Shri A. Vinod Kumar Reddy, CHENNAI V. DCIT, CHENNAI

ITA 2657/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7790 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 12-09-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYLO PAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Capital asset; Business income
• Section: 54B; 2(14); 63

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI , ! ' ! # . $% & '( BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO: 2657/MAD/2016 / ASSESSMENT YEAR : 2011-2012 SHRI A.VINOD KUMAR REDDY, 4 TH FLOOR, BAY WATCH APARTMENTS, NO.92/93,COSTAL ROAD, BESANT NAGAR, CHENNAI-90. VS. THE DCIT, BUSINESS CIRCLE-II, CHENNAI. [PAN ABOPV 6636 N] ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : MR.S.SRIDHAR,ADVOCATE /RESPONDENT BY : MR.SUPRIYLO PAL, JCIT, D.R / DATE OF HEARING : 15 - 12 - 2016 / DATE OF PRONOUNCEMENT : 17 - 02 - 2017 - / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-2,CHENNAI DATED 23.08.2016 PERTAINING TO ASSESSMENT YEAR 2011-12 . ITA NO.2657/16 :- 2 -: 2. THE ASSESSEE HAS RAISED THE GROUND THAT CIT(A ) ERRED IN SUSTAINING THE TAXATION OF ` 4,75,10,880/- BEING THE PROFIT WORKED OUT ON SALE OF PROPERTIES/LANDS REJECTING THE CLAIM OF TRANSFER/SALE OF AGRICULTURAL LANDS IN THE COMPUTATION OF TAXABLE TO TAL INCOME AND THE GAIN ON SALE OF SUCH LAND WAS LIABLE FOR CAPITAL GA INS TAX. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS BUILDER AND FLAT PROMOTER, DIRECTOR IN INFRASTRUCTURE DEVELOPMENT CO MPANY. DURING THE FINANCIAL YEAR 2009-10, THE ASSESSEE PURCHASED LAND ADMEASURING 1 ACRE AND 55.70 CENTS AT THALAMBUR FOR 3,89,25,000/- FROM SHRI D.VENKATESH & OTHERS AND TOGETHER WITH STAMP DUTY, THE TOTAL COST OF LAND COME TO RS. 4,24,74,120/-. WITHIN A SHORT SPAN OF 6 1/2 MONTHS I.E. ON 1.4.2010, THE LAND WAS SOLD TO M/S VISHRAM INFRASTR UCTURE PVT. LTD., FOR A CONSIDERATION OF RS. 9 CRORES. 3.1 THE ASSESSING OFFICER FOUND THAT AS PER THE RE TURN OF INCOME OF M/S VISHRAM INFRASTRUCTURE PVT. LTD. FOR THE AY 2011-12 , THE LAND WAS CONVERTED INTO STOCK-IN-TRADE AND AS PER THE SCHEDULE-4 OF TH E BALANCE SHEET OF THE COMPANY AS ON 31.3.2011, THIS LAND AT THALAMBUR APP EARS AS CLOSING STOCK OF LAND OF THE COMPANY M/S VISHRAM INFRASTRUCTURE P VT. LTD. THE ASSESSING OFFICER ALSO OBSERVED THAT IN THE YEAR OF PURCHASE, THE ASSESSEE HAD CATEGORIZED THE SAID LAND AS AN ASSET IN THIS PROPR IETARY BUSINESS OF REAL ESTATE AND NOT AS HIS PERSONAL ASSET. ITA NO.2657/16 :- 3 -: 3.2. KEEPING IN VIEW THE FACTS THAT THE LAND IN QUE STION WAS SOLD WITHIN A SHORT SPAN OF 6 1/2 MONTHS, THE ASSESSEE HAS BEEN E NGAGED IN REAL ESTATE BUSINESS AND THE SALE OF LAND ITSELF IS MADE TO M/S VISHRAM INFRASTRUCTURE PVT. LTD., A COMPANY IN WHICH THE ASSESSEE AND HIS WIFE CONTROL THE ENTIRE STAKE, THE ASSESSING OFFICER HELD THAT THE ENTIRE T RANSACTION OF PURCHASE AND SALE OF LAND HAS BEEN ENTERED INTO FOR THE PURPOSE OF REAL ESTATE APPRECIATION ONLY. HOLDING THE TRANSACTION AS AN ADVENTURE IN TH E NATURE OF TRADE, THE ASSESSING OFFICER BROUGHT TO TAX THE ENTIRE PROFIT OF RS. 4,75,10,880/- AS PROFIT FROM BUSINESS OF THE ASSESSEE. 3.3 ALTERNATIVELY, THE ASSESSING OFFICER HAS HELD THAT SINCE THERE HAS HARDLY BEEN A CHANGE IN THE LAND VALUE BETWEEN THE DATE OF PURCHASE AND DATE OF SALE, THE EXCESS BENEFIT GRANTED TO THE ASS ESSEE BY THE COMPANY IN WHICH HE IS A DIRECTOR AND ALSO HOLDS SUBSTANTIAL I NTEREST, HAS TO BE TREATED AS INCOME U/S. 2(24)(IV) OF THE IT ACT, 1961. AGGRI EVED BY THE ADDITION, THE APPELLANT CARRIED THE APPEAL BEFORE THE LD.CIT(A). 4. ON APPEAL, LD.CIT(A) OBSERVED THAT PROFIT FROM SALE OF LAND IS TO BE TAXED AS BUSINESS INCOME, AS THE TRANSACTION IS IN THE NATURE OF ADVENTURE IN NATURE OF TRADE ON THE FOLLOWING REASONS:- (I) THE ASSESSEE IS CARRYING ON THE BUSINESS OF REA L ESTATE AND HAS SOLD LANDS, WHICH WERE HIS STOCK-IN-TRADE. (II) THE LAND HAS BEEN SOLD WITHIN AN EXTREMELY SHO RT SPAN OF 6 MONTHS, TO THE REAL ESTATE COMPANY WHEREIN THE ASSESSEE ALONGW ITH HIS WIFE MS.A.NAMRATHA, IS THE MAIN STAKE HOLDER AND ITA NO.2657/16 :- 4 -: (III) NO AGRICULTURAL ACTIVITIES WHATSOEVER HAVE B EEN CARRIED ON IN THE LANDS IN QUESTION. ACCORDINGLY, LD.CIT(A) SUSTAINED THE ADDITION MADE BY THE LD. ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BE FORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUS ED THE MATERIAL ON RECORD. IT IS THE CONTENTION OF THE AR THAT THE LAND WAS HE LD BY THE ASSESSEE AS A CAPITAL ASSET. FURTHER CONTENTION IS THAT IT IS INTENDED TO RETAIN THE AGRICULTURAL LAND ACQUIRED AS A CAPITAL ASSET. THE ASSESSEE REFLECTED THE SAME IN THE BALANCE SHEET AS ON 31-3-2010 AS A FIX ED ASSET BY SHOWING THE SAME AS LAND AT THALAMBUR AT ` 4,24,74,120/- AND FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IT WAS ALSO SHOWN AGRICULT URAL INCOME AT ` 25,000/- IN HIS RETURN OF INCOME. THE ASSESSEE INTENTS TO C ARRY ON AGRICULTURAL OPERATIONS. THIS AGRICULTURAL LAND IS SITUATED BEYO ND THE MUNICIPAL LIMITS. THE ASSESSEE HAS NOT TAKEN ANY PERMISSION FROM THE GOVE RNMENT FOR MAKING PLOTS, AS THE ASSESSEE COMPANY NEVER HAD ANY INTENT ION TO MAKE THE LAND INTO PLOTS AND CARRY ON REAL ESTATE BUSINESS IN RES PECT OF THE LAND. THE ASSESSEE HAS SOLD LAND AS IT IS CONDITION. COPIES O F SALE DEEDS OF THE ABOVE SAID LAND ARE BROUGHT ON RECORD BY THE ASSESSEE BEF ORE THE LOWER AUTHROITIES TO PROVE THE FACT THAT THE LAND HELD/SOLD BY THE AS SESSEE IS AGRICULTURAL LAND. 5.1. THE AR SUBMITTED THAT THE SALE TRANSACTION EFF ECTED BY THE ASSESSEE IN RESPECT OF THE ABOVE AGRICULTURE LAND CONSTITUTED O NLY SALE OF AGRICULTURE LAND, AND BY NO STRETCH OF IMAGINATION IT CAN BE TR EATED AS ADVENTURE IN ITA NO.2657/16 :- 5 -: TRADE AND SO AS TO TREAT THE SAME AS 'BUSINESS TRAN SACTION' FOR THE FOLLOWING REASONS: I) PURCHASE AND HOLDING OF LAND FOR A PERIOD AND SU BSEQUENT SALE THEREOF ITSELF CANNOT BE AN INDICATOR TO HOLD THAT THE INTENTION OF THE ASSESSEE WAS TO CARRY ON BUSINESS WITH THOSE AS SETS. THE INTENTION CANNOT BE PRESUMED UNLESS SUPPORTED BY EV IDENCE. IN THIS CASE THE TREATMENT GIVEN BY THE ASSESSEE FOR T HIS ASSET IN THE ACCOUNT BOOKS CANNOT INDICATE THAT THE INTENTIO N OF THE ASSESSEE IS TO HOLD THE SAME AS BUSINESS ASSET TO HAVE GOOD RETURNS FROM THE SAME. II) THE ASSET ACQUIRED WAS AGRICULTURE LAND AS PER THE EVIDENCE BROUGHT ON RECORD ON 16-09-2009 FOR ` 4,24,74,120/-(INCLUDING STAMP DUTY). IT WAS SOLD ON 1-4-2010 IN THE A.Y. 20 11-12 FOR A CONSIDERATION OF ` 9 CRORES. THUS, THE ASSESSEE HELD THE AGRICULTURE LAND FOR ABOUT 6 MONTHS. DURING THAT PERIOD THE ASSESSEE CARRIED ON REGULAR AGRICULTURAL OPERATIONS IN THE LAND. IN THE LIGHT OF FAVOURABLE MARKET CONDITIONS THE AS SESSEE THOUGHT IT GOOD TO SELL THE ASSET TO REALIZE A GOOD AMOUNT. REALIZATION OF BETTER PRICE IN A BOOMING MARKET CAN NOT BE CONSIDERED AS AN ADVENTURE IN TRADE III) THE EXPRESSION ADVENTURE IN THE NATURE OF TRAD E OCCURS IN THE DEFINITION OF BUSINESS UNDER SECTION 2(13) BUT THE EXPRESSION ADVENTURE IN THE NATURE OF TRADE HAS NOT BEEN DEFIN ED IN THE ACT. IT MAY BE PERTINENT TO MENTION HERE THAT A SPE CIFIC TRANSACTION PARTAKE THE CHARACTER OF BUSINESS OR AN ADVENTURE IN ITA NO.2657/16 :- 6 -: THE NATURE OF TRADE OR REALIZATION OF CAPITAL ASSET OR A MERE CONVERSION OF ASSET HAS TO BE DECIDED DEPENDING UPO N FACTS OF EACH CASE. IV) IN DECIDING AS TO WHETHER A PARTICULAR TRANSACT ION IS AN ADVENTURE IN THE NATURE OF TRADE, THE ASSESSING OFFICER MUST CONSIDER ALL THE RELEVANT AND PROVED FACTS AND CIRCUMSTANCES. RE ALIZATION OF INVESTMENTS CONSISTING OF PURCHASE OF AGRICULTURAL LAND AND RESALE, THOUGH PROFITABLE ARE CLEARLY OUTSIDE THE D OMAIN OF ADVENTURE IN THE NATURE OF TRADE. V) THE ASSESSEE TREATED THE ASSETS AS INVESTMENT IN AGRICULTURAL LAND. THEREFORE DISPOSAL OF THE SAME WOULD NOT CONV ERT, WHAT WAS A CAPITAL ACCRETION, TO AN ADVENTURE IN THE NAT URE OF TRADE. TO MAKE IT MORE CLEAR, SALE OF AGRICULTURAL LAND BY THE ASSESSEE AND REALISATION OF GOOD PRICE WOULD NOT ALTER THE B ASIC NATURE AND CHARACTERISTIC OF THE TRANSACTION. THERE WAS NO ELEMENT OF TRADE ATTACHED TO THE ACTIVITY OF THE ASSESSEE IN P URCHASE AND SALE OF THE LAND. A CONTINUOUS BUSINESS REQUIRES MO RE ACTIVITY AND GREATER ORGANIZATION. THIS IS ABSENT IN THE TRA NSACTION OF SALE OF LAND BY THE ASSESSEE. THEREFORE, ALTHOUGH T HERE IS PROFIT IN THE TRANSACTION THE TRANSACTION CANNOT BE CHARAC TERIZED AS AN ADVENTURE IN THE NATURE OF TRADE. VI) WHETHER A TRANSACTION IN RESPECT OF AN ASSET IS CAPITAL OR BUSINESS INCOME BEING ADVENTURE IN THE NATURE OF TR ADE DEPENDS ON THE FACTS AND CIRCUMSTANCES OF THE CASE. THERE ARE MANY FACTORS LIKE FREQUENCY OF TRANSACTIONS, PERIOD OF HOLDING, INTENTION FOR RESALE ETC, WHICH DETERMINE WHETHER T HE GAIN ARISING OF A TRANSACTION IS IN THE PROCESS OF REALI SATION OF INVESTMENT OR IN THE COURSE OF BUSINESS. THE MERE F ACT THAT THE PERSON HAS PURCHASED A LAND AND SUBSEQUENTLY SOLD I T, GIVING RISE TO A SUBSTANTIAL PROFIT CANNOT CHANGE THE CHAR ACTER OF THE ITA NO.2657/16 :- 7 -: TRANSACTION. IT IS THE GENERAL HUMAN TENDENCY TO EA RN PROFIT OUT OF CAPITAL ASSET. NO ONE INVESTS TO INCUR A LOSS. I F THE MARKET CONDITION SUDDENLY GOES UP OR DOWN, IT IS ALWAYS TH E TENDENCY OF A PERSON TO TAKE A QUICK DECISION SO THAT THE RE ALIZATION ON THE INVESTMENT IS MAXIMUM OR THE LOSS IS MINIMUM. VII) AS ALREADY MENTIONED THE ASSESSEE CARRIED ON A GRICULTURAL OPERATIONS IN THE SAID AGRICULTURE LAND. IN THAT PR OCESS THE ASSESSEE ITSELF INVOLVED IN THE PRIMARY OPERATION S UCH AS PLOUGHING, TILLING, SOWING, WATERING ETC. THE ASSES SEE HAS DECLARED AGRICULTURAL INCOME OF ` 25,000/- IN THE ASSESSMENT YEAR UNDER CONSIDERATION. VIII) BY SELLING THE ABOVE AGRICULTURE PRODUCE THE ASSESSEE EARNED AGRICULTURE RECEIPTS WHICH WERE BROUGHT INTO THE AC COUNT BOOKS OF THE ASSESSEE AS SHOWN IN THE STATEMENT OF INCOME AS WELL AS RETURN OF INCOME. 5.2. FROM THE ABOVE, IT IS CLEAR THAT: A) THE ASSESSEE PURCHASED AGRICULTURE LAND NOW UNDE R CONSIDERATION SITUATED BEYOND 8 KM FROM THE MUNICIPAL LIMITS. B) THE ASSESSEE TREATED THE SAME AS FIXED ASSET IN THEIR BOOKS AS LAND AT THALAMBUR AT ` 4,24,74,120/-. C) THE LAND WAS IDENTIFIED AS AGRICULTURE LAND IN T HE REVENUE RECORDS. D) THE ASSESSEE CARRIED ON AGRICULTURAL OPERATIONS IN THE LAND. E) THE ASSESSEE DID NOT CARRY ON ANY COMMERCIAL ACT IVITY WITH REFERENCE TO THAT LAND SUCH AS GETTING OF APPROVAL FOR CONVER TING INTO SITES, PLOTTING ITA NO.2657/16 :- 8 -: OF THE SAME INTO SITES ETC. THUS, THE CHARACTER OF THE LAND I.E., AGRICULTURE NATURE WAS CONTINUING TILL THE SAME WAS SOLD BY THE ASSESSEE COMPANY. F) BECAUSE OF FAVOURABLE MARKET CONDITIONS THE ASSE SSEE SOLD THE LAND AND THE SAME FETCHED THEM A GOOD PRICE. 5.3. THEREFORE, IN THE PRESENT CASE THERE IS NO DIS PUTE REGARDING THE FACT THAT THE ASSESSEES ACQUIRED AGRICULTURAL LAND. THERE IS ALSO NO DISPUTE THAT THERE WAS AGRICULTURAL OPERATION IN THIS LAND BEFORE SALE OF THIS LAND. 5.4. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE AMOUNT RECEIVED ON SALE OF THIS AGRICULTURAL PROPERTY IS NOTHING BUT O N ACCOUNT OF ADVENTURE IN THE NATURE OF TRADE AND THE SAME WAS BROUGHT INTO I NCOME FROM BUSINESS. IN THIS CASE, THE ASSESSEE HELD THE LAND ALWAYS AS INV ESTMENT AND NOT AT ALL CONVERTED INTO STOCK-IN-TRADE. THE CHARACTER OF THE LAND IN THE HANDS OF THE ASSESSEES HAS NOT CHANGED. THERE IS NO MATERIAL ON RECORD IN RESPECT OF THIS LAND TO SHOW THAT THE ASSESSEE CARRIED ON ACTIVITIE S OF BUYING AND SELLING OF LAND IN A SYSTEMATIC MANNER SO AS TO JUSTIFY THE AC TION OF THE AO IN TREATING THE ACTIVITIES OF THE ASSESSEE AS ADVENTURE IN THE NATURE OF TRADE. THE ASSESSEE IS NOT IN THE BUSINESS OF REAL ESTATE AS A LLEGED BY THE LOWER AUTHORITIES. ON THE OTHER HAND, THE ASSESSEE IS ENG AGED IN THE BUSINESS OF BUILDER AND FLAT PROMOTER AND DIRECTOR IN AN INFRA STRUCTURE DEVELOPMENT COMPANY AS EVIDENCED BY FROM 3CD ATTACHED TO THE AUDIT REPORT ISSUED ITA NO.2657/16 :- 9 -: U/S 44 AB OF THE ACT. THE LAND WAS SOLD BY THE ASSE SSEES IN ACREAGE AND NOT BY MAKING PLOTS. 5.5. NOW THE QUESTION AS TO WHETHER A LAND IS AGRIC ULTURAL LAND OR NOT IS ESSENTIALLY A QUESTION OF FACT. THE QUESTION HAS TO BE ANSWERED IN EACH CASE HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THA T CASE. THERE MAY BE FACTORS BOTH FOR AND AGAINST A PARTICULAR POINT OF VIEW. WE HAVE TO ANSWER THE QUESTION ON A CONSIDERATION OF ALL OF THEM, A P ROCESS OF EVALUATION AND THE INFERENCE HAS TO BE DRAWN ON A CUMULATIVE CONSI DERATION OF ALL THE RELEVANT FACTS. IT MAY BE STATED HERE THAT NOT ALL THE FACTORS OR TESTS WOULD BE PRESENT OR ABSENT IN ANY CASE AND THAT IN EACH C ASE ONE OR MORE OF THE FACTORS MAY MAKE APPEARANCE AND THAT ULTIMATE DECIS ION WILL HAVE TO BE REACHED ON A BALANCED CONSIDERATION OF THE TOTALITY OF THE CIRCUMSTANCES. 5.6. THE EXPRESSION 'AGRICULTURAL LAND' IS NOT DEFI NED IN THE ACT, AND NOW, WHETHER IT IS AGRICULTURAL LAND OR NOT HAS TO BE DE TERMINED BY USING THE TESTS OR METHODS LAID DOWN BY THE COURTS FROM TIME TO TIM E. 5.7. THE HON'BLE SUPREME COURT IN THE CASE OF SMT. SARIFABIBI MOHMED IBRAHIM (204 ITR 631) HAS APPROVED THE DECISION OF A DIVISION BENCH OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIDDHARTH J. DESAI (1982) 28 CTR (GUJ) 148 : (1983) 139 ITR 628 (GUJ) AND HAS LAID DOWN 13 TESTS OR FACTORS WHICH ARE REQUIRED TO BE CONSIDERED AND UPO N CONSIDERATION OF WHICH, THE QUESTION WHETHER THE LAND IS AN AGRICULT URAL LAND OR NOT HAS TO BE DECIDED OR ANSWERED. WE REPRODUCE THE SAID 13 TESTS AS FOLLOWS: ITA NO.2657/16 :- 10 - : (I) WHETHER THE LAND WAS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL AND WHETHER IT WAS SUBJECT TO THE PAYM ENT OF LAND REVENUE? (II) WHETHER THE LAND WAS ACTUALLY OR ORDINARILY US ED FOR AGRICULTURAL PURPOSES AT OR ABOUT THE RELEVANT TIME? (III) WHETHER SUCH USER OF THE LAND WAS FOR A LONG PERIOD OR WHETHER IT WAS OF A TEMPORARY CHARACTER OR BY ANY OF A STOPGAP ARRANGEMENT? (IV) WHETHER THE INCOME DERIVED FROM THE AGRICULTUR AL OPERATIONS CARRIED ON IN THE LAND BORE ANY RATIONAL PROPORTION TO THE INVESTMENT MADE IN PURCHASING THE LAND? (V) WHETHER, THE PERMISSION UNDER S. 65 OF THE BOMB AY LAND REVENUE CODE WAS OBTAINED FOR THE NON-AGRICULTURAL USE OF T HE LAND? IF SO, WHEN AND BY WHOM (THE VENDOR OR THE VENDEE)? WHETHE R SUCH PERMISSION WAS IN RESPECT OF THE WHOLE OR A PORTION OF THE LAND? IF THE PERMISSION WAS IN RESPECT OF A PORTION OF THE LAND AND IF IT WAS OBTAINED IN THE PAST, WHAT WAS THE NATURE OF THE US ER OF THE SAID PORTION OF THE LAND ON THE MATERIAL DATE? (VI) WHETHER THE LAND, ON THE RELEVANT DATE, HAD CE ASED TO BE PUT TO AGRICULTURAL USE? IF SO, WHETHER IT WAS PUT TO AN A LTERNATIVE USE? WHETHER SUCH LESSER AND/OR ALTERNATIVE USER WAS OF A PERMANENT OR TEMPORARY NATURE? (VII) WHETHER THE LAND, THOUGH ENTERED IN REVENUE RECORDS, HAD NEVER BEEN ACTUALLY USED FOR AGRICULTURE, THAT IS, IT HAD NEVER BEEN ITA NO.2657/16 :- 11 - : PLOUGHED OR TILLED? WHETHER THE OWNER MEANT OR INTE NDED TO USE IT FOR AGRICULTURAL PURPOSES? (VIII) WHETHER THE LAND WAS SITUATED IN A DEVELOPE D AREA? WHETHER ITS PHYSICAL CHARACTERISTICS, SURROUNDING SITUATION AND USE OF THE LAND IN THE ADJOINING AREA WERE SUCH AS WOULD INDICATE THAT THE LAND WAS AGRICULTURAL? (IX) WHETHER THE LAND ITSELF WAS DEVELOPED BY PLOT TING AND PROVIDING ROADS AND OTHER FACILITIES? (X) WHETHER THERE WERE ANY PREVIOUS SALES OF PORTIO NS OF THE LAND FOR NON-AGRICULTURAL USE? (XI) WHETHER PERMISSION UNDER S. 63 OF THE BOMBAY T ENANCY AND AGRICULTURAL LAND ACT, 1948, WAS OBTAINED BECAUSE T HE SALE OR INTENDED SALE WAS IN FAVOUR OF A NON-AGRICULTURIST? IF SO, WHETHER THE SALE OR INTENDED SALE TO SUCH NON-AGRICULTURISTS WA S FOR NON- AGRICULTURAL OR AGRICULTURAL USER? (XII) WHETHER THE LAND WAS SOLD ON YARDAGE OR ON A CREAGE BASIS? (XIII) WHETHER AN AGRICULTURIST WOULD PURCHASE THE LAND FOR AGRICULTURAL PURPOSES AT THE PRICE AT WHICH THE LAND WAS SOLD AN D WHETHER THE OWNER WOULD HAVE EVER SOLD THE LAND VALUING IT AS A PROPERTY YIELDING AGRICULTURAL PRODUCE ON THE BASIS OF ITS YIELD?' ITA NO.2657/16 :- 12 - : 6. IN THE PRESENT CASE, THERE IS NO DISPUTE THAT T HE ASSESSEE'S LANDS WERE CLASSIFIED AS AGRICULTURAL LAND IN THE REVENUE RECO RDS. AS HELD BY THE APEX COURT, WHEN THE LAND IS ASSESSED TO THE LAND REVENU E AS AGRICULTURAL LAND UNDER STATE REVENUE LAW, IT IS CERTAINLY A RELEVANT FACTOR BUT NOT CONCLUSIVE. THE LAND WAS ALREADY CLASSIFIED AS AGRICULTURAL LAN D IN THE REVENUE RECORDS AND THE ASSESSEE CARRIED ON AGRICULTURAL ACTIVITIES IN THE SAID LAND, WHICH WAS CONFIRMED BY THE RETURN OF INCOME FILED BY THE ASSE SSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AS THE ASSESSEE DECLARED I NCOME FROM AGRICULTURAL OPERATIONS. THE REVENUE EARNED FROM AGRICULTURAL OP ERATIONS WAS REFLECTED IN THE RETURN OF INCOME FILED BEFORE THE DEPARTMENT. S INCE THE INTENTION OF THE COMPANY IS NOT TO USE THE AGRICULTURAL LAND FOR NON -AGRICULTURAL PURPOSES, THERE IS NO QUESTION OF TAKING OF ANY PERMISSION FO R CONVERSION OF THE LAND. 6.1. THE A.R SUBMITTED THAT ASSESSEE CARRIED ON AGR ICULTURAL OPERATIONS IN THE LAND. THE OWNER INTENDED TO USE IT FOR AGRICULT URAL PURPOSES ONLY AND THE INTENTION OF THE OWNER IS FULFILLED SINCE THE AGRIC ULTURAL ACTIVITIES GENERATED INCOME. THE LAND WAS SITUATED IN A AREA WHEREIN LOT OF AGRICULTURAL ACTIVITIES ARE BEING CARRIED ON. NO DEVELOPMENT OF THE LAND WA S DONE BY MAKING PLOTS AND PROVIDING ROADS AND OTHER FACILITIES. IT IS WRO NG TO CONCLUDE THAT WORK HAS BEEN DONE AIMING TO PLOTTING, DEVELOPING INFRAS TRUCTURE BECAUSE THE LAND DEVELOPMENT WAS DONE IN OTHER LAND. THERE WERE NO P REVIOUS SALE OF THE PORTIONS OF THE LAND FOR NON-AGRICULTURAL USE. THE LAND WAS SOLD ONLY AS AGRICULTURAL LANDS AT THE TIME OF SALE AND AGRICULT URAL OPERATIONS WERE CONTINUED AS ON THE DATE OF SALE. THE LAND WAS SOLD ON ACREAGE BASIS ONLY. ITA NO.2657/16 :- 13 - : THE LAND WAS SOLD AT PREVAILING MARKET PRICES ONLY. NON PRODUCTION OF EVIDENCE FOR AGRICULTURAL EXPENDITURE WHICH WAS ACT UALLY INCURRED DOES NOT MAKE AN AGRICULTURAL LAND A NON-AGRICULTURAL ONE. T HE EVIDENCE FOR RECEIPT OF AGRICULTURAL INCOME IS ON RECORD. SIMPLY BECAUSE IN COME WAS LESS 'ONE CANNOT MAKE AN AGRICULTURAL INCOME AS A BUSINESS IN COME'. WHAT HAS TO BE SEEN HERE IS WHETHER THE INCOME WAS RECEIVED ON AGR ICULTURAL ACTIVITY OR NOT INSTEAD OF SEEING THE RATIO. IT IS WRONG TO SAY THA T THE ACTIVITIES OF THE ASSESSEE, WHICH ARE AGRICULTURAL IN FACT, CONFIRM T O THE COMMERCIAL NATURE. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT THE J UDGEMENT OF SUPREME COURT IN THE CASE OF SMT. SARIFABIBI MOHAMED IBRAHI M & ORS. (CITED SUPRA) SUPPORTS THE CASE OF THE ASSESSEE RATHER THAN AGAIN ST THE ASSESSEE. 6.2. A REFERENCE COULD BE MADE TO THE CASE OF CWT V S. OFFICER-IN- CHARGE (COURT OF WARDS) (105 ITR 138) (SC) WHEREIN THE CON STITUTION BENCH OF THE HON'BLE SUPREME COURT STATED THAT THE TERM 'AGRICUL TURE' AND 'AGRICULTURAL PURPOSE' WAS NOT DEFINED IN THE INDIAN IT ACT AND THAT WE MUST NECESSARILY FALL BACK UPON THE GENERAL SENSE IN WHICH THEY HAVE BEEN UNDERSTOOD IN COMMON PARLANCE. THE HON'BLE SUPREME COURT HAS 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 ITA NO.2657/16 :- 14 - : 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 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 HON'BLE SUPREME COURT IN THE AFORESAID CASE OBSERVED THAT THE ENTRIES IN REVENUE RECORDS WERE CONSIDERED GOOD PRI MA FACIE EVIDENCE. 6.3. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF DR. MOTIBHAI D. PATEL VS. CIT (1982) 27 CTR (GUJ) 238 : (1981) 127 ITR 671 (GUJ) REFERRING TO THE CONSTITUTION BENCH OF THE HON'BLE SUPREME COURT HAD STATED THAT IF AGRICULTURAL OPERATIONS ARE BEING CARRIED ON IN THE LAND IN QUESTION AT THE 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 WAS S OLD. THE DIVISION BENCH OF THE HON'BLE GUJARAT HIGH COURT FURTHER HELD THAT TH ERE WAS NOTHING ON RECORD TO SHOW THAT THE PRESUMPTION ROSE FROM THE LONG USE R OF THE LAND FOR AGRICULTURAL PURPOSE AND ALSO THE PRESUMPTION ARISI NG FROM THE ENTRIES OF THE REVENUE RECORDS ARE REBUTTED. ITA NO.2657/16 :- 15 - : 6.4. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF C WT VS. H. V. MUNGALE (1983) 32 CTR (BOM) 301 : (1984) 145 ITR 208 (BOM) HELD THAT THE HON'BLE SUPREME COURT HAD POINTED OUT THAT THE ENTRIES RAIS ED ONLY A REBUTTABLE PRESUMPTION AND SOME EVIDENCE WOULD, THEREFORE, HAV E TO BE LED BEFORE TAXING AUTHORITIES ON THE QUESTION OF INTENDED USER OF THE LAND UNDER CONSIDERATION BEFORE THE PRESUMPTION COULD BE REBUT TED. THE COURT FURTHER HELD THAT THE SUPREME COURT HAD CLEARLY POINTED OUT THAT THE BURDEN TO REBUT THE PRESUMPTION WOULD BE ON THE REVENUE. THE HON'BL E BOMBAY HIGH COURT HELD THAT THE RATIO OF THE DECISION OF THE SUPREME COURT WAS THAT WHAT IS TO BE DETERMINED IS THE CHARACTER OF THE LAND ACCORDIN G 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 TH AT IT WAS ACTUALLY AND ORDINARILY USED FOR AGRICULTURAL PURPOSE AT THE REL EVANT TIME. 6.5. WE MAY ALSO REFER TO THE CASE OF CIT VS. MANILAL SOMNATH (1977) 106 ITR 917 (GUJ), WHEREIN THE DIVISION BENCH OF THE HO N'BLE GUJARAT HIGH COURT OBSERVED THAT THE POTENTIAL NON- AGRICULTURAL VALUE OF THE LAND FOR WHICH A PURCHASER MAY BE PREPARED TO PAY A LARGE PRICE WOUL D NOT DETRACT FROM ITS CHARACTER AS AGRICULTURAL LAND ON THE RELEVANT DATE OF SALE. 6.6. WE MAY ALSO REFER TO THE CASE OF GOPAL C. SHARMA VS. CIT (1994) 116 CTR (BOM) 377 : (1994) 209 ITR 946 (BOM), IN WHICH, THE CASE OF SMT. SARIFABIBI MOHAMED IBRAHIM & ORS. VS. CIT (SUPRA) WAS REFERRED TO AND ITA NO.2657/16 :- 16 - : 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 NATURE OF TRADE. IN OTHER WORDS, THE PRICE PAID IS NOT DECISIVE TO SAY WHETHER THE LAND IS AGRICULTURAL OR NOT. 6.7. WE MAY REFER TO A JUDGMENT OF THE HON'BLE MADR AS HIGH COURT IN THE CASE OF CWT VS. E. UDAYAKUMAR (2006) 284 ITR 511 (M AD) WHERE THE HON'BLE MADRAS HIGH COURT HAS REFERRED TO THE DECIS ION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SMT. SAVITA RANI (2004) 186 CTR (P&H) 240 : (2004) 270 ITR 40 (P&H) AND HAS OBS ERVED 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 COMMERC IAL AREA OR THE LAND HAVING BEEN PARTIALLY UTILISED FOR NON-AGRICUL TURAL PURPOSES OR THAT THE VENDEES HAD ALSO PURCHASED IT FOR NON-A GRICULTURAL PURPOSES, WERE TOTALLY IRRELEVANT 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 CLAIM ED EXEMPTION FROM LEVY OF CAPITAL GAINS UNDER S. 54B OF THE ACT ON THE GROUND THAT THE LAND SOLD BY HER WAS AGRICULTURAL LAND AND THE SALE ITA NO.2657/16 :- 17 - : PROCEEDS WERE INVESTED IN THE PURCHASE OF AGRICULTU RAL 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 ASSESSEE HOLDING THAT THE TRANSACTION IN QUESTION DULY FULFILLED THE CONDITIO NS SPECIFIED FOR RELIEF. ON FURTHER APPEAL TO THE HIGH COURT, THE PU NJAB & HARYANA HIGH COURT FOUND THAT THE FINDING THAT THE LAND HAD BEEN USED FOR AGRICULTURAL PURPOSES WAS BASED ON CO GENT AND RELEVANT MATERIAL. THE REVENUE RECORD SUPPORTED THE CLAIM. EVEN THE RECORDS OF THE IT DEPARTMENT SHOWED THAT THE AS SESSEE HAD DECLARED AGRICULTURAL INCOME FROM THIS LAND IN HER RETURNS FOR THE PRECEDING TWO YEARS. THE LAND BEING LOCATED IN COMM ERCIAL AREA OR THE LAND HAVING BEEN PARTIALLY UTILISED FOR NON- AGRICULTURAL PURPOSES OR THAT THE VENDEES HAD ALSO PURCHASED IT FOR NONAGRICULTURAL PURPOSES, WERE TOTALLY IRRELEVANT C ONSIDERATION FOR THE PURPOSES OF APPLICATION 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 ASSESSEE OWNED AGRICULTURAL LAND WITHIN THE LIMITS OF TIRUNELVELI CORPORATION AND HE HAD NOT PUT UP ANY CONSTRUCTION THEREON, THE ASS ESSEE IS ENTITLED TO CLAIM EXEMPTION FROM THE WT ACT FOR THE ASSESSMENT OF WEALTH-TAX. THAT THE LAND IN QUESTION IS ADJACEN T TO THE HOSPITAL IS TOTALLY IRRELEVANT.' 7. ADVERTING TO THE FACTS OF THE PRESENT CASE, THE LAND IN QUESTION IS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL L AND AND THERE IS NO DISPUTE REGARDING THIS ISSUE AND ACTUAL CULTIVATION HAS BEE N CARRIED ON THIS LAND AND ITA NO.2657/16 :- 18 - : INCOME WAS DECLARED FROM THIS LAND IN THE RETURN OF INCOME FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR AS AGRICULTURAL IN COME. IT IS ALSO AN ADMITTED FACT THAT THE AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO SHOW THAT THE AGRICULTURAL LAND WAS USED FOR NON-AGRICUL TURAL PURPOSES AND THE ASSESSEE HAS NOT PUT THE LAND TO ANY PURPOSES OTHER THAN AGRICULTURAL PURPOSES. 8. IT IS ALSO AN ADMITTED POSITION THAT MERE INCL USION OR PROXIMITY OF LAND TO ANY DEVELOPMENT AREA 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, BEC AUSE THE SURROUNDING AREA WAS TOTALLY DEVELOPED AND MERE POSSIBILITY TO PUT T HE LAND INTO USE FOR NON- AGRICULTURAL PURPOSES WOULD NOT CHANGE THE CHARACTE R OF THE AGRICULTURAL LAND INTO NON-AGRICULTURAL LAND, WHEN THE LAND WAS SOLD BY THE ASSESSEE. IT IS ALSO AN ADMITTED POSITION THAT THE ASSESSEE HAD NOT APPL IED 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 LAND IS CLASSIFIED AS AGRICULTURAL LAND AND HAS NOT BEEN CHANGED FROM AGRICULTURAL LAND TO NON-AGRICULTURAL LAND AT THE R ELEVANT POINT OF TIME WHEN THE LAND WAS SOLD BY THE ASSESSEE. IT IS ALSO NOT I N DISPUTE THAT THERE WAS NO ACTIVITY UNDERTAKEN BY THE ASSESSEE OF DEVELOPING T HE LAND BY PLOTTING AND PROVIDING ROADS AND OTHER FACILITIES AND THERE WAS NO INTENTION ALSO ON THE ITA NO.2657/16 :- 19 - : PART OF THE ASSESSEES HEREIN TO PUT THE SAME FOR NO N-AGRICULTURAL PURPOSES AT TIME OF THEIR OWNERSHIP THAT LAND. NO SUCH FINDING HAS BEEN GIVEN BY THE DEPARTMENT. NO MATERIAL OR EVIDENCE IN SUPPORT OF T HE FACT THAT THE ASSESSEES HAVE PUT THE LAND IN USE FOR NON-AGRICULT URAL PURPOSES HAS BEEN BROUGHT ON RECORD. AT THE RELEVANT POINT OF TIME TH E LAND WAS USED FOR AGRICULTURAL PURPOSES ONLY AND NOTHING IS BROUGHT O N RECORD TO SHOW THAT THE LAND WAS PUT IN USE FOR NON-AGRICULTURAL PURPOSES B Y THE ASSESSEE. IN VIEW OF THE DECISION OF THE HON'BLE HIGH COURT IN THE CASE OF GOPAL C. SHARMA VS. CIT (209 ITR 946) (BOM), IT IS ALSO CLEAR THAT THE PRO FIT MOTIVE OF THE ASSESSEE IN SELLING THE LAND WITHOUT ANYTHING MORE BY ITSELF CAN NEVER BE DECISIVE TO SAY THAT THE ASSESSEE USED THE LAND FOR NON-AGRICULTURAL PURPOSES. WE MAY ALSO REFER TO A DECISION OF THE HON'BLE SUPR EME COURT IN THE CASE OF N. SRINIVASA RAO VS. SPECIAL COURT (2006) 4 SCC 214 WHERE IT WAS OBSERVED THAT THE FACT THAT AGRICULTURAL LAND IN QUESTION IS INCLUDED IN URBAN AREA WITHOUT MORE, HELD NOT ENOUGH TO CONCLUDE THAT THE USER OF THE SAME HAD BEEN ALTERED WITH PASSAGE OF TIME. THUS, THE FACT T HAT THE LAND IN QUESTION IN THE INSTANT 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. 9. IT IS ALSO EVIDENT FROM THE MEMORANDUM EXPLAINING T HE PROVISIONS OF FINANCE ACT , 1970, WHEREBY S. 2(14) WAS AMENDED SO AS TO INCLUDE THE AGRICULTURAL LAND LOCATED WITHIN THE JURISDICTION O F A MUNICIPALITY IN THE ITA NO.2657/16 :- 20 - : DEFINITION OF THE EXPRESSION 'CAPITAL ASSET'. THE R ELEVANT PORTION OF THE SAID MEMORANDUM IS REPRODUCED HEREUNDER: '30. ... THE FINANCE ACT , 1970 HAS, ACCORDINGLY, AMENDED THE RELEVANT PROVISIONS OF THE INCOME-TAX ACT SO AS TO BRING WITHIN THE SCOPE OF TAXATION CAPITAL GAINS ARISING FROM THE TR ANSFER 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 AC CORDING TO THE LAST PRECEDING CENSUS FOR WHICH THE RELEVANT FIGURE S HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR . THE CENTRAL GOVERNMENT HAS BEEN AUTHORISED TO NOTIFY IN THE OFF ICIAL GAZETTE ANY AREA OUTSIDE THE LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD HAVING A POPULATION OF NOT LESS THAN TEN THOU SAND UP TO A MAXIMUM DISTANCE OF 8 KILOMETRES FROM SUCH LIMITS, FOR THE PURPOSES OF THIS PROVISION. SUCH NOTIFICATION WILL BE ISSUED BY THE CENTRAL GOVERNMENT, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANISATION OF SUCH AREA, AND, WHEN ANY SUCH AREA IS NOTIFIED BY THE CENTRAL GOVERNMENT, AGRICULTURAL LAND SITUAT ED WITHIN SUCH AREA WILL STAND INCLUDED WITHIN THE TERM 'CAPITAL A SSET'. AGRICULTURAL LAND SITUATED IN RURAL AREAS, I.E., AREAS OUTSIDE A NY MUNICIPALITY OR CANTONMENT BOARD HAVING A POPULATION OF NOT LESS TH AN TEN THOUSAND AND ALSO BEYOND THE DISTANCE NOTIFIED BY T HE CENTRAL GOVERNMENT FROM THE LIMITS OF ANY SUCH MUNICIPALITY OR CANTONMENT BOARD, WILL CONTINUE TO BE EXCLUDED FROM THE TERM 'CAPITAL ASSET'. 9.1 IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE OPINION THAT THE LAND IN QUESTION CANNOT BE CONSIDERED AS STOCK IN T RADE IN THE HANDS OF ITA NO.2657/16 :- 21 - : ASSESSEE. IT IS NOTHING BUT AGRICULTURAL LAND IN T ERMS OF SEC.2(14)(III) R.W.S. 10(1) OF THE ACT AND TRANSFER OF THAT LAND C ANNOT LEAD TO TAXABLE CAPITAL GAINS OR INCOME FROM BUSINESS. 9.2 FURTHER, IT IS ALSO BE NOTED THAT OUR ABOVE VI EW IS ALSO SUPPORTED BY THE RECENT JUDGMENT OF JURISDICTIONAL HIGH COURT IN T.C.A.NO. 483/2016 DATED 1-9-2016 IN THE CASE OF M/S MANSI FI NANCE CHENNAI LTD. IN VIEW OF THE ABOVE, WE DIRECT THE AO TO CONS IDER GAIN ON SALE OF IMPUGNED LAND AS EXEMPTED FROM CAPITAL GAIN AND TO TREAT AS AGRICULTURAL INCOME ONLY. ACCORDINGLY, WE ALLOW T HE GROUND TAKEN BY THE ASSESSEE IN HIS APPEAL. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED ON 17 TH FEBRUARY, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) & / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 17 TH FEBRUARY, 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF