Shri Subramaniam Vadivel, CHENNAI V. ACIT, CHENNAI

CO 19/CHNY/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8329 (ITAT-CHENNAI)
• Duration Of Justice: 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-02-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-02-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 29-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANIL NAIR
• Assessee Lawyers: DR S MOHARANA IRS
• Keywords: Capital asset
• Section: 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI S.S.GODARA, JUDICIAL MEMBER I.T.A.NO. 2118/MDS/2012 AND C.O.NOS. 1 & 19/MDS/2013 ASSESSMENT YEAR : 2009-10 THE ASSISTANT COMMISSIONER OF INCOME-TAX, BUSINESS CIRCLE-VII, CHENNAI 600 034. VS. SHRI SUBRAMANIAM VADIVEL, 38-A MAYOR BASUDEV STREET, WASHERMANPET, CHENNAI 600 021. PAN AACPV2373F (APPELLANT) (RESPONDENT/CROSS OBJECTOR) APPELLANT BY : DR. S. MOHARANA, IRS, CIT RESPONDENT BY : SHRI ANIL NAIR, CA DATE OF HEARING : 12 TH FEBRUARY, 2013 DATE OF PRONOUNCEMENT : 20 TH FEBRUARY, 2013 O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT THE APPEAL IS FILED BY THE REVENUE. THE CROSS OBJE CTIONS ARE FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2009-2010. THE APPEAL AND THE CROSS OBJECTIONS ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-IX ITA 2118/12 CO 1 & 19/13 :- 2 -: AT CHENNAI, DATED 17.8.2012 AND ARISE OUT OF THE AS SESSMENT COMPLETED UNDER SEC.143(3) OF THE INCOME-TAX ACT, 1 961. 2. THE ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM HOUSE PROPERTY AND OTHER SOURCES. IN THE PREVIOUS YEAR, RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAD SOLD TWELVE PIECES OF LAND BELONGING TO HIM TO M/S. PALLANISHAM Y PROPERTIES PVT. LTD. FOR A CONSIDERATION OF ` 26,40,00,000/-. ALL THE PARCELS OF LAND ARE CONTIGUOUSLY SITUATED AT PADUR VILLAGE, CHENGALPET TALUK, KANCHEEPURAM DISTRICT. THE PARCELS OF LAND SOLD BY THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSES SMENT YEAR UNDER APPEAL, WERE PURCHASED BY THE ASSESSEE OVER A PERIOD OF TEN YEARS FROM 1980 TO 1991. THE EXTENT OF AREA DI FFERED FROM PLOT TO PLOT, FROM 8 CENTS TO 1.25 ACRES, TOTALING TO 4. 43 ACRES. 3. IN THE RETURN FILED BY HIM, THE ASSESSEE DID NOT OFFER ANY INCOME FOR TAXATION BY WAY OF LONG-TERM CAPITAL GAI NS ON ACCOUNT OF SALE OF LANDS, AS STATED ABOVE. THE CLAIM OF TH E ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT THE LANDS SOL D BY HIM WERE AGRICULTURAL LAND AND, THEREFORE, NOT A CAPITAL ASS ET EXIGIBLE TO CAPITAL GAINS TAXATION. ITA 2118/12 CO 1 & 19/13 :- 3 -: 4. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASS ESSING OFFICER SOUGHT TO VERIFY THE CLAIM OF THE ASSESSEE THAT THE LANDS SOLD BY HIM WERE AGRICULTURAL IN NATURE. THE ASSES SING OFFICER SUMMONED THE VILLAGE ADMINISTRATIVE OFFICER AT PADU R AND OBTAINED A SWORN STATEMENT ON 9.12.2011. IN HIS ST ATEMENT GIVEN BEFORE THE ASSESSING OFFICER, THE VILLAGE ADMINISTR ATIVE OFFICER MADE IT CLEAR THAT THE LANDS SOLD, BELONGED TO THE ASSESSEE BUT HE DID NOT CARRY ON ANY AGRICULTURAL ACTIVITIES AT THE TIME OF SELLING THE LANDS. HE ALSO STATED THAT AS PER THE LAND RECORDS , THE ASSESSEE HAD NOT CARRIED ON ANY AGRICULTURAL ACTIVITIES FOR SO MANY YEARS IN THE PAST. HE ALSO STATED THAT THE ASSESSEE HAS NOT PAID LOCAL LAND CESS, LAND CESS SURCHARGES AND WATER CHARGES FOR T HE LANDS SOLD BY HIM, AS IS OTHERWISE REQUIRED IN THE CASE OF AGR ICULTURAL LANDS. HE ALSO STATED THAT AGRICULTURAL ACTIVITIES WERE NO T CARRIED OUT, NOT ONLY IN ASSESSEES PROPERTY BUT ALSO IN SURROUNDING PROPERTIES. HE FURTHER STATED THAT EVEN THOUGH THE LAND WAS CLA SSIFIED AS AGRICULTURAL LAND, NO AGRICULTURAL ACTIVITIES WERE BEING CARRIED OUT IN THE AREA BECAUSE OF DEVELOPMENT OF REAL ESTATE BUSI NESS. HE STATED THAT A LOT OF EDUCATIONAL INSTITUTIONS HAVE COME AROUND THE AREA AND THE LAND VALUE SKYROCKETED AND REAL ESTATE BUSINESS WAS ITA 2118/12 CO 1 & 19/13 :- 4 -: VERY BRISK AND THEREFORE, NOBODY WAS CARRYING ON AN Y AGRICULTURAL ACTIVITY IN THE AREA FOR SO MANY YEARS IN THE PAST. HE FURTHER STATED THAT THE ASSESSEE STILL HOLDS LANDS UNSOLD A ND THOSE UNSOLD LANDS WERE ALSO NOT USED FOR AGRICULTURAL PURPOSES. 5. IN VIEW OF THE ABOVE DETAILS COLLECTED FROM THE VILLAGE ADMINISTRATIVE OFFICER, THE ASSESSING OFFICER INVIT ED THE OBJECTIONS OF THE ASSESSEE AGAINST TREATING THE LANDS SOLD BY HIM AS NON- AGRICULTURAL. THE ASSESSEE STATED THAT THE LANDS A RE CLASSIFIED AS AGRICULTURAL LANDS IN REVENUE RECORDS AS NANJAI AND PUNJAI LANDS AND THIS CLASSIFICATION ESTABLISHES THAT THE LANDS WERE AGRICULTURAL IN NATURE. AFTER THE SALE OF LANDS, THE PURCHASERS MIGHT HAVE DEVELOPED THE LANDS BUT THAT DOES NOT ALTER THE CHA RACTER OF THE LANDS BEFORE ITS SALE. THE ASSESSEE EXPLAINED THAT WHEN THE LANDS WERE SOLD BY HIM, THEY WERE AGRICULTURAL IN N ATURE AND, THEREFORE, THE LANDS DID NOT PARTAKE THE CHARACTER OF CAPITAL ASSET. 6. IT IS TO BE SEEN THAT THE ASSESSING OFFICER HAD ALSO MADE LOCAL INSPECTION OF THE PROPERTY. 7. TO MAKE THE LONG STORY SHORT, THE ASSESSING OFFI CER REJECTED THE OBJECTIONS RAISED BY THE ASSESSEE AND HELD THAT THE PROPERTIES SOLD BY THE ASSESSEE WERE NOT AGRICULTURAL IN NATUR E. ACCORDINGLY, ITA 2118/12 CO 1 & 19/13 :- 5 -: HE COMPUTED THE LONG TERM CAPITAL GAINS AT ` 26,16,06,595/- ARISING OUT OF THE SALE OF LANDS MADE BY THE ASSESS EE FOR A CONSIDERATION OF ` 26,40,00,000/-. 8. THE MATTER WAS CARRIED IN FIRST APPEAL BEFORE TH E COMMISSIONER OF INCOME-TAX(APPEALS). HE ACCEPTED T HE CONTENTIONS OF THE ASSESSEE AND HELD THAT THE PROPE RTIES SOLD BY THE ASSESSEE WERE AGRICULTURAL IN NATURE. THEREFOR E, HE CANCELLED THE CAPITAL GAINS ASSESSMENT. THE APPEAL FILED BY THE ASSESSEE WAS ALLOWED. 9. THE REVENUE IS AGGRIEVED AND, THEREFORE, THE SEC OND APPEAL BEFORE THE TRIBUNAL. 10. THE GROUNDS RAISED BY THE REVENUE IN THE PRESEN T APPEAL ARE EXTRACTED BELOW : 2. THE LD. CIT(A) ERRED IN HOLDING THAT THE LAND SOLD BY THE ASSESSEE IS AGRICULTURAL LAND AND THEREFORE IS NOT A CAPITAL ASSET FOR THE PURPOSE OF CHARGING CAPITAL GAINS TAX. 2.1 THE LD. CIT(A() OUGHT TO HAVE APPRECIATED THAT THE LAND SOLD BY THE ASSESSEE WAS SITUATED NEAR TH E ITA 2118/12 CO 1 & 19/13 :- 6 -: OLD MAHABALIPURAM ROAD WHICH IS DECLARED AS IT CORRIDOR AND IS AN INDUSTRIAL/COMMERCIAL AREA. 2.2 THE LD. CIT(A) FAILED TO APPRECIATE THAT THE AREA IS COVERED UNDER CORPORATION LIMITS OF CHENNAI AS ZONE XV. IT IS SUBMITTED THAT THOUGH THE ACTUAL NOTIFICATION WAS ISSUED IN 2009, THE FACT THAT THE ASSESSEE SOLD THE LAND IN THE IMMEDIATELY PRECEDING YEAR IS INDICATIVE OF THE EXTENT OF DEVELOPMENT OF THE AREA, WHICH THE LD. CIT(A) FAILED TO APPRECIATE. 2.3 THE LD. CIT(A) ERRED IN RELYING UPON THE POPULATION AS PER LAST CENSUS OF THE PARTICULAR VIL LAGE ALONE TO HOLD THAT THE LAND IS AN AGRICULTURAL LAND . IT IS SUBMITTED THAT THE HONBLE SUPREME COURT IN THE CAS E OF G M OMER KHAN (196 ITR 269) HAS HELD THAT THE POPULATION OF THE ENTIRE MUNICIPALITY HAS TO BE CONSIDERED AND NOT THAT OF A PARTICULAR AREA/VILLAG E, FOR THE PURPOSE OF SECTION 2(14)(III). 2.4 THE LD. CIT(A) THUS OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE DID NOT SATISFY THE CUMULATIVE ITA 2118/12 CO 1 & 19/13 :- 7 -: CONDITIONS LAID DOWN IN SECTION 2(14) FOR TREATING THE LAND AS AGRICULTURAL LAND. 2.5 THE LD. CIT(A) FAILED TO APPRECIATE THAT THE HONBLE SUPREME COURT IN THE CASE OF SMT SARIFABIBI (204 ITR 631) HAS OBSERVED TO THE EFFECT THAT THE L AND BEING MENTIONED AS AGRICULTURAL LAND IN THE REVENUE RECORDS IS NOT CONCLUSIVE EVIDENCE TO PROVE ITS CHARACTER. 2.6 THE LD. CIT(A) FAILED TO APPRECIATE THAT THE VAO HAD STATED ON OATH BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE DID NOT CARRY OUT ANY AGRICULTURA L ACTIVITY IN THE SAID LAND. 2.7 HAVING OBSERVED IN PARA 6.8(C), THAT THE LAND RECORDS (ADANGAL) DO NOT INDICATE ANY CULTIVATION I N THE SUBJECT LAND FOR THE YEARS 2002-2008, IT IS SUBMITT ED THAT THE LD. CIT(A) ERRED IN HOLDING THAT THE LAND WAS AGRICULTURAL LAND, RELYING UPON THE LAND RECORDS OF THE ADJACENT LAND FOR SUBSEQUENT YEARS. 2.8 IT IS SUBMITTED THAT THE RELIED UPON DECISION O F THE HONBLE ITAT, CHENNAI IN THE CASE OF SHERIFF DY AN ITA 2118/12 CO 1 & 19/13 :- 8 -: (ITA NO.2088/MDS/2010 DATED 24.06.2011) HAS NOT BECOME FINAL AND THE DEPARTMENT HAS FILED APPEAL BEFORE THE HONBLE HIGH COURT. 11. WE HEARD DR. S. MOHARANA, THE LEARNED COMMISSIO NER OF INCOME-TAX APPEARING FOR THE REVENUE. THE LEARNED COMMISSIONER CONTENDED THAT THE ASSESSING OFFICER H AS TREATED THE PROPERTIES AS NON-AGRICULTURAL, AFTER CONDUCTIN G EXTENSIVE ENQUIRIES INCLUDING SITE INSPECTION. THE ASSESSING OFFICER HAD COLLECTED THE DETAILS FROM THE VILLAGE ADMINISTRATI VE OFFICER THROUGH A SWORN STATEMENT. THE EVIDENCES COLLECTED BY THE ASSESSING OFFICER SHOWED BEYOND DOUBT THAT NO AGRIC ULTURAL ACTIVITIES WERE CARRIED ON IN THE PROPERTIES SOLD B Y THE ASSESSEE. THE ASSESSING OFFICER FOUND THAT THE ENTIRE AREA HA S BECOME A SEMI-URBAN AREA WITH A LOT OF REAL ESTATE DEVELOPME NT AND EDUCATIONAL INSTITUTIONS COMING AROUND. THE ASSESS ING OFFICER HAS ESTABLISHED THE FACT THAT AGRICULTURAL ACTIVITI ES WERE NOT CARRIED OUT, NOT ONLY IN THE PROPERTIES OWNED BY THE ASSESS EE, BUT ALSO IN THE SURROUNDING AREAS. EVEN THOUGH THE PROPERTIES WERE AGRICULTURAL PROPERTIES IN THE LONG PAST, NO AGRICU LTURAL ACTIVITIES WERE BEING CARRIED ON IN THAT AREA FOR SO MANY YEAR S IN THE PAST ITA 2118/12 CO 1 & 19/13 :- 9 -: BECAUSE OF THE URBANIZATION AND REAL ESTATE DEVELOP MENT. THE LEARNED COMMISSIONER EXPLAINED THAT AGRICULTURAL CH ARACTER OF THE PROPERTIES HAD ALREADY BEEN LOST LONG AGO AND, THER EFORE, THERE IS NO FORCE IN THE ARGUMENT OF THE ASSESSEE THAT THE P ROPERTIES SOLD BY THE ASSESSEE WERE AGRICULTURAL IN NATURE. HE, T HEREFORE, SUBMITTED THAT THE ORDER OF THE ASSESSING OFFICER M AY BE UPHELD AND THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APP EALS) MAY BE SET ASIDE. 12. SHRI ANIL NAIR, THE LEARNED CHARTERED ACCOUNTAN T APPEARING FOR THE ASSESSEE, ON THE OTHER HAND, SUPPORTED THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS). THE LE ARNED CHARTERED ACCOUNTANT EXPLAINED THAT THE PROPERTIES WERE ACQUIRED BY THE ASSESSEE OVER A PERIOD OF TEN YEARS SINCE 19 80. AT THE TIME OF PURCHASE OF THESE PROPERTIES, THEY WERE AGR ICULTURAL LANDS AND AGRICULTURAL ACTIVITIES WERE ALSO CARRIED ON. A LOT OF DEVELOPMENT CAME AROUND THE PROPERTIES SOLD BY TH E ASSESSEE. A NUMBER OF EDUCATIONAL INSTITUTIONS ARE BEING SET UP AROUND THE AREA. REAL ESTATE DEVELOPMENT IS ALSO TAKING PLAC E. BUT ALL THESE THINGS DO NOT CHANGE THE CHARACTER OF THE PROPERTIE S HELD BY THE ASSESSEE. THE PROPERTIES WERE AGRICULTURAL IN NATU RE WHICH IS ITA 2118/12 CO 1 & 19/13 :- 10 -: BEYOND DOUBT. IN REVENUE RECORDS, THE PROPERTIES O F THE ASSESSEE WERE SHOWN AS AGRICULTURAL LAND AS NANJAI AND PUNJA I. THE ASSESSEE HAD CARRIED ON AGRICULTURAL OPERATIONS IN THE PROPERTIES IN A CONSISTENT MANNER. 13. THE LEARNED CHARTERED ACCOUNTANT FURTHER EXPLAI NED THAT EVEN AT THE TIME OF SALE, THE PROPERTIES WERE USED FOR AGRICULTURAL OPERATIONS, AS THE ASSESSEE HAD PLANTED CASUARINA T REES AS PART OF ITS AGRICULTURAL OPERATIONS. HE SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS EXAMINED ALL THESE ASPEC TS IN A DETAILED 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 NOT AGRICULTURAL IN NATURE. THE COMMISSIONER HAS ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF CIT VS. RAJA BENOY KUMAR SAHAS ROY (32 ITR 466). HE HAS ALSO RELIED ON THE DECISION OF THE INCOME-TA X APPELLATE ITA 2118/12 CO 1 & 19/13 :- 11 -: TRIBUNAL B BENCH, CHENNAI RENDERED IN THE CASE OF M/S. PALLAVA RESORTS P. LTD. IN ITA NO.794/MDS/2011DATED 11.10.2 012. 15. THE ASSESSEE HAS RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ALL INDIA TEA & TRADING CO. LTD. (219 ITR 544), THE DECISION OF THE HONBLE MAD RAS HIGH COURT IN THE CASE OF M.S.SRINIVASA NAICKER (291 ITR 481) AND ALSO THE ORDER OF THE TRIBUNAL, CHENNAI B BENCH IN THE CAS E OF ACIT VS. SHRI SHERIT DYAN IN ITA NO.2088/MDS/2010 DATED 24.6 .2011. THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ALSO RELIED ON A NUMBER OF JUDICIAL PRONOUNCEMENTS IN HIS ORDER FOR COMING TO THIS CONCLUSION. 16. WE HEARD BOTH SIDES IN DETAIL AND GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES, THE ARGUMENTS OF THE PART IES AS WELL AS THE VARIOUS DECISIONS RELIED ON BY THEM. 17. THE ANCHOR OF THE ARGUMENTS ADVANCED BY THE ASS ESSEE IN THE PRESENT CASE IS THAT THE LANDS SOLD BY HIM WERE SHOWN AS AGRICULTURAL LAND IN REVENUE RECORDS. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SARIFABIBI MOHAMED IBR AHIM (136 ITR 621) HAS HELD THAT, THE FACT THAT THE LAND IS ENTER ED AS AGRICULTURAL ITA 2118/12 CO 1 & 19/13 :- 12 -: LAND IN REVENUE RECORDS AND IS ASSESSED AS SUCH UND ER THE LAND REVENUE CODE, WOULD BE A CIRCUMSTANCE IN FAVOUR OF CONCLUSION THAT IT IS A AN AGRICULTURAL LAND. HOWEVER, THIS W OULD RAISE ONLY A PRIMA FACIE PRESUMPTION AND THE SAID PRESUMPTION CA N BE DESTROYED BY OTHER CIRCUMSTANCES POINTING TO THE CO NTRARY CONCLUSION. THIS LEGAL PROPOSITION HIGHLIGHTED BY THE HONBLE GUJARAT HIGH COURT HAS BEEN LATER UPHELD BY THE HON BLE SUPREME COURT IN THE CASE OF SARIFABIBI MOHAMED IBRAHIM VS. CIT (204 ITR 631). IT IS ALSO TO BE SEEN THAT THE QUESTION, WHE THER A PARTICULAR LAND IS AGRICULTURAL OR NOT, IS BASICALLY A QUESTIO N OF FACT. AS LAID DOWN BY VARIOUS HIGH COURTS IN DIFFERENT JUDGMENTS, A SERIES OF TESTS ARE APPLIED TO DECIDE, WHETHER A LAND IS AGRI CULTURAL OR NOT. IT IS ALSO TO BE UNDERSTOOD THAT ALL THESE TESTS AR E IN THE NATURE OF GUIDELINES AND HAVE TO BE APPLIED, DEPENDING UPON T HE 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 2118/12 CO 1 & 19/13 :- 13 -: MADE IN THE REVENUE RECORDS. THE PROPERTIES WERE I N FACT, PURCHASED OVER A PERIOD OF TEN YEARS SINCE 1980. A T THE TIME OF PURCHASE OF THESE PARCELS OF LAND, THEY MIGHT HAVE BEEN AGRICULTURAL LANDS. THAT IS WHY THE LAND PARCELS A RE CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL LANDS. THAT PO SITION 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 VILLAGE ADMI NISTRATIVE OFFICER IN UNEQUIVOCAL TERMS IN HIS STATEMENT GIVEN UNDER SEC.131 BEFORE THE ASSESSING AUTHORITY. THE VILLAGE ADMINI STRATIVE OFFICER HAS STATED THAT NOT ONLY FOR THE IMPUGNED PREVIOUS YEAR BUT ALSO FOR SO MANY EARLIER PREVIOUS YEARS, NO AGRICULTURAL ACTIVITIES WERE CARRIED OUT IN THAT AREA. THE ASSESSEE AS WELL AS THE OWNERS OF SURROUNDING PROPERTIES WERE NOT IN FACT CARRYING ON ANY AGRICULTURAL ACTIVITIES. THE STATEMENT GIVEN BY TH E VILLAGE ADMINISTRATIVE OFFICER IS VERY EXHAUSTIVE AND DESCR IPTIVE. HE HAS STATED THE REASONS AS TO WHY THE AGRICULTURAL ACTIV ITIES WERE NOT BEING CARRIED OUT ON THOSE PROPERTIES. BECAUSE OF URBANIZATION, THE PROPERTIES BEING IN THE PERIPHERAL OF CHENNAI M ETROPOLIS, REAL ESTATE DEVELOPMENT HAS STARTED TAKING PLACE IN THAT AREA AS WELL. ITA 2118/12 CO 1 & 19/13 :- 14 -: FOUR EDUCATIONAL INSTITUTIONS HAVE BEEN SET UP IN T HE AREA WITHIN A SHORT PERIOD. A LOT OF PRIVATE AND COMMERCIAL BUIL DINGS ARE CONSTRUCTED. BECAUSE OF THE BOOM OF THE REAL ESTAT E DEVELOPMENT, THE ENTIRE CONTINGENT OF THAT LAND HAS BECOME SUBJECT MATTER OF TRANSACTIONS INTENDED FOR THE PUR POSE OF REAL ESTATE DEVELOPMENT. IN THAT BACKGROUND NO AGRICULT URAL ACTIVITIES WERE BEING CARRIED OUT IN THAT AREA. THE CASE OF T HE ASSESSEE IS ALSO NOT AN EXCEPTION. 19. THE STATEMENT GIVEN BY THE VILLAGE ADMINISTRATI VE OFFICER HAS CATEGORICALLY ESTABLISHED THE FINDING OF THE AS SESSING OFFICER THAT THE LANDS SOLD BY THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL WERE NOT AGRICU LTURAL LAND. THE PAST HISTORY OF THE LAND ALONE IS NOT THE DECID ING FACTOR. ONCE UPON A TIME THE LAND MIGHT HAVE BEEN USED FOR AGRIC ULTURAL OPERATIONS. IN THAT WAY OF SPEAKING, ALMOST ALL PA RTS OF CHENNAI METROPOLIS MIGHT BE AGRICULTURAL OR MARSHY LAND IN GOOD OLD PAST. THEREFORE, HISTORY IS NOT THE ONLY TEST TO BE APPLI ED TO DECIDE THE CHARACTER OF THE LAND AT THE TIME OF SALE. A TEMPO RARY STOPPAGE IN THE AGRICULTURAL ACTIVITIES CARRIED ON BY AN ASSESS EE ALSO SHOULD NOT GO AGAINST AN ASSESSEE. FOR ONE OR OTHER REASO N, AN ITA 2118/12 CO 1 & 19/13 :- 15 -: ASSESSEE MAY NOT BE CARRYING ON AGRICULTURAL OPERAT IONS FOR ONE OR TWO YEARS, HE MIGHT BE CARRYING ON AGRICULTURAL OPERATIONS FOR ALL THE YEARS IN A CONSISTENT MANNER. IN SUCH CASE S, IT IS NOT POSSIBLE TO HOLD THAT NON CARRYING ON AGRICULTURAL OPERATIONS FOR ONE 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 MAN Y 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. T HEREFORE, BY VIRTUE OF NOT CARRYING ON AGRICULTURAL ACTIVITIES F OR A QUIET LONG TIME IN THE PAST, THE CHARACTER OF THE LAND OCCUPIED BY THE ASSESSEE HAS BEEN NATURALLY CONVERTED INTO A NON-AGRICULTURA L 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 O F LAND, THE ASSESSEE HAD BEEN CARRYING ON AGRICULTURAL OPERATI ON BY WAY OF ITA 2118/12 CO 1 & 19/13 :- 16 -: GROWING CASUARINA PLANTS. THE EFFECT OF CULTIVATIN G CASUARINA PLANTS WAS CONSIDERED BY THE TRIBUNAL, CHENNAI B BENCH IN THE CASE OF M/S. PALLAVA RESORTS P. LTD. IN ITA NO.794/ MDS/11 DATED 11.10.2012. IN PARAGRAPH 22 OF THE SAID ORDER, TH E TRIBUNAL HAS HELD THAT CULTIVATING CASUARINA PLANTS FOR A SHORT PERIOD OF TIME DOES NOT ALTER THE BASIC CHARACTER OF THE LAND. TH E LAND PURCHASED BY THE ASSESSEE WAS NOT USEFUL FOR CARRYI NG ON ANY NORMAL AGRICULTURAL ACTIVITIES. ONLY PLANTS LIKE C ASUARINA GROWN THEREIN. FOR EARNING INCOME FROM CASUARINA PLANTS , THE ASSESSEE NEED NOT PURCHASE LAND BY INVESTING CRORES OF RUPEE S. INVESTMENT AND RETURN DO NOT HAVE ANY COMPARISON. EVEN THOUGH THE ABOVE OBSERVATION OF THE TRIBUNAL IN THE CASE OF M/S. PAL LAVA RESORTS P. LTD. IS NOT EXACTLY APPLICABLE TO THE PRESENT CASE, IT SHOWS, IF CIRCUMSTANCE SO PERMITS, THE FRIVOLOUSNESS OF THE A RGUMENTS 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 GENERAT E MEANINGFUL INCOME TO THE PERSON WHO IS CARRYING ON AGRICULTURA L ACTIVITIES. IF ITA 2118/12 CO 1 & 19/13 :- 17 -: THE AGRICULTURAL ACTIVITIES CARRIED ON BY THE ASSES SEE 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 PAR T OF ECONOMIC ACTIVITIES OF OUR COUNTRY. THEREFORE, THE ACTIVITI ES CARRIED ON BY THE ASSESSEE MUST BE MEANINGFUL AND RESULT-ORIENTED TOW ARDS GENERATING REASONABLE INCOME FROM SUCH OPERATIONS. AS FAR AS THE PRESENT CASE IS CONCERNED, THERE WAS NO SUCH EC ONOMIC UTILIZATION OF THE LAND FOR EARNING INCOME BY CARRY ING ON AGRICULTURAL OPERATIONS. 23. IT IS, IN THIS CONTEXT THAT WE HAVE TO REFER TH E ARGUMENTS OF THE ASSESSEE THAT THE ASSESSEE HAD REPORTED AGRICU LTURAL INCOME IN HIS RETURNS OF INCOME FOR ASSESSMENT YEARS 2004- 05 TO 2008- 09. THE AGRICULTURAL INCOME RETURNED BY THE ASSESS EE FOR THOSE ASSESSMENT YEARS ARE VERY SMALL AMOUNTS LIKE ` 28,800/-, ` 27,000/-, ` 21,000/-, 15,500/- AND ` 20,450/- RESPECTIVELY. THE ABOVE AGRICULTURAL INCOME RETURNED BY THE ASSESSEE IS NOT FROM THE LAND OF 4.43 ACRES SOLD BY THE ASSESSEE BUT FRO M THE LAND STILL OWNED AND OCCUPIED BY HIM. WHEN THIS IS CONSIDERED , IT IS OBVIOUS THAT THE AGRICULTURAL INCOME RETURNED BY TH E ASSESSEE ITA 2118/12 CO 1 & 19/13 :- 18 -: WAS JUST FOR NAMESAKE AND IT WAS NOT THE RESULT OF ANY AGRICULTURAL OPERATIONS CARRIED ON BY THE ASSESSEE, IN AN ECONOM IC WAY. THERE WAS NO ECONOMIC UTILIZATION OF LAND FOR THE P URPOSE OF EARNING AGRICULTURAL INCOME. IN FACT, THE ASSESSEE HAD STARTED PURCHASING THE LAND SINCE 1980. HE CONTINUED TO PU RCHASE THE LAND TILL 1991. SINCE THEN UPTO THE ASSESSMENT YEA R 2003-04, THE ASSESSEE HAD NOT RETURNED ANY AGRICULTURAL INCOME. THE ASSESSEE STARTED FILING RETURNS FOR THE ASSESSMENT YEARS 2004-05 TO 2008-09. WE CANNOT RULE OUT THAT THIS WAS ONLY A PLOY CARRIED OUT BY THE ASSESSEE TO MAKE AN IMPRESSION BEFORE TH E TAX AUTHORITIES THAT THE ASSESSEES LAND WAS AGRICULTUR AL 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 THE AREA AND IN VIEW OF HECTIC ACTIVITIES OF REAL ESTATE DEVELOP MENT. THEREFORE, WE ARE OF THE OPINION THAT THESE SMALL AMOUNTS OF A GRICULTURAL INCOME RETURNED BY THE ASSESSEE FOR FEW ASSESSMENT YEARS DO NOT GO TO 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 AGRICU LTURAL OPERATIONS ON OR AROUND THE RELEVANT TIME OF SALE. IT IS ALSO TO BE SEEN THAT ITA 2118/12 CO 1 & 19/13 :- 19 -: THE INCOME RETURNED FROM AGRICULTURAL OPERATIONS CA RRIED ON IN THE LAND WAS JUST FOR NAMESAKE AND DOES NOT HAVE ANY PR OPORTION 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. 25. IT COULD BE ONLY AN EXOTIC ARGUMENT TO SAY THAT THE AGRICULTURAL LAND OF 4.43 ACRES OWNED BY THE ASSESS EE WAS SOLD IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR U NDER APPEAL FOR A FABULOUS CONSIDERATION OF ` 26,40,00,000/-. IT MEANS THE AGRICULTURAL LAND SOLD BY THE ASSESSEE HAD A MARKET VALUE OF MORE THAN ` 6 CRORES PER ACRE. IT IS UNHEARD OF. IT CLEARLY ILLUSTRATES THAT THE LAND HAS BECOME AN NON-AGRICULTURAL LAND WITH H IGH 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 ASPE CT REALLY CO- RELATES THE ARGUMENT OF THE REVENUE THAT THE ASSESS EE HAD NOT BEEN CARRYING ON ANY AGRICULTURAL OPERATIONS IN THE LANDS FOR SO MANY YEARS IN THE PAST. ITA 2118/12 CO 1 & 19/13 :- 20 -: 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 TH E ASSESSMENT YEAR UNDER APPEAL FOR A CONSIDERATION OF ` 26,40,00,000/- 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 GAIN S ARISING OUT OF TRANSFER OF THAT CAPITAL ASSET IS EXIGIBLE TO CAPIT AL 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 T HE METROPOLIS, IS IRRELEVANT. A NON-AGRICULTURAL PROPERTY, WHETHER INSIDE THE MUNICIPALITY 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 F ACTS AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THE ORDER O F THE COMMISSIONER OF INCOME-TAX(APPEALS) ON THIS POINT A ND RESTORE THE ORDER OF THE ASSESSING OFFICER. ITA 2118/12 CO 1 & 19/13 :- 21 -: 28. NOW, WE WILL CONSIDER THE CROSS-OBJECTIONS FILE D BY THE ASSESSEE. THE CROSS-OBJECTION NO.1/MDS/2013 IS FIL ED IN SUPPORT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-T AX(APPEALS). IN VIEW OF OUR ORDER ABOVE, THE SAID CROSS-OBJECTIO N HAS BECOME INFRUCTUOUS AND LIABLE TO BE DISMISSED. THE CROSS- OBJECTION NO.19/MDS/2013 IS ONLY A DUPLICATION OF C.O.NO.1/MD S/2013 ALREADY FILED BY THE ASSESSEE. THEREFORE, IT IS RE JECTED. 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 WEDNESDAY, THE 20 TH OF FEBRUARY, 2013 AT CHENNAI. SD/- SD/- (S.S.GODARA) (DR.O. K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 20 TH FEBRUARY, 2013 MPO* COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR