said divisions. Understandably, the boundaries for the municipal election could not have been fixed including the Semmencheri (also known as Chemmancherry) area, unless the same was already brought into the municipal limits, which we find was already done by the Government vide Notification GO No.256 dated 26.12.2009 & 280 dated 09.11.2010. According to us therefore, the land in question was to be regarded as capital asset in terms of Section 2(14)(iii)(a) of the Act. Hence, the Ld. CIT(A)’s order on this aspect also stands reversed. ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::56 :: 46. Since we have already held that the land in question fell under Section 2(14)(iii)(a) of the Act, the arguments raised by both parties relating to Section 2(14)(iii)(b) of the Act have become academic in nature and is therefore not being separately looked into. 47. We now come to the computation of capital gains upon transfer of such land. We note that the Ld. CIT(A) had primarily adjudicated the question whether the land was agricultural or not. Although the Ld. CIT(A) is noted to have made certain observations regarding the calculations of capital gains at Para 4.2.46 to 4.2.48 of his order, but we note that, the same was fraught with infirmities and imaginary assumptions. The Ld. CIT(A) also did not take into consideration, the modification of terms vide supplemental agreement dated 22.05.2011. It is also not clear to us whether the non-refundable security deposit was Rs.8 crores or Rs.10 crores. Also, the details of the additional area allocated to the assessee and his brothers, is not clear. Further, we note that, there is a dispute regarding the guideline value of the land in question. The assessee is noted to have provided guideline value, which he has obtained from the stamp duty authorities, whereas the AO has referred to the value of Rs.9 crores per acre agreed between the parties, which is found mentioned in the supplemental JDA. We therefore note ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::57 :: that, several aspects regarding the computation of capital gains is required to be clarified, in order to arrive at the correct figure of assessable capital gains. In the fitness of the matters therefore, we restore this exercise back to the Ld. CIT(A) for the limited purpose of ascertaining the value of capital gains assessable in the hands of the assessee in this AY 2012-13. If required, the Ld. CIT(A) may call for a remand report from the AO as well. Ground No. 2 of the Revenue’s appeal is therefore partly allowed for statistical purposes. 48. Ground No. 3 of the Revenue’s appeal is against the Ld. CIT(A)’s action of deleting the addition of Rs.2,08,000/-. It is noted that, the AO while holding the above land in question to be non-agricultural, also held that the agricultural income of Rs.2,08,000/- claimed as exempt was not supported by any evidence and hence added it as income from other sources. The Ld. CIT(A) is noted to have deleted the addition. Now the Revenue is in appeal before us. 49. Heard both the parties. Having regard to our findings rendered at Paras 34 above, we agree with the Ld. DR that the assessee was unable to substantiate with evidence that he had derived agricultural income of Rs.2,08,000/-. Rather this meagre income was shown as a smokescreen to colour the land in question to be agricultural. We therefore do not ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::58 :: countenance the findings of the Ld. CIT(A) and restore the order of the AO on this issue. Ground No. 3 is therefore dismissed. 50. As a result therefore, the appeal of the Revenue in ITA No.2095/Chny/2015 stands partly allowed. 51. Now we come to the appeal in ITA No.22/Chny/2021 which is against the order passed u/s 147/143(3) of the Act dated 31.12.2019. Since the Ld. CIT(A) had simply followed the order of his predecessor in dated 18.05.2015 in relation to the original order u/s 143(3) of the Act, in light of our findings rendered in ITA No.2095/Chny/2015, it will be in fitness of the matters that this appeal is also restored back to the Ld. CIT(A) for computation of the correct figure of capital gains. Hence, this appeal of the Revenue is also partly allowed. 52. We now take up the Revenue’s appeal in the matters of other brothers, Shri P N Manisundhar in ITA Nos. 2096/Chny/2015&7/Chny 2021, Shri P S Mohan in ITA No.475/Chny/2018 and Shri P S Sarvanan in ITA No. 8/Chny/2021. According to us, our findings rendered above in the matters of Shri N S Srinivasan (supra) would mutatis mutandis apply to these appeals as well. Following the same, we hold that, the land transferred by the assessee and his brothers vide JDA dated 18.05.2011 was in the nature of ‘capital asset’ u/s 2(14) of the Act ITA No.2095/Chny/2015 & ITA No.22/Chny/2021 (Mr.N.S.Srinivasan) ITA No. 2096/Chny/2015 & ITA No.7/Chny/2021 (Mr.P.N.Manisundhar) ITA No.8/Chny/2021 (Mr.P.S.Saravanan) ITA No.475/Chny/2018 (Mr.P.S.Mohan) (AY 2012-13) ::59 :: and therefore the gains derived therefrom was required to be assessed to capital gains. Hence, the orders of the Ld. CIT(A) in this regard stands reversed and the order of the AO is restored. For the limited purpose of computation of capital gains liable to tax in the AY 2012-13, all these matters are set aside back to the file of the Ld. CIT(A) to re-compute the same in conformity with our directions given in Para 47 above. Accordingly, all these appeals of the Revenue stands partly allowed. 53. In the result, all the appeals of the Revenue stands partly allowed. Order pronounced on the 03rd day of March, 2025, in Chennai. Sd/- Sd/- (एबीटी. वर्की) (ABY T. VARKEY) न्याधयकसदस्य/JUDICIAL MEMBER (जगदीश) (JAGADISH) लेखासदस्य/ACCOUNTANT MEMBER चेन्नई/Chennai, धदिांक/Dated: 03rd March, 2025. TLN आदेशकीप्रधतधलधपअग्रेधर्त/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकरआयुक्त/CIT, Chennai / Madurai / Salem / Coimbatore. 4. धवभागीयप्रधतधिधि/DR 5. गार्ाफाईल/GF "