ITO, CHENNAI V. T.Premkumar, CHENNAI

ITA 1165/CHNY/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4917 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2017
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 11-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 02-05-2014
• Court: TRIBUNAL
• Department Lawyers: MILIND MADHUKAR BHUSARI
• Assessee Lawyers: T N SEETHARAMAN
• Keywords: Capital asset; Business income; Cost of acquisition; Capital receipt
• Section: 54B; 2(14); 63

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . ' # , $ #% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . /ITA NO. 1097/MDS/2014 / ASSESSMENT YEAR : 2010-11 THE INCOME-TAX OFFICER, BUSINESS WARD-IIII(2), CHENNAI-34. ( /APPELLANT) V. MRS. CHITRA RAJENDRAN, FLAT NO.2B, VISHRANTHI APARTMENTS, 76, KALAKSHETRA ROAD, THIRUVANMIYUR, CHENNAI 41. PAN AFMPC2455A (/ RESPONDENT) . /ITA NO. 1164/MDS/2014 / ASSESSMENT YEAR : 2010-11 THE INCOME-TAX OFFICER, BUSINESS WARD XV(2), CHENNAI-34. ( /APPELLANT) V. SHRI B. RAJENDRAN , NO.105, 4 TH MAIN ROAD, GANDHI NAGAR, ADYAR, CHENNAI-600 020. PAN ACJPR2673M (/ RESPONDENT) . /ITA NO. 1165/MDS/2014 / ASSESSMENT YEAR : 2010-11 THE INCOME-TAX OFFICER, BUSINESS WARD XV(2), CHENNAI-34. ( /APPELLANT) V. SHRI T. PREMKUMAR , B-6, DEV APARTMENTS, NO.77/32, THIRUVANMIYUR, CHENNAI 41. PAN AAHPP0274E (/ RESPONDENT) . /ITA NO. 1144/MDS/2014 / ASSESSMENT YEAR : 2010-11 THE ASSISTANT COMMISSIONER OF INCOME-TAX, BUSINESS CIRCLE XV, CHENNAI - 34. ( /APPELLANT) V. M/S. RAJENDRAN ASSOCIATES , NO.13, SREEMAN SRINIVASAN STREET, ALWARPET,CHENNAI PAN AAAFR 5288 H (/ RESPONDENT) - - ITA 1097, 1164/14 ETC. 2 DEPARTMENT BY : SHRI MILIND MADHUKAR BHUSARI, CIT ASSESSEE S BY : SHRI T.N.SEETHARAMAN, ADVOCATE / DATE OF HEARING : 11.01.2017 ! / DATE OF PRONOUNCEMENT : 05.04.2017 & / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINS T THE COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX(APPE ALS) DATED 26.12.2013. 2. THE COMMON GROUND IN ALL THESE APPEALS IS WITH R EGARD TO DELETION OF ADDITION MADE BY THE AO TOWARDS CAPITAL GAINS ON SALE OF LAND TREATING IT AS NON-AGRICULTURAL LAND 3. THE FACTS AND THE RELEVANT DETAILS RELATING TO A LL THESE ABOVE APPEALS IN SHORT ARE GIVEN AS UNDER:- PARTICULARS RAJENDRA ASSOCITES B.RAJENDRAN CHITRA RAJENDRAN T.PREMKUMAR STATUS FIRM INDIVIDUAL INDIVIDUAL INDIVIDUAL DATE OF FILING OF RETURN 14.10.2010 29.08.2011 24.0 8.2011 23.04.2011 INCOME RETURNED 48,46,670 17,06,290 3,97,670 4,52,5 10 AGRICULTURAL LANDS MEASUREMENT IN PAIYANUR VILLAGE 223 CENTS 2019 CENTS 291.1 CENTS 1230 CENTS SALE CONSIDERATION 4,79,45,000 37,96,77,330 12,10, 57,699 15,90,60,000 INCOME ASSESSED 5,24,94,950 33,48,62,240 12,09,16,1 60 2,03,52,510 SINCE THE FACTS ARE SIMILAR, WE CONSIDER THE RELEVA NT FACTS AS NARRATED IN THE CASE OF MRS.CHITRA RAJENDRAN IN ITA NO.1097/MDS./2014. THE FACTS OF THE CASE ARE THAT T HE ASSESSEE PURCHASED LANDS ON 9.10.2003 IN TWO PARTS FROM SHRI ABRAHAM - - ITA 1097, 1164/14 ETC. 3 CHACKO FOR A TOTAL AMOUNT OF 3,95,000/- ( 2,88,750/- AND 1,06,250/-). DURING THE PREVIOUS YEAR RELEVANT TO THE AY 2010- 11, THE ASSESSEE WHO WAS THE OWNER OF THE LANDS MEA SURING ABOUT 291.1 CENTS, AT NO.155, PAIYANOOR VILLAGE, CH ENGALPATTU TALUK, KANCHEEPURAM DISTRICT (SURVEY NUMBERS : 173/ 5AI (210.6 CENTS) AND 63/1180.5 CENTS) SOLD THE SAME (IN TWO P ARTS) FOR A TOTAL SUM OF 12.10 CRORES, ON 15 TH FEBRUARY, 2010 TO M/S. TRUTHFUL REALTORS AND PROPBUILD PVT. LTD., A COMPAN Y WHICH IS INTO REAL ESTATE AND CONSTRUCTION BUSINESS. THE AS SESSEE HAS TREATED THE SALE PROCEEDS AMOUNTING TO 12,09,07,669/- ( 12,10,57,669/- LESS COST OF ACQUISITION 1,50,000/-) AS EXEMPTED INCOME CLAIMING IT TO BE AGRICULTURAL LANDS. THE A SSESSEE DID NOT FURNISH ANY PROOF FOR HAVING CARRIED OUT AGRICULTUR AL OPERATIONS IN THE ABOVE LANDS. THE ASSESSEE HAS FILED HER RETURN S FOR THE FIRST TIME THIS YEAR, ADMITTING INCOME FROM OTHER SOURCES , BEING INTEREST ON DEPOSITS HELD AND STATED THAT THE NET A GRICULTURAL INCOME IS REFLECTED IN HER HUSBANDS RETURN. 3.1 THE AO HAS GONE THROUGH THE RECITALS OF THE SAL E DEED FOR SALE OF 80.5 CENTS OF LAND SOLD, WHEREIN IT IS STAT ED AT PAGE 3, SECOND PARAGRAPH THAT WHEREAS PRESENTLY THE PROPERTIES SET - - ITA 1097, 1164/14 ETC. 4 OUT IN THE SCHEDULES HEREUNDER IS IDLE, BARREN AND UNFIT FOR AGRICULTURAL PURPOSES AND THE VENDORS FIND IT VERY DIFFICULT TO MAINTAIN THE SAME AND THE SAID PROPERTIES ARE LYING FALLOW WITHOUT ANY YIELD OR RETURN THERE FROM. FURTHER, THE AO OBSERVED THAT THE OTHER PART SOLD IS LYING ADJACENT TO THIS LAND AND THEY SHARE ONE COMMON BOUNDARY. ACCORDING TO THE AO, TH E ASSESSEE HAS HERSELF ADMITTED THAT THE LANDS WERE S OLD WITH AN INTENTION OF GETTING A HIGHER PROFIT. THE AO STA TED THAT THE ASSESSEE HAS PURCHASED THE LANDS ABUTTING THE OLD MAHABALIPURAM ROAD (OMR-IT CORRIDOR) IN THE YEAR 20 03 AND THE LANDS WERE SOLD AT AN EXORBITANT PRICE WHICH IS FAR FROM THE REACH OF ANY AGRICULTURIST TO PURCHASE FOR CARRYING OUT AGRICULTURAL OPERATIONS. ACCORDING TO THE AO, THE CERTIFICATE F ROM THE VILLAGE ADMINISTRATIVE OFFICER IS INCOMPLETE AND WITHOUT TH E DATE, YEAR ETC. THE CERTIFICATE OF THE DY. TAHSILDAR IS DATED 17.1.2006 AND NOT RELEVANT TO THE DATE OF SALE. TO SUPPORT THE A SSESSEES CASE, SHE RELIED ON THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF SHRI M.S.SRINIVASA (291 ITR 481). THE ASSESSEE HAS ALSO CLAIMED THAT HER HUSBAND HAD TAKEN LOAN FROM CHINGE LPUT CO-OP. PRIMARY AGRICULTURAL RURAL DEVELOPMENT BANK LTD. FO R CARRYING - - ITA 1097, 1164/14 ETC. 5 OUT AGRICULTURAL OPERATIONS. THE ASSESSEE HAS ALSO STATED THAT AGRICULTURAL OPERATIONS WERE CARRIED OUT BY SHRI RA MACHANDRA NAIDU AND A COPY OF THE NEWSPAPER CUTTING WHICH SHO WS THAT A NEW VARIETY OF PADDY, J-18 WAS CULTIVATED DURING 20 05-06. HOWEVER, ACCORDING TO THE AO, THE ASSESSEE DID NOT FURNISH ANY CONTEMPORANEOUS EVIDENCES TO INDICATE THAT AGRICULT URAL OPERATIONS WERE CARRIED OUT IN THE LANDS. ACCORDI NGLY, THE AO OBSERVED THAT THE ASSET TRANSFERRED IS NOT AN AGRIC ULTURAL LAND AND THE SAME IS TREATED AS A CAPITAL ASSET, THE TRA NSFER OF WHICH TRIGGERS CAPITAL GAINS. 3.2 FURTHER, THE AO OBSERVED THAT AS PER SALE DEED LAND WAS LYING AS BARREN LAND AND UNFIT FOR CULTIVATION. FO R THIS PURPOSE, HE REFERRED THE PREAMBLE OF THE SALE DEED AND ALSO ANS WER TO QUESTION NO.1 OF THE ASSESSEE IN LETTER DATED 11.2. 2013. ACCORDING TO THE AO, THE ASSESSEES INTENTION TO SA LE THE LAND WAS TO GET HIGHER PROFIT. THE ASSESSEE HAS CLAIME D THAT THE LAND WAS AGRICULTURAL LAND AND AGRICULTURAL INCOME WAS DECLARED IN HER HUSBANDS RETURN OF INCOME AS A PROOF OF IT, RETURNS OF INCOME OF HER HUSBAND FOR THE AY 1993-94 AND 1999-2 000 HAVE BEEN FILED BEFORE HIM, WHICH WERE BRUSHED ASIDE BY THE AO, AS - - ITA 1097, 1164/14 ETC. 6 THESE RETURNS WERE NOT RELATING TO THE ASSESSMENT Y EAR UNDER CONSIDERATION. HE FURTHER OBSERVED THAT THE MERE FACT THAT THE LANDS WERE USED FOR AGRICULTURE IN THE PAST AND LAN D REVENUE WAS PAID CANNOT BE REASON ENOUGH TO ACCEPT THE CLAIM OF THE ASSESSEE THAT THE LANDS WERE AGRICULTURAL. ACCORDI NG TO THE AO, SOME AGRICULTURAL OPERATIONS SHOULD HAVE BEEN CARRI ED OUT IN THE LANDS. FOR THIS PROPOSITION, THE AO RELIED ON THE JUDGMENT IN THE CASE OF RAJA MUSTAFA ALI KHAN V. CIT (16 ITR 330) A ND CIT V. OFFICERS IN CHARGE (COURT OF WARDS) REPORTED IN 105 ITR 133(SC). THE PURCHASER, M/S.TRUTHFUL REALTORS AN D PROPBUILD P. LTD. IS A REAL ESTATE AND CONSTRUCTION COMPANY, AS PER WHICH THE AO INFERRED THAT THE ASSESSEE SOLD THE LAND FOR THE PURPOSE OF NON-AGRICULTURAL PURPOSES. HENCE, HE PLACED REL IANCE ON THE ABOVE JUDGMENT FOR TREATING THE IMPUGNED LAND AS NO N- AGRICULTURAL LAND. 3.3 ACCORDING TO THE AO, THE ASSESSEE, WHO HAS BEEN KEEPING THE LANDS BARREN, AS EVIDENT FROM THE RECIT ALS OF THE SALE DEED, HAS SOLD THE LANDS TO A CONSTRUCTION COMPANY FOR WINDFALL GAINS AND IN VIEW OF THIS, THE GAIN HAS TO BE TREAT ED AS CAPITAL GAINS AND THE RULING RELIED ON BY THE ASSESSEE IN T HE CASE OF SHRI - - ITA 1097, 1164/14 ETC. 7 M.S.SRINIVASA NAICKER & OTERS VS. ITO [292 ITR 48(MDS.)] I S NOT ANALOGOUS TO THE ASSESSEES CASE, SINCE THE LANDS H ELD BY THE ASSESSEE DO NOT FALL UNDER THE CATEGORY OF AGRICULT URAL LANDS. EVEN ON THE DATE OF SALE, AS PER THE SALE DEED RECI TALS, THE LANDS WERE UNFIT FOR CULTIVATION AND LYING BARREN. ACCOR DING TO THE AO, THE SUBJECT LAND WAS NON-AGRICULTURAL LAND, WHICH I S TO BE TREATED AS A CAPITAL ASSET, EVEN THOUGH IT MAY BE SITUATED BEYOND 8 KMS FROM THE NEAREST MUNICIPAL LIMITS BECAUSE THESE CON DITIONS OF DISTANCE HAVE TO BE APPLIED ONLY TO LANDS WHICH ARE PRIMARILY CLASSIFIED AS AGRICULTURAL LANDS. ACCORDINGLY, THE AO TREATED THE GAIN ARISING OUT OF SALE OF LAND AS LONG TERM CAPIT AL GAINS AND BROUGHT THE SAME TO TAX. AGAINST THIS, THE ASSESSE E WENT IN APPEAL BEFORE THE CIT(APPEALS). 4. ON APPEAL, THE CIT(APPEALS) AFTER CONSIDERING TH E FOLLOWING JUDGMENTS HAS OBSERVED THAT GAIN ON SALE OF LAND NOT TO BE CHARGED TO CAPITAL GAIN AS THE TOTAL CONSIDERATI ON RECEIVED REPRESENT SALE OF AGRICULTURAL LAND WHICH ARE NOT C APITAL ASSETS U/S.2(14) OF THE IT ACT AND ALLOWED THE APPEAL OF T HE ASSESSEE RELYING ON THE FOLLOWING CASE LAWS. - - ITA 1097, 1164/14 ETC. 8 1. BHAVANI DISTELLERIES AND CHEMICALS LTD. (ITA NO.667/09-10, CIT(A)-III, CHENNAI DATED 31.3.2000 2. SMT. B. JAYANTHI (ITA NO.104/1-=11, CIT(A)-IV, CHENNAI DATED 20.3.2011 3. SHRI SHERIFF DYAN (ITA NO. 172/08-09, CIT(A)-IX, CHENNAI DATED 13.09.2010 AY 2006-07 & ITA NO.2088/MDS/2010, ITAT, B BENCH, CHENNAI DT. 24.6.2007 AY 2006-07 4. SMT. S. ANURADHA (ITA NO.115/10-11, CIT(A)-IX, CHENNAI DATED 26.3.2012 5. CIT(A) VS. SHASHIBEN (288 ITR 319) WHEREIN IT WA S HELD THAT AGRICULTURAL LAND, BARREN AND UNCULTIVATE D LAND ONLY GROSS WAS RAISED STILL IT IS CONSIDERED AS AN AGRICULTURAL LAND. 6. GEMINI PICTURES CIRCUIT P. LTD. VS. CIT (130 ITR 686 (MAD) THE ONUS IS ON THE DEPARTMENT TO PROVE THAT LAND IS NON-AGRICULTURAL. ONCE THE ASSESSEE PROVES THAT THE LAND IS AGRICULTURAL, THE BURDEN OF PROVING THA T IT IS NOT AGRICULTURAL LAND IS ON THE REVENUE. 7. BORHAT TEA CO. LTD. VS. CIT (138 ITR 783)(CAL) F OR THE PURPOSE OF LAND BEING AGRICULTURAL LAND, ACTUAL AGRICULTURE OPERATION OR CULTIVATION OR TELLING OF LANDS IS NOT NECESSARY. WHAT IS TO BE SEEN IS WHETHER SUCH LAND IS CAPABLE OF AGRICULTURE OPERATION BEING CARRIED O N. 8. GORDHAMBHAI KAHANDAS DALWADI VS. CIT (127 ITR 664)(GUJ) THE CORRECT TEST THAT HAS TO BE APPLIED I S WHETHER ON THE DATE OF SALE THE LAND WAS AGRICULTUR AL LAND OR NOT. AFTER THE SALE THE PURCHASE WAS GOING TO PUT THE LAND TO NON-AGRICULTURAL USE. IT IS NOT ME AN THAT THE LAND HAS SEIZED TO BE AGRICULTURAL LAND ON THE DATE OF SALE. - - ITA 1097, 1164/14 ETC. 9 9. MADHA BAI H PATEL VS. CIT (20. ITR 638 (GUJ) IF THE LAND IS RECORDED AS AGRICULTURAL AND IN THE REVENUE RECORDS AND IF TILL THE DATE OF SALE, IT IS USED AND EXPLOI TED AS AGRICULTURAL LAND, THEN SUCH PIECE OF LAND WOULD HAV E TO BE REGARDED AS AGRICULTURAL EVEN THOUGH IT WAS INCLUDED WITHIN THE MUNICIPAL LIMITS OR IT WAS SOLD ON PER ACREAGE B ASIS. AGAINST THIS THE REVENUE IS IN APPEAL BEFORE US IN ALL THE ABOVE CASES. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IT IS THE CONTENTION OF THE AR THAT THE LAND WAS HE LD BY THE ASSESSEE AS AN AGRICULTURAL LAND AND IT IS NOT FAL LING WITHIN 8 KMS FROM THE LOCAL LIMITS OF ANY MUNICIPAL OR CANTONMENT BOARD A S REFERRED IN SECTION 2(14)(III)(A) OF THE INCOME TAX ACT AND ALSO NOT FALLING WITHIN THE NOTIFIED AREA AS PER PROVISIONS OF SECTION 2(14)(III)(B) O F THE ACT. THE LAND IS SITUATED 4 KMS FROM THIRUPORUR TOWN PANCHAYAT AND 8 .4 KMS FROM MAHABALIPURAM BOTH ARE TOWN PANCHAYATHS WHICH ARE N OT A NOTIFIED AREA AND THE NEAREST MUNICIPAL CORPORATION IS CHENGALPET WHICH IS 30 KMS AND CHENNAI CORPORATION IS ABOUT 23 KMS FROM THE LAND. THE LAND WAS ACTUALLY CLASSIFIED AS AGRICULTURAL LAND AS PER GOVERNMENT R EVENUE RECORDS AND THIS LAND IS SUBJECT TO REVENUE LAND TAX. THE LAND WAS A CTUALLY AND ORDINARILY USED FOR AGRICULTURAL PURPOSE, SINCE IT WAS PURCHAS ED TILL THE DATE OF SALE . EVEN TODAY THE LAND IS CLASSIFIED UNDER AGRICULTURAL LAND AS PER REVENUE RECORDS. THE LAND WAS NEVER USED FOR NON AGRICULTUR AL PURPOSE TILL THE DATE OF SALE AND IT WAS NEVER CEASED TO PUT TO AGRICULTU RAL PURPOSE. THE LANDS WERE PURCHASED IN THE YEARS 1991 -92 TO 1995-96 AS AGRICULTURAL LAND AND - - ITA 1097, 1164/14 ETC. 10 AGRICULTURAL OPERATIONS WERE CARRIED OUT IN THE SAI D LAND BY THE ASSESSEE ON HIS OWN AND AGRICULTURAL INCOME WAS ADMITTED UPTO A SSESSMENT YEAR 1998- 99. SUBSEQUENTLY, THE LAND WAS USED FOR CULTIVATION BY THE THIRD PARTY AND CHITTA ADANGAL SHOWING THE CULTIVATION OF PADDY WAS FURNISHED TO THE ASSESSING OFFICE. THE LAND WAS ACTUALLY USED FOR AG RICULTURAL PURPOSES AND THE LAND IS CAPABLE OF USE FOR THE PURPOSE OF AGRIC ULTURE TILL THE DATE OF SALE. THE ASSESSEE ALSO EXPLAINED THE REASONS FOR NON-ADM ISSION OF AGRICULTURAL INCOME AS THE LAND WAS GIVEN TO THIRD PARTY FOR THE AGRICULTURAL PURPOSES AND THERE WAS NO INCOME FROM THE SAID LAND. THE AS SESSEE HAS PURCHASED THE SAID LAND MEASURING ABOUT 291.1 CENTS FOR A SUM OF ` 12.86 LAKHS TWO DECADES AGO AND HARVESTED PADDY ONLY IN THE SAID LA ND. THE FUTURE SCOPE OF THE AREA TO USE THE LAND FOR NON-AGRICULTURAL PU RPOSES DO NOT REFLECT THAT THE LAND IS NOT AN AGRICULTURAL LAND AND ALSO EXIS TENCE OF ONE EDUCATIONAL INSTITUTION DOES NOT ALTER THE CHARACTER OF THE ASS ESSEES LAND. THE ASSESSEE NEVER MADE ANY PLOT OUT OF THE IMPUGNED LA ND AND THE LAND WAS SOLD IN CENTS AND NOT AS SQUARE FEET. THE ASSESSEE HAS NOT MADE ANY ROADS OR ANY FACILITIES AND IT WAS UNDEVELOPED LAND FIT T O USE FOR AGRICULTURAL PURPOSE AT THE TIME OF SALE. THE ENTIRE LAND WAS SO LD AS IT WAS PURCHASED. THE ASSESSEE SOLD THE LAND ONLY BECAUSE OF FAVOURAB LE MARKETING CONDITIONS AS THE LAND WAS FETCHED A HIGHER PRICE AND THE GETT ING UP HIGHER PRICE DUE TO INDUSTRIALIZATION OR URBANIZATION CANNOT BE LED TO CONCLUSION THAT AGRICULTURAL LAND WAS SOLD AS NON-AGRICULTURAL LAND WHEN THE CLASSIFICATION OF - - ITA 1097, 1164/14 ETC. 11 LAND SHOWN IN REVENUE RECORD AS AGRICULTURAL LAND. EVEN TEMPORARY STOPPAGE OF THE AGRICULTURAL ACTIVITIES DUE TO UN-F AVOURABLE CONDITIONS, THE LAND CANNOT BE TREATED AS NON-AGRICULTURAL LAND. TH E ASSESSEE SHOWN THE AGRICULTURAL INCOME, WHEN THE AGRICULTURAL OPERATIO NS WERE CARRIED ON THE SAID LAND. IN CERTAIN YEARS, THERE WAS NO AGRICULT URAL INCOME, THOUGH IT WAS LET OUT TO OTHER PERSONS FOR AGRICULTURAL PURPOSES. THE PURPOSE FOR WHICH THE PURCHASER USED THE LAND CANNOT BE A REASON TO T REAT THE AGRICULTURAL LAND AS NON AGRICULTURAL LAND. THE ASSESSEE INTENT TO CARRY ON AGRICULTURAL OPERATIONS. THIS AGRICULTURAL LAND IS SITUATED BEYO ND THE MUNICIPAL LIMITS. THE ASSESSEE HAS NOT TAKEN ANY PERMISSION FROM THE GOVERNMENT FOR MAKING PLOTS, AS THE ASSESSEE NEVER HAD ANY INTENTI ON TO MAKE THE LAND INTO PLOTS AND CARRY ON REAL ESTATE BUSINESS IN RES PECT OF THE LAND. THE ASSESSEE HAS SOLD LAND AS IT IS CONDITION. COPIES O F SALE DEEDS OF THE ABOVE SAID LAND WERE BROUGHT ON RECORD BY THE ASSESSEE BE FORE THE LOWER AUTHORITIES TO PROVE THE FACT THAT THE LAND HELD/SO LD BY THE ASSESSEE IS AGRICULTURAL LAND. 5.1. THE AR SUBMITTED THAT THE SALE TRANSACTION EFF ECTED BY THE ASSESSEE IN RESPECT OF THE ABOVE AGRICULTURE LAND CONSTITUTED O NLY SALE OF AGRICULTURE LAND, AND BY NO STRETCH OF IMAGINATION, IT CANNOT B E TREATED AS GAIN ON SALE OF SUCH CAPITAL ASSET LIABLE FOR TAXABLE CAPITAL GA INS, OR ADVENTURE IN TRADE AND SO AS TO TREAT THE SAME AS 'BUSINESS TRANSACTIO N' FOR THE FOLLOWING REASONS: - - ITA 1097, 1164/14 ETC. 12 I) PURCHASE AND HOLDING OF LAND FOR A PERIOD AND SU BSEQUENT SALE THEREOF ITSELF CANNOT BE AN INDICATOR TO HOLD THAT THE INTE NTION OF THE ASSESSEE WAS TO CARRY ON BUSINESS WITH THOSE ASSETS . THE INTENTION CANNOT BE PRESUMED UNLESS SUPPORTED BY EVIDENCE. IN THIS CASE THE TREATMENT GIVEN BY THE ASSESSEE FOR THIS ASSET IN HER HANDS CANNOT INDICATE THAT THE INTENTION OF THE ASSESSEE IS TO H OLD THE SAME AS BUSINESS ASSET. II) THE ASSET ACQUIRED WAS AGRICULTURE LAND AS PER THE EVIDENCE BROUGHT ON RECORD FOR `3,95,000/-IN TWO PARTS I.E. SHRI ABRAHAM CHACKO `2,88,750/- AND `1,06,250/- -(INCLUDING STAMP DUTY). IT WAS SOLD ON FOR A CONSIDERATION OF ` .12,10,57,669/-. THUS, THE ASSESSEE HELD THE AGRICULTURE LAND FOR ABOUT TWO DE CADES. DURING THAT PERIOD THE ASSESSEE CARRIED ON REGULAR AGRICUL TURAL OPERATIONS IN THE LAND. IN THE LIGHT OF FAVOURABLE MARKET CONDITI ONS THE ASSESSEE THOUGHT IT GOOD TO SELL THE ASSET TO REALIZE A GOOD AMOUNT. REALIZATION OF BETTER PRICE IN A BOOMING MARKET CAN NOT BE CONSIDERED AS AN ADVENTURE IN TRADE. III) THE EXPRESSION ADVENTURE IN THE NATURE OF TRAD E OCCURS IN THE DEFINITION OF BUSINESS UNDER SECTION 2(13) BUT THE EXPRESSION ADVENTURE IN THE NATURE OF TRADE HAS NOT BEEN DEFIN ED IN THE ACT. IT MAY BE PERTINENT TO MENTION HERE THAT A SPECIFIC TR ANSACTION PARTAKE THE CHARACTER OF BUSINESS OR AN ADVENTURE IN THE NATURE OF TRADE OR REALIZATION OF CAPITAL ASSET OR A MERE CONVERSION OF ASSET HAS TO BE DECIDED DEPENDING UPO N FACTS OF EACH CASE. IV) IN DECIDING AS TO WHETHER A PARTICULAR TRANSACT ION IS AN ADVENTURE IN THE NATURE OF TRADE, THE ASSESSING OFFICER MUST CON SIDER ALL THE RELEVANT AND PROVED FACTS AND CIRCUMSTANCES. REALIZ ATION OF - - ITA 1097, 1164/14 ETC. 13 INVESTMENTS CONSISTING OF PURCHASE OF AGRICULTURAL LAND AND RESALE, THOUGH PROFITABLE ARE CLEARLY OUTSIDE THE DOMAIN OF ADVENTURE IN THE NATURE OF TRADE. V) THE ASSESSEE TREATED THE ASSETS AS INVESTMENT IN AGRICULTURAL LAND. THEREFORE DISPOSAL OF THE SAME WOULD NOT CONVERT, W HAT WAS A CAPITAL ACCRETION, TO AN ADVENTURE IN THE NATURE OF TRADE. TO MAKE IT MORE CLEAR, SALE OF AGRICULTURAL LAND BY THE ASSESS EE AND REALIZATION OF GOOD PRICE WOULD NOT ALTER THE BASIC NATURE AND CHARACTERISTIC OF THE TRANSACTION. THERE WAS NO ELEMENT OF TRADE ATTA CHED TO THE ACTIVITY OF THE ASSESSEE IN PURCHASE AND SALE OF TH E LAND. A CONTINUOUS BUSINESS REQUIRES MORE ACTIVITY AND GREA TER ORGANIZATION. THIS IS ABSENT IN THE TRANSACTION OF SALE OF LAND B Y THE ASSESSEE. THEREFORE, ALTHOUGH THERE IS PROFIT IN THE TRANSACT ION THE TRANSACTION CANNOT BE CHARACTERIZED AS AN ADVENTURE IN THE NATU RE OF TRADE. VI) WHETHER A TRANSACTION IN RESPECT OF AN ASSET IS CAPITAL OR BUSINESS INCOME BEING ADVENTURE IN THE NATURE OF TRADE DEPEN DS ON THE FACTS AND CIRCUMSTANCES OF THE CASE. THERE ARE MANY FACTO RS LIKE FREQUENCY OF TRANSACTIONS, PERIOD OF HOLDING, INTEN TION FOR RESALE ETC, WHICH DETERMINE WHETHER THE GAIN ARISING OF A TRANS ACTION IS IN THE PROCESS OF REALISATION OF INVESTMENT OR IN THE COUR SE OF BUSINESS. THE MERE FACT THAT THE PERSON HAS PURCHASED A LAND AND SUBSEQUENTLY SOLD IT, GIVING RISE TO A SUBSTANTIAL PROFIT CANNOT CHANGE THE CHARACTER OF THE TRANSACTION. IT IS THE GENERAL HUMAN TENDENCY TO EARN PROFIT OUT OF CAPITAL ASSET. NO ONE INVESTS TO INCUR A LOSS. IF THE MARKET CONDITION SUDDENLY GOES UP OR DOWN, IT I S ALWAYS THE TENDENCY OF A PERSON TO TAKE A QUICK DECISION SO TH AT THE REALIZATION ON THE INVESTMENT IS MAXIMUM OR THE LOSS IS MINIMUM . - - ITA 1097, 1164/14 ETC. 14 VII) AS ALREADY MENTIONED THE ASSESSEE CARRIED ON A GRICULTURAL OPERATIONS IN THE SAID AGRICULTURE LAND. IN THAT PROCESS THE A SSESSEE ITSELF INVOLVED IN THE PRIMARY OPERATION SUCH AS PLOUGHING , TILLING, SOWING, WATERING ETC. THE ASSESSEE HAS DECLARED AGRICULTURA L INCOME IN EARLIER ASSESSMENT YEARS AND THERE WAS NO INCOME I N THE ASSESSMENT YEAR UNDER CONSIDERATION. 5.2. FROM THE ABOVE, IT IS CLEAR THAT: A) THE ASSESSEE PURCHASED AGRICULTURE LAND NOW UNDE R CONSIDERATION SITUATED BEYOND 8 KM FROM THE MUNICIPAL LIMITS. B) THE ASSESSEE TREATED THE SAME AS FIXED ASSET IN HER HAND AS LAND. C) THE LAND WAS IDENTIFIED AS AGRICULTURE LAND IN T HE REVENUE RECORDS. D) THE ASSESSEE CARRIED ON AGRICULTURAL OPERATIONS IN THE LAND. E) THE ASSESSEE DID NOT CARRY ON ANY COMMERCIAL ACT IVITY WITH REFERENCE TO THAT LAND SUCH AS GETTING OF APPROVAL FOR CONVERTIN G INTO SITES, PLOTTING OF THE SAME INTO SITES ETC. THUS, THE CHARACTER OF THE LAN D I.E., AGRICULTURE NATURE WAS CONTINUING TILL THE SAME WAS SOLD BY THE ASSESS EE COMPANY. F) BECAUSE OF FAVOURABLE MARKET CONDITIONS THE ASSE SSEE SOLD THE LAND AND THE SAME FETCHED THEM A GOOD PRICE. - - ITA 1097, 1164/14 ETC. 15 5.3. THEREFORE, IN THE PRESENT CASE THERE IS NO DIS PUTE REGARDING THE FACT THAT THE ASSESSEES ACQUIRED AGRICULTURAL LAND. THERE IS ALSO NO DISPUTE THAT THERE WAS AGRICULTURAL OPERATION IN THIS LAND BEFORE SALE OF THIS LAND. 5.4. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE AMOUNT RECEIVED ON SALE OF THIS AGRICULTURAL PROPERTY IS NOTHING BUT LONG T ERM CAPITAL GAINS ON TRANSFER OF SUCH AN AGRICULTURAL LAND AND THE SAME WAS BROUGHT INTO INCOME FROM BUSINESS. IN THIS CASE, THE ASSESSEE HELD THE LAND ALWAYS AS INVESTMENT AND NOT AT ALL CONVERTED INTO STOCK-IN-TRADE. THE CHARACTER OF THE LAND IN THE HANDS OF THE ASSESSEES HAS NOT CHANGED. THERE IS NO MATERIAL ON RECORD IN RESPECT OF THIS LAND TO SHOW THAT THE ASSESSEE CARRIED ON ACTIVITIES OF BUYING AND SELLING OF LAND IN A SYSTEMATIC MANNER SO AS TO JUSTIFY THE ACTION OF TH E AO IN TREATING THE ACTIVITIES OF THE ASSESSEE AS ADVENTURE IN THE NATURE OF TRADE . THE ASSESSEE IS NOT IN THE BUSINESS OF REAL ESTATE AS ALLEGED BY THE LOWER AUTH ORITIES. 5.5. NOW THE QUESTION AS TO WHETHER A LAND IS AGRIC ULTURAL LAND OR NOT IS ESSENTIALLY A QUESTION OF FACT. THE QUESTION HAS TO BE ANSWERED IN EACH CASE HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THA T CASE. THERE MAY BE FACTORS BOTH FOR AND AGAINST A PARTICULAR POINT OF VIEW. WE HAVE TO ANSWER THE QUESTION ON A CONSIDERATION OF ALL OF THEM, A PROCESS OF EVA LUATION AND THE INFERENCE HAS TO BE DRAWN ON A CUMULATIVE CONSIDERATION OF ALL TH E RELEVANT FACTS. IT MAY BE STATED HERE THAT NOT ALL THE FACTORS OR TESTS WOULD BE PRESENT OR ABSENT IN ANY CASE AND THAT IN EACH CASE ONE OR MORE OF THE FACTO RS MAY MAKE APPEARANCE AND - - ITA 1097, 1164/14 ETC. 16 THAT ULTIMATE DECISION WILL HAVE TO BE REACHED ON A BALANCED CONSIDERATION OF THE TOTALITY OF THE CIRCUMSTANCES. 5.6. THE EXPRESSION 'AGRICULTURAL LAND' IS NOT DEFI NED IN THE ACT, AND NOW, WHETHER IT IS AGRICULTURAL LAND OR NOT HAS TO BE DETERMINED BY USING THE TESTS OR METHODS LAID DOWN BY THE COURTS FROM TIME TO TIME. 5.7. THE HON'BLE SUPREME COURT IN THE CASE OF SMT. SARIFABIBI MOHMED IBRAHIM (204 ITR 631) HAS APPROVED THE DECISION OF A DIVISI ON BENCH OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIDDHARTH J. DESAI (1982) 28 CTR (GUJ) 148 : (1983) 139 ITR 628 (GUJ) AND HAS LAID DOWN 13 TESTS OR FACTORS WHICH ARE REQUIRED TO BE CONSIDERED AND UPON CONSIDERATION OF WHICH, THE QUESTION WHETHER THE LAND IS AN AGRICULTURAL LAND OR NOT HAS TO BE DECIDED OR ANSWERED. WE REPRODUCE THE SAID 13 TESTS AS FOLLOWS: (I) WHETHER THE LAND WAS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL AND WHETHER IT WAS SUBJECT TO THE PAYMENT OF LAND R EVENUE? (II) WHETHER THE LAND WAS ACTUALLY OR ORDINARILY US ED FOR AGRICULTURAL PURPOSES AT OR ABOUT THE RELEVANT TIME? (III) 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? - - ITA 1097, 1164/14 ETC. 17 (IV) WHETHER THE INCOME DERIVED FROM THE AGRICULTUR AL OPERATIONS CARRIED ON IN THE LAND BORE ANY RATIONAL PROPORTION TO THE INVESTMENT MADE IN PURCHASING THE LAND? (V) WHETHER, THE PERMISSION UNDER S. 65 OF THE BOMB AY LAND REVENUE CODE WAS OBTAINED FOR THE NON-AGRICULTURAL USE OF T HE LAND? IF SO, WHEN AND BY WHOM (THE VENDOR OR THE VENDEE)? WHETHER SUC H PERMISSION WAS IN RESPECT OF THE WHOLE OR A PORTION OF THE LAND? I F THE PERMISSION WAS IN RESPECT OF A PORTION OF THE LAND AND IF IT WAS OBTA INED IN THE PAST, WHAT WAS THE NATURE OF THE USER OF THE SAID PORTION OF T HE LAND ON THE MATERIAL DATE? (VI) WHETHER THE LAND, ON THE RELEVANT DATE, HAD CE ASED TO BE PUT TO AGRICULTURAL USE? IF SO, WHETHER IT WAS PUT TO AN A LTERNATIVE USE? WHETHER SUCH LESSER AND/OR ALTERNATIVE USER WAS OF A PERMAN ENT OR TEMPORARY NATURE? (VII) 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? (VIII) WHETHER THE LAND WAS SITUATED IN A DEVELOPE D AREA? WHETHER ITS PHYSICAL CHARACTERISTICS, SURROUNDING SITUATION AND USE OF THE LAND IN THE ADJOINING AREA WERE SUCH AS WOULD INDICATE THAT THE LAND WAS AGRICULTURAL? - - ITA 1097, 1164/14 ETC. 18 (IX) WHETHER THE LAND ITSELF WAS DEVELOPED BY PLOT TING AND PROVIDING ROADS AND OTHER FACILITIES? (X) WHETHER THERE WERE ANY PREVIOUS SALES OF PORTIO NS OF THE LAND FOR NON- AGRICULTURAL USE? (XI) WHETHER PERMISSION UNDER S. 63 OF THE BOMBAY T ENANCY AND AGRICULTURAL LAND ACT, 1948, WAS OBTAINED BECAUSE T HE SALE OR INTENDED SALE WAS IN FAVOUR OF A NON-AGRICULTURIST? IF SO, W HETHER THE SALE OR INTENDED SALE TO SUCH NON-AGRICULTURISTS WAS FOR NO N-AGRICULTURAL OR AGRICULTURAL USER? (XII) WHETHER THE LAND WAS SOLD ON YARDAGE OR ON A CREAGE BASIS? (XIII) WHETHER AN AGRICULTURIST WOULD PURCHASE THE LAND FOR AGRICULTURAL PURPOSES AT THE PRICE AT WHICH THE LAND WAS SOLD AN D WHETHER THE OWNER WOULD HAVE EVER SOLD THE LAND VALUING IT AS A PROPE RTY YIELDING AGRICULTURAL PRODUCE ON THE BASIS OF ITS YIELD?' 6. IN THE PRESENT CASE, THERE IS NO DISPUTE THAT T HE ASSESSEE'S LANDS WERE CLASSIFIED AS AGRICULTURAL LAND IN THE REVENUE RECO RDS. AS HELD BY THE APEX COURT, WHEN THE LAND IS ASSESSED TO THE LAND REVENUE AS AG RICULTURAL LAND UNDER STATE REVENUE LAW, IT IS CERTAINLY A RELEVANT FACTOR BUT NOT CONCLUSIVE. THE LAND WAS ALREADY CLASSIFIED AS AGRICULTURAL LAND IN THE REVE NUE RECORDS AND THE ASSESSEE CARRIED ON AGRICULTURAL ACTIVITIES IN THE SAID LAND , FOR WHICH WAS NO DISPUTE AS THE ASSESSEE DECLARED INCOME FROM AGRICULTURAL OPERATIO NS UPTO ASSESSMENT YEAR - - ITA 1097, 1164/14 ETC. 19 1998-99. SINCE THE INTENTION OF THE ASSESSEE WAS NO T TO USE THE AGRICULTURAL LAND FOR NON-AGRICULTURAL PURPOSES, THERE IS NO QUESTION OF TAKING OF ANY PERMISSION FOR CONVERSION OF THE LAND. 6.1. THE A.R SUBMITTED THAT ASSESSEE CARRIED ON AGR ICULTURAL OPERATIONS IN THE LAND UPTO ASSESSMENT YEAR 1998-99. THE OWNER INTEND ED TO USE IT FOR AGRICULTURAL PURPOSES ONLY AND THE INTENTION OF THE OWNER IS FUL FILLED SINCE THE AGRICULTURAL ACTIVITIES GENERATED INCOME. THE LAND WAS SITUATED IN A AREA WHEREIN LOT OF AGRICULTURAL ACTIVITIES ARE BEING CARRIED ON. NO DE VELOPMENT OF THE LAND WAS DONE BY MAKING PLOTS AND PROVIDING ROADS AND OTHER FACIL ITIES. IT IS WRONG TO CONCLUDE THAT WORK HAS BEEN DONE AIMING TO PLOTTING, DEVELOP ING INFRASTRUCTURE BECAUSE THE LAND DEVELOPMENT WAS DONE IN OTHER LAND. THERE WAS NO PREVIOUS SALE OF THE PORTIONS OF THE LAND FOR NON-AGRICULTURAL USE. THE LAND WAS SOLD ONLY AS AGRICULTURAL LANDS AT THE TIME OF SALE AND AGRICULT URAL OPERATIONS WERE CONTINUED AS ON THE DATE OF SALE. THE LAND WAS SOLD ON ACREAG E BASIS ONLY. THE LAND WAS SOLD AT PREVAILING MARKET PRICES ONLY. NON PRODUCTI ON OF EVIDENCE FOR AGRICULTURAL EXPENDITURE WHICH WAS ACTUALLY INCURRED DOES NOT MA KE AN AGRICULTURAL LAND A NON-AGRICULTURAL ONE. WHAT HAS TO BE SEEN HERE IS W HETHER THE INCOME WAS RECEIVED ON AGRICULTURAL ACTIVITY OR NOT, INSTEAD O F SEEING THE RATIO OF JUDGMENTS RELIED BY THE PARTIES. IT IS WRONG TO SAY THAT THE ACTIVITIES OF THE ASSESSEE, WHICH ARE AGRICULTURAL IN FACT, CONFIRM TO THE COMMERCIAL NATURE. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT THE JUDGMENT OF SUPREME COURT IN THE CASE OF SMT. - - ITA 1097, 1164/14 ETC. 20 SARIFABIBI MOHAMED IBRAHIM & ORS. (CITED SUPRA) SUPPORTS THE CASE OF THE ASSESSEE RATHER THAN AGAINST THE ASSESSEE. 6.2. A REFERENCE COULD BE MADE TO THE CASE OF CWT V S. OFFICER-IN- CHARGE (COURT OF WARDS) (105 ITR 138) (SC) WHEREIN THE CONSTITUTI ON BENCH OF THE HON'BLE SUPREME COURT STATED THAT THE TERM 'AGRICULTURE' AN D 'AGRICULTURAL PURPOSE' WAS NOT DEFINED IN THE INDIAN IT ACT AND THAT WE MUST NECESSARILY FALL BACK UPON THE GENERAL SENSE IN WHICH THEY HAVE BEEN UNDERSTOOD IN COMMON PARLANCE. THE HON'BLE SUPREME COURT HAS OBSERVED THAT THE TERM 'A GRICULTURE' IS THUS UNDERSTOOD AS COMPRISING WITHIN ITS SCOPE THE BASIC AS WELL AS SUBSEQUENT OPERATIONS IN THE PROCESS OF AGRICULTURE AND RAISIN G ON THE LAND ALL PRODUCTS WHICH HAVE SOME UTILITY EITHER FOR SOMEONE OR FOR T RADE AND COMMERCE. IT WILL BE SEEN THAT THE TERM 'AGRICULTURE' RECEIVES A WIDER I NTERPRETATION BOTH IN REGARD TO ITS OPERATION AS WELL AS THE RESULT OF THE SAME. NE VERTHELESS THERE IS PRESENT ALL THROUGHOUT THE BASIC IDEA THAT THERE MUST BE AT THE BOTTOM OF ITS CULTIVATION OF THE LAND IN THE SENSE OF TILLING OF THE LAND, SOWIN G OF THE SEEDS, PLANTING AND SIMILAR WORK DONE ON THE LAND ITSELF AND THIS BASIC CONCEPTION IS ESSENTIAL SINE QUA NON OF ANY OPERATION PERFORMED ON THE LAND CONS TITUTING AGRICULTURAL OPERATION AND IF THE BASIC OPERATIONS ARE THERE, TH E REST OF THE OPERATIONS FOUND THEMSELVES UPON THE SAME, BUT IF THE BASIC OPERATIO NS ARE WANTING, THE SUBSEQUENT OPERATIONS DO NOT ACQUIRE THE CHARACTERI STICS OF AGRICULTURAL OPERATIONS. THE CONSTITUTION BENCH OF THE HON'BLE S UPREME COURT IN THE - - ITA 1097, 1164/14 ETC. 21 AFORESAID CASE OBSERVED THAT THE ENTRIES IN REVENUE RECORDS WERE CONSIDERED GOOD PRIMA FACIE EVIDENCE. 6.3. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF DR. MOTIBHAI D. PATEL VS. CIT (1982) 27 CTR (GUJ) 238 : (1981) 127 ITR 671 (GUJ) REFERRING TO THE CONSTITUTION BENCH OF THE HON'BLE SUPREME COURT HAD STATED THAT IF AGRICULTURAL OPERATIONS ARE BEING CARRIED ON IN THE LAND IN QUESTION AT THE TIM E WHEN THE LAND IS SOLD AND FURTHER IF THE ENTRIES IN THE REVENUE RECORDS SHOW THAT THE LAND IN QUESTION IS AGRICULTURAL LAND, THEN, A PRESUMPTION ARISES THAT THE LAND IS AGRICULTURAL IN CHARACTER AND UNLESS THAT PRESUMPTION IS REBUTTED B Y EVIDENCE LED BY THE REVENUE, IT MUST BE HELD THAT THE LAND WAS AGRICULT URAL IN CHARACTER AT THE TIME WHEN IT WAS SOLD. THE DIVISION BENCH OF THE HON'BLE GUJARAT HIGH COURT FURTHER HELD THAT THERE WAS NOTHING ON RECORD TO SHOW THAT THE PRESUMPTION ROSE FROM THE LONG USER OF THE LAND FOR AGRICULTURAL PURPOSE AND ALSO THE PRESUMPTION ARISING FROM THE ENTRIES OF THE REVENUE RECORDS ARE REBUTTED. 6.4. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF C WT VS. H. V. MUNGALE (1983) 32 CTR (BOM) 301 : (1984) 145 ITR 208 (BOM) HELD THAT THE HON'BLE SUPREME COURT HAD POINTED OUT THAT THE ENTRIES RAIS ED ONLY A REBUTTABLE PRESUMPTION AND SOME EVIDENCE WOULD, THEREFORE, HAV E TO BE LED BEFORE TAXING AUTHORITIES ON THE QUESTION OF INTENDED USER OF THE LAND UNDER CONSIDERATION BEFORE THE PRESUMPTION COULD BE REBUTTED. THE COURT FURTHER HELD THAT THE SUPREME COURT HAD CLEARLY POINTED OUT THAT THE BURD EN TO REBUT THE PRESUMPTION - - ITA 1097, 1164/14 ETC. 22 WOULD BE ON THE REVENUE. THE HON'BLE BOMBAY HIGH CO URT HELD THAT THE RATIO OF THE DECISION OF THE SUPREME COURT WAS THAT WHAT IS TO BE DETERMINED IS THE CHARACTER OF THE LAND ACCORDING TO THE PURPOSE FOR WHICH IT WAS MEANT OR SET APART AND CAN BE USED. IT IS, THEREFORE, OBVIOUS TH AT THE ASSESSEE HAD ABUNDANTLY PROVED THAT THE SUBJECT LAND SOLD BY THEM WAS AGRIC ULTURAL LAND NOT ONLY AS CLASSIFIED IN THE REVENUE RECORDS, BUT ALSO IT WAS SUBJECTED TO THE PAYMENT OF LAND REVENUE AND THAT IT WAS ACTUALLY AND ORDINARIL Y USED FOR AGRICULTURAL PURPOSE AT THE RELEVANT TIME. 6.5. WE MAY ALSO REFER TO THE CASE OF CIT VS. MANILAL SOMNATH (1977) 106 ITR 917 (GUJ), WHEREIN THE DIVISION BENCH OF THE HON'BL E GUJARAT HIGH COURT OBSERVED THAT THE POTENTIAL NON- AGRICULTURAL VALUE OF THE LAND FOR WHICH A PURCHASER MAY BE PREPARED TO PAY A LARGE PRICE WOUL D NOT DETRACT FROM ITS CHARACTER AS AGRICULTURAL LAND ON THE RELEVANT DATE OF SALE. 6.6. WE MAY ALSO REFER TO THE CASE OF GOPAL C. SHARMA VS. CIT (1994) 116 CTR (BOM) 377 : (1994) 209 ITR 946 (BOM), IN WHICH, THE CASE OF SMT. SARIFABIBI MOHAMED IBRAHIM & ORS. VS. CIT (SUPRA) WAS REFERRED TO AND RELIED, AMONGST OTHER CASES. IN THIS CASE, THE DIVISION BENCH OF TH E BOMBAY HIGH COURT HAS STATED THAT THE PROFIT MOTIVE OF THE ASSESSEE SELLI NG THE LAND WITHOUT ANYTHING MORE BY ITSELF CAN NEVER BE DECISIVE FOR DETERMINAT ION OF THE ISSUE AS TO WHETHER THE TRANSACTION AMOUNTED TO AN ADVENTURE IN THE NAT URE OF TRADE. IN OTHER WORDS, THE PRICE PAID IS NOT DECISIVE TO SAY WHETHER THE L AND IS AGRICULTURAL OR NOT. - - ITA 1097, 1164/14 ETC. 23 6.7. WE MAY REFER TO A JUDGMENT OF THE HON'BLE MADR AS HIGH COURT IN THE CASE OF CWT VS. E. UDAYAKUMAR (2006) 284 ITR 511 (MAD) WHERE THE HON'BLE MADRAS HIGH COURT HAS REFERRED TO THE DECISION OF THE HON' BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SMT. SAVITA RANI (2004) 186 CTR (P&H) 240 : (2004) 270 ITR 40 (P&H) AND HAS OBSERVED AND HELD AS UNDER : '8. IT IS WELL SETTLED IN THE CASE OF CIT VS. SMT. SAVITA RANI (2004) 186 CTR (P&H) 240 : (2004) 270 ITR 40 (P&H), WHEREI N IT IS HELD THAT THE LAND BEING LOCATED IN A COMMERCIAL AREA OR THE LAND HAVING BEEN PARTIALLY UTILISED FOR NON-AGRICULTURAL PURPOS ES OR THAT THE VENDEES HAD ALSO PURCHASED IT FOR NON-AGRICULTURAL PURPOSES, WERE TOTALLY IRRELEVANT CONSIDERATION FOR THE PURPOSES O F APPLICATION OF S. 54B . 9. IN THE ABOVESAID CASE, THE ASSESSEE AN INDIVIDUA L SOLD 15 KARNALS, 18 MARLAS OF LAND OUT OF HER SHARE IN 23 KARNALS, 1 7 MARLAS LAND DURING THE FINANCIAL YEAR 1990-91, RELEVANT TO THE ASST. YR. 1991-92, THE SALE WAS EFFECTED BY THREE REGISTERED SALE DEED S. WHILE FILING HER RETURN OF INCOME, SHE CLAIMED EXEMPTION FROM LEVY O F CAPITAL GAINS UNDER S. 54B OF THE ACT ON THE GROUND THAT THE LAND SOLD BY HER WAS AGRICULTURAL LAND AND THE SALE PROCEEDS WERE INVEST ED IN THE PURCHASE OF AGRICULTURAL LAND WITHIN TWO YEARS. THE AO REJEC TED THE CLAIM OF THE ASSESSEE HOLDING THAT THE LAND SOLD BY THE ASSE SSEE WAS NOT AGRICULTURAL LAND AND THIS WAS UPHELD BY THE CIT(A) . ON FURTHER APPEAL, THE TRIBUNAL ACCEPTED THE CLAIM OF THE ASSE SSEE HOLDING THAT THE TRANSACTION IN QUESTION DULY FULFILLED THE COND ITIONS SPECIFIED FOR RELIEF. ON FURTHER APPEAL TO THE HIGH COURT, THE PU NJAB & HARYANA HIGH COURT FOUND THAT THE FINDING THAT THE LAND HAD BEEN USED FOR AGRICULTURAL PURPOSES WAS BASED ON COGENT AND RELEV ANT MATERIAL. - - ITA 1097, 1164/14 ETC. 24 THE REVENUE RECORD SUPPORTED THE CLAIM. EVEN THE REC ORDS OF THE IT DEPARTMENT SHOWED THAT THE ASSESSEE HAD DECLARED AG RICULTURAL INCOME FROM THIS LAND IN HER RETURNS FOR THE PRECED ING TWO YEARS. THE LAND BEING LOCATED IN COMMERCIAL AREA OR THE LAND H AVING BEEN PARTIALLY UTILISED FOR NON-AGRICULTURAL PURPOSES OR THAT THE VENDEES HAD ALSO PURCHASED IT FOR NONAGRICULTURAL PURPOSES, WERE TOTALLY IRRELEVANT CONSIDERATION FOR THE PURPOSES OF APPLIC ATION OF S. 54B . 10. IT IS SEEN FROM THE AFORESAID DECISION THAT THE AGRICULTURAL LAND SOLD BY THE ASSESSEE WITH AN INTENT TO PURCHASE ANO THER LAND WITHIN TWO YEARS HAD ALSO BEEN PERMITTED TO CLAIM EXEMPTIO N UNDER S. 54B OF THE IT ACT, 1961. IN THE INSTANT CASE, EVEN THOU GH THERE WAS NO SALE AS SUCH, THE ASSESSEE OWNED AGRICULTURAL LAND WITHIN THE LIMITS OF TIRUNELVELI CORPORATION AND HE HAD NOT PUT UP ANY C ONSTRUCTION THEREON, THE ASSESSEE IS ENTITLED TO CLAIM EXEMPTIO N FROM THE WT ACT FOR THE ASSESSMENT OF WEALTH-TAX. THAT THE LAND IN QUESTION IS ADJACENT TO THE HOSPITAL IS TOTALLY IRRELEVANT.' 7. ADVERTING TO THE FACTS OF THE PRESENT CASE, THE LAND IN QUESTION IS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL LAND AND THE RE IS NO DISPUTE REGARDING THIS ISSUE AND ACTUAL CULTIVATION HAS BEEN CARRIED ON TH IS LAND UPTO ASSESSMENT YEAR 1998-99 AND INCOME WAS DECLARED FROM THIS LAND IN T HE RETURN OF INCOME FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR AS AGRICULTURA L INCOME. IT IS ALSO AN ADMITTED FACT THAT THE AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO SHOW THAT THE AGRICULTURAL LAND WAS USED FOR NON-AGRICULTURAL PURPOSES AFTER THE ASSESSMENT YEAR 1998-99 AND THE ASSESSEE HAS NOT PUT THE LAND TO ANY PURPOSES OTHER THAN AGRICULTURAL PURPOSES AFTER THE ASSESSMENT YEAR 199 8-99. - - ITA 1097, 1164/14 ETC. 25 8. IT IS ALSO AN ADMITTED POSITION THAT MERE INCL USION OR PROXIMITY OF LAND TO ANY DEVELOPMENT AREA WITHOUT ANY INFRASTRUCTURE DEV ELOPMENT THEREUPON OR WITHOUT ESTABLISHING AND PROVING THAT THE LAND WAS PUT INTO USE FOR NON- AGRICULTURAL PURPOSES BY THE ASSESSEE DOES NOT AND CANNOT CONVERT THE AGRICULTURAL LAND INTO NON-AGRICULTURAL LAND. IN TH E INSTANT CASE, AT THE RELEVANT POINT OF SALE OF THE LAND IN QUESTION, BECAUSE THE SURROUNDING AREA WAS TOTALLY DEVELOPED AND MERE POSSIBILITY TO PUT THE LAND INTO USE FOR NON-AGRICULTURAL PURPOSES WOULD NOT CHANGE THE CHARACTER OF THE AGRI CULTURAL LAND INTO NON- AGRICULTURAL LAND, WHEN THE LAND WAS SOLD BY THE AS SESSEE. IT IS ALSO AN ADMITTED POSITION THAT THE ASSESSEE HAD NOT APPLIED FOR CONV ERSION OF THE LAND IN QUESTION INTO NON-AGRICULTURAL PURPOSES AND NO SUCH PERMISSI ONS WERE OBTAINED FROM THE CONCERNED AUTHORITY. IN THE REVENUE RECORDS, THE LA ND IS CLASSIFIED AS AGRICULTURAL LAND AND HAS NOT BEEN CHANGED FROM AGRICULTURAL LAN D TO NON-AGRICULTURAL LAND AT THE RELEVANT POINT OF TIME WHEN THE LAND WAS SOLD B Y THE ASSESSEE. IT IS ALSO NOT IN DISPUTE THAT THERE WAS NO ACTIVITY UNDERTAKEN BY THE ASSESSEE OF DEVELOPING THE LAND BY PLOTTING AND PROVIDING ROADS AND OTHER FACILITIES AND THERE WAS NO INTENTION ALSO ON THE PART OF THE ASSESSEES HEREIN TO PUT THE SAME FOR NON- AGRICULTURAL PURPOSES AT TIME OF THEIR OWNERSHIP TH AT LAND. NO SUCH FINDING HAS BEEN GIVEN BY THE DEPARTMENT. NO MATERIAL OR EVIDEN CE IN SUPPORT OF THE FACT THAT THE ASSESSEES HAVE PUT THE LAND IN USE FOR NON -AGRICULTURAL PURPOSES HAS BEEN BROUGHT ON RECORD. AT THE RELEVANT POINT OF TI ME THE LAND WAS USED FOR AGRICULTURAL PURPOSES ONLY AND NOTHING IS BROUGHT O N RECORD TO SHOW THAT THE LAND - - ITA 1097, 1164/14 ETC. 26 WAS PUT IN USE FOR NON-AGRICULTURAL PURPOSES BY THE ASSESSEE. IN VIEW OF THE DECISION OF THE HON'BLE HIGH COURT IN THE CASE OF GOPAL C. SHARMA VS. CIT (209 ITR 946) (BOM), IT IS ALSO CLEAR THAT THE PROFIT MO TIVE OF THE ASSESSEE IN SELLING THE LAND WITHOUT ANYTHING MORE BY ITSELF CAN NEVER BE DECISIVE TO SAY THAT THE ASSESSEE USED THE LAND FOR NON-AGRICULTURAL PURPOSE S. WE MAY ALSO REFER TO A DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F N. SRINIVASA RAO VS. SPECIAL COURT (2006) 4 SCC 214 WHERE IT WAS OBSERVED THAT T HE FACT THAT AGRICULTURAL LAND IN QUESTION IS INCLUDED IN URBAN AREA WITHOUT MORE, HELD NOT ENOUGH TO CONCLUDE THAT THE USER OF THE SAME HAD BEEN ALTERED WITH PASSAGE OF TIME. THUS, THE FACT THAT THE LAND IN QUESTION IN THE INSTANT C ASE IS BOUGHT BY DEVELOPER CANNOT BE A DETERMINING FACTOR BY ITSELF TO SAY THA T THE LAND WAS CONVERTED INTO USE FOR NON-AGRICULTURAL PURPOSES. 9. IT IS ALSO EVIDENT FROM THE MEMORANDUM EXPLAINING T HE PROVISIONS OF FINANCE ACT , 1970, WHEREBY S. 2(14) WAS AMENDED SO AS TO INCLUDE THE AGRICULTURAL LAND LOCATED WITHIN THE JURISDICTION OF A MUNICIPALITY I N THE DEFINITION OF THE EXPRESSION 'CAPITAL ASSET'. THE RELEVANT PORTION OF THE SAID M EMORANDUM IS REPRODUCED HEREUNDER: '30. ... THE FINANCE ACT , 1970 HAS, ACCORDINGLY, AMENDED THE RELEVANT PROVISIONS OF THE INCOME-TAX ACT SO AS TO BRING WITHIN THE SCOPE OF TAXATION CAPITAL GAINS ARISING FROM THE TRANSFER OF AGRICULTURAL LAND SITUATED IN CERTAIN AREAS. FOR THIS PURPOSE, THE DE FINITION OF THE TERM 'CAPITAL ASSET' IN SECTION 2(14) HAS BEEN AMENDED SO AS TO EXCLUDE FROM ITS SCOPE ONLY AGRICULTURAL LAND IN INDIA WHIC H IS NOT SITUATE IN ANY - - ITA 1097, 1164/14 ETC. 27 AREA COMPRISED WITHIN THE JURISDICTION OF A MUNICIP ALITY OR CANTONMENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN T EN THOUSAND PERSONS ACCORDING TO THE LAST PRECEDING CENSUS FOR WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR. THE CENTRAL GOVERNMENT HAS BEEN AUTHORISED TO NOTIF Y IN THE OFFICIAL GAZETTE ANY AREA OUTSIDE THE LIMITS OF ANY MUNICIPA LITY OR CANTONMENT BOARD HAVING A POPULATION OF NOT LESS THAN TEN THOU SAND UP TO A MAXIMUM DISTANCE OF 8 KILOMETRES FROM SUCH LIMITS, FOR THE PURPOSES OF THIS PROVISION. SUCH NOTIFICATION WILL BE ISSUED BY THE CENTRAL GOVERNMENT, HAVING REGARD TO THE EXTENT OF, AND SCO PE FOR, URBANISATION OF SUCH AREA, AND, WHEN ANY SUCH AREA IS NOTIFIED BY THE CENTRAL GOVERNMENT, AGRICULTURAL LAND SITUATED WITH IN SUCH AREA WILL STAND INCLUDED WITHIN THE TERM 'CAPITAL ASSET'. AGR ICULTURAL LAND SITUATED IN RURAL AREAS, I.E., AREAS OUTSIDE ANY MU NICIPALITY OR CANTONMENT BOARD HAVING A POPULATION OF NOT LESS TH AN TEN THOUSAND AND ALSO BEYOND THE DISTANCE NOTIFIED BY THE CENTRA L GOVERNMENT FROM THE LIMITS OF ANY SUCH MUNICIPALITY OR CANTONMENT B OARD, WILL CONTINUE TO BE EXCLUDED FROM THE TERM 'CAPITAL ASSET'. 9.1 IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE O PINION THAT THE LAND IN QUESTION CANNOT BE CONSIDERED AS STOCK IN TRADE IN THE HANDS OF ASSESSEE OR CAPITAL ASSET LIABLE FOR TAXABLE CAPITA L GAINS ON ITS TRANSFER. IT IS NOTHING BUT TRANSFER OF AGRICULTURAL LAND IN TER MS OF SEC.2(14)(III) R.W.S. 10(37) OF THE ACT AND TRANSFER OF THAT LAND CANNOT LEAD TO TAXABLE CAPITAL GAINS OR INCOME FROM BUSINESS. - - ITA 1097, 1164/14 ETC. 28 9.2 FURTHER, IT IS ALSO BE NOTED THAT OUR ABOVE VI EW IS ALSO SUPPORTED BY THE RECENT JUDGMENT OF JURISDICTIONAL HIGH COURT IN T.C.A.NO. 483/2016 DATED 1-9-2016 IN THE CASE OF M/S MANSI FINANCE CHE NNAI LTD. IN VIEW OF THE ABOVE, WE DIRECT THE AO TO CONSIDER GAIN ON SALE OF IMPUGNED LAND AS EXEMPTED FROM CAPITAL GAIN AND TO TREAT AS CAPITAL RECEIPT UNDER PROVISIONS OF SECTION 10(37) OF THE ACT ONLY. ACC ORDINGLY, WE DISMISS THE GROUND TAKEN BY THE REVENUE IN ITS APPEAL. 10. SINCE THE ISSUE IN OTHER APPEALS BY THE REVENU E IN ITA NOS. 1144/MDS./2014, 1164/MDS./2014, & 1165/MDS./2014 AR E IDENTICAL, FOLLOWING THE RATIO LAID DOWN IN ITA NO.1097/MDS./2014 AS DISCUSS ED ABOVE, WE ARE INCLINED TO DISMISS THESE APPEALS OF THE REVENUE ALSO. 11. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED ON WEDNESDAY , THE 05 TH OF APRIL 2017 AT CHENNAI. SD/- SD/- ( '. $ ) ( % & ' ' ) (G. PAVAN KUMAR) (CHANDRA POOJARI) 8 9: /JUDICIAL MEMBER ; 9:/ACCOUNTANT MEMBER %;8 /CHENNAI, B9 /DATED, THE 05.04.2017. K S SUNDARAM - - ITA 1097, 1164/14 ETC. 29 9;C DE F;E /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. G () /CIT(A) 4. G /CIT 5. EHI J /DR 6. IK L /GF.