Shri Vijay V. Shah, CHENNAI V. ITO, CHENNAI

CO 172/CHNY/2016

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 2913 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 25-11-2016
• Court: TRIBUNAL
• Department Lawyers: SAMARENDRA KUMAR BEHERA
• Assessee Lawyers: SHIVA SRINIVAS
• Keywords: Capital asset

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , ! ' . #$ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER . / ITA NO. 2496/MDS/2016 / ASSESSMENT YEAR : 2012-13 AND CO NO. 172/MDS/2016 THE INCOME-TAX OFFICER, NC WARD-12(5), CHENNAI. ( /APPELLANT) V. SHRI VIJAY SHAH , OLD NO.7, NEW NO.102, ARMENIAN ST., GEORGE TOWN, CHENNAI 600 001. PAN ADOPV5284G RESPONDENT/CROSS OBJECTOR) . / ITA NO. 2495/MDS/2016 / ASSESSMENT YEAR : 2012-13 AND CO NO.173/MDS/2016 THE INCOME-TAX OFFICER, NON CORPORATE WARD-12(5), CHENNAI. ( /APPELLANT) V. SHRI RAJESH V. SHAH , OLD NO.67, NEW NO.102, ARMENIAN ST., GEORGE TOWN, CHENNAI 600 001. PAN ADEPS4359R RESPONDENT/CROSS OBJECTOR) - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 2 / APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT, D.R / RESPONDENT BY : SHRI SAMARENDRA KUMAR BEHERA, FCA / DATE OF HEARING : 27.02.2017 & 24.03.2017 !' / DATE OF PRONOUNCEMENT: 26.04.2017 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THE APPEALS FILED BY THE REVENUE AND THE CROSS OBJECTIONS FILED BY DIFFERENT ASSESSES ARE DIRECTED AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) FOR THE ASSESSMENT YEAR 2012-13. 2. THE ONLY GROUND IN REVENUES APPEAL IS WITH REGA RD TO THE FINDING OF THE CIT(A) THAT THE LAND SOLD BY THE ASS ESSEE IS AN AGRICULTURAL LAND, THEREBY DELETING THE LONG TERM C APITAL GAINS WITHOUT GIVING PROPER OPPORTUNITY TO THE ASSESSING OFFICER TO COUNTER THE ARGUMENT OF THE ASSESSEE. THE CROSS OB JECTIONS FILED BY THE ASSESSES ARE IN SUPPORT OF THE ORDER O F THE CIT(APPEALS). 3. SINCE THE ISSUE IN REVENUES APPEAL IS COMMON, T HE FACTS AS NARRATED IN ITA 2496/M/16 ARE REPRODUCED HERE. THE AO - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 3 NOTICED THAT THE ASSESSEE ALONG WITH HIS FOUR FAMIL Y MEMBERS HAVE SOLD A LAND AT KUNNUKADU VILLAGE ON 24.02.2012 . THEY HAVE OWNED THE LAND BY WAY OF INHERITANCE FROM THEI R FATHER, LATE V.S.SHAH, WHO HAS PURCHASED THE AGRICULTURAL LANDS MEASURING 8.30 ACRES OF LAND BEARING SURVEY NUMBER 26/1A ON 5 .7.1984. THE ASSESSEE SOLD 3.92 ACRES OF LAND ON 24.2.2012 F OR SALE CONSIDERATION OF 11,66,00,000/-. HOWEVER, IN THE RETURN OF INCOME, THE CAPITAL GAIN WAS NOT SHOWN. THE AO SOU GHT CLARIFICATION IN THIS REGARD IN THE ASSESSMENT PROC EEDINGS. THE AUTHORIZED REPRESENTATIVE CONTENDED BEFORE THE AO B Y GIVING WRITTEN SUBMISSION THAT THE LAND SOLD WAS AN AGRICU LTURAL LAND AND IT FALL BEYOND 8 KMS FROM THE MUNICIPAL LIMIT O F CHENNAI MUNICIPAL CORPORATION, THEREFORE, ON SALE OF AGRICU LTURAL LAND THERE IS NO CAPITAL GAIN ARISES AND HENCE, THE SAME WAS NOT INCORPORATED IN THE RETURN OF INCOME. THE AO DID N OT FIND THE EXPLANATION OFFERED BY THE ASSESSEE SATISFACTORY AN D ARRIVED AT A CONCLUSION THAT THERE WERE NO AGRICULTURAL ACTIVITY CARRIED ON AND FURTHER RELYING ON THE INSPECTORS REPORT THAT THE LAND SOLD IS AT A DISTANCE OF 7.2 KMS FROM THE LIMIT OF MUNICIPAL COR PORATION, HENCE THE AGRICULTURAL LAND SOLD IS A CAPITAL ASSET AS PER THE - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 4 INCOME-TAX ACT AND THEREFORE, CAPITAL GAINS TAX WAS LEVIABLE ON SALE OF SUCH ASSET. THE AO ALSO CONSIDERED THE DE VELOPMENT CHARGES AS PART OF SALE CONSIDERATION AND ACCORDING LY, ADOPTED THE SALE CONSIDERATION OF AGRICULTURAL LAND AT 16,66,00,000/- AND COMPUTED THE TAXABLE LTCG IN THE CASE OF THE AS SESSEE AT 3,30,02,574/-. THE AO ALLOWED THE DEDUCTION U/S.5 4EC FOR 50 LAKHS FROM THE LTCG AND ASSESSED THE TAXABLE CAPITA L GAIN AT 2,80,02,574/- AS GIVEN IN DETAIL IN THE ASSESSMENT ORDER. 4. THE CIT(A) OBSERVED THAT THE AO IN HIS ORDER STA TED THAT THE EXPRESSION OF AGRICULTURE LAND HAS NOT BEEN D EFINED IN THE INCOME-TAX ACT, 1961 NOR IN THE 1922 ACT, NOR IT HA S BEEN DEFINED IN THE WEALTH-TAX ACT, 1957 AND, THEREFORE, THE EXPRESSION AGRICULTURAL LAND BE GIVEN THE MEANING AS IT IS GENERALLY UNDERSTOOD IN THE COMMON PARLANCE AND AS IT ORDINARILY BEARS IN THE PLAIN LANGUAGE. AGRICULTURAL INCOME F ROM EUCALYPTUS TREES WERE NOT GROWN BY HUMAN SKILL AND LABOUR COUL D CONSTITUTE AGRICULTURAL INCOME AND THE TEST APPLIED WAS WHETHE R THERE WAS SOME INTEGRATED ACTIVITY WHICH COULD BE DESCRIBED A S AGRICULTURAL OPERATIONS YIELDING INCOME. IT IS PERTINENT TO NOT E THAT A MERE - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 5 WILD OR SPONTANEOUS GROWTH OF TREES, NOT INVOLVING THE EMPLOYMENT OF ANY HUMAN LABOUR OR SKILL FOR RAISING THEM COULD NOT BE AGRICULTURAL INCOME. THE CIT(APPEALS) FUR THER OBSERVED THAT IN ORDER TO COME IN THE CATEGORY OF AGRICULTUR AL LAND, ACCORDING TO THE AO, THE LAND CAN BE SAID TO BE EIT HER ACTUALLY USED OR MEANT TO BE USED FOR AGRICULTURAL PURPOSE. THE ESSENTIAL REQUIREMENT FOR AN AGRICULTURAL LAND IS THAT THERE SHOULD BE CULTIVATION OF LAND IN THE SENSE OF FEELING THE LAN D, SOWING THE SEEDS, PLANTING AND SIMILAR WORK ON THE LAND ITSELF . IF THERE IS NEITHER ANYTHING IN ITS CONDITION, NOR ANYTHING IN THE EVIDENCE TO INDICATE THAT THE INTENTION OF ITS OWNER OR POSSESS OR SO AS TO CONNECT IT WITH AN AGRICULTURAL PURPOSE, THE LAND C OULD NOT BE AGRICULTURAL LAND. THE CIT(APPEALS) OBSERVED THAT ACCORDING TO THE AO THE VAO CERTIFICATE INDICATES THAT EUCALYPTU S TREES WERE AROUND 300 STANDING ON THE LAND. AND ON IMAGINATIO N CAME TO A CONCLUSION THAT ON SUBSEQUENT PERIOD VAO HAS NOT CE RTIFIED WHETHER THE TREES ARE GROWN, OR AVAILABLE IN THE SA ID LAND. THE AUTHORIZED REPRESENTATIVE CONTENDED BY WRITTEN SUBM ISSION STATING THAT THE AGRICULTURAL LAND MEASURING 8.30 A CRES COMPRISED IN SURVEY NO.26/1A, KUNNUKADU VILLAGE, VILLAGE NO.4 5, - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 6 CHENGALPET TALUK, CHENGALPET DISTRICT WAS PURCHASED BY THE LATE S.V.SHAH ON 5 TH DAY OF JULY, 1984. HIS LEGAL HEIRS (WIFE- MS.BHARATI V. SHAH & FOUR SONS MR. HITESH V. SHAH , RAJESH V SHAH, MR. AJAY V. SHAH & MR. VIJAY V SHAH) ARE LOOK ING AFTER THE SAID PROPERTY AND DEVELOPED THE SAID PROPERTY IN DI FFERENT INTERVALS TO DO THE AGRICULTURAL ACTIVITIES (FILLI NG THE LAND, DIG WELL & PROTECT WITH BOUNDARIES). 4.1 THE CIT(APPEALS) OBSERVED THAT THEY DID AGRICUL TURAL ACTIVITIES IN LAST SEVERAL YEARS INCLUDING THE FINA NCIAL YEAR 2011- 12 AND ADMITTED THE AGRICULTURAL INCOME IN THE FILI NG THE INCOME- TAX RETURN. THEY HAVE SUBMITTED THE REPORTS LIKE C HITTA, ADANGAL, PATTA, VAO CERTIFICATE AND SRO CERTIFICATE BEFORE THE AO. AT THE TIME OF ASSESSMENT PROCEEDINGS, THE AS SESSEE HAD SUBMITTED VARIOUS DOCUMENTS & REPORTS CHITTA, ADAN GAL, PATTA, ETC. AND LETTERS FROM GOVERNMENT DEPARTMENTS LIKE V AO, GOVT. SURVEYOR, SRO, BDO AND ALSO RTI ACTS AND PROVED THA T THE CONCERNED LAND IS AN AGRICULTURAL LAND AND ALSO EXE MPTED AS PER INCOME-TAX ACT. BUT VOLUNTARILY THE INCOME-TAX OFF ICERS REJECTED THE SAME IN THEIR OWN MOTION. HOWEVER, THE SAME AR E PRODUCED - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 7 BEFORE APPEAL AUTHORITY ALSO. EVEN THE BLOCK DEVEL OPMENT OFFICER, THIRUPUR HAS GIVEN THE CERTIFICATE STATING THAT THIS IS TO CERTIFY THAT THE ECR 8.30 ACRES SURVEY NUMBER 26/1A AT 45 KUNNUKADU VILLAGE, CHENGALPETTU TALUK, IS AGRICULTU RAL LAND, THUS, FROM THE SUBMISSION OF THE ASSESSEE, IT IS PR OVED BEYOND DOUBT THAT THE AGRICULTURAL ACTIVITIES HAVE BEEN CA RRIED ON AND EVEN THE AGRICULTURAL INCOME HAD ALSO BEEN OFFERED IN THE INCOME TAX RETURN REGULARLY AND GOVERNMENT DOCUMENTS LIKE CHITTA, ADANGAL, PATTA, ETC., AND LETTERS FROM GOVT. DEPART MENTS LIKE VAO, GOVT. SURVEYOR, SRO, BDO AND ALSO RTI ACTS AND PROVED THAT THE CONCERNED LAND IS AN AGRICULTURAL LAND IN VIEW OF SEC.2(14)(III) OF THE INCOME-TAX ACT, 1961. THEREF ORE, THE ACTION OF THE AO IN ARRIVING AT A CONCLUSION THAT IT IS NO T AN AGRICULTURAL LAND, IS DISMISSED AND THE LAND IN QUESTION IS TREA TED AS AGRICULTURAL LAND. 4.2 REGARDING THE ISSUE, WHETHER THE AGRICULTURAL L AND IS A CAPITAL ASSET OR NOT, THE CIT(APPEALS) OBSERVED THA T ACCORDING TO THE AO, THE AGRICULTURAL LAND IN QUESTION IS SITUAT ED WITHIN 8 KMS FROM THE BOUNDARY OF CORPORATION LIMIT, MUNICIPALIT Y, TOWN - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 8 PANCHAYAT, CANTONMENT BOARD FOR ANY OTHER NOTIFIED AREA BY THE STATE OR CENTRAL GOVERNMENT. THE AO HAS MENTIONED THAT FROM 19.7.2011 THE GOVERNMENT OF TAMIL NADU HAS NOTIFIED MUNICIPALITY ADMINISTRATION AND EXTENDED CHENNAI CI TY MUNICIPAL CORPORATION LIMIT. THE SAME WAS FURTHER REVISED BY GOMS NO. ......DATED 12.09.2011 AND ACCORDINGLY, THE CHENNAI CITY MUNICIPAL CORPORATION LIMIT WAS NOT EXTENDED UPTO U THANDI VILLAGE ON ECR ROAD. THE ASSESSEE PRODUCED BEFORE HIM VARIOUS GOVERNMENT RECORDS TO SUPPORT HIS CONTENTIO N THAT THE LAND IN QUESTION IS BEYOND 8 KMS FROM THE CHENNAI C ITY MUNICIPAL CORPORATION LIMIT. THE AO DISREGARDED THE REPORTS AND CERTIFICATES GIVEN BY THE GOVERNMENT AUTHORITY AND STEPPED INTO THE SHOES AND DEPUTED INSPECTOR TO PHYSICALLY MEASU RE THE DISTANCE. THE INSPECTOR TRAVELLED A MOTORABLE ROAD IN A CAR AND GAVE HIS REPORT THAT THE DISTANCE BETWEEN THE UTHAN DI VILLAGE BOUNDARIES END AT THE BEGINNING OF KANNATHUR VILLAG E WHICH COMES IMMEDIATELY AFTER THE TOLL PLAZA, UTHANDI, FR OM THIS PLACE, THE LAND IS LOCATED AT A DISTANCE OF 7.2 KMS. THE ASSESSEE CONTENDED BEFORE THE CIT(APPEALS) THAT THE INSPECTO R IS NOT THE PERSON WHO CAN MEASURE THE DISTANCE CORRECTLY BECAU SE THE - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 9 INSPECTOR WILL NOT BE FAMILIAR WITH THE CHENNAI CIT Y CORPORATION LIMIT, MAP, BOUNDARIES, BOUNDARIES OF THE LAST PART ETC., MOREOVER, HE MAY NOT BE WELL VERSED WITH THE TECHNI QUE OF MEASUREMENTS OF THE DISTANCE. THEREFORE, THE LD. A R PLEADED BEFORE THE CIT(APPEALS) THAT THE ISSUE BE DECIDED B ASED ON REPORT OF GOVERNMENT SURVEYORS, WHO IS THE AUTHORI TY ON MEASURING LANDS AND DISTANCE. THE LD. AR, PINPOIN TED THAT THE INSPECTOR HAS TAKEN THE MEASUREMENT FROM THE SIGN B OARD, WHERE IT IS MENTIONED KANNATHUR BY THE LOCAL AUTHOR ITY FOR AN IDENTIFICATION OF THAT AREA AND THE INSPECTOR TAKIN G IT AS A LIMIT POINT FOR MEASURING A DISTANCE IS NOT CORRECT. IT IS DIFFICULT FOR THE INCOME-TAX INSPECTOR TO FIND OUT THE LAST SURVEY NU MBER ON PHYSICAL LAND I.E. IDENTIFY LAST SURVEY NUMBER OR P LOT PHYSICALLY ONLINE. THE LD. AR HAS PRODUCED THE DISTANCE REPOR T FROM GOVERNMENT SURVEYOR, WHO HAS IDENTIFIED FROM THE GO VERNMENT ORDER, NEW CHENNAI CITY CORPORATION MAP AND RTI ACT S, THAT UTHANDI TOLL PLAZA AND RAGASS DENTAL COLLEGE & HOSP ITAL STATING THE PLOT IS 191 IS THE LAST BOUNDARY POINT FOR CHEN NAI CITY CORPORATION TERRITORY LIMIT AND HAS GIVEN THE DIAGR AM OF THE DISTANCE. AS PER THE PHYSICAL MEASUREMENT BEFORE T HE - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 10 GOVERNMENT SURVEYOR, THE DISTANCE BETWEEN THE PLOT NUMBER 191 AND THE KANNATHUR SIGN BOARD IS MORE BY 300 MTS., W HICH HAS BEEN IGNORED BY THE INSPECTOR FOR LACK OF PROPER IN FORMATION. EVEN THE INSPECTOR HAS TAKEN MEASUREMENT BY ROAD ON ECR ROAD FROM KANNATHUR SIGN BOARD TO THE POINT ON ECR ROAD WHICH IS PARALLEL TO SAID LAND, WHICH FURTHER MORE BY 50 MTS. 4.3 FURTHER, ACCORDING TO THE LD. AR, THE REVENUE INSPECTOR (INSPECTION) KANCHIPURAM DISTRICT HAS CERTIFIED THA T KUNDRUKADU VILLAGE SITUATED WITHIN THIRUVIDANTHAI VILLAGE, NOR THERN BOUNDARIES OF KANATHUR REDDIKUPPAM, THIRUPOROUR TAL UK, SOUTH PART OF UTHANDI VILLAGE COMPRISED IN PUNJAI S.NO.26 /1A LYING AT A DISTANCE OF 8.1 KMS AND SITUATED AT SOLINGANALLUR T ALUK WITHIN CORPORATION OF CHENNAI, THIRUPORUR TALUK, KANCHIPUR AM DIST. THE LD. AR HAS ALSO SUPPORTED BY CERTIFICATE FROM V ILLAGE ADMINISTRATIVE OFFICER, THIRUVANTHAI VILLAGE, CHENG ALPATTU TALUK THAT KUNDRUKADU VILLAGE HAS POPULATION 8500 AS PER LAST CENSUS. FINALLY, THE BLOCK DEVELOPMENT OFFICER, THIRUPORUR VILLAGE CERTIFIES AS UNDER : THIS IS TO CERTIFY THAT THE ECR 8.30 ACRES, SURVEY NO.26/1A AT 45 K UNDER KUNDKADRU VILLAGE, CHENGALPATT TALUK, KANCHIP URAM DIST - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 11 IS AN AGRICULTURAL LAND AND IS SITUATED IN RURAL AR EA. THE ABOVE REFERRED LAND IS SITUATED AT KOVALAM PANC HAYAT UNION OFFICE, I.E. BLOCK DEVELOPMENT OFFICE THIRUPORUR TH ERE IS NO MUNICIPALITY OFFICE THE POPULATION IN THIS AREA IS APPROXIMATE 8500 PER SON THE ABOVE REFERRED LAND IS SITUATED AT A DISTANCE O F 13 KM FROM THE LOCAL LIMITS OF THIRUPORUR PANCHAYAT UNION . IN VIEW OF THE ABOVE, THE CIT(APPEALS) TREATED THE AGRICULTURAL LAND IN QUESTION AS AGRICULTURAL LAND AND OBSERVED THAT AS PER SEC.2(14)(III) OF THE ACT, SALE PROCEEDS OF AGRICUL TURAL LAND ARE EXEMPT UNDER THE INCOME-TAX ACT. ACCORDINGLY, THE CIT(APPEALS) DIRECTED THE AO TO DELETE THE ADDITION MADE FOR 11,760/- BY TREATING AGRICULTURAL INCOME AS OTHER S OURCE. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE LEARNED D.R CONTENDED THAT THE ASSESS ING OFFICER HAS TREATED THE PROPERTIES AS NON-AGRICULTURAL, AFTER C ONDUCTING EXTENSIVE ENQUIRIES. THE ASSESSING OFFICER HAD COLLECTED THE DETAILS FROM THE TAHSILDAR THROUGH ENQUIRIES U/S.133(6). THE TAHSI LDAR VIDE HIS LETTER IN 3/2014 STATED THAT THERE IS NO AGRICULTURAL ACT IVITIES CARRIED OUT IN THE SAID LAND FOR PAST 3 YEARS PRIOR TO SALES. THE EVIDENCES COLLECTED BY THE ASSESSING OFFICER SHOWED BEYOND DOUBT THAT N O AGRICULTURAL - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 12 ACTIVITIES WERE CARRIED ON IN THE PROPERTIES SOLD B Y THE ASSESSEE. THE ASSESSING OFFICER FOUND THAT THE ENTIRE AREA HAS BE COME A SEMI- URBAN AREA WITH A LOT OF REAL ESTATE DEVELOPMENT AN D EDUCATIONAL INSTITUTIONS COMING AROUND. THE ASSESSING OFFICER HAS ESTABLISHED THE FACT THAT AGRICULTURAL ACTIVITIES WERE NOT CARR IED OUT, NOT ONLY IN THE PROPERTIES OWNED BY THE ASSESSEE, BUT ALSO IN THE S URROUNDING AREAS. EVEN THOUGH THE PROPERTIES WERE AGRICULTURAL PROPER TIES IN THE LONG PAST, NO AGRICULTURAL ACTIVITIES WERE BEING CARRIED ON IN THAT AREA FOR SO MANY YEARS IN THE PAST BECAUSE OF THE URBANIZATION AND REAL ESTATE DEVELOPMENT. THE LEARNED D.R EXPLAINED THAT AGRICU LTURAL CHARACTER OF THE PROPERTIES HAD ALREADY BEEN LOST LONG AGO AN D, THEREFORE, THERE IS NO FORCE IN THE ARGUMENT OF THE ASSESSEE THAT TH E PROPERTIES SOLD BY THE ASSESSEE WERE AGRICULTURAL IN NATURE. HE, T HEREFORE, SUBMITTED THAT THE ORDER OF THE ASSESSING OFFICER MAY BE UPHE LD AND THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) MAY BE S ET ASIDE. 12. THE LEARNED CHARTERED ACCOUNTANT APPEARING FOR THE ASSESSEE, ON THE OTHER HAND, SUPPORTED THE ORDER PASSED BY TH E COMMISSIONER OF INCOME-TAX(APPEALS). THE LEARNED CHARTERED ACCOU NTANT EXPLAINED THAT THE PROPERTIES WERE ACQUIRED BY WAY INHERITANC E FROM LATE - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 13 V.S.SHAH. AT THE TIME OF PURCHASE, THEY WERE AGRIC ULTURAL LANDS AND AGRICULTURAL ACTIVITIES WERE ALSO CARRIED ON. A LO T OF DEVELOPMENT CAME AROUND THE PROPERTIES SOLD BY THE ASSESSEE. RE AL ESTATE DEVELOPMENT IS ALSO TAKING PLACE. BUT ALL THESE TH INGS DO NOT CHANGE THE CHARACTER OF THE PROPERTIES HELD BY THE ASSESSE E. THE PROPERTIES WERE AGRICULTURAL IN NATURE WHICH IS BEYOND DOUBT. IN REVENUE RECORDS, THERE WERE AROUND 300 EUCALYPTUS TREES STA NDING ON THE LAND. THESE TREES WERE COMMISSIONED BY THE ASSESSE E DURING THE YEAR 2006-07. SUBSEQUENT PERIOD, THE VAO HAS NOT C ERTIFIED WHETHER THE TREES ARE GROWN OR AVAILABLE IN THE SAID LAND. 13. THE LEARNED CHARTERED ACCOUNTANT FURTHER EXPLAI NED THAT EVEN AT THE TIME OF SALE, THE PROPERTIES WERE HAVING EUC ALYPTUS TREES, AS THE ASSESSEE HAD PLANTED THESE TREES AS PART OF ITS AGRICULTURAL OPERATIONS. HE SUBMITTED THAT THE COMMISSIONER OF INCOME- TAX(APPEALS) HAS EXAMINED ALL THESE ASPECTS IN A DE TAILED MANNER AND, THEREFORE, THE APPEAL FILED BY THE REVENUE BE DISMISSED. 14. THE REVENUE HAS RELIED ON THE DECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF SARIFABIBI MOHAMED IBR AHIM VS. CIT (204 ITR 631) TO HOLD THAT THE PROPERTIES SOLD BY T HE ASSESSEE WERE - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 14 NOT AGRICULTURAL IN NATURE. HE HAS ALSO RELIED ON THE DECISION OF THE INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI RE NDERED IN THE CASE OF M/S. PALLAVA RESORTS P. LTD. IN ITA NO.794/ MDS/2011DATED 11.10.2012. 15. THE A.R HAS RELIED ON THE FOLLOWING DECISIONS:- A) IN THE CASE OF MRS.SAKUNTHALA VEDACHALAM & OTH ERS VS. ACIT IN TAX CASE (APPEAL) NO.566 AND 567 OF 2013 OF JURISDICTIO NAL HIGH COURT. B) IN THE CASE OF BYALAPPA VS. STATE (KARNATKA)(DB) IN 1982 AIR (KARNATAKA) 99 AND ALSO C) IN THE CASE OF RAJA BENOY KUMAR SAHAS ROY IN 32 ITR 466(SC) D) IN THE CASE OF CIT VS.K.E.SUNDARA MUDALIAR AND ORS. ON 02.2.1050 E) IN THE CASE OF MRS. SAKUNTHALA VEDACHALAM VS. AC IT 6 TH AUGUST 2014- MADRAS HIGH COURT F) IN THE CASE OF DECIT VS. LATE DR.N.RANGABASHYAM (REP. BY WIFE MRS.CHITRALEKHA)- ITAT CHENNAI B BENCH ON 10THNOV EMBER, 2016. G) IN THE CASE OF PAVADAI PATHAN VS. RAMASWAMI CHE TTY AIR 1922 MAD. 351. 16. WE HEARD BOTH SIDES IN DETAIL AND GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES, THE ARGUMENTS OF THE PARTIES AS WELL AS THE VARIOUS DECISIONS RELIED ON BY THEM. 17. THE CRUX OF THE ARGUMENTS ADVANCED BY THE ASSES SEE IN THE PRESENT CASE IS THAT THE LANDS SOLD BY HIM WERE SHO WN AS AGRICULTURAL LAND IN REVENUE RECORDS. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SARIFABIBI MOHAMED IBRAHIM (136 ITR 621) HAS HELD THAT, THE FACT THAT THE LAND IS ENTERED AS AGRICULTURAL L AND IN REVENUE - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 15 RECORDS AND IS ASSESSED AS SUCH UNDER THE LAND REVE NUE CODE, WOULD BE A CIRCUMSTANCE IN FAVOUR OF CONCLUSION THA T IT IS A AN AGRICULTURAL LAND. HOWEVER, THIS WOULD RAISE ONLY A PRIMA FACIE PRESUMPTION AND THE SAID PRESUMPTION CAN BE DESTROY ED BY OTHER CIRCUMSTANCES POINTING TO THE CONTRARY CONCLUSION. THIS LEGAL PROPOSITION HIGHLIGHTED BY THE HONBLE GUJARAT HIGH COURT HAS BEEN LATER UPHELD BY THE HONBLE SUPREME COURT IN THE CA SE OF SARIFABIBI MOHAMED IBRAHIM VS. CIT (204 ITR 631). IT IS ALSO TO BE SEEN THAT THE QUESTION, WHETHER A PARTICULAR LAND IS AGRICULT URAL OR NOT, IS BASICALLY A QUESTION OF FACT. AS LAID DOWN BY VAR IOUS HIGH COURTS IN DIFFERENT JUDGMENTS, A SERIES OF TESTS ARE APPLIED TO DECIDE, WHETHER A LAND IS AGRICULTURAL OR NOT. IT IS ALSO TO BE UND ERSTOOD THAT ALL THESE TESTS ARE IN THE NATURE OF GUIDELINES AND HAVE TO B E APPLIED, DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE. 18. IN THE PRESENT CASE, AS ALREADY STATED, THE COR E OF THE ARGUMENTS OF THE ASSESSEE IS ON THE CLASSIFICATION OF THE LAND IN REVENUE RECORDS. BUT, THAT ALONE DOES NOT CONCLUSI VELY PROVE THE NATURE OF THE LAND SOLD BY THE ASSESSEE, AS OTHER E VIDENCES ARE SHADOWING THE SAID PRESUMPTION PRIMA FACIE CREATED BY THE ENTRY - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 16 MADE IN THE REVENUE RECORDS. THE PROPERTIES WERE I N FACT, INHERITED BY THE ASSESSEE. AT THE TIME OF PURCHASE OF THESE PARCELS OF LAND, THEY MIGHT HAVE BEEN AGRICULTURAL LANDS. THAT IS W HY THE LAND PARCELS ARE CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTUR AL LANDS. THAT POSITION WAS CONTINUED IN A RELIGIOUS MANNER WITHOU T ANY ANNUAL VERIFICATION OF THE NATURE OF THE PROPERTY. BUT, T HE 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 PA ST 3 EARLIER PREVIOUS YEARS, NO AGRICULTURAL ACTIVITIES WERE CAR RIED OUT IN THAT AREA. THE ASSESSEE AS WELL AS THE OWNERS OF SURROUNDING P ROPERTIES WAS NOT IN FACT CARRYING ON ANY AGRICULTURAL ACTIVITIES . THE LETTER GIVEN BY THE TAHSILDAR IS VERY IMPORTANT. HE HAS STATED TH E REASONS AS TO WHY THE AGRICULTURAL ACTIVITIES WERE NOT BEING CARRIED OUT ON THOSE PROPERTIES. BECAUSE OF URBANIZATION, THE PROPERTIE S BEING IN THE PERIPHERAL OF CHENNAI METROPOLIS, REAL ESTATE DEVEL OPMENT HAS STARTED TAKING PLACE IN THAT AREA AS WELL. A LOT O F PRIVATE AND COMMERCIAL BUILDINGS ARE CONSTRUCTED. BECAUSE OF T HE BOOM OF THE REAL ESTATE DEVELOPMENT, THE ENTIRE CONTINGENT OF T HAT LAND HAS - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 17 BECOME SUBJECT MATTER OF TRANSACTIONS INTENDED FOR THE PURPOSE OF REAL ESTATE DEVELOPMENT. IN THAT BACKGROUND NO AGR ICULTURAL ACTIVITIES WERE BEING CARRIED OUT IN THAT AREA. THE CASE OF T HE ASSESSEE IS ALSO NOT AN EXCEPTION. 19. THE LETTER GIVEN BY THE TAHSILDAR HAS CATEGORIC ALLY ESTABLISHED THE FINDING OF THE ASSESSING OFFICER THAT THE LANDS SOLD BY THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSES SMENT YEAR UNDER APPEAL WERE NOT AGRICULTURAL LAND. THE PAST HISTOR Y OF THE LAND ALONE IS NOT THE DECIDING FACTOR. ONCE UPON A TIME THE L AND MIGHT HAVE BEEN USED FOR AGRICULTURAL OPERATIONS. IN THAT WAY OF SPEAKING, ALMOST ALL PARTS OF CHENNAI METROPOLIS MIGHT BE AGRICULTUR AL 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 SAL E. A TEMPORARY STOPPAGE IN THE AGRICULTURAL ACTIVITIES CARRIED ON BY AN ASSESSEE ALSO SHOULD NOT GO AGAINST AN ASSESSEE. FOR ONE OR OTHE R REASON, AN ASSESSEE MAY NOT BE CARRYING ON AGRICULTURAL OPERAT IONS FOR ONE OR TWO YEARS, HE MIGHT BE CARRYING ON AGRICULTURAL OPE RATIONS FOR ALL THE YEARS IN A CONSISTENT MANNER. IN SUCH CASES, IT IS NOT POSSIBLE TO HOLD - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 18 THAT NON CARRYING ON AGRICULTURAL OPERATIONS FOR ON E OR TWO YEARS PERMANENTLY CHANGES THE CHARACTER OF THE LAND. 20. BUT, HERE THE CASE IS STILL DIFFERENT. THE ASS ESSEE HAS NOT BEEN CARRYING ON AGRICULTURAL OPERATIONS FOR SO MANY YEA RS 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 TH E PAST, THE CHARACTER OF THE LAND OCCUPIED BY THE ASSESSEE HAS BEEN NATURALL Y CONVERTED INTO A NON-AGRICULTURAL LAND. 21. IN THIS REGARD, WE HAVE TO APPLY OUR MIND TO ON E MORE VITAL QUESTION, WHETHER THE ASSESSEE WAS CARRYING OUT AGR ICULTURAL OPERATIONS OR NOT. THE CASE OF THE ASSESSEE IN THE PRESENT CASE IS THAT EVEN AT THE TIME OF SALE OF THESE PARCELS OF L AND, 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 TH E CASE OF M/S. PALLAVA RESORTS P. LTD. IN ITA NO.794/MDS/11 DATED 11.10.2012. IN - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 19 PARAGRAPH 22 OF THE SAID ORDER, THE TRIBUNAL HAS HE LD THAT CULTIVATING CASUARINA PLANTS FOR A SHORT PERIOD OF TIME DOES NO T ALTER THE BASIC CHARACTER OF THE LAND. THE LAND PURCHASED BY THE A SSESSEE WAS NOT USEFUL FOR CARRYING ON ANY NORMAL AGRICULTURAL ACTI VITIES. ONLY PLANTS LIKE CASUARINA GROWN THEREIN. FOR EARNING INCOME FROM CASUARINA PLANTS, THE ASSESSEE NEED NOT PURCHASE LAND BY INVE STING CRORES OF RUPEES. INVESTMENT AND RETURN DO NOT HAVE ANY COMP ARISON. EVEN THOUGH THE ABOVE OBSERVATION OF THE TRIBUNAL IN THE CASE OF M/S. PALLAVA RESORTS P. LTD. IS NOT EXACTLY APPLICABLE T O THE PRESENT CASE, IT SHOWS, IF CIRCUMSTANCE SO PERMITS, THE FRIVOLOUSNES S OF THE ARGUMENTS USUALLY MADE BY THE ASSESSEES THAT THEY HAVE CARRIE D ON AGRICULTURAL ACTIVITIES BY PLANTING CASUARINA. 22. IN THE CONTEXT OF AGRICULTURAL OPERATIONS, IT I S NECESSARY TO SEE THAT THE AGRICULTURAL OPERATIONS CARRIED ON BY THE ASSESSEE MUST BE ACTIVITY OF ECONOMIC GAIN. IT MUST GENERATE MEANIN GFUL 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 THA T THE LAND IS AGRICULTURAL IN NATURE. INDIA IS PRE-DOMINANTLY AN AGRICULTURAL ECONOMY WHERE - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 20 AGRICULTURAL ACTIVITIES ARE MAJOR PART OF ECONOMIC ACTIVITIES OF OUR COUNTRY. THEREFORE, THE ACTIVITIES CARRIED ON BY T HE ASSESSEE MUST BE MEANINGFUL AND RESULT-ORIENTED TOWARDS GENERATING R EASONABLE 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 OPERATIO NS. 23. IT IS, IN THIS CONTEXT THAT WE HAVE TO REFER TH E ARGUMENTS OF THE ASSESSEE THAT THE ASSESSEE HAD REPORTED AGRICULTUR AL INCOME IN HIS RETURNS OF INCOME FOR ASSESSMENT YEAR AT ` 11,760/-. WHEN THIS IS CONSIDERED, IT IS OBVIOUS THAT THE AGRICULTURAL INC OME RETURNED BY THE ASSESSEE WAS JUST FOR NAMESAKE AND IT WAS NOT THE R ESULT 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 TH AT THIS WAS ONLY A PLOY CARRIED OUT BY THE ASSESSEE TO MAKE AN IMPRESS ION BEFORE THE TAX AUTHORITIES THAT THE ASSESSEES LAND WAS AGRICU LTURAL IN NATURE, SO THAT THE ASSESSEE CAN CLAIM THE BENEFIT OF AGRICULT URAL LAND, WHEN THE LANDS ARE SOLD, IN VIEW OF HIGH DEMAND OF LAND IN T HE AREA AND IN VIEW OF HECTIC ACTIVITIES OF REAL ESTATE DEVELOPMENT. T HEREFORE, WE ARE OF - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 21 THE OPINION THAT THESE SMALL AMOUNTS OF AGRICULTURA L INCOME RETURNED BY THE ASSESSEE FOR FEW ASSESSMENT YEAR DO NOT GO T O CHANGE THE CHARACTER OF THE LAND. 24. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE LAND WAS NOT ACTUALLY OR ORDINARILY USED FOR AGRICULTURA L 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 TH E EFFORTS USUALLY THAT WOULD HAVE BEEN MADE BY A TRUE AGRICULTURIST. AT THE TIME OF SALE OF LAND ALSO NO AGRICULTURAL ACTIVITIES WERE CARRIE D ON BY THE ASSESSEE. 25. IT COULD BE ONLY AN EXOTIC ARGUMENT TO SAY THAT THE AGRICULTURAL LAND OF 3.92 ACRES OWNED BY THE ASSESSEE WAS SOLD I N THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL F OR A FABULOUS CONSIDERATION OF ` 11,66,00,000/-. IT MEANS THE AGRICULTURAL LAND SO LD BY THE ASSESSEE HAD A MARKET VALUE OF ABOUT ` 3 CRORES PER ACRE. IT IS UNHEARD OF. IT CLEARLY ILLUSTRATES THAT THE LAN D HAS BECOME AN NON- AGRICULTURAL LAND WITH HIGH MARKET POTENTIAL FOR RE AL ESTATE DEVELOPMENT, NOT ALL OF A SUDDEN IN THE PREVIOUS YE AR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL BUT OVER A PERIOD OF L ONG YEARS IN THE - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 22 PAST. THIS ASPECT REALLY CO-RELATES THE ARGUMENT O F THE REVENUE THAT THE ASSESSEE HAD NOT BEEN CARRYING ON ANY AGRICULTU RAL OPERATIONS IN THE LANDS FOR SO MANY YEARS IN THE PAST. 26. IN THESE CIRCUMSTANCES, IT IS OUR CONSIDERED VI EW THAT THE ASSESSING OFFICER HAS CONCLUSIVELY ESTABLISHED THAT THE LANDS SOLD BY THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE A SSESSMENT YEAR UNDER APPEAL FOR A CONSIDERATION OF ` 11,66,00,000/- WERE NOT AGRICULTURAL IN NATURE, BUT, ON THE OTHER HAND, THE Y ARE NON-AGRICULTURAL LAND. THEREFORE, IT DEFINITELY COMES UNDER THE CAT EGORY OF CAPITAL ASSET. ACCORDINGLY, THE GAINS ARISING OUT OF TRA NSFER OF THAT CAPITAL ASSET IS EXIGIBLE TO CAPITAL GAINS TAX. 27. WHEN THE BASIC NATURE OF THE LAND ITSELF FOUND TO BE NON- AGRICULTURAL, THE ARGUMENTS REGARDING STATUS OF THE PROPERTY, WHETHER WITHIN METROPOLIS OR OUTSIDE THE LIMIT OF THE METRO POLIS, IS IRRELEVANT. A NON-AGRICULTURAL PROPERTY, WHETHER INSIDE THE MUN ICIPALITY OR OUTSIDE THE MUNICIPALITY OR EVEN IN A REMOTE VILLAGE IS A CAPITAL ASSET AND TRANSFER OF THE SAME MAY GENERATE INCOME LIABLE FOR CAPITAL GAINS TAXATION. IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, WE SET ASIDE THE - - ITA 2496, 2495/1 6 & CO 172 & 173/M/16 23 ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) ON THIS POINT AND RESTORE THE ORDER OF THE ASSESSING OFFICER. 28. NOW, WE WILL CONSIDER THE CROSS-OBJECTIONS FILE D BY THE ASSESSEE. THE CROSS-OBJECTION NO.172/MDS/2016 & 1 73/MDS./2016 ARE FILED IN SUPPORT OF THE ORDER OF LD.CIT(A) AND NOT RAISED ANY GROUND SEEKING ANY FURTHER RELIEF FROM TRIBUNAL. I N VIEW OF OUR ORDER FINDINGS IN THE APPEALS OF REVENUE, THE SAID CROSS- OBJECTIONS HAVE BECOME INFRUCTUOUS AND LIABLE TO BE DISMISSED. 29. IN RESULT, THE APPEAL FILED BY THE REVENUE IS A LLOWED AND THE CROSS-OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSE D. ORDER PRONOUNCED ON 26 TH APRIL, 2017 AT CHENNAI. SD/- SD/- ( # $ . % &' ) ( ( ) * + ) DUVVURU RL REDDY , -./012/3445/26, 7 89 /JUDICIAL MEMBER 89:;<<4=0>/0>?@AB@2 (7 /CHENNAI, C8 /DATED, THE 26 TH APRIL, 2017. K S SUNDARAM 8D EFGF / COPY TO: 1 . / APPELLANT 3. H, / CIT(A) 5. FIJ K / DR 2. / RESPONDENT 4. H / CIT 6. J'L / GF