Mr.Tono Thomas, Cochin V. The ACIT,

ITA 355/COCH/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7524 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 20-01-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 21-07-2014
• Court: TRIBUNAL
• Department Lawyers: SHANTAM BOSE
• Assessee Lawyers: A GOPALAKRISHNAN
• Keywords: Capital asset; Question of law; Cost of acquisition
• Section: 54B; 54F; 2(14); 142(1); 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH C OCHIN BEFORE S/SHRI B.P. JAIN, AM AND GEORGE GEOR GE K., JM I.T.A. NO.355/ COCH/ 2014 ASSESSMENT YEAR : 32008-09 MR. TONO THOMAS, FLAT NO. 12A, EXPRESS ESTATE, KALOOR, KOCHI-682 017. [PAN:ABPPT 6266M] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2(2), KOCHI. (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT) I.T.A. NO.356/ COCH/ 2014 ASSESSMENT YEAR :2008-09 M/S. TANVEST PROPERTIES, FLAT NO. 12A, EXPRESS ESTATE, KALOOR, KOCHI-682 017. [PAN:AACFT 9134G] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2(2), KOCHI. (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT) I.T.A. NO.441/COCH/ 2015 ASSESSMENT YEAR :2008-09 SMT. SIJI TONO, FLAT NO. 12A, EXPRESS ESTATE, KALOOR, KOCHI-682 017. [PAN:AAZPT3718R] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2(2), KOCHI. (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI A. GOPALAKRISHNAN, CA REVENUE BY SHRI SHANTAM BOSE, CIT(DR) DATE OF HEARING 21/01/2016 DATE OF PRONOUNCEMENT 05/02/2016 I.T.A. NOS.355,356 &441/COCH/2015 2 O R D E R PER B.P.JAIN, ACCOUNTANT MEMBER: THESE THREE APPEALS OF DIFFERENT ASSESSEES ARI SE FROM THREE DIFFERENT ORDERS OF LD. CIT(A)-II, KOCHI AS PER DETAILS BELOW : SL. NO. I.T.A. NO. ASSESSEE ASST. YEAR CIT(A) DATE OF ORDER 1. 355/COCH/2014 SHRI TONO THOMAS 2008-09 CIT(A) II, KOCHI 03.03.2014 2. 356/COCH/2014 M/S. TANVEST PROPERTIES 2008-09 CIT(A)-II, KOCHI 03.03.2014 3. 441COCH/2015 SMT. SIJI TONO 2008-09 CIT(A)-II, KOCHI 09.06.2015 2. THE LD. AR, SHRI A. GOPALAKRISHNAN, CA ARGUED THAT THE FACTS IN ALL THE APPEALS ARE IDENTICAL WHICH HAVE BEEN CONCEDED BY T HE LD. DR AS WELL. THEREFORE, WE HAVE DECIDED TO TAKE UP THE AFORESAID APPEALS TOGETHER BY THIS CONSOLIDATED ORDER. FIRST OF ALL WE SHALL TAK E UP THE APPEAL IN THE CASE OF TONO THOMAS, IN I.T.A. NO. 355/COCH/2014 AND OUR ORDER HEREINBELOW SHALL BE IDENTICALLY APPLICABLE IN ALL THE APPEALS AS AFORESAID. SHRI TONO THOMAS I.T.A. NO. 355/COCH/2015 : AY 2008 -09 . 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS A PARTNER IN THE FIRM M/S.TANVEST PROPERTIES, ERNAKULAM. THE ASSESSEE FILE D THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 DECLARING A TOTAL I NCOME OF RS.28,62,680/- THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICES U/S. 143(2) AND U/S. 142(1) OF THE ACT WERE ISSUED. I.T.A. NOS.355,356 &441/COCH/2015 3 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, I T WAS NOTICED THAT THE ASSESSEE HAD CLAIMED EXEMPTION OF RS.8,14,58,726/- BEING THE SALE CONSIDERATION RECEIVED BY HIM FROM SALE OF LANDS SI TUATED IN KAKKANAD AND KIZHAKKAMBALAM. THE PROPERTIES WERE ACQUIRED AT TH E TOTAL COST OF RS.24,15,200 IN THE YEAR 2003 AND 2004 AND THE SAME WAS SOLD ON 18.12.2007 AND 17.01.2008. THE TOTAL SALE CONSIDER ATION FOR THE AFORESAID LANDS WAS RS.8,45,32,960/-. IT WAS THE CASE OF THE ASSESSEE THAT THE SAID LANDS WERE AGRICULTURAL LANDS AND WERE OUTSIDE THE PURVIEW OF CAPITAL ASSET AS CONTEMPLATED U/S. 2(14) OF THE ACT. THE A SSESSING OFFICER VIDE ORDER DATED 31/12/2010, PRIMARILY CONSIDERING THE D EVELOPMENT AROUND THE SAID LANDS AND THE REPORT OF THE REVENUE DIVISIONAL OFFICER WITH RESPECT TO THE BLOCK IN WHICH THE AFORESAID LANDS WERE SITUATE D, HELD THAT THE LANDS SOLD BY THE ASSESSEE CANNOT BE EXCLUDED FROM EXPRES SION CAPITAL ASSET AS PROVIDED UNDER SUB CLAUSE (III) OF CLAUSE (14) OF S ECTION 2 OF THE ACT. HE FURTHER RELIED UPON THE FACT THAT THE LANDS WERE SO LD TO THE BUILDERS BY THE ASSESSEE. THE ASSESSING OFFICER ASSESSED THE INCOM E ARISING OUT OF THE SALE OF THE LANDS UNDER THE HEAD INCOME FROM BUSINESS ON SUBSTANTIVE BASIS AND UNDER THE HEAD INCOME FROM LONG TERM CAPITAL GAINS ON PROTECTIVE BASIS. THE LONG TERM CAPITAL GAIN WAS CALCULATED AT RS.8,0 9,99,681/- AND THE INCOME FROM BUSINESS ON ACCOUNT OF PROFIT FROM SALE OF PROPERTY WAS DETERMINED AT RS.8,14,58,726/-. THE INCOME FROM CAP ITAL GAINS WAS NOT I.T.A. NOS.355,356 &441/COCH/2015 4 INCLUDED IN THE COMPUTATION OF TOTAL INCOME AS THE ADDITION UNDER THE HEAD CAPITAL GAINS WAS MADE ON PROTECTIVE BASIS. 5 . AGGRIEVED BY THE ASSESSMENT ORDER DATED 31.12.2 010, THE ASSESSEE PREFERRED THE APPEAL BEFORE THE LD. CIT(A). THE ASS ESSEE CHALLENGED THE ADDITION MADE BY THE ASSESSING OFFICER ON VARIOUS G ROUNDS, MORE PARTICULARLY THE FACT THAT THE CONCERNED VILLAGE OF FICER HAD CERTIFIED IN FAVOUR OF THE ASSESSEE THAT THE AGRICULTURAL OPERATIONS WE RE IN FACT CARRIED OUT ON THE SAID LANDS. THE LD. CIT(A) VIDE THE IMPUGNED OR DER DATED 03.03.2014 CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R AND HELD THAT THE LAND CANNOT BE CATEGORIZED AS AN AGRICULTURAL LAND AND T HE PROFIT FROM THE SALE OF THE LANDS WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS ONLY. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER DATED 03.03.2014 PASSED BY THE LD. CIT(A) AND HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL: 1 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED COMMISSIONER OF INCOME TAX APPEALS-II, KOCHI. I. ERRED IN CONFIRMING AND HOLDING WITHOUT APPREC IATING THE FACTS AND THE DETAILED OBJECTIONS,, EXPLANATIONS AND OTHER SUPPOR TING EVIDENCES FURNISHED BY THE APPELLANT, THE CONCLUSION OF THE LEARNED ASS ESSING AUTHORITY THAT THE LANDS WITH THE EXTENT OF 4.2472 ACRES AND 3.1076 AC RES SITUATED IN KAKKANAD VILLAGE AT OLD SURVEY NOS.823/6-B-2,823/6-C824/2,83 0/1-B, 824/3-B, 823/6- A-7, 823, 6-C AND AT KIZHAKKAMBALAM VILLAGE AT SURV EY NOS. 36/1-2, 6/3, 6/3- 1, 35/2, 33/2 RESPECTIVELY AND SOLD DURING THE PREV IOUS YEAR 2007-08 RELEVANT TO THE ASSESSMENT YEAR 2008-09 WERE NOT AGRICULTURA L LANDS WITHIN THE MEANING OF SECTION 2(14) OF THE INCOME TAX ACT, 196 1 AND HENCE LIABLE FOR INCOME TAX ON THE SURPLUS OF RS.8,14,58,730/- EARNE D ON THE SALE OF THE RESPECTIVE AGRICULTURAL LANDS AND I.T.A. NOS.355,356 &441/COCH/2015 5 II. FURTHER WENT WRONG IN CONFIRMING AND ACCEPTING THE FINDING OF THE LEARNED ASSESSING AUTHORITY THAT THE SURPLUS OF RS.8,14,58, 730/- REALIZED ON THE SALE OF SUCH AGRICULTURAL LANDS HELD FOR A PERIOD OF MOR E THAN FIVE YEARS WAS TAXABLE UNDER THE HEAD INCOME FROM BUSINESS TREAT ING THE TWO TRANSACTIONS INVOLVING PURCHASE AND SALE OF THESE TWO PROPERTIES OVER A PERIOD OF FIVE YEARS FROM 2002 TO 2007 AS ADVENTURES IN THE NATUR E OF TRADE LEVYING INCOME TAX ON THE PROFIT MADE ON THE SALE OF SUCH L ANDED PROPERTIES AT THE RATE APPLICABLE FOR THE INCOME UNDER THE HEAD INCO ME FROM BUSINESS. III. ERRED IN CONFIRMING THE PROTECTIVE ASSESSMENT O F THE LEARNED ASSESSING AUTHORITY WHICH IS INVALID AND LEGALLY NOT SUSTAINA BLE AS THE LEARNED CIT AND THE ASSESSING AUTHORITY DID NOT PROPERLY APPLY THEI R MIND WITH CLARITY AND CONVICTION AS MUCH AS THE ASSESSING AUTHORITY WAS N OT SURE ABOUT THE HEAD OF INCOME UNDER WHICH THE ALLEGED TAXABLE INCOME SHOUL D BE ASSESSED TO TAX AS SHE TREATED THE SURPLUS ON THE SALE OF AGRICULTURAL LANDS AS ASSESSABLE TO TAX UNDER THE HEAD INCOME FROM BUSINESS AND STILL HOL DING IN ANOTHER PART OF THE ASSESSMENT ORDER THAT THE SAID SURPLUS IS TREATED A S INCOME FROM LONG TERM CAPITAL GAINS ON A PROTECTIVE BASIS. 2. THE LEARNED COMMISSIONER ERRED IN CONFIRMING TH E COMPUTATION, BY THE LEARNED ASSESSING AUTHORITY, OF THE INCOME UNDER TH E HEAD INCOME FROM BUSINESS TREATING THE TWO PROPERTIES SOLD BY THE A PPELLANT UNDER QUESTION AS NON AGRICULTURAL LANDS AND AS BUSINESS ASSETS FOR A SSESSING, TO INCOME TAX, THE SURPLUS EARNED ON ITS SALE UNDER THE HEAD INCO ME FROM BUSINESS. THE LEARNED COMMISSIONER SHOULD HAVE GRANTED EXEMPTION FROM LEVY OF INCOME TAX ON THE SURPLUS OF RS.8,14,58,730/- MADE BY THE APPELLANT ON THE SALE OF SAID TWO PROPERTIES ACCEPTING THEM CORRECTLY AS AGR ICULTURAL LANDS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE OF T HE APPELLANT AND AS PER THE LAW THE LEARNED CIT WAS NOT JUSTIFIED IN TREATING T HE LANDS IN QUESTION AS NON AGRICULTURAL LANDS MERELY BECAUSE THERE ARE CERTAIN DEVELOPMENTS TAKING PLACE IN ERNAKULAM DISTRICT AND IN CERTAIN AREAS SITUATED AT THE DISTANCE OF 5 TO 10 KILOMETERS AWAY FROM THE PROPERTIES. THE LEARNED CI T SHOULD HAVE ACCEPTED THE CERTIFICATE OF THE VILLAGE OFFICER AND OTHER DO CUMENTARY EVIDENCES FURNISHED BY THE APPELLANT CONFIRMING THAT THE PROP ERTY IN EACH OF THE TWO CASES IS A PADDY FIELD (NILAM) AND AGRICULTURAL O PERATIONS WERE CARRIED OUT IN THE LANDS UNDER CONSIDERATION UPTO THE DATE OF S ALE FROM THE DATE OF I.T.A. NOS.355,356 &441/COCH/2015 6 PURCHASE AND HENCE SHOULD HAVE CONCLUDED THAT THE C HARACTER OF THE PROPERTIES SOLD FOR A TOTAL VALUE (GROSS CONSIDERAT ION) OF RS.8,45,32,960/- DURING THE PREVIOUS YEAR 2007-08 IS AGRICULTURAL IN NATURE. 4. THE LEARNED CIT ERRED BOTH IN LAW AND FACTS IN HOLDING THAT THE PROPERTIES SOLD BY THE APPELLANT WERE NOT AGRICULTURAL LANDS A ND FURTHER WENT WRONG IN CONCLUDING THAT THE SURPLUS EARNED FROM THE SALE OF SUCH LAND IS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS CONC LUDING THAT THE ACTIVITY UNDERTAKEN BY THE APPELLANT IS AN ADVENTURE IN THE NATURE OF TRADE DESPITE THE FACT THAT THE APPELLANT HAD SUBMITTED DETAILED OBJECTIONS, EXPLANATIONS, CLARIFICATIONS, DOCUMENTS AND EVIDENCES TO SUPPORT THE FACT THAT THE PROPERTY IS AN AGRICULTURAL LAND AND THE APPELLANT PURCHASED THE PROPERTIES ONLY FOR THE PURPOSE OF AGRICULTURAL OPERATIONS AND TILL THE DAT E OF SALE OF THE PROPERTIES IN QUESTION, THE PROPERTIES WERE RETAINING THE CHARACT ER OF AGRICULTURAL LANDS AND THE ORDER OF THE LEARNED CIT WAS BASED ON COMPLETE MISCONCEPTION OF THE FACTS OF THE CASE AND THE APPLICABLE STATUTORY PROV ISIONS OF THE LAW. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTE R, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ASSESSMENT YE AR TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 6. THE LD. AR HAS CONTESTED THE FINDINGS ARRIVED AT BY THE ASSESSING OFFICER AND THE FIRST APPELLATE AUTHORITY. HE SUBMITTED THAT T HE ASSESSEE HAD ACTUALLY CARRIED OUT AGRICULTURAL OPERATIONS ON REGULAR BASIS SINCE THE PURCHASE TILL THE SALE OF THE LANDS. HE STATES THAT THE ASSESSEE BELONGED TO A FA MILY ENGAGED IN AGRICULTURE AND FARMING AND THE SUBJECT LANDS WERE SITUATED IN TRADITIONALLY AGRICULTURAL VILLAGES. HE STRENUOUSLY ARGUED THAT THE LANDS PURC HASED BY THE ASSESSEE WERE CLASSIFIED AS NILAM MEANING PADDY FILED/AGRICULTURA L LAND IN THE REVENUE RECORDS AND THE AFORESAID FACTS STOOD CONFIRMED BY THE CERT IFICATES ISSUED BY THE VILLAGE OFFICERS. HE FURTHER ARGUED THAT THE ASSESSEE DID N OT SUBMIT ANY APPLICATION BEFORE ANY AUTHORITY SEEKING PERMISSION TO COVERT T HE LANDS FROM AGRICULTURAL TO I.T.A. NOS.355,356 &441/COCH/2015 7 NON AGRICULTURAL PROPERTY. HE HAS FURTHER CONTENDE D THAT THE ASSESSEE HAD NOT INFUSED ANY CAPITAL INTO AGRICULTURAL LAND DURING T HE COURSE OF HIS POSSESSION. THE LD. AR HAS RELIED UPON VARIOUS JUDGMENTS INCLUDING THE JUDGMENT RENDERED BY THE ITAT, COCHIN BENCH IN THE CASE OF M.J. THOMAS V S. DCIT IN I.T.A. NO. 224/COCH/2011 DATED 06/06/2014. THE ASSESSEE HAD RE LIED UPON THE FOLLOWING DOCUMENTS TO EVIDENCE THAT THE PROPERTIES SOLD WERE AGRICULTURAL LANDS : 1. COPY OF THE CERTIFICATE NO.2822/13(3) DATED 22.10.2 013 ISSUED BY THE VILLAGE OFFICER, KIZHAKKAMBALAM (ENGLISH TRANSLATION ). 2. COPY OF THE CERTIFICATE NO. 2822/13(3) DATED 22.10. 2013 ISSUED BY THE VILLAGE OFFICER, KIZHAKKAMBALAM. 3. COPY OF THE CERTIFICATE NO.3366/12920 DATED 16.08.2 012 ISSUED BY THE VILLAGE OFFICER,KIZHAKKAMBALAM. 4. COPY OF THE ELECTRICITY BILL WITH CONSUMER NO.4129 U SED IN THE PROPERTIES WITH SY. NO.356/1,3,4,5,343/9 & 355/8 AT KIZHAKKAMB ALAM. 5. NOTE ON THE ELECTRICITY CONNECTION GIVEN TO THE AGRI CULTURAL LAND SITUATED IN SURVEY NO. 257/3 OF KAKKANAD VILLAGE, KANAYANNUR TALUK WHICH WAS PURCHASED BY SHRI TONO THOMAS. 6. COPY OF THE CERTIFICATE NO. 3073/2013 DATED 04.11.2 013 ISSUED BY THE VILLAGE OFFICER, KAKKANAD. 7. COPY OF THE CERTIFICATE NO.553/14 DATED 05.02.2014 ISSUED BY THE VILLAGE OFFICER, KAKKANAD. 8. STATEMENT SHOWING THE COMPUTATION OF AGRICULTURAL I NCOME (ESTIMATED) OF SHRI TONO THOMAS FOR THE YEAR 2003-04. 9. STATEMENT SHOWING THE COMPUTATION OF AGRICULTURAL I NCOME (ESTIMATED0 OF SHRI TONO THOMAS FOR THE YEAR 2004-05. 10. STATEMENT SHOWING THE COMPUTATION OF AGRICULTURAL I NCOME (ESTIMATED) OF SHRI TONO THOMAS FOR THE YEAR 2005-06. I.T.A. NOS.355,356 &441/COCH/2015 8 11. STATEMENT SHOWING THE COMPUTATION OF AGRICULTURAL I NCOME (ESTIMATED) OF SHRI TONO THOMAS FOR THE YEAR 2006-07. 12. STATEMENT SHOWING THE COMPUTATION OF AGRICULTURAL INCOME (ESTIMATED) OF SHRI TONO THOMAS FOR THE YEAR 2007-08. APART FROM THE ABOVE DOCUMENTS, THE ASSESSEE ALSO F ILED COPY OF LEDGER ISSUED BY RUBBER BOARD, WITH WHOM THE SELLER IS REGISTERED AS A PLANTER GRANTING SUBSIDY FOR REPLANTATION OF RUBBER TREES UNDERTAKEN . PHOTGRAPHS OF THE PROPERTIES WHEREIN COCONUT TREES, BANANA PLANTS ETC . CAN BE SEEN, WERE PLACED ON RECORD. 7. THE LD. DR ON THE OTHER HAND HAS CONTENDED THA T THE PROPERTIES SOLD BY THE APPELLANT WERE SITUATED IN HIGHLY DEVELOPED AREAS A ND THE SAME WERE SOLD TO THE BUILDERS FOR NON AGRICULTURAL PURPOSES. HE FURTHER SUBMITTED THAT THE ASSESSEE HAD NOT CARRIED OUT ANY AGRICULTURAL OPERATIONS FOR MORE THAN TWO DECADES IN THE PAST AND THE INTENTION OF THE APPELLANT IN ACQUIRIN G THE SUBJECT PROPERTIES COULD NOT HAVE BEEN FOR AGRICULTURAL OPERATIONS. IT WAS A RGUED THAT THE COST OF ACQUISITION OF THE PROPERTIES INCURRED BY THE APPEL LANT WAS VERY HIGH AND AGRICULTURAL OPERATIONS WOULD NEVER YIELD RETURNS T O MATCH THE COST OF ACQUISITION. HE SUBMITTED THAT THE REPORT OF THE VILLAGE OFFICER CANNOT BE RELIED UPON. HE, INTER ALIA, RELIED UPON THE ORDER PASSED BY THE ITA T, COCHIN BENCH IN THE CASE OF ACIT VS. SHRI SREEDHAR ASHOK KUMAR IN I.T.A. NO. 18 /COCH/2012 WHEREIN THE APPEAL OF THE ASSESSEE WAS DISMISSED. I.T.A. NOS.355,356 &441/COCH/2015 9 8. THE LD. DR FURTHER RELIED UPON THE ORDERS PASS ED BY THE ASSESSING OFFICER AS WELL AS THE FIRST APPELLATE AUTHORITY TO SUPPORT HI S SUBMISSIONS. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE FACTS ON RECORD. THE GROUNDS RAISED BY THE ASSESSEE ARE PERTAINING TO ON E ISSUE ONLY AS TO WHETHER THE AGRICULTURAL LANDS SOLD BY THE ASSESSEE WOULD C OME WITHIN THE PURVIEW OF CAPITAL ASSET AS DEFINED UNDER SECTION 2(14) OF T HE ACT AND WHETHER THE SURPLUS WOULD BE CHARGEABLE UNDER THE HEAD INCOME FROM BUSI NESS. GROUND NOS. 1 TO 4 ARE, THEREFORE, TAKEN UP TOGETHER FOR DISPOSAL. 10. IN THE PRESENT CASE, THE APPELLANT HAD PURCHAS ED AGRICULTURAL LAND IN KAKKANAD VILLAGE AND IN KIZHAKKAMBALAM VILLAGE, BOT H IN THE REVENUE DISTRICT OF ERNAKULAM. THE SUBJECT PROPERTIES WERE PURCHASED IN THE YEAR 2003 AND 2004. THE COST OF ACQUISITION WAS RS.24,15,200/-. THE SUB JECT LANDS WERE CATEGORIZED AS PADDY FIELDS (NILAM) IN THE REVENUE RECORDS. THE APPELLANT CLAIMS THAT BEFORE SELLING THE LANDS, HE WAS CARRYING OUT AGRICULTURAL ACTIVITIES LIKE GROWING PADDY, COCONUT, RUBBER PLANTATION, PLANTATION OF VEGETABLE S AND OTHER MISCELLANEOUS CROPS ON THE LAND IN QUESTION. THE APPELLANT SOLD T HE AFORESAID LANDS IN THE RELEVANT ASSESSMENT YEAR 2008-09. THE LAND ADMEASUR ING 3.1 ACRES WAS SOLD ON 18.12.2007 FOR A SALE CONSIDERATION OF RS.6,75,44, 000/- TO M/S. ADANI INFRASTRUCTURE & DEVELOPERS PRIVATE LTD. AND TO M/S. ALOKA REAL ESTATE PRIVATE LTD. THE OTHER PROPERTY ADMEASURING 4.24 ACRES WAS SOLD TO ONE MR. P.C. JOSE ON I.T.A. NOS.355,356 &441/COCH/2015 10 17/01/2008 FOR A SALE CONSIDERATION OF RS.1,69,88,9 60/-. AFTER REDUCING THE COST OF ACQUISITION FROM THE TOTAL SALE CONSIDERATION OF RS.8,45,32,960/-, THE APPELLANT CLAIMED AN EXEMPTION OF RS.8,14,58,726/-, STATING T HAT THE AFORESAID LANDS ARE NOT CAPITAL ASSETS AS CONTEMPLATED U/S. 2(14) OF TH E ACT. 11. TO APPRECIATE THE CONTROVERSY IN THE PRESENT APPEAL, IT WOULD BE RELEVANT TO EXTRACT THE DEFINITION OF THE TERM CAPITAL ASSET AS DEFINED U/S. 2(14) OF THE ACT. (14) CAPITAL ASSET MEANS (A) PROPERTY OF ANY KIND HELD BY AN ASSESSEE, WHE THER OR NOT CONNECTED WITH HIS BUSINESS OF PROFESSION; (B) ANY SECURITIES HELD BY A FOREIGN INSTITUTIONAL INVESTOR WHICH HAS INVESTED IN SUCH SECURITIES IN ACCORDANCE WITH THE REGULATIONS MADE UNDER THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992) , BUT DOES NOT INCLUDE (I) ANY STOCK-IN-TRADE (OTHER THAN THE SECURITIES REFERRED TO IN SUB-CLAUSE (B), CONSUMABLE STORES OR RAW MATERIALS HELD FOR THE PUR POSES OF HIS BUSINESS OR PROFESSION (II) PERSONAL EFFECTS, THAT IS TO SAY, MOVABLE PRO PERTY (INCLUDING WEARING APPAREL AND FURNITURE) HELD FOR PERSONAL USE BY THE ASSESSEE OR ANY MEMBER OF HIS FAMILY DEPENDENT ON HIM, BUT EXCLUDES (A) JEWELLERY; (B) ARCHAEOLOGICAL COLLECTIONS; (C) DRAWINGS; (D) PAINTINGS; (E) SCULPTURES; OR (F) ANY WORK OF ART. (EXPLANATION 1) FOR THE PURPOSES OF THIS SUB-CLAUS E, JEWELLERY INCLUDES (A) ORNAMENTS MADE OF GOLD, SILVER, PLATINUM OR ANY OTHER PRECIOUS METAL OR ANY ALLOY CONTAINING ONE OR MORE OF SUCH PRECIOUS M ETALS, WHETHER OR NOT I.T.A. NOS.355,356 &441/COCH/2015 11 CONTAINING ANY PRECIOUS OR SEMI-PRECIOUS STONE, AND WHETHER OR NOT WORKED OR SEWN INTO ANY WEARING APPAREL; (B) PRECIOUS OR SEMI-PRECIOUS STONES, WHETHER OR NO T SET IN ANY FURNITURE, UTENSIL OR OTHER ARTICLE OR WORKED OR SEWN INTO ANY WEARING APPAREL. (EXPLANTION 2 FOR THE PURPOSES OF THIS CLAUSE- (A) THE EXPRESSION FOREIGN INSTITUTIONAL INVESTOR SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE (A) OF THE EXPLANATION TO S ECTION 115AD; (B) THE EXPRESSION SECURITIES SHALL HAVE THE MEAN ING ASSIGNED TO IT IN CLAUSE (H) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGUL ATION ACT, 1956 (42 OF 1956). (III) AGRICULTURAL LAND IN INDIA, NOT BEING LAND SI TUATE (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURIS DICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNICIPAL CORPORA TION, NOTIFIED AREA COMMITTEE, TOWN AREA COMMITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAME) OR A CANTONMENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAND; OR (B) IN ANY AREA WITHIN THE DISTANCE, MEASURED AERI ALLY, - (I) NOT BEING MORE THAN TWO KILOMETRES, FROM THE LO CAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITE M (A) AND WHICH HAS A POPULATION OF MORE THAN TEN THOUSAND BUT NOT EXCEED ING ONE LAKH; OR (II) NOT BEING MORE THAN SIX KILOMETRES, FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITE M (A) AND WHICH HAS A POPULATION OF MORE THAN ONE LAKH BUT NOT EXCEEDING TEN LAKH; OR (III) NOT BEING MORE THAN EIGHT KILOMETRES, FROM TH E LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITE M (A) AND WHICH HAS A POPULATION OF MORE THAN 10 LAKH. EXPLANATION, - FOR THE PURPOSES OF THIS SUB-CLAUSE, POPULATION MEANS THE POPULATION ACCORDING TO THE LAND PRECEDING CENSUS O F WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PRE VIOUS YEAR. (IV) 61/2 PER CENT GOLD BONDS, 1977, OR 7 PER CENT GOLD BONDS, 1980, OR NATIONAL DEFENCE GOLD BONDS, 1980, ISSUED BY THE CE NTRAL GOVERNMENT. (V) SPECIAL BEARER BONDS, 1991, ISSUED BY THE CENTR AL GOVERNMENT; I.T.A. NOS.355,356 &441/COCH/2015 12 (VI) GOLD DEPOSIT BONDS ISSUED UNDER THE GOLD DEPOS IT SCHEME, 1999 NOTIFIED BY THE CENTRAL GOVERNMENT. (EXPLANATION, - FOR THE REMOVAL OF DOUBTS, IT IS HER EBY CLARIFIED THAT PROPERTY INCLUDES AND SHALL BE DEEMED TO HAVE ALWAYS INCLUDE D ANY RIGHTS IN OR IN RELATION TO AN INDIAN COMPANY, INCLUDING RIGHTS OF MANAGEMEN T OR CONTROL OR ANY OTHER RIGHTS WHATSOEVER; 12. SECTION 45 OF THE ACT PROVIDES FOR THE CHARG EABILITY OF INCOME TAX ON THE PROFITS ARISING OUT OF THE SALE OR TRANSFER OF CAP ITAL ASSET DEFINED ABOVE. THE LOGICAL COROLLARY WOULD BE THAT IF THE PROPERTY SOL D IS NOT A CAPITAL ASSET, CAPITAL GAINS WOULD NOT ARISE. THE LD. CIT(A), AFTER HOLDIN G THE LANDS IN QUESTION TO BE A CAPITAL ASSET, HELD THAT THE PROFIT ARISING THEREOF WOULD BE CHARGEABLE UNDER THE HEAD INCOME FROM BUSINESS. WE WILL FIRST DECIDE AS TO WHETHER THE LANDS SOLD IN THE PRESENT CASE WOULD FALL UNDER THE DEFINITION OF CAPITAL ASSET OR NOT. IT IS ADMITTED THAT THE ASSESSEE FALLS UNDER THE EXCEPTIO NS CARVED OUT IN THE SAID SECTION. THE TERM AGRICULTURAL LAND HAS NOT BEEN DEFINED UNDER THE ACT. THE HONBLE SUPREME COURT IN THE CASE OF C.W.T. VS. OFF ICER-IN-CHARGE (COURT OF WARDS), PAIGAH 105 ITR 133 (SC) DEALING WITH THE AF ORESAID ISSUE HELD THE AGRICULTURAL LAND MUST BE A LAND WHICH COULD BE SAI D TO BE EITHER ACTUALLY USED OR ORDINARILY USED OR MEANT TO BE USED FOR AGRICULTURA L PURPOSES, THAT IS TO SAY, IT MUST HAVE A CONNECTION WITH THE AGRICULTURAL USER O R PURPOSE AND MERE POTENTIALITY OF AGRICULTURAL USE IS NOT ENOUGH. I.T.A. NOS.355,356 &441/COCH/2015 13 13. THE ASSESSEES SUBMISSIONS IS THAT HE HAD CUL TIVATED THE LANDS WITH PADDY, MANGOES, RUBBER, COCONUT, GINGER, JACK FRUITS AND O THER VEGETABLES FROM THE DATE OF PURCHASE OF THE SAID LANDS. THE AFORESAID AVERME NT OF THE ASSESSEE IS SOUGHT TO BE CORROBORATED BY THE CERTIFICATES ISSUED BY TH E VILLAGE ADMINISTRATION OFFICER OF BOTH THE VILLAGES, THE CONFIRMING THAT THE LANDS ARE CLASSIFIED AS AGRICULTURAL LANDS IN THE REVENUE RECORDS AND THE ASSESSEE CARRI ED OUT AGRICULTURAL OPERATIONS IN THESE LANDS. IN ADDITION TO ABOVE DOCUMENTARY EV IDENCES, SEVERAL OTHER EVIDENCES WERE PLACED ON RECORD, TO PROVE CLEARLY T HAT AGRICULTURAL OPERATIONS WERE CARRIED OUT BY THE ASSESSEE. WE SEE NO REASON TO DISREGARD THE CERTIFICATES PROVIDED BY THE VILLAGE ADMINISTRATION OFFICER. THE VILLAGE OFFICERS WHOSE REPORTS/CERTIFICATES ARE RELIED UPON ARE THE EMPLOY EES IN THE REVENUE DEPARTMENT ITSELF AND ARE NOT PRIVATE PROFESSIONALS HIRED BY THE ASSESSEE. HAVING GIVEN THE REPORT IN FAVOUR OF THE ASSESSEE THAT THE AGRICULTURAL OPERATIONS WERE CARRIED OUT BY HIM, THE BURDEN SHIFTS ON THE REVENU E TO DISPROVE THE SAME. UNLESS THE SAME IS DONE, IT CANNOT BE PRESUMED THAT THE VILLAGE OFFICERS DID NOT CONDUCT PROPER ENQUIRIES FOR THE SAME. THE REPORT C ANNOT BE CASUALLY DONE AWAY WITH BY THE REVENUE. THE REVENUE WAS WELL WITHIN I TS POWERS TO SUMMON OR CALL FOR FURTHER INFORMATION FROM THE VILLAGE OFFICERS C ONCERNED. HOWEVER, THE ASSESSING OFFICER DID NOT EXERCISE SUCH AN OPTION S O AS TO REBUT THE EVIDENCE IN THE FORM OF A CERTIFICATE GIVEN BY THE VILLAGE OFFI CER. ACCORDING TO US, THE CERTIFICATE IS UNAMBIGUOUS AND THE SAME LEAVES NO MANNER OF DOUBT THAT THE LAND WAS USED FOR AGRICULTURAL PURPOSES. MOREOVER, THE ASSESSEE ALSO FILED COPY OF LEDGER IS SUED BY RUBBER BOARD, (W.R.T. SUBJECT PROPERTY) WITH WHOM, THE ASS ESSEE IS REGISTERED AS A RUBBER PLANTER. I.T.A. NOS.355,356 &441/COCH/2015 14 14. THE ISSUE RAISED IN THE PRESENT APPEAL AROSE BEFORE THE ITAT, COCHIN BENCH IN THE CASE OF SHRI KALATHINGAL FAIZAL RAHIMAN IN I.T.A. NO. 456/COCH/2015 DATED 06/01/2016 WHEREIN THE APPEAL OF THE REVENUE WAS DI SMISSED BY THE TRIBUNAL. IN THE AFORESAID CASE IT WAS HELD AS UNDER: 12. IT IS THE ADMITTED CASE OF BOTH THE PARTIES TH AT THE STATE GOVERNMENT HAD NOT MAINTAINED ANY RECORDS FOR CULTIVATION OF THE L AND. THE ASSESSEE HAS SUBMITTED THAT THE LAND WAS USED FOR THE COCONUT PL ANTATION AND FOR THE SAME HE HAS RELIED UPON THE CERTIFICATE OF THE VILLAGE O FFICER CERTIFYING THAT THE SUBJECT LAND WAS USED FOR COCONUT PLANTATION AND FO R GROWING OTHER AGRICULTURAL CROPS FROM 1981 ONWARDS AND THE ASSESSEE WAS EARNIN G AGRICULTURAL INCOME OUT OF IT. IN THE ABSENCE OF ANY RECORD MAINTAINED BY T HE STATE GOVERNMENT, WE SEE NO REASON TO DISBELIEVE THE CERTIFICATE OF THE VILLAGE OFFICER AND THE SAME CANNOT BE REJECTED SOLELY ON THE BASIS THAT IT WAS ISSUED POST THE SALE OF LAND BY THE ASSESSEE. THE CERTIFICATE IS CLEAR AND UNAMB IGUOUSLY STATES THAT THE SAID LAND WAS USED FOR COCONUT PLANTATION, WHICH LEAVES NO MANNER OF DOUBT THAT THE LAND WAS USED FOR AGRICULTURAL PURPOSES. 15. IN THE CASE OF SHRI KALATHINGAL FAIZAL RAHIMA N (SUPRA), THE TRIBUNAL RELIED UPON THE DECISION OF THE ITAT, COCHIN BENCH IN THE CASE OF SHRI M.J. THOMAS VS. DCIT IN I.T.A. NO. 224/COCH/2011 DATED 06-06-2014. THE TRIBUNAL IN THAT CASE RELIED UPON THE CERTIFICATE OF THE VILLAGE OFFICER HOLDING THAT IN THE ABSENCE OF ANY OTHER REVENUE RECORD MAINTAINED BY THE STATE GO VERNMENT, THE CERTIFICATE ISSUED BY THE VILLAGE OFFICER CAN BE RELIED UPON. I N THE AFORESAID JUDGMENT, IT WAS HELD AS UNDER: 26. NOW THE QUESTION ARISES FOR CONSIDERATION IS IN THE ABSENCE OF RECORDS MAINTAINED BY THE STATE GOVERNMENT FOR CULT IVATION WHETHER THE MATERIAL FILED BY THE ASSESSEES WOULD BE SUFFICIENT TO PROVE TO SHOW THAT THE ASSESSEES WERE USING THE LAND FOR AGRICULTURAL PURPOSE / AND THE LAND IN QUESTION HAS ANY CONNECTION WITH AGRICULTURAL PU RPOSE. ALL THE I.T.A. NOS.355,356 &441/COCH/2015 15 ASSESSEES ARE INDIVIDUAL ASSESSEES. AGRICULTURE IN THIS COUNTRY IS UNORGANISED. NORMALLY ILLITERATE CITIZENS OF THIS C OUNTRY ARE ENGAGED IN AGRICULTURAL ACTIVITIES. THOUGH THE RESPECTIVE STAT E GOVERNMENTS ARE TAKING STEPS TO SELL THE AGRICULTURAL PRODUCE IN THE MARKE TS, STILL, THE SALE OF AGRICULTURAL PRODUCE IS NOT REGULATED PROPERLY. THE AGRICULTURAL LABOURERS, WHO ARE ENGAGED FOR CULTIVATION, ARE ALSO ILLITERAT E. IN THOSE CIRCUMSTANCES, EXPECTING MATERIAL EVIDENCES FROM THE AGRICULTURIST S FOR CULTIVATION MAY BE FAR-FETCHED. IN RESPECT OF CORPORATE COMPANIES THAT ARE ENGAGED IN CULTIVATION, MAY MAINTAIN EVIDENCE FOR PURCHASE OF FERTILIZERS, PAYMENT OF WAGES TO LABOURERS AND IN RESPECT OF SALE OF AGRICU LTURAL PRODUCES. HOWEVER, SUCH KIND OF EVIDENCE MAY NOT BE EXPECTED FROM INDIVIDUAL FARMERS SO LONG AS THE GOVERNMENT DOES NOT REGULATE THE CULTIVATION OF LAND AND SALE OF AGRICULTURAL PRODUCE IN THIS COUNTRY. T HIS GROUND REALITY CANNOT BE IGNORED BY JUDICIAL AUTHORITIES WHILE ADJUDICATI NG THE DISPUTE WITH REGARD TO CULTIVATION. THEREFORE, THIS TRIBUNAL CANNOT BLAME THE ASSESSEES FOR NOT MAINTAINING RECORDS FOR CULTIVATION. 27. THE STATE GOVERNMENT IS EXPECTED TO MAINTAIN CU LTIVATION ACCOUNT FOR THE PURPOSE OF ESTIMATION OF FOOD PRODUCTION OF THE STATE AND POSSIBLE EXCESS OR DEFICIT IN THE FOOD PRODUCTION SO AS TO M AKE NECESSARY ARRANGEMENT FOR SUPPLY OF FOOD TO THE PEOPLE. IN SP ITE OF BEST EFFORTS TAKEN BY THIS TRIBUNAL, NO EVIDENCE IS COMING FORWA RD FROM THE REVENUE TO SHOW THAT THE STATE GOVERNMENT WAS MAINTAINING A NY RECORD. IN FACT, THE ASSESSING OFFICER, AFTER EXAMINING THE VILLAGE ADMINISTRATIVE OFFICER, ADDITIONAL TAHSILDAR AND AGRICULTURAL OFFICER, FOUN D THAT THE VILLAGE ADMINISTRATIVE OFFICER AND TAHSILDAR ARE NOT MAINTA INING ANY RECORD FOR THE PURPOSE OF CULTIVATION. EVEN THE AGRICULTURAL OF FICER IS NOT MAINTAINING ANY RECORDS FOR CULTIVATION. THE RECORD S AVAILABLE WITH THE STATE GOVERNMENT ARE ONLY THE REGISTER FOR COLLECTI ON OF CONTRIBUTION TOWARDS KERALA AGRICULTURAL WORKERS WELFARE FUND, BASIC TAX REGISTER AND THE CLASSIFICATION OF LAND AS AGRICULTURAL LAND . APART FROM THESE, THERE IS NO OTHER MATERIAL AVAILABLE WITH THE STATE GOVER NMENT. IF THAT IS SO, IT IS NOT KNOWN HOW THE FOOD PRODUCTION OF THE STATE W AS ESTIMATED SO AS TO ENSURE SUFFICIENT SUPPLY OF FOOD TO THE PEOPLE O F THE STATE. THE FACT REMAINS IS THAT THE REVENUE COULD NOT PRODUCE ANY E VIDENCE FOR CULTIVATION OF LAND MAINTAINED BY GOVERNMENT OF KER ALA. FROM THE REMAND REPORT FILED BY THE ASSESSING OFFICER THE FO OD PRODUCTION OF THE STATE APPEARS TO HAVE BEEN ESTIMATED ON THE BASIS O F THE FARMERS, WHO WERE REGISTERED ON THE RECORDS OF PADDY FIELD WITHO UT CONSIDERING THE ACTUAL CULTIVATION. THEREFORE, THE STATE GOVERNMENT FOR THE PURPOSE OF FOOD PRODUCTION CONSIDERS THE PADDY FIELDS AND THE AGRICULTURISTS AS A BASIS FOR FOOD PRODUCTION. IN THOSE SITUATIONS, THE ASSESSEE HAS PRODUCED CERTIFICATES FROM THE VILLAGE OFFICER TO S HOW THAT THE SUBJECT I.T.A. NOS.355,356 &441/COCH/2015 16 LANDS WERE UNDER CULTIVATION. THIS TRIBUNAL IS OF T HE CONSIDERED OPINION THAT IN THE ABSENCE OF ANY OTHER RECORD MAINTAINED BY THE STATE GOVERNMENT FOR CULTIVATION OF THE LAND, THE CERTIFI CATE GIVEN BY THE VILLAGE ADMINISTRATIVE OFFICER, WHO IS PERSONALLY A CQUAINTED WITH THE LAND MAY BE ONE OF THE FACTORS TO BE TAKEN INTO CONSIDER ATION. THIS TRIBUNAL CANNOT IGNORE THE CERTIFICATE GIVEN BY THE VILLAGE ADMINISTRATIVE OFFICER ON THE BASIS OF HIS ACQUAINTANCE WITH THE FIELD CER TIFYING THAT THE SUBJECT LANDS WERE SUBJECTED TO CULTIVATION. 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 ITR 631 (SC). IN THE CASE BEFORE THE APEX COURT, TH E ASSESSEE SOLD A PIECE OF LAND SITUATED WITHIN THE REVENUE LIMITS OF NAVAGAON VILLAGE IN THE MUNICIPAL LIMITS OF SURAT MUNICIPALITY. IN THE YEAR 1967, THE ASSESSEE AGREED TO SELL THE LAND TO A HOUSING SOCIETY. THE A SSESSEE CLAIMED THE GAIN ON TRANSFER OF SUCH LAND AS EXEMPT U/S 2(14) O F THE ACT. THE APEX COURT FOUND THAT THE ASSESSEE APPLYING FOR PERMISSI ON TO SELL THE LAND FOR NON AGRICULTURAL PURPOSE AND IMMEDIATELY AFTER APPL ICATION FOR CONVERSION OF LAND, THE LAND WAS NOT CULTIVATED FOR A PERIOD OF FOUR YEAR. IN THOSE FACTUAL CIRCUMSTANCES, THE APEX COURT FOUN D THAT THE LAND IN QUESTION IS NOT AN AGRICULTURAL LAND. IN THE CASE B EFORE US, THE ASSESSEE HAS NOT APPLIED FOR CONVERSION OF LAND FOR NON AGRI CULTURAL PURPOSE. THE LAND IN QUESTION IS CLASSIFIED AS AGRICULTURAL LAND AND THE VILLAGE OFFICER CERTIFIED THAT THE LAND WAS SUBJECTED TO CULTIVATIO N. THE ASSESSEE IS CONTRIBUTING TO THE AGRICULTURAL LABOURERS WELFARE FUND AND ALSO PAYING REVENUE TAX AS AGRICULTURAL LAND WHICH IS EVIDENCE FROM BASIC TAX REGISTER. IN VIEW OF THE MATERIAL AVAILABLE ON RECO RD DISCLOSING THE CULTIVATION OF LAND, THIS TRIBUNAL IS OF THE CONSID ERED OPINION THAT JUDGMENT OF THE APEX COURT IN THE CASE OF SARIFABIB I MOHMED IBRAHIM AND OTHERS (SUPRA) MAY NOT BE APPLICABLE TO THE FAC TS OF THE CASE. 29. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMEN T OF THE KERALA HIGH COURT IN THE CASE OF SMT. ASHA GEORGE (SUPRA). IN T HE CASE BEFORE THE KERALA HIGH COURT IN THE CASE OF SMT. ASHA GEORGE ( SUPRA), THE QUESTION AROSE FOR CONSIDERATION WAS EXEMPTIONS U/S 54B AND 54F OF THE ACT. ONE OF THE PRE-CONDITIONS FOR GRANT OF EXEMPTIONS U/S 5 4B AND 54F IS THAT THE LAND SHOULD BE USED FOR CULTIVATION IMMEDIATELY TWO YEARS BEFORE THE DATE OF TRANSACTION. SUCH A CONDITION IS NOT AVAILABLE F OR TREATING THE LAND AS CAPITAL ASSET U/S 2(14) OF THE ACT. THEREFORE, AS O BSERVED EARLIER, WHAT IS REQUIRED IS THE CONNECTION BETWEEN THE LAND AND THE AGRICULTURAL PURPOSE AND IF THE LAND IS CULTIVATED IN ANY OF THE EARLIER YEARS, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE LAND HAS TO BE TREA TED AS AGRICULTURAL LAND. THE MATERIAL EVIDENCE PRODUCED BY THE ASSESSEES ARE - (I) THE CERTIFICATE I.T.A. NOS.355,356 &441/COCH/2015 17 ISSUED BY THE VILLAGE OFFICER; (II) CERTIFICATE ISS UED BY THE AGRICULTURAL OFFICER; (III) CLASSIFICATION OF LAND BY STATE GOVE RNMENT AS AGRICULTURAL LAND; (IV) RECEIPT FOR PAYMENT OF CONTRIBUTION TO AGRICUL TURAL WORKERS WELFARE FUND; AND (V) BASIC TAX REGISTER. FROM THESE MATERI ALS, IT APPEARS THAT THE STATE GOVERNMENT HAS CLASSIFIED THE SUBJECT LAND AS AGRICULTURAL LAND. THE GOVERNMENT IS COLLECTING TAX AS AGRICULTURAL LAND W HICH IS EVIDENT FROM THE BASIC TAX REGISTER. THE ASSESSEES ARE ALSO CONTRIBU TING TOWARDS AGRICULTURAL WORKERS WELFARE FUND. THE VILLAGE OFF ICER CERTIFIED THAT THE SUBJECT LANDS WERE SUBJECTED TO CULTIVATION. IN THO SE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE SUBJ ECT LANDS WERE AGRICULTURAL LANDS BEYOND THE MUNICIPAL LIMITS OR B EYOND 8 KMS RADIUS OF THE NOTIFIED MUNICIPALITY. THEREFORE, THE SUBJECT L AND CANNOT BE TREATED AS CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) O F THE ACT; HENCE NOT LIABLE FOR CAPITAL GAIN TAX UNDER THE INCOME-TAX AC T. 1 6 . THE LD. DR SUBMITTED THAT THE LAND CANNOT BE SAI D TO BE AGRICULTURAL IN NATURE AS THE SAME IS LOCATED IN A DEVELOPED LOCALI TY CONSISTING OF LUXURY HOUSING PROJECTS AND INFORMATION PARKS. HE HAS FURTHER REL IED UPON A REPORT OF THE INSPECTOR OF INCOME TAX WHO MADE LOCAL INSPECTION O F THE PROPERTY IN 2010. WE ARE NOT IN AGREEMENT WITH THE CONTENTION OF THE REV ENUE. THERE CANNOT BE A CASE WHERE MERELY BECAUSE OF THE DEVELOPMENT IN THE SURROUNDING AREAS, THE LAND LOOSES ITS AGRICULTURAL CHARACTER. THE ASSESSE E HAS NO CONTROL OVER THE URBANIZATION OF THE SURROUNDING AREAS. THE DEVELOPM ENT CANNOT ALTER THE AGRICULTURAL NATURE OF THE LAND, MORE SO, WHEN IN T HE REVENUE RECORDS, THE LAND IS CATEGORIZED AS A PADDY FIELD AND ACTUAL AGRICULTURA L OPERATIONS HAVE BEEN CERTIFIED TO BE CARRIED OUT BY THE VILLAGE OFFICER. FURTHERMORE, THE SAID EVIDENCE OF THE REPORT OF THE INSPECTOR WAS COLLECTED BEHIND THE BACK OF THE ASSESSEE AND THE SAME CANNOT BE USED AGAINST HIM. I.T.A. NOS.355,356 &441/COCH/2015 18 17. THE ASSESSEE WAS FREE TO SELL HIS PROPERTY T O THE BUILDER OF ANY PRIVATE PERSON AT THE MARKET PRICE NEGOTIATED BETWEEN HIM A ND THE BUYER. HIGHER VALUE OF SALE PRICE CANNOT IPSO FACTO MEAN THAT THE LAND IN QUESTION IS NOT AGRICULTURAL LAND. THE ONLY QUESTION WHICH WAS REQUIRED TO BE SE EN WAS WHETHER ACTUAL AGRICULTURAL OPERATIONS WERE CARRIED OUT ON THE SUB JECT LANDS. THE REVENUE MISDIRECTED ITSELF BY HIGHLIGHTING THE POTENTIAL NO N AGRICULTURAL USE OF THE LAND BY REFERRING TO THE FACTS THAT THE LAND WAS SOLD TO A BUILDER AT A VERY HIGH PRICE. 18. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GORDHANBHAI KAHANDAS DALWADI VS. CIT (1981) 127 ITR 664, OBSERVED THAT WHILE DECIDING THE QUESTION AS TO WHETHER THE LAND IS AGRICULTURAL LAND OR NOT, THE USE OR POTENTIAL USE BY THE BUYER CANNOT BE THE BASIS TO DETERMINE THE NATURE O F THE LAND. IT WAS FURTHER HELD THAT THE CRUCIAL DATE FOR THE PURPOSE OF FINDI NG OUT THE CHARACTER OF THE LAND IS THE DATE OF SALE AND THE QUESTION THAT HAS TO BE ASKED IS WHETHER ON THE DATE OF SALE, THE LAND WAS AGRICULTURAL LAND OR NOT. THE COURT FURTHER HELD THAT MERELY BECAUSE THE LAND IS SURROUNDED BY DEVELOPMENT OR TH AT DEVELOPMENT HAS CAUGHT UP WITH THE LAND IN QUESTION, IT SHOULD NOT BE HELD THAT THE LAND HAS CEASED TO BE AN AGRICULTURAL LAND. IN THE AFORESAID JUDGMENT, IT WAS HELD HAS UNDER: 5. IN PARA. 7 OF ITS ORDER THE TRIBUNAL FOUND THAT THE LAND WAS WITHIN THE MUNICIPAL LIMITS OF ANAND. IT WAS NEAR AMUL DAIRY, GANESH DU GGHALAYA AND CHAROTAR TOBACCO COMPANY. CHAROTAR IRON FACTORY, KRISHNA IRO N FACTORY AND OTHER INDUSTRIAL CONCERNS WERE ALSO IN THE VICINITY OF THE LAND. THU S, ACCORDING TO THE TRIBUNAL, THE LAND WAS IN A FAST DEVELOPING LOCALITY. PERMISSION HAD BEEN OBTAINED FROM THE REVENUE AUTHORITIES UNDER S. 63 OF THE BOMBAY TENAN CY AND AGRICULTURAL LANDS ACT AND A COPY OF THAT PERMISSION WAS FILED BEFORE THE TRIBUNAL. THE TRIBUNAL HELD THAT I.T.A. NOS.355,356 &441/COCH/2015 19 THE PERMISSION OBTAINED UNDER S. 63 OF THE BOMBAY T ENANCY AND AGRICULTURAL LANDS ACT PROVED THAT THE INTENTION OF THE ASSESSEE WAS T O PUT THE LAND TO NON- AGRICULTURAL USE. PERMISSION WAS OBTAINED TO SELL T HE LAND FOR THE PURPOSE OF CONSTRUCTING BUILDINGS AND IT WAS, THEREFORE, OBVIO US THAT THE LAND WAS SOLD FOR NON-AGRICULTURAL USE. 6. IT HAS BEEN OBSERVED BY THE SUPREME COURT IN CWT VS. OFFICER-IN CHARGE (COURT OF WARDS), PAIGAH [1976] CTR (SC) 404: (1976)105 IT R 133 (SC) THAT IF THE LAW HAS NOT BEEN CORRECTLY APPRECIATED BY THE TRIBUNAL, ITS APPRECIATION OF FACTS IS BOUND TO BE AFFECTED BY THE WRONG APPROACH TO THE E VIDENCE. NOW, IN THE INSTANT CASE, THE TRIBUNAL HAS HELD AGAINST THE ASSESSEE BE CAUSE PERMISSION TO SELL THE LAND FOR NON-AGRICULTURAL USE WAS OBTAINED. THIS CO URT HAS POINTED OUT IN CIT V. MANILAL SOMNATH [1977] 106 ITR 917 (GUJ) THAT THE P ERMISSION GRANTED BY THE REVENUE AUTHORITIES UNDER S. 63 OF THE BOMBAY TENAN CY AND AGRICULTURAL LANDS ACT CLEARLY GOES TO SHOW THAT IN CASE THE LAND DID NOT CEASE TO BE AGRICULTURAL LAND, THE PERMISSION WOULD BE TREATED AS CANCELLED AND, THERE FORE, THE SALE IN FAVOUR OF THE PARTICULAR PURCHASER WOULD BE INFRUCTUOUS AND THE L AND WOULD REVERT TO THE ASSESSEE AS AGRICULTURAL LAND. IN SUCH AN EVENTUALI TY, THE LAND WOULD STILL CONTINUE TO BE AGRICULTURAL LAND BECAUSE THE PERMISSION TO S ELL TO A NON-AGRICULTURIST WOULD BE TREATED AS CANCELLED. IT HAS TO BE BORNE IN MIND THAT THE CORRECT TEST THAT HAS TO BE APPLIED IS WHETHER ON THE DATE OF THE SALE THE L AND WAS AGRICULTURAL LAND OR NOT. BECAUSE AFTER THE SALE THE PURCHASER WAS GOING TO P UT THE LAND TO NON-AGRICULTURAL USE, IT DOES NOT MEAN THAT THE LAND HAD CEASED TO B E AGRICULTURAL LAND AT THE DATE OF SALE. THE CRUCIAL DATE FOR THE PURPOSE OF FINDIN G OUT THE CHARACTER OF THE LAND IS THE DATE OF SALE AND THE QUESTION THAT HAS TO BE AS KED IS WHETHER ON THE DATE OF SALE THE LAND WAS AGRICULTURAL LAND OR NOT. HOWEVER , WE FIND THAT WHAT HAS WEIGHED WITH THE TRIBUNAL, INTER ALIA, IS THE FACT THAT AFT ER THE SALE THE PURCHASER WAS GOING TO USE THE LAND FOR NON-AGRICULTURAL PURPOSES AND I T IS IN THE LIGHT OF WHAT WAS GOING TO HAPPEN IN FUTURE THAT THE TRIBUNAL HELD THAT THE LAND WAS NON-AGRICULTURAL IN CHARACTER AT THE RELEVANT TIME. IT MUST BE BORNE IN MIND, AS WAS HELD BY THIS COURT IN CHHOTALAL PRABHUDAS V. CIT [1979] 10 CTR (GUJ) 6 9 : (1979) 116 ITR 631 (GUJ), THAT IF THE LAND IS ACTUALLY USED FOR AGRICULTURAL PURPOSES AS INDICATED IN MANILAL SOMNATH'S CASE (SUPRA) OR BY THE SUPREME COURT IN B EGUMPET PALACE'S CASE [1976] 105 ITR 133 (SC), AT LEAST, PRIMA FACIE IT C AN BE SAID TO BE LAND WHICH IS EITHER ACTUALLY USED OR ORDINARILY USED OR MEANT TO BE USED FOR AGRICULTURAL PURPOSES. IF IT IS ACTUALLY USED AT THE RELEVANT DA TE FOR AGRICULTURAL PURPOSES AND THERE ARE NO SPECIAL FEATURES, AS FOR EXAMPLE, A BU ILDING SITE BEING ACTUALLY USED AS A STOP-GAP ARRANGEMENT FOR AGRICULTURAL PURPOSE, IT WOULD BE AGRICULTURAL LAND. POTENTIAL USE OF THE LAND AS NON-AGRICULTURAL LAND IS TOTALLY IMMATERIAL. ENTRIES IN THE RECORD OF RIGHTS ARE GOOD PRIMA FACIE EVIDENCE REGARDING LAND BEING AGRICULTURAL AND IF THE PRESUMPTION RAISED EITHER FROM ACTUAL US ER OF THE LAND OR FROM ENTRIES IN REVENUE RECORDS IS TO BE REBUTTED, THERE MUST BE MA TERIAL ON THE RECORD TO REBUT THE PRESUMPTION. THE APPROACH OF THE FACT-FINDING A UTHORITIES, NAMELY, THE IT AUTHORITIES AND THE TRIBUNAL, SHOULD BE TO CONSIDER THE QUESTION FROM THE POINT OF VIEW OF THE PRESUMPTION ARISING FROM ENTRIES IN THE RECORD OF RIGHTS OR ACTUAL USER OF THE LAND AND THEN CONSIDER WHETHER THAT PRESUMPT ION IS DISLODGED BY THE PRESENCE OF OTHER FACTORS IN THE CASE. 7. IN CHHOTALAL PRABHUDAS' CASE (SUPRA) IN 1952 NO N- AGRICULTURAL USE OF THE LAND WAS DISCONTINUED AND PERMISSION WAS OBTAINED FOR US E OF LAND FOR PURELY AGRICULTURAL PURPOSES AND THEREAFTER FOR SOME YEARS AFTER 1952 THE LAND WAS ALLOWED TO LIE FALLOW AND THEREAFTER AGRICULTURAL O PERATIONS WERE RESUMED ON THE LAND, AND IN THE LIGHT OF THOSE FACTS, THIS COURT H ELD THAT THE LAND WAS AGRICULTURAL I.T.A. NOS.355,356 &441/COCH/2015 20 LAND. IN THAT CASE, THE LAND WAS USED FOR BRICK-MAK ING FOR NEARLY TWO DECADES BEFORE IT WAS RETURNED TO AGRICULTURAL OPERATIONS I N 1952. IN THE INSTANT CASE, WE HAVE NON-AGRICULTURAL USE FOR BRICK-MAKING FOR A PE RIOD OF TWO YEARS AND THEREAFTER THE LAND WAS ALLOWED TO LIE FALLOW AND AGRICULTURAL OPERATIONS WERE STARTED AND BAJRI WAS GROWN IN THIS LAND IN THE REVENUE YEAR 1964-65. WE MAY POINT OUT THAT UNDER THE BOMBAY TENANCY AND AGRICULTURAL LANDS ACT, 1948 , ' LAND ' HAS BEEN DEFINED IN S. 2, SUB-S. (8), TO MEAN, INTER ALIA, LAND WHICH I S USED FOR AGRICULTURAL PURPOSES OR WHICH IS SOMETIMES USED AS AGRICULTURAL LAND, BUT I S ALLOWED TO LIE FALLOW, IS AGRICULTURAL LAND FOR THE PURPOSES OF THE TENANCY A CT, AND IT IS THAT AGRICULTURAL LAND FOR THE SALE OF WHICH TO A NON-AGRICULTURIST PERMIS SION UNDER S. 63 IS NECESSARY AND IT, IS IN THE LIGHT OF THIS DEFINITION WHICH HAS OB VIOUSLY TO BE BORNE IN MIND WHEN PERMISSION UNDER S. 63 IS OBTAINED, THAT THE QUESTI ON HAS TO BE APPROACHED. IT MUST BE POINTED OUT THAT IN CIT V.MANILAL SOMNATH ( SUPRA) THIS COURT HAS OBSERVED THAT MERELY BECAUSE LAND IS SURROUNDED BY DEVELOPME NT OR THAT DEVELOPMENT HAS CAUGHT UP WITH THE LAND IN QUESTION IT SHOULD NOT B E HELD THAT THE LAND HAD CEASED TO BE AGRICULTURAL LAND. IT IS NOBODY'S CASE THAT P ERMISSION FOR NON-AGRICULTURAL USE UNDER S. 63 OF THE BOMBAY LAND REVENUE CODE HAD BEE N OBTAINED BY THE VENDOR, THE ASSESSEE, BEFORE HE SOLD THE LAND ON JANUARY 30 , 1969, TO THE PURCHASER. THE IMPORTANCE OF THE POTENTIAL NON-AGRICULTURAL USE OF THE LAND MAY BE REFLECTED IN THE PRICE WHICH THE PURCHASER IS PREPARED TO PAY FOR TH E AGRICULTURAL LAND, BUT POTENTIAL NON-AGRICULTURAL USE DOES NOT ALTER THE CHARACTER O F THE LAND FROM AGRICULTURAL LAND TO NON-AGRICULTURAL LAND. IN THE INSTANT CASE, IT H AS BEEN FOUND THAT THE ASSESSMENT WHICH WAS BEING PAID WAS FOR AGRICULTURAL USE OF TH E LAND AND THE SPECIAL RATES WHICH ARE FIXED FOR NON-AGRICULTURAL USE WERE NOT B EING PAID BY THE ASSESSEE PRIOR TO THE DATE OF THE SALE. UNDER THESE CIRCUMSTANCES, SINCE THE CORRECT TESTS WHICH ARE REQUIRED BY LAW TO BE APPLIED FOR DETERMINING A S TO OF WHAT DATE THE CHARACTER OF THE LAND IS TO BE FOUND AND, SECONDLY, IN THE LI GHT OF WHAT TESTS THE QUESTION HAS TO BE DECIDED, HAVE NOT BEEN APPLIED BY THE TRIBUNA L, WE ARE APPLYING THE CORRECT TESTS TO THE FACTS FOUND AND, IN OUR OPINION, APPLY ING THE PRINCIPLES LAID DOWN BY THIS COURT IN CWT VS. NARANDAS MOTILAL [1971] 80 IT R 39 (GUJ). MANILAL SOMNATH'S CASE (SUPRA), SMT. CHANDRAVATI ATMARAM PATEL VS. CI T [1978] CTR (GUJ) 211 : (1978) 114 ITR 302 (GUJ) AND CHHOTALAL PRABHUDAS VS . CIT (SUPRA), READ IN THE LIGHT OF THE OBSERVATIONS OF THE SUPREME COURT IN B EGUMPET PALACE'S CASE (SUPRA), IT IS CLEAR THAT THE TRIBUNAL WAS IN ERROR WHEN IT HELD ON THE FACTS FOUND THAT IN LAW THE LAND WAS NOT AGRICULTURAL LAND. THE CONCLUSION THAT IT WAS NOT AGRICULTURAL LAND WAS A MIXED QUESTION OF LAW AND FACT AND THE APPROA CH OF THE TRIBUNAL ADOPTED IN COMING TO THIS CONCLUSION WAS NOT IN STRICT ACCORDA NCE WITH LAW. SINCE THE REVENUE RECORDS SHOWED THAT THIS WAS AGRICULTURAL LAND, THE APPROACH SHOULD HAVE BEEN WHETHER THE PRESUMPTION THAT THIS WAS AGRICULTURAL LAND WAS BEING REBUTTED BY ANY EVIDENCE ABOUT USER OF THE LAND OR ABOUT THE CHARAC TER OF THE LAND HAVING BEEN CHANGED PRIOR TO THE DATE OF THE SALE. NO SUCH EVID ENCE HAS BEEN POINTED OUT FROM THE RECORDS OF THIS CASE OR FROM THE FACTS FOUND BY THE TRIBUNAL AND CONSIDERATIONS OF OTHER DEVELOPMENT IN THE LOCALITY OR OTHER LOCAL ITY IN THE VICINITY OF THE LAND ARE NOT PROPER CONSIDERATIONS TO BE APPLIED, AS WAS POI NTED OUT IN MANILAL SOMNATH'S CASE (SUPRA). 19. IN THE CASE OF CIT VS. MANILAL SOMNATH, 106 ITR 917 JPB 6 TO 15, THE HONBLE GUJARAT HIGH COURT OBSERVED THAT THE PRICE REALIZED IN PROPORTION TO THE I.T.A. NOS.355,356 &441/COCH/2015 21 VALUE OF LAND AS AGRICULTURAL LAND CANNOT BE A TEST TO DETERMINE THE ACTUAL NATURE AND CHARACTER OF THE LAND. THE AFORESAID JUDGMENT O F THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GORDHANBHAI KAHANDAS DALWADI V S. CIT (SUPRA) FOLLOWED THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF MANILAL SOMNATH (SUPRA). THE COURT OBSERVED AS UNDER: 13 . SO FAR AS THE SPECIAL FEATURES OF THIS CASE ARE CON CERNED, IN OUR OPINION, THE FACT THAT THE LAND WAS WITHIN THE MUNICIPAL LIMITS OR THE FACT THAT IT WAS INCLUDED WITHIN THE PROPOSED TOWN PLANNING SCHEME WOULD NOT BY THEMSELVES DISLODGE THE PRESUMPTION FLOWING FROM THE ACTUAL USER OF THE LAN D. THE FACT, ON THE OTHER HAND, THAT THERE WAS NO APPROACH ROAD AT THE RELEVANT TIM E AND THAT AGRICULTURAL OPERATIONS WERE BEING CARRIED ON WITH THE AID OF TR ACTOR WOULD GO TO SHOW THAT THE PRESUMPTION RAISED FROM ACTUAL USER CANNOT BE DISLO DGED. THIS WAS NOT A CASE OF A MERE PURCHASER GOING IN FOR AGRICULTURAL ACTIVITY P ENDING THE DISPOSAL OF THE LAND. THIS WAS THE ANCESTRAL LAND OF THE ASSESSEE-HUF AND RIGHT FROM 1939 WHEN THE LAND WAS RECEIVED BY IT ON PARTITION, THIS ASSESSEE -HUF WAS CARRYING ON AGRICULTURAL OPERATIONS ON THE LAND TILL THE DATE OF THE SALE. N OTHING HAD HAPPENED TILL THE DATE OF THE SALE TO SHOW THAT THE CHARACTER OF THE LAND HAS CEASED TO BE THAT OF AGRICULTURAL LAND. WHAT WE HAVE TO CONSIDER IS NOT WHAT THE PURCHASER DID WITH THE LAND OR WHAT THE PURCHASER WAS SUPPOSED TO DO WITH THE LAND, BUT WHAT WAS THE CHARACTER OF THE LAND AT THE TIME WHEN THE SALE TOO K PLACE. IT IS TRUE THAT PERMISSION TO SELL THE LAND TO TARAKKUNJ CO-OPERATI VE HOUSING SOCIETY LTD. WAS GRANTED ON CONDITION THAT THE LAND WOULD BE USED FO R RESIDENTIAL PURPOSES AND THE APPLICATION FOR PERMISSION UNDER SECTION 63 OF THE BOMBAY TENANCY AND AGRICULTURAL LANDS ACT WAS APPLIED FOR ON THE FOOTI NG THAT, AFTER THE SALE, THE LAND WOULD BE USED FOR RESIDENTIAL PURPOSES. BUT THAT ON LY GOES TO SHOW THAT, AFTER THE DATE OF THE SALE, THIS LAND WAS TO CEASE TO BE AGRI CULTURAL LAND. THE PERMISSION GRANTED BY THE CITY DEPUTY COLLECTOR UNDER SECTION 63 OF THE BOMBAY TENANCY AND AGRICULTURAL LANDS ACT CLEARLY GOES TO SHOW THAT IN CASE THE LAND DID NOT CEASE TO BE AGRICULTURAL LAND, THE PERMISSION WOULD BE TREATED AS CANCELLED AND, THEREFORE, THE SALE IN FAVOUR OF TARAKKUNJ CO-OPERATIVE HOUSING SO CIETY LTD. WOULD BE INFRUCTUOUS AND THE LAND WOULD REVERT BACK TO THE ASSESSEE. IN SUCH AN EVENTUALITY, THE LAND WOULD STILL CONTINUE TO BE AGRICULTURAL LAND BECAUS E THE PERMISSION TO SELL TO A NON- AGRICULTURIST WOULD BE TREATED AS CANCELLED. THAT E VENTUALITY HAS NOT HAPPENED AND AS POINTED OUT IT WAS SOME TIME IN FEBRUARY, 1969, THAT THE PERMISSION FOR NON- AGRICULTURAL USE WAS GRANTED TO THE PURCHASER, THAT IS, TARAKKUNJ CO-OPERATIVE HOUSING SOCIETY LTD. THE FACT THAT A PARTICULAR PLO T OF AGRICULTURAL LAND HAS POTENTIAL NON-AGRICULTURAL VALUE FOR WHICH A PURCHASER IS PRE PARED TO PAY A HIGH PRICE DOES NOT MEAN THAT IT IS NOT AN AGRICULTURAL LAND AT THE RELEVANT DATE AND THE FACTOR WHICH HAS BEEN EMPHASIZED BY MR. KAJI ABOUT THE PRI CE REALISED BEING OUT OF ALL PROPORTION TO THE VALUE OF THE LAND AS AGRICULTURAL LAND IS NOT A FACTOR WHICH WOULD DISLODGE THE PRESUMPTION FLOWING FROM THE ACTUAL US ER OF THIS LAND AS AGRICULTURAL LAND. THE LAND HAD UNDOUBTEDLY POTENTIAL, NON-AGRIC ULTURAL VALUE AND FOR THAT POTENTIAL NON-AGRICULTURAL VALUE, THE PURCHASER WAS PREPARED TO PAY A LARGE PRICE BUT SUCH POTENTIAL NON-AGRICULTURAL VALUE DOES NOT DETRACT FROM THE CHARACTER OF THE LAND AS AGRICULTURAL LAND AT THE DATE OF THE SALE. I.T.A. NOS.355,356 &441/COCH/2015 22 14 . UNDER THESE, CIRCUMSTANCES, IN OUR OPINION, THE TRI BUNAL WAS RIGHT IN HOLDING THAT THE LAND IN QUESTION WAS AGRICULTURAL LAND. WE , THEREFORE, ANSWER THE QUESTION REFERRED TO US IN THE AFFIRMATIVE, THAT IS, IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE. THE CIT WILL PAY THE COSTS OF THIS REFEREN CE TO THE ASSESSEE. 20. THE HONBLE SUPREME COURT IN THE CASE OF SMT. SARIFABIBI MOHMED IBRAHIM & ORS. VS. CIT (1997) 204 ITR 631 AND THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIDDHARTH J. DESAI [1983] 139 ITR 62 8 LAID DOWN CERTAIN TESTS TO DETERMINE THE TRUE NATURE OF THE LAND. THE CASE OF SAKUNTHALA VEDACHALAM VS. VANITHA MANICKAVASAGAM, 369 ITR 558 (MAD) JPB 16 T O 23 WAS A CASE WHEREIN THE REVENUE CONTENDED THAT THE ASSESSEE HAD FAILED TO SATISFY CERTAIN CONDITIONS LAID DOWN IN THE AFORESAID TESTS, THOUGH THE LAND W AS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL. THE HONBLE COURT IN THE A FORESAID CIRCUMSTANCES, HELD AS UNDER: 12. HENCE, THE ONLY POINT THAT HAS TO BE CONSIDERE D IS THAT WHETHER THE TEST AS LAID DOWN IN THE DECISION REPORTED IN CIT V. SIDDHARTH J . DESAI [1983] 139 ITR 628 (GUJ) HAS BEEN SATISFIED BY THE ASSESSEES. IN THE S AID DECISION, IN PARAGRAPH 11, IT IS HELD AS FOLLOWS (PAGE 638) : 'ON A CONSPECTUS OF THESE CASES, SEVERAL FACTORS AR E DISCERNIBLE WHICH WERE CONSIDERED AS RELEVANT AND WHICH WERE WEIGHED AGAIN ST EACH OTHER WHILE DETERMINING THE TRUE NATURE AND CHARACTER OF THE LA ND. IT MAY BE USEFUL TO EXTRACT FROM THOSE DECISIONS SOME OF THE MAJOR FACTORS WHIC H WERE CONSIDERED AS HAVING A BEARING ON THE DETERMINATION OF THE QUESTION. THOSE FACTORS ARE : (1) WHETHER THE LAND WAS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL AND WHETHER IT WAS SUBJECT TO THE PAYMENT OF LAND REVEN UE ? (2) WHETHER THE LAND WAS ACTUALLY OR ORDINARILY USE D FOR AGRICULTURAL PURPOSES AT OR ABOUT THE RELEVANT TIME ? (3) WHETHER SUCH USER OF THE LAND WAS FOR A LONG PE RIOD OR WHETHER IT WAS OF A TEMPORARY CHARACTER OR BY WAY OF A STOP-GAP ARRANGE MENT ? (4) WHETHER THE INCOME DERIVED FROM THE AGRICULTURA L OPERATIONS CARRIED ON IN THE LAND BORE ANY RATIONAL PROPORTION TO THE INVESTMENT MADE IN PURCHASING THE LAND ? I.T.A. NOS.355,356 &441/COCH/2015 23 (5) WHETHER, THE PERMISSION UNDER SECTION 65 OF THE BOMBAY LAND REVENUE CODE WAS OBTAINED FOR THE NON-AGRICULTURAL USE OF THE LA ND ? IF SO, WHEN AND, BY WHOM (THE VENDOR OR THE VENDEE) ? WHETHER SUCH PERMISSIO N 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 W AS THE NATURE OF THE USER OF THE SAID PORTION OF THE LAND ON THE MATERIAL DATE ? (6) WHETHER THE LAND, ON THE RELEVANT DATE, HAD CEA SED TO BE PUT TO AGRICULTURAL USE ? IF SO, WHETHER IT WAS PUT TO AN ALTERNATIVE U SE ? WHETHER SUCH CESSER AND/OR ALTERNATIVE USER WAS OF A PERMANENT, OR TEMP ORARY NATURE ? (7) WHETHER THE LAND, THOUGH ENTERED IN REVENUE REC ORDS, HAD NEVER BEEN ACTUALLY USED FOR AGRICULTURE, THAT IS, IT HAD NEVE R BEEN PLOUGHED OR TILLED ? WHETHER THE OWNER MEANT OR INTENDED TO USE IT FOR A GRICULTURAL PURPOSES ? (8) WHETHER THE LAND WAS SITUATE IN A DEVELOPED ARE A ? WHETHER ITS PHYSICAL CHARACTERISTICS, SURROUNDING SITUATION AND USE OF T HE LANDS IN THE ADJOINING AREA WERE SUCH AS WOULD INDICATE THAT THE LAND WAS AGRIC ULTURAL ? (9) WHETHER THE LAND ITSELF WAS DEVELOPED BY PLOTTI NG AND PROVIDING ROADS AND OTHER FACILITIES ? (10) WHETHER THERE WERE ANY PREVIOUS SALES OF PORTI ONS OF THE LAND FOR NON- AGRICULTURAL USE ? (11) WHETHER PERMISSION UNDER SECTION 63 OF THE BOM BAY TENANCY AND AGRICULTURAL LANDS ACT, 1948, WAS OBTAINED BECAUSE THE SALE OR INTENDED SALE WAS IN FAVOUR OF A NON-AGRICULTURIST ? IF SO, WHETHER T HE SALE OR INTENDED SALE TO SUCH NON-AGRICULTURIST WAS FOR NON-AGRICULTURAL OR AGRIC ULTURAL USER ? (12) WHETHER THE LAND WAS SOLD ON YARDAGE OR ON ACR EAGE BASIS ? (13) WHETHER AN AGRICULTURIST WOULD PURCHASE THE LA ND FOR AGRICULTURAL PURPOSES AT THE PRICE AT WHICH THE LAND WAS SOLD AND WHETHER THE OWNER WOULD HAVE EVER SOLD THE LAND VALUING IT AS A PROPERTY YIELDING AGR ICULTURAL PRODUCE ON THE BASIS OF ITS YIELD ? AT THE RISK OF REPETITION, WE MAY MENTION THAT NOT ALL OF THESE FACTORS WOULD BE PRESENT OR ABSENT IN ANY CASE AND THAT IN EACH CASE ONE OR MORE OF THOSE FACTORS MAY MAKE APPEARANCE AND THAT THE ULTIMATE DECISION WILL HAVE TO BE REACHED ON A BALANCED CONSIDERATION OF THE TOTALITY OF CIRCUMSTA NCES.' 13. ACCORDING TO THE TRIBUNAL, THAT IF THE ABOVE TE STS ARE APPLIED, THE ASSESSEES COULD NOT SATISFY ANY OF THE CONDITIONS EXCEPT COND ITIONS NOS. 1, 5, 11 AND 12. THE TRIBUNAL HELD THAT THE ASSESSEES COULD NOT PROVE TH AT THE LANDS WAS ACTUALLY OR ORDINARILY USED FOR AGRICULTURAL PURPOSES. THIS REA SONING DOES NOT APPEAR TO BE CORRECT IN VIEW OF THE ABOVESAID DECISION OF THE GU JARAT HIGH COURT, WHEREIN IT WAS CLEARLY HELD IN CLAUSE (1) IN PARAGRAPH 11 THAT WHE THER THE LAND WAS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL AND WHETHER IT WAS SUBJECT TO THE PAYMENT OF LAND REVENUE HAS TO BE CONSIDERED FOR GRANT OF EXEM PTION. 14. THUS, IT IS EVIDENT FROM THE ABOVE, WHICH CLEAR LY STATES THAT ANY ONE OF THE ABOVE FACTORS CAN BE PRESENT IN A CASE TO QUALIFY F OR THE BENEFIT OF CLASSIFICATION AS I.T.A. NOS.355,356 &441/COCH/2015 24 AGRICULTURAL LANDS. IN THIS CASE, THE ASSESSEES HAV E QUALIFIED UNDER CLAUSE 11(1) SINCE AS PER THE ADANGAL RECORDS, THESE LANDS WERE CLASSIFIED AS AGRICULTURAL LANDS AND THE ASSESSEES HAVE ALSO PAID REVENUE KIST, NAME LY, REVENUE PAYMENT. THEREFORE, THE TRIBUNAL HAS MISCONSTRUED THE JUDGME NT OF THE GUJARAT HIGH COURT (SUPRA) THAT ALL CONDITIONS LAID DOWN IN PARAGRAPH 11 SHOULD BE SATISFIED, WHICH IS NOT A CORRECT INTERPRETATION. 16. ONCE THE TRIBUNAL HAS ACCEPTED THAT THE CLASSIF ICATION OF LANDS AS PER THE REVENUE RECORDS ARE AGRICULTURAL LANDS, WHICH ARE E VIDENCED BY THE ADANGAL AND THE LETTER OF THE TAHSILDAR AND SATISFIES OTHER CONDITI ONS OF SECTION 2(14) OF THE INCOME- TAX ACT, WE ARE OF THE VIEW THAT THE TRIBUNAL HAS M ISDIRECTED ITSELF AS STATED ABOVE. 17. YET OTHER REASON GIVEN BY THE TRIBUNAL IS THAT THE ADJACENT LANDS ARE PUT TO COMMERCIAL USE BY WAY OF PLOTS AND, THEREFORE, THE VERY CHARACTER OF THE LANDS OF THE ASSESSEES IS DOUBTED AS AGRICULTURAL IN NATURE. THE MANNER IN WHICH THE ADJACENT LANDS ARE USED BY THE OWNER THEREIN IS NOT A GROUND FOR THE TRIBUNAL TO COME TO A CONCLUSION THAT THE ASSESSEES' LANDS ARE NOT AGRICULTURAL IN NATURE. THE REASON GIVEN BY THE TRIBUNAL THAT THE ADJACENT LAND S HAVE BEEN DIVIDED INTO PLOTS FOR SALE WOULD NOT MEAN THAT THE LANDS SOLD BY THE ASSESSEES WERE FOR THE PURPOSE OF DEVELOPMENT OF PLOTS. ALSO THE REASONING GIVEN B Y THE TRIBUNAL 'NO AGRICULTURISTS WOULD HAVE PURCHASED THE LAND SOLD BY THE ASSESSEE FOR PURSUING ANY AGRICULTURAL ACTIVITY' IS BASED ON MERE CONJECTURES AND SURMISES . 18. THE PLEA OF THE LEARNED STANDING COUNSEL APPEAR ING FOR THE REVENUE THAT THERE WAS NO AGRICULTURAL OPERATIONS PRIOR TO THE DATE OF SALE IS OF NO AVAIL AS THE DEFINITION UNDER SECTION 2(14) OF THE INCOME-TAX AC T HAS THE ANSWER TO SUCH A PLEA RAISED. FURTHERMORE, IT IS ALSO ON RECORD THAT THE LANDS ARE AGRICULTURAL LANDS CLASSIFIED AS DRY LANDS, FOR WHICH KIST HAS BEEN PA ID. 19. THE VIEW OF THE ASSESSEE IS FORTIFIED BY THE DE CISION REPORTED IN (1937) 32 ITR 466 (COMMISSIONER OF INCOME-TAX V. RAJA BENOY KUMAR SAHAS ROY WHEREIN IT IS HELD AS FOLLOWS: 'THERE WAS AUTHORITY FOR THE PROPOSITION THAT THE E XPRESSION 'AGRICULTURAL LAND' MENTIONED IN ENTRY 21 OF LIST II OF THE SEVENTH SCH EDULE TO THE GOVERNMENT OF INDIA ACT, 1935, SHOULD BE INTERPRETED IN ITS WIDER SIGNIFICANCE AS INCLUDING LANDS WHICH ARE USED OR ARE CAPABLE OF BEING USED FOR RAI SING ANY VALUABLE PLANTS OR TREES OR FOR ANY OTHER PURPOSE OF HUSBANDRY (SEE SAROJINI DEVI V. SHRI KRISHNA ANJANNEYA SUBRAHMANYAM ILR [1945] MAD 61 AND MEGH RAJ V. ALLA H RAKHIA [1942] FCR 53).' 20. FOR THE FOREGOING REASONS, WE PASS THE FOLLOWIN G ORDER : (I) ON THE QUESTION OF LAW RAISED, WE ARE OF THE VI EW THAT THE TRIBUNAL WAS NOT JUSTIFIED IN REJECTING THE EXEMPTION. ACCORDINGLY, THE QUESTIONS OF LAW ARE ANSWERED IN FAVOUR OF THE ASSESSEES ; (II) CONSEQUENTLY, THE ORDER OF THE TRIBUNAL DATED APRIL 11, 2013, IS SET ASIDE. IN THE RESULT, BOTH THE ABOVE TAX CASE (APPEALS) AR E ALLOWED. NO COSTS. CONSEQUENTLY, CONNECTED MISCELLANEOUS PETITIONS ARE CLOSED. I.T.A. NOS.355,356 &441/COCH/2015 25 21. THE ASSESSEE HAS RELIED UPON THE LAND UTILIZA TION ORDER, 1967 IN KERALA WHICH PROHIBITS THE USE OF PADDY FIELD AND SIMILAR FARM FOR NON AGRICULTURAL PURPOSES WITHOUT OBTAINING PRIOR PERMISSION OF THE REVENUE DIVISIONAL OFFICER. IT IS AN ADMITTED FACT IN THE PRESENT CASE THAT THE AS SESSEE HAD NOT APPLIED FOR SUCH PERMISSION TO CONVERT HIS PROPERTIES FROM AGRICULTU RAL TO NON AGRICULTURAL LAND. THE REVENUE HAS RELIED UPON A SUBSEQUENT ORDER OF T HE REVENUE DIVISIONAL OFFICER, POST SALE, TO SUPPORT HIS SUBMISSIONS. IT IS PERTINENT TO MENTION HERE THAT THE ASSESSEE WAS NOT PRIVY TO THE PROCEEDINGS BEFORE THE REVENUE DIVISIONAL OFFICER CARRIED OUT BY THE BUYER. IF THE REVENUE DI VISIONAL OFFICER ON A SUBSEQUENT APPLICATION POST THE SALE BY THE ASSESSE E HAD SANCTIONED THE CONVERSION OF THE LAND, THE ASSESSEE CANNOT BE MADE TO SUFFER FOR THAT REASON. ALSO THE SAME WILL NOT ALTER THE NATURE OF THE LAND HELD BY THE ASSESSEE DURING THE COURSE OF HIS POSSESSION. THE NATURE HAS TO BE EXAMINED TILL THE DATE OF THE SALE OF PROPERTY. ALSO WITH RESPECT TO THE LAND AT KIZHAKKAMBALAM, THE REVENUE HAS RELIED UPON THE DESCRIPTION OF THE PROPERTY AS COMMERCIAL IN CERTAIN PROCEEDINGS BEFORE THE REVENUE DIVISIONAL OFFICER. THE OBJECTION OF THE REVENUE IS UNSUSTAINABLE PRIMARILY BECAUSE OF THE REASON TH AT THE NATURE AND CHARACTER OF THE ENTIRE LAND COMPRISED IN ONE BLOCK UNDER THE SA ME SURVEY NEED NOT BE THE SAME. 22. APART FROM THE AFORESAID FACTS, THE ASSESSEE H AD PRODUCED COMPUTATION STATEMENTS OF HIS AGRICULTURAL INCOME BEFORE THE RE VENUE FOR THE PERIOD 2003-04 I.T.A. NOS.355,356 &441/COCH/2015 26 TO 2007-08. HE SUBMITTED THAT SINCE THE LAND HOLDIN G OF THE ASSESSEE WAS BELOW THE LIMITS PRESCRIBED UNDER THE KERALA AGRICULTURAL INCOME TAX, 1991, HE WAS NOT REQUIRED TO FILE THE RETURN. ALSO, THE ASSESSEE SUB MITS THAT HE DID NOT DECLARE AGRICULTURAL INCOME AS THE OPERATION RESULTED IN LO SS. CONSIDERING THE CERTIFICATES ISSUED BY THE VILLAGE OFFICERS AND THE CATEGORIZATI ON OF THE LANDS IN THE REVENUE RECORDS, WE SEE NO REASON FOR THE REVENUE TO DISREG ARD THE COMPUTATION STATEMENTS GIVEN BY THE ASSESSEE. 23. THE OBJECTIONS TAKEN BY THE REVENUE THAT TH E PAYMENT OF ADVANCE TAX TO THE TUNE OF RS.27,50,000/- BY THE ASSESSEE AND ALSO MENTIONING OF THE WORD COMMERCIAL IN THE SALE DEED SHOW THE INTENTION OF THE ASSESSEE TO SELL THE PROPERTY AS COMMERCIAL PROPERTY, ARE MISCONCEIVED. 24. IT IS AN ADMITTED FACT THAT THE ASSESSEE HA D PAID CONTRIBUTION TO AGRICULTURAL WORKERS WELFARE FUND APPLICABLE FOR AG RICULTURAL LANDS SITUATED IN KERALA. FURTHER, THE ASSESSEE HAD PAID BASIC LAND TAX UPTO THE DATE OF SALE WITH RESPECT TO THE SUBJECT LANDS AT THE RATE APPLICABLE FOR THE AGRICULTURAL PROPERTIES IN KERALA. 25. ALSO THE KERALA STATE ELECTRICITY BOARD HAS LEVIED ELECTRICITY CHARGES AT THE RATES APPLICABLE FOR THE USE OF ELECTRICITY FOR THE AGRICULTURAL LANDS. CONSIDERING THE AFORESAID EVIDENCES FURNISHED BY THE ASSESSEE A LONGWITH THE FACT THAT THE I.T.A. NOS.355,356 &441/COCH/2015 27 VILLAGE ADMINISTRATION OFFICERS HAD ISSUED CERTIFIC ATES STATING THAT ACTUAL AGRICULTURAL OPERATIONS WERE CARRIED OUT ON THE LAN DS AND ALSO THE FACT THAT THE LANDS ARE CLASSIFIED AS AGRICULTURAL LANDS (NILAM) IN REVENUE RECORDS MAINTAINED BY THE STATE GOVERNMENT, WE HOLD THAT THE TWO LANDS IN QUESTION WERE AGRICULTURAL LANDS ON THE DATE WHEN THEY WERE SOLD BY THE ASSESSEE . 26. IN THE CASE OF HINDUSTAN INDUSTRIAL RESOURC ES LTD. VS. ACIT (2009) 335 ITR 77 (JPB 37 TO 41), THE HONBLE DELHI HIGH COURT OBSERVED THAT IF THE NATURE OF THE LAND IS AGRICULTURAL, AND THE ASSESSEE INTEN DS TO USE THE LAND FOR INDUSTRIAL PURPOSES, THE NATURE AND CHARACTER OF THE LAND WILL NOT BE ALTERED. THE HONBLE COURT WENT ON TO FURTHER HOLD THAT THE FACT THAT TH E ASSESSEE DID NOT CARRY OUT AGRICULTURAL OPERATIONS ALSO WILL NOT ALTER THE AGR ICULTURAL NATURE OF THE LAND. IT WAS HELD AS UNDER: 7. WE HAVE HEARD THE LEARNED COUNSEL FOR THE PARTIE S AT LENGTH. THE LEARNED COUNSEL FOR THE ASSESSEE/APPELLANT SUBMITTED THAT INTENTION TO USE A PARTICULAR PIECE OF LAND FOR A NON-AGRICULTURAL PURPOSE CANNOT BY ITSELF ALT ER THE CHARACTER OF THE LAND. IT WAS SUBMITTED BY HIM THAT WHAT IS TO BE SEEN IS WHA T WAS THE NATURE AND CHARACTER OF THE LAND ON THE DATE THE SAME WAS ACQUIRED. THE LEARNED COUNSEL SUBMITTED THAT THIS ISSUE HAD BEEN CONSIDERED BY THIS COURT ON SEV ERAL OCCASIONS, AS INDICATED IN THE DECISIONS IN D.L.F. HOUSING & CONSTRUCTION (P) LTD. VS. CIT (1982) 29 CTR (DEL) 199 : (1983) 141 ITR 806 (DEL), DLF UNITED LTD. VS. CIT (1986) 161 ITR 714 (DEL) AND DLF UNITED LTD. VS. CIT (1995) 129 CTR (DEL) 33 : (1996) 217 ITR 333 (DEL). THE DECISION IN (1982) 29 CTR (DEL) 199 : (1983) 141 ITR 806 (DEL) (SUPRA) HAS BEEN FOLLOWED IN THE OTHER TWO CASES. IN (1982) 29 CTR (DEL) 199 : (1983) 141 ITR 806 (DEL), THIS COURT, IN SIMILAR CIRCUMSTANCES, OBSERV ED THAT THE ASSESSEE THEREIN HAD NOT, TILL THE DATE OF THE AWARD, MADE ANY ATTEM PT TO CONVERT OR ALTER THE CHARACTER OF THE LAND AS IT WAS USED FOR AGRICULTUR E ALONE THROUGHOUT. THE COURT OBSERVED THAT THE MERE CIRCUMSTANCE THAT THE LAND I N QUESTION MAY HAVE BEEN PURCHASED WITH A VIEW TO DEVELOP IT LATER ON AND SE LL IT AT A PROFIT IN THE SHAPE OF PLOTS WOULD BE HARDLY ENOUGH TO JUSTIFY THE INFEREN CE THAT IT WAS A TRADING ASSET OR A VENTURE IN THE NATURE OF TRADE. ON THE STRENGTH O F THESE DECISIONS, THE LEARNED COUNSEL FOR THE APPELLANT/ASSESSEE SUBMITTED THAT T HE INTENTION TO USE THE LAND IN A I.T.A. NOS.355,356 &441/COCH/2015 28 PARTICULAR WAY IN FUTURE WAS NOT WHAT WAS RELEVANT. THE IMPORTANT POINT TO BE NOTED WAS WHAT WAS THE CHARACTER OF THE LAND ON THE DATE WHEN IT WAS ACQUIRED. 9. HAVING CONSIDERED THE ARGUMENTS ADVANCED BY THE COUNSEL FOR THE PARTIES, WE ARE OF THE VIEW THAT THE ASSESSEE'S CONTENTIONS DES ERVE TO BE UPHELD AND THE FINDINGS RETURNED BY THE TRIBUNAL OUGHT TO BE REVER SED. WE ARE CONSCIOUS THAT WE ARE NOT MERELY REVERSING A FINDING OF FACT, WHAT WE ARE INTENDING TO DO IS TO POINT OUT THAT THE TRIBUNAL'S FINDING OF FACT IS CONTRARY TO ITS OWN RECORD AND, THEREFORE, IS IN THE REALM OF PERVERSITY. THIS IS SO BECAUSE THE TRIBUNAL CLEARLY HELD THAT AT THE POINT OF TIME WHEN THE ASSESSEE PURCHASED THE SAID LAND, IT WAS AGRICULTURAL LAND. THERE IS NO DISPUTE WITH REGARD TO THIS. THE TRIBUN AL ALSO NOTED THAT THE AWARD PASSED ON 1ST APRIL, 1992 BY THE DISTRICT COLLECTOR (LAND ACQUISITION), GREATER NOIDA, BULANDSHAR, WAS A DOCUMENT WHICH ESTABLISHED BEYOND DOUBT THAT THE LAND IN QUESTION WAS AGRICULTURAL LAND. THUS, ON THE DAT E OF PURCHASE, THE LAND IN QUESTION WAS AGRICULTURAL LAND AND ON THE DATE OF A CQUISITION, THE CHARACTER OF THE LAND CONTINUED TO BE AGRICULTURAL. WHEN THESE TWO C LEAR FINDINGS HAVE BEEN RETURNED, IT IS APPARENT THAT IN THE TRANSITIONAL P ERIOD, THAT IS, BETWEEN PURCHASE AND ACQUISITION, THE NATURE AND CHARACTER OF THE LA ND DID NOT CHANGE. THE FACT THAT THE APPELLANT/ASSESSEE INTENDED TO USE THE LAND FOR INDUSTRIAL PURPOSES DID NOT IN ANY WAY ALTER THE NATURE AND CHARACTER OF THE LAND. THE FURTHER FACT THAT THE APPELLANT/ASSESSEE DID NOT CARRY OUT ANY AGRICULTUR AL OPERATIONS DID NOT ALSO RESULT IN ANY CONVERSION OF THE AGRICULTURAL LAND INTO AN INDUSTRIAL LAND. IT IS NOBODY'S CASE THAT THE APPELLANT/ASSESSEE CARRIED OUT ANY OPERATI ONS FOR SETTING UP ANY PLANT OR MACHINERY OR OF THE LIKE NATURE SO AS TO LEAD TO AN INFERENCE THAT THE NATURE AND CHARACTER OF THE LAND HAD BEEN CHANGED FROM AGRICUL TURAL TO INDUSTRIAL. THE MERE FACT THAT THE APPELLANT/ASSESSEE DID NOT CARRY OUT ANY AGRICULTURAL OPERATION DID NOT ALTER THE NATURE AND CHARACTER OF THE LAND. IN ANY EVENT, THIS DISCUSSION IS NOT RELEVANT IN THE BACKDROP OF THE CLEAR FINDING GIVEN BY THE TRIBUNAL THAT ON THE DATE OF THE PURCHASE AND AS ALSO ON THE DATE OF ACQUISIT ION, THE LAND IN QUESTION WAS AGRICULTURAL LAND. HAVING COME TO SUCH A CONCLUSION , THE TRIBUNAL OUGHT NOT TO HAVE GONE INTO QUESTION OF INTENTION OF THE APPELLANT/ A SSESSEE AND DEFINITELY NOT INTO THE QUESTION OF INTENTION OF THE LAND ACQUIRING AUT HORITY, THE LATTER BEING A WHOLLY IRRELEVANT CONSIDERATION. 27. HONBLE KARNATAKA HIGH COURT IN THE CASE OF S MT. K. LEELAVATHY (2012) 341 ITR 287 HAS FOLLOWED THE SAME VIEW EXPRESSED BY HON BLE DELHI HIGH COURT IN THE CASE OF HINDUSTAN INDUSTRIAL RESOURCES LTD. (SU PRA) IN THAT CASE, THEIR LORDSHIP OF KARNATAKA HIGH COURT HAVE HELD THAT THE LAND SOLD BY THE ASSESSEE RETAINED ITS AGRICULTURAL CHARACTER TILL THE DATE O F ORDER PERMITTING NON AGRICULTURAL I.T.A. NOS.355,356 &441/COCH/2015 29 USE AND THE LAND ASSUMES THE CHARACTER OF CAPITAL A SSET ONLY AFTER THE DATE OF ORDER PERMITTING NON-AGRICULTURAL USE. 28. THE REVENUE HAS STRONGLY RELIED UPON THE JUD GMENT IN THE CASE OF ACIT VS. SREEDHAR ASHOK KUMAR (SUPRA) OF ITAT, COCHIN BENCH, WHEREIN THE APPEAL OF THE ASSESSEE WAS DISMISSED AND IT WAS HELD THAT THE LAN D THEREIN CAME WITHIN THE DEFINITION OF CAPITAL ASSET. THE AFORESAID JUDGM ENT WAS RENDERED UNDER ITS OWN FACTS AND CIRCUMSTANCES AND THE SAME ARE DISTINGUIS HABLE WITH THE PRESENT CASE. IN THAT CASE, THE ASSESSEE THEREIN HAD ADMITTED AT THE TIME OF SURVEY THAT HE WILL OFFER CAPITAL GAIN ON THE SALE OF THE PROPERTY TO T AX. MOREOVER, IT WAS OBSERVED THAT THERE WAS NO CONSUMPTION OF ELECTRICITY DURING THE PREVIOUS YEAR IN QUESTION. THE FACTS OF THE PRESENT CASE ARE DIFFERENT AND THE REFORE, THE SAID JUDGMENT WILL NOT HELP THE CASE OF THE REVENUE. 29. IN VIEW OF THE AFORESAID, WE HOLD THAT THE LA NDS IN QUESTION DO NOT COME WITHIN THE AMBIT OF CAPITAL ASSET AS CONTEMPLATED U/S. 2(14) OF THE ACT, AND THEREFORE, THE LONG TERM CAPITAL GAIN IS NOT APPLIC ABLE TO THE SALE OF LANDS CARRIED OUT BY THE ASSESSEE. 30. CONSIDERING THE AFORESAID CIRCUMSTANCES, WE HAVE TO EXAMINE WHETHER THE PROFIT ARISING OUT OF THE SAID SALE OF LANDS WOULD BE CHARGEABLE UNDER THE HEAD INCOME FROM BUSINESS. THE ASSESSEE SUBMITS THAT APART FROM THE AFORESAID SALE CARRIED OUT IN THE ASSESSMENT YEAR 2008-09, TH E ASSESSEE HAD ALSO SOLD ANY I.T.A. NOS.355,356 &441/COCH/2015 30 PROPERTY DURING THE PERIOD COMMENCING FROM 2000 TO 2015. ALSO THE ASSESSEE HAD NOT APPLIED FOR CONVERSION OF THE LAND FOR NON AGRICULTURAL USE BEFORE THE REVENUE DIVISIONAL OFFICER. THE ASSESSEE HAD FURTHE R NOT DEVELOPED THE LAND BY PLOTTING AND PROVIDING ROADS AND OTHER FACILITIES. CONSIDERING THE AFORESAID FACTS, THE LANDS IN QUESTION CANNOT BE SAID TO BE STOCK IN TRADE. THERE IS COMPLETE ABSENCE OF TRADING ACTIVITIES AND SPECULATION IN TH E AFORESAID TRANSACTIONS OF SALE CARRIED OUT BY THE ASSESSEE. IN VIEW THEREOF, WE H OLD THAT THE PROFIT ARISING OUT OF THE SALE OF THE PROPERTIES CANNOT BE COMPUTED UN DER THE HEAD INCOME FROM BUSINESS. 31. ACCORDINGLY, GROUND NOS. 1 TO 4 RAISED BY THE ASSESSEE ARE ALLOWED. 32. GROUND NO. 5 IS GENERAL IN NATURE AND THEREFO RE, DO NOT REQUIRE ADJUDICATION. THUS THE APPEAL OF THE ASSESSEE IN I. T.A. NO. 355/COCH/2014 IS ALLOWED. 33. NOW WE SHALL TAKE UP THE APPEALS OF THE ASSESS ES IN I.T.A. NOS. 356/COCH/2014 AND 441/COCH/2015. THE FACTS OF THE CASE ARE IDENTICAL TO THE FACTS IN THE CASE OF IN I.T.A. NO. 355/COCH/2014, D ECIDED BY US HEREINABOVE. SINCE THE FACTS IN THESE TWO APPEALS ARE IDENTICAL TO THE FACTS IN THE CASE OF I.T.A. NO.355/COCH/2014, ACCORDINGLY, OUR ORDER HEREINABOV E IN I.T.A. NO. I.T.A. NOS.355,356 &441/COCH/2015 31 355/COCH/2014 SHALL BE IDENTICALLY APPLICABLE IN TH E CASE OF APPEALS IN I.T.A. NOS. 356/COCH/2014 & 441/COCH/2015. 34. IN THE RESULT, THE APPEALS OF THE ASSESSES IN I.T.A. NOS. 355 & 356/COCH/2014 AND I.T.A. NO. 441/COCH/2015 ARE ALLO WED. PRONOUNCED IN THE OPEN COURT ON 05-02-2016. SD/- SD/- (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 05TH FEBRUARY, 2016 GJ COPY TO: 1. MR. TONO THOMAS, FLAT NO. 12A, EXPRESS ESTATE, KAL OOR, KOCHI-682 017. 2. M/S. TANVEST PROPERTIES, FLAT NO. 12A, EXPRESS ES TATE, KALOOR, KOCHI-682 017. 3. SMT. SIJI THOMAS, FLAT NO. 12A, EXPRESS ESTATE, K ALOOR, KOCHI-682 017. 4. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -2(2), KOCHI. 5. THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCH I. 6. THE COMMISSIONER OF INCOME-TAX, KOCHI. 7. D.R., I.T.A.T.,COCHIN. 8. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN