N.Venkataraman, CHENNAI V. DCIT, CHENNAI

ITA 1380/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8160 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-10-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 19-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: N DEVANATHAN
• Keywords: Capital asset
• Section: 143(3); 2(14); 63

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' # . $ , & ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICI AL MEMBER ./ I.T.A.NO.1380/MDS/2016 ( / ASSESSMENT YEAR: 2011-12) MR.N.VENKATARAMAN, NO.7/3, OLD NO.4/3, SKANDALAYA, JUSTICE SUNDARAM ROAD, MYLAPORE, CHENNAI-600004. VS THE DEPUTY COMMISSIONER OF INCOME TAX, (BUSINESS CIR.II) / NON-CORPORATE CIRCLE-2, CHENNAI. PAN: AACPV4475G ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. N.DEVANATHAN, ADVOCATE /RESPONDENT BY : MR. SUPRIYO PAL, JCIT /DATE OF HEARING : 27 TH OCTOBER,2016 /DATE OF PRONOUNCEMENT : 4 TH JANUARY, 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 (AP PEALS)- 2, CHENNAI DATED 04.03.2016 IN ITA NO.142/CIT(A)-2/ 2013- 14 PASSED UNDER SECTION 143(3) R.W.S. 250(6) OF THE ACT. 2. THE ASSESSEE HAS RAISED SEVERAL ELABORATE GROUND S IN HIS APPEAL, HOWEVER, THE CRUX OF THE ISSUE IS AS FO LLOWS:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUSTAINING THE ORDER OF THE LEARNED ASSESSING OFFICER WHO HAD COMPUTED THE LONG TERM CAPITAL GAIN OF THE ASSESSEE AT ` 1,28,38,808/- BY TREATING THE LAND SOLD BY THE ASSESSEE AS NON-AGRICULTURAL LAND AND BROUGHT 2 ITA NO.1380/MDS/2016 THE SAME UNDER THE AMBIT OF LONG TERM CAPITAL GAIN TAX. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL FILED HIS RETURN OF INCOME FOR THE ASSE SSMENT YEAR 2011-12 ON 27.09.2011 DECLARING HIS TOTAL INCOME A S ` 2,61,45,844/-, WHICH WAS SUBSEQUENTLY REVISED BY H IM ON 03.10.2012 DISCLOSING THE INCOME AT ` 2,85,45,840/-. THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY AND N OTICE UNDER SECTION 143(2) WAS ISSUED TO THE ASSESSEE ON 27.09.2012. SUBSEQUENTLY, THE LEARNED ASSESSING OFF ICER COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF TH E ACT ON 05.02.2014 WHEREIN HE COMPUTED LONG TERM CAPITAL GA IN AT RS.1,28,38,804/- TOWARDS SALE OF HIS AGRICULTURAL L AND TREATING THE SAME AS NON-AGRICULTURE LAND. DURING THE COURS E OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE LEARN ED ASSESSING OFFICER THAT THE ASSESSEE HAD SOLD HIS IM MOVABLE PROPERTY BEING AGRICULTURAL DRY LAND SITUATED AT NO.90, KATTAVAKKAM VILLAGE, WALAJABAD TALUK FOR SALE CONSI DERATION OF ` 1,33,72,024/-. THE ASSESSEE HAD PURCHASED THE AFORE SAID AGRICULTURAL LAND IN THE YEAR 2005. WITH RESPECT T O THE SALE OF 3 ITA NO.1380/MDS/2016 THE LAND DURING THE RELEVANT ASSESSMENT YEAR, THE A SSESSEE HAD CLAIMED IT AS EXEMPT FROM LONG TERM CAPITAL GAI NS TAX SINCE THE LAND SOLD WAS AGRICULTURAL LAND. HOWEVER, THE LEARNED ASSESSING OFFICER OPINED THAT THE LAND SOLD BY THE ASSESSEE CANNOT BE TREATED AS AGRICULTURAL LAND AND EXEMPT FROM LONG TERM CAPITAL GAIN TAX BECAUSE OF THE FOLL OWING REASONS:- I) THE ASSESSEE HAD NOT DISCLOSED AGRICULTURAL INCO ME ACCRUED FROM THE LAND FOR THE ASSESSMENT YEAR 2006- 07 TO 2011-12. THEREFORE, IT CAN BE PRESUMED THAT THE ASS ESSEE HAD NOT CARRIED OUT ANY AGRICULTURAL ACTIVITIES IN HIS AGRICULTURAL LAND. II) THOUGH THERE CAN BE A PRESUMPTION THAT THE LAND SOLD BY THE ASSESSEE IS AGRICULTURAL LAND IF IT IS RECORDED IN THE REVENUE RECORDS AS AGRICULTURAL LAND AND ASSESSED A S SUCH UNDER THE LAND REVENUE CODE, SUCH PRESUMPTION CAN B E REBUTTED IF THE LAND IS SURROUNDED IN POTENTIAL COM MERCIAL AREA. RELIANCE WAS PLACED IN THE DECISION OF THE HO NBLE GUJARAT HIGH COURT IN THE CASE CIT VS. SARIFABIBI M OHAMMED IBRAHIM REPORTED IN 136 ITR 621. IN THE PRESENT CAS E THE LAND WAS SITUATED IN THE CLOSE PROXIMITY OF INDUSTRIAL A REA OF 4 ITA NO.1380/MDS/2016 ORAGADAM WHICH IS A FAST GROWING AUTOMOBILE HUB IN SOUTH ASIA. III) THE LAND WAS SOLD TO A REAL ESTATE COMPANY M/S . INNO REAL PVT.LTD. AND M/S. INNO ESTATE PVT.LTD., WHO HA D PUT TO USE FOR NON-AGRICULTURAL PURPOSES. IV) THE SALE CONSIDERATION FOR THREE ACRES OF LAND SOLD BY THE ASSESSEE IS RS.1.3 CRORES WHICH IS NORMALLY THE PRI CE REALIZABLE TOWARDS BUILDING SITES. IN FACT THE ASSE SSEE HAD PURCHASED THE LAND ONLY FOR A MEAGER VALUE OF RS.6. 2 LAKHS DURING THE PERIOD MARCH,2005 WHICH IS ONLY FIVE YEA RS PRIOR TO THE DATE OF SALE .THUS, THERE WAS APPRECIATION OF M ORE THAN 30 TIMES. V) THE VALUE OF THE LAND SOLD WAS PHENOMENAL AND TH EREFORE, NOT VIABLE FOR AGRICULTURAL PURPOSES. 4. THEREAFTER RELYING ON VARIOUS DECISIONS, THE LEA RNED ASSESSING OFFICER CONCLUDED THAT THE LAND SOLD BY T HE ASSESSEE CANNOT BE TREATED AS AGRICULTURAL LAND AND THEREFORE BROUGHT THE CAPITAL GAIN ARISING OUT OF THE SALE OF LAND TO THE AMBIT OF LONG TERM CAPITAL GAIN TAX. 5 ITA NO.1380/MDS/2016 5. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) ALSO CONFIRMED THE ORDER OF THE LEARNED A SSESSING OFFICER BY OBSERVING AS UNDER:- ' ' 6. CONCLUSION: FROM THE ANALYSIS OF THE FACTS OF THE APPELLANT'S CASE, VIS - VIS THE JUDGEMENTS OF VARIOUS COURTS, IT IS SEEN THAT THE LANDS IN QUESTION ARE NOT AGRICULTURAL IN NATURE, SINCE, A), THE APPELLANT HAS NOT PRODUCED ANY EVIDENCE WHATSOEVER, IN SUPPORT OF HIS CONTENTION THAT HE HAS CULTIVATED RICE AND SUGARCANE IN THE LANDS AT NATHANALLUR AND KATTAWAKKAM VILLAGE. AS RIGHTLY OBSERVED BY THE ASSESSING OFFICER, WHILE PASSING THE ASSESSMENT ORDER AND ALSO IN HIS REMAND REPORT DT.L0.1.2016, THAT NOT ONLY HAS THE APPELLANT NOT RETURNED ANY (NET) INCOME FROM AGRICULTURAL ACTIVITIES, BUT ALSO, HE HAS NOT REFLECTED ANY INCOME OR EXPENDITURE RELATING TO CARRYING ON OF AGRICULTURAL ACTIVITIES, IN HIS RETURN OF INCOME. B) THE VILLAGE AGRICULTURAL OFFICERS OF NATHANALLUR AS WELL AS KALTAWAKKAM VILLAGES HAVE NOT CONFIRMED ABOUT THE ACTUAL CARRYING ON OF AGRICULTURAL ACTIVITIES BY THE APPELLANT, IN THE LANDS IN QUESTION, AND HAVE ROUTINELY FORWARDED THE COPIES OF ADANGAL EXTRACTS PERTAINING TO THE LAND IN QUESTION. AS MENTIONED EARLIER, THE APPELLANT'S NAME DOES NOT FIND A MENTION IN THE ADANGAL EXTRACT PERTAINING TO THE LAND AT NATHANALLUR AND ONLY THE NAME OF ONE SHRI PANDURANGAN FINDS A PLACE THEREIN. C) AS HIGHLIGHTED VIDE PARA 5.8.(SUPRA), NOT ONLY ARE THE LANDS LOCATED IN CLOSE PROXIMITY OF THE FAST GROWING INDUSTRIAL AREA OF ORAGADAM, BUT ALSO, THE PURCHASE OF -THE LAND, AT A TIME WHICH STRIKINGLY COINCIDES WITH THE NOTIFICATION OF ORAGADAM .AREA ITSELF, AS A SPECIAL ECONOMIC ZONE, FOR DEVELOPMENT BY SIPCOT, LENDS STRONG CREDENCE TO THE VIEW OF THE 6 ITA NO.1380/MDS/2016 ASSESSING OFFICER, THAT THE APPELLANT HAD NOT PURCHASED THE LANDS IN QUESTION WITH THE IDEA OF CARRYING OF AGRICULTURAL ACTIVITIES, BUT RATHER, WI TH THE IDEA OF CAPITALIZING ON THE FAST APPRECIATING REAL ESTATE VALUE IN ORAGADAM INDUSTRIAL AREA. D) IN FACT, IT IS INTERESTING TO NOTE THAT THE APPELLANT HAS MADE RATHER ELABORATE WRITTEN SUBMISSIONS, DISCUSSING VARIOUS CASE-LAWS AT LENGTH, BUT NO SUBMISSION WHATSOEVER HAVE' BEEN MADE EVIDENCING THE CARRYING ON OF AGRICULTURAL ACTIVITY BY HIM, DURING THE PERIOD FOR WHICH HE HELD THE LANDS. HENCE, TAKING INTO ACCOUNT, ALL THE AFOREMENTIONED FACTS, IT IS SEEN THAT THE AO IS FULLY JUSTIFIED IN REJECTING THE ASSESSEES CLAIM THAT THE LANDS IN QUESTION ARE AGRICULTURAL IN NATURE AND BRINGING TO TAX THE CAPITAL GAINS ARISING FROM THE SALE THEREOF. 6. BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE LAND PURCHASED AND SOLD BY THE ASSESSEE IS AGRICULTURAL LAND. IT WAS FURTHER ARGUE D THAT THE ASSESSEE HAD NOT CHANGED THE CHARACTERISTIC OF LAND AND HELD THE SAME AS AGRICULTURAL LAND ALL THR OUGH HIS PERIOD OF HOLDING. AGRICULTURAL OPERATIONS WERE ALSO CARRIED OUT IN THE LAND THOUGH NOT COMMERCIALLY. TH E LAND WAS SITUATED OUTSIDE 8 KMS OF THE MUNICIPAL LI MIT. IT WAS FURTHER SUBMITTED THAT, AS PER SECTION 2 (14)(I II) OF THE ACT, THE LAND DOES NOT FALL WITHIN THE MEANING OF 7 ITA NO.1380/MDS/2016 CAPITAL ASSET AS IT IS AGRICULTURAL LAND SITUATIN G IN INDIA COMPLYING WITH THE PROVISIONS OF SECTION 2(14)(III) (A & B) OF THE ACT. HE FURTHER RELIED ON VARIOUS CASE LAWS TO SUPPORT HIS CLAIM AND PLEADED THAT THE EXEMPTION DENIED BY THE REVENUE MAY BE GRANTED. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND, VEHEMENTLY ARGUED IN SUPPORT OF THE ORD ERS OF THE REVENUE AUTHORITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS ON RECORD. THE LEARNED AUTHORIZED REPRESENTATIVE PRODUCED THE FOLLOWING DOCUMENTS BEFORE US WHICH COULD NOT BE CONFRONTED B Y THE REVENUE:- 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 155 8 ITA NO.1380/MDS/2016 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 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 AGRICULTURAL LAND AND CERTAIN AGRICULTURAL ACTIVITI ES WERE PERFORMED ON IT. THE ADANGAL CERTIFICATE ISSUED B Y THE STATE GOVERNMENT REVENUE OFFICIALS ALSO STATES THAT THE NEIGHBORHOOD LANDS ARE ALSO AGRICULTURAL LAND A ND AGRICULTURAL ACTIVITIES WERE PERFORMED ON THE SAME (P.B. PAGE NO. 159 & 161). FURTHER, THESE LANDS WERE LOCATED BEYOND THE MUNICIPAL LIMIT OF EIGHT KILOMET ERS SAY APPROXIMATELY TWENTY KILOMETERS FROM THE MUNICI PAL LIMIT AS PER THE CERTIFICATE ISSUED BY THE REVENUE AUTHORITIES. THESE FACTS COULD NOT BE SUCCESSFULLY 9 ITA NO.1380/MDS/2016 DISPROVED OR CONFRONTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. THE BLUNT REASON STATED BY THE LEAR NED ASSESSING OFFICER IN HIS ORDER FOR DENYING TO TREAT THE LAND SOLD BY THE ASSESSEE AS AGRICULTURAL LAND ARE THAT:- I) THE LAND IN QUESTION WAS DRY LAND. II) NO AGRICULTURAL OPERATION WAS CARRIED OUT IN TH E LAND. 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 IN 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 WA RDS), PAIGAH REPORTED IN 105 ITR 133. THE HONBLE APEX 10 ITA NO.1380/MDS/2016 COURT HAS EXPLAINED THE MEANING OF THE AGRICULTURAL LAND IN RESPECT TO WEALTH TAX MATTER EVEN WHEN THE LOCATION OF THE LAND WAS WITHIN THE MUNICIPAL LIMIT S AS FOLLOWS:- 'AGRICULTURAL LAND' MEANING OF. 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 'AGRICULT URAL LAND' WITHIN THE MEANING OF SECTION 2(E). ON A REFERENCE, THE HI GH COURT HELD THE LAND TO BE AGRICULTURAL LAND BECAUSE: (I) THE A REA WAS 108 ACRES ABUTTING THE HUSSAIN SAGAR TANK; (II) THE LAND HAD TWO WELLS IN IT; (III) IT WAS CAPABLE OF BEING USED FOR AGRICULTURAL PURPOSES, (IV) IT HAD NOT BEEN PUT TO ANY USE WHICH COULD CHANGE THE CHARACTER OF THE LAND BY MAKING IT UNFIT FOR IMMEDIATE CULTIVATI ON; AND (V) IT WAS CLASSIFIED AND ASSESSED TO LAND REVENUE AS 'AGRICUL TURAL LAND' UNDER 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 RAIS E ONLY A REBUTTABLE PRESUMPTION. THEREFORE, THE APPELLATE TR IBUNAL SHOULD DETERMINE AFRESH WHETHER THE LANDS WERE AGRICULTURA L AFTER GIVING 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 EXPRESSION AS WIDE A MEANING AS POSSIBLE. THE CORRECT RULE IS TO FIND OUT THE EXACT SENSE IN WHICH THE WORDS HAVE BEEN USED IN THE PART ICULAR CONTEXT AND GIVE AN INTERPRETATION IN CONSONANCE WITH THE P URPOSE OF THE STATUTE. THE OBJECT OF THE ACT IS TO TAX SURPLUS WE ALTH AND IT IS CLEAR THAT ALL LAND WAS NOT EXCLUDED FROM THE DEFINITION OF 'ASSETS'. THEREFORE, IT IS IMPERATIVE TO GIVE REASONABLE LIMI TS TO THE SCOPE OF THE EXPRESSION 'AGRICULTURAL LAND' AND GIVE IT A RE STRICTED MEANING;. 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 SHOW N IS THE CONNECTION WITH AN AGRICULTURAL PURPOSE AND USER AN D NOT THE MERE 11 ITA NO.1380/MDS/2016 POSSIBILITY OF USER OF LAND, BY SOME POSSIBLE FUTUR E OWNER OR POSSESSOR, FOR AN AGRICULTURAL PURPOSE. IT IS NOT T HE MERE POTENTIALITY, WHICH WILL ONLY AFFECT ITS VALUATION AS PART OF 'ASSETS', BUT ITS ACTUAL CONDITION AND INTENDED USER WHICH HA S TO BE SEEN FOR PURPOSES OF EXEMPTION FROM WEALTH-TAX. ONE OF THE O BJECTS OF THE EXEMPTION IS TO ENCOURAGE CULTIVATION OR ACTUAL UTI LISATION OF LAND FOR AGRICULTURAL PURPOSES. IF THERE IS NEITHER ANYT HING IN ITS CONDITION, NOR ANYTHING IN THE EVIDENCE TO INDICATE THE INTENTION OF ITS OWNERS OR POSSESSORS SO AS TO CONNECT IT WITH A N AGRICULTURAL PURPOSE, THE LAND COULD NOT BE 'AGRICULTURAL LAND' FOR THE PURPOSES OF EARNING AN EXEMPTION UNDER THE ACT. ENTRIES IN R EVENUE RECORDS ARE, HOWEVER, GOOD PRIMA FACIE EVIDENCE. 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 CONSTRUCTION THEREON, THE ASSESSEE WAS ENTITLED TO CLAIM EXEMPTION FROM THE WEALTH- TAX. III) IN THE CASE N.S.SRINIVASA NAICKER & SONS VS. ITO REPORTED IN 292 ITR 481(MAD) THE HONBLE MADRAS HIG H 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 NOT FOR ANYTHING ELSE. THE LANDS IN QUESTION WERE ALSO REGI STERED AS AGRICULTURAL LANDS AND ASSESSED TO LAND REVENUE. TH E FACT THAT THE PURCHASER HAD PUT IT TO USE FOR A TOTALLY DIFFE RENT PURPOSE FROM THAT OF THE ASSESSEE OUGHT NOT TO HAVE WEIGHED WITH THE TAX AUTHORITY. CAPITAL GAINS TAX COULD NOT BE LEVIED. 12 ITA NO.1380/MDS/2016 IV) IN THE CASE CIT VS. MANILAL SOMNATH REPORTED IN 106 ITR 917 (GUJ), THE HONBLE GUJARAT HIGH COURT HAS H ELD AS FOLLOWS:- HELD THAT WHAT HAD TO BE CONSIDERED IS NOT WHAT TH E PURCHASER DID WITH THE LAND OR THE PURCHASER WAS SUPPOSED 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 PLAN NING SCHEME WAS NOT BY ITSELF SUFFICIENT TO REBUT THE PRESUMPTI ON ARISING FROM ACTUAL USE OF THE LAND. THE LAND HAD BEEN USED FOR AGRICULTURAL PURPOSES FOR A LONG TIME AND NOTHING HAD HAPPENED T ILL THE DATE OF THE SALE TO CHANGE THAT CHARACTER OF THE LAND. T HE POTENTIAL NON-AGRICULTURAL VALUE OF THE LAND FOR WHICH A PURC HASER 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. V) IN THE CASE CIT VS. SMT. LILAVATI THAKORELAL PAT EL REPORTED IN 152 ITR 565 (GUJ), THE HONBLE GUJARAT HIGH COURT HAS HELD AS FOLLOWS:- HELD THAT I N DETERMINING WHETHER LAND IS AGRICULTURAL 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 ST OP-GAP ARRANGEMENT; (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? 13 ITA NO.1380/MDS/2016 VI) IN THE CASE MRS. SAKUNTHALA VEDACHALAM & ANOTHER V S. ACIT REPORTED IN 369 ITR 558 (MAD), THE HONBLE MA DRAS 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 TAHSILDAR, WHICH SHOWED THAT THE LANDS WERE AGRICUL TURAL IN NATURE AND THE REVENUE HAD ALSO ACCEPTED THAT THE L ANDS WERE FALLING WITHIN THE RESTRICTED ZONE IN TERMS OF SECT ION 2(14) . THE ASSESSEES HAVE QUALIFIED UNDER CLAUSE 11(1) SINCE A S PER THE ADANGAL RECORDS, THESE LANDS WERE CLASSIFIED AS AGR ICULTURAL LANDS AND THE ASSESSEES HAVE ALSO PAID REVENUE KIST , NAMELY, REVENUE PAYMENT. THE TESTS LAID DOWN BY THE GUJARAT HIGH COURT 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 AS AGRICULTURAL LANDS. THE REASON GI VEN BY THE TRIBUNAL WAS THAT THE ADJACENT LANDS WERE PUT TO CO MMERCIAL USE BY WAY OF PLOTS AND, THEREFORE, THE VERY CHARAC TER 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 CONCLUSION THAT THE ASSESSEES' LANDS WERE NOT AGRIC ULTURAL IN NATURE. THE REASON GIVEN BY THE TRIBUNAL THAT THE A DJACENT LANDS HAVE BEEN DIVIDED INTO PLOTS FOR SALE WOULD N OT MEAN THAT THE LANDS SOLD BY THE ASSESSEES WERE FOR THE PURPOS E OF DEVELOPMENT OF PLOTS. ALSO THE REASONING GIVEN BY T HE TRIBUNAL NO AGRICULTURISTS WOULD HAVE PURCHASED THE LAND SO LD BY THE ASSESSEE FOR PURSUING ANY AGRICULTURAL ACTIVITY WA S BASED ON MERE CONJECTURES AND SURMISES. THEREFORE, THE ASSES SEES WERE ENTITLED TO EXEMPTION. VII) IN THE CASE CIT VS. BORHAT TEA CO.LTD. REPORTED IN 138 ITR 783 (CAL), THE HONBLE CALCUTTA HIGH COURT HA S HELD AS FOLLOWS:- FOR THE PURPOSE OF LAND BEING AGRICULTURAL LAND, A CTUAL AGRICULTURAL OPERATIONS OR CULTIVATION OR TILLING O F THE LAND IS NOT NECESSARY. WHAT IS TO BE SEEN IS WHETHER SUC H LAND IS CAPABLE OF AGRICULTURAL OPERATIONS BEING CA RRIED ON THEREON. 14 ITA NO.1380/MDS/2016 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, MUNI CIPAL CORPORATION, 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, (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 EXCEED ING 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 EXCEEDING 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; 15 ITA NO.1380/MDS/2016 12. FROM THE ABOVE, IT IS CRYSTAL CLEAR THAT THE LA ND SOLD BY THE ASSESSEE CANNOT BE BROUGHT UNDER THE AMBIT OF C APITAL GAINS TAX BECAUSE IT IS AN AGRICULTURAL LAND AND DO ES NOT FALL WITHIN THE DEFINITION OF CAPITAL ASSET UNDER SECTIO N 2(14) OF THE ACT BECAUSE OF THE FOLLOWING REASONS:- I) THE LAND IS CLASSIFIED AS AGRICULTURAL LAND IN T HE REVENUE RECORDS. II) IT IS SITUATED OUTSIDE THE LIMIT OF EIGHT KILOM ETERS FROM THE MUNICIPAL LIMITS. III) AS PER THE REVENUE RECORDS, AGRICULTURAL ACTIV ITIES WERE BEING CARRIED OUT IN THE LAND. IV) THOUGH THE REVENUE HAS MADE ALLEGATION THAT THE LAND IS SURROUNDED BY INDUSTRIAL AREA, HOWEVER NO EVIDENCE IS BROUGHT BEFORE US TO JUSTIFY THEIR CLAI M. 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 IMMATERIAL. 16 ITA NO.1380/MDS/2016 VII) JUST BECAUSE THE PRICE OF THE LAND IS EXORBITA NT, IT 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 THE FACT THAT IT IS AGRICULTURAL LAND. IX) EVEN IF SOME COMMERCIAL ESTABLISHMENTS HAVE SPRUNG UP IN THE CLOSE VICINITY OF THE LAND, IT CAN NOT 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 CAS E OF 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 FR OM THE ADANGAL IS CLASSIFIED AS AGRICULTURAL LAND. FURTH ER IN THE PRESENT SCENARIO WHERE THE ROADS HAVE DEVELOPED AND MODERN VEHICLES ARE IN PLENTY, TRANSPORTATION FACIL ITIES HAVE DRASTICALLY IMPROVED DUE TO WHICH PRICE OF DISTANT NEIGHBORHOOD LANDS ALSO SHOOTS UP BECAUSE OF EASY ACCESSIBILITY, BUT THAT CANNOT MEAN THAT ALL THOSE LANDS LOOSE 17 ITA NO.1380/MDS/2016 THE CHARACTERISTICS OF AGRICULTURAL LAND AND IF HEL D 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 TH AN 19 KM., FROM THE NEAREST MUNICIPAL LIMIT. MOREOVER THE DEC ISION RELIED BY THE REVENUE IN THE CASE CIT V/S. SARIFABI BI MOHMED IBRAHIM (SUPRA) THE FACTS ARE NOT IDENTICAL BECAUSE IN THAT CASE THE LAND WAS SITUATED WITHIN THE MUNIC IPAL LIMITS AND WITHIN A TOWN PLANNING SCHEME WHILE AS IN THE C ASE OF THE ASSESSEE THE LAND IS SITUATED BEYOND 19 K.M., F ROM THE MUNICIPAL LIMITS. FURTHER IT IS NOT NECESSARY FOR THE ASSESSEE TO EXPLOIT THE AGRICULTURAL LAND BY COMMERCIAL PROD UCTION OF AGRICULTURAL PRODUCE BUT IT WOULD SUFFICE EVEN IF A GRICULTURAL ACTIVITIES ARE CARRIED OUT FOR SELF CONSUMPTION. FO R THE AFORESAID REASONS, WE HEREBY HOLD THAT THE LAND SOL D BY THE ASSESSEE IS AGRICULTURAL LAND AND CANNOT BE TERMED AS CAPITAL ASSET BY VIRTUE OF SECTION 2(14) OF THE A CT AND HENCE, CAPITAL GAIN ARISING OUT OF THE SALE OF THE LAND SO LD BY THE ASSESSEE WILL NOT ATTRACT CAPITAL GAIN TAX. THEREFO RE, WE HEREBY DIRECT THE LEARNED ASSESSING OFFICER TO DELE TE THE ADDITION MADE FOR RS. 1,28,38,808/- UNDER THE HEAD LONG TERM CAPITAL GAINS. 18 ITA NO.1380/MDS/2016 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. O RDER PRONOUNCED IN THE OPEN COURT ON THE 4 TH JANUARY, 2017 SD/- SD/- ( ' # . $ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 04.01.2017 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF