ITO, CHENNAI V. Ayisha fathima, CHENNAI

ITA 1371/CHNY/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8861 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2016
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 23-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 20-06-2013
• Court: TRIBUNAL
• Department Lawyers: DURAI PANDIANA
• Assessee Lawyers: S SRIDHAR
• Keywords: Capital asset; Business income
• Section: 54B; 2(14); 63; 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI , . !' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.1371/MDS./2013 / ASSESSMENT YEAR :2009-10 INCOME TAX OFFICER, WARD XV(1), CHENNAI 600 034. VS. SMT.AYISHA FATHIMA , NO.16/11,BRAHANDAMBAL STREET, NUNGAMBAKKAM, CHENNAI 600 034. [PAN AAHPF 1873 F ] ( #$ / APPELLANT) ( %&#$ /RESPONDENT) / APPELLANT BY : MR.DURAI PANDIAN,ACIT,DR /RESPONDENT BY : MR.S.SRIDHAR, ADVOCATE / DATE OF HEARING : 23 - 0 6 - 201 6 !' / DATE OF PRONOUNCEMENT : 17 - 0 8 - 2016 ' / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-XII DATED 28.0 3.2013 PERTAINING TO ASSESSMENT YEAR 2009-10. 2. THE GRIEVANCE OF THE REVENUE IN THIS APPEAL IS WITH REGARD TO FINDINGS OF THE LD.CIT(A) IS THAT THERE WAS NO TRAN SFER IN TERMS OF ITA NO. 1371/MDS./2013 :- 2 -: SECTION 2(47)(V) OF THE ACT IN RESPECT OF IMPUGNED PROPERTY, THOUGH THE REGISTRATION WAS DONE ON 01.04.2008 WHICH WAS I N CONTINUATION OF THE JOINT DEVELOPMENT AGREEMENT (JDA) ENTERED BY TH E ASSESSEE ON 09.07.2005 WITH THE DEVELOPER. 3 THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS THE OWNER OF 50% OF THE LAND AT EGATTUR VILALGE, MEASURING 6 ACR ES AND 21 CENTS. THE OTHER 50% WAS OWNED BY HER BROTHER. THE ASSESSE E SOLD THE PROPERTY VIDE DOCUMENT REGISTERED ON 01.04.2008 TO M/S.OMR MALL DEVELOPERS PVT LTD., AND RECEIVED CONSIDERATION AS FOLLOWS:- 1,45,295 SQ.FT. RS.13,68,00,280/- I) ` 1,44,00,000/- RECEIVED AS ADVANCE. II) ` 4,45,13,280/- RECEIVED IN THE FORM OF 5,56,416 SHARES OF ` 10 EACH AT PREMIUM OF ` 70 EACH. III) ` 7,78,87,000/- RECEIVED AS DEBENTURES OF 77,887 ` 1,000/- EACH 56,503.44 SQ. FT. ` 5,31,99,720/-, I) ` 56,00,000/- RECEIVED AS ADVANCE II) ` 1,73,10,720/- RECEIVED AS 2,16,384/- SHARES OF ` 10 EACH WITH PREMIUM OF ` 70/- . III) ` 3,02,89,000/- RECEIVED AS 30,289 DEBENTURES OF ` 1,000/- EACH. ITA NO. 1371/MDS./2013 :- 3 -: THE ASSESSEE CLAIMED THAT THE SAID PROPERTY WAS SOL D, WHICH IS AN AGRICULTURAL LAND AND THERE IS NO LIABILITY OF CAPI TAL GAINS TAX. MORE SO, THE ASSESSEE ORIGINALLY ENTERED INTO JDA WITH M/S.A LLIED MAJESTIC PROMOTERS ON 09.07.2005 AND ACCORDING TO THE ASSESS EE, THE TRANSFER TOOK PLACE IN THE ASSESSMENT YEAR 2006-07 AND NOT I N THE ASSESSMENT YEAR 2009-10. THE AO DISAGREEING WITH THE CONTENTI ON OF THE AO OBSERVED THAT THE TRANSFER TOOK PLACE VIDE REGISTER ED SALE DEED DATED 01.04.2008 TO M/S.OMR MALL DEVELOPERS PVT LTD.. AG AINST THE ORDER OF LD. ASSESSING OFFICER, THE ASSESSEE CARRIED THE APP EAL TO THE LD.CIT(A). 3.1 ON APPEAL, THE LD.CIT(A) OBSERVED THAT TRANSF ER TOOK PLACED ONLY ON ASSESSMENT YEAR 2006-07 VIDE JDA DAT ED 09.07.2005 WHEN THE ASSESSEE ENTERED INTO JDA WITH M/S.ALLIED MAJESTIC PROMOTERS WHICH AMOUNT TO PART PERFORMANCE U/S.53A OF TRANSFE R OF PROPERTY ACT. 3.2 REGARDING THE NATURE OF LAND, THE LD.CIT(A) O BSERVED THAT THE IMPUGNED LANDS UNDER CONSIDERATION ARE AGRICULTURAL LANDS, AS PER THE REVENUE RECORDS, AND ALSO UNDER CULTIVATION-OF AGRI CULTURAL CROPS TILL THE ASSESSEE HANDED OVER THE POSSESSION OF LANDS TO MEG ISTIC PROMOTORS ON 09.07.2005, UNDER JOINT DEVELOPMENT AGREEMENT. E VEN IN THE JOINT DEVELOPMENT AGREEMENT THE LANDS WERE SHOWN AS AGRIC ULTURAL LANDS WITH STANDING CROPS. ASSESSEES DECLARATION OF AGRI CULTURAL INCOME IN ITA NO. 1371/MDS./2013 :- 4 -: HER RETURNS OF INCOME FILED UP TO A.Y.2006-07 CLEAR LY PROVES THAT THE LANDS ARE AGRICULTURAL LANDS AND ARE UNDER AGRICULT URAL USE ONLY. FURTHER, SINCE THE ASSESSEE TRANSFERRED AND HANDED OVER THE LANDS TO M/S. ALLIED MEGISTIC PROMOTORS, ON 09.07.2005, AS AGRICULTURAL LANDS ONLY. THEREFORE, THE LANDS UNDER CONSIDERATION THE LANDS ARE AGRICULTURAL LANDS (AS PER REVENUE RECORDS); THE LANDS ARE UNDER CONTINUOUSLY USED FOR AGRICUL TURAL ACTIVITIES (GROWING CROPS) TILL THE DATE OF TRANSFER AND HANDI NG OVER THE POSSESSION; THE LANDS ARE TRANSFERRED AND HANDED OVER TO MIS. ALLIED MEGISTIC PROMOTORS AS AGRICULTURAL LANDS (WITH STANDING CROP S) ONLY; AND HENCE WILL NOT CONSTITUTE CAPITAL ASSET FOR T HE PURPOSE OF SEC.2( 14) OF THE ACT. ACCORDING TO LD.CIT(A), CONSEQUENT TO THE JOINT DEVELOPMENT AGREEMENT WITH M/S. ALLIED MEGISTIC PRO MOTORS ON 09.07.2005, THE ASSESSEE AND HER BROTHER, RECEIVED PART OF THE CONSIDERATION OF RS.2,00,00,000/- AS ADVANCE, HANDE D OVER THE POSSESSION OF THE PROPERTY TO M/S. ALLIED MEGISTIC PROMOTORS AND ALSO EXECUTED GENERAL POWER OF ATTORNEY IN FAVOUR OF SHR I A. ABDUL WADOOD (THE MANAGING PARTNER OF M/S. ALLIED MEGISTIC PROMO TORS). THE PROPERTY WAS NEVER RECEIVED BACK BY THE ASSESSEE FROM M/S.AL LIED MEGISTIC PROMOTORS. M/S. OMR MALL DEVELOPERS P LTD, IN WHOSE NAME THE PROPERTY WAS FINALLY REGISTERED ON 0 1.04.2008, WAS ONLY A NOMINEE OF M/S. ALLIED MEGISTIC PROMOTORS. HENCE THE SALE DEED REGISTERED IN THE ITA NO. 1371/MDS./2013 :- 5 -: NAME OF M/S.OMR MALL DEVELOPERS P LTD IS NOT A SEPA RATE TRANSACTION OF TRANSFER OF PROPERTY. IT IS ONLY THE CONTINUAT ION AND CULMINATION OF THE TRANSACTION ALREADY ENTERED WITH M/S. ALLIED ME GISTIC PROMOTORS. THIS CAN FURTHER BE VISUALIZED FROM THE FOLLOWING F ACTS:- THE GPAS EXECUTED AS PER THE JOINT DEVELOPMENT AGRE EMENT ON 09.07.2005 ARE STILL IN FORCE AND IN FACT THEY WERE BEING USED EVEN AFTER THE FINAL REGISTRATION OF THE LANDS IN T HE NAME OF M/S.OMR MALL DEVELOPERS P LTD. THE ADVANCE OF RS.2 00 00000 JUNE 2005 (BY M/S.AL LIED MEGISTIC PROMOTORS) WAS SHOWN AS THE ADVANCE PAID BY M/S.OM R MALL DEVELOPERS P LTD. M/S.OMR MALL DEVELOPERS P LTD. IS ONLY NOMINEE OF M EGISTIC PROMOTORS AND HAS BEEN NOMINATED BY M/S.AILIED MEGI STIC PROMOTORS. FURTHER, THE ULTIMATE BENEFICIARIES OF M /S.ALLIED MEGISTIC PROMOTORS AND M/S.OMR MALL DEVELOPERS P LT D ARE ONE AND THE SAME. WHEN THE DEVELOPER M/S.ALLIED MEGISTIC PROMOTORS NOMINATED M/S.OMR MAIL DEVELOPERS P LTD FOR THE PURPOSE OF RE GISTRATION, THE ASSESSEE HAS NO OPTION BUT REGISTER THE LANDS IN TH E NAME OF THE SAID NOMINEE. ITA NO. 1371/MDS./2013 :- 6 -: LD.CIT(A) OBSERVED THAT M/S. ALLIED MEGISTIC PROMOT ERS, HAS NEVER FAILED TO DELIVER HIS PART OFCONTRACT. THEREFORE, H ANDING OVER THE POSSESSION OF THE PROPERTY, BASED ON THE JOINT DEVE LOPMENT AGREEMENT ON 09.07.2005, TO M/S. ALLIED MEGISTIC PR OMOTERS, WILL AMOUNT TO PART PERFORMANCE UNDER SEC.53A OF THE T RANSFER OF PROPERTY ACT. THE SAME AMOUNTS TO TRANSFER WITHIN THE DEFINITION OF CLAUSE (VI) OF SEC.2(47) OF THE ACT. THEREFORE THER E WAS A CLEAR TRANSFER OF PROPERTY ON 09.07.2005 (I.E. IN THE F.Y.2005-06) . IN FACT, THE ASSESSEE ALSO CLEARED THE TRANSFER OF THE LANDS IN HER RETURN OF INCOME FILED FOR A.Y.2006-07. HENCE THE TAXABILITY OF THE GAINS ARISING ON TRANSFER OF THE SAID LANDS, IS ANY, HAS TO BE DEALT IN THE F.Y 2005- 06(A.Y 2006-07) AND NOT IN THE F.Y 2008-09(A.Y 2009 -10). FROM THE ABOVE FACTS, THE LD.CIT(A) CAME TO A CONCLUSION THA T THE LANDS UNDER CONSIDERATION ARE NOT ONLY AGRICULTURAL LANDS FALLI NG OUTSIDE THE DEFINITION OF CAPITAL ASSET U/S.2(14) OF THE ACT, BUT ALSO TRANSFERRED IN THE FINANCIAL YEAR 2005-06 RELEVANT THE ASSESSMENT YEAR 2006-07. IN EITHER CASE, CHARGEABILITY OF THE CONSIDERATION TO TAX UNDER THE HEAD CAPITAL GAINS (OR OTHER HEADS) DOES NOT ARISE IN THE FINANCIAL YEAR 2008-09, RELEVANT TO THE ASSESSMENT YEAR 2009-10. T HEREFORE, THE ASSESSING OFFICERS ACTION OF BRINGING THE SALE PRO CEEDS OF THE SAID AGRICULTURAL LANDS TO CAPITAL GAINS TAX, ESPECIALLY IN A.Y.2009- 10, IS NOT ITA NO. 1371/MDS./2013 :- 7 -: JUSTIFIED AND DELETED. AGGRIEVED BY THE ORDER OF L D.CIT(A), THE REVENUE IS IN APPEAL BEFORE US ON THIS ISSUE. 4. THE LD.D.R SUBMITTED THAT MERE SIGNING OF THE JDA BETWEEN THE OWNER AND THE DEVELOPER DOES NOT RESULT IN TRANSFER OF PROPERTY AND THE DEVELOPER HAD NOT DONE ANY ACT IN FURTHERANCE OF THE CONTRACT WITHIN THE TIME STIPULATED IN THE AGREEMEN T. FURTHER, LD.D.R CONTENDED THAT AS PER PARA 40 OF THE JDA WHEREIN I T WAS ONCE AGAIN MENTIONED THAT THE OWNERS OUGHT TO REFUND THE DEPOS IT OF ` 120 LAKHS TO THE DEVELOPER WITHIN 2 WEEKS OF THE OWNER BEING INTIMATED ABOUT COMPLETION AND THAT THE RESPECTIVE SPACE ALLOTTED F OR THE OWNERS IS FIT FOR TAKING POSSESSION OF THE PROJECT. IT IS STATED HERE THAT THE CONSIDERATION COULD NOT EVEN BE QUANTIFIED AT THE T IME OF JDA AS THE COST OF CONSTRUCTION RELATING TO THE OWNER COULD BE QUANTIFIED ONLY AT THE TIME OF COMPLETION OF THE PROJECT. LD.D.R SUBMI TTED THAT THE JDA WAS A CONDITIONAL AGREEMENT FOR SPECIFIC PERFORMANC E BY THE DEVELOPER, WHICH THEY FAILED TO COMPLY WITH AND HEN CE THERE WAS NO TRANSFER AS ON THE DATE OF JDA. LD.D.R FURTHER SUB MITTED THAT THE SUBJECT LAND WAS AGRICULTURAL LAND AS THE NATURE OF LAND HAS CHANGED SUBSEQUENT TO THE JDA AND AT THE TIME OF TRANSFER O N 01.04.2008, IT WAS NON-AGRICULTURAL LAND. FURTHER, LD.D.R CONTEND ED THAT THE SALE DEED EXECUTED ON 01.04.2008 MENTIONED THE PROPERTY AS VACANT SITE AND NOT AGRICULTURAL LAND. LD.D.R POINTED OUT THAT THE DEVELOPER HAD ITA NO. 1371/MDS./2013 :- 8 -: NOT FULFILLED HIS PART OF THE AGREEMENT VIZ. HANDIN G OVER THE 27% OF THE CONSTRUCTED AREA AND HENCE NO CONSIDERATION COULD B E SAID TO HAVE PASSED ON TO THE OWNER AS ON THE DATE OF JDA TO INV OKE THE PROVISIONS OF THE SECTION 2(27)(V) OF THE ACT. LD.D.R SUBMITTE D THAT THERE WAS NO TRANSFER IN TERMS OF SECTION 2(47)(V) OF THE ACT IN RESPECT OF IMPUGNED PROPERTY, THOUGH THE REGISTRATION WAS DONE ON 01.04 .2008 WHICH WAS IN CONTINUATION OF THE JOINT DEVELOPMENT AGREEMENT (JDA) ENTERED BY THE ASSESSEE ON 09.07.2005 WITH THE DEVELOPER. LD.D .R RELIED ON THE DECISION OF THE TRIBUNAL, HYDERABAD BENCH IN THE CA SE OF MS.K.RADHIKA VS. CIT (2011)(13 TAXMANN 92) AND HONBLE APEX COUR T IN THE CASE OF SARDAR GOVINDRAO MAHADIK VS. DEVI SAHAL (AIR 1982-S C-989) AND ARGUED IN SUPPORT OF THE ORDER OF LD. ASSESSING OFF ICER. 5. ON THE OTHER HAND, LD.A.R SUBMITTED THAT THE TR ANSFER WAS ACTUALLY TOOK PLACE WHEN THE ASSESSEE ENTERED INT O JDA ON 09.07.2005 WITH M/S.ALLIED MAJESTIC PROMOTERS. AS PER JDA, ASSESSEE HAS TO RECEIVE 27% OF BUILT-UP AREA WHICH IS NOT LE SS THAN 1,41,135 SQ.FT AND REMAINING BUILDING PLINTH AREA I.E. 73% H ALL BE RETAINED BY THE DEVELOPER. ACCORDING TO LD.A.R, TRANSFER TOOK PLACE ON 09.07.2005. SUBSEQUENT SALE DEED IS ONLY TO CONTINUATION OF THI S JDA. FURTHER REFERRING TO THE COPY OF JDA DATED 09.07.2005,LD.A. R SUBMITTED THAT AS PER CLAUSE NO.(IV) ASSESSEE HANDED OVER THE POSSESS ION OF ENTIRE AGRICULTURAL LAND TO DEVELOPER. FURTHER, HE SUBMIT TED THAT THE ASSESSEE ITA NO. 1371/MDS./2013 :- 9 -: HAS RECEIVED CONSIDERABLE AMOUNT OF DEPOSITS VIDE C LAUSE (II) OF THE SAID DEED I.E. JDA. AS PER CLAUSE (VI) OF JDA, THE TIME IS THE ESSENCE OF THE CONTRACT AGREEMENT AND WITHIN 30 DAYS, THE DEVE LOPER HAS TO OBTAIN THE REQUISITE SANCTION FROM THE AUTHORITIES CONCERNED AND COMPLETE THE CONSTRUCTION WITHIN 36 MONTHS FROM THE DATE OF COMMENCEMENT OF THE CONSTRUCTION OF THE SAID PROPER TY. THE DELAY FOR HANDING OVER THE BUILDING TO THE ASSESSEE WOULD RES ULT IN PAYMENT OF DAMAGES AT RS.2/- LAKHS PER MONTH TILL THE DELIVERY OF THE BUILDING. THE ASSESSEE ALSO AUTHORIZED THE DEVELOPER TO GET A LL THE SANCTIONS TO BE OBTAINED FROM THE AUTHORITIES AT THEIR OWN COSTS . FURTHER, AS PER CLAUSE (9), THE ASSESSEE AUTHORIZED TO ENTER INTO T HE NECESSARY AGREEMENTS AND DEAL WITH THEIR PORTION AND ALLOTTED OF THE BUILDING WITH THE UNDIVIDED SHARE IN THE LAND IN THE MANNER DEEMED FIT BY THE DEVELOPER. THE ASSESSEE, AS PER CLAUSE (34), HAD A LSO UNDERTAKEN TO EXECUTE THE REGISTER SALE DEED IN FAVOUR OF THE DEV ELOPER AND THEIR NOMINEE CONVEYING TO THEM THE SCHEDULE B MENTIONED THEREIN. ACCORDING TO HIM, READINGS OF THE JDA IN WHOLE GIVE THE IMPRESSION THAT THE TRANSFER TOOK PLACE IN TERM OF SECTION 2(4 7)(V) OF THE ACT ON 09.07.2005 AND ACCORDING TO HIM, THERE WAS NO TRANS FER AS ALLEGED BY THE DEPARTMENTAL REPRESENTATIVE IN THE ASSESSMENT Y EAR 2009-10 VIDE SALE DEED DATED FIRST APRIL, 2008. ITA NO. 1371/MDS./2013 :- 10 - : 5.1 THE LD.A.R PLEADED BEFORE US THAT SEC.2(47)(I ) OF THE ACT TREATS THE SALE OF THE PROPERTY EXCHANGE OR RELINQUISHME NT OF THE ASSET AS TRANSFER WITHIN THE MEANING OS SEC.2(47) OF THE A CT. SEC.2(47) SHOWS THAT ANY TRANSACTION BY WAY OF AN AGREEMENT OR ARRANGEME NT IN ANY MANNER WHICH HAS THE EFFECT OF TRANSFERRING OR ENABLING TH E ENJOYMENT OF IMMOVABLE PROPERTY ALSO TREATS AS TRANSFER. IN THIS CASE, THE ASSESSEES IN EXCHANGE OF 27% OF THE CONSTRUCTED AREA, TRANSFERRED 73% OF THE LAND TO THE BUILDER AND HANDED OVER THE PHYSICAL POSSESSION. THEREFORE, IT IS AN EXCHANGE OF PROPERTY BETWEEN THE PARTIES. IN OTHER WORDS, THE A SSESSEES EXCHANGED 73% OF THE LANDED AREA FOR 27% OF THE CONSTRUCTED AREA. ACCORDING TO A.R, THERE IS A TRANSFER WITHIN THE MEANING OF SECTION 2(47) ( I) OF THE ACT ON THE DATE ON WHICH THE AGREEMENT DATED 09.07.2005 WAS EXECUTE D. EVEN OTHERWISE, THE JOINT VENTURE AGREEMENT HAS THE EFFECT OF TRANS FERRING 73% OF THE LANDED AREA TO THE BUILDER. THE ASSESSEE CANNOT TAKE BACK 73% LANDED AREA ON WHICH THE BUILDER HAS COMMENCED CONSTRUCTION. AT TH E BEST, THE ASSESSEES WOULD GET ONLY 27% OF THE CONSTRUCTED AREA AND 27% LANDED AREA PROPORTIONATE TO THE CONSTRUCTED AREA. HE CONTENDED THAT THE TRANSACTION BETWEEN THE ASSESSEES AND THE BUILDER IS BY WAY OF ARRANGEMENT OR AGREEMENT WHICH HAS THE EFFECT OF TRANSFERRING THE LANDED PROPERTY FOR ENJOYMENT OF THE BUILDER. IN OTHER WORDS, THE ASSES SEES TRANSFERRED 73% OF THE LAND AREA TO THE BUILDER FOR ITS ENJOYMENT. HE STATED THAT THERE WAS A TRANSFER ON 09.07.2005 WITHIN THE MEANING OF SECTIO N 2(47)(I) AND 2(47)(VI) OF THE ACT. THEREFORE, THE RELEVANT TRANSACTION TOO K PLCE IN THE FINANCIAL YEAR 2005-06 WHICH FALLS IN THE ASSESSMENT YEAR. ITA NO. 1371/MDS./2013 :- 11 - : 5.2 ACCORDING TO LD.A.R, THE ASSESSEE ENTERED IN TO AN AGREEMENT AND HANDING OVER THE PHYSICAL POSSESSION OF THE PRO PERTY TO BUILDER ALLOWING IT TO ENJOY 73% OF THE LAND IN LIEU OF 27% OF THE C ONSTRUCTED AREA AND NO CAPITAL GAIN ARISES IN THE YEAR IN WHICH THE CONSTR UCTION WAS COMPLETED AND THE CONSTRUCTED AREA WAS HANDED OVER TO THE ASSESSE ES. LD.A.R RELIED ON THE FOLLOWING JUDGMENETS:- I. D.KASTURI VS. CIT IN 251 ITR 532(MAD.) II. CHATURBHUJ DWARAKADAS KAPADIA VS. CIT IN 260 I TR 491 (BOM.) III. ITO VS. SHRI BAKTHAVATSALAM GOWTHAM IN ITA NO. 1614/MDS./2010 FOR ASSESSMENT YEAR 2007-08 DATED 04.05.2012. IV) MRS.P.A.SARALA IN ITA NO.1396/MDS./2013 DATED 1 5.05.2015. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ISSUE FOR OUR CONSIDERATION IS WITH REGARD TO THE YEAR IN WHICH THE CAPITAL GAINS ARISE FOR ASSESSMENT ON TRA NSFER OF LAND BY THE ASSESSEE ALONG WITH OTHER PERSON. WE HAVE CAREFULL Y GONE THROUGH JDA DATED 09.07.2005. THE FOLLOWING CLAUSES ARE REP RODUCED FOR REFERENCE:- CLAUSE 1. THE OWNER HAVE AUTHORIZED THE DEVLOPER TO CONST RUCT AT ITS OWN COST OF DEVELOPER A MULTISTORIED COMPLEX OVER THE L AND CAREFULLY DESCRIBED IN THE SCHEDULE A HEREUNDER. THE OWNERS A ND THE DEVELOPER HAVE AGREED TO PUT UP THE CONSTRUCTION NOT MORE THA N 2 FSI FOR TIME BEING AND IN SUCH A CASE THE OWNER IS ENTITLED TO H AVE 27% BUILTUP P- ITA NO. 1371/MDS./2013 :- 12 - : LINT AREA WHICH SHOULD BE NOT LESS THAN 1,41,135 SQ .FT. AND THE REMAINING BUILT-UP PUNT AREA THAT IS 73% SHALL BE R ETAINED BY THE DEVELOPER AND IN CONSIDERATION THEREOF THE LAND OWN ERS SLAH TRANSFER 73% UNDIVIDED SHARE OVER THE LAND DESCRIBED IN THE- SCHEDULE A HEREUNDER TO THE DEVELOPER OR TO THEIR NOMINIEES. I F THE DEVELOPER ARE ABLE TO PUT UP CONSTRUCTION MORE THAN 2 FSI, THE LA ND OWNER SHALL BE ENTITLED TO GET PROPORTIONATE EXTRA CONSTRUCTED ARE A AT 27% FOR THEMSELVES, WHILE THE REMAINING 73% SHALL BE RETAIN ED BY THE DEVELOPER. 2. THE DEVELOPER SHALL ALLOT THE OWNERS BUILTUP PU NT AREA IN CONSTRUCTION WITH THE OWNERS AND THE SAME WILL BE M ARKED IN THE PLAN RELATING TO THE PROJECT AS PER THE SPECIFICATION PR DVIDED IN THE ANNEXURE 1 OF THIS AGREEMENT AND IN ADDITION THE DE VELOPER SHALL PAY REFUNDABLE DEPOSIT OF RS.1,20,00,000/- (ONE CRORE A ND TWENTY LAKHS ONLY) TO THE OWNERS IN THE FOLLOWING MANNER: A) RS.60,00,000/- (RUPEES SIXTY LAKHS ONLY) ON SIGN ING THIS AGREEMENT. - B) RS.60,00,000/- (RUPEES SIXTY LAKHS ONLY) ON THE PLANS BEING APPROVED. 3. THE DEVELOPER FURTHER AGREES THAT OUT OF THE 73% BUILTUP AREA RETAINED BY THE DEVELOPER, THE DEVELOPER HAVE AGREE D TO SHARE EQUALLY WITH THE OWNERS THE SALE PROCEEDS OVER AND ABOVE AT RS.2,350/- PER SQ.FT. THAT IS, IF FOR EXAMPLE, THE DEVELOPER SELLS OUT OF THEIR 73% BUILTUP PLINT AREA TO ANY PROSPECTIVE BUYER AT THE RATE OF RS.2500/- PER SQ.FT. THEN THE DEVELOPER SHALL SHARE (2500-2350= 1 50/2) RS.75/- PER SQ.FT. 4. THE OWNERS AGREE TO EXECUTE AND REGISTER NECESSA RY POWER OF ATTORNEY JOINTLY IN FAVOUR OF THE NOMINEE OF THE DE VELOPER AND THE NOMINEE OF THE OWNER FOR SELLING 73% OF THE UNDIVID ED SHARE OF THE LAND. MOREFULLY DESCRIBED IN THE SCHEDULE A HEREUND ER TO THE NOMINEES OF THE DEVELOPER AND A SEPARATE POWER OF A TTORNEY IN FAVOUR OF THE NOMINEE OF THE DEVELOPER FOR APPLYING AND OB TAINING BUILDING SANCTION PLAN, SERVICE CONNECTION ETC., THE OWNERS HAVE THIS DAY HANDED OVER POSSESSION OF THE ENTIRE AGRICULTURAL L ANDS, SUBJECT MATTER OF THIS AGREEMENT. 5. THE DEVELOPER SHALL FOR THE PURPOSE OF DEVELOPME NT IMMEDIATELY BE AT LIBERTY AT ITS OWN COST OF SURVEY THE SAID PROPE RTY, TAKE MEASUREMENTS AND TO APPLY FOR SANCTIONING OF A BUIL DING PLAN FROM THE MUNICIPAL AND OTHER AUTHORITIES, STPI, CHENNAI METR OPOLITAN THE ITA NO. 1371/MDS./2013 :- 13 - : DEVELOPMENT AUTHORITY AND CORPORATION OF CHENNAI ON SUCH TERMS AND CONDITIONS HAS MAY BE AGREED TO THE DEVELOPER. THE DEVELOPER MAY IN CONSULTATION WITH THE OWNERS, DECIDE ON THE NATURE OF THE BUILDING TO BE CONSTRUCTED. 6. THE DEVELOPER SHALL COMMENCE CONSTRUCTION OF THE NEW BUILDING WITHIN 30 DAYS OF OBTAINING SANCTIONS FROM AUTHORITIES CONCER NED OR FROM THE DATE ON WHICH VACANT POSSESSION OF THE SAID PROPERTY IS HAN DED OVER WHICHEVER DATE IS LATER AND COMPLETE THE CONSTRUCTION WITHIN 36 MO NTHS FROM THE DATE OF COMMENCEMENT OF CONSTRUCTION ON THE SAID PROPERTY I N ONE OR MORE PHASES OR STAGES MAY BE REQUIRED, TAKING INTO CONSIDERATIO N THE MARKET CONDITION AND SUBJECT ONLY TO FORCE MAJOR CONDITIONS. IF ANY DELAY IN HANDLING OVER THE BUILDING WITHIN 36 MONTHS, THE DEVELOPER AGREES TO PAY RS,2,00,000/(RUPEES TWO LACS ONLY) PER MONTH FOR THE DELAYED PERIOD AS COMPENSATION TO THE OWNER TILL DELIVERY OF THE BUILDING. IN THE EVENT O F ANY UNAVOIDABLE DELAY IN THE COMPLETION OF THE BUILDING DUE TO ANY CA USE OR CAUSES BEYOND THE DEVELOPERS CONTROL THE PARTIES HERETO SHALL BY MUT UAL CONSENT IN WRITING EXTEND THE PERIOD OF PERFORMANCE. 7. IT IS AGREED THAT THE DEVELOPER WILL MEET AND PA Y ALL EXPENSES INCLUDING THE EXPENSES INCURRED FOR OBTAINING THE SANCTIONED BUILDING PLANS, APPROVALS, FEE TO BE PAID TO VARIOUS AUTHORITIES AND TO APPLY AND OBTAIN SERVICE CONNECTIONS FOR USE IN THE BUILDING AND FOR ENGAGIN G ARCHITECTS, CONSTRUCTION ENGINEERS, CONTRACTORS, SUB CONTRACTORS, ARTISANS A ND TO MEET THE COST OF PURCHASE OF ALL MATERIALS USED FOR CONSTRUCTION AS PER THE SANCTIONED PLAN WITH PERMISSIBLE DEVIATIONS AND SHALL BE WHOLLY RES PONSIBLE TO COMPLY WITH ALL PROVISIONS OF THE LAW WITH REGARD TO INTEREST OF TH E AFORESAID PERSONS. THE CHANGE IN PLANS WILL BE INTIMATED TO THE OWNERS. 8. THE DEVELOPER SHALL BE RESPONSIBLE TO MAKE PAYME NTS TO ALL WORKERS, WORKMEN, STAFFS, EMPLOYEES AND CONTRACTORS AND SUBC ONTRACTORS, FOR THE PURPOSE OF EXECUTING THE WORK AND DEVELOPMENT OF TH E SCHEDULE A MENTIONED PROPERTY. 9. THE DEVELOPER HAS THE RIGHT TO ENTER INTO THE NE CESSARY AGREEMENTS AND DEAL WITH AND SELL ITS PORTION ALLOTTED UNDER THIS AGREEMENT AS AN UNDIVIDED OR DIVIDED SHARE OF LAND OR AS LAND AND BUILDING OR IN ANY OTHER MANNER DEEMED FIT BY THE DEVELOPER, SUBJECT ONLY TO THE CO NDITION THAT THE DEVELOPER SHALL CONSTRUCT AND DELIVER TO THE OWNER THE 27% SH ARE IN THE BUILT UP AREA. THE ALLOTMENT OF EXACT SPACES FOR THE DEVELOPER AND THE OWNERS WOULD BE MUTUALLY AGREED UPON AFTER THE APPROVED DRAWINGS AR E OBTAINED FROM THE CONCERNED AUTHORITY. 15. THE DEVELOPER SHALL BE ENTITLED TO APPLY TO TH E AUTHORITIES CONCERNED FOR THE NECESSARY APPROVALS, SANCTIONS AND PERMITS IN R ESPECT OF PLANS FOR CONSTRUCTION OF ANY BUILDING WHETHER STOREY3ED OR O THERWISE, ON THE SAID PROPERTY. ITA NO. 1371/MDS./2013 :- 14 - : 20. THE DEVELOPER SHALL BE ENTITLED TO CORRESPOND W ITH AND RECEIVE ANY CORRESPONDENCE OR OTHER INTIMATION FROM THE AUTHORI TIES CONCERNED REGARDING THE PLANS, SANCTIONS, APPROVALS OR PERMITS FOR CONS TRUCTION OF ANY BUILDING ON THE SAID PROPERTY OR FOR THE PROVISION OF ANY AMENI TIES OR FACILITIES THERETO. 21. THE DEVELOPER SHALL BE ENTITLED TO PAY SUCH FEE S, CHARGES OR LEVIES AND TO FURNISH SECURITIES/ IN MONEY OR OTHERWISE AS AND WH EN REQUIRED BY THE AUTHORITIES CONCERNED FOR ANY DEMOLITION OR CONSTRU CTION ACTIVITY TO BE CARRIED OUT ON THE SAID PROPERTY OR FOR THE PROVISION OF AM ENITIES OR FACILITIES THERETO. 25. IN THE ALTERNATIVE, THE OWNERS AGREE TO EXECUTE A POWER OF ATTORNEY IN FAVOUR OF THE NOMINEE OF THE DEVELOPER, EMPOWERING THE AGENT TO APPLY, SIGN AND GET DEMOLITION PLAN APPROVAL, RECONSTRUCTI ON PLAN SANCTIONS, BUILDING PERMIT AND PLANNING PERMIT, SERVICE CONNEC TIONS SUCH AS WATER, SEWERAGE, ELECTRICITY ETC., AND ALSO TO DEMOLISH TH E OLD BUILDING AND TO DEVELOP THE PROPERTY APART FROM EMPOWERING THE AGEN T TO DEAL WITH THE PROPERTY IN SUCH MANNER AS MAY BE REQUIRED FOR THE DEVELOPMENT OF THE SAME. 27. THE DEVELOPER IS ENTITLED TO GET THE CONSTRUCTI ON WORK DONE EITHER BY THEMSELVES OR THROUGH / OTHER WELL KNOWN CONSTRUCT ORS OR SUB-CONTRACTORS OR AGENTS AND SHALL BE ENTITLED TO GIVE SUCH CONSTRUCT ORS WHOLE OF THE CONSTRUCTION OR ANY PART OR PARTS OF THE WORK OR CO NSTRUCTIONS, PROVIDED THAT THE SAME SHALL NOT RELIEVE THE DEVELOPER FOR THEIR LIABILITY UNDER THIS AGREEMENT OR FROM ACTIVE SUPERVISION WORK DURING IT S PROGRESS. THE DEVELOPER MAY IF IT CHOOSES, ASSIGNS THIS AGREEMENT TO ANY OTHER PARTY ONLY AFTER GETTING NECESSARY PRIOR APPROVAL FROM THE OWN ERS. 28. THE DEVELOPER SHALL FINISH THE CONSTRUCTION OF THE BUILDING IN ACCORDANCE WITH THE SPECIFICATIONS THAT ARE SET OUT IN THE ANN EXURE TO THIS AGREEMENT AND AS PER THE GUIDANCE AND INSTRUCTIONS OF THE ARC HITECTS AND CONSTRUCTION ENGINEERS ENGAGED FOR THIS PURPOSE. 34. THE OWNERS HEREBY UNDERTAKE TO EXECUTE AND REGI STER THE DEEDS OF SALE IN FAVOUR OF THE DEVELOPER AND THEIR NOMINEE CONVEY ING TO THEM THE SCHEDULE B MENTIONED PROPERTY OR REGISTER A POWER O F ATTORNEY IN FAVOUR OF THE DEVELOPER FOR THE SAME SUBJECT TO CLAUSE 4 ABOV E. 37. THE OWNER AND THE DEVELOPER AGREES NOT TO CHANG E THE COMMON NAME FOR THE PROJECT AS MAY BE GIVEN BY THE DEVELOPER. THE DEVELOPER AGREES TO CONSIDER THE SUGGESTION OF THE OWNERS IN THIS REGAR D. 40. THE OWNERS AGREE TO REFUND THE SECURITY DEPOSI T OF 120 LAKH TO THE DEVELOPER WITHIN TWO WEEKS OF THE OWNER BEING INTIM ATED ABOUT COMPLETION AND THAT THE RESPECTIVE SPACE ALLOTTED FOR THE OWNE RS IS FIT FOR TAKING POSSESSION OF THE PROJECT. ITA NO. 1371/MDS./2013 :- 15 - : 44. THE ORIGINAL TITLE DEED IN RESPECT OF THE SCHED ULE A PROPERTY SHALL BE DEPOSITED WITH THE COMMON PERSON IN FAITH, KNOWN TO BOTH THE PARTIES TILL THE COMPLETION OF THE CONSTRUCTION OF THE PROJECT AND A FTER THE COMPLETION OF CONSTRUCTION, THE SAID ORIGINAL TITLE DEEDS IN RESP ECT OF A SCHEDULE PROPERTY SHALL BE DELIVERED TO THE OWNERS ASSOCIATION TO BE FORMED AFTER THE COMPLETION OF CONSTRUCTION. AS PER ABOVE, THE POSSESSION IS GIVEN BY THE ASSESS EE VIDE THIS JDA DATED 09.07.2005 AND ALSO AUTHORIZED THE DEVELOPER TO GET NECESSARY APPROVALS FOR THE PURPOSE OF CONSTRUCTION. THE ASS ESSEE ALSO RECEIVED SUBSTANTIAL AMOUNT OF ` 120 LAKHS AS REFUNDABLE DEPOSIT. THE TIME IS ESSENCE OF THE CONTRACT WITHIN 30 DAYS FROM THE DAT E OF GIVING VACANT POSITION OF THE PROPERTY. THE DEVELOPER HAS TO GET THE PERMISSION FOR CONSTRUCTION OF THE PROPERTY. AFTER GETTING PERMISS ION FOR CONSTRUCTION IN THE SAID PROPERTY, THE DEVELOPER HAS TO COMPLETE THE CONSTRUCTION WITHIN 36 MONTHS HANDED OVER THE ASSESSEES SHARE O F THE CONSTRUCTED PORTION OF BUILDING TO THE ASSESSEE, OTHERWISE IT A TTRACTS DAMAGES, IT SHALL BE TWO LAKHS PER MONTH TILL THE DELIVERY OF T HE BUILDING. THE ASSESSEE HAS ALSO UNDERTAKEN TO REGISTER THE PROPER TY AT THE COST OF DEVELOPER OR ANLY PERSON OR NOMINATED OF THE DEVE LOPER. THEREFORE, IT IS OBIVIOUS THAT THE PHYSICAL POSSESSION OF THE PROPERTY AS WELL AS MANAGEMENT OF THE PROPERTY WAS NOT IN THE HANDS OF THE ASSESSEE. 6.1 WE HAVE GONE THROUGH THE PROVISIONS OF THE SEC TION 2(47) OF THE ACT WHICH DEFINES TRANSFER. UNDER THE COMMON LAW , TRANSFER OF ITA NO. 1371/MDS./2013 :- 16 - : IMMOVABLE PROPERTY VALUING MORE THAN 100 RUPEES WOU LD BE MADE ONLY BY EXECUTING REGISTERED SALE DEED. HOWEVER, UN DER INCOME TAX ACT, SEC.2(47) DEFINES TRANSFER IN RELATION TO CA PITAL ASSET. FOR THE PURPOSE OF CONVENIENCE WE ARE EXTRACTING SEC.2(47) OF THE ACT. S. 2(47) TRANSFER, IN RELATION TO A CAPITAL ASSET , INCLUDES, (I) THE SALE, EXCHANGE OR RELINQUISHMENT OF THE ASS ET ; OR (II) THE EXTINGUISHMENT OF ANY RIGHTS THEREIN ; OR (III) THE COMPULSORY ACQUISITION THEREOF UNDER ANY LAW ; OR (IV) IN A CASE WHERE THE ASSET IS CONVERTED BY THE OWNER THEREOF INTO, OR IS TREATED BY HIM AS, STOCK-IN-TRADE OF A BUSINESS CAR RIED ON BY HIM, SUCH CONVERSION OR TREATMENT ; OR (IVA) THE MATURITY OR REDEMPTION OF A ZERO COUPON B OND ; OR (V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE P OSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A O F THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 1882) ; OR (VI) ANY TRANSACTION (WHETHER BY WAY OF BECOMING A MEMBER OF, OR ACQUIRING SHARES IN, A CO-OPERATIVE SOCIETY, COMPANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT OR ANY ARRANGEMENT OR IN AN Y OTHER MANNER WHATSOEVER) WHICH HAS THE EFFECT OF TRANSFERRING, O R ENABLING THE ENJOYMENT OF, ANY IMMOVABLE PROPERTY : EXPLANATION 1. FOR THE PURPOSES OF SUB-CLAUSES (V) AND (VI), IMMOVABLE PROPERTY SHALL HAVE THE SAME MEANING AS IN CLAUSE (D) OF SECTION 269UA. EXPLANATION 2. FOR THE REMOVAL OF DOUBTS, IT IS HE REBY CLARIFIED THAT TRANSFER INCLUDES AND SHALL BE DEEMED TO HAVE ALW AYS INCLUDED DISPOSING OF OR PARTING WITH AN ASSET OR ANY INTEREST THEREIN, O R CREATING ANY INTEREST IN ANY ASSET IN ANY MANNER WHATSOEVER, DIRECTLY OR IND IRECTLY, ABSOLUTELY OR CONDITIONALLY, VOLUNTARILY OR INVOLUNTARILY, BY WAY OF AN AGREEMENT (WHETHER ENTERED INTO IN INDIA OR OUTSIDE INDIA) OR OTHERWIS E, NOTWITHSTANDING THAT SUCH TRANSFER OF RIGHTS HAS BEEN CHARACTERISED AS B EING EFFECTED OR DEPENDENT UPON OR FLOWING FROM THE TRANSFER OF A SH ARE OR SHARES OF A COMPANY REGISTERED OR INCORPORATED OUTSIDE INDIA ; ITA NO. 1371/MDS./2013 :- 17 - : 6.1 IT IS AN ADMITTED FACT THAT IN THIS CASE FOR A SSESSMENT YEAR 2006-07, ASSESSEE DISCLOSED THE TRANSACTIONS AS A NOTE IN HE R RETURN OF INCOME STATING AS FOLLOWS:- NOTE: THE ASSESSEE HAS ENTERED INTO A JOINT DEVELO PMENT AGREEMENT WITH ALLIED MAGISTIC PROMOTERS DURING THE ASSESSMENT YEAR IN RESPECT OF DEVELOPMENT OF AGRICULTURAL LANDS AT EKATTUR VILLAGE AND HANDED OVER THE POSSESSION OF THE PROPERTY. SHE HA S ALSO EXECUTED A POWER OF ATTORNEY IN FAVOUR OF THE DEVELOPERS THOUG H THE DEEMED SALE IS COMPLETE DURING THE ASSESSMENT YEAR. AS PER THE PARA IT IS EXEMPTED AS IT IS AN AGRICULTURAL LANDS AND IT IS N OT A CAPITAL ASSET AS PER THE SEC.2(24) OF THE IT ACT. 6.2 AS SEEN FROM THE ABOVE, THERE IS A FAIR DISCLO SURE BY THE ASSESSEE REGARDING THE SALE OF THE IMPUGNED PROPERTY. IN THA T ASSESSMENT YEAR I.E.2006-07, IT IS SAID TO BE ACCEPTED BY THE DEPAR TMENT THAT AS THERE WAS NO TRANSFER OF CAPITAL ASSET AS AN AGRICULTURAL LAND. IT IS NOT THE CASE OF THE DEPARTMENT THAT IT WAS SUBJECT TO ANY RECTIFICATION OR REVISION SUBSEQUENTLY. UNLESS THE DEPARTMENT DISTURBED THE ASSESSMENT FOR ASSESSMENT YEAR 2006- 07, THE DEPARTMENT HAS PRECLUDED FROM TREATING THE TRANSFER OF SAME LAND AS A TRANSFER IN TERMS OF SEC.2(47)(V) OF THE ACT IN T HE ASSESSMENT YEAR 2009- 10 FOR WHATEVER REASON STATED BY THE AO. IN OUR OP INION, MERELY BECAUSE AN AGREEMENT OF SALE HAS NOT BEEN REGISTERED, WHICH OT HERWISE IN NATURE OF AGREEMENT REFERRED IN SEC.53A OF THE TRANSFER OF PR OPERTY ACT CANNOT BE TAKEN OUT OF AMBIT OF SEC.2(47)(V) OF THE ACT WHEN PARTING OF THE POSSESSION OF IMMOVABLE PROPERTY HAS ALREADY TAKEN PLACE AS EN UMERATED IN EARLIER PARA OF THIS ORDER. IT IS VERY CLEAR THAT THERE IS GIVI NG UP OF THE POSSESSION TO THE ITA NO. 1371/MDS./2013 :- 18 - : BUILDER/DEVELOPER AND HE HAS GIVEN THE SUBSTANTIAL AMOUNT TO THE ASSESSEE IN THE FORM OF REFUNDABLE DEPOSIT AND HE HAS SHOWN WILLINGNESS TO PERFORM HIS PART OF DUTY TO THE ASSESSEE AND THERE IS NO QU ESTION OF GOING BACK FROM HIS CONSENT TO ACT AS BUILDER. THIS VIEW OF OURS I S FORTIFIED BY THE ORDER OF TRIBUNAL IN THE CASE OF ITO VS. SHRI BAKTHAVATSALAM GOWTHAM IN ITA NO.1614/MDS./2010 DATED 04.05.2012. THUS, WE DO NO T FIND ANY ERROR IN THE FINDINGS OF THE LD.CIT(A) WHEREIN HE HAS OBSERVED T HAT THERE IS NO TRANSFER IN THE ASSESSMENT YEAR 2009-10 AND THE SAME IS UPHE LD. 6.3 WITHOUT PREJUDICE TO THE ABOVE, THE REVENUE HA S RAISED ONE MORE GROUND REGARDING FINDINGS OF THE LD.CIT(A) THAT THE LAND WAS AGRICULTURAL LAND, THOUGH AT THE TIME OF TRANSFER ON 01.04.2008, IT WAS NON AGRICULTURAL LAND. 6.4 LD.D.R SUBMITTED THAT THE SAID DEED EXECUTED O N 01.04.2008 MENTIONED THE PROPERTY AS VACANT SITE AND NOT AGRIC ULTURAL LAND. FURTHER LD.D.R SUBMITTED THAT THE NATURE OF LAND CHANGED SU BSEQUENT TO THE JDA FROM AGRICULTURAL LAND TO VACANT SITE SINCE NO AGRI CULTURAL ACTIVITY WAS CARRIED OUT DURING THE PERIOD FROM THE DATE OF AGREEMENT TO THE EXECUTION OF SALE OF THE PROPERTY BY THE ASSESSEE. HE RELIED ON THE ORDE R OF LD. ASSESSING OFFICER. ON THE OTHER HAND, LD.A.R RELIED ON THE ORDER OF LD .CIT(A). 6.4 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. REGARDING NATURE OF LAND WHETHER IT IS AGRICULTURAL LAND OR NOT. IT IS ALWAYS DEPEND UPON THE FACTS OF THE CASE. IN THE PRESENT C ASE, ORIGINALLY THE ASSET ITA NO. 1371/MDS./2013 :- 19 - : WAS ACQUIRED BY THE TRUST CONSISTING OF ASSESSEE AN D HER BROTHER AS A BENEFICIARY. LATER ON REVOCATION OF THE TRUST IMPUG NED PROPERTY WAS DEVOLVED ON THE ASSESSEE AND SUBSEQUENTLY THE ASSES SEE ENTERED INTO JDA ON 09.07.2005. NOW THE QUESTION IS WHETHER THE SAID PROPERTY IS AGRICULTURAL LAND OR NOT IS ESSENTIALLY A QUESTION OF FACT. THE QUESTION HAS TO BE ANSWERED IN EACH CASE HAVING REGARD TO THE FACTS AND CIRCUMS TANCES OF THAT CASE. THERE MAY BE FACTORS BOTH FOR AND AGAINST A PARTICU LAR POINT OF VIEW. WE HAVE TO ANSWER THE QUESTION ON A CONSIDERATION OF A LL OF THEM, A PROCESS OF EVALUATION AND THE INFERENCE HAS TO BE DRAWN ON A C UMULATIVE CONSIDERATION OF ALL THE RELEVANT FACTS. IT MAY BE STATED HERE TH AT NOT ALL THE FACTORS OR TESTS WOULD BE PRESENT OR ABSENT IN ANY CASE AND THAT IN EACH CASE ONE OR MORE OF THE FACTORS MAY MAKE APPEARANCE AND THAT ULTIMATE D ECISION WILL HAVE TO BE REACHED ON A BALANCED CONSIDERATION OF THE TOTALITY OF THE CIRCUMSTANCES. THE EXPRESSION AGRICULTURAL LAND IS NOT DEFINED IN TH E ACT, AND NOW, WHETHER IT IS AGRICULTURAL LAND OR NOT HAS GOT TO BE DETERMINED B Y USING THE TESTS OR METHODS LAID DOWN BY THE COURTS FROM TIME TO TIME. 6.5 THE HONBLE SUPREME COURT IN THE CASE OF SMT. SARIFABIBI MOHMED IBRAHIM (204 ITR 631) HAS APPROVED THE DECISION OF A DIVISION BENCH OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. S IDDHARTH 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 UPO N CONSIDERATION OF WHICH, THE QUESTION WHETHER THE LAND IS AN AGRICULT URAL LAND OR NOT HAS GOT TO BE DECIDED OR ANSWERED. WE REPRODUCE THE SAID 13 TE STS AS FOLLOWS: ITA NO. 1371/MDS./2013 :- 20 - : 1. WHETHER THE LAND WAS CLASSIFIED IN THE REVENUE R ECORDS AS AGRICULTURAL AND WHETHER IT WAS SUBJECT TO THE PAYM ENT OF LAND REVENUE? 2. WHETHER THE LAND WAS ACTUALLY OR ORDINARILY USED FOR AGRICULTURAL PURPOSES AT OR ABOUT THE RELEVANT TIME ? 3. WHETHER SUCH USER OF THE LAND WAS FOR A LONG PER IOD OR WHETHER IT WAS OF A TEMPORARY CHARACTER OR BY ANY O F A STOPGAP ARRANGEMENT? 4. WHETHER THE INCOME DERIVED FROM THE AGRICULTURAL OPERATIONS CARRIED ON IN THE LAND BORE ANY RATIONAL PROPORTION TO THE INVESTMENT MADE IN PURCHASING THE LAND? 5. WHETHER, THE PERMISSION UNDER S. 65 OF THE BOMBA Y LAND REVENUE CODE WAS OBTAINED FOR THE NON-AGRICULTURAL USE OF THE LAND? IF SO, WHEN AND BY WHOM (THE VENDOR OR TH E VENDEE)? WHETHER SUCH PERMISSION WAS IN RESPECT OF THE WHOLE OR A PORTION OF THE LAND? IF THE PERMISSION W AS 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 SA ID PORTION OF THE LAND ON THE MATERIAL DATE? 6. WHETHER THE LAND, ON THE RELEVANT DATE, HAD CEAS ED TO BE PUT TO AGRICULTURAL USE? IF SO, WHETHER IT WAS PUT TO AN ALTERNATIVE USE? WHETHER SUCH CESSER AND/ OR ALTERN ATIVE USER WAS OF A PERMANENT OR TEMPORARY NATURE? 7. WHETHER THE LAND, THOUGH ENTERED IN REVENUE RECO RDS, HAD NEVER BEEN ACTUALLY USED FOR AGRICULTURE, THAT IS, IT HAD NEVER BEEN PLOUGHED OR TILLED? WHETHER THE OWNER ME ANT OR INTENDED TO USE IT FOR AGRICULTURAL PURPOSES? 8. WHETHER THE LAND WAS SITUATED IN A DEVELOPED ARE A? WHETHER ITS PHYSICAL CHARACTERISTICS, SURROUNDING S ITUATION AND USE OF THE LANDS IN THE ADJOINING AREA WERE SUC H AS WOULD INDICATE THAT THE LAND WAS AGRICULTURAL? 9. WHETHER THE LAND ITSELF WAS DEVELOPED BY PLOTTIN G AND PROVIDING ROADS AND OTHER FACILITIES? 10. WHETHER THERE WERE ANY PREVIOUS SALES OF PORTIO NS OF THE LAND FOR NON-AGRICULTURAL USE? 11. WHETHER PERMISSION UNDER S. 63 OF THE BOMBAY TE NANCY AND AGRICULTURAL LANDS ACT, 1948, WAS OBTAINED BECA USE THE SALE OR INTENDED SALE WAS IN FAVOUR OF A NON- ITA NO. 1371/MDS./2013 :- 21 - : AGRICULTURIST? IF SO, WHETHER THE SALE OR INTENDED SALE TO SUCH NON-AGRICULTURISTS WAS FOR NON-AGRICULTURAL OR AGRICULTURAL USER? 12. WHETHER THE LAND WAS SOLD ON YARDAGE OR ON ACRE AGE BASIS? 13. WHETHER AN AGRICULTURIST WOULD PURCHASE THE LAN D FOR AGRICULTURAL PURPOSES AT THE PRICE AT WHICH THE LAN D WAS SOLD AND WHETHER THE OWNER WOULD HAVE EVER SOLD THE LAND VALUING IT AS A PROPERTY YIELDING AGRICULTURAL PROD UCE ON THE BASIS OF ITS YIELD?' 6.6 A REFERENCE COULD BE MADE TO THE CASE OF CWT VS. OFFICER- IN-CHARGE (COURT OF WARDS) (105 ITR 138) (SC) WHEREIN THE CON STITUTION BENCH OF THE HONBLE SUPREME COURT STATED THAT THE TERM AGRICUL TURE AND AGRICULTURAL PURPOSE WAS NOT DEFINED IN THE INDIAN IT ACT AND T HAT WE MUST NECESSARILY FALL BACK UPON THE GENERAL SENSE IN WHICH THEY HAVE BEEN UNDERSTOOD IN COMMON PARLANCE. THE HONBLE SUPREME COURT HAS OBSE RVED THAT THE TERM AGRICULTURE IS THUS UNDERSTOOD AS COMPRISING WITH IN ITS SCOPE THE BASIC AS WELL AS SUBSEQUENT OPERATIONS IN THE PROCESS OF AGR ICULTURE AND RAISING ON THE LAND ALL PRODUCTS WHICH HAVE SOME UTILITY EITHE R FOR SOMEONE OR FOR TRADE AND COMMERCE. IT WILL BE SEEN THAT THE TERM AGRICU LTURE RECEIVES A WIDER INTERPRETATION BOTH IN REGARD TO ITS OPERATION AS W ELL AS THE RESULT OF THE SAME. NEVERTHELESS THERE IS PRESENT ALL THROUGHOUT THE BASIC IDEA THAT THERE MUST BE AT THE BOTTOM OF ITS CULTIVATION OF THE LAN D IN THE SENSE OF TILLING OF THE LAND, SOWING OF THE SEEDS, PLANTING AND SIMILAR WORK DONE ON THE LAND ITSELF AND THIS BASIC CONCEPTION IS ESSENTIAL SINE QUA NON OF ANY OPERATION PERFORMED ON THE LAND CONSTITUTING AGRICULTURAL OPE RATION AND IF THE BASIC OPERATIONS ARE THERE, THE REST OF THE OPERATIONS FO UND THEMSELVES UPON THE ITA NO. 1371/MDS./2013 :- 22 - : SAME, BUT IF THE BASIC OPERATIONS ARE WANTING, THE SUBSEQUENT OPERATIONS DO NOT ACQUIRE THE CHARACTERISTICS OF AGRICULTURAL OPE RATIONS. THE CONSTITUTION BENCH OF THE HONBLE SUPREME COURT IN THE AFORESAID CASE OBSERVED THAT THE ENTRIES IN REVENUE RECORDS WERE CONSIDERED GOOD PRI MA FACIE EVIDENCE. 6.7 THE HONBLE GUJARAT HIGH COURT IN THE CASE OF D R. MOTIBHAI D. PATEL VS. CIT (1982) 27 CTR (GUJ) 238 : (1981) 127 ITR 671 (G UJ) REFERRING TO THE CONSTITUTION BENCH OF THE HONBLE SUPREME COURT HAD STATED THAT IF AGRICULTURAL OPERATIONS ARE BEING CARRIED ON IN THE LAND IN QUESTION AT THE TIME WHEN THE LAND IS SOLD AND FURTHER IF THE ENTRI ES IN THE REVENUE RECORDS SHOW THAT THE LAND IN QUESTION IS AGRICULTURAL LAND , THEN, A PRESUMPTION ARISES THAT THE LAND IS AGRICULTURAL IN CHARACTER A ND UNLESS THAT PRESUMPTION IS REBUTTED BY EVIDENCE LED BY THE REVENUE, IT MUST BE HELD THAT THE LAND WAS AGRICULTURAL IN CHARACTER AT THE TIME WHEN IT W AS SOLD. THE DIVISION BENCH OF THE HONBLE GUJARAT HIGH COURT FURTHER HEL D THAT THERE WAS NOTHING ON RECORD TO SHOW THAT THE PRESUMPTION ROSE FROM TH E LONG USER OF THE LAND FOR AGRICULTURAL PURPOSE AND ALSO THE PRESUMPTION A RISING FROM THE ENTRIES OF THE REVENUE RECORDS ARE REBUTTED. 6.8 THE HONBLE 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 HONBLE 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 ITA NO. 1371/MDS./2013 :- 23 - : CONSIDERATION BEFORE THE PRESUMPTION COULD BE REBUT TED. THECOURT FURTHER HELD THAT THE SUPREME COURT HAD CLEARLY POINTED OUT THAT THE BURDEN TO REBUT THE PRESUMPTION WOULD BE ON THE REVENUE. THE HONBLE BOMBAY HIGH COURT HELD THAT THE RATIO OF THE DECISION OF THE SU PREME COURT WAS THAT WHAT IS TO BE DETERMINED IS THE CHARACTER OF THE LAND AC CORDING TO THE PURPOSE FOR WHICH IT WAS MEANT OR SET APART AND CAN BE USED. IT IS, THEREFORE, OBVIOUS THAT THE ASSESSEE HAD ABUNDANTLY PROVED THAT THE SU BJECT LAND SOLD BY THEM WAS AGRICULTURAL 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 ORDINARILY USED FOR AGRICULTURAL PURPOSE AT THE REL EVANT TIME. 6.9 WE MAY ALSO REFER TO THE CASE OF CIT VS. MANIL ALSOMNATH (1977) 106 ITR 917 (GUJ), WHEREIN THE DIVISION BENCH OF THE HO NBLE 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. 7. WE MAY ALSO REFER TO THE CASE OF GOPAL C. SHARM A VS. CIT (1994) 116 CTR (BOM) 377 : (1994) 209 ITR 946 (BOM), IN WH ICH, THE CASE OF SMT. SARIFABIBI MOHAMED IBRAHIM &ORS. VS. CIT (SUPRA) WA S REFERRED TO AND RELIED, AMONGST OTHER CASES. IN THIS CASE, THE DIVI SION BENCH OF THE BOMBAY HIGH COURT HAS STATED THAT THE PROFIT MOTIVE OF THE ASSESSEE SELLING THE LAND WITHOUT ANYTHING MORE BY ITSELF CAN NEVER BE DECISI VE FOR DETERMINATION OF THE ISSUE AS TO WHETHER THE TRANSACTION AMOUNTED TO AN ADVENTURE IN THE ITA NO. 1371/MDS./2013 :- 24 - : NATURE OF TRADE. IN OTHER WORDS, THE PRICE PAID IS NOT DECISIVE TO SAY WHETHER THE LAND IS AGRICULTURAL OR NOT. 7.1 WE MAY REFER TO A JUDGMENT OF THE HONBLE MADRA S HIGH COURT IN THE CASE OF CWT VS. E. UDAYAKUMAR (2006) 284 ITR511 (MA D) WHERE THE HONBLE MADRAS HIGH COURT HAS REFERRED TO THE DECIS ION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SMT. SAVITA RANI (2004) 186 CTR (P&H) 240 : (2004) 270 ITR 40 (P&H) AND HAS OBSERVED AND HELD AS UNDER : '8. IT IS WELL SETTLED IN THE CASE OF CIT VS. SMT. SAVITA RANI (2004) 186 CTR (P&H) 240 : (2004) 270 ITR 40 (P&H), WHEREIN IT IS HELD THAT THE LAND BEING LOCATED IN A COMMERCIAL AREA OR THE LAND HAVING BEEN PARTIALLY UTILISED FOR NON- AGRICULTURAL PURPOSES OR THAT THE VENDEES HAD ALSO PURCHASED IT FOR NON- AGRICULTURAL PURPOSES, WERE TOTALLY IRRELE VANT CONSIDERATION FOR THE PURPOSES OF 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 K ARNALS, 17 MARLAS LAND DURING THE FINANCIAL YEAR 1990-91, RELE VANT TO THE ASST. YR. 1991-92, THE SALE WAS EFFECTED BY THREE R EGISTERED SALE DEEDS. WHILE FILING HER RETURN OF INCOME, SHE CLAIMED EXEMPTION FROM LEVY OF CAPITAL GAINS UNDER S. 54B O F THE ACT ON THE GROUND THAT THE LAND SOLD BY HER WAS AGRICULTUR AL LAND AND THE SALE PROCEEDS WERE INVESTED IN THE PURCHASE OF AGRICULTURAL LAND WITHIN TWO YEARS. THE AO REJECTED THE CLAIM OF THE ASSESSEE HOLDING THAT THE LAND SOLD BY THE ASSESSEE 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 ITA NO. 1371/MDS./2013 :- 25 - : THAT THE TRANSACTION IN QUESTION DULY FULFILLED THE CONDITIONS SPECIFIED FOR RELIEF. ON FURTHER APPEAL TO THE HIGH COURT, THE PUNJAB & HARYANA HIGH COURT FOUND THAT THE FINDING THAT THE LAND HAD BEEN USED FOR AGRICULTURAL PURPOSES WAS BA SED ON COGENT AND RELEVANT MATERIAL. THE REVENUE RECORD SU PPORTED THE CLAIM. EVEN THE RECORDS OF THE IT DEPARTMENT SH OWED THAT THE ASSESSEE HAD DECLARED AGRICULTURAL INCOME FROM THIS LAND IN HER RETURNS FOR THE PRECEDING TWO YEARS. THE LAND B EING LOCATED IN COMMERCIAL AREA OR THE LAND HAVING BEEN PARTIALL Y UTILISED FOR NON-AGRICULTURAL PURPOSES OR THAT THE VENDEES HAD A LSO PURCHASED IT FOR NONAGRICULTURAL PURPOSES, WERE TOT ALLY 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 PURCHAS E ANOTHER LAND WITHIN TWO YEARS HAD ALSO BEEN PERMITTED TO CL AIM EXEMPTION UNDER S. 54B OF THE IT ACT, 1961. IN THE INSTANT CASE, EVEN THOUGH THERE WAS NO SALE AS SUCH, THE AS SESSEE OWNED AGRICULTURAL LAND WITHIN THE LIMITS OF TIRUNE LVELI CORPORATION AND HE HAD NOT PUT UP ANY CONSTRUCTION THEREON, THE ASSESSEE IS ENTITLED TO CLAIM EXEMPTION FROM TH E WT ACT FOR THE ASSESSMENT OF WEALTH-TAX.THAT THE LAND IN QUEST ION IS ADJACENT TO THE HOSPITAL IS TOTALLY IRRELEVANT.' 7.2 ADVERTING TO THE FACTS OF THE PRESENT CASE, TH E LAND IN QUESTION IS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL L AND AND THERE IS NO DISPUTE REGARDING THIS ISSUE AND ACTUAL CULTIVATION HAS BEE N CARRIED ON THIS LAND AND INCOME WAS DECLARED FROM THIS LAND IN THE RETURN OF INCOME FILED BY THE ASSESSEE FOR THE EARLIER YEARS AS AGRICULTURAL INCO ME. IT IS ALSO AN ADMITTED ITA NO. 1371/MDS./2013 :- 26 - : FACT THAT THE ASSESSEE HAS NOT APPLIED FOR CONVERSI ON OF THIS AGRICULTURAL LAND FOR NON-AGRICULTURAL PURPOSES AND THE ASSESSEE HAS NOT PUT THE LAND TO ANY PURPOSES OTHER THAN AGRICULTURAL PURPOSES. IT IS AL SO AN ADMITTED FACT THAT NEITHER THE IMPUGNED PROPERTY NOR THE SURROUNDING A REAS WERE SUBJECT TO ANY DEVELOPMENTAL ACTIVITIES AT THE RELEVANT POINT OF TIME OF SALE OF THE LAND. 7.3 THE STATE GOVERNMENT ALSO PRESCRIBED THE PROCE DURE FOR CONVERSION OF AGRICULTURAL LAND INTO NON-AGRICULTURAL LAND. BE ING SO, WHENEVER THE AGRICULTURAL LAND TO BE TREATED AS NON-AGRICULTURAL LAND, THE SAME HAS TO BE CONVERTED IN ACCORDANCE WITH THE PROVISIONS OF STAT E GOVERNMENT. IF BY A GOVERNMENT NOTIFICATION, THE NATURE AND CHARACTER O F LAND CHANGES FROM AGRICULTURE INTO NON-AGRICULTURE THEN THERE IS NO Q UESTION OF CONVERSION OF THIS LAND FOR NON- AGRICULTURAL PURPOSES BY THE REV ENUE AUTHORITIES CONCERNED. THE LAND OWNERS ARE REQUIRED TO APPLY TO THE CONCERNED REVENUE AUTHORITIES FOR THE PURPOSE OF CONVERSION OF THE AG RICULTURAL LAND INTO NON- AGRICULTURAL LAND AND THERE IS NO AUTOMATIC CONVERS ION IN THIS CASE. 7.4 IT IS ALSO AN ADMITTED POSITION THAT MERE IN CLUSION OR PROXIMITY OF LAND TO ANY SPECIAL ZONE WITHOUT ANY INFRASTRUCTURE DEVELOPMENT THEREUPON OR WITHOUT ESTABLISHING AND PROVING THAT THE LAND W AS 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, THE SURROUNDING AREA WAS TOTALLY UNDEVELOPED AND EXCEPT MERE FUTURE POSSIBIL ITY TO PUT THE LAND INTO USE FOR NON-AGRICULTURAL PURPOSES WOULD NOT CHANGE THE CHARACTER OF THE ITA NO. 1371/MDS./2013 :- 27 - : AGRICULTURAL LAND INTO NON-AGRICULTURAL LAND AT THE RELEVANT POINT OF TIME WHEN THE LAND WAS SOLD BY THE ASSESSEE. IT IS ALSO AN AD MITTED POSITION THAT THE ASSESSEE HAD NOT APPLIED FOR CONVERSION OF THE LAND IN QUESTION INTO NON- AGRICULTURAL PURPOSES AND NO SUCH PERMISSIONS WERE OBTAINED FROM THE CONCERNED AUTHORITY. IN THE REVENUE RECORDS, THE LA ND IS CLASSIFIED AS AGRICULTURAL LAND AND HAS NOT BEEN CHANGED FROM AGR ICULTURAL LAND TO NON- AGRICULTURAL LAND AT THE RELEVANT POINT OF TIME WHE N THE LAND WAS SOLD BY 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 PURPOSE S AT TIME OF THEIR OWNERSHIP THAT LAND. NO SUCH FINDING HAS BEEN GIVEN BY THE DEPARTMENT. NO MATERIAL OR EVIDENCE IN SUPPORT OF THE FACT THAT TH E ASSESSEES HAVE PUT THE LAND IN USE FOR NON- AGRICULTURAL PURPOSES HAS BEEN BROUGHT ON RECORD. THE NATURE OF THE CROP AND THE PERSON WHO CULTIVATED TH E LAND ARE DULY MENTIONED IN THE ASSESSMENT ORDER SHOWS THAT AT THE RELEVANT POINT OF TIME THE LAND WAS USED FOR AGRICULTURAL PURPOSES ONLY AN D NOTHING IS BROUGHT ON RECORD TO SHOW THAT THE LAND WAS PUT IN USE FOR NON -AGRICULTURAL PURPOSES BY THE ASSESSEES. IN VIEW OF THE DECISION OF THE HONB LE HIGH COURT IN THE CASE OF GOPAL C. SHARMA VS. CIT (209 ITR 946) (BOM), IT IS ALSO CLEAR THAT THE PROFIT MOTIVE OF THE ASSESSEE IN SELLING THE LAND W ITHOUT ANYTHING MORE BY ITSELF CAN NEVER BE DECISIVE TO SAY THAT THE ASSESS EE USED THE LAND FOR NON- AGRICULTURAL PURPOSES. WE MAY ALSO REFER TO A DECIS ION OF THE HONBLE SUPREME COURT IN THE CASE OF N. SRINIVASA RAO VS. S PECIAL COURT (2006) 4 ITA NO. 1371/MDS./2013 :- 28 - : SCC 214 WHERE IT WAS OBSERVED THAT THE FACT THAT AG RICULTURAL LAND IN QUESTION IS INCLUDED IN URBAN AREA WITHOUT MORE, HE LD 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 INS TANT CASE IS BOUGHT BY DEVELOPER CANNOT BE A DETERMINING FACTOR BY ITSELF TO SAY THAT THE LAND WAS CONVERTED INTO USE FOR NON-AGRICULTURAL PURPOSES. 7.5 RECENTLY THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MADHUKUMAR N. (HUF) (2012) 78 DTR (KAR) 391 HELD AS FOLLOWS: '9. AN AGRICULTURAL LAND IN INDIA IS NOT A CAPITAL ASSET BUT BECOMES A CAPITAL ASSET IF IT IS THE LAND LOCATED U NDER SECTION 2(14)(III)(A) & (B) OF THE ACT, SECTION 2(14) (III) (A) OF THE ACT COVERS A SITUATION WHERE THE SUBJECT AGRICULTURAL L AND IS LOCATED WITHIN THE LIMITS OF MUNICIPAL CORPORATION, NOTIFIE D AREA COMMITTEE, TOWN AREA COMMITTEE, TOWN COMMITTEE, OR CANTONMENT COMMITTEE AND WHICH HAS A POPULATION OF NOT LESS THAN 10,000. 10. SECTION 2(14)(M)(B) OF THE ACT COVERS THE SITUA TION WHERE THE SUBJECT LAND IS NOT ONLY LOCATED WITHIN THE DIS TANCE OF 8 KMS FROM THE LOCAL LIMITS, WHICH IS COVERED BY CLAU SE (A) TO SECTION 2(14)(III) OF THE ACT, BUT ALSO REQUIRES TH E FULFILMENT OF THE CONDITION THAT THE CENTRAL GOVERNMENT HAS ISSUE D A NOTIFICATION UNDER THIS CLAUSE FOR THE PURPOSE OF I NCLUDING THE AREA UP TO 8 KMS, FROM THE MUNICIPAL LIMITS, TO REN DER THE LAND AS A CAPITAL ASSET. 11. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE SUBJECT LAND IS NOT LOCATED WITHIN THE LIMITS OF DASARAHALL I CITY MUNICIPAL ITA NO. 1371/MDS./2013 :- 29 - : COUNCIL THEREFORE, CLAUSE (A) TO SECTION 2(14][III] OF THE ACT IS NOT ATTRACTED. 12. HOWEVER, THOUGH IT IS CONTENDED THAT IT IS LOCA TED WITHIN 8 KNITS,, WITHIN THE MUNICIPAL LIMITS OF DASARAHALLI CITY MUNICIPAL COUNCIL IN THE ABSENCE OF ANY NOTIFICATION ISSUED U NDER CLAUSE (B) TO SECTION 2(14)(III) OF THE ACT, IT CANNOT BE LOOKED IN AS A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14)(I II)(B) OF THE ACT ALSO AND THEREFORE THOUGH THE TRIBUNAL MAY NOT HAVE SPELT OUT THE REASON AS TO WHY THE SUBJECT LAND CANNOT BE CONSIDERED AS A CAPITAL ASSET BE GIVING THIS VERY REASON, WE FIND THE CONCLUSION ARRIVED AT BY THE TRIBUNAL IS N EVERTHELESS THE CORRECT CONCLUSION.' 7.7 FURTHER THE KOLKATA BENCH OF THE TRIBUNAL IN T HE CASE OFDCIT VS. ARIJITMITRA (48 SOT 544) (KOL) HELD AS FOLLOWS: '7. FROM THE ABOVE, IT IS CLEAR THAT AGRICULTURAL L AND SITUATED IN AREAS LYING WITHIN A DISTANCE NOT EXCEEDING 8 KM FROM THE LOCAL LIMITS OF SUCH MUNICIPALITIES OR CANTONMENT B OARDS ARE COVERED BY THE AMENDED DEFINITIONS OF CAPITAL ASSE T, IF SUCH AREAS ARE, HAVING REGARD TO THE EXTENT OF AND SCOPE FOR THEIR URBANIZATION AND OTHER RELEVANT CONSIDERATIONS, IS NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS BEHALF. CENTRAL GOVE RNMENT IN EXERCISE OF SUCH POWERS HAS ISSUED THE ABOVE NOT IFICATION, AS AMENDED LATEST BY NOTIFICATION NO. 11186 DATED 28.12.1999 CLEARLY CLARIFIES THAT AGRICULTURAL LAND SITUATION IN RURAL AREAS, AREAS OUTSIDE THE MUNICIPALITY OR CANT ONMENT BOARD ETC., HAVING A POPULATION OF NOT LESS THAN 10 ,000 AND ALSO BEYOND THE DISTANCE NOTIFIED BY CENTRAL GOVERN MENT FROM LOCAL LIMITS I.E. THE OUTER LIMITS OF ANY SUCH MUNICIPALITY OR CANTONMENT BOARD ETC., STILL CONTINUES TO BE EXC LUDED ITA NO. 1371/MDS./2013 :- 30 - : FROM THE DEFINITION OF CAPITAL ASSET. ACCORDINGLY , IN VIEW OF SUB-CLAUSE (B) OF SECTION 2(14)(III) OF THE ACT EVE N UNDER THE AMENDED DEFINITION OF EXPRESSION CAPITAL ASSET, T HE AGRICULTURAL LAND SITUATED IN RURAL AREAS CONTINUES TO BE EXCLUDED FROM THAT DEFINITION. AND AS IN THE PRESEN T CASE, ADMITTEDLY, THE AGRICULTURAL LAND OF THE ASSESSEE I S OUTSIDE THE MUNICIPAL LIMITS OF RAJARHAT MUNICIPALITY AND T HAT ALSO 2.5 KM AWAY FROM THE OUTER LIMITS OF THE SAID MUNIC IPALITY, ASSESSEES LAND DOES NOT COME WITHIN THE PURVIEW OF SECTION 2(14)(III) EITHER UNDER SUB CLAUSE (A) OR (B) OF TH E ACT, HENCE THE SAME CANNOT BE CONSIDERED AS CAPITAL ASSE T WITHIN THE MEANING OF THIS SECTION. HENCE, NO CAPITAL GAIN TAX CAN BE CHARGED ON THE SALE TRANSACTION OF THIS LAND ENT ERED BY THE ASSESSEE. ACCORDINGLY, WE QUASH THE ASSESSMENT ORDER QUA CHARGING OF CAPITAL GAINS ON VERY JURISDICTION OF THE ISSUE IS QUASHED. THE CROSS OBJECTION OF THE ASSESS EE IS ALLOWED.' 7.8 IT WAS HELD IN THE CASE OF CIT VS. MANILAL SOMN ATH (106ITR 917) AS FOLLOWS: UNDER THE INCOME-TAX ACT OF 1961, AGRICULTURAL LEN D SITUATED IN INDIA WAS EXCLUDED FROM THE DEFINITION OF ' CAPITAL ASSET' AND ANY GAIN FROM THE SALE THEREOF W AS NOT TO BE INCLUDED IN THE TOTAL INCOME OF AN ASSESSEE TIND ER THE HEAD 'CAPITAL GAINS'. IN ORDER TO DETERMINE WHETHER A PARTICULAR LAND IS AGRICULTURAL LAND OR NOT ONE HAS TO FIRST FIND OUT IF IT IS BEING PUT TO ANY USE. IF IT IS USED FO R AGRICULTURAL PURPOSES THERE IS A PRESUMPTION THAT IT IS AGRICULT URAL LAND. IF IT IS USED FOR NON-AGRICULTURAL PURPOSES THE PRE SUMPTION IS THAT IT IS NON-AGRICULTURAL LAND. THIS PRESUMPTION ARISING FROM ACTUAL USE CAN BE REBUTTED BY THE PRESENCE OF OTHER ITA NO. 1371/MDS./2013 :- 31 - : FACTORS. THERE MAY BE CASES WHERE LAND WHICH IS ADM ITTEDLY NON-AGRICULTURAL IS USED TEMPORARILY FOR AGRICULTUR AL PURPOSES. THE DETERMINATION OF THE QUESTION WOULD, THEREFORE, DEPEND ON THE FACTS OF EACH CASE. THE ASSESSEE, HINDU, UNDIVIDED FAMILY, HAD OBTAINED SOME LAND ON A PARTITION IN 1939. FROM THAT TIME, UP TO THE TIME OF ITS SALE, AGRICULTURAL OPERATIONS WERE CARRIED O N IN THE LAND. THERE WAS NO REGULAR ROAD TO THE LAND AND IT WAS WITH THE AID OF A TRACTOR THAT AGRICULTURAL OPERATIONS W ERE BEING CARRIED ON.THE LAND WAS INCLUDED WITHIN A DRAFT TOW N PLANNING SCHEME. THE ASSESSEE GOT PERMISSION OF THE COLLECTOR TO SELL THE LAND FOR RESIDENTIAL PURPOSES AND SOLD IT.ON THE QUESTION WHETHER THE LAND WAS AGRICULTURA L LAND: HELD, THAT WHAT HAD TO BE CONSIDERED IS NOT WHAT TH E PURCHASER DID WITH THE LAND OR THE PURCHASER WAS SU PPOSED TO DO WITH THE LAND, BUT WHAT WAS THE CHARACTER OF THE LAND AT THE TIME WHEN THE SALE TOOK PLACE. THE FACT THAT THE LAND WAS WITHIN MUNICIPAL LIMITS OR THAT IT WAS INCLUDED WITHIN A PROPOSED TOWN PLANNING SCHEME WAS NOT BY ITSELF SUF FICIENT TO REBUT THE PRESUMPTION ARISING FROM ACTUAL USE OF THE LAND.THE LAND HAD BEEN USED FOR AGRICULTURAL PURPOS ES FOR A LONG TIME AND NOTHING HAD HAPPENED TILL THE DATE OF THE SALE TO CHANGE THAT CHARACTER OF THE LAND. THE POTENTIAL NON- AGRICULTURAL VALUE OF THE LAND FOR WHICH A PURCHASE R MAY BE PREPARED TO PAY A LARGE PRICE WOULD NOT DETRACT FRO M ITS CHARACTER AS AGRICULTURAL LAND AT THE DATE OF THE S ALE. THE LAND IN QUESTION WAS, THEREFORE, AGRICULTURAL LAND. ITA NO. 1371/MDS./2013 :- 32 - : 7.9 FURTHER THE WORD 'CAPITAL ASSET IS DEFINED IN SECTION 2(14) TO MEAN PROPERTY OF ANY KIND HELD BY AN ASSESSEE, WHETHER O R NOT CONNECTED WITH HIS BUSINESS OR PROFESSION, BUT DOES NOT INCLUDE- (III) AGRICULTURAL LAND IN INDIA, NOT BEING LAND SI TUATED- (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURIS DICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNICIPAL CORPORATION, NOTIFIED AREA COMMITTEE, TOW N AREA COMMITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAME) OR A CANTONMENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDING C ENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED B EFORE THE FIRST DAY OF THE PREVIOUS YEAR; OR (B) IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MOR E THAN EIGHT KILOMETRES, FROM THE LOCAL LIMITS OF ANY MUNI CIPALITY OR CANTONMENT BOARD REFERRED TO IN ITEM (A), AS THE CENTRAL GOVERNMENT MAY, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANIZATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS, SPECIFY IN THIS BEHALF BY NOTIFICATION IN THE OFFICIAL GAZETTE; 8. IT IS VERY CLEAR FROM THE ABOVE THAT THE GAIN O N SALE OF AN AGRICULTURAL LAND WOULD BE EXIGIBLE TO TAX ONLY WHEN THE LAND TR ANSFERRED IS LOCATED WITHIN THE JURISDICTION OF A MUNICIPALITY. THE FACT THAT A LL THE EXPRESSIONS ENLISTED AFTER THE WORD MUNICIPALITY ARE PLACED WITHIN THE B RACKETS STARTING WITH THE WORDS 'WHETHER KNOWN AS' CLEARLY INDICATES THAT SUC H EXPRESSIONS ARE USED TO DENOTE A MUNICIPALITY ONLY, IRRESPECTIVE OF THE NAM E BY WHICH SUCH ITA NO. 1371/MDS./2013 :- 33 - : MUNICIPALITY IS CALLED. THIS FACT IS FURTHER SUBSTA NTIATED BY THE PROVISIONS CONTAINED UNDER CLAUSE (B) WHEREIN IT HAS BEEN CLEA RLY PROVIDED THAT THE AUTHORITY REFERRED TO IN CLAUSE (A) WAS ONLY MUNICI PALITY. 8.1 WE ALSO PERUSED THE MEANING OF THE TERM LOCAL A UTHORITY AS REFERRED IN SECTION 10(20) OF THE ACT. (20) THE INCOME OF A LOCAL AUTHORITY WHICH IS CHARG EABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY', 'CAPIT AL GAINS' OR 'INCOME FROM OTHER SOURCES' OR FROM A TRA DE OR BUSINESS CARRIED ON BY IT WHICH ACCRUES OR ARISES F ROM THE SUPPLY OF A COMMODITY OR SERVICE [(NOT BEING WATER OR ELECTRICITY) WITHIN ITS OWN JURISDICTIONAL AREA OR FROM THE SUPPLY OF WATER OR ELECTRICITY WITHIN OR OUTSIDE IT S OWN JURISDICTIONAL AREA]. [EXPLANATION. - FOR THE PURPOSES OF THIS CLAUSE, TH E EXPRESSION 'LOCAL AUTHORITY' MEANS (I) PANCHAYAT AS REFERRED TO IN CLAUSE (D) OF ARTIC LE 243 OF THE CONSTITUTION; OR (II) MUNICIPALITY AS REFERRED TO IN CLAUSE (E) OF A RTICLE 243P OF THE CONSTITUTION; OR (III) MUNICIPAL COMMITTEE AND DISTRICT BOARD,LEGALL Y ENTITLED TO, OR ENTRUSTED BY THE GOVERNMENT WITH, THE CONTRO L OR MANAGEMENT OF A MUNICIPAL OR LOCAL FUND; OR (IV) CANTONMENT BOARD AS DEFINED IN SECTION 3 OF TH E CANTONMENTS ACT, 1924 (2 OF 1924); 8.2 IT IS ALSO EVIDENT FROM THE MEMORANDUM EXPLAIN ING THE PROVISIONS OF FINANCE ACT, 1970, WHEREBY S. 2(14) WAS AMENDED SO AS TO INCLUDE THE AGRICULTURAL LANDS LOCATED WITHIN THE JURISDICTION OF A MUNICIPALITY IN THE DEFINITION OF THE EXPRESSION 'CAPITAL ASSET'. THE R ELEVANT PORTION OF THE SAID MEMORANDUM IS REPRODUCED HEREUNDER: ITA NO. 1371/MDS./2013 :- 34 - : '30. ... THE FINANCE ACT, 1970 HAS, ACCORDINGLY, AM ENDED THE RELEVANT PROVISIONS OF THE INCOME-TAX ACT SO AS TO BRING WITHIN THE SCOPE OF TAXATION CAPITAL GAINS ARISING FROM TH E TRANSFER OF AGRICULTURAL LAND SITUATED IN CERTAIN AREAS. FOR TH IS PURPOSE, THE DEFINITION OF THE TERM 'CAPITAL ASSET' IN SECTION 2 (14) HAS BEEN AMENDED SO AS TO EXCLUDE FROM ITS SCOPE ONLY AGRICU LTURAL LAND IN INDIA WHICH IS NOT SITUATE IN ANY AREA COMPRISED WI THIN THE JURISDICTION OF A MUNICIPALITY OR CANTONMENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAND PERSONS ACCORDING TO THE LAST PRECEDING CENSUS FOR WHICH THE RELEVANT FI GURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR. THE CENTRAL GOVERNMENT HAS BEEN AUTHORISED TO NOTIFY IN THE OFFICIAL GAZETTE ANY AREA OUTSIDE THE LIMITS OF ANY MUNICIPA LITY OR CANTONMENT BOARD HAVING A POPULATION OF NOT LESS TH AN TEN THOUSAND UP TO A MAXIMUM DISTANCE OF 8 KILOMETRES F ROM SUCH LIMITS, FOR THE PURPOSES OF THIS PROVISION. SUCH NO TIFICATION WILL BE ISSUED BY THE CENTRAL GOVERNMENT, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANISATION OF SUCH AREA, AND, WHEN ANY SUCH AREA IS NOTIFIED BY THE CENTRAL GOVERNMENT, AGRICUL TURAL LAND SITUATED WITHIN SUCH AREA WILL STAND INCLUDED WITHI N THE TERM 'CAPITAL ASSET'. AGRICULTURAL LAND SITUATED IN RURA L AREAS, I.E., AREAS OUTSIDE ANY MUNICIPALITY OR CANTONMENT BOARD HAVING A POPULATION OF NOT LESS THAN TEN THOUSAND AND ALSO B EYOND THE DISTANCE NOTIFIED BY THE CENTRAL GOVERNMENT FROM TH E LIMITS OF ANY SUCH MUNICIPALITY OR CANTONMENT BOARD, WILL CON TINUE TO BE EXCLUDED FROM THE TERM 'CAPITAL ASSET'. 8.3 FURTHER IT IS NOBODY'S CASE THAT THE PROPERT Y FALLS WITHIN ANY AREA WHICH IS COMPRISED WITHIN THE JURISDICTION OF A MUN ICIPALITY OR CANTONMENT BOARD OR WHICH HAS A POPULATION OF NOT LESS THAN 10 ,000 ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR. IN OTHER WORDS, THE LAND DOES NOT FALL IN SUB-CLAUSE (A) OF SECTION 2(14)(III) OF THE ACT AS THE LAND IS OUTSIDE OF ANY MUNICIPALITY INCLUDING GHMC. FURTHER WE HAVE TO SEE WHETHER THE LAND FALLS IN CLAUSE (B) OF SECTION 2(14) (III). THIS SE CTION PRESCRIBES THAT ANY AREA WITHIN SUCH DISTANCE, NOT BEING MORE THAN 8 KM FROM THE LOCAL LIMIT OF ANY MUNICIPALITY OR CANTONMENT BOARD AS REFERRED TO IN SUB-CLAUSE (A) OF SECTION 2(14)(III) OF THE ACT, AS THE CENTRAL GOVERNMENT MA Y, HAVING REGARD TO THE ITA NO. 1371/MDS./2013 :- 35 - : EXTENT OF, AND SCOPE FOR, URBANISATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS, SPECIFY IN THIS BEHALF BY NOTIFICAT ION IN THE OFFICIAL GAZETTE. 8.4 WE HAVE CAREFULLY GONE THROUGH THE NOTIFICATIO N ISSUED BY THE CENTRAL GOVERNMENT U/S. 2(1A)(C) PROVISO (II)(B) AND 2(14)( 3B) VIDE NO. 9447 (F. NO. 164/(3)/87/ITA-I) DATED 6 TH JANUARY, 1994 AS AMENDED BY NOTIFICATION NO. 11186 DATED 28 TH DECEMBER, 1999. IN THE SCHEDULE ANNEXED TO THE NOTIFICATION DATED 6.1.1994, ENTRY IS RELATING TO C HENNAI WHEREIN MENTIONED THAT THE AREAS UP TO A DISTANCE OF 8 KM FROM THE MU NICIPAL LIMITS IN ALL DIRECTIONS. IT IS CLEAR FROM THESE NOTIFICATION THA T AGRICULTURAL LAND SITUATED IN AREAS LYING WITHIN A DISTANCE NOT EXCEEDING 8 KM FR OM THE LOCAL LIMITS OF CHENNAI CORPORATION IS COVERED BY THE AMENDED DEFI NITIONS OF 'CAPITAL ASSET'. CENTRAL GOVERNMENT IN EXERCISE OF SUCH POWE RS HAS ISSUED THE ABOVE NOTIFICATION, AS AMENDED LATEST BY NOTIFICATION NO. 11186 DATED 28.12.1999 CLEARLY CLARIFIES THAT AGRICULTURAL LAND SITUATION IN RURAL AREAS, AREAS OUTSIDE THE MUNICIPALITY OR CANTONMENT BOARD ETC., HAVING A POPULATION OF NOT LESS THAN 10,000 AND ALSO BEYOND THE DISTANCE NOTIFIED B Y CENTRAL GOVERNMENT FROM LOCAL LIMITS I.E. THE OUTER LIMITS OF ANY SUCH MUNICIPALITY OR CANTONMENT BOARD ETC., STILL CONTINUES TO BE EXCLUDED FROM THE DEFINITION OF 'CAPITAL ASSET'. ACCORDINGLY, IN VIEW OF SUB-CLAUSE (B) OF SECTION 2 (14)(III) OF THE ACT EVEN UNDER THE AMENDED DEFINITION OF EXPRESSION 'CAPITAL ASSET', THE AGRICULTURAL LAND SITUATED IN RURAL AREAS CONTINUES TO BE EXCLUD ED FROM THAT DEFINITION. AND AS IN THE PRESENT CASE, ADMITTEDLY, THE AGRICUL TURAL LAND OF THE ASSESSEE IS OUTSIDE THE MUNICIPAL LIMITS OF CHENNAI AND THA T ALSO 8 KM AWAY FROM THE ITA NO. 1371/MDS./2013 :- 36 - : OUTER LIMITS OF THIS MUNICIPALITY, ASSESSEE'S LAND DOES NOT COME WITHIN THE PURVIEW OF SECTION 2(14)(III) EITHER UNDER SUB CLAU SE (A) OR (B) OF THE ACT, HENCE THE SAME CANNOT BE CONSIDERED AS CAPITAL ASSE T WITHIN THE MEANING OF THIS SECTION. HENCE, NO CAPITAL GAIN TAX CAN BE CHA RGED ON THE SALE TRANSACTION OF THIS LAND ENTERED BY THE ASSESSEE. T HIS IS SUPPORTED BY THE ORDER OF KOLKATA BENCH OF THIS TRIBUNAL IN THE CASE OF ARIJITMITRA (CITED SUPRA), HARISH V. MILANI (SUPRA) AND M.S. SRINIVASN AICKER VS. ITO (292 ITR 481) (MAD). BY BORROWING THE MEANING FROM THE ABOVE SECTION, WE ARE NOT ABLE TO APPRECIATE THAT THE LAND FALLS WITHIN THE T ERRITORIAL LIMIT OF ANY MUNICIPALITY WITHOUT NOTIFICATION OF CENTRAL GOVERN MENT AS HELD BY THE KARNATAKA HIGH COURT IN THE CASE OF MADHUKUMAR N. ( HUF) (CITED SUPRA). 8.5. FROM THE FACTS AND CIRCUMSTANCES OF THE CASE, AS NARRATED BEFORE US, IT IS IMPORTANT TO NOTE THAT WHAT WAS THE INTENTION OF THE ASSESSEES AT THE TIME OF ACQUIRING THE LAND OR INTERVAL ACTION BY TH E ASSESSEE BETWEEN THE PERIOD FROM PURCHASE AND SALE OF THE LAND AND THE R ELEVANT IMPROVEMENT/DEVELOPMENT TAKEN PLACE DURING THIS TIM E IS RELEVANT FOR DECIDING THE ISSUE WHETHER TRANSACTION WAS IN THE N ATURE OF TRADE. THOUGH INTENTION SUBSEQUENTLY FORMED MAY BE TAKEN INTO ACC OUNT, IT IS THE INTENTION AT THE INCEPTION IS CRUCIAL. ONE OF THE ESSENTIAL E LEMENTS IN AN ADVENTURE OF THE TRADE IS THE INTENTION TO TRADE; THAT INTENTION MUST BE PRESENT AT THE TIME OF PURCHASE. THE MERE CIRCUMSTANCES, THAT A PROPERT Y IS PURCHASED IN THE HOPE THAT WHEN SOLD LATER ON IT WOULD LEAVE A MARGI N OF PROFIT, WOULD NOT BE SUFFICIENT TO SHOW, AN INTENTION TO TRADE AT THE IN CEPTION. IN A CASE WHERE ITA NO. 1371/MDS./2013 :- 37 - : THE PURCHASE HAS BEEN MADE SOLELY AND EXCLUSIVELY W ITH THE INTENTION TO RESELL AT A PROFIT AND THE PURCHASER HAS NO INTENTI ON OF HOLDING THE PROPERTY FOR HIMSELF OR OTHERWISE ENJOYING OR USING IT, THE PRESENCE OF SUCH AN INTENTION IS A RELEVANT FACTOR AND UNLESS IT IS OFF SET BY THE PRESENCE OF OTHER FACTORS IT WOULD RAISE AS STRONG PRESUMPTION THAT T HE TRANSACTION IS AN ADVENTURE IN THE NATURE OF TRADE. EVEN SO, THE PRES UMPTION IS NOT CONCLUSIVE AND IT IS CONCEIVABLE THAT, ON CONSIDERING ALL THE FACTS AND CIRCUMSTANCES IN THE CASE, THE COURT MAY, DESPITE THE SAID INITIAL I NTENTION, BE INCLINED TO HOLD THAT THE TRANSACTION WAS NOT AN ADVENTURE IN THE NA TURE OF TRADE. THE PRESUMPTION MAY BE REBUTTED. IN THE PRESENT CASE, C ONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IT CANNOT BE CONSIDERED A S AN ADVENTURE IN THE NATURE OF TRADE. THE INTENTION OF THE ASSESSEE FROM THE INCEPTION WAS TO CARRY ON AGRICULTURAL OPERATIONS AND EVEN THERE WAS NO INTENTION TO SELL THE LAND IN FUTURE AT THAT POINT OF TIME. IT WAS DUE TO CERTAIN COMPELLING CIRCUMSTANCES CAME INTO PICTURE AT A LATER STAGES, THE ASSESSEES WERE FORCED TO SELL THE LAND. MERELY BECAUSE OF THE FACT THAT T HE LAND WAS SOLD IN A SHORT PERIOD OF HOLDING, IT CANNOT BE HELD THAT INCOME AR ISING FROM THE SALE OF LAND WAS TAXABLE AS PROFIT ARISING FROM THE ADVENTURE IN THE NATURE OF TRADE. THE PERIOD OF HOLDING SHOULD NOT SUGGEST THAT THE ACTIV ITY WAS AN ADVENTURE IN THE NATURE OF TRADE. 8.6 FURTHER, WE MAKE IT CLEAR THAT WHEN THE LAND WHICH DOES NOT FALL UNDER THE PROVISIONS OF SECTION 2(14)(III) OF THE I T ACT AND AN ASSESSEE WHO IS ENGAGED IN AGRICULTURAL OPERATIONS IN SUCH AGRIC ULTURAL LAND AND ALSO BEING ITA NO. 1371/MDS./2013 :- 38 - : SPECIFIED AS AGRICULTURAL LAND IN REVENUE RECORDS, THE LAND IS NOT SUBJECTED TO ANY CONVERSION AS NON-AGRICULTURAL LAND BY THE ASSE SSEE OR ANY OTHER CONCERNED PERSON, TRANSFERS SUCH AGRICULTURAL LAND AS IT IS AND WHERE IT IS BASIS, IN SUCH CIRCUMSTANCES, IN OUR OPINION, SUCH TRANSFER LIKE THE CASE BEFORE US CANNOT BE CONSIDERED AS A TRANSFER OF CAP ITAL ASSET OR THE TRANSACTION RELATING TO SALE OF LAND WAS NOT AN ADV ENTURE IN THE NATURE OF TRADE SO AS TO TAX THE INCOME ARISING OUT OF THIS T RANSACTION AS BUSINESS INCOME. ACCORDINGLY, THE GROUND RAISED BY THE REVEN UE IS DISMISSED.. 8.7 IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED ON 17 TH AUGUST, 2016, AT CHENNAI. SD/ - SD/ - ( . ) ( G.PAVAN KUMAR ) / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 17 TH AUGUST, 2016 K S SUNDARAM &'(()*( +* / COPY TO: ( 1 . / APPELLANT 3. ( ,(- . / CIT(A) 5. */0 (1 / DR 2. / RESPONDENT 4. ( , / CIT 6. 02(3 / GF