M/s. Fancy Mega Projects P. Ltd, Ernakulam V. The ITO, Cochin

ITA 21/COCH/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3907 (ITAT-COCHIN)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-06-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 24-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Capital asset; Business income; Earning of tax free income; Onus to prove
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI ABRAHAM P. GEORGE, AM & GEORGE GEORGE K., JM I. T.A. NO. 21 / CO CH/201 7 ASSESSMENT YEAR : 201 3 - 1 4 FANCY MEGA PROJECTS (P) LTD., 36/1685, JUDGES AVENUE, KALOOR, ERNAKULAM, KOCHI-682 017. [PAN:AABCF 0264F] VS. THE INCOME TAX OFFICER, CORPORATE WARD-1(3), KOCHI. (ASSESSEE - APPELLANT) (REVENU E - RESPONDENT) ASSESSEE BY SHRI R.VIJAYARAGHAVAN, CA REVENUE BY SHRI A. DHANARAJ, SR. DR D ATE OF HEARING 14 / 0 6 / 201 7 DATE OF PRONOUNCEMENT 16 / 0 6 /201 7 O R D E R PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST AN ORDER DATED 07-12-2016 OF THE CIT(A)-I, KOCHI. 2. IT HAS TAKEN TOTAL 3 GROUNDS. OF THIS GROUND NO. 3 IS ON LEVY OF INTEREST U/S. 234B AND 234D OF THE ACT WHICH IS CONSEQUENTIAL IN NATURE. THROUGH ITS GROUND NO. 1 & 2, ASSESSEE IS AGGRIEVED ON SURPLUS ARISING OUT OF THE SALE OF AGRICULTURAL I.T.A. NO.21 /COCH/2017 2 LAND BEING TREATED AS BUSINESS INCOME. ASSESSEE IS ALSO AGGRIEVED ON DENIAL OF ITS CLAIM OF AGRICULTURAL INCOME. 3. FACT APROPOS ARE THAT ASSESSEE S A COMPANY IN CORPORATED ON 4.1.2005, WITH ITS PRIMARY OBJECT OF DOING BUSINESS IN REAL ESTATE , HAD FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR DECLARING NIL IN COME. ASSESSEE HAD ALSO CLAIMED A CARRY FORWARD LOSS OF RS.9,16,330/- ASSE SSEE HAD SHOWN A SUM OF RS.1,18,46,000/- AS EXEMPT RECEIPTS IN ITS RETURN O F INCOME. ASSESSEE HAD TAKEN A STAND THAT THE SURPLUS AROSE OUT OF THE SALE OF A N AGRICULTURAL LAND AND WAS NOT EXIGIBLE TO TAX. HOWEVER, THE ASSESSING OFFICER WA S OF THE OPINION THAT SURPLUS ARISING ON SALE OF LAND BY THE ASSESSEE COULD BE CO NSIDERED ONLY INCOME ARISING ON AN ADVENTURE IN THE NATURE OF TRADE. ASSESSING OFFICER WAS OF THE OPINION THAT THE LAND WHICH WAS SOLD WAS PURCHASED ON 04/11/2011 AND SOLD ON 04/03/2013, AND THE PROFIT OF RS.1,18,46,000/- HAD TO BE CONSID ERED AS BUSINESS INCOME. ASSESSING OFFICER ALSO NOTED THAT THE MAIN OBJECT O F THE ASSESSEE WAS REAL ESTATE BUSINESS AND HENCE THE SURPLUS COULD NOT BE CONSIDE RED UNDER ANY HEAD OTHER THAN INCOME FROM BUSINESS. 4. EXPLANATION OF THE ASSESSEE WAS SOUGHT. REPLY O F THE ASSESSEE WAS THAT THE LAND OF 2.86 ACRES SOLD BY IT, WHICH GAVE RISE TO T HE SURPLUS, WAS HELD BY IT AS FIXED ASSET IN ITS BOOKS OF ACCOUNTS. AS PER THE A SSESSEE, THE LAND WHICH WAS SITUATED IN KOTUVALLY, NORTH PARAVUR, ERNAKULAM, COU LD NOT BE CONSIDERED I.T.A. NO.21 /COCH/2017 3 CONSIDERING THE DEFINITION OF CAPITAL ASSET CONSIDE RING GIVEN IN SECTION 2(14)(III) OF THE INCOME TAX ACT (IN SHORT THE ACT). FURTHE R, AS PER THE ASSESSEE, THE LAND SOLD WAS BEYOND 8 KMS. OF MUNICIPAL AREA AND THERE WERE 85 NOS. OF STANDING COCONUT TREES GROWN IN THE LAND. ASSESSEE CONTENDE D THAT THE AGRICULTURAL INCOME WAS BEING EARNED BY IT FROM THE SALE OF COCO NUT PRODUCE AND SHOWN AS SUCH IN ITS RETURNS. A CERTIFICATE DATED 18.2.2013 ISSUED BY THE AGRICULTURAL OFFICER WAS ALSO FILED. CONTENTION OF THE ASSESSEE WAS THAT LAND WAS PURCHASED AS AGRICULTURAL LAND AND SOLD IN THE SAME FASHION WITH OUT MAKING ANY CHANGES TO IT. AS PER THE ASSESSEE, THERE WAS NO CONVERSION IN THE LAND RECORDS NOR ANY PLOTTING OF LAND. VIS--VIS ITS MAIN OBJECT MENTIO NED BY THE ASSESSING OFFICER AS A REASON FOR TREATING THE SURPLUS AS BUSINESS INCOM E, REPLY OF THE ASSESSEE WAS THAT NOTHING IN ITS MEMORANDUM OF ASSOCIATION PROHI BITED IT FROM USING THE LAND FOR AGRICULTURAL PURPOSES AND SUCH ACTIVITY WAS COV ERED BY THE OBJECTS WHICH WERE INCIDENTAL OR ANCILLARY TO THE MAIN OBJECT. F URTHER CONTENTION OF THE ASSESSEE WAS THAT IT HAD PROCURED THE LAND WITH THE INTENTION OF USING IT FOR AGRICULTURAL PURPOSES. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. K.E. SUNDAR A MUDALIAR (18 ITR 259) (MAD.), HONBLE GUJARAT HIGH COURT IN THE CASE OF C IT VS. RAJSHIBHAI MERAMANBHAI ODEDRA [(2013) 86 CCH 309)] AND THE DEC ISIONS OF THE PANAJI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. DURGA DAS K.PRABHU SHASTRI (I.T.A. NOS. 129,130,144,156-161, 174, 175 & 178/2013), JOD HPUR BENCH OF THE TRIBUNAL IN THE CASE OF SUPRIYA SANWAR (SMT.) VS. I TO (149 ITD 1) AND THAT OF I.T.A. NO.21 /COCH/2017 4 THE HYDERABAD BENCH OF THIS TRIBUNAL IN THE CASE OF HARNIKS PARK PVT.LTD. VS. ITO [(2014) 62 SOT 0015)]. 5. HOWEVER, THE ASSESSING OFFICER WAS NOT IMPRESSE D BY THE ABOVE REPLY. ACCORDING TO HIM, THERE WAS A SPOT ENQUIRY CONDUCTE D ON 254/02/2016 BY THE OFFICER AND IT WAS FOUND THAT THERE WERE ONLY NATUR ALLY GROWN COCONUT TREES IN THE LAND WITH NO EVIDENCE OF ANY AGRICULTURAL OPERA TIONS. AS PER THE ASSESSING OFFICER, INFORMATION OBTAINED FROM THE LOCAL AGRICU LTURAL OFFICER AND LOCAL RESIDENTS, CONFIRMED THAT THE LAND WAS NOT USED FOR ANY AGRICULTURAL ACTIVITY. ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD SOLD THE LAND WITHIN 16 MONTHS OF ITS PURCHASE. AS PER THE ASSESSING OFFICER, THE AG RICULTURAL INCOME EARNED BY THE ASSESSEE WERE NOT FROM ANY AGRICULTURAL OPERATIONS CARRIED OUT BY THE ASSESSEE BUT ONLY INCIDENTAL TO THEIR OWNERSHIP OVER THE LAN D. ASSESSING OFFICER ALSO PICKED HOLES IN THE CERTIFICATE ISSUED BY THE AGRIC ULTURAL OFFICER PRODUCED BY THE ASSESSEE. ACCORDING TO HIM, AGRICULTURAL OFFICER D ID NOT CERTIFY THAT AGRICULTURAL OPERATIONS WERE CARRIED OUT BY THE ASSESSEE. LD. A SSESSING OFFICER CAME TO A CONCLUSION THAT THE INTENTION BEHIND THE PURCHASE O F LAND WAS ONLY AN ADVENTURE IN THE NATURE OF TRADE AND ASSESSEE HAD INDULGED IN FREQUENT PURCHASES AND SALE OF PROPERTIES. ACCORDING TO HIM, IF THE INTENTION OF THE ASSESSEE WAS TO PURSUE AN AGRICULTURAL ACTIVITY, IT WOULD NOT HAVE SOLD TH E LAND WITHIN A SHORT PERIOD OF 16 MONTHS. AS PER THE ASSESSING OFFICER, THERE WAS NO INTENTION TO DO ANY AGRICULTURAL OPERATION AND PURCHASE AS WELL AS SALE WERE A PART OF ASSESSEES I.T.A. NO.21 /COCH/2017 5 BUSINESS. HE ADDED THE AMOUNT OF RS.1,18,46,000/- AS PROFITS UNDER THE HEAD INCOME FROM BUSINESS. HE ALSO CONSIDERED THE AGR ICULTURAL INCOME OF RS.1,80,200/- SHOWN BY THE ASSESSEE AS INCOME FROM BUSINESS AND DENIED EXEMPTION CLAIMED ON SUCH AMOUNT U/S. 10(1) OF THE ACT. 6. AGGRIEVED THE ASSESSEE MOVED IN APPEAL BEFORE THE CIT(A). ARGUMENTS TAKEN BY THE ASSESSEE BEFORE THE CIT(A) AND COMMENTS OF T HE CIT(A) ARE SUMMARIZED AS UNDER: (I) THE PROVISIONS OF SECTION 2( 14) OF THE ACT AN D 2( 14)(III) WHICH DEFINED 'CAPITAL ASSET' AND THE COMPONENT SECTION 2( 14)(III) THAT D EFINED 'AGRICULTURAL/AND' HAVE BEEN CITED. CIT(A) COMMENTS; THESE DO NOT HELP THE APPELLANT, SINCE IN THE LACK OR ABSENCE OF' PROVEN AGRICULTURAL OPERATION' SUCH LANDS CANNOT YI ELD 'AGRICULTURAL INCOME' NOR CAN THE SALE OF SUCH LANDS BE HELD AS TAX-EXEMPT U/S 10(1). THE TWO SECTIONS DO NOT ADD UP ALL THE FACTS OF THE INSTANT CASE, (II) THE LANDS UNDER REFERENCE WERE SITUATED OUTSI DE THE STIPULATED BOUNDARY OF 8 KILOMETRES FROM THE NOTIFIED MUNICIPAL AREA AND WE RE 'AGRICULTURAL LANDS' PER THE GOVERNMENT RECORDS AND SECTION 2( 14)(III). CIT(A) COMMENTS: THE SAME REASONS AS IN CLAUSE 7(G G)(I) ABOVE AND THE CIRCUMSTANCES OF FAST-PACED DEVELOPMENT AND PURSUAN T INCREASES IN LAND VALUES STATED IN SOME OF THE JUDICIAL RATIOS FOUND THE CONCLUSION TH AT THESE FACTS ALONE WILL NOT RESULT IN TAX-EXEMPTION U/S 10(1) ON THE SALE OF THE IMPUGNED LANDS (III)) 85 COCONUT TREES WERE STATED TO BE GROWN ON THE SAID LAND. THE PHOTOGRAPHS OR THE LANDS TAKEN ON THE DATE OF THEIR POSSESSION WERE SU BMITTED TO THE AO. THE APPELLANT WAS STATED TO HAVE EARNED AGRICULTURAL INCOME OUT O F THE SAID LANDS DURING THE IMPUGNED A.Y. 2012-13, WHICH INCOME WAS STATED TO BE THE NET OR THE PROCEEDS OF THE SALE OF THE COCONUTS LESS THE ATTENDANT COSTS OR SALES AND TREE -MAINTENANCE EXPENSES. CIT(A) COMMENTS: ALL OF THESE DO NOT PROVE THE KERN EL FACT AND ARGUMENT THAT THERE HAVE BEEN ANY AGRICULTURAL OPERATIONS. WE ONLY HAVE STATIC AND MEANINGLESS VISUALS THAT PROJECT FACTS BUT REVEAL NEITHER THE ESSENTIAL NOR THE VITAL (OF THERE EXISTING ANY ACTUAL I.T.A. NO.21 /COCH/2017 6 EFFORT AT AGRICULTURE, SUCH AS OF AT LEAST OF THE W ATERING OR THE COCONUT TREES) ALONGSIDE EMPTY UNSUBSTANTIATED WORDS OR OF ALLEGED PROCEEDS, COSTS AND EXPENSES. (IV) A CERTIFICATE DATED 18.02.2013 WAS OBTAINED FR OM THE AGRICULTURAL OFFICER THAT THE MANAGING DIRECTOR (MD) OF' THE APPELLANT (SHRI. E. P. GEORGE) WAS A 'BONAFIDE CULTIVATOR' (SIC) OR OWNED LANDS MEASURING 2.86 ACR ES AS IDENTIFIED IN KOTTUVALLY PANCHAYAT, ERNAKULARN DISTRICT IN WHICH CAPACITY HE HAD CULTIVATED 85 COCONUT TREES IN THE SAID AREA, WAS PRODUCED BEFORE THE AO. CIT(A) COMMENTS. AS STATED BY THE ASSESSING OFFICER , THIS IS A SUPERFICIAL STATEMENT OF BEING A 'CULTIVATOR' AND HAVING CULTIVATED. HO W AND IN WHAT MANNER SUCH CULTIVATION TOOK PLACE AND THE STATISTICS, INCLUDIN G THE YIELDS AND ACCOUNTS OF SUCH CULTIVATION ARE COMPLETELY MISSING. IT IS READILY A PPARENT FROM THE ARTIFICIAL-LOOKING ROUNDED FIGURES OF THE 'AGRICULTURAL INCOMES' EARNE D AND REPORTED THAT THE APPELLANT HAS NOT BOTHERED ABOUT MAINTAINING ANY PROPER RECOR DS AND ACCOUNTS OR ITS OPERATIONS AND ACTIVITIES, BESIDES, WHY THE AGRICULTURAL OFFIC ER HAS DISCONNECTEDLY CERTIFIED IN FAVOUR OF THE INDIVIDUAL SHRI E. P. GEORGE INSTEAD OF THE APPELLANT COMPANY IS TELLING, MISLEADING AND STATUTORILY UNACCEPTABLE. (V) THE LAND WAS PURCHASED AS AGRICULTURAL LAND AND SOLD AS SUCH WITHOUT MAKING ANY CHANGES AND THUS THE CHARACTER OF THE LAND HAD NOT CHANGED. CIT(A) CORNM E NTS: THIS ARGUMENT DOES NOT HELP THE APPELLANT, PAR TICULARLY BECAUSE THE TRADING AND/OR SPECULATIVE INTENT IN THE TRANSACTIO N THAT ARE APPARENT HAVE BEEN ACCEPTED IN THIS ORDER TO BE THE REAL INTENT LEADING TO THE TREATMENT OR THE TRANSACTIONS IN THE LANDS AS BUSINESS INCOME, IT IS THEREFORE IN THE INTEREST OF THE APPELLANT TO MAKE NO CHANGES OR PERHAPS IT DID NOT HAVE THE NEED OR THE OPPORTUNITY TO MAKE ANY CHANGES.. (VI) THE APPELLANT'S PROFESSED OBJECTS IN ITS MOA D O NOT PROHIBIT IT FROM ACQUIRING AGRICULTURAL LANDS AND USING SUCH LANDS FOR AGRICUL TURAL PURPOSES, THE OBJECT-CLAUSE NO. 2 TITLED ' OBJECTS INCIDENTAL OR ANCILLARY TO THE ATTAINMENT O F THE MAIN OBJECTS INCLUDES PHRASES AND TERMS LIKE 'TO DEVELOP ANY LAND ACQUIRED OR TO BE BE ACQUIRED ' AND 'PLANTING, PAVING, DRAINING, FARMING, CULTIVATING A ND LETTING ', THE APPELLANT WAS 'EMPOWERED TO CARRY OUT ALL OF THE ACTIVITIES SPECI FIED IRRESPECTIVE OF THE OTHER OBJECTS SPECIFIED' CIT(A) COMMENTS: THE FACT THAT SUCH PIOUS STATEMENT S HAVE BEEN MADE IN THE MOA ARE NOT DENIED BUT DO NOT PROVE ACTUAL ACTION ON THE GR OUND.. NO AMOUNT OF SYLLOGISTIC REASONING OR LEGAL INTERPRETATION ON THESE CAN PROD UCE EVEN A MODICUM OF FACT. THE AO HAS ONLY CITED THE MOA TO EXPLAIN THE GENERAL CONTE XT, CIRCUMSTANCES AND SURROUNDINGS OF THE APPELLANT'S EXISTENCE, EVENTS AND ACTIVITIES TO IN TURN ARGUE THAT AGAINST SUCH A BACKDROP, THE APPELLANTS SUDDEN CLAIMS OF INTEREST AND DESIRE IN AGRICULTURE APPEAR UNNATURAL AND CONTRIVED AND NEED TO BE VIEWED WITH MISGIVINGS AND QUALMS BY ANY REASONABLE PERSON. THE FACT OF IMMEDIATE DISPOSAL O F THE PURCHASED LANDS BY THE APPELLANT SANS ANY ACTIVITY TO FURTHER ITS PROCLAIM ED INTEREST ONLY STRCNGTHEN THE SAID SKEPTICISM. I.T.A. NO.21 /COCH/2017 7 (VII) THE SAID LANDS WERE PURCHASED BY THE APPELLAN T WITH THE INTENT OF USING THEM FOR AGRICULTURAL PURPOSES, EVIDENCED FROM THE FACT OF T HE REPORTING OF AGRICULTURAL INCOMES IN THE RETURNS OF INCOME AND THE CERTIFICATE (REFER RED TO ABOVE) PROVIDED BY THE AGRICULTURAL OFFICER. CIT(A) COMMENTS: THESE HAVE BEEN ALREADY REJECTED. THERE HAVE BEEN NO OPERATIONS AND ONLY HOLLOW WORDS AND EMPTY REPORTING. (VIII) THERE WERE ONLY 2 INSTANCES OF TRANSACTIONS IN AGRICULTURAL LANDS INCLUDING THOSE OR THE IMPUGNED LANDS UNDER REFERENCE, SINCE THE AP PELLANT'S INCORPORATION AND INCEPTION OR BUSINESS IN THE F,Y, 2004-05. THEREFOR E. THE APPELLANT COULD NOT BE HELD TO BE ENGAGED IN FREQUENTLY TRADING IN LANDS. CIT(A) COMMENTS: EVEN ONE SUCH INSTANCE WILL BE SU FFICIENT TO IMPUTE AND CONCLUDE AS GENERATING TAXABLE BUSINESS INCOME FROM AN 'ADVENTURE IN THE NATURE OF TRADE' THE RATIOS OF THE HON'BLE SUPREME COURT IN THE CASE OF SAROJ KUMAR MAZUMDAR VS THE COMMISSIONER OF INCOME TAX (1959) AIR 1252, 1959 SC R SUPL. (2) 846 AND RAJA J RAMESHWAR RAO VS. COMMISSIONER OF INCOME TAX (1961) 42 ITR 179 (SC) ARE CITED IN SUPPORT. (IX) PER SECTION 2(13) OF THE ACT, IF ANY INCOME WA S TO BE HELD AS BUSINESS INCOME, 'THERE SHOULD BE ANY ACTIVITY IN RHE NATURE OF ANY ADVENTURE OR CONCERN IN THE NATURE OF TRADE , COMMERCE OR' MANUFACTURE ' (SIC), WHICH WAS NOT THE CASE IN THE PRESENT INST ANCE. CIT(A) COMMENTS: THE FACT OF THE PURCHASE OF THE LA ND WITH THE RETRO-ANNOUNCED INTENT OF CARRYING OUT AGRICULTURE, THE LACK OR ANY SUBSEQ UENT AGRICULTURAL OPERATIONS/ACTIVITIES, THE NON-MAINTENANCE OF ACCOUNTS AND RECORDS, THE PI PED UP AND LIKELY NON-EXISTENT AND FAKED FIGURES OF AGRICULTURAL INCOMES, THE ABSENCE OF MATERIAL EVIDENCES AND THE UNUSUALLY QUICK AND POST-HASTE DISPOSAL OF THE LAND S CAN LEAD TO ONLY ONE PRESUMPTION, THAT OF AN 'ADVENTURE IN THE NATURE OF TRADE' WHICH HAS NOT BEEN REBUTTED IN ANY MANNER. (X ) IT HAS BEEN SUBMITTED USING VARIOUS JUDICIAL R ATIOS, AS INTERPRETED BY [HE APPELLANT IN ITS FAVOUR, THAT A) WHERE AN AGRICULTURAL LAND I S USED FOR CULTIVATION; B) THE LAND IS AGRICULTURAL AS PER THE RECORDS OF THE AUTHORITIES, C) NO ALTERATIONS HAD BEEN MADE IN THE LAND BY THE ASSESSEE CONCERNED, D) THE LAND SOLD W AS REFLECTED AS FIXED ASSETS IN THE STATEMENTS OF ACCOUNTS; AND E) THERE WERE AGRICULTU RAL OPERATIONS CARRIED OUT ON THE SAID LAND AS PER AVAILABLE EVIDENCES, THEN SUCH LAND COU LD NOT BE HELD TO BE STOCK-IN-TRADE AND THE SALE OF SUCH LAND WOULD NOT HE AN ADVENTURE IN THE NATURE OF TRADE. THEREFORE, SUCH SALE COULD NOT BE TREATED AND TAXED AS BUSINES S INCOME. CIT(A) COMMENTS: NO CULTIVATION OR AGRICULTURAL OPE RATIONS HAVE BEEN EVIDENCED. THE FACT OF THE LANDS BEING AGRICULTURAL IN THE RECORDS ALONE DO NOT AUTOMATICALLY PREDICATE TAX EXEMPTION U/S. 10(1) OF THE ACT, THE NO-ALTERAT IONS-ON-LAND SCENARIO HAS EVENTUALIZED BECAUSE OF LACK OR OPPORTUNITY AND THE SHORTAGE OF TIME AND THE SUDDEN I.T.A. NO.21 /COCH/2017 8 AND SERENDIPITOUS ARRIVAL OF A BUYER ARMED WITH A G OOD PRICE. THE MANNER IN WHICH THE LANDS HAVE BEEN TREATED IN THE ACCOUNTS IS AN ARTIF ICE AND WILL NOT HOLD AS HELD BY THE HON'BLE SUPREME COURT ABOVE. SUCH LAND SHOULD RIGHT FULLY HAVE BEEN CLASSIFIED AND ACCOUNTED FOR AS STOCK-IN-TRADE AND THE PROFITS FRO M THEIR SALE DECLARED FOR TAX PURPOSES AS BEING FROM AN ADVENTURE IN THE NATURE OF TRADE A SSESSABLE UNDER THE HEAD BUSINESS INCOME. (XI) THE APPELLANT'S OPINION IS THAT THE ASSESSING OFFICER GROSSLY ERRED BY MERELY ALLEGING THAT THE INTENTION OF THE APPELLANT BEHIND THE PURCHASE OF LAND WAS REAL ESTATE BUSINESS. CIT(A) COMMENTS: THE AO NEEDED TO EVALUATE THE FAC TS AND THE EVIDENCES AGAINST THE APPLICABLE CIRCUMSTANCES. HE HAS DONE SO. THE AP PELLANT'S RAISON DETRE AND ALPHA AND OMEGA WERE REAL ESTATE ACTIVITIES. ALTHOUGH IT (THE APPELLANT) WAS NOT PREVENTED FROM PLUNGING INTO AGRICULTURAL ACTIVITIES, ANY STE P TAKEN IN SUCH DIRECTION NEEDED TO BE DISTINGUISHED AS SUCH THROUGH SUBSTANTIVE EVIDENCES SHOWN TO BE SANS ANY COLOURABLE OBJECTIVES OR DEVICES. THE APPELLANT HAS NOT SUCCES SFULLY MADE THIS HAPPEN OWING TO LACK OF EVIDENCES. IT APPEARS TO BELIEVE THAT STILL PHOTOGRAPHS OF LONG STANDING COCONUT TREES AGAINST AZURE SKIES AND UNILATERAL ASSERTIONS WILL DO THE TRICK FOR IT. (XII) PER THE APPELLANT, THE INFORMATION OBTAINED F ROM THE LOCAL BODIES AND RESIDENTS HAVE NO RELEVANCE SINCE THE SAID LAND WAS TREATED A S AGRICULTURAL LAND BASED ON FACTS. BESIDES, THE SAID INFORMATION OBTAINED SHOULD HAVE BEEN SHARED WITH THE APPELLANT. CIT(A) COMMENTS: THE DETAILS OF THE INFORMATION ARE NOT AVAILABLE IN THESE PROCEEDINGS, BUT I CONCUR THAT THE INFORMATION MUST BE SHARED. IN ALL EARLIER PASSAGE, I HAVE DIRECTED THE AO TO SHOWCASE WRITTEN EVIDENCES OR THE INFORMATION SO OBTAINED, HOWEVER, THE LOCAL BODIES AND RESIDENTS BEING INDEP ENDENT THIRD PARTIES, THEIR VERSIONS ARE EXTREMELY RELEVANT TO EVALUATE THE UNILATERAL A ND SELF-INTERESTED ASSERTIONS OF THE APPELLANT ABOUT ALLEGED AGRICULTURAL ACTIVITIES BY IT. (XIII) THAT THE APPELLANT SOLD MOST OF ITS PROPERTI ES, INCLUDING THE LAND IN QUESTION, IN THE PAST AND IN SUBSEQUENT YEARS, TO EARN PROFITS W ERE STATED BY THE APPELLANT TO BE NOT RELEVANT IN DETERMINING WHETHER THE LAND IN QUESTIO N WAS AN AGRICULTURAL LAND OR NOT, CIT(A) COMMENTS: THE APPELLANT IS A MODE OF DENIAL AND IS TALKING THROUGH ITS HAT. IT IS FOR THE APPELLANT TO SHOW WHY ITS CONTRARIAN EXP LANATIONS OF AGRICULTURAL ACTIVISM AND TAX-EXEMPT INCOMES IN RESPECT OF THE REFERENCED LANDS ALONE NEED TO BE ACCEPTED AGAINST THE BACKDROP OF ITS FREQUENT BUYING AND SEL LING OF LANDS INCLUDING AGRICULTURAL LANDS IN ITS CAPACITY AS A REAL ESTATE TRADER. 'ONCE A REAL ESTATE TRADER, ALWAYS A REAL ESTATE TRADER IS A VALID PRESUMPTION, UNLESS AND UNTIL REBUTTED . ANY AND ALL EXCEPTIONS NEED TO BE CONCLUSIVELY DISTINGUISHED AN D PROVED THROUGH VALID EVIDENCES AND REASONS, I.T.A. NO.21 /COCH/2017 9 (XIV) THE APPELLANT HAD RILED ITS RETURN OF INCOME DISCLOSING THE PROFITS ON SALE OF AGRICULTURAL LAND UNDER THE HEAD 'CAPITAL GAINS' AND HAD CLAIMED THE SALE OF AGRICULTURAL LAND AS EXEMPT FOR THE REASONS STATED, CIT(A) COMMENTS: IN THE ABSENCE OF SUPPORTING FACTS AND EVIDENCES, AND THAT OF DISCHARGE OF THE BURDEN OF PROOF TO SUBSTANTIATE IT S RETURN OF INCOME AND THE ENTRIES THEREIN, SUCH STATEMENTS HAVE ONLY RHETORICAL VALUE , THEY ARE UNILATERAL ASSERTIONS AND OBVIOUSLY SELF-INTERESTED AND IN THE ABSENCE OF EVI DENCES AS AFORE-STATED DO NOT SURVIVE THE TEST OF THE INDEPENDENT AUDIT, AS THE O NE CARRIED OUT BY THE ASSESSING OFFICER. (XV) THE APPELLANT'S POSITION IS THAT THE PERIOD OF HOLDING IS IRRELEVANT IN DETERMINING THE NATURE OF THE TRANSACTION. CIT(A) CORNMCNTS: ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN A MATTER THAT SEEKS TO DETERMINE THE ORIGINAL INTENT AS WELL AS P IT AND DISTINGUISH AMONGST: A) INVESTMENT AND STOCK-IN-TRADE, B) THE PURCHASE AND SALE OF AGRICULTURAL LAND AND OTHER REAL-ESTATE TRANSACTIONS; C) AN ADVENTURE IN THE NA TURE OF TRADE AND A CAPITAL INVESTMENT, ET AL , THE PERIOD OF HOLDING IS ABSOLUTELY RELEVANT IN D ETERMINING THE NATURE OR THE TRANSACTION, (XVI) PER THE APPELLANT, THERE ARE NO RESTRICTIONS IMPOSED UNDER THE INCOME TAX ACT ON THE PERIOD OF HOLDING OF AGRICULTURAL LAND IN DETER MINING ITS TAXABILITY. CIT(A) COMMENTS:: THIS IS TRUE. HOWEVER, THE SHORT PERIOD HAS ALSO LIKELY RESULTED IN THE APPELLANT CARRYING OUT NO AGRICULTURAL ACTIVITY . THE UNSEEMLY SPEED AT WHICH THE LAND WAS SOLD WHEN SET AGAINST THE BACKGROUND OF OV ERWHELMING EVIDENCES OF ABSENCE OF AGRICULTURAL OPERATIONS (AS WELL AS EVIDENCES OR SUCH OPERATIONS) SERVES TO DECIDE IN FAVOUR OF BUSINESS INCOME FROM TRADING AND AGAINST INVESTMENT AND AGRICULTURAL ACTIVITIES, 7. IN CONCLUSION, THE CIT(A) WAS OF THE OPINION T HAT THE ASSESSEE COULD NOT PROVE ANY AGRICULTURAL OPERATIONS CARRIED ON BY IT OR GROWING OF ANY COCONUT TREES BY ITS OWN EFFORTS. AS PER THE CIT(A), JUST BECAUSE THERE WAS NO CHANGE IN THE CHARACTER OF THE PROPERTY FROM THE POINT ASSESSEE P URCHASED IT TO THE POINT ASSESSEE SOLD IT, WOULD NOT IMPLY THAT INTENTION OF THE ASSESSEE WAS TO DO ANY AGRICULTURAL ACTIVITY. ACCORDING TO HIM, THE ASSES SEE COULD NOT SHOW THAT ANY REAL AGRICULTURAL OPERATION WAS DONE BY HIM IN THE SUBJE CT LAND. CIT(A) HELD THAT I.T.A. NO.21 /COCH/2017 10 THOUGH THE LAND WAS SHOWN BY THE ASSESSEE AS A FIXE D ASSET, IN REALITY IT WAS A PORTION OF ITS STOCK-IN-TRADE. FURTHER, AS PER THE CIT(A), THE ASSESSEES MAIN OBJECT WAS REAL ESTATE BUSINESS AND HENCE PROFITS O F RS.1,18,46,000/- WAS RIGHTLY TREATED BY THE ASSESSING OFFICER AS BUSINESS INCOME . CIT(A) ALSO UPHELD THE DISALLOWANCE OF AGRICULTURAL INCOME OF RS.1,80,200/ -. 8. NOW BEFORE US, LD. AR, STRONGLY ASSAILING THE ORDER OF THE LOWER AUTHORITIES SUBMITTED THAT THERE WERE ONLY TWO INSTANCES OF SAL E OF LAND DONE BY THE ASSESSEE IN ITS ENTIRE PERIOD OF EXISTENCE. EVEN TH ESE TWO SALES WERE PART AND PARCEL OF A SINGLE TRANSACTION. AS PER THE LD. AR, ONE INSTANCE OF SALE WOULD NOT BE SUFFICIENT TO HOLD THAT THE ASSESSEE WAS DOING A REAL ESTATE BUSINESS. RELYING ON PG. NO. 105 WHICH IS A STATEMENT OF PROFIT AND L OSS ACCOUNT FOR YEARS ENDING 31-03-2011, 31-03-2012 AND 31-03-2013, LD. AR POINT ED OUT THAT INCOME OF THE ASSESSEE WERE FROM INTEREST, AGRICULTURE, COMMISSI ON AND DIVIDEND. AS PER THE LD. AR, PROFITS ON SALE OF LAND APPEARED ONLY IN TW O YEARS. THUS ACCORDING TO HIM, THE DOMINANT BUSINESS OF THE ASSESSEE WAS AS A N INVESTMENT COMPANY AND NOT AS A REAL ESTATE COMPANY. ACCORDING TO HIM OBJ ECT CLAUSE IN THE MEMORANDUM OF ASSOCIATION WOULD NOT BE SUFFICIENT T O CONSIDER THE SALE OF AN AGRICULTURAL LAND AS A BUSINESS ADVENTURE. LD. AR POINTED OUT THAT THERE WERE 85 NOS. OF STANDING COCONUT TREES AND THESE WERE TENDE D TO BY THE ASSESSEE. AS PER THE LD. AR, ASSESSEE WAS NOT REQUIRED TO DO BAS IC AGRICULTURAL OPERATION, EXCEPT OCCASIONAL TILLING AND MANURING, SINCE THE C OCONUT TREES WERE STANDING I.T.A. NO.21 /COCH/2017 11 AND GROWN WHEN THE ASSESSEE PURCHASED THE AGRICULTU RAL LAND. ACCORDING TO HIM, THE STATUS OF THE LAND WHEN THE ASSESSEE SOLD IT, REMAINED THE SAME AND THE NATURE OF THE LAND WAS CLEARLY INDICATED IT TO BE AGRICULTURAL. RELYING ON THE COPY OF A CERTIFICATE ISSUED BY THE AGRICULTURAL OF FICER, PLACED AT PAPERBOOK PG. NO. 100, LD. AR SUBMITTED THAT THE AGRICULTURAL OFF ICER CLEARLY CERTIFIED THE CULTIVATION OF COCONUT PALMS IN THE SUBJECT LAND AN D ALSO CONSIDERED THE ASSESSEE AS A BONA FIDE CULTIVATOR OF THE SUBJECT LAND. RELI ANCE WAS PLACED ON THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CAS E OF M.J. THOMAS VS. DY. CIT (I.T.A NO. 224/COCH/2014 DATED 06/06/2014) AND THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF SHAKUNTALA VEDACH ALAM VS. VANITHA MANICKAVASAGAM (369 ITR 558). 9. PER CONTRA, LD. DR STRONGLY SUPPORTING THE ORD ERS OF THE LOWER AUTHORITIES, SUBMITTED THAT THE CIT(A) HAD CONSIDERED A HOST OF JUDGMENTS AND HAD RIGHTLY REACHED A CONCLUSION THAT THE ASSESSEE COULD NOT SH OW THE LAND TO BE USED FOR ANY AGRICULTURAL PURPOSE. AS PER THE LD. DR, THE A SSESSEE BEING A REAL ESTATE BUSINESS, TIT HAD NO INTENTION TO DO ANY AGRICULTUR E, AND THE SALE OF LAND COULD ONLY BE CONSIDERED AS A PART OF ITS BUSINESS.. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE ORDERS. IT IS NOT DISPUTED THAT THE ASSESSEE HAD ACQUIRED AND SOLD TH E LAND WITHIN A PERIOD OF 16 MONTHS. DETAILS OF HOLDING AND SALE OF VARIOUS ASS ETS DURING THE PERIOD AY 2007- I.T.A. NO.21 /COCH/2017 12 08 TO AY 2014-15S HAS BEEN SUMMARIZED BY THE ASSESS ING OFFICER AT PARA 3.10 OF HIS ORDER AND IT IS REPRODUCED HEREUNDER FOR BREVIT Y: A.Y VALUE OF FIXED ASSET AT BEGINNING OF THE YEAR AS PER RETURN RS. AMOUNT OF PURCHASE OF LANDS DURING THE YEAR (RS.) AMOUNT OF FIXED ASSET OTHER THAN LAND INCLUDED (RS.) PROFIT FOR SALE OF FIXED ASSET CREDITED TO P&L ACCOUNT (RS.) AGRICULTURAL INCOME CREDITED TO P&L ACCOUNT(RS.) AMOUNT OF CAPITAL GAINS OFFERED TO TAX (RS.) AMOUNT CLAIMED AS EXEMPTED U/S. 10(1) OF THE ACT (RS.) 2007-08 3036305 0 0 0 0 2008-09 4000191 0 0 0 0 2009-10 3700191 0 96725 0 180245 0 2010-11 69173280 5832000 5266920 160000 0 54 26920 2011-12 9124700 3270022 5394600 790363 170000 0 375294 2012-13 32667700 23543000 4585410 0 180200 0 0 2013-14 19513700 3897588 0 180200 0 118 46000 2014-15 17830427 3312959 0 180200 0 0 11. IT HAS NOT BEEN DISPUTED BY THE ASSESSEE THAT ITS MAIN OBJECT AS PER ITS MEMORANDUM OF ASSOCIATION WAS DOING BUSINESS IN REA L ESTATE. ADMITTEDLY, THERE WERE ONLY TWO INSTANCES OF SALE OF LAND DURING ITS ENTIRE EXISTENCE. FURTHER, ONE OF THE MAIN ARGUMENTS OF THE ASSESSEE IS ITS MAIN O BJECT OF DOING REAL ESTATE BUSINESS WOULD NOT BY ITSELF CONVERT ITS TWO INSTAN CES OF SALE OF AGRICULTURAL LAND AS A BUSINESS OR AN ADVENTURE IN THE NATURE OF BUSI NESS. AT THIS JUNCTURE IT WILL BE APPROPRIATE TO HAVE A LOOK AT THE PROFIT AND LOS S ACCOUNTS OF THE ASSESSEE, TO HAVE A BETTER UNDERSTANDING OF THE ACTUAL NATURE OF ITS ACTIVITIES. THIS HAS BEEN SUMMARIZED AT PAPER BOOK PAGE NO. 105 WHICH IS REPR ODUCED HEREUNDER: I.T.A. NO.21 /COCH/2017 13 A READING OF THE ABOVE, DOES IN OUR OPINION, SHOW T HAT, SIGNIFICANT PORTION OF ITS EARNINGS, IF NOT ALL, CAME FROM INTEREST, COMMISSIO N, DIVIDEND AND AGRICULTURE, EXCEPT FOR FINANCIAL YEAR ENDING 31 ST MARCH 2013, WHEN IT HAD PROFIT OF RS.1,18,46,000 ON SALE OF LAND. IN OUR OPINION, TH ERE IS MUCH STRENGTH IN THE ARGUMENT OF THE LD. AR THAT THE ASSESSEES INCOME W AS MORE OUT OF THE INVESTMENTS AND ITS OPERATIONS DID NOT REFLECT ANY REAL ESTATE BUSINESS. WE I.T.A. NO.21 /COCH/2017 14 CANNOT SAY THAT ONE OR TWO INSTANCES OF SALE OF AGR ICULTURAL LAND WOULD NOT BE SUFFICIENT TO DEEM THE ASSESSEE TO BE A REAL ESTAT E DEALER. ESPECIALLY SO, WHEN IT IS NOT DISPUTED THAT LAND SOLD BY THE ASSESSEE WAS HELD BY IT AS A FIXED ASSET AND NOT AS A STOCK-IN-TRADE. IN FACT THE BALANCE SHEET OF THE ASSESSEE FOR THREE YEARS, WHICH IS PLACED AT PAPERBOOK PG. 104, DOES N OT SHOW ANY STOCK-IN-TRADE AT ALL. ON THE OTHER HAND, ITS INVESTMENTS WERE ALMOS T WHOLLY REFLECTED BY SHARES OF KALABHAVAN STUDIOS LIMITED, SHARES OF GMR INFRAS TRUCTURE LTD., UNITS OF HDFC MUTUAL FUND, UNITS OF HDFC MUTUAL FUNDS AND UNITS O F BIRLA SUN LIFE DYNAMIC BOND FUNDS. IF THE ASSESSEE HAD PURCHASED PROPERT Y WITH AN INTENTION TO DO A BUSINESS IN REAL ESTATE, IT WOULD HAVE BEEN A PART OF ITS STOCK-IN-TRADE AND NOT PART OF ITS FIXED ASSETS. INTENTION OF THE ASSESSE E, IN OUR OPINION, AS COMING OUT OF THE BALANCE SHEET P&L IS THAT THE SUBJECT LAND W AS NOT PURCHASED TO DO A BUSINESS. 12. NOW COMING TO THE QUESTION WHETHER THE LAND S OLD WAS AGRICULTURAL OR NOT, THE AGRICULTURAL OFFICERS CERTIFICATE PLACED AT PA PERBOOK PG. NO. 100 IS REPRODUCED BELOW: C E R T I F I C A T E CERTIFIED THAT SRI E.P. GEORGE, MANAGING DIREC TOR M/S. FANCY MEGA PROJECTS PVT. LTD., KALOOR IS A BONAFIDE CULTIVATOR OF KOTTU VALLY PANCHAYATH AND OWNS LAND OF 2.8 ACRES OF LAND IN THE SURVEY NOS 116/5, 10-2, 10, 8, 9, 11A, 92/12, & 92/8. HE HAS BEEN CULTIVATING 85 O OF COCONUT PALMS IN AB OVE SAID AREA. I.T.A. NO.21 /COCH/2017 15 THIS CERTIFICATE IS ISSUED TO BE PRODUCED TO THE IN COME TAX DEPARTMENT DATED : 18/02/2013 SD/- KOTTUVALLY AGRICULTURAL OFFICER KRISHIBHAVAN, KOTTUVALLY KAITHARAM P.O. THE CERTIFICATE CLEARLY STATES THAT ASSESSEE WAS A BONA FIDE CULTIVATOR OF THE SUBJECT LAND AND HE WAS CULTIVATING 85 NOS. OF COCO NUT PALMS BEARING. THERE CAN BE NO CASE FOR THE REVENUE THAT TENDING TO COCONUT PALMS IS NOT AN AGRICULTURAL OPERATION. TO TREAT THE COCONUT PALMS AS A SPONTAN EOUS GROWTH, AS DONE BY THE ASSESSING OFFICER, IS IN OUR OPINION, NOT APPROPRIA TE. SPONTANEOUS GROWTH OF SOME COCONUT PALMS MAYN OCCUR OCCASIONALLY. BUT TO SAY THAT 85 NOS. OF COCONUT PALMS IN AN AREA OF 2.86 ACRES WERE ALL SPONTANEOUS GROWTH AND THE COCONUT PALMS WERE YIELDING COCONUTS MERELY BY THE GRACE OF NATURE WITH NO EFFORT WHATSOEVER BY HUMANS IS SOMETHING IMPOSSIBLE TO BEL IEVE. ADMITTEDLY, THE PROPERTY WAS SITUATED BEYOND A DISTANCE OF 8 KMS FR OM THE MUNICIPAL LIMITS. ASSESSEE WAS ALSO HAVING AGRICULTURAL ELECTRICITY C ONNECTION AS EVIDENCED BY A CERTIFICATE ISSUED BY KSEB PLACED AT PAPERBOOK PG. N O. 103. AT THIS JUNCTURE, IT WOULD BE APPOSITE TO HAVE A LOOK AT PARAGRAPH 18 OF THE DECISION OF THE TRIBUNAL IN THE CASE OF M.J. THOMAS (SUPRA) WHICH IS REPRODU CED HEREUNDER: 18. THE NEXT ISSUE WOULD ARISE FOR CONSIDERATION IS WHETHER THE SUBJECT LAND IS AN AGRICULTURAL LAND OR NOT? IF THE SUBJECT LAND IS NO T AN AGRICULTURAL LAND THEN IT WOULD FALL WITHIN THE DEFINITION OF CAPITAL ASSET. WHAT I S EXCLUDED IS ONLY THE AGRICULTURAL LAND AND NOT ALL LAND. THEREFORE, WE HAVE TO SEE WH ETHER THE SUBJECT LAND IS AN AGRICULTURAL LAND OR NOT? THE TERM AGRICULTURAL LAN D IS NOT DEFINED IN THE INCOME-TAX ACT. THE CONSTITUTION OF INDIA, ARTICLE 366( I) DEF INES AGRICULTURE INCOME WHICH READS AS FOLLOWS: 'ART. 366( I). I.T.A. NO.21 /COCH/2017 16 'AGRICULTURAL INCOME' MEANS AGRICULTURAL INCOME AS DEFINED FOR THE PURPOSE OF THE ENACTMENT RELATING TO INCOME-TAX. 'IN VIEW OF THE A BOVE CONSTITUTIONAL PROVISION EVEN FOR AGRICULTURAL INCOME WE HAVE TO REFER TO TH E DEFINITION GIVEN IN THE INCOME- TAX ACT. IN THE ABSENCE OF ANY EXPRESS DEFINITION E ITHER IN THE CONSTITUTION OF INDIA OR IN THE INCOME-TAX ACT IN RESPECT OF AGRICULTURAL LA ND WE HAVE TO TAKE THE MEAN ING \I! IN COMMON PARLANCE. IN COMMON PARLANCE, THE LAND WH ICH IS MEANT FOR CULTIVATION IS CONSIDERED TO BE AN AGRICULTURAL LAND. THIS TRIBUNA L FINDS A SIMILAR REFERENCE 'AGRICULTURAL LAND' IN WEALTH-TAX ACT. SECTION 2(E) OF THE WEALTH-TAX ACT, 1957 READS AS FOLLOWS: '2. IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUI RES, -(A) TO (D) XXXXXXXXXXXXXXXXXXX (E) 'ASSETS' INCLUDES PROPERTY OF EVERY DESCRIPTION, MOVABLE OR IMMOVABLE, BUT DOES NOT INCLUDES PROPERT Y OF EVERY DESCRIPTION, MOVABLE OR IMMOVABLE, BUT DOES NOT INCLUDE, - (1) I N RELATION TO ASSESSMENT YEAR COMMENDING ON THE 1 ST DAY OF APRIL, 1969, OR ANY EARLIER ASSESSMENT YEAR (1)AGRICULTURAL LAND AND GROWING CROPS, GRASS OR ST ANDING TREES ON SUCH LAND. THEREFORE AGRICULTURAL LAND AND GROWING CROPS, GRA SS AND STANDING TREES ON SUCH LAND ARE EXCLUDED FROM THE DEFINITION OF ASSET EVEN UN DER THE WEALTH-TAX ACT. AN OCCASION AROSE BEFORE THE APEX COURT IN CWT VS. OFF ICER IN CHARGE (COURT OF WARD PAIGAH (1976) 105 ITR 133(SC) TO CONSIDER THE TERM AGRICULTURAL LAND OCCURRED IN SECTION 2(E) OF THE WEALTH TAX ACT. THEREFORE, THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE INTERPRETATION GIVEN BY THE APEX C OURT IN THE CASE OF CWT VS. OFFICER IN CHARGE (SUPRA) IN RESPECT OF AGRICULTURA L LAND UNDER THE CONTEXT OF WEALTH- TAX ACT WOULD BE MORE APPROPRIATE AND PROPER FOR DE FINING THE TERM AGRICULTURAL LAND. THE APEX COURT, AFTER REFERRING TO THE PROV ISIONS OF THE CONSTITUTION OF INDIA, MORE PARTICULARLY ENTRY 86, LIST 1 TO 7 TH SCHEDULE, FOUND THAT AGRICULTURAL LAND IS ONLY A SPECIES OF LAND. THE MAIN QUESTION IS WHETHER IT SHOULD STAND FOR ALL LANDS WHICH IS CAPABLE OF BEING UTILIZED FOR AGRICULTURAL PURPOSE AND OR FOR SOME LAND WHICH EITHER IS BEING ACTUALLY USED OR HAS BEEN SET APART OR PREPAR ED FOR USE OF AGRICULTURAL PURPOSE SO AS TO INDICATE THE INTENTION OF THE OWNER OR OCCUPI ER OF THE LAND TO PUT IT TO AGRICULTURAL USES. REFERRING TO THE EARLIER JUDGMENT OF THE APEX COURT IN CIT VS. RAJA BINOY KUMAR SUHAS ROY (1957) 32 ITR 466 THE APEX COURT FO UND THAT THE DETERMINATION OF THE CHARACTER OF THE LAND ACCORDING TO THE PURPOSE FOR WHICH IT IS MEANT OR SET UP FOR AND CAPABLE USE IS A MATTER WHICH OUGHT TO BE DETER MINED ON THE FACTS OF EACH PARTICULAR CASE. IN FACT, THE APEX COURT HELD AS F OLLOWS: .WHAT IS REALLY REQUIRED TO BE SHOWN IS THE CONNE CTION WITH AN AGRICULTURAL PURPOSE AND USER AND NOT THE MERE POSS IBILITY OF USER OF LAND, BY SOME POSSIBLE FUTURE OWNER OR POSSESSOR, FOR AN AGRICULTURAL PURPOSE. IT IS NOT THE MERE POTENTIALITY, WHICH WILL ONLY EFFEC T ITS VALUATION AS PART OF ASSETS, BUT ITS ACTUAL CONDITION AND INTENDED USE R WHICH HAS TO BE SEEN FOR PURPOSES OF EXEMPTION FROM WEALTH-TAX. IN VIEW OF THE ABOVE JUDGMENT OF THE APEX COURT THE RE SHOULD BE A CONNECTION TO INDICATE THE INTENTION OF THE OWNERS OR POSSESSORS SO AS TO CONNECT WITH AGRICULTURAL PURPOSE IN RESPECT OF THE LAND. THE ENTRIES IN THE I.T.A. NO.21 /COCH/2017 17 REVENUE RECORD A PRIMA FACIE EVIDENCE TO INDICATE T HAT THE LAND IN QUESTION IS AGRICULTURAL LAND. 28. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF THE APEX COURT IN THE CASE OF SARIFABIBI MOHMED IBRAHIM AND OTHERS VS CIT (1993) 204 ITR631 (SC). IN THE CASE BEFORE THE APEX COURT, THE ASSESS EE SOLD A PIECE OF LAND SITUATED WITHIN THE REVENUE LIMITS OF AVAGAON VILLA GE IN THE MUNICIPAL LIMITS OF SURAT MUNICIPALITY. IN THE YEAR 1967, THE ASSESSEE AGREED TO SELL THE LAND TO A HOUSING SOCIETY. THE ASSESSEE CLAIMED THE GAIN ON TRANSFER OF SUCH LAND AS EXEMPT U/S 2( 14) OF THE ACT. THE APEX COURT FOUND THAT THE ASSESSEE APPLYING FOR PERMISSION TO SELL THE LAND F OR NON-AGRICULTURAL PURPOSE AND IMMEDIATELY AFTER APPLICATION FOR CONVE RSION OF LAND, THE LAND WAS NOT CULTIVATED FOR A PERIOD OF FOUR YEAR. IN TH OSE FACTUAL CIRCUMSTANCES, THE APEX COURT FOUND THAT THE LAND IN QUESTION IS N OT AN AGRICULTURAL LAND. IN THE CASE BEFORE US, THE ASSESSEE HAS NOT APPLIED FOR CONVERSION OF LAND FOR NON-AGRICULTURAL PURPOSE. THE LAND IN QUESTION IS CLASSIFIED AS AGRICULTURAL LAND AND THE VILLAGE OFFICER CERTIFIED THAT THE LAND WAS SUBJECTED TO CULTIVATION. THE ASSESSEE IS CONTRIBUT ING TO THE AGRICULTURAL LABOURER'S WELFARE FUND AND ALSO PAYING REVENUE TAX AS AGRICULTURAL LAND WHICH IS EVIDENCE FROM BASIC TAX REGISTER. IN VIEW OF THE MATERIAL AVAILABLE ON RECORD DISCLOSING THE CULTIVATION OF L AND, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT JUDGMENT OF THE APEX CO URT IN THE CASE OF SARIFABIBI MOHMED IBRAHIM AND OTHERS (SUPRA) MAY NO T BE APPLICABLE TO THE FACTS OF THE CASE. IN OUR OPINION, THE INTENTION OF THE OWNERS TO DO A GRICULTURAL OPERATION IN THE SUBJECT LAND IS CLEAR FROM THE ATTENDANT FACTS AND THEY HAD RETURNED AGRICULTURAL INCOME FOR VARIOUS ASSESSMENT YEARS PRECEDING THE I MPUGNED ASSESSMENT YEAR. THEY WERE HAVING CERTIFICATES ISSUED BY THE COMPETE NT AUTHORITIES SHOWING THAT THE LAND WAS AGRICULTURAL. NO DOUBT, THE LD. CIT(A ) HAS RELIED ON VARIOUS JUDGMENTS FOR SUPPORTING HIS CONCLUSION THAT THE SU BJECT LAND COULD NOT BE CONSIDERED AS AGRICULTURAL AND SALE THEREFROM GAVE RISE TO BUSINESS INCOME. HOWEVER, ALMOST ALL OF THESE JUDGMENTS INCLUDING TH AT OF THE HON[BLE APEX COURT IN THE CASE OF SARIFIBHAI MOHAMED IBRAHIM VS. CIT AND OTHERS (204 ITR 631) I.T.A. NO.21 /COCH/2017 18 AND THE JUDGMENT OF THE HONBLE KERALA HIGH COURT IN THE CASE OF SMT. ASHA GEORGE VS. ITO (351 ITR 123) WERE EXAMINED BY THIS TRIBUNAL IN THE CASE OF M.J. THOMAS (SUPRA). HONBLE MADRAS HIGH COURT IN THE CASE OF SHAKUNTALA VEDACHALAM VS. VANITHA MANICKAVASAGAM (SUPRA) HAS A LSO HELD THAT CLASSIFICATION OF LAND IN REVENUE RECORDS, WAS CLEARLY INDICATIVE OF THE NATURE OF THE LAND. IN THE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE S UBJECT LAND COULD ONLY BE CONSIDERED AS AGRICULTURAL. SINCE IT WAS SITUATED B EYOND 8 KMS. FROM THE MUNICIPAL LIMITS, SALE THEREOF WOULD NOT RESULT IN ANY CAPITAL GAINS. SURPLUS COULD NOT HAVE BEEN TREATED AS INCOME FROM BUSINESS SINCE ASSESSEE HAD NOT VENTURED INTO THE BUSINESS OF REAL ESTATE. FOR THE VERY SAM E REASON, WE ARE OF THE OPINION THAT THE AGRICULTURAL INCOME RETURNED BY TH E ASSESSEE COULD NOT HAVE BEEN ADDED TO THE TOTAL INCOME SINCE IT WAS EXEMPT U/S. 10(1) OF THE ACT. GROUNDS NOS. 1 AND 2 ARE ALLOWED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S ALLOWED. PRONOUNCED IN THE OPEN COURT ON 16-06-2017. SD/- SD/- (GEORGE GEORGE K.) ( ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 16 TH JUNE, 2017 GJ COPY TO: 1. FANCY MEGA PROJECTS (P) LTD., 36/1685, JUDGES AV ENUE, KALOOR, ERNAKULAM, KOCHI-682 017. I.T.A. NO.21 /COCH/2017 19 2. INCOME TAX OFFICER, CORPORATE, WARD-1(3), KOCHI. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-I, KOCHI . 4. THE PR. COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., CO CHIN