A.Vijayaraghavan, CHENNAI V. DCIT, CHENNAI

ITA 1379/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7803 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 19-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K N DHANDA
• Assessee Lawyers: N DEVANATHAN
• Keywords: Capital asset
• Section: 143(3); 2(14)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ! ' ! # . $% , & ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO.1379/MDS/2016 ( / ASSESSMENT YEAR: 2011-12) MR. A.VIJAYARAGHAVAN, MADHURAMS, S-3, 2 ND FLOOR,NO.41, OLD NO.20, ALARMELMANGAPURAM , MYLAPORE, CHENNAI-600 004. VS THE DEPUTY COMMISSIONER OF INCOME TAX, (BUSINESS CIR.II) / NON-CORPORATE CIRCLE-2, CHENNAI. PAN: AAHPV7299K ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. N.DEVANATHAN, ADVOCATE /RESPONDENT BY : MR. K.N. DHANDAPANI, JCIT /DATE OF HEARING : 3 RD FEBRUARY 2017 ! /DATE OF PRONOUNCEMENT : 27 TH FEBRUARY 2017 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, CHENNAI DATED 08.03.2016 IN ITA NO.40/CIT(A)-2/2014-15 PASSED UND ER SECTION 143(3) R.W.S. 250(6) OF THE ACT. 2. THE ASSESSEE HAS RAISED SEVERAL ELABORATE GROUND S IN ITS APPEAL, HOWEVER, THE CRUX OF THE ISSUE IS AS FOLLOW S:- I) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUSTAINING THE ORDER OF THE LEARNED AS SESSING OFFICER WHO HAD COMPUTED THE LONG TERM CAPITAL GAIN OF THE ASSESSEE AT RS. 1,31,11,493/- BY TREATING THE L AND 2 ITA NO.1379/MDS/2016 SOLD BY THE ASSESSEE AS NON-AGRICULTURAL LAND AND B ROUGHT THE SAME UNDER THE AMBIT OF LONG TERM CAPITAL GAIN TAX. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE PROFESSION AS CONSULTANT OF CENTRAL EXCISE MATTERS, FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 25.09.2011 DECLARING TOTAL INCOME OF ` 24,93,808/-. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE WAS ISSUE D UNDER SECTION 143(2) OF THE ACT ON 31.07.2012. THEREAFTER, THE LE ARNED ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 143( 3) OF THE ACT ON 13.03.2014 WHEREIN HE HELD THAT THE LAND SOLD BY TH E ASSESSEE IS NOT AGRICULTURAL LAND EXEMPTED U/S. 2(14) OF THE ACT, A ND THEREFORE THE ASSESSEE WAS LIABLE TO BE TAXED UNDER THE HEAD LON G TERM CAPITAL GAIN WITH RESPECT TO THE SALE OF HIS LAND. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE LEARNED ASSESSING OFFICER THAT THE ASSESSEE HAD SOLD HIS IMMOVABLE LANDED PROPERTY TO THE EXTENT OF 3.38 ACR ES IN KATTAWAKKAM VILLAGE NEAR KANCHEEPURAM FOR SALE CONSIDERATION OF ` 1,35,32,168/- VIDE SALE DEED NO.4786 DATED 16.09.2010 TO M/S. INN O REAL PVT. LTD. IN THE RETURN OF INCOME THE ASSESSEE HAD CLAIMED EX EMPTION WITH 3 ITA NO.1379/MDS/2016 RESPECT TO THE CAPITAL GAIN ARISEN OUT OF THE SALE OF THE AFORESAID IMMOVABLE PROPERTY BY STATING IT TO BE AGRICULTURAL LAND BY VIRTUE OF SECTION 2(14) OF THE ACT. IN SUPPORT OF HIS CLAIM, THE ASSESSEE HAD FURNISHED TAHSILDAR CERTIFICATE STATING THAT NATHAN ALLUR AND KATTAVAKKAM VILLAGES ARE SITUATED BEYOND 8 KMS., FR OM THE MUNICIPAL LIMITS AND THE POPULATION IS LESS THAN 10,000. HOW EVER, THE LD. AO OPINED THAT THE LAND SOLD BY THE ASSESSEE IS NOT AG RICULTURE LAND BECAUSE OF THE FOLLOWING REASONS: 1. THOUGH THE PURCHASE DEED OF THE LAND STATED THE YEAR OF PURCHASE OF THE LAND TO BE 2005 AND THE NATURE OF L AND TO BE AGRICULTURAL DRY LAND, THE ASSESSEE HAD NOT UTILIZE D THE LAND FOR AGRICULTURAL PURPOSES. 2. THE ASSESSEE HAD ALSO NOT DECLARED ANY AGRICULTU RAL INCOME FROM THE ASSESSMENT YEAR 2006-07 ONWARDS TO THE REL EVANT ASSESSMENT YEAR 2011-12. 3. RELIANCE WAS PLACED IN THE DECISION OF THE HONB LE SUPREME COURT IN THE CASE OF STATE OF UTTAR PRADESH VS. NAN DKUMAR AGARWAL & OTHERS VIDE ORDER DATED 19.11.1997, SARIF ABIBI MOHAMMED IBRAHIM & OTHERS VS. CIT (1993) 204 ITR 63 1 (SC). 4. THE LAND WAS SOLD TO A REAL ESTATE COMPANY VIZ., M/S. INNO REAL PVT. LTD., AND MEANT TO BE UTILIZED FOR NON-AGRICUL TURAL PURPOSES. 4 ITA NO.1379/MDS/2016 5. THE ASSESSEE HAD PURCHASED THE LAND FOR MERE AMO UNT OF RS.2.8 LAKHS IN THE YEAR 2005. HOWEVER, IT WAS SOL D TO THE COMPANY AT AN EXORBITANT PRICE OF RS.1.35 CRORES. H ENCE THE NATURE OF THE LAND SOLD CANNOT BE AGRICULTURAL LAND . 6. THE LAND WAS SURROUNDED BY INDUSTRIAL ESTATES WI TH CLOSE PROXIMITY TO VARIOUS ESTABLISHED INDUSTRIES WHICH E STABLISHES THE FACT THAT THE LAND SOLD IS NOT AGRICULTURAL IN NATU RE. 4.1 THEREAFTER, THE LD. AO CONCLUDED BY STATING THA T THE LAND SOLD BY THE ASSESSEE CANNOT BE TREATED AS AGRICULTURE LAND AND HENCE HE BROUGHT THE CAPITAL GAIN ARISING OUT OF SALE OF THE LAND TO THE AMBIT OF LONG TERM CAPITAL GAIN TAX. ON APPEAL, THE LD. CIT CONFIRMED THE ORDER OF THE LD. AO BY OBSERVING AS UNDER: 6. CONCLUSION: 6.1. FROM THE ANALYSIS OF THE FACTS OF THE APPELLAN T'S CASE, VIS-A-VIS THE JUDGEMENTS OF VARIOUS COURTS, IT IS SEEN THAT THE L ANDS IN QUESTION ARE NOT AGRICULTURAL IN NATURE, SINCE, A) THE APPELLANT HAS NOT CARRIED ON ANY AGRICULTURA L ACTIVITY WHATSOEVER, AS IS CLEAR FROM HIS OWN ADMISSION IN THE GROUNDS O F APPEAL AND ALSO FROM THE FACT, AS OBSERVED BY THE ASSESSING OFFICER THAT HE HAS NOT ADMITTED ANY AGRICULTURAL INCOME RIGHT FROM AY 2006 -07(THE YEAR SUBSEQUENT TO PURCHASE OF LAND) TO AY 2011-12. B) AS HIGHLIGHTED VIDE PARA S.1.6.(SUPRA), NOT ONLY ARE THE LANDS LOCATED IN CLOSE PROXIMITY OF THE FAST GROWING INDUSTRIAL A REA OF ORAGADAM, BUT 5 ITA NO.1379/MDS/2016 ALSO, THE PURCHASE OF THE LAND, AT A TIME WHICH COI NCIDES WITH THE NOTIFICATION OF ORAGADAM AREA ITSELF, AS A SPECIAL ECONOMIC ZONE, FOR DEVELOPMENT BY SIPCOT, LENDS STRONG CREDENCE TO THE VIEW OF THE ASSESSING OFFICER, THAT THE APPELLANT HAD NOT PURCH ASED THE LANDS IN QUESTION WITH THE IDEA OF CARRYING OF AGRICULTURAL ACTIVITIES, BUT RATHER, WITH THE IDEA OF CAPITALIZING ON THE FAST APPRECIAT ING REAL ESTATE VALUE IN ORAGADAM INDUSTRIAL AREA. C) IN FACT, IT IS INTERESTING TO NOTE THAT THE APPE LLANT HAS MADE RATHER ELABORATE WRITTEN SUBMISSIONS, DISCUSSING VARIOUS C ASE-LAWS AT LENGTH, BUT NO SUBMISSION WHATSOEVER HAVE BEEN MADE EVIDENC ING THE CARRYING ON OF AGRICULTURAL ACTIVITY BY HIM, DURING THE PERI OD FOR WHICH HE HELD THE LANDS. HENCE, TAKING INTO ACCOUNT, ALL THE AFOREMENTIONED FACTS, IT IS SEEN THAT THE ASSESSING OFFICER WAS JUSTIFIED IN REJECTING TH E ASSESSEE'S CLAIM THAT THE LANDS IN QUESTION ARE AGRICULTURAL IN NATURE AN D BRINGING TO TAX THE CAPITAL GAINS ARISING FROM THE SALE THEREOF. 4.2 AT THE OUTSET, THE LD. AR SUBMITTED THAT ON THE EARLIER OCCASION THIS BENCH OF THE TRIBUNAL IN THE CASE SHRI N. VENK ATARAMAN VS. DCIT IN ITA NO.1380/MDS/2016, ON THE IDENTICAL ISSUE AND WITH RESPECT TO THE ADJACENT LAND HAD HELD THE MATTER IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE LAND SOLD BY SHRI N. VENKATARAMAN IS AGRICULTURE LAND AND THEREFORE NOT LIABLE FOR CAPITAL GAIN TAX BY VI RTUE OF SECTION 2(14) OF THE ACT. IT WAS THEREFORE PLEADED THAT RELIEF MAY B E GRANTED IN THE CASE OF THE ASSESSEE ALSO, SINCE THE CHARACTERISTICS OF THE LAND SOLD BY SHRI N. VENKATRAMAN AND THAT OF THE ASSESSEE IS IDENTICA L AND SIMILAR. LD. DR ON THE OTHER HAND ARGUED IN SUPPORT OF THE ORDER S OF THE REVENUE 6 ITA NO.1379/MDS/2016 AUTHORITIES AND REQUESTED FOR SUSTAINING THE ORDER OF THE LD. CIT(A) AND THE LD. AO. 4.3 WE HAVE HEARD THE RIVAL SUBMISSION AND CAREFULL Y PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FACTS OF T HE CASE, WE FIND MERIT IN THE CONTENTION OF THE LD. AR. THE DETAIL S OF LAND SOLD BY SHRI N. VENKATRAMAN AND SHRI A. VIJAYARAGHAVAN (ASS ESSEE) ARE SUMMARIZED HEREIN BELOW FOR REFERENCE: SALE OF LAND BY SHRI N. VENKATRAMAN IN FAVOUR OF INNO REAL PVT. LTD. (SALE PROCEEDS AGGREGATING TO RS.1,33,72,024/-. DOCUMENT NO. (1) 4780 RS.64,05,760 (2) 4801 RS.55,65,004 (3) 4783 RS.14,01,260 TOTAL - RS.1,33,72,024 DOCUMENT NO.4783 EXECUTED BY MOTHER. ALL DOCUMENTS EXECUTE WITH THE SUB REGISTRAR WALLAJABAD. SALE OF LAND BY SHRI A. VIJAYARAGHAVAN (ASSESSEE) IN FAVOUR OF INNO REAL PVT. LTD. DOCUMENT NO. 4786 -RS. 1,35,32,168 DOCUMENT EXECUTE WITH THE SUB REGISTRAR WALLAJABAD. RELEVANT SALE DEED DOCUMENT NO.4801/10 DATED 15/09/2010 SALE DEED DATED 15/09/2010, REGISTERED NO.4786 EXTENT OF LAND SOLD 1.39 ACRES EXTENT OF LAND SOLD 3.38 ACRES SURVEY NO. EXTENT IN HECTARES EXTENT IN ACRES SURVEY NO. EXTENT IN HECTARES EXTENT IN ACRES 61/2 PART 0.56.25/1.12.5 1.39/2.78 61/1 0.94.0 2.32 62/2 0.42.5 1.06 TOTAL 1.36.5 3.38 7 ITA NO.1379/MDS/2016 SALE CONSIDERATION RS.55,65,004/- SALE CONSIDERATIO N RS.1,35,32,168/- NATURE OF LAND : DRY AGRICULTURAL LANDS IN 90. KATTAWAKKAM VILLAGE NATURE OF LAND : DRY AGRICULTURAL LANDS IN 90. KATTAWAKKAM VILLAGE CERTIFICATE FROM THE TAHSILDAR R.C.NO.1875/10/A5 DATED 31.05.2011 STATING THAT THE LAND IS SITUATED BEYOND 8 KMS. FROM THE MUNICIPAL LIMIT AND THE CENSUS OF THE LOCAL POPULATION IS LESS THAN 10000 PERSONS CERTIFICATE FROM THE TAHSILDAR R.C.NO.1875/10/A5 DATED 31.05.2011 STATING THAT THE LAND IS SITUATED BEYOND 8 KMS. FROM THE MUNICIPAL LIMIT AND THE CENSUS OF THE LOCAL POPULATION IS LESS THAN 10000 PERSONS CHITTA ADANGALS DATED 30.05.2010 STATING THAT SUGARCANE IS CULTIVATED IN THE LAND SURVEY NO.61/2, PATTA NO.1071 (PB 151 OF ITA NO.1380 OF 2016) CHITTA ADANGALS DATED 30.05.2010 STATING THAT SUGARCANE AND PADDY ARE CULTIVATED IN THE LAND SURVEY NO.61/1, 62/2 PATTA NO.1073 4.4 FROM THE ABOVE, IT IS EVIDENT THAT THE LAND SOL D BY THE ASSESSEE IS IDENTICAL AND ADJACENT TO THE LAND SOLD BY SHRI N.VENKATRAMAN BECAUSE BOTH THE SURVEY NUMBER FALLS UNDER SURVEY NO.6 AND OF THE SAME VILLAGE. THEREFORE THE CHARACTERISTICS OF BOTH THE LANDS CANNOT BE DIFFERENT FROM ONE ANOTHER. FURTHER ON THE IDENTIC AL ISSUE, THIS BENCH OF THE TRIBUNAL IN THE CASE OF SHRI N. VENKATRAMAN, IN ITA NO.1380/MDS/2016 VIDE ORDER DATED 04.01.2017 HAD HE LD AS FOLLOWS: 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS ON RECORD. THE LEARNED AUTHOR IZED REPRESENTATIVE PRODUCED THE FOLLOWING DOCUMENTS BEF ORE US WHICH COULD NOT BE CONFRONTED BY THE REVENUE:- 8 ITA NO.1379/MDS/2016 S.NO. DESCRIPTION PAGE NO. IN THE PAPER BOOK 1. PATTA NO.1071 IN THE NAME OF THE ASSESSEE MR.N.VENKATRAMAN S/O, S.NAGARAJAN TO THE EXTENT OF 1 HECTARE 12.50 ARE IN KATTAVAKKAM VILLAGE ISSUED BY THE TAHSILDAR, KANCHIPURAM TALUK. 151 2. PATTA NO.1061 IN THE NAME OF THE ASSESSEE MR.N.VENKATRAMAN S/O. S.NAGARAJAN TO THE EXTENT OF 0.81.50 ARE IN KATTAVAKKAM VILLAGE ISSUED BY THE TAHSILDAR, KANCHIPURAM TALUK 153 3 CERTIFICATE ISSUED BY TAHSILDAR, KANCHIPURAM TALUK OFFICE DATED 31.05.2011 TO THE EFFECT THAT NATHANALLUR & KATTAVAKKAM VILLAGES ARE SITUATED BEYOND 8 KMS (APPROXIMATELY 20 KMS AWAY) FROM KANCHIPURAM MUNICIPALITY AND IN THE ABOVE MENTIONED VILLAGES POPULATION IS LESS THAN 20,000 155 4 IN RESPONSE TO THE SUMMON ISSUED U/S.131 THE VAO, KATTAVAKKAM VIDE HIS LETTER DATED 7.1.2016 HAD ENCLOSED THE COPY OF RELEVANT ADANGAL REGISTER WITH RESPECT TO THE CULTIVATION PERFORMED IN THE LAND OWNED BY SHRI N.VENKATRAMAN (THE ASSESSEE) AND OTHERS OF THE NEIGHBORHOOD :- 1. GROUNDNUT 2. COCONUT PLANTATION 3. TURMERIC 4. SUGARCANE 157, 159, 161 5. LAND TAX RECEIPT IN THE NAME OF MR. N.VENKATRAMAN (THE ASSESSEE) DATED 24.04.2008 FOR PATTA NO.1071 FOR RS.500/- AND FOR PATTA NO.1061 FOR RS.400/- 163 9. FROM THE ABOVE, IT IS EVIDENT THAT THE LAND OWNE D BY THE ASSESSEE WHICH WAS SUBSEQUENTLY SOLD IS AGRICULTURA L LAND AND CERTAIN AGRICULTURAL ACTIVITIES WERE PERFORMED ON I T. THE ADANGAL CERTIFICATE ISSUED BY THE STATE GOVERNMEN T REVENUE OFFICIALS ALSO STATES THAT THE NEIGHBORHOOD LANDS ARE ALSO AGRICULTURAL LAND AND AGRICULTURAL ACTIVITIES WERE PERFORMED ON THE SAME (P.B. PAGE NO. 159 & 161). FU RTHER, THESE LANDS WERE LOCATED BEYOND THE MUNICIPAL LIMIT OF EIGHT 9 ITA NO.1379/MDS/2016 KILOMETERS SAY APPROXIMATELY TWENTY KILOMETERS FROM THE MUNICIPAL LIMIT AS PER THE CERTIFICATE ISSUED BY TH E REVENUE AUTHORITIES. THESE FACTS COULD NOT BE SUCCESSFULLY DISPROVED OR CONFRONTED BY THE LEARNED DEPARTMENTAL REPRESENTATI VE. THE BLUNT REASON STATED BY THE LEARNED ASSESSING OFFICE R IN HIS ORDER FOR DENYING TO TREAT THE LAND SOLD BY THE ASS ESSEE AS AGRICULTURAL LAND ARE THAT:- I) THE LAND IN QUESTION WAS DRY LAND. II) NO AGRICULTURAL OPERATION WAS CARRIED OUT IN THE LA ND. III) THE LAND IS SITUATED IN THE CLOSE PROXIMITY TO THE INDUSTRIAL AREA OF ORAGADAM. IV) THE LAND WAS SOLD TO REAL ESTATE COMPANY FOR NON- AGRICULTURAL PURPOSES. V) THE LAND WAS SOLD AT EXORBITANT PRICE. VI) ONLY IN THE REMOTE PAST THE LAND WAS USED FOR AGRICULTURAL PURPOSES. VII) THE ASSESSEE HAD NOT DECLARED AGRICULTURAL INCOME I N HIS RETURN. 10. AT THIS JUNCTURE, THE CASE LAWS CITED BY THE LE ARNED AUTHORIZED REPRESENTATIVE ARE VERY RELEVANT. I) IN THE CASE CWT VS OFFICER IN-CHARGE(COURT OF WARDS ), PAIGAH REPORTED IN 105 ITR 133. THE HONBLE APEX CO URT HAS EXPLAINED THE MEANING OF THE AGRICULTURAL LAND IN R ESPECT TO WEALTH TAX MATTER EVEN WHEN THE LOCATION OF THE LAND WAS WITHIN THE MUNICIPAL LIMITS AS FOLLOWS:- 'AGRICULTURAL LAND' MEANING OF. 10 ITA NO.1379/MDS/2016 THE QUESTION WAS WHETHER THE PROPERTY CALLED 'BEGUM PET PALACE' WITHIN THE MUNICIPAL LIMITS OF HYDERABAD CONSISTING OF VACANT LANDS OF ABOUT 108 ACRES AND ALSO BUILDINGS ENCLOSE D IN COMPOUND WALLS CONSTITUTED 'AGRICULTURAL LAND' WITHIN THE ME ANING OF CLAUSE (I) OF SECTION 2(E) OF THE WEALTH-TAX ACT, 1957. BECAUS E THE LAND WAS NEVER INTENDED TO BE USED FOR AGRICULTURE AND WAS N OT PLOUGHED OR TILLED, THE INCOME-TAX AUTHORITIES AND THE APPELLAT E TRIBUNAL HELD THAT THE PROPERTY COULD NOT BE TREATED AS 'AGRICULTURAL LAND' WITHIN THE MEANING OF SECTION 2(E). ON A REFERENCE, THE HIGH C OURT HELD THE LAND TO BE AGRICULTURAL LAND BECAUSE: (I) THE AREA WAS 1 08 ACRES ABUTTING THE HUSSAIN SAGAR TANK; (II) THE LAND HAD TWO WELLS IN IT; (III) IT WAS CAPABLE OF BEING USED FOR AGRICULTURAL PURPOSES, (I V) IT HAD NOT BEEN PUT TO ANY USE WHICH COULD CHANGE THE CHARACTER OF THE LAND BY MAKING IT UNFIT FOR IMMEDIATE CULTIVATION; AND (V) IT WAS CLASSIFIED AND ASSESSED TO LAND REVENUE AS 'AGRICULTURAL LAND' UND ER THE A.P. LAND REVENUE ACT. ON APPEAL TO THE SUPREME COURT: HELD, THAT THE FIRST FOUR FEATURES CONSIDERED BY TH E HIGH COURT AND BASED UPON ABSENCE OF ANY USER FOR NON-AGRICULTURAL PURPOSES WERE INCONCLUSIVE, AND THE FIFTH FEATURE ALONE PROVIDED SOME EVIDENCE OF THE CHARACTER OF THE LAND FROM THE POINT OF VIEW OF ITS PURPOSE. THAT THE PROPERTY WAS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL LAND WAS NOT CONCLUSIVE AND SUCH ENTRIES COULD RAISE ONL Y A REBUTTABLE PRESUMPTION. THEREFORE, THE APPELLATE TRIBUNAL SHOU LD DETERMINE AFRESH WHETHER THE LANDS WERE AGRICULTURAL AFTER GI VING OPPORTUNITY TO BOTH SIDES TO LEAD FURTHER EVIDENCE. SIMPLY BECAUSE 'AGRICULTURAL LAND' HAS NOT BEEN DEF INED IN THE WEALTH TAX ACT, 1957, IT IS NOT CORRECT TO GIVE THE EXPRES SION AS WIDE A MEANING AS POSSIBLE. THE CORRECT RULE IS TO FIND OU T THE EXACT SENSE IN WHICH THE WORDS HAVE BEEN USED IN THE PARTICULAR CO NTEXT AND GIVE AN INTERPRETATION IN CONSONANCE WITH THE PURPOSE OF TH E STATUTE. THE OBJECT OF THE ACT IS TO TAX SURPLUS WEALTH AND IT I S CLEAR THAT ALL LAND WAS NOT EXCLUDED FROM THE DEFINITION OF 'ASSETS'. T HEREFORE, IT IS IMPERATIVE TO GIVE REASONABLE LIMITS TO THE SCOPE O F THE EXPRESSION 'AGRICULTURAL LAND' AND GIVE IT A RESTRICTED MEANIN G;. 11 ITA NO.1379/MDS/2016 THE DETERMINATION OF THE CHARACTER OF THE LAND, ACC ORDING TO THE PURPOSE FOR WHICH IT IS MEANT OR SET APART AND CAN BE USED, IS A MATTER WHICH OUGHT TO BE DETERMINED ON THE FACTS OF EACH PARTICULAR CASE. WHAT IS REALLY REQUIRED TO BE SHOWN IS THE CO NNECTION WITH AN AGRICULTURAL PURPOSE AND USER AND NOT THE MERE POSS IBILITY OF USER OF LAND, BY SOME POSSIBLE FUTURE OWNER OR POSSESSOR, F OR AN AGRICULTURAL PURPOSE. IT IS NOT THE MERE POTENTIALITY, WHICH WIL L ONLY AFFECT ITS VALUATION AS PART OF 'ASSETS', BUT ITS ACTUAL CONDI TION AND INTENDED USER WHICH HAS TO BE SEEN FOR PURPOSES OF EXEMPTION FROM WEALTH- TAX. ONE OF THE OBJECTS OF THE EXEMPTION IS TO ENCO URAGE CULTIVATION OR ACTUAL UTILISATION OF LAND FOR AGRICULTURAL PURP OSES. IF THERE IS NEITHER ANYTHING IN ITS CONDITION, NOR ANYTHING IN THE EVIDENCE TO INDICATE THE INTENTION OF ITS OWNERS OR POSSESSORS SO AS TO CONNECT IT WITH AN AGRICULTURAL PURPOSE, THE LAND COULD NOT BE 'AGRICULTURAL LAND' FOR THE PURPOSES OF EARNING AN EXEMPTION UNDER THE ACT. ENTRIES IN REVENUE RECORDS ARE, HOWEVER, GOOD PRIMA FACIE EVID ENCE. II) IN THE CASE CWT VS. E.UDAYAKUMAR, REPORTED IN 284 ITR 511 ,THE HONBLE MADRAS HIGH COURT HAS HELD AS FOLLOWS :- THE FACT THAT THERE WAS A HOSPITAL IN THE ADJACENT LAND WAS TOTALLY IRRELEVANT. SINCE THE ASSESSEE HAD NOT PUT UP ANY C ONSTRUCTION THEREON, THE ASSESSEE WAS ENTITLED TO CLAIM EXEMPTI ON FROM THE WEALTH-TAX. III) IN THE CASE N.S.SRINIVASA NAICKER & SONS VS. ITO RE PORTED IN 292 ITR 481(MAD) THE HONBLE MADRAS HIGH COURT HAS HELD AS FOLLOWS:- HELD THAT IT WAS AN ADMITTED CASE THAT TILL THE DA TE OF SALE, AGRICULTURAL OPERATIONS WERE CARRIED ON BY THE ASSE SSEE. THE LAND WAS PUT TO USE ONLY FOR AGRICULTURAL PURPOSES AND N OT FOR ANYTHING ELSE. THE LANDS IN QUESTION WERE ALSO REGISTERED AS AGRICULTURAL 12 ITA NO.1379/MDS/2016 LANDS AND ASSESSED TO LAND REVENUE. THE FACT THAT T HE PURCHASER HAD PUT IT TO USE FOR A TOTALLY DIFFERENT PURPOSE F ROM THAT OF THE ASSESSEE OUGHT NOT TO HAVE WEIGHED WITH THE TAX AUT HORITY. CAPITAL GAINS TAX COULD NOT BE LEVIED. IV) IN THE CASE CIT VS. MANILAL SOMNATH REPORTED IN 106 ITR 917 (GUJ), THE HONBLE GUJARAT HIGH COURT HAS HELD AS F OLLOWS:- HELD THAT WHAT HAD TO BE CONSIDERED IS NOT WHAT TH E PURCHASER DID WITH THE LAND OR THE PURCHASER WAS SUPPOSED TO DO W ITH 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 MUNIC IPAL LIMITS OR THAT IT WAS INCLUDED WITHIN A PROPOSED TOWN PLANNIN G SCHEME WAS NOT BY ITSELF SUFFICIENT TO REBUT THE PRESUMPTION A RISING FROM ACTUAL USE OF THE LAND. THE LAND HAD BEEN USED FOR AGRICUL TURAL PURPOSES FOR A LONG TIME AND NOTHING HAD HAPPENED TILL THE D ATE OF THE SALE TO CHANGE THAT CHARACTER OF THE LAND. THE POTENTIAL NON-AGRICULTURAL VALUE OF THE LAND FOR WHICH A PURCHASER MAY BE PREP ARED TO PAY A LARGE PRICE WOULD NOT DETRACT FROM ITS CHARACTER AS AGRICULTURAL LAND AT THE DATE OF THE SALE. THE LAND IN QUESTION WAS T HEREFORE, AGRICULTURAL LAND. V) IN THE CASE CIT VS. SMT. LILAVATI THAKORELAL PAT EL REPORTED IN 152 ITR 565 (GUJ), THE HONBLE GUJARAT HIGH COURT H AS HELD AS FOLLOWS:- HELD THAT IN DETERMINING WHETHER LAND IS AGRICULTUR AL OR NOT, THE IMPORTANT FACTORS WHICH SHOULD BE TAKEN INTO CONSID ERATION ARE: (I) CLASSIFICATION OF THE LAND IN THE REVENUE RECORDS A S AGRICULTURAL LAND; (II) ACTUAL OR ORDINARY USE OF THE LAND FOR AGRICULTURAL PURPOSES AT OR ABOUT THE RELEVANT TIME; (III) WHETHER SUCH USER WAS FOR A SUBSTANTIAL PERIOD OR IT WAS FOR A TEMPORARY DURATION ONLY BY WAY OF A STOP- GAP ARRANGEMENT; 13 ITA NO.1379/MDS/2016 (IV) RATIONAL PROPORTION OF INCOME FROM THE LAND TO INVESTMENT MADE THEREIN; (V) PERMISSION UNDER S. 65 OF THE BOMBAY L AND REVENUE CODE FOR CHANGE OF USER, AND WHEN AND BY WHOM IT HAS BEE N OBTAINED; (VI) CESSATION OF THE AGRICULTURAL USE AND CONVERTING TH E LAND TO NON- AGRICULTURAL PURPOSE; (VII) NON-USE FOR AGRICULTURA L PURPOSE OF THE LAND THOUGH LISTED IN REVENUE RECORDS AS AGRICULTURAL LA ND; (VIII) ITS SITUATION, PHYSICAL CHARACTERISTICS AND DEVELOPMENT IN THE VIC INITY; (IX) PERMISSION UNDER S. 63 OF THE BOMBAY TENANCY AND AGRICULTURAL LANDS ACT, 1948, AND WHEN AND BY WHOM; (X) PRICE OF THE LAND ON SALE , AND WHETHER THE VALUE WAS DETERMINED AS A UNIT OF THE LAND OR ON YA RDAGE OR ON ACREAGE BASIS? VI) IN THE CASE MRS. SAKUNTHALA VEDACHALAM & AN OTHER VS. ACIT REPORTED IN 369 ITR 558 (MAD), THE HONBLE MADRAS HIGH COURT HAS HELD AS FOLLOWS:- HELD, ALLOWING THE APPEALS, THAT THE ASSESSEES HAD ALSO PRODUCED A COPY OF THE ADANGAL AND THE LETTER FROM THE TAHSILD AR, WHICH SHOWED THAT THE LANDS WERE AGRICULTURAL IN NATURE AND THE REVEN UE HAD ALSO ACCEPTED THAT THE LANDS WERE FALLING WITHIN THE RESTRICTED Z ONE IN TERMS OF SECTION 2(14) . THE ASSESSEES HAVE QUALIFIED UNDER CLAUSE 1 1(1) SINCE AS PER THE ADANGAL RECORDS, THESE LANDS WERE CLASSIFIED AS AGRICULTURAL LANDS AND THE ASSESSEES HAVE ALSO PAID REVENUE KIST, NAME LY, REVENUE PAYMENT. THE TESTS LAID DOWN BY THE GUJARAT HIGH CO URT RELIED ON BY THE TRIBUNAL CLEARLY STATED THAT ANY ONE OF THE FACTORS CAN BE PRESENT IN A CASE TO QUALIFY FOR THE BENEFIT OF CLASSIFICATION A S AGRICULTURAL LANDS. THE REASON GIVEN BY THE TRIBUNAL WAS THAT THE ADJACENT LANDS WERE PUT TO COMMERCIAL USE BY WAY OF PLOTS AND, THEREFORE, THE VERY CHARACTER OF THE LANDS OF THE ASSESSEES WAS DOUBTED AS AGRICULTURAL IN NATURE. THE MANNER IN WHICH THE ADJACENT LANDS WERE USED BY THE OWNER THEREIN WAS NOT A GROUND FOR THE TRIBUNAL TO COME TO A CONCLUSI ON THAT THE ASSESSEES' LANDS WERE NOT AGRICULTURAL IN NATURE. THE REASON G IVEN BY THE TRIBUNAL THAT THE ADJACENT LANDS HAVE BEEN DIVIDED INTO PLOT S FOR SALE WOULD NOT MEAN THAT THE LANDS SOLD BY THE ASSESSEES WERE FOR THE PURPOSE OF 14 ITA NO.1379/MDS/2016 DEVELOPMENT OF PLOTS. ALSO THE REASONING GIVEN BY T HE TRIBUNAL NO AGRICULTURISTS WOULD HAVE PURCHASED THE LAND SOLD B Y THE ASSESSEE FOR PURSUING ANY AGRICULTURAL ACTIVITY WAS BASED ON ME RE CONJECTURES AND SURMISES. THEREFORE, THE ASSESSEES WERE ENTITLED TO EXEMPTION. VII ) IN THE CASE CIT VS. BORHAT TEA CO.LTD. REPORT ED IN 138 ITR 783 (CAL), THE HONBLE CALCUTTA HIGH COURT HAS HE LD AS FOLLOWS:- FOR THE PURPOSE OF LAND BEING AGRICULTURAL LAND, A CTUAL AGRICULTURAL OPERATIONS OR CULTIVATION OR TILLING OF THE LAND IS NOT NECESSARY. WHAT IS TO BE SEEN IS WHETHER SUCH LAND IS CAPABLE OF AGRICULTURAL OPERATIONS BEING CARRIED ON THEREON. 11. FURTHER, PROVISIONS OF SECTION 2(14) (III) IS E XTRACTED HEREIN BELOW FOR REFERENCE. 2(14) CAPITAL ASSET MEANS- (A) (B) . (I).. (II). ( III) AGRICULTURAL LAND IN INDIA, NOT BEING LAND SIT UATE (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURIS DICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNICIPAL CORPORA TION, NOTIFIED AREA COMMITTEE, TOWN AREA COMMITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAME) OR A CANTONMENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAND; OR (B) IN ANY AREA WITHIN THE DISTANCE, MEASURED AERIA LLY, 15 ITA NO.1379/MDS/2016 (I) NOT BEING MORE THAN TWO KILOMETRES, FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITE M (A) AND WHICH HAS A POPULATION OF MORE THAN TEN THOUSAND BUT NOT EXCE EDING ONE LAKH; OR (II) NOT BEING MORE THAN SIX KILOMETRES, FROM THE L OCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITE M (A) AND WHICH HAS A POPULATION OF MORE THAN ONE LAKH BUT NOT EXCEEDIN G TEN LAKH; OR (III) NOT BEING MORE THAN EIGHT KILOMETRES, FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITE M (A) AND WHICH HAS A POPULATION OF MORE THAN TEN LAKH. EXPLANATION.FOR THE PURPOSES OF THIS SUB-CLAUSE, ' POPULATION' MEANS THE POPULATION ACCORDING TO THE LAST PRECEDING CENS US OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIR ST DAY OF THE PREVIOUS YEAR; 12. FROM THE ABOVE, IT IS CRYSTAL CLEAR THAT THE LA ND SOLD BY THE ASSESSEE CANNOT BE BROUGHT UNDER THE AMBIT OF CAPIT AL GAINS TAX BECAUSE IT IS AN AGRICULTURAL LAND AND DOES NOT FALL WITHIN THE DEFINITION OF CAPITAL ASSET UNDER SECTION 2(14) OF THE ACT BECAUSE OF THE FOLLOWING REASONS:- I) THE LAND IS CLASSIFIED AS AGRICULTURAL LAND IN THE REVENUE RECORDS. II) IT IS SITUATED OUTSIDE THE LIMIT OF EIGHT KILOMETER S FROM THE MUNICIPAL LIMITS. III) AS PER THE REVENUE RECORDS, AGRICULTURAL ACTIVITIES WERE BEING CARRIED OUT IN THE LAND. IV) THOUGH THE REVENUE HAS MADE ALLEGATION THAT THE LAN D IS SURROUNDED BY INDUSTRIAL AREA, HOWEVER NO EVIDENCE IS BROUGHT BEFORE US TO JUSTIFY THEIR CLAIM. 16 ITA NO.1379/MDS/2016 V) THE LAND WAS PURCHASED AND SUBSEQUENTLY SOLD BY THE ASSESSEE WAS CLASSIFIED AS AGRICULTURAL LAND IN THE REVENUE RECORDS. VI) THE INTENTION OF THE PURCHASER OF THE LAND IS IMMAT ERIAL. VII) JUST BECAUSE THE PRICE OF THE LAND IS EXORBITANT, I T CANNOT BE TREATED THAT THE LAND IS NON-AGRICULTURAL, WHEN THE REVENUE RECORD STATES OTHERWISE. VIII) THE LARGE EXTENT OF LAND WOULD ALSO POINT OUT TO TH E FACT THAT IT IS AGRICULTURAL LAND. IX) EVEN IF SOME COMMERCIAL ESTABLISHMENTS HAVE SPRUNG UP IN THE CLOSE VICINITY OF THE LAND, IT CANNOT MEAN THAT THE PRIMARY CHARACTERISTIC OF THE AGRICULTURAL LAND IS LOST. 13. IT IS FURTHER PERTINENT TO MENTION THAT THE CAS E LAWS CITED BY THE REVENUE DO NOT APPLY TO THE FACTS OF THE CASE O F THE ASSESSEE SIMPLY BECAUSE, THE LAND IN QUESTION FALLS OUTSIDE THE MUNICIPAL LIMIT OF 8 KILOMETERS RATHER 20 KMS., AWAY APPROXIMATELY AND THE ENTIRE LOCALITY AS EVIDENT FROM THE ADANGAL IS CLASSIFIE D AS AGRICULTURAL LAND. FURTHER IN THE PRESENT SCENARIO WHERE THE ROA DS HAVE DEVELOPED AND MODERN VEHICLES ARE IN PLENTY, TRANSP ORTATION FACILITIES HAVE DRASTICALLY IMPROVED DUE TO WHICH P RICE OF DISTANT NEIGHBORHOOD LANDS ALSO SHOOTS UP BECAUSE OF EASY A CCESSIBILITY, BUT THAT CANNOT MEAN THAT ALL THOSE LANDS LOOSE THE CHA RACTERISTICS OF AGRICULTURAL LAND AND IF HELD SO THE PURPOSE OF THE ACT WILL BE DEFEATED. IN THE PRESENT CASE IT IS NOT IN DISPUTE THAT THE LAND IN QUESTION IS MORE THAN 19 KM., FROM THE NEAREST MUNI CIPAL LIMIT. MOREOVER THE DECISION RELIED BY THE REVENUE IN THE CASE CIT V/S. 17 ITA NO.1379/MDS/2016 SARIFABIBI MOHMED IBRAHIM (SUPRA) THE FACTS ARE NOT IDENTICAL BECAUSE IN THAT CASE THE LAND WAS SITUATED WITHIN T HE MUNICIPAL LIMITS AND WITHIN A TOWN PLANNING SCHEME WHILE AS I N THE CASE OF THE ASSESSEE THE LAND IS SITUATED BEYOND 19 K.M., FROM THE MUNICIPAL LIMITS. FURTHER IT IS NOT NECESSARY FOR THE ASSESS EE TO EXPLOIT THE AGRICULTURAL LAND BY COMMERCIAL PRODUCTION OF AGRIC ULTURAL PRODUCE BUT IT WOULD SUFFICE EVEN IF AGRICULTURAL ACTIVITIE S ARE CARRIED OUT FOR SELF CONSUMPTION. FOR THE AFORESAID REASONS, WE HER EBY HOLD THAT THE LAND SOLD BY THE ASSESSEE IS AGRICULTURAL LAND AND CANNOT BE TERMED AS CAPITAL ASSET BY VIRTUE OF SECTION 2(14) OF TH E ACT AND HENCE, CAPITAL GAIN ARISING OUT OF THE SALE OF THE LAND SO LD BY THE ASSESSEE WILL NOT ATTRACT CAPITAL GAIN TAX. THEREFORE, WE HE REBY DIRECT THE LEARNED ASSESSING OFFICER TO DELETE THE ADDITION MA DE FOR RS. 1,28,38,808/- UNDER THE HEAD LONG TERM CAPITAL GAIN S. 4.5 SINCE THE FACTS IN THE CASE OF THE ASSESSEE IS IDENTICAL TO THE CASE DECIDED BY THE TRIBUNAL SUPRA, WE DO NOT HAVE ANY HESITATION TO HOLD THAT IN THE CASE OF THE ASSESSEE ALSO CAPITAL GAIN TAX WILL NOT BE ATTRACTED BY VIRTUE OF SECTION 2(14)(III) OF THE AC T, BECAUSE THE LAND SOLD BY THE ASSESSEE IS AGRICULTURE LAND AND SHALL FALL OUTSIDE THE AMBIT OF CAPITAL ASSET. ACCORDINGLY, WE HEREBY DIRECT THE LD. AO TO DELETE THE LONG TERM CAPITAL GAIN OF RS.1,31,11,493/- ASSE SSED IN THE HANDS OF THE ASSESSEE. 18 ITA NO.1379/MDS/2016 5. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON THE 27 TH FEBRUARY, 2017 SD/- SD/- ( ! ' ! # . $% ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) ' #$ /JUDICIAL MEMBER #$ / ACCOUNTANT MEMBER %' /CHENNAI, &# /DATED 27 TH FEBRUARY, 2017 JR # () *) /COPY TO: 1. APPELLANT 2. RESPONDENT 3. + ( )/CIT(A) 4. + /CIT 5. ),- . /DR 6. -/ /GF