Smt. R. Uma Devi, Hyderabad V. Dy.CIT, Central Circle-(5_, Hyderabad

ITA 350/HYD/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8957 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 03-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: K C DEVDAS SHRI A SRINIVAS
• Keywords: Capital asset; Business income; Search and seizure; Wrong claim; Onus to prove
• Section: 143(3); 2(14); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SMT.ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.350/HYD/14 : ASSESSMENT YEAR 2008 - 09 SMT. R.UMA DEVI, HYDERABAD (PAN AIIPR 5276 R ) V/S. DY. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 5, HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : S HRI K.C.DEVDAS SHRI A.SRINIVAS RESPONDENT BY : SHRI RAMAKRISHNA BANDI DR DATE OF HEARING 24.2.2015 DATE OF PRONOUNCEMENT 11.3.2015 O R D E R PER P.M.JAGTAP, ACCOUNTANT MEMBER : TH IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) VII, HYDERABAD DATED 27.12.2013. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL. A SEARCH AND SEIZURE ACTION WAS CONDUCTED IN THE CASES BELONGING TO VENIGALLA ANAND PRASAD GROUP ON 7.10.2009. DURING THE COURSE OF THE SAID SEARCH, CERTAIN DOCUMENTS RELATING TO THE ASSESSEE WERE FOUND AN D SEIZED. CONSEQUENTLY, A NOTICE UNDER S.153C WAS ISSUED BY THE ASSESSING OFFICER ON 3.9.2010 IN RESPONSE TO WHICH RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY THE ASSESSEE, DECLARING TOTAL INCOME OF RS.2,53,260. IN THE SAID RETURN, PRO FIT ARISING FROM SALE OF LAND AMOUNTING TO RS.1,96,92,500 WAS DECLARED BY THE ASSESSEE AS SHORT TERM CAPITAL GAINS, AND THE SAME WAS CLAIMED TO BE EXEMPT ON THE GROUND THAT THE LAND SOLD, BEING AN I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 2 AGRICULTURAL LAND, WAS NOT A CAPITAL ASSET UNDER S.2(14) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE CLAIM OF THE ASSESSEE FOR THIS EXEMPTION WAS EXAMINED BY THE ASSESSING OFFICER IN DETAIL, AND ON SUCH EXAMINATION, HE RECORDED HIS FINDINGS/OBSERVATIONS, WHICH, AS SUMMARIZED BY THE LEARNED CIT (A) IN THE IMPUGNED ORDER, ARE AS UNDER - (A) THE APPELLANT HAD PURCHASED 4 ACRES IN SURVEY NO.66 8 (AC 0.12 GTS), SY. NO.669(AC 0.09 GUNTAS), SY.NO.6709AC 2.10 GTS) AND SY.NO.671 (AC 0.09 GTS) SITUATED AT BOWRAMPET, DUNDIGAL, RR DIST, FROM ONE SRI G.SRINIVASA RAO, FOR AN AMOUNT OF RS.6,15,000/ - THROUGH REGISTERED SALE DEED DOC. NO.3898/2005, DATED 02/04/2005. (B) ASSESSEE SOLD 2 ACRES , I.E. IN SY. NO.668 (AC 0.12 GTS), SY. NO.669 (AC.1.09 GUNTAS) SY. NO.670(AC.2.10 GTS) AND SY.NO.671 (AC 0.09 GTS ) TO M/S VARUN CONSTRUCTIONS THROUGH THE SALE CUM GPADATED 5 .03.200 8 IN DOCUMENT NO.2794/.20098 FOR AN AMOUNT OF RS. .2,00,00,000/ - . (C) THE APPELLANT HAD PURCHASED AND TRANSACTED IN THE LAND WHICH WAS CONTIGUOUS TO THE LAND PURCHASED AND SIMILARLY TRANSA CTED BY M/S BHAVYA CONSTRUCTIONS PVT LTD (BCPL), SRI V ANANDA PRASAD (MD OF BCPL), AND OTHER INDIVIDUALS, WHO ALL, LIKE THE ASSESSEE - APPELLANT, WERE THE INVESTORS IN M/S BHAVYA CEMENTS PVT LTD, A COMPANY SET UP BY SRI V ANANDA PRASAD. ALL THESE PERSONS HAD SHOWN THE SOURCES OF INVESTMENT IN THE SHARE CAPITAL OF M/S BHAVYA CEMENTS AS SALE PROCEEDS OF THESE LANDS. (D) THE DETAILED INVESTIGATION AND THE EVIDENCES FOUND RELATING TO THE CLAIM OF BHAVYA CONSTRUCTION AND SRI V ANANDA PRASAD WERE NARRATED IN FULL FROM PAGE 2 OF THE ASST. ORDER ONWARDS. THE ASSESSING OFFICER RELIED UPON THE EVIDENCES GATHERED BY THE INVESTIGATION WING LIKE STATE OF LAND, BLANK BILL OF A FERTILIZER VENDOR I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 3 AND SEED COMPANY WITH THE SOFT COPY OF THIS BILL AVAILABLE IN THE HARD DISK, THE NATURE OF BUSINESS OF M/S BHAVYA CONSTRUCTION, THE REVENUE RECORDS AND THE .STATE M ENT OF VILLAGE REVENUE OFFICER (PAGE 5), THE PAST OWNER OF SUCH LAND THE FUTURE OWNER OF SUCH LAND TRANSACTED BY BHAVYA CONSTRUCTION, PHOTOGRAPHIC E VIDENCE OF THE ACTUAL STATE OF LANDS GATHERED BY THE INVESTIGATION WING. PHOTOGRAPHIC EVIDENCES CLEARLY INDICATED THAT NO AGRICULTURAL ACTIVITY WAS UNDERTAKEN ON THIS LAND, COPIES OF THE PHOTOS INDICATING THE STATE OF LAND WERE ON PAGES 8 TO 11 OF THE A SST. ORDER. THE 'SOFT' COPY OF A BILL OF A FIRM AND BLANK BILLS OF ANOTHER FIRM DEALING IN AGRICULTURAL INPUTS LED TO THE CONCLUSION THAT SUSPICIOUS AND BOGUS CLAIM OF EXPENDITURE IS MADE TO CREATE A FACADE OF AGRICULTURAL ACTIVITY, WHEN, IN REALITY, T HERE WAS NO SUCH ACTIVITY. (E) THE LEGAL POSITION REGARDING AGRICULTURAL LAND AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF SARIFABIBI (204 ITR 631) AND THE DECISION OF HON'BLE ITAT, HYDERABAD IN THE CASE OF M/S G.K.PROPERTIES PVT LTD IN ITA NO .773/HYD/07, DATED 27.06.2008 WERE MENTIONED ON PAGES 15 AND 16 OF THE ASST. ORDER. THE AO THEREAFTER CONCLUDED THAT THE LANDS ARE NOT AGRICULTURAL IN NATURE. (F) THE AO ALSO HELD THAT THE LAND WAS NOT SUITED FOR AGRICULTURAL USE AND NO AGRICULTURAL ACTIVITY WAS CARRIED ON. THEREFORE, ALTERNATIVELY, EVEN THE EXEMPTION U/S 2(14) IS NOT AVAILABLE TO BCPL AND THE LAND IS THEREFORE A CAPITAL ASSET IN ITS HAND. (G) THE ENTIRE DISCUSSION ON PAGES 2 TO 16 WAS MENTIONING M/S BCPL BUT IT WAS HELD THAT THIS APPLIES IN TOTO TO MOST OF THE INVESTORS IN BHAVYA CEMENTS LTD INCLUDING THE ASSESSEE SMT. R. UMA DEVI (PAGE 16 OF THE ASST. ORDER). I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 4 (H) THE AO SEEING THE COORDINATED ACTIVITY UNDERTAKEN BY BCPL, ITS MD AND OTHER INVESTORS/SHARE HOLDERS IN DEALING WITH LAND IN SUCH MANNER, CAME TO THE CONCLUSION THAT M/S BCPL AND ITS ASSOCIATES HAVE PERFORMED AN ADVENTURE IN THE COURSE OF NORMAL PROFESSIONAL ACTIVITY WHICH I S BUYING AND SELLING OF LAND ALONG WITH ITS ASSOCIATES. THE AO OBSERVED THAT THE LAND WAS BOUGHT BY ALL THE ASSOCIATES OF BCPL IN THE SAME PERIOD AT BOWRAMPET WHICH WAS ADJACENT TO THE URBAN AGGLOMERATION SPRAWLING AROUND HYDERABAD CITY. THIS INDICATED THA T ALL THESE INDIVIDUALS INVESTED IN THIS L AND KEEPING IN VIEW THE RISING REAL ESTATE MARKET. THE AO ALSO NOTICED THAT THE RISE IN PRICE OF THE LAND WAS AROUND 100 TIMES IS LESS THAN 3 YEARS. THIS FACT ONLY CONFIRMED THE INTENTION OF THE INVESTMENT. THE AO HAD ALSO HELD THAT THE ASSESSEE HAS DONE A SYSTEMATIC ACTIVITY IN THIS PERIOD OF TIME IN AN ESTABLISHED MANNER ALONG WITH OTHER ASSOCIATES. HE, THEREFORE, HELD THAT THE ACTIVITY CARRIED ON BY THE ASSESSEE HAS TO BE TREATED AS CARRYING OUT OF BUSINESS AND THE INCOME FROM SALE OF LAND SHOULD BE TREATED AS AN ADVENTURE IN THE NATURE OF TRADE. ACCORDINGLY, HE BROUGHT IT TO TAX UNDE R SECTION 28 OF THE ACT (PAGE 1 9 & 20 OF ASST. ORDER). (I) IN COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE STAT ED TH AT AGR ICULTURAL LAND WAS PURCHASED FROM ONE SRI G.SRINIVASA RAO AND ACRES W ERE SOLD TO M/S. VARUN CONSTRUCTION AS AGRICULTURAL LAND. THE ASSESSEE ALSO SUBMITTED THE FOLLOWING IN SUPPORT OF THE CLAIM THAT THE LAND IS AGRICULTURAL (I ) PURCHASE AND SALE DEED DESCRIBING LAND AS AGRICULTURAL LAND, (II) PATTADAR PASS BOOK ISSUED BY THE MRO, (III) CERTIFICATE OF DEPUTY COLLECTOR AND MRO QUTUBULLAPUR MANDAL STATING THAT THE LAND IS AGRICULTURAL LAND AND THAT THE ASSESSEE WAS RAISING CROPS L IKE PADDY, CATTLE FEED, MAIZE, JOWAR AND VEGETABLES ETC. AND (IV) CERTIFICATE OF TOWN PLANNING OFFICER, GHMC QUTUBULLAPUR CIRCLE IN G/1240/2008 DATED 04.10.2008 I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 5 STATING THAT THE SAID LANDS ARE NOT FALLING UNDER GHMC LIMIT. (V) THE ENTIRE TRANSACTION WAS TH ROUGH SUB - REGISTER OF MEDCHAL REVENUE AUTHORITIES AND NOT THROUGH HYDERABAD REVENUE AUTHORITIES. THE JURISDICTIONAL AUTHORITY IS QUTUBULLAPUR MUNICIPALITY AND NOT HYDERABAD MUNICIPALITY. I T WAS ALSO SUBMITTED THAT QUTUBULLAPUR MUNICIPALITY WAS NOT NOTIFIE D BY THE CENTRAL GOVT. THE APPELLANT THEREFORE CLAIMED THAT THESE ARE AGRICULTURAL LANDS AND ARE EXEMPT FROM BEING TREATED AS CAPITAL ASSET IN TERMS OF PROVISIONS OF SECTION 2(14) OF THE I.T. ACT, 1961. (J) THE AO HOWEVER, DID NOT ACCEPT THE CLAIM AND STATED THAT MERE CLAIM OF THESE LANDS AS AGRICULTURAL BASED AS PER OLD RECORD WITHOUT GIVING CREDENCE TO THE VISIBLE PHYSICAL APPEARANCE AND ALL ROUND URBAN DEVELOPMENT IN AND AROUND THESE LANDS IS NOT JUSTIFIED . HE ALSO HELD THAT TRACES OF AGRICULTURAL ACTIVITY HAS TO BE VISIBLY SEEN, PHYSICAL FELT AS PER GEOGRAPHICAL TERRAIN, SOIL CONDITIONS AND MORE SO, WITH VERIFIABLE EVIDENCES OF AGRICULTURAL PRODUCE, SALE BILLS/VOUCHERS ETC. THE ASSESSEE COULD NOT PRODUCE ANY PROOF FOR HER CLAIM OF AGRICULTURAL ACTI VITY. THE AO ALSO STATED THAT GREATER HYDERABAD MUNICIPAL CORPORATION WAS FORMED ON 16.04.2007 ON 16.04.2007 AND QUTUBULLAHPUR MUNICIPALITY WAS AMONG THE 12 MUNICIPALITIES AND 8 GGRAM PANCHAYATS THAT WERE MERGED IN MUNICIPAL CORPORATION OF HYDERABAD. HE , THEREFORE, DISCOUNTED THE QUESTION RAISED BY THE ASSESSEE REGARDING THE NOTIFICATION OF QUTUBULLAHPUR MUNICIPALITY. (K) THE AO FINALLY, WITHOUT PREJUDICE TO ALL THE CLAIMS OF THE ASSESSEE HELD THAT ASSESSEE'S TRANSACTION IN SALE OF LAND AS AKIN TO BUS INESS ACTIVITY AND ASSESSED IT AS BUSINESS INCOME OF THE ASSESSEE. HE AGAIN DREW PARALLEL TO THE ACTIVITY UNDERTAKEN BY BCPL AND THE OTHER INDIVIDUALS WHO ALL WERE INVESTORS IN BHAVYA CEMENTS AND THE AO FELT THAT THE LANDS WERE PURCHASED BY I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 6 VARIOUS INDIVIDUALS WITH A VIEW TO MAKE QUICK PROFIT AND THE SAME PROFITS WERE APPARENTLY INVESTED IN BHAVYA CEMENTS. HE THEREFORE, BROUGHT THE SALE PROCEEDS TO TAX AS UNDER THE HEAD INCOME FROM BUSINESS. 3. ON THE BASIS OF THE ABOVE FINDINGS/OBSERVATIONS, THE ASSESSING OFFICER HELD THAT THE LAND SOLD BY THE ASSESSEE WAS NOT AN AGRICULTURAL LAND AND THE ACTIVITY OF PURCHASE AND SALE OF THE SAID LAND BEING AN ADVENTURE IN THE NATURE OF TRADE, PROFIT ARISING THEREFROM WAS CHARGEABLE TO TAX IN HER HANDS AS BUSINESS INCOME. ACCORDINGLY, SUCH PROFIT AMOUNTING TO RS.1,9 6 , 92 , 500 WAS BROUGHT TO TAX BY THE ASSESSING OFFICER IN THE HANDS OF THE ASSESSEE AS HER BUSINESS INCOME IN THE ASSESSMENT COMPLETED UNDER S.143(3) READ WITH S.153C OF THE ACT, VIDE ORDER DATED 2 3 .11 .2011. 4. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER UNDER S.143(3) READ WITH S.153C, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEARNED CIT(A) AND DETAILED SUBMISSIONS WERE MADE BY HER BEFORE THE LEARNED CIT(A) IN SUPPORT OF THE STAND THA T THE LAND IN QUESTION WAS AGRICULTURAL LAND. THE SUBMISSIONS MADE BY THE ASSESSEE IN THIS REGARD, AS SUMMARIZED BY THE LEARNED CIT(A) IN THE IMPUGNED ORDER, WERE AS UNDER - (I) THE ASSET TRANSFERRED IS AGRICULTURAL LAND LOCATED BEYOND 8 KMS OF ANY NOTIFIE D MUNICIPALITY. IT IS TH E R E FORE, NO T A CAPITAL ASSET U/S. 2(47) OF THE I .T. ACT. (II) T HE EVIDENCE ON WHICH THE AO PLACED RELIAN C E AND RESTED HIS CON C LU S ION WERE ACTUALLY THE FINDINGS IN THE ASST. ORDER IN TH E CA S E OF M/S. BCPL WHICH OWN E D ANOTHER PATCH OF LAND CONTIGUOUS TO THE LAND OWNED BY THE APPELLANT. THE OB S ERVATION S A ND THE CON C LU S ION S DRAWN THEREIN WERE U T ILISE D AGAINST T H E APPELL A N T , WHI C H IS IN C ORREC T . THE APP E LL A NT H A D NOTHING TO DO WITH THOSE FIN D IN G S. (II I ) T HE APPELLANT SUBMITTED THAT SHE IS AN AGRICULTURIST AND THE FAMILY AS ORIGINALLY DEPENDING UPON THE INCOME DERIVED FROM AGRICULTURAL OPERATIONS. (IV) THE ASSESSEE CARRIED ON AGRICULTURAL OPERATION. I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 7 (V) THE AO MADE THE ASSESSMENT KEEPING THE QUANTUM OF CONSIDERATION RECEIVED ON SALE OF LAND WHICH IS NOT RELEVANT FOR DETERMINING THE NATURE OF LAND. IN SUPPORT OF THE ABOVE SUBMISSIONS, THE ASSESSEE ONCE AGAIN FILED BEFORE THE LEARNED CIT(A), COPIES OF THE PATTADAR PASS BOOK, MRO CERTIFICATE DATED 28.8.2005, CERTIFICATE DATED 4.10.2005 ISSUED BY THE TOWN PLANNING OFFICER, QUTUBULLAPUR CIRCLE; CERTIFICATE DATED 4.2.2005 ISSUED BY THE DEPUTY TAHSILDAR AND QUTUBULLAPUR STATING THAT BOWRAMPET VILLAGE IS 12 KMS FROM QUTUBULLAPUR MUNICIPAL LIMITS. 5. WHILE CHALLENGING THE ACTION OF THE AS SESSING OFFICER IN BRINGING TO TAX THE SHORT TERM CAPITAL GAINS ARISING FROM THE SALE OF AGRICULTURAL LAND UNDER THE HEAD BUSINESS INCOME, THE ASSESSEE MADE THE FOLLOWING SUBMISSIONS BEFORE THE LEARNED CIT(A) ON THE RELEVANT FACTUAL AND LEGAL ASPECTS - 11.2. THE FACTUAL ASPECTS ARE AS UNDER: - ( A ) THE APPELLANT IS A LADY, WHO DERIVED INCOME FORM HOUSE PROPERTY AND SOME ITNT INCOME. ( B ) SHE HAD NEVER CARRIED ON A BUSINESS IN REAL ESTATE EITHER BEFORE OR AFTER THIS LAND TRANSACTION. ( C ) AGRICULTURAL LAND WAS PURCHASED AS AN INVESTMENT AND NOT AS STOCK IN TRADE. EVEN THE SALE PROCEEDS ARE REALIZATION OF INVESTMENT AND NOT BUSINESS INCOME. ( D ) NO DEVELOPMENTAL ACTIVITY LIKE MAKING OF ROADS, PROVIDING AMENITIES BEFORE SALE WERE DONE. NO SYS TEMATIC ORGANIZED ACTIVITY WAS UNDERTAKEN. HER ACTIVITIES WREN TO ORGANIZED OR REPETITIVE AS IN THE CASE OF A BUSINESS. ( E ) THE LAND WAS NOT CONVERTED INTO NON - AGRICULTURAL LAND BEFORE SALE. ( F ) NO ATTEMPT WAS MADE TO IMPROVE THE QUALITY OF LAND MAKING IT MORE SUITABLE FOR SALE. I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 8 ( G ) THERE WAS NO REPETITION OF THE TRANSACTION EXCEPT SELLING OF A PORTION OF LAND ACQUIRED IN THE YEAR 2004. ( H ) JUST BECAUSE SUBSTANTIAL GAINS WERE MADE, IT DOES NOT BECOME BUSINESS INCOME. (I) JUST BECAUSE, THE ADJOINING LAND WAS PURCHASED BY BUILDER AND THERE WAS A BOOMING REAL ESTATE MARKET, THE TRANSACTION OF SALE BY THE APPELLANT CANNOT BECOME A BUSINESS TRANSACTION. IT WOULD REMAIN GAINS FROM INVESTMENT. 11.2 ON THE LEGAL ASPECT, IT WAS SUBMITTED THAT : (A) 2(13) DEFINES BUSINESS AS INCLUDING ANY TRADE, COMMERCE OR MANUFACTURE OR ANY ADVENTURE OR CONCERN IN THE NATURE OF TRADE OR MANUFACTURE. IT IS THE PRESENCE OF ABSENCE OF SUCH ELEMENT IN A PARTICULAR TRANSACTION IN A QUESTION THAT WOUL D DECIDE WHETHER IT IS IN THE NATURE OF TRADE OR NOT. THERE IS NO SUCH ATTRIBUTE OR ELEMENT IN THIS TRANSACTION OF SALE OF LAND BY THE APPELLANT. THE APPELLANT NEVER CARRIED ON ANY BUSINESS IN REAL ESTATE. THE WORD BUSINESS CONNOTES SOME REAL, SUBSTANTIAL AND SYSTEMATIC CAUSE ORGANIZED COURSE OF ACTIVITY OR CONDUCT WITH A SAID PURPOSE. AN ELEMENT OF FREQUENCY IS ASSOCIATED WITH BUSINESS WHICH IS ABSENT IN THIS CASE. (B) DECISIONS OF THE HON'BLE SC IN THE CASE OF G.VENKATA SWAMY NAIDU & CO. (35 ITR 594) AN D SREE MEENAKSHI MILLS LTD (31 ITR 28) WERE CITED. IN THE CASE OF G.VENKATA SWAMY NAIDU IT WAS HELD THAT - IF A PERSON INVEST MONEY IN LAND INTEND TO HOLD IT, ENJOYS IT FOR SOME TIME AND SELL FOR PROFIT, IT WOULD BE A CLEAR CASE OF CAPITAL ACCRETION AND NO T PROFIT DERIVED - FROM AN ADVENTURE OF TRADE. CASES OF REALIZATION OF INVESTMENT CONSISTING OF PURCHASE AND RESALE, THOUGH PROFITABLE, ARE CLEARLY OUTSIDE THE DOMAIN OF ADVENTURE IN THE NATURE OF TRADE.' (C) IT IS NOT UNCOMMON THAT DUE TO RAPID GROWTH OF URB AN AREA, AGRICULTURAL LANDS IN THE VICINITY OF CITY ARE COMMANDING A HIGH PRICE. THE PACE OF URBANIZATION IS NOT IN THE CONTROL OF HOLDERS OF AGRICULTURAL LAND. IF 'LARGE PROFITS ARE MADE IT DOES NOT BECOME BUSINESS INCOME'. (D) NEITHER THE PROFIT MOTIV E NOR THE LARGE PROFIT DOES NOT CHANGE THE TRANSACTION TO A BUSINESS I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 9 TRANSACTION (JANAKIRAM BAHADURRAM VS CIT (57 ITR 21)(SC)} AND CIT VS. SUTLEJ COTTON MILLS SUPPLY AGENCY {100 ITR 706(SC)}. (E) EXTENT OF LAND HELD AS INVESTMENT CANNOT B E CRITERIA CANNOT BE HELD AS SAME WAS HELD AS STOCK IN TRADE INDIAN HUME PIPE CO. LTD. 107 ITR 179 PARA 8(BOM) (F) APPELLANT ALSO RELIED UPON THE FOLLOWING JUDICIAL DECISIONS (I) B NARSIMHA REDDY VS. ITO (47 ITD 398 ) (HYD) (II) CIT VS RADHESHAM MORARKA 127 ITR 111) (III) K.RADHIKA VS DCIT {47 SOT 180 (HYD)} (IV) A MOHD. MOHIDEEN - MADRAS HIGH COURT (V) TULLA VEERENDER VS,. ADNL CIT RANGE - 6 ITA (ITAT HYD) IN ITA NO.550/HYD/2012 DT. 04/07/2013 (VI) KAPIL CHIT FUNDS PVT LTD. (ITAT HYD) (ITA NO.1424/H/2012 DT. 05/09/2013) (G) THE APPELLANT ALSO STATED THAT IF AN INCOME FALLS UNDER TWO HEADS, IT CANNOT BE SHIFTED FROM ONE HEAD TO ANOTHER HEAD MERELY BECAUSE IT IS GETTING EXEMPTED UNDER THE STATUTE UNDER THAT HEAD. (H) THE BURDEN OF PROOF IS ON REVENUE TO ESTABLISH WITH POSITIVE PROOF THAT A TRANSACTION IS ADVENTURE AND HAS TO GO FURTHER TO ESTABLISH THAT IT IS IN THE NATURE OF A TRADE. IN A BORDER LINE CASE INVOLVING A TRANSACTION IN LAND, BURDEN BECOMES THAT M UCH MORE HEAVIER. THERE IS NO ROOM FOR ANY DOUBT OR DEBATE PARTICULARLY WHEN A TRANS A CTION IS SUCH TH A T IT MAY FALL UNDER TWO HEA D S ONE A PRIMARY HEAD AND A SECON D ARY OR AL T ERNATIVE HEAD AS IN TH E IN S TANT CA S E OF TH E APPELLANT. 6. AFTER TAKING INTO CONSIDERATION THE SUBMISSIONS MADE BY THE ASSESSEE AND THE MATERIAL AVAILABLE ON RECORD, THE LEARNED CIT(A) FOUND MERIT IN THE STAND TAKEN BY THE ASSESSEE THAT PROFIT ARISING FROM THE SALE OF LAND DID NOT CONSTITUTE THE BUSINESS INCOME O F THE ASSESSEE AND THE SAME WAS IN THE NATURE OF SHORT TERM CAPITAL GAINS, AS RIGHTLY CLAIMED BY THE ASSESSEE. AS REGARDS THE CLAIM OF THE ASSESSEE THAT THE LAND IN QUESTION SOLD BY HER WAS AN AGRICULTURAL LAND, THE LEARNED CIT(A) IDENTIFIED THE FACTORS IN FAVOUR I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 10 OF THE ASSESSEE AND AGAINST THE ASSESSEE ON THIS ISSUE AND SUMMARIZED THE SAME IN A TABULAR FORM AS UNDER - SL. NO. AGRICULTURAL LAND NON - AGRICULTURAL LAND 1. THE MRO C E R T IFICATE ISSUED IN 2005 S T ATES THE LAND AS AG R I C ULTUR A L AND ALSO THE CROP S GROWN. THE HON'BLE SUPREME COURT IN TH E CA S E OF SHARIFABIBI HAD CLEARLY STATED TH A T THE DESCRIPTION OF LAND IN REVENUE RECORD DOES NO T MAT T ER. IT IS TO BE SEEN WH E TH E R THE L A ND WAS USE D , IS BEING USED AND WHETHER IT WILL BE USED FOR AGRICULTURE AS IT IS THIS CONTINU E D USE FOR AGRICULTURE WHICH IS THE RATIONALE FOR GIVING EXEMPTION. 2. THE PAHANIS INDI C ATE LAND AS MET T A I.E. DRY LANDS THE GOVT. CLASSIFIES LANDS ONLY INTO EITHER THOSE WITH IRRIGATION FACILITY OR THOSE WHICH DO NO T HAVE IRRIGA TION FACILITY I.E. METTA LANDS. THI S CLASSI F I CA T I ON BY ITSELF WOULD NO T IN DI CATE WH E THER ANY CROP I S GROWN. THE CROP S CULTIVATE D ARE MENTIONED SEP A R A TELY IN TH E PAHANI. THE PAHANI DOES N O T IN DIC ATE ANY CROP GROWN. 3. THE PU R CHA S E DE E D O F 2004 AS WELL AS THE S A LE DEED OF 2007 CLASSIFY THE LAND AS AGRICULTURE. THE ASSESSEE IN ITS FIRST STATEMENT STA T ED THAT SHE HAS GROWN MAIZE. THE PHOTOGRAPHIC EVIDENCE AVAILABLE IN THE ASST ORDER IN D I C ATES THAT THE LAND WAS NOT PUT TO USE FOR CULTIVATION AT ALL. THE ASSESSEE IN THE STATEMENT ALSO STATED THAT THE CROP WAS DESTROYED AND DOES NO T REMEMBER ANY AG R ICULTURE EXPENSES. 4. THE AO HAS ALSO STATED THAT CERTAIN VEGETABLES THE PHOTOGRAPHIC EVID E NCE A VAILABLE IN TH E SALE DEED I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 11 AND CROPS WERE GROWN BY WATCHMAN, SIGNIFYING THAT LAND WAS AG R IC U LTURAL (NO T APPLICABLE TO APPELLANTS CASE SPECIFICALLY) ITSELF WHEREIN, THE PHOTOGRAPH OF THE LAND IS MADE P A RT OF THE SALE DEED. THIS CONTEMPORANEOUS EVIDENCE ALSO DOES NO T IN DIC ATE ANY AG R ICU L T U RAL AC T IVITY ON THE L A N D . IT I S EVID E N T THAT THE LAND WAS IDLE AND SOME WILD BUSHES W E RE SEEN. AGRICULTURAL AC T I V ITY AT ANY POINT OF TIME IS ABSOLUTELY INVISIBLE. A WATCHMAN GROWING FODDER FOR THE CAT6TLE OR HAVING A SMALL KITCHEN GARDEN FOR PERSONAL CONSUMPTION IN A SMALL FRAGMENT OF LAND IS NOT THE SAME THING AS CARRYING OUT AGRICULTURAL OPERATION TO CLASSIFY THE ENTIRE LAND OF ABOUT 45 ACRES (TOTAL LAND SOLD B Y 14 PARTIES INCLUDING APPELLANT VIDE SALE AGREEMENT DATED 12.03.2007) AS BEING AGRICULTURAL IN NATURE. 5. LAND WAS SOLD IN ACRES AND NO T IN S Q. YDS. IT IS SEEN THAT THOUGH IT WAS SOLD IN ACRES AND NOT IN SQ. YDS , TH E RATE PAID WAS NO LESS AT 1 CRORE PER ACRE WHICH ACTUALLY WORKS OUT TO M O R E THAN RS.2,000/ - SQ. YD. 6. THERE W A S NO APPLICATION EITHER BEFORE OR AFTER FOR CONVERSION OF LAND TO NON - AGRICUL T U R AL LAND. THE BUYER WAS A COMPANY IN REAL ESTATE AND CON S TRUC T ION BU S IN E SS. USUALLY, INS TEAD OF INCURRING FURTHER EXPENSE, ANY LAND OWNER WOULD LEA V E SUCH HASSLES O F GETTING SUCH CONVERS I ON C E RTIFIC A TE TO THE U S ER REA L ESTATE COMPANY TO DEAL WITH SUCH THINGS. I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 12 7. LAND WAS BEYOND 8 KMS OF NOTIFIED MUNICIPALITY AN QUTUBULLAPUR MANDAL WAS NO T P A RT OF GHMC AS ON THE DTE OF SALE OF LAND IN MARCH, 2007. THIS DEALS WITH LO C A T ION OF AG R IC U LTURAL L A ND. MOREOVER, THE HON'BLE ITAT, HYDERABAD AS RECENTLY AS MAR C H 2013 IN TH E CA S E OF SYED NAWAB HUSSAIN, RR DI S T. VS. ASSESSEE ON 8 M AR C H, 2013 IN ITA N O.851/HYD/2012 2007 - 08 REAFFIRMED ITS OWN DECISION IN TH E CA S E OF SMT GOUSIA B EGUM & ORS. VS. DCIT IN ITA NO.S 1 0 2 4 TO 1026/HYD/2011 AND ITA NOS.1268 TO 1271/HYD/2011. W H E REIN IT CITED THE DE C I SI ON OF HON'BLE PUNJAB & HARYANA HIGH CO U R T IN TH E CA S E OF CIT V/S. SMT. ANJANA SEHGAL (SUPRA) THAT THE E X PRESSION FROM THE LO C AL L I MITS OF ANY MUNICIPALITY USED I N SEC T ION 2 ( 14)(III)(B) OF THE INCOM E - TAX ACT DENOTES ANY MUNICIPALITY OR MUNICIPALITY O F TH E DI S TRICT IN WHI C H T H E LAN D IS SITUATED 8. . NO EVI D ENCE OF ANY AG R I C ULTURAL INCOME. IN FACT, THOUGH THE ASSESSING OFFICER HAD NO T M E NTION ED THIS ASPE C T, IT IS NOTED THAT THE APPELLANT ASSESSEE HAS NOT SHOWN ANY AGRICULTURAL INCOE OR ANY AGRICULTURAL EXPENDITURE . THE IN C OM E TAX RE C ORDS OF TH E ASSESSEE DO NO T IN D I C ATE ANY INCOME EVEN IN TH E TAX RETURNS FILED AFTER THE SEARCH IN RESPONSE TO NOTICE U/S. 153C 7. KEEPING IN VIEW THE ABOVE FACTORS, THE LEARNED CIT(A) HELD THAT THE LAND IN QUESTION SOLD BY THE ASSESSEE WAS NOT I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 13 AGRICULTURAL LAND BY SUMMARIZING HIS OBSERVATIONS IN PARAGRAPH 1 7 AS UNDER - 1 7 .0 THUS, ON SUMMATION OF FACTS AND CIRCUMSTANCES BOTH FAVOURABL E AND A GAIN S T THE ASSESSEE/APPELLANT, AS PER THE ABO V E TABLE, I T I S CLEAR THAT OTHER THAN ITS ASSERTION AND AN MRO C E RTIFIC A TE ISSUED IN A ROUTINE MANNER THAT TOO IN 2005, THE APPELLANT REALLY DOES NO T H A VE ANYTHING REAL AND SUBSTANTIVE TO CLAIM TH A T THE LAND WAS RE A LLY AGRICULTURAL. THE HONBLE SC HAD ALREADY STA T ED THAT THE REVENUE RECORD, THOUGH, IMPO R TANT IS N O T CONCLUSIVE EVIDENCE. THE PHOTOGR APHIC EVIDENC E GATHERED BY THE INVESTI G ATION WING MAY BE IN 2009. BUT THE PICTURES CLEARLY SHOW THAT THE LAND WAS LEFT IDLE AND THERE IS REALLY NO ATTEMPT TO BRING IT UN D ER CULTIVATION IN WH A TSOEVER MANNER. MORE IMPORTANTLY, THE PU R CH AS E AND SALE DE E DS A LSO H A VE PHOTOGRAPHS PASTED AS PART OF SALE DEED. TH E SE ARE CONTEMPORANEOUS. THEY TOO DO NO T DIFFER FROM THE PIC T URE THAT THE INVESTIGATION WING TOOK. THE ENVIRONMENT OF TH E ENTIRE CHUNK OF LAND NOT ONLY APPELLANTS BUT THE OTHER RELATED INVESTORS OF BHAV YA CEMENTS IS IDENTICAL. FURTHER, THE PROXIM ITY TO CITY, THE MERGER WITHIN GHMC WITHIN A MONTH O F SALE ( WHEN THE P R OPOSAL FOR SUCH MERGER AND THE DRAFTING O F SUCH BILL MU S T HAVE BE E N IN NEWS MUCH BEFORE ) CLEARLY SHOW THE DEVELOPM E NT ACTIVITY TAKING PL A CE AROUN D AN D WHICH IS A KEY FACTOR IN ASSESSIN G THE GENERAL ENVIRONMENT AROUND TH E LAND AND ITS USE. 8. THE LEARNED CIT(A) THUS HELD THAT THE PROFIT ARISING TO THE ASSESSEE FROM THE SALE OF LAND WAS CHARGEABLE TO TAX IN HER HANDS AS SHORT TERM CAPITAL GAINS IN THE YEAR UNDER CONSIDERATION. 9. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS - 1. THE ORDER OF THE LEARNED CIT(A) IS AGAINST LAW, WEIGHT OF EVIDENCE AND FACTS OF THE CASE. I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 14 2. THE LEARNED CIT(A) SHOULD HAVE APPRECIATED THAT THE PROVISIONS OF SECTION 153C IS NOT APPLICABLE IN THE CASE AS A COPY OF REGISTERED DEVELOPMENT AGREEMENT, WHICH IS IN PUBLIC DOMAIN, CANNOT CONSTITUTE AN INCRIMINATING EVIDENCE TO INITIATE PROCEEDING UNDER SECTION 153C OF IT ACT WITHOUT PROPER SATISFACTION. 3. THE LEARNED CIT(A) OUGHT NOT HAVE IGNORED THE EVIDENCES FILED BY THE APPELLANT THAT THE LAND IS AGRICULTURAL WHICH WERE DULY SUPPORTED BY THE CERTIFICATES OF REVENUE AUTHORITIES AND OT HER EVIDENCES AVAILABLE IN THE DEPARTMENTAL RECORDS ACCEPTING SUCH CLAIM IN RESPECT OF CONTIGUOUS LAND BASING ON WHICH HIS PREDECESSORS IN OFFICE AND THE ASSESSING OFFICER HAVE EXEMPTED THE INCOME ARISING OUT OF TRANSFER HOLDING THAT THE LAND IS AGRICULTUR AL AND DOES NOT CONSTITUTE A CAPITAL ASSET. 4. HAVING COME TO A FINDING THAT THE INCOME NOT ASSESSABLE UNDER ADVENTURE IN THE NATURE OF TRADE AS DONE BY THE ASSESSING OFFICER, THE LEARNED CIT(A) OUGHT TO HAVE DELETED THE ADDITION ALLOWING RELIEF TO THE A PPELLANT ON WHICH ISSUE APPEAL WAS PREFERRED WITHOUT TREATING THE SAME UNDER THE HEAD CAPITAL GAIN. 5. THE LEARNED CIT( A) OUGHT TO HAVE APPRECIATED THAT HIS POWERS TO DECIDE AN APPEAL ARE CIRCUMSCRIBED AS PROVIDED IN SECTION 251 WHICH STIPULATES THAT THE CIT(A) CAN CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT. IN THE LIGHT OF THIS, CIT(A) OUGHT NOT HAVE CHANGED THE HE AD OF INCOME AS DETERMINED BY THE AO AS FALLING UNDER ADVENTURE IN THE NATURE TRADE TO CAPITAL GAIN 6. IT IS NOT A FACT THAT THE APPELLANT CLAIMED THAT THE INCOME IS ASSESSABLE UNDER THE HEAD CAPITAL GAIN AS A GROUND TO CHANGE THE HEAD OF INCOME. TH E CLAIM OF APPELLANT WAS THAT THE LAND BEING AGRICULTURAL, THE SAME CANNOT ENTER INTO COMPUTATION UNDER SECTION 45 UNDER THE HEAD CAPITAL GAIN. THIS CLAIM CANNOT BE CONSTRUED TO MEAN THAT THE APPELLANT WANTED THE INCOME TO BE ASSESSED UNDER CAPITAL GAIN TO CHANGE THE HEAD OF INCOME. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT SUCH A CLAIM BY THE APPELLANT DOES NOT FALL UNDER ANY SPECIFIC HEAD AS PROVIDED UNDER SECTION 14. 7. IN THE LIGHT OF ABOVE, THE ADDITION MADE UNDER HEAD CAPITAL GAIN BY CIT(A) IS LIABLE TO BE DELETED. I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 15 8. THE APPELLANT CRAVES LEAVE TO ADD/ALTER/MODIFY ANY OF THE GROUNDS AS MAY BE NECESSARY FOR ADJUDICATION OF THE CASE. 10. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBS ERVED THAT BY AN AGREEMENT OF SALE WITH POSSESSION - CUM - IRREVOCABLE POWER OF ATTORNEY DATED 5.3.2008, THE LAND IN QUESTION WAS TRANSFERRED BY THE ASSESSEE TO M/S. VARUN CONSTRUCTIONS. THERE WAS A SIMILAR AGREEMENT ENTERED INTO BY OTHER 14 LAND OWNERS, WHO WERE OWNERS OF THE ADJACENT LANDS ON THE SAME DATE TRANSFERRING THEIR LANDS TO M/S., VARUN CONSTRUCTIONS. THE SAID FOURTEEN PARTIES HAD ALSO CLAIMED THE PROFIT ARISING FROM THE TRANSFER OF THEIR LAND TO M/S. VARUN CONSTRUCTIONS AS EXEMPT ON THE GROUND THA T THEIR LANDS, BEING AGRICULTURAL LANDS, WERE NOT CAPITAL ASSETS WITHIN THE MEANING OF S.2(14). IN THEIR CASES ALSO, THE CLAIM WAS NOT ALLOWED BY THE ASSESSING OFFICER AND WHEN THE MATTER REACHED THE TRIBUNAL IN THE CASE OF SIX OF THE SAID ASSESSEES, NAM ELY, M/S.BHAVYA CONSTRUCTIONS PVT. LTD., SHRI M.S.RAGHAVA REDDY, SHRI R.SRINIVASA RAO, SHRI R.UMA MAHESWAR, SHRI P.SHIVAKUMAR AND SHRI G.C.SUBBANAIDU, THE COORDINATE BENCH OF THIS TRIBUNAL VIDE ITS ORDER DATED 28.8.2014 DECIDED SIMILAR ISSUE IN FAVOUR OF T HE ASSESSEE, HOLDING THAT THE LAND SOLD BY THE SAID ASSESSEES WERE AGRICULTURAL LANDS, AND THEREFORE, THE PROFITS ARISING FROM THE TRANSFER OF SUCH LANDS, WAS NOT CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEES. THE ELABORATE OBSERVATIONS/FINDINGS RECORDED BY THE TRIBUNAL, WHILE COMING TO THIS CONCLUSION, AS CONTAINED IN PARAGRAPHS 13 AND 14 ARE AS UNDER - 13. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIALS ON RECORD AS WELL AS THE ORDERS OF THE REVENUE AUTHORITIES. WE HAVE ALSO APPLIED OUR MIND TO THE DECISIONS PLACED BEFORE US. ON GOING THROUGH THE ORDER OF THE LEARNED CIT(A) WE DO NOT FIND ANY INFIRMITY EITHER WITH REGARD TO HIS CONCLUSION IN RESPECT OF THE NATURE OF LAND SOLD BY THE ASSESSEE OR WITH REGARD TO THE ISSUE AS TO WHETHER THE TRANSACTION IS TO BE TREATED AS AN ADVENTURE IN THE NATURE OF TRADE. AS I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 16 CAN BE SEEN FROM THE FACTS AND MATERIALS PLACED ON RECORD, THE NATURE OF LAND AT THE TIME OF PURCHASE BY THE ASSESSEE FROM M/S DECCAN PROPERTIES LTD. AND ALSO AT THE TIME OF SALE TO M/S VARUN CONS TRUCTIONS, REMAINED THE SAME I.E. AGRICULTURAL NOT ONLY IN THE REVENUE RECORDS BUT ALSO IN THE PAHANIS. IT IS ALSO A FACT ON RECORD THE ASSESSEE HAS SHOWN INCOME FROM AGRICULTURAL OPERATIONS CARRIED ON OVER THE SAID LAND IN THE RETURN OF INCOME FILED FOR T HE IMPUGNED ASSESSMENT YEAR AS WELL AS THE PRECEDING ASSESSMENT YEAR WHICH HAS BEEN ACCEPTED BY AO. IN FACT THE AO HAS NOT TOTALLY RULED OUT AGRICULTURAL OPERATION, THOUGH ACCORDING TO HIM IT IS NOT SUBSTANTIAL. IN THESE CIRCUMSTANCES, WHEN THE NATURE OF L AND SOLD BY THE ASSESSEE STILL REMAINS TO BE AGRICULTURAL IN THE REVENUE RECORDS AND THE ASSESSEE HAS NOT APPLIED FOR CONVERSION OF THE LAND TO NON - AGRICULTURAL IT CANNOT BE TREATED AS NON - AGRICULTURAL LAND ONLY BECAUSE THE AO WAS OF THE VIEW THAT AGRICULT URAL OPERATION ON THE SAID LAND IS NOT POSSIBLE TO THE EXTENT SHOWN BY THE ASSESSEE. IN THIS CONTEXT IT IS TO BE NOTED THAT THE CERTIFICATE ISSUED BY THE DY. COLLECTOR AND MANDAL REVENUE OFFICER, QUTUBULLAPUR MANDAL (AT PAGE 99 OF ASSESSEES PAPER BOOK) C LEARLY INDICATE THAT THE LAND UNDER THE SAME SURVEY NOS. SITUATED AT BOWRAMPET VILLAGE ARE UNDER CULTIVATION BY RAISING CROPS OF PADDY, CATTLE FEED, MAIZE, JOWAR ETC. FURTHER THE PAHANIS ALSO INDICATE THE CROPS GROWN OVER THE SAID LAND. WHEN CERTIFICATE HA S BEEN ISSUED BY GOVT. AUTHORITIES CERTIFYING CULTIVATION OF AGRICULTURAL PRODUCE THE AO WAS NOT CORRECT IN REJECTING THEM WITHOUT PROPER EVIDENCE. MOREOVER, CERTIFICATE DT.04/02/2009 ISSUED BY DY. COLLECTOR AND TAHSILDAR QUTUBULLAPUR MANDAL ( AT PAGE 100 OF ASSESSEES PAPER BOOK) AND CERTIFICATE DT. 04/10/2008 OF TOWN PLANNING OFFICER, GHMC (AT PAGE 101 OF PAPER BOOK) CLEARLY INDICATE THAT BOWRAMPET VILLAGE WHERE ASSESSEES LAND IS SITUATED IS BEYOND THE LIMIT OF GHMC. IT IS A FACT ON RECORD, IN THE ORIGIN AL ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT, THE AO HAS EXAMINED THE NATURE OF TRANSACTION BY CONDUCTING NECESSARY ENQUIRY AND AFTER PROPER APPLICATION OF MIND HAD ACCEPTED THE CLAIM OF THE ASSESSEE THAT THE ASSET BEING SOLD BEING AGRICULTURAL LAND WI LL NOT ATTRACT CAPITAL GAIN TAX. THE DEPARTMENT HAS NOT BROUGHT ANY COGENT EVIDENCE OR MATERIAL ON RECORD TO DISPROVE ASSESSEES CLAIM EITHER IN RESPECT OF AGRICULTURAL INCOME EARNED THROUGH AGRICULTURAL OPERATION CONDUCTED ON THE SAID LAND OR THE FACT THA T THE LAND IS SITUATED BEYOND THE PRESCRIBED LIMIT OF THE NEAREST MUNICIPALITY NOTIFIED BY THE CENTRAL GOVERNMENT. IN THE AFORESAID CIRCUMSTANCES, THE FINDING OF THE CIT(A) REMAINS UNCONTROVERTED. I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 17 THEREFORE, IT HAS TO BE HELD THAT AS THE LAND SOLD BY THE A SSESSEE IS IN THE NATURE OF AGRICULTURAL LAND AND IS SITUATED BEYOND THE PRESCRIBED LIMIT OF ANY MUNICIPALITY NOTIFIED BY THE CENTRAL GOVT. IT CANNOT COME WITHIN THE DEFINITION OF CAPITAL ASSET AS ENVISAGED U/S 2(14) OF THE ACT. SO FAR AS THE FINDING OF TH E AO THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE IS AN ADVENTURE IN THE NATURE OF TRADE, THE SAME IS ALSO WITHOUT MERIT FOR THE STRONG AND VALID REASONS RECORDED BY THE CIT(A). ON A PERUSAL OF THE ASSESSMENT ORDER, IT APPEARS, THAT THE AO HAS TREATED THE TRANSACTION AS AN ADVENTURE IN THE NATURE OF TRADE ONLY TO OVERCOME ASSESSEES CLAIM OF EXEMPTION FROM CAPITAL GAIN ON THE GROUND THAT THE ASSET SOLD IS NOT A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE ACT. AS RIGHTLY OBSERVED BY THE LEA RNED CIT(A), THE FACTS CLEARLY INDICATE THAT THE ASSESSEE HAS HELD THE ASSET FOR MORE THAN TWO YEARS AND ONLY BECAUSE OF COMPELLING CIRCUMSTANCES SOLD IT TO M/S VARUN CONSTRUCTIONS IN THE YEAR UNDER CONSIDERATION. THEREFORE, NONE OF THE ATTRIBUTES OF AN AD VENTURE IN THE NATURE OF TRADE IS PRESENT IN THE TRANSACTION. IT WILL BE PERTINENT TO MENTION HERE THAT EARLIER A BENCH OF THIS TRIBUNAL HAD AN OCCASION TO EXAMINE SIMILAR NATURE OF DISPUTE ARISING OUT OF SIMILAR NATURE OF TRANSACTION RELATING TO SALE OF A GRICULTURAL LAND LOCATED IN THE SAME AREA IN CASE OF SOME OTHER ASSESSEES, NAMELY, SMT. M. VIJAYA AND OTHERS VS. DCIT (ITA NOS.306, 307, 309 & 311/HYD/13 ORDER DATED 06/06/2014) WHO ALSO SOLD THEIR LAND TO M/S VARUN CONSTRUCTIONS. THE TRIBUNAL AFTER EXAMIN ING THE CONTENTIONS OF THE PARTIES AND REFERRING TO A NUMBER OF JUDGMENTS HELD AS UNDER: 23. ADVERTING TO THE FACTS OF THE PRESENT CASE, THE LAND INQUESTION IS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL LAND AND THERE IS NO DISPUTE REGARDING THIS ISSUE AND ACTUAL CULTIVATION HAS BEEN CARRIED ON THIS LAND AND INCOME WAS DECLARED FROM THIS LAND IN THE RETURN OF INCOME FILED BY THE ASSESSEE FOR THE AY AS AGRICULTURAL INCOME. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE HAS NOT APPLIED FOR CONVERSION OF THIS AGRICULTURAL LAND FOR NON - AGRICULTURAL PURPOSES BEFORE SALE OF THIS PROPERTY AND THE ASSESSEE HAS NOT PUT THE LAND TO ANY PURPOSES OTHER THAN AGRICULT URAL PURPOSES. IT IS ALSO AN ADMITTED FACT THAT NEITHER THE IMPUGNED PROPERTY NOR THE SURROUNDING AREAS WERE SUBJECT TO ANY DEVELOPMENTAL ACTIVITIES AT THE RELEVANT I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 18 POINT OF TIME OF SALE OF THE LAND AS PER THE EVIDENCE BROUGHT ON RECORD. 24. THE PROVISIO NS OF ANDHRA PRADESH AGRICULTURAL LAND (CONVERSION FOR NON - AGRICULTURAL PURPOSES) ACT, 2006 ALSO PRESCRIBED THE PROCEDURE FOR CONVERSION OF AGRICULTURAL LAND INTO NON - AGRICULTURAL LAND. BEING SO, WHENEVER THE AGRICULTURAL LAND TO BE TREATED AS NON - AGRICULT URAL LAND, THE SAME HAS TO BE CONVERTED IN ACCORDANCE WITH THE PROVISIONS OF ANDHRA PRADESH AGRICULTURAL LAND (CONVERSION FOR NON - AGRICULTURAL PURPOSES) ACT, 2006. IF BY A GOVERNMENT NOTIFICATION, THE NATURE AND CHARACTER OF LAND CHANGES FROM AGRICULTURE I NTO NON - AGRICULTURE THEN THERE IS NO QUESTION OF CONVERSION OF THIS LAND FOR NON - AGRICULTURAL PURPOSES BY THE REVENUE AUTHORITIES CONCERNED. TO OUR UNDERSTANDING NATURE OF LAND CANNOT BE CHANGED BY ANY STATE GOVERNMENT NOTIFICATION AND THE LAND OWNERS ARE REQUIRED TO APPLY TO THE CONCERNED REVENUE AUTHORITIES FOR THE PURPOSE OF CONVERSION OF THE AGRICULTURAL LAND INTO NON - AGRICULTURAL LAND AND THERE IS NO AUTOMATIC CONVERSION PER SE BY STATE GOVERNMENT NOTIFICATION. 25. IN THE INSTANT CASE, AT THE RELEVANT POINT OF SALE OF THE LAND IN QUESTION, THE SURROUNDING AREA WAS TOTALLY UNDEVELOPED AND EXCEPT MERE FUTURE POSSIBILITY TO PUT THE LAND INTO USE FOR NON - AGRICULTURAL PURPOSES WOULD NOT CHANGE THE CHARACTER OF THE AGRICULTURAL LAND INTO NON - AGRICULTURAL LAN D AT THE RELEVANT POINT OF TIME WHEN THE LAND WAS SOLD BY THE ASSESSEE. IT IS ALSO AN ADMITTED POSITION THAT THE ASSESSEE HAD NOT APPLIED FOR CONVERSION OF THE LAND IN QUESTION INTO NON - AGRICULTURAL PURPOSES AND NO SUCH PERMISSIONS WERE OBTAINED FROM THE C ONCERNED 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 RELEVANT POINT OF TIME WHEN THE LAND WAS SOLD BY THE ASSESSEE. IT IS ALSO NOT IN DISPUTE THAT THERE WAS NO ACTIVITY UNDERTAKEN BY THE ASSESSEE OF DEVELOPING THE LAND BY PLOTTING AND PROVIDING ROADS AND OTHER FACILITIES AND THERE WAS NO INTENTION ALSO ON THE PART OF THE ASSESSEES HEREIN TO PUT THE SAME FOR NON - AGRICULTURAL PURPOSES AT TIME OF THEIR OWNERSHIP THAT LAND. NO SUCH FINDING HAS BEEN GIVEN BY THE DEPARTMENT. NO MATERIAL OR I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 19 EVIDENCE IN SUPPORT OF THE FACT THAT THE ASSESSEES HAVE PUT THE LAND IN USE FOR NON - AGRICULTURAL PURPOSES HAS BEEN BROUGHT ON RECORD. THE NATURE OF THE CROP AND THE PERSON WHO CULTIVATED THE LAND ARE DULY MENTIONED IN THE REVENUE RECORDS SHOWS THAT AT THE RELEVANT POINT OF TIME THE LAND WAS USED FOR AGRICULTURAL PURPOSES ONLY AND NOTHING IS BROUGHT ON RECORD TO SHOW THAT THE LAND WAS PUT IN USE FOR NON - AGRICULTURAL P URPOSES BY THE ASSESSEES. IN VIEW OF THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF GOPAL C. SHARMA VS. CIT (209 ITR 946) (BOM), IT IS ALSO CLEAR THAT THE PROFIT MOTIVE OF THE ASSESSEE IN SELLING THE LAND 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 HONBLE SUPREME COURT IN THE CASE OF N. SRINIVASA RAO VS. SPECIAL COURT (2006) 4 SCC 214 WHERE IT WAS OBSERVED THAT THE FACT THAT AGRICUL TURAL 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 THAT THE LAND IN QUESTION IN THE INSTANT CASE IS BOUGHT BY DEVELOPER CANNOT BE A DETE RMINING FACTOR BY ITSELF TO SAY THAT THE LAND WAS CONVERTED INTO USE FOR NON - AGRICULTURAL PURPOSES. 26. RECENTLY THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS.MADHUKUMAR N. (HUF) (2012) 78 DTR (KAR) 391 HELD AS FOLLOWS: '9. AN AGRICULTURAL LAND IN INDIA IS NOT A CAPITAL ASSET BUT BECOMES A CAPITAL ASSET IF IT IS THE LAND LOCATED UNDER SECTION 2(14)(III)(A) & (B) OF THE ACT, SECTION 2(14) (III) (A) OF THE ACT COVERS A SITUATION WHERE THE SUBJECT AGRICULTURAL LAND IS LOCATED WITHIN THE LIMITS OF MUNICIPAL CORPORATION, NOTIFIED AREA COMMITTEE, TOWN AREA COMMITTEE, TOWN COMMITTEE, OR CANTONMENT COMMITTEE AND WHICH HAS A POPULATION OF NOT LESS THAN 10,000. 10. SECTION 2(14)(M)(B) OF THE ACT COVERS THE SITUATION WHERE THE SUBJECT LAND IS NOT ONLY LOCATED WITH IN THE DISTANCE OF 8 KMS FROM THE LOCAL LIMITS, WHICH IS COVERED BY CLAUSE (A) TO SECTION 2(14)(III) OF THE ACT, BUT ALSO REQUIRES THE FULFILMENT OF THE CONDITION THAT THE CENTRAL GOVERNMENT HAS ISSUED A NOTIFICATION UNDER THIS CLAUSE FOR THE PURPOSE OF IN CLUDING THE AREA UP I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 20 TO 8 KMS, FROM THE MUNICIPAL LIMITS, TO RENDER THE LAND AS A CAPITAL ASSET. 11. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE SUBJECT LAND IS NOT LOCATED WITHIN THE LIMITS OF DASARAHALLI CITY MUNICIPAL COUNCIL THEREFORE, CLAUSE (A) TO SECTION 2(14][III] OF THE ACT IS NOT ATTRACTED. 12. HOWEVER, THOUGH IT IS CONTENDED THAT IT IS LOCATED WITHIN 8 KNITS,, WITHIN THE MUNICIPAL LIMITS OF DASARAHALLI CITY MUNICIPAL COUNCIL IN THE ABSENCE OF A NY NOTIFICATION ISSUED UNDER CLAUSE (B) TO SECTION 2(14)(III) OF THE ACT, IT CANNOT BE LOOKED IN AS A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14)(III)(B) OF THE ACT ALSO AND THEREFORE THOUGH THE TRIBUNAL MAY NOT HAVE SPELT OUT THE REASON AS TO WHY TH E SUBJECT LAND CANNOT BE CONSIDERED AS A CAPITAL ASSET BE GIVING THIS VERY REASON, WE FIND THE CONCLUSION ARRIVED AT BY THE TRIBUNAL IS NEVERTHELESS THE CORRECT CONCLUSION.' 27. FURTHER THE KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. ARIJIT MI TRA (48 SOT 544) (KOL) HELD AS FOLLOWS: '7. FROM THE ABOVE, IT IS CLEAR THAT AGRICULTURAL LAND SITUATED IN AREAS LYING WITHIN A DISTANCE NOT EXCEEDING 8 KM FROM THE LOCAL LIMITS OF SUCH MUNICIPALITIES OR CANTONMENT BOARDS ARE COVERED BY THE AMENDED DEFIN ITIONS OF 'CAPITAL ASSET', IF SUCH AREAS ARE, HAVING REGARD TO THE EXTENT OF AND SCOPE FOR THEIR URBANIZATION AND OTHER RELEVANT CONSIDERATIONS, IS NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS BEHALF. CENTRAL GOVERNMENT IN EXERCISE OF SUCH POWERS HAS ISSUED THE ABOVE NOTIFICATION, AS AMENDED LATEST BY NOTIFICATION NO. 11186 DATED 28.12.1999 CLEARLY CLARIFIES THAT AGRICULTURAL LAND SITUATION IN RURAL AREAS, AREAS OUTSIDE THE MUNICIPALITY OR CANTONMENT BOARD ETC., HAVING A POPULATION OF NOT LESS THAN 10,000 AND ALSO BEYOND THE DISTANCE NOTIFIED BY CENTRAL GOVERNMENT FROM LOCAL LIMITS I.E. THE OUTER LIMITS OF ANY SUCH MUNICIPALITY OR CANTONMENT BOARD ETC., STILL CONTINUES TO BE EXCLUDED FROM THE DEFINITION OF 'CAPITAL ASSET'. ACCORDINGLY, IN VIEW OF SUB - CLAUSE (B ) OF SECTION 2(14)(III) OF THE ACT EVEN UNDER THE AMENDED DEFINITION OF EXPRESSION 'CAPITAL ASSET', THE AGRICULTURAL LAND SITUATED IN RURAL AREAS CONTINUES TO BE EXCLUDED FROM THAT DEFINITION. AND AS IN THE PRESENT CASE, I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 21 ADMITTEDLY, THE AGRICULTURAL LAND OF THE ASSESSEE IS OUTSIDE THE MUNICIPAL LIMITS OF RAJARHAT MUNICIPALITY AND THAT ALSO 2.5 KM AWAY FROM THE OUTER LIMITS OF THE SAID MUNICIPALITY, ASSESSEE'S LAND DOES NOT COME WITHIN THE PURVIEW OF SECTION 2(14)(III) EITHER UNDER SUB CLAUSE (A) OR (B) OF THE ACT, HENCE THE SAME CANNOT BE CONSIDERED AS CAPITAL ASSET WITHIN THE MEANING OF THIS SECTION. HENCE, NO CAPITAL GAIN TAX CAN BE CHARGED ON THE SALE TRANSACTION OF THIS LAND ENTERED BY THE ASSESSEE. ACCORDINGLY, WE QUASH THE ASSESSMENT ORDER QUA CHARGIN G OF CAPITAL GAINS ON VERY JURISDICTION OF THE ISSUE IS QUASHED. THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED.' 28. IT WAS HELD IN THE CASE OF CIT VS. MANILAL SOMNATH (106 ITR 917) AS FOLLOWS: UNDER THE INCOME - TAX ACT OF 1961, AGRICULTURAL LEND SITUA TED IN INDIA WAS EXCLUDED FROM THE DEFINITION OF 'CAPITAL ASSET' AND ANY GAIN FROM THE SALE THEREOF WAS NOT TO BE INCLUDED IN THE TOTAL INCOME OF AN ASSESSEE TINDER THE HEAD 'CAPITAL GAINS'. IN ORDER TO DETERMINE WHETHER A PARTICULAR LAND IS AGRICULTURAL L AND OR NOT ONE HAS TO FIRST FIND OUT IF IT IS BEING PUT TO ANY USE. IF IT IS USED FOR AGRICULTURAL PURPOSES THERE IS A PRESUMPTION THAT IT IS AGRICULTURAL LAND. IF IT IS USED FOR NON - AGRICULTURAL PURPOSES THE PRESUMPTION IS THAT IT IS NON - AGRICULTURAL LAND . THIS PRESUMPTION ARISING FROM ACTUAL USE CAN BE REBUTTED BY THE PRESENCE OF OTHER FACTORS. THERE MAY BE CASES WHERE LAND WHICH IS ADMITTEDLY NON - AGRICULTURAL IS USED TEMPORARILY FOR AGRICULTURAL PURPOSES. THE DETERMINATION OF THE QUESTION WOULD, THEREFOR E, DEPEND ON THE FACTS OF EACH CASE. 'THE ASSESSEE, HINDU, UNDIVIDED FAMILY, HAD OBTAINED SOME LAND ON A PARTITION IN 1939. FROM THAT TIME, UP TO THE TIME OF ITS SALE, AGRICULTURAL OPERATIONS WERE CARRIED ON IN THE LAND. THERE WAS NO REGULAR ROAD TO THE LA ND AND IT WAS WITH THE AID OF A TRACTOR THAT AGRICULTURAL OPERATIONS WERE BEING CARRIED ON. THE LAND WAS INCLUDED WITHIN A DRAFT TOWN PLANNING SCHEME. THE ASSESSEE GOT PERMISSION OF THE COLLECTOR TO SELL THE LAND FOR RESIDENTIAL PURPOSES AND SOLD IT. ON TH E QUESTION WHETHER THE LAND WAS AGRICULTURAL LAND: HELD, THAT WHAT HAD TO BE CONSIDERED IS NOT WHAT THE PURCHASER DID WITH THE LAND OR THE PURCHASER WAS SUPPOSED TO DO WITH THE LAND, BUT I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 22 WHAT WAS THE CHARACTER OF THE LAND AT THE TIME WHEN THE SALE TOOK PLACE. THE FACT THAT THE LAND WAS WITHIN MUNICIPAL LIMITS OR THAT IT WAS INCLUDED WITHIN A PROPOSED TOWN PLANNING SCHEME WAS NOT BY ITSELF SUFFICIENT TO REBUT THE PRESUMPTION ARISING FROM ACTUAL USE OF THE LAND. THE LAND HAD BEEN USED FOR AGRICULTURAL PURP OSES FOR A LONG TIME AND NOTHING HAD HAPPENED TILL THE DATE OF THE SALE TO CHANGE THAT CHARACTER OF THE LAND. THE POTENTIAL NON - AGRICULTURAL VALUE OF THE LAND FOR WHICH A PURCHASER MAY BE PREPARED TO PAY A LARGE PRICE WOULD NOT DETRACT FROM ITS CHARACTER A S AGRICULTURAL LAND AT THE DATE OF THE SALE. THE LAND IN QUESTION WAS, THEREFORE, AGRICULTURAL LAND. 29. FURTHER THE WORD 'CAPITAL ASSET' IS DEFINED IN SECTION 2(14) TO MEAN PROPERTY OF ANY KIND HELD BY AN ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSI NESS OR PROFESSION, BUT DOES NOT INCLUDE (III) AGRICULTURAL LAND IN INDIA, NOT BEING LAND SITUATE - (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURISDICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNICIPAL CORPORATION, NOTIFIED AREA COMMIT TEE, 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 ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR; OR (B) IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MORE THAN EIGHT KILOMETRES, FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITEM (A), AS THE CENTRAL GOVERNMENT MAY, HAVING REGARD TO THE EXTENT OF, AND SCO PE FOR, URBANIZATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS, SPECIFY IN THIS BEHALF BY NOTIFICATION IN THE OFFICIAL GAZETTE; 30. IT IS VERY CLEAR FROM THE ABOVE THAT THE GAIN ON SALE OF AN AGRICULTURAL LAND WOULD BE EXIGIBLE TO TAX ONLY WHEN THE LAND TRANSFERRED IS LOCATED WITHIN THE JURISDICTION OF A MUNICIPALITY. THE FACT THAT ALL THE EXPRESSIONS ENLISTED AFTER THE WORD MUNICIPALITY ARE PLACED WITHIN THE BRACKETS STARTING WITH THE WORDS 'WHETHER KNOWN AS' CLEARLY INDICATES THAT SUCH EXPRESSIONS ARE USED TO DENOTE A MUNICIPALITY ONLY, IRRESPECTIVE OF THE NAME BY WHICH SUCH MUNICIPALITY IS CALLED. THIS FACT IS FURTHER SUBSTANTIATED BY THE PROVISIONS CONTAINED UNDER CLAUSE (B) WHEREIN IT HAS I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 23 BEEN CLEARLY PROVIDED THAT THE AUTHO RITY REFERRED TO IN CLAUSE (A) WAS ONLY MUNICIPALITY. 31. WE ALSO PERUSED THE MEANING OF THE TERM LOCAL AUTHORITY AS REFERRED IN SECTION 10(20) OF THE ACT. (20) THE INCOME OF A LOCAL AUTHORITY WHICH IS CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY', 'CAPITAL GAINS' OR 'INCOME FROM OTHER SOURCES' OR FROM A TRADE OR BUSINESS CARRIED ON BY IT WHICH ACCRUES OR ARISES FROM THE SUPPLY OF A COMMODITY OR SERVICE [(NOT BEING WATER OR ELECTRICITY) WITHIN ITS OWN JURISDICTIONAL AREA OR FROM THE SUPPLY OF WATER OR ELECTRICITY WITHIN OR OUTSIDE ITS OWN JURISDICTIONAL AREA]. [EXPLANATION. - FOR THE PURPOSES OF THIS CLAUSE, THE EXPRESSION 'LOCAL AUTHORITY' MEANS (I) PANCHAYAT AS REFERRED TO IN CLAUSE (D) OF ARTICLE 243 OF THE CONSTITUTION; OR (II) M UNICIPALITY AS REFERRED TO IN CLAUSE (E) OF ARTICLE 243P OF THE CONSTITUTION; OR (III) MUNICIPAL COMMITTEE AND DISTRICT BOARD, LEGALLY ENTITLED TO, OR ENTRUSTED BY THE GOVERNMENT WITH, THE CONTROL OR MANAGEMENT OF A MUNICIPAL OR LOCAL FUND; OR (IV) CAN TONMENT BOARD AS DEFINED IN SECTION 3 OF THE CANTONMENTS ACT, 1924 (2 OF 1924); 32. IT IS ALSO EVIDENT FROM THE MEMORANDUM EXPLAINING THE PROVISIONS OF FINANCE ACT, 1970, WHEREBY S. 2(14) WAS AMENDED SO AS TO INCLUDE THE AGRICULTURAL LANDS LOCATED WITHIN THE JURISDICTION OF A MUNICIPALITY IN THE DEFINITION OF THE EXPRESSION 'CAPITAL ASSET'. THE RELEVANT 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 TRANSFER OF AGRICULTURAL LAND SITUATED IN CERTAIN AREAS. FOR THIS PURPOSE, THE DEFINITION OF THE TERM 'CAPITAL ASSET' IN SECTION 2(14) HAS BEEN AMENDED SO AS TO EXCLUDE FROM ITS SCOPE ONLY AGRICULTURAL LAND IN INDIA WHICH IS NOT SITUATE IN ANY AREA COMPRISED WITHIN THE JURISDICTION OF A I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 24 MUNICIPALITY OR CANTONMENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAND PERSONS ACCO RDING TO THE LAST PRECEDING CENSUS FOR WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR. THE CENTRAL GOVERNMENT HAS BEEN AUTHORISED TO NOTIFY IN THE OFFICIAL GAZETTE ANY AREA OUTSIDE THE LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD HAVING A POPULATION OF NOT LESS THAN TEN THOUSAND 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, A ND SCOPE FOR, URBANISATION OF SUCH AREA, AND, WHEN ANY SUCH AREA IS NOTIFIED BY THE CENTRAL GOVERNMENT, AGRICULTURAL LAND SITUATED WITHIN SUCH AREA WILL STAND INCLUDED WITHIN THE TERM 'CAPITAL ASSET'. AGRICULTURAL LAND SITUATED IN RURAL AREAS, I.E., AREA S OUTSIDE ANY MUNICIPALITY OR CANTONMENT BOARD HAVING A POPULATION OF NOT LESS THAN TEN THOUSAND AND ALSO BEYOND THE DISTANCE NOTIFIED BY THE CENTRAL GOVERNMENT FROM THE LIMITS OF ANY SUCH MUNICIPALITY OR CANTONMENT BOARD, WILL CONTINUE TO BE EXCLUDED FROM THE TERM 'CAPITAL ASSET'. 33. FURTHER IT IS NOBODY'S CASE THAT THE PROPERTY FALLS WITHIN ANY AREA WHICH IS COMPRISED WITHIN THE JURISDICTION OF A MUNICIPALITY OR CANTONMENT BOARD OR WHICH HAS A POPULATION OF NOT LESS THAN 10,000 ACCORDING TO THE LAST PR ECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR. IN OTHER WORDS, THE LAND DOES NOT FALL IN SUB - CLAUSE (A) OF SECTION 2(14)(III) OF THE ACT AS THE LAND IS OUTSIDE OF ANY MUNICIPALITY INCLUDING GHMC . FURT H ER WE HAVE TO SEE WHETHER THE LAND FALLS IN CLAUSE (B) OF SECTION 2(14)(III). THIS SECTION PRESCRIBES THAT ANY AREA WITHIN SUCH DISTANCE, NOT BEING MORE THAN 8 KM FROM THE LOCAL LIMIT OF ANY MUNICIPALITY OR CANTONMENT BOARD AS REFERRED TO IN SUB - CLA USE (A) OF SECTION 2(14)(III) OF THE ACT, AS THE CENTRAL GOVERNMENT MAY, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANISATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS, SPECIFY IN THIS BEHALF BY NOTIFICATION IN THE OFFICIAL GAZETTE. 34. WE HA VE CAREFULLY GONE THROUGH THE NOTIFICATION ISSUED BY THE CENTRAL GOVERNMENT U/S. 2(1A)(C) PROVISO (II)(B) AND 2(14)(3B) VIDE NO. 9447 (F. NO. 164/(3)/87/ITA - I) DATED 6 TH JANUARY, 1994 AS AMENDED BY NOTIFICATION NO. 11186 DATED 28 TH I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 25 DECEMBER, 1999. IN THE SCHEDULE ANNEXED TO THE NOTIFICATION DATED 6.1.1994, ENTRY NO. 17 IS RELATING TO HYDERABAD WHEREIN MENTIONED THAT THE AREAS UP TO A DISTANCE OF 8 KM FROM THE MUNICIPAL LIMITS IN ALL DIRECTIONS. IN THE NOTIFICATION 11186 DATED 28.12.1999 THERE IS NO ENTRY RELATING TO HYDERABAD. IT IS CLEAR FROM THESE NOTIFICATIONS THAT AGRICULTURAL LAND SITUATED IN AREAS LYING WITHIN A DISTANCE NOT EXCEEDING 8 KM FROM THE LOCAL LIMITS OF HYDERABAD MUNICIPALITY (GHMC) IS COVERED BY THE AMENDED DEFINITIONS OF 'CAPITAL ASSET'. CENTRAL GOVERNMENT IN EXERCISE OF SUCH POWERS HAS ISSUED THE ABOVE NOTIFICATION, AS AMENDED LATEST BY NOTIFICATION NO. 11186 DATED 28.12.1999 CLEARLY CLARIFIES THAT AGRICULTURAL LAND SITUATION IN RURAL AREAS, AREAS OUTSIDE THE MUNICIPALITY OR CANTONMENT B OARD ETC., HAVING A POPULATION OF NOT LESS THAN 10,000 AND ALSO BEYOND THE DISTANCE NOTIFIED BY CENTRAL GOVERNMENT FROM LOCAL LIMITS I.E. THE OUTER LIMITS OF ANY SUCH MUNICIPALITY OR CANTONMENT BOARD ETC., STILL CONTINUES TO BE EXCLUDED FROM THE DEFINITIO N OF 'CAPITAL ASSET'. ACCORDINGLY, IN VIEW OF SUB - CLAUSE (B) OF SECTION 2(14)(III) OF THE ACT EVEN UNDER THE AMENDED DEFINITION OF EXPRESSION 'CAPITAL ASSET', THE AGRICULTURAL LAND SITUATED IN RURAL AREAS CONTINUES TO BE EXCLUDED FROM THAT DEFINITION. AND AS IN THE PRESENT CASE, ADMITTEDLY, THE AGRICULTURAL LAND OF THE ASSESSEE IS OUTSIDE THE MUNICIPAL LIMITS OF HYDERABAD MUNICIPALITY AND THAT ALSO 8 KM WAY FROM THE OUTER LIMITS OF THIS MUNICIPALITY, ASSESSEE'S LAND DOES NOT COME WITHIN THE PURVIEW OF SEC TION 2(14)(III) EITHER UNDER SUB CLAUSE (A) OR (B) OF THE ACT, HENCE THE SAME CANNOT BE CONSIDERED AS CAPITAL ASSET WITHIN THE MEANING OF THIS SECTION. HENCE, NO CAPITAL GAIN TAX CAN BE CHARGED ON THE SALE TRANSACTION OF THIS LAND ENTERED BY THE ASSESSEE. THIS IS SUPPORTED BY THE ORDER OF KOLKATA BENCH OF THIS TRIBUNAL IN THE CASE OF ARIJIT MITRA (CITED SUPRA), HARISH V. MILANI (SUPRA) AND M.S. SRINIVAS NAICKER VS. ITO (292 ITR 481) (MAD). BY BORROWING THE MEANING FROM THE ABOVE SECTION, WE ARE NOT ABLE TO APPRECIATE THAT THE LAND FALLS WITHIN THE TERRITORIAL LIMIT OF ANY MUNICIPALITY WITHOUT NOTIFICATION OF CENTRAL GOVERNMENT AS HELD BY THE KARNATAKA HIGH COURT IN THE CASE OF MADHUKUMAR N. (HUF) (CITED SUPRA). 35. FROM THE FACTS AND CIRCUMSTANCES OF THE C ASE, AS NARRATED BEFORE US, IT IS IMPORTANT TO NOTE THAT WHAT WAS THE INTENTION OF THE ASSESSEES AT THE TIME OF ACQUIRING THE LAND OR INTERVAL ACTION BY THE ASSESSEE BETWEEN THE PERIOD FROM PURCHASE AND SALE OF THE LAND AND THE RELEVANT IMPROVEMENT/DEVELOP MENT TAKEN PLACE DURING THIS TIME IS RELEVANT FOR DECIDING THE ISSUE WHETHER TRANSACTION WAS IN THE NATURE OF TRADE. I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 26 THOUGH INTENTION SUBSEQUENTLY FORMED MAY BE DIFFERENT, IT IS THE INTENTION AT THE INCEPTION IS CRUCIAL. ONE OF THE ESSENTIAL ELEMENTS IN AN ADVENTURE OF THE TRADE IS THE INTENTION TO TRADE; THAT INTENTION MUST BE PRESENT AT THE TIME OF PURCHASE. THE MERE CIRCUMSTANCES THAT A PROPERTY IS PURCHASED IN THE HOPE THAT WHEN SOLD LATER ON IT WOULD LEAVE A MARGIN OF PROFIT, WOULD NOT BE SUFFICIENT TO SHOW, AN INTENTION TO TRADE AT THE INCEPTION. IN A CASE WHERE THE PURCHASE HAS BEEN MADE SOLELY AND EXCLUSIVELY WITH THE INTENTION TO RESELL AT A PROFIT AND THE PURCHASER HAS NO INTENTION OF HOLDING THE PROPERTY FOR HIMSELF OR OTHERWISE ENJOYING OR USING IT, THE PRESENCE OF SUCH AN INTENTION IS A RELEVANT FACTOR AND UNLESS IT IS OFFSET BY THE PRESENCE OF OTHER FACTORS IT WOULD RAISE AS STRONG PRESUMPTION THAT THE TRANSACTION IS AN ADVENTURE IN THE NATURE OF TRADE. EVEN SO, THE PRESUMPTION IS NOT CONCLUSIVE AND IT IS CONCEIVABLE THAT, ON CONSIDERING ALL THE FACTS AND CIRCUMSTANCES IN THE CASE, THE COURT MAY, DESPITE THE SAID INITIAL INTENTION, BE INCLINED TO HOLD THAT THE TRANSACTION WAS NOT AN ADVENTURE IN THE NATURE OF TRADE. THE PRESUMPTION MAY BE REBUTTE D. IN THE PRESENT CASE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IT CANNOT BE CONSIDERED AS AN ADVENTURE IN THE NATURE OF TRADE. THE INTENTION OF THE ASSESSEE FROM THE INCEPTION WAS TO CARRY ON AGRICULTURAL OPERATIONS. MERELY BECAUSE OF THE FACT THAT THE LAND WAS SOLD IN A SHORT PERIOD OF HOLDING, IT CANNOT BE HELD THAT INCOME ARISING FROM THE SALE OF LAND WAS TAXABLE AS PROFIT ARISING FROM THE ADVENTURE IN THE NATURE OF TRADE OR CAPITAL GAIN. THE PERIOD OF HOLDING SHOULD NOT SUGGEST THAT THE ACT IVITY WAS AN ADVENTURE IN THE NATURE OF TRADE. 36. IN VIEW OF OUR ABOVE DISCUSSION, IN OUR OPINION, THE LAND IS NOT SITUATED WITHIN THE QUTUBULLAPUR MUNICIPALITY, BUT, THE SAME SITUATED IN THE DUNDIGAL VILLAGE AND THE EVIDENCE BROUGHT ON RECORD SUGGEST T HAT THE LAND IS AN AGRICULTURAL LAND, HENCE, IT IS NOT LIABLE FOR TAXATION. ACCORDINGLY, THE ADDITION MADE ON THIS COUNT IS DELETED IN ALL THE APPEALS UNDER CONSIDERATION. NO EVIDENCE SUGGESTS THAT DUNDIGAL VILLAGE FALLS WITHIN QUTUBULLAPUR MUNICIPALITY AN D ALSO THIS QUTUBULLAPUR MUNICIPALITY HAS NOT NOTIFIED IN THE YEAR UNDER SECTION 2(14)(III) OF THE I.T. ACT AND QUTUBULLAPUR MUNICIPALITY ABOLISHED AND MERGED WITH MUNICIPAL CORPORATION OF HYDERABAD WITH EFFECT FROM 16/04/2007. WE HAVE ALSO GONE THROUGH TH E RECORD PLACED IN THE PAPER BOOK AT PAGES 76 & 77. AT PAGE 76, A COPY OF THE INTIMATION IS PLACED ISSUED BY THE TOWN PLANNING OFFICER, QUTHBULLAPUR , CIRCLE 15, GHMC VIDE REF. NO. G/1240/2008, DATED 04/10/2008 INFORMING I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 27 THAT THE LAND IS NOT FALLING IN T HE GHMC LIMITS. AT PAGE 77, A COPY OF THE AGRICULTURAL LAND CERTIFICATE IS PLACED, ISSUED BY THE DEPUTY COLLECTOR & MANDAL REVENUE OFFICER, QUTUBULLAPUR MANDAL VIDE REF. NO. A/13607/2005, DATED 20/08/2005 STATING THAT THE LANDS ARE U NDER CULTIVATION BY RAI SING CROPS I.E. PADDY, CATTLE FEED, MAIZE, JOWAR, VEGETEABLES ETC. 37. FURTHER, WE MAKE IT CLEAR THAT WHEN THE LAND WHICH DOES NOT FALL UNDER THE PROVISIONS OF SECTION 2(14)(III) OF THE IT ACT AND AN ASSESSEE WHO IS ENGAGED IN AGRICULTURAL OPERATIONS IN S UCH AGRICULTURAL LAND AND ALSO BEING SPECIFIED AS AGRICULTURAL LAND IN REVENUE RECORDS, THE LAND IS NOT SUBJECTED TO ANY CONVERSION AS NON - AGRICULTURAL LAND BY THE ASSESSEE OR ANY OTHER CONCERNED PERSON, TRANSFERS SUCH AGRICULTURAL LAND AS IT IS AND WHERE IT IS BASIS, IN SUCH CIRCUMSTANCES, IN OUR OPINION, SUCH TRANSFER LIKE THE CASE BEFORE US CANNOT BE CONSIDERED AS A TRANSFER OF CAPITAL ASSET OR THE TRANSACTION RELATING TO SALE OF LAND WAS NOT AN ADVENTURE IN THE NATURE OF TRADE SO AS TO TAX THE INCOME A RISING OUT OF THIS TRANSACTION AS BUSINESS INCOME. 14. ON GOING THROUGH THE AFORESAID ORDER OF THE COORDINATE BENCH, WE FIND THE FACTS DEALT UPON BY THE TRIBUNAL IS IDENTICAL TO THE FACTS IN THE PRESENT CASE. THEREFORE, RATIO LAID DOWN THEREIN ALSO EQUALLY APPLIES TO THE FACTS OF THE PRESENT CASE AS THE LAND SOL D IS NOT ONLY AGRICULTURAL IN NATURE BUT IS ALSO SITUATED BEYOND 12 KMS FROM THE LIMIT OF A MUNICIPALITY NOTIFIED BY THE CENTRAL GOVT. HENCE, LAND SOLD BY ASSESSEE NOT BEING A CAPITAL ASSET, THE GAIN DERIVED THERE FROM IS NOT TAXABLE AT THE HANDS OF THE AS SESSEE. ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) BY DISMISSING THE GROUND RAISED. 11. AT THE TIME OF HEARING BEFORE US, LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THE CASE OF THE ASSESSEE AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THE CASES OF THESE SIX ASSESSEES, WHICH HAVE ALREADY BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEES, VIDE ITS COMMON ORDER DATED 28.8.2014, AND THIS POSITION IS NOT DISPUTED BY THE LEARNED DEPARTMENTAL REPRESE NTATIVE. THE ISSUE INVOLVED IN GROUND NO.3 OF THE ASSESSEES APPEAL THUS IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH OF I TA NO. 350 /H YD/20 14 SMT. R. UMA DEVI, H YDERABAD 28 THIS TRIBUNAL DATED 28.8.2014 (SUPRA) AND RESPECTFULLY FOLLOWING THE SAME, WE DECIDE THE IS SUE INVOLVED IN GROUND NO.3 IN FAVOUR OF THE ASSESSEE AND ALLOW THE SAME. 12. KEEPING IN VIEW OUR DECISION RENDERED ABOVE ON GROUND NO.3 THAT THE LAND IN QUESTION SOLD BY THE ASSESSEE, BEING AGRICULTURAL LAND, THE PROFIT ARISING FROM THE SALE OF THE SAM E, IS NOT CHARGEABLE TOT AX IN THE HANDS OF THE ASSESSEE AS CAPITAL GAIN, THE OTHER ISSUES RAISED BY THE ASSESSEE HAVE BECOME INFRUCTUOUS, AS AGREED BY THE LEARNED REPRESENTATIVES OF BOTH THE SIDES. WE, THEREFORE, DO NOT CONSIDER IT NECESSARY OR EXPEDIENT TO ADJUDICATE UPON THE SAME. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 11 TH MARCH, 2015 SD/ - SD/ - ( ASHA VIJAYARAGHAVAN ) ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER D T/ - 11 TH MARCH, 201 5 COPY FORWARDED TO: 1. SMT. R. UMA DEVI , PLOT NO.50 3 , SUDHA TOWERS BHAGYANAGAR COLONY, KUKATPALLY, HYDERABAD 2 . DY. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 5, HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) VII HYDERABAD 4. COMMISSIONER OF INCOME - TAX CENTRAL, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S