INCOME TAX OFFICER, ALWAR V. M/S KRISH HOME PVT. LTD., NEW DELHI

ITA 390/JPR/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8632 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 27-03-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K RAWAT
• Assessee Lawyers: RAJEEV SOGANI C A DHK
• Keywords: Capital asset; Search and seizure; Earning of tax free income
• Section: 2(14); 115JB; 63; 2

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KN O ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA NO. 390/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2014-15. THE INCOME TAX OFFICER, WARD 2(3), ALWAR. CUKE VS. M/S. KRISH HOME PVT. LTD., 203, CAXTON HOUSE, 2E, JHANDEWALAN EXTENSION, NEW DELHI. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AACCK 9397 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI A.K. RAWAT (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI RAJEEV SOGANI (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 18/09/2018. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 13/12/2018. VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A), JAIPUR DATED 01.01.2018 FOR THE ASSESSMENT YEAR 201 4-15 WHEREIN THE REVENUE HAS TAKEN THE FOLLOWING GROUND OF APPEAL:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT (A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE IN RESPECT OF DE DUCTION OF RS. 2,43,15,546/- ON ACCOUNT OF GAIN ON SALE OF AGRICULTURE LAND (RUR AL) OUT OF BOOK PROFIT, WITHOUT APPRECIATING THE MATERIAL FACTS OF THE CASE . 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGE D IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. THE ASSESSEE E-FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 29.09.2014 DECLARING TO TAL INCOME AT LOSS OF ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 2 RS. 1,26,493/- AND AGRICULTURAL INCOME OF RS. 1,40, 000/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND IN THE SCRUT INY ASSESSMENT, THE AO NOTED THAT THE ASSESSEE IN THE COMPUTATION OF BOOK PROFIT UNDER SECTION 115JB HAS REDUCED AN AMOUNT OF RS. 2,43,15,546/- ON ACCOU NT OF GAIN ON SALE OF AGRICULTURAL LAND. THE AO NOTED THAT DURING THE YE AR UNDER CONSIDERATION, THE ASSESSEE SOLD SOME LAND AND EARNED PROFIT OF RS. 2, 43,15,546/- THEREON WHICH HAS BEEN CLAIMED AS DEDUCTION WHILE COMPUTING THE B OOK PROFIT UNDER SECTION 115JB. HOWEVER, AS PER SECTION 115JB, THE DEDUCTIO N CLAIMED BY THE ASSESSEE ON ACCOUNT OF GAIN ON SALE OF AGRICULTURAL LAND IS NOT ALLOWABLE AS IT IS NOT AN AGRICULTURAL INCOME COVERED UNDER SECTION 10(1) OF THE IT ACT. IN RESPONSE, THE ASSESSEE SUBMITTED THAT THE GAIN ON S ALE OF AGRICULTURAL LAND IS AN ALLOWABLE DEDUCTION WHILE COMPUTING THE BOOK PRO FIT UNDER SECTION 115JB. THE AO DID NOT ACCEPT THIS CONTENTION OF THE ASSESS EE AND MADE THIS ADDITION OF RS. 2,43,15,546/- TO THE BOOK PROFIT OF THE ASSE SSEE COMPUTED UNDER SECTION 115JB FOR CHARGING MINIMUM ALTERNATE TAX (M AT). 3. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEF ORE THE LD. CIT (A) AND CONTENDED THAT THE GAIN ON SALE OF AGRICULTURAL LAN D IS AN AGRICULTURAL INCOME AND, THEREFORE, THE SAME IS AN ALLOWABLE DEDUCTION AS PER PROVISIONS OF SECTION 115JB OF THE ACT. THE ASSESSEE PLACED RELI ANCE ON VARIOUS DECISIONS. THE LD. CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE B Y ACCEPTING THE GAIN ON SALE OF AGRICULTURAL LAND AS AGRICULTURAL INCOME EX EMPT UNDER SECTION 10(1) OF THE ACT. AGGRIEVED BY THE ORDER OF THE LD. CIT (A) , THE REVENUE HAS FILED THE PRESENT APPEAL. 4. THE LD. D/R HAS SUBMITTED THAT THE ASSESSEE IN I TS BOOKS OF ACCOUNT HAS SHOWN THE GAIN ON SALE OF AGRICULTURAL LAND AS CAPI TAL GAIN AND NOT AS AGRICULTURAL INCOME. FURTHER, EVEN IN THE RETURN O F INCOME, THE ASSESSEE HAS NOT DECLARED THIS INCOME AS AGRICULTURAL INCOME AND HAS SEPARATELY DECLARED ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 3 THE AGRICULTURAL INCOME OF RS. 1,40,000/-. ONLY IN THE COMPUTATION OF BOOK PROFITS, THE ASSESSEE HAS CLAIMED DEDUCTION OF THIS AMOUNT OF RS. 2,43,15,546/- AS AN ALLOWABLE DEDUCTION. THE L D. D/R HAS SUBMITTED THAT ONCE THE ASSESSEE IN THE BOOKS OF ACCOUNT HAS NOT T REATED THE SAID INCOME AS AGRICULTURAL INCOME, THE SAME CANNOT BE ALLOWED AS A DEDUCTION AS THE PROVISIONS OF SECTION 10(1) ARE NOT APPLICABLE ON T HE SAID INCOME OF THE ASSESSEE. THE PROVISIONS OF SECTION 115JB IS A SEL F CONTAINED CODE AND THE AO CANNOT TINKER WITH THE BOOKS OF ACCOUNTS PREPARED B Y THE ASSESSEE AS PER SCHEDULE-VI OF THE COMPANIES ACT. THUS, IN THE BOO KS OF ACCOUNT, THE ASSESSEE HAS SHOWN THIS INCOME AS PROFIT ON SALE OF AGRICULTURAL LAND BEING CAPITAL GAIN, THEREFORE, ONCE THIS INCOME IN QUESTI ON IS NOT DECLARED BY THE ASSESSEE OR TREATED IN THE BOOKS OF ACCOUNT AS AGRI CULTURAL INCOME, THEN THE SAME CANNOT BE ALLOWED AS DEDUCTION AS PER THE PROV ISIONS OF SECTION 115JB. ONCE THE CAPITAL GAIN ARISING ON SALE OF LAND IS NO T FALLING IN THE PROVISIONS OF SECTION 10(1) OF THE IT ACT, NO DEDUCTION IS ALLOWE D UNDER SECTION 115JB WHILE COMPUTING THE BOOK PROFIT. THUS THE LD. D/R HAS SU BMITTED THAT THOUGH THE AO HAS ACCEPTED THE CAPITAL GAIN ARISING FROM SALE OF AGRICULTURAL LAND AS NOT ASSESSABLE TO CAPITAL GAIN IN VIEW OF THE EXCLUSION CLAUSE OF SECTION 2(14)(III) OF THE IT ACT, HOWEVER, THE SAME WILL NOT PARTAKE T HE CHARACTER OF AGRICULTURAL INCOME WHICH IS EXEMPT UNDER SECTION 10(1) OF THE A CT AND CONSEQUENTLY NO DEDUCTION IS ALLOWABLE UNDER SECTION 115JB IN RESPE CT OF THE SAID INCOME. HE HAS REFERRED TO THE FINDING OF THE AO ON THIS ISSUE AND SUBMITTED THAT THE CLAIM OF THE ASSESSEE IS NOT SUPPORTED BY THE BOOKS OF ACCOUNT AND, THEREFORE, THE SAME IS NOT AN ALLOWABLE CLAIM FOR COMPUTATION OF BOOK PROFIT. 5. ON THE OTHER HAND, THE LD. A/R OF THE ASSESSEE H AS SUBMITTED THAT THE AO HAS ACCEPTED THE FACT THAT THE LAND IN QUESTION SOLD BY THE ASSESSEE WAS AGRICULTURAL LAND BEYOND THE DISTANCE OF 8 KM FROM THE MUNICIPAL LIMITS AND, THEREFORE, THE GAIN ARISING FROM THE SALE OF SAID L AND WAS ACCEPTED AS NOT ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 4 TAXABLE UNDER CAPITAL GAINS TAX IN VIEW OF THE PROV ISIONS OF SECTION 2(14)(III) OF THE ACT. THUS THE GAIN FROM SALE OF RURAL AGRICULT URAL LAND WOULD BE IN THE NATURE OF AGRICULTURAL INCOME AS PER SECTION 2(1A) AND EXPLANATION-1 TO SAID SECTION. THE LD. A/R HAS SUBMITTED THAT SECTION 2( 1A) DEFINES THE AGRICULTURAL INCOME BEING ANY RENT OR REVENUE DERIVED FROM LAND WHICH IS SITUATED IN INDIA AND USED FOR AGRICULTURAL PURPOSE. BEFORE INSERTIO N OF EXPLANATION-1 TO SECTION 2(1A) BY FINANCE ACT, 1989 WITH RETROSPECTIVE EFFEC T FROM 01.04.1970, ALL INCOME ARISING OUT OF SALE OF AGRICULTURAL LAND INC LUDING URBAN AGRICULTURAL LAND WERE HELD TO BE AGRICULTURAL INCOME BY VARIOUS COUR TS INCLUDING HONBLE BOMBAY HIGH COURT AND ANDHRA PRADESH HIGH COURT IN CASE OF MANUBHAI A. SHETH VS. N.D. NIRGUDKAR 128 ITR 87 (BOM) AND J. RA GHOTTAAMA REDDY 169 ITR 174 (AP) RESPECTIVELY. THE LD. A/R HAS THUS SU BMITTED THAT HONBLE BOMBAY HIGH COURT HAS HELD THAT THE CAPITAL GAINS O N SALE OF LAND SITUATED IN INDIA, WHICH IS USED FOR AGRICULTURAL PURPOSE, WOUL D BE REVENUE DERIVED FROM SUCH LAND AND, THEREFORE, THE SAME IS AGRICULTURAL INCOME WITHIN THE MEANING OF SECTION 2(1) OF THE IT ACT. IT WAS ALSO HELD TH AT PARLIAMENT WOULD HAVE NO LEGISLATIVE COMPETENCE TO TAX SUCH AGRICULTURAL INC OME. SIMILAR VIEW WAS TAKEN BY THE HONBLE ANDHRA PRADESH HIGH COURT IN C ASE OF J. RAGHOTTAAMA REDDY (SUPRA) AND HELD THAT THE GAIN ARISING FROM S ALE OF AGRICULTURAL LAND IS AN AGRICULTURAL INCOME AS PER PROVISIONS OF SECTION 2(1A) OF THE IT ACT. FOLLOWING THESE DECISIONS, THE TRIBUNAL IN A SERIES OF DECISIONS HAVE TAKEN THE SIMILAR VIEW EVEN AFTER INSERTION OF EXPLANATION-1 TO SECTION 2(1A) OF THE ACT. THE LD. A/R HAS SUBMITTED THAT IN THE EXPLANATION, THE REVENUE DERIVED FROM LAND WAS EXCLUDED FROM THE PURVIEW OF AGRICULTURAL INCOME ONLY IN RESPECT OF THE AGRICULTURAL LAND WHICH ARE TREATED AS URBAN AG RICULTURAL LAND OR WITHIN THE DISTANCE OF 8 KM FROM THE MUNICIPAL LIMITS, THEREFO RE, THE REVENUE DERIVED FROM THE AGRICULTURAL LAND AND ANY INCOME ARISING F ROM TRANSFER OF SUCH LAND WHICH IS STILL A RURAL AGRICULTURAL LAND BEYOND THE DISTANCE OF 8 KM FROM THE MUNICIPAL LIMITS FALL IN THE DEFINITION AGRICULTURA L INCOME AS PER SECTION 2(1A) ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 5 OF THE ACT. IN SUPPORT OF HIS CONTENTION, HE HAS R ELIED UPON THE FOLLOWING DECISIONS:- MANUBHAI A. SHETH VS. N.D. NIRGUDKAR 128 ITR 87 (BO M) J. RAGHOTTAAMA REDDY 169 ITR 174 (AP) HARRISONS MALAYALAM LTD. 32 SOT 497 (COCHIN) AGRI GOLD FOODS & FARM PRODUCTS LTD. ITA NO. 451/VI ZAG/2012 THE NILGIRI TEA ESTATE LTD. ITA NO. 37/COCH/2014 THUS THE LD. A/R HAS SUBMITTED THAT AS PER THE VARI OUS DECISIONS OF THIS TRIBUNAL, THE INCOME ON TRANSFER OF AGRICULTURAL LA ND WOULD BE AGRICULTURAL INCOME AND, THEREFORE, THE SAID INCOME IS NOT TO BE INCLUDED IN THE TOTAL INCOME AS PER THE PROVISIONS OF SECTION 10(1) OF TH E ACT AND CONSEQUENTLY SHALL BE REDUCED FROM THE BOOK PROFIT AS PER PROVIS IONS OF SECTION 115JB OF THE ACT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LIMITED ISSUE UNDER CONSIDERATION IS WHETHER INCOME DERIVED FROM SALE OF LAND IN THE HANDS OF THE ASSESSEE IS I N NATURE OF AGRICULTURE INCOME EXEMPT UNDER SECTION 10(1) OF THE ACT AND IF THE ANSWER TO THE SAME IS IN AFFIRMATIVE, WHETHER IT CAN BE EXCLUDED WHILE COMPUTING BOOK PROFITS UNDER SECTION 115JB OF THE ACT. 7. RECENTLY, THE COORDINATE BENCH IN CASE OF ACIT VS. SUNIL BANSAL ( IN ITA NO. 523/JP/2012 DATED 06.11.2018) HAS DEALT WITH THIS ISSUE AT LENGTH EXAMINING THE VARIOUS LEGAL AUTHORITIES ON T HE SUBJECT INCLUDING THE DECISIONS RELIED UPON BY THE LD AR. WE THEREFORE D EEM IT APPROPRIATE TO REFER TO THE SAID DISCUSSION AND FINDINGS OF THE COORDINA TE BENCH WHICH ARE REPRODUCED AS UNDER:- ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 6 7.2 ON THE ALTERNATIVE PLEA THAT EVEN IF THE ACTIV ITY OF THE ASSESSEE CONSIDERED AS BUSINESS, THE INCOME DERIVED FROM SAL E OF THE AGRICULTURAL LAND IS AN AGRICULTURAL INCOME, WE FIND THAT BEFORE GOIN G INTO THE SAID ISSUE WHETHER THE SALE OF AGRICULTURAL LAND RESULTS IN AG RICULTURAL INCOME OR CAPITAL GAIN NOT LIABLE TO TAX U/S 2(14)(III) OF THE ACT, T HE EXPRESSION AGRICULTURAL LAND ITSELF HAS TO BE TAKEN INTO CONSIDERATION. THE QUES TION WHETHER A PARTICULAR LAND IS AGRICULTURAL LAND WAS FIRST CONSIDERED BY T HE CONSTITUTIONAL BENCH OF THE HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER O F WEALTH TAX VS. OFFICER IN CHARGE (COURT OF WARDS) 105 ITR 133. THE DEFINIT ION OF AGRICULTURAL LAND WITHIN THE MEANING OF SECTION 2(E) OF WEALTH TAX AC T WAS CONSIDERED AND IT WAS OBSERVED BY THE HON'BLE SUPREME COURT THAT TO D ETERMINE THE CHARACTER OF LAND ACCORDING TO THE PURPOSE FOR WHICH IT IS ME ANT OR SET APART AND CAN BE USED, IS A MATTER WHICH OUGHT TO BE DETERMINED ON T HE FACTS OF EACH PARTICULAR CASE. WHAT IS REALLY REQUIRED TO BE SHOWN IS THE CO NNECTION WITH AN AGRICULTURAL PURPOSE AND USER AND NOT THE MERE POSS IBILITY OF USER OF LAND, BY SOME POSSIBLE FUTURE OWNER OR POSSESSOR, FOR AN AGR ICULTURAL PURPOSE. IT IS NOT THE MERE POTENTIALITY, WHICH WILL ONLY AFFECT ITS V ALUATION AS PART OF 'ASSETS', BUT ITS ACTUAL CONDITION AND INTENDED USER WHICH HA S TO BE SEEN FOR PURPOSES OF EXEMPTION FROM WEALTH-TAX. THE HON'BLE SUPREME C OURT IN A SUBSEQUENT DECISION IN THE CASE OF SMT. SARIFABIBI MOHMED IBRA HIM V. COMMISSIONER OF INCOME-TAX 204 ITR 631 HAS REFERRED TO THE DECISION OF THE CONSTITUTIONAL BENCH IN THE CASE OF COMMISSIONER OF WEALTH TAX VS. OFFICER IN CHARGE (COURT OF WARDS) (SUPRA) AT PAGE 637 AND 638 AS UNDER: WHETHER A LAND IS AN AGRICULTURAL LAND OR NOT IS E SSENTIALLY A QUESTION OF FACT. SEVERAL TESTS HAVE BEEN EVOLVED IN THE DECISI ONS OF THIS COURT AND THE HIGH COURTS, BUT ALL OF THEM ARE MORE IN THE NA TURE OF GUIDELINES. THE QUESTION HAS TO BE ANSWERED IN EACH CASE HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THAT CASE. THERE MAY BE FACTORS BOTH FOR AND AGAINST A PARTICULAR POINT OF VIEW. THE COURT HAS T O ANSWER THE QUESTION ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 7 ON A CONSIDERATION OF ALL OF THEMA PROCESS OF EVAL UATION. THE INFERENCE HAS TO BE DRAWN ON A CUMULATIVE CONSIDERA TION OF ALL THE RELEVANT FACTS. THE FIRST DECISION OF THIS COURT WHICH CONSIDERED T HE MEANING OF THE EXPRESSION 'AGRICULTURAL LAND' IS IN CIT V . RAJA B ENOY KUMAR SAHAS ROY [1957] 32 ITR 466. BUT THE QUESTION THERE WAS WHETHER THE INCOME FROM FOREST LAND DERIVED FROM SAL AND PIYASAL TREES , 'NOT GROWN BY HUMAN SKILL AND LABOUR' CONSTITUTES AGRICULTURAL IN COME? THE DECISION THAT DIRECTLY CONSIDERED THE ISSUE, THOUGH UNDER TH E WEALTH-TAX ACT, 1957 IS IN CWT V. OFFICER-IN-CHARGE ( COURT OF WARD S) [1976] 105 ITR 133 (SC) (HEREINAFTER REFERRED TO AS THE BEGUMPET PALACE CASE). IT WAS AN APPEAL FROM A FULL BENCH DE CISION OF THE ANDHRA PRADESH HIGH COURT. THE HIGH COURT HAD TAKEN THE VI EW, FOLLOWING A DECISION OF THE MADRAS HIGH COURT IN T. SAROJINI DE VI V. T. SRI KRISHNA AIR 1944 MAD. 401, THAT THE EXPRESSION 'AGR ICULTURAL LAND' SHOULD BE GIVEN THE WIDEST MEANING. IT HELD THAT TH E FACT THAT THE LAND IS ASSESSED TO LAND REVENUE AS AGRICULTURAL LAND UN DER THE STATE REVENUE LAW IS A STRONG PIECE OF EVIDENCE OF ITS CH ARACTER AS AN AGRICULTURAL LAND. ON APPEAL, A CONSTITUTION BENCH OF THIS COURT HELD THAT; (A) INASMUCH AS AGRICULTURAL LAND IS EXEMPTED FROM THE PURVIEW OF THE DEFINITION OF THE EXPRESSION 'ASSETS', IT IS 'I MPOSSIBLE TO ADOPT SO WIDE A TEST AS WOULD OBVIOUSLY DEFEAT THE PURPOSE O F THE EXEMPTION GIVEN'. THE IDEA BEHIND EXEMPTING THE AGRICULTURAL LAND IS TO ENCOURAGE CULTIVATION OF LAND AND THE AGRICULTURAL OPERATIONS . 'IN OTHER WORDS THIS EXEMPTION HAD TO BE NECESSARILY GIVEN A MORE RESTRI CTED MEANING THAN THE VERY WIDE AMBIT GIVEN TO IT BY THE FULL BENCH O F THE ANDHRA PRADESH HIGH COURT', (B) WHAT IS REALLY REQUIRED TO BE SHOW N IS THE CONNECTION WITH AN AGRICULTURAL PURPOSE AND USER AND NOT THE M ERE POSSIBILITY OF USER OF LAND BY SOME POSSIBLE FUTURE OWNER OR PO SSESSOR, FOR AN ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 8 AGRICULTURAL PURPOSE. IT IS NOT THE MERE POTENTIALI TY BUT ITS ACTUAL CONDITION AND INTENDED USER WHICH HAS TO BE SEEN FO R PURPOSES OF EXEMPTION, (EMPHASIS SUPPLIED) (C) 'THE PERSON CLAI MING AN EXEMPTION OF ANY PROPERTY OF HIS FROM THE SCOPE OF HIS ASSETS MUST SATISFY THE CONDITIONS OF THE EXEMPTION', (D) 'THE DETERMINATIO N OF THE CHARACTER OF LAND, ACCORDING TO THE PURPOSE FOR WHICH IT IS MEAN T OR SET APART AND CAN BE USED, IS A MATTER WHICH OUGHT TO BE DETERMIN ED ON THE FACTS OF EACH PARTICULAR CASE', (E) THE FACT THAT THE LAND I S ASSESSED TO THE LAND REVENUE AS AGRICULTURAL LAND UNDER THE STATE REVENU E LAW IS CERTAINLY A RELEVANT FACT BUT IT IS NOT CONCLUSIVE. WHETHER A LAND IS AN AGRICULTURAL LAND OR NOR IS ES SENTIALLY A QUESTION OF FACT AND SEVERAL TESTS HAS TO BE APPLIED AS LAID DOWN BY THE HON'BLE SUPREME COURT AND HON'BLE HIGH COURTS THOUGH ALL OF THEM AR E MERE IN THE NATURE OF GUIDANCE. THE QUESTION HAS TO BE ANSWERED IN EACH C ASE HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE. AS IT IS CLEAR THAT THE HON'BLE SUPREME COURT HAS HELD THAT THE LAND IS ASSESSED TO LAND RE VENUE AS AN AGRICULTURAL LAND IS NOT A CONCLUSIVE FACT AND THE QUESTION IS T O BE DECIDED BY CONSIDERING VARIOUS FACTORS INCLUDING WHETHER THE LAND IS USED FOR CULTIVATION AND AGRICULTURE OPERATIONS ARE CARRIED OUT. THUS WHAT I S REALLY REQUIRED TO BE SEEN IN CONNECTION WITH AN AGRICULTURAL LAND IS THE CONN ECTION WITH AGRICULTURAL PURPOSE AND USER AND NOT THE MERE POSSIBLE OF USER OF LAND BY SOME POSSIBLE FUTURE OWNER. THE HON'BLE SUPREME COURT IN THE CASE OF SMT. SARIFABIBI MOHMED IBRAHIM V. COMMISSIONER OF INCOME-TAX (SUPRA ) HAS ALSO CONSIDERED THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. V.A. TRIVEDI 172 ITR 95 AND OBSERVED AT PAGE 641 AS UNDER: THE BENCH OBSERVED THAT TO ASCERTAIN THE TRUE CHA RACTER AND THE NATURE OF THE LAND, IT MUST BE SEEN WHETHER IT HAS BEEN PUT TO USE FOR AGRICULTURAL PURPOSES FOR A REASONABLE SPAN OF TIME PRIOR TO THE RELEVANT ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 9 DATE AND FURTHER WHETHER ON THE RELEVANT DATE THE L AND WAS INTENDED TO BE PUT TO USE FOR AGRICULTURAL PURPOSES FOR A REASO NABLE SPAN OF TIME IN THE FUTURE. EXAMINING THE FACTS OF THE CASE FROM TH E SAID POINT OF VIEW, THE BENCH HELD THAT THE AGREEMENT ENTERED INTO BY T HE ASSESSEE WITH THE HOUSING SOCIETY IS THE CRUCIAL CIRCUMSTANCE SIN CE IT SHOWED THAT THE ASSESSEE AGREED TO SELL THE LAND TO HOUSING SOCIETY ADMITTEDLY FOR UTILISATION FOR NON-AGRICULTURAL PURPOSES. THE SALE -DEEDS WERE EXECUTED FOUR MONTHS AFTER THE AGREEMENT OF SALE AND EVEN IF ANY AGRICULTURAL OPERATIONS WERE CARRIED ON WITHIN THE SAID SPAN OF FOUR MONTHS, - THE BENCH HELD - IT WAS EVIDENTLY IN THE NATURE OF A ST OP-GAP ARRANGEMENT. ON THE DATE THE LAND WAS SOLD, THE BENCH HELD, THE LAND WAS NO LONGER AGRICULTURAL LAND WHICH IS EVIDENT FROM THE FACT TH AT THE ASSESSEE HAD OBTAINED PERMISSION EVEN IN AUGUST 1966 TO CONVERT THE SAID LAND TO NON-AGRICULTURAL PURPOSES. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS . V.A. TRIVEDI (SUPRA) HAS LAID DOWN THE PRINCIPLE FOR ASCERTAINING THE TR UE CHARACTER AND NATURE OF THE LAND THAT IT MUST BE SEEN WHETHER IT HAS BEEN P UT TO USE FOR AGRICULTURAL PURPOSES FOR A REASONABLE SPAN OF TIME PRIOR TO REL EVANT DATE AND FURTHER THE LAND WAS INTENDED TO BE PUT TO USE FOR AGRICULTURAL PURPOSE FOR A REASONABLE TIME PERIOD IN FUTURE. IF THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT AS WELL AS THE HON'BLE HIGH COURT ARE TO BE A PPLIED IN THE FACTS OF THE PRESENT CASE THEN ONE CAN SAFELY SAY THAT THE LAND PURCHASED BY THE ASSESSEE, WHO IS NOT AN AGRICULTURIST FOR THE INTEN TION TO RESALE IT TO THE COMPANY AS PER THEIR PREDETERMINED PLAN LOSES ITS C HARACTER THE MOMENT THE ASSESSEE PURCHASED THE LANDS WITH THE INTENTION TO BE USED IN FUTURE FOR NON- AGRICULTURAL PURPOSES. HENCE, THE LAND WAS NO LONGE R AGRICULTURAL LAND WHEN THE ASSESSEE PURCHASED IT FOR RESALE AND WAS CONVER TED TO NON-AGRICULTURAL USE AT THE TIME OF SALE TO THE COMPANY. THE HON'BLE SUPREME COURT AFTER ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 10 CONSIDERING THE VARIOUS DECISIONS ON THE POINT AS W ELL AS THE FACTS AS HELD AT PAGE 642 AND 643 AS UNDER: NOW, WE MAY CONSIDER THE VARIOUS CIRCUMSTANCES AP PEARING FOR AND AGAINST THE APPELLANT'S CASE. THE FACTS IN THEIR FA VOUR ARE: LAND BEING REGISTERED AS AGRICULTURAL LAND IN THE REVENUE RECO RDS; PAYMENT OF LAND REVENUE IN RESPECT THEREOF TILL THE YEAR 1968-69; A BSENCE OF ANY EVIDENCE THAT IT WAS PUT TO ANY NON-AGRICULTURAL US E BY THE APPELLANTS; THAT THE LAND WAS ACTUALLY CULTIVATED TILL AND INCL UDING THE AGRICULTURAL YEAR 1964-65; THAT THERE WERE AGRICULTURAL LANDS AB UTTING THE SAID LAND AND THAT THE APPELLANTS HAD NO OTHER SOURCE OF INCO ME EXCEPT THE INCOME FROM THE SAID LAND. AS AGAINST THE ABOVE FAC TS, THE FACTS APPEARING AGAINST THEIR CASE ARE: THE LAND WAS SITU ATED WITHIN THE MUNICIPAL LIMITS - IT WAS SITUATED AT A DISTANCE OF ONE KILOMETER FROM THE SURAT RAILWAY STATION; THE LAND WAS NOT BEING CULTI VATED FROM THE YEAR 1965-66 UNTIL IT WAS SOLD IN 1969; THE APPELLANTS H AD ENTERED INTO AN AGREEMENT SALE WITH A HOUSING CO-OPERATIVE SOCIETY TO SELL THE SAID LAND FOR AN AVOWED NON-AGRICULTURAL PURPOSE, NAMELY , CONSTRUCTION OF HOUSES; THEY HAD APPLIED IN JUNE 1968 AND MARCH 196 9 FOR PERMISSION TO SELL THE SAID LAND FOR NON-AGRICULTURAL PURPOSES UNDER SECTION 63 OF THE BOMBAY TENANCY AND AGRICULTURAL LANDS ACT AND O BTAINED THE SAME ON 22-4-1969; SOON AFTER OBTAINING THE SAID PERMISS ION THEY EXECUTED SALE-DEEDS IN THE FOLLOWING MONTH, I.E., IN MAY 196 9; THE LAND WAS SOLD AT THE RATE OF RS. 23 PER SQ. YD. AND THE PURCHASER -SOCIETY COMMENCED CONSTRUCTION OPERATIONS WITHIN THREE DAYS OF PURCHA SE. WHAT IS THE INFERENCE THAT FLOWS FROM A CUMULATIVE CONSIDERATIO N OF ALL THE AFORESAID CONTENDING FACTS? THIS QUESTION HAS TO BE ANSWERED KEEPING THE CRITERIA EVOLVED IN BEGUMPET PALACE'S CASE (SUPRA) SET OUT H EREINBEFORE. IN OUR OPINION, THE ENTERING INTO THE AGREEMENT TO SELL TH E LAND FOR HOUSING PURPOSES, THE APPLYING AND OBTAINING THE PERMISSION TO SELL THE LAND FOR ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 11 NON-AGRICULTURAL PURPOSES UNDER SECTION 63 AND ITS SALE SOON THEREAFTER AND THE FACT THAT THE LAND WAS NOT CULTIVATED FOR A PERIOD OF FOUR YEARS PRIOR TO ITS SALE COUPLED WITH ITS LOCATION, THE PR ICE AT WHICH IT WAS SOLD DO OUTWEIGH THE CIRCUMSTANCES APPEARING IN FAVOUR O F THE APPELLANTS' CASE. THE AFORESAID FACTS DO ESTABLISH THAT THE LAN D WAS NOT AN AGRICULTURAL LAND WHEN IT WAS SOLD. THE APPELLANTS HAD NO INTENTION TO BRING IT UNDER CULTIVATION AT ANY TIME AFTER 1965-6 6 CERTAINLY NOT AFTER THEY ENTERED INTO THE AGREEMENT TO SELL THE SAME TO A HOUSING CO- OPERATIVE SOCIETY. THOUGH A FORMAL PERMISSION UNDER SECTION 65 OF THE BOMBAY LAND REVENUE CODE WAS NOT OBTAINED BY THE AP PELLANTS, YET THEIR INTENTION IS CLEAR FROM THE FACT OF THEIR APP LICATION FOR PERMISSION TO SELL IT FOR A NON-AGRICULTURAL PURPOSE UNDER SEC TION 63 OF THE BOMBAY TENANCY AGRICULTURAL LANDS ACT. WE ARE, THEREFORE, OF THE OPINION THAT THE HIGH COU RT WAS RIGHT IN HOLDING THAT THE SAID LAND WAS NOT AN AGRICULTURAL LAND AT THE TIME OF ITS SALE AND THAT THE INCOME ARISING FROM ITS SALE WAS NOT EXEMPT FROM THE CAPITAL GAINS TAX. THE APPEALS, ACCORDINGLY, FAIL A ND ARE DISMISSED. NO COSTS. IT WAS CONSIDERED BY THE HON'BLE SUPREME COURT THAT THE ASSESSEE ENTERED INTO AN AGREEMENT TO SELL THE LAND FOR HOUSING PURP OSE AFTER APPLYING AND OBTAINING THE PERMISSION TO SELL THE LAND FOR NON-A GRICULTURAL PURPOSE AND THEREFORE, WHEN THE LAND WAS NEITHER CULTIVATED PRI OR TO THE SALE NOR TO BE CULTIVATED IN FUTURE COUPLED WITH THE FACTORS OF IT S LOCATIONS AND PRICES ESTABLISHED THAT THE LAND WAS NOT AN AGRICULTURAL L AND WHEN IT WAS SOLD. THIS ISSUE WAS AGAIN CONSIDERED BY THE HONBLE BOMBAY HI GH COURT IN THE CASE OF GOPAL C SHARMA VS CIT 209 ITR 946 AND BY FOLLOWING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SMT. SARIFABIBI MOHMED IBRAHIM V. COMMISSIONER OF INCOME-TAX (SUPRA), THE HON'BLE HIG H COURT HAS OBSERVED AND HELD IN PARA 13, 24 TO 26 AS UNDER: ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 12 13. THE EXPRESSION 'AGRICULTURAL LAND' IS NOT DEFINED UNDER THE ACT. THE QUESTION AS TO WHETHER THE LAND IN QUESTION WAS LIABLE TO BE CONSIDERED AS AGRICULTURAL LAND FOR PURPOSE OF INCO ME-TAX IS LIABLE TO BE DECIDED WITH REFERENCE TO THE CRITERIA LAID D OWN BY JUDICIAL DECISIONS OF THE SUPREME COURT AND HIGH COURTS. THE UNDERLYING OBJECT OF THE ACT TO EXEMPT 'AGRICULTURAL INCOME' F ROM INCOME-TAX IS TO ENCOURAGE ACTUAL CULTIVATION OR DEFACTO AGRIC ULTURAL OPERATIONS. ACTUAL USER OF THE LAND FOR AGRICULTURA L PURPOSE OR ABSENCE THEREOF AT THE RELEVANT TIME IS UNDOUBTEDLY ONE OF THE CRUCIAL TESTS FOR DETERMINATION OF THE ISSUE. IT IS WELL SETTLED THAT THE NATURE AND CHARACTER OF LAND MAY UNDERGO A CHAN GE DEPENDING UPON ITS SITUATION, GROWTH OF LOCALITY, Z ONE IN WHICH IT IS SITUATE AND ITS POTENTIALITY. ACCORDING TO RECEN T DECISIONS OF THE SUPREME COURT, THE FACT THAT THE LAND IS SOLD OR TR ANSFERRED TO A NON-AGRICULTURIST FOR A NON-AGRICULTURAL PURPOSE OR THAT IT IS LIKELY TO BE USED FOR NON-AGRICULTURAL PURPOSE SOON AFTER ITS TRANSFER IS ALSO A RELEVANT FACTOR GERMANE TO THE DETERMINATION OF THE ISSUE. MERELY BECAUSE THE LAND WAS USED FOR AGRICULTURAL P URPOSE IS REMOTE PAST OR IT CONTINUE TO BE ASSESSED TO LAND R EVENUE ON THE FOOTING OF AGRICULTURAL LAND IS NOT DECISIVE. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXX 24. THE LEARNED COUNSEL FOR THE ASSESSEE MAINLY RELIE D UPON THE DIVISION BENCH JUDGMENT OF THIS COURT IN THE CASE O F CWT V. H.V. MUNGALE [1984] 145 ITR 208, RATIO OF JUDGMENT OF TH E DIVISION BENCH OF THIS COURT IN THE CASE OF WEALTH-TAX REFER ENCE NO. 5 OF 1964 DECIDED ON 4-12-1973 AND THE JUDGMENT OF THIS COURT IN CIT V. P.C. JOSHI AND B.C. JOSHI [1993] 202 ITR 1017 . THE THRUST OF THE ARGUMENT OF THE LEARNED COUNSEL FOR T HE ASSESSEE IS ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 13 THAT THE FACT THAT THE LAND WAS LYING VACANT AND NO T USED FOR CULTIVATION FOR SEVERAL YEARS WAS NOT OF ANY LEGAL CONSEQUENCE. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE COURT MUST PRESUME THAT THE VACANT LAND CONTINUED TO BE ' AGRICULTURAL LAND' IN NATURE AND CHARACTER ONCE IT WAS SHOWN THA T THE LAND WAS ASSESSED TO LAND REVENUE AS AN AGRICULTURAL LAN D. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE LAST TWO P ARAGRAPHS FROM THE JUDGMENT OF CHANDURKAR, J. AS HIS LORDSHIP THEN WAS FROM H.V. MUNGALE'S CASE (SUPRA) WHEREIN IT WAS OBS ERVED THAT UNLESS THE LAND WAS ALLOWED TO BE CONVERTED FOR NON -AGRICULTURAL PURPOSE BY THE ORDER OF COLLECTOR UNDER THE PROVISI ONS OF THE LAND REVENUE ACT, THE INITIAL PRESUMPTION TO THE EF FECT THAT THE LAND WAS AGRICULTURAL IN NATURE WOULD CONTINUE TO O PERATE. TO SOME EXTENT, SOME OF THE OBSERVATIONS APPEAR TO BE IN CONFLICT WITH THE VIEW NOW TAKEN BY THE SUPREME COURT IN SMT . SARIFABIBI MOHMED IBRAHIM'S CASE (SUPRA). IT IS FAR TOO OBVIOU S TO US THAT THE VIEW TAKEN BY THE SUPREME COURT IN SARIFABIBI M OHMED IBRAHIM'S CASE (SUPRA) WOULD PREVAIL. IN OUR OPINIO N, THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN THE CA SE OF SMT. SARIFABIBI MOHMED IBRAHIM (SUPRA) AND BY THIS COURT IN V.A. TRIVEDI'S CASE (SUPRA) DO EMPHASISE THE FACTOR OF N ON-USER OF THE LAND FOR CULTIVATION FOR REASONABLE SPAN OF TIME PR IOR TO THE DATE OF TRANSFER AS A CRUCIAL FACTOR FOR DETERMINATION O F THE ISSUE. APPLYING THE RATIO OF THE SUPREME COURT JUDGMENT IN SMT. SARIFABIBI MOHMED IBRAHIM'S CASE (SUPRA) TO THE FAC TS OF THE CASE, WE HOLD THAT THE REFERENCE LANDS COULD NOT BE CONSI DERED AS 'AGRICULTURAL LANDS' ON THE DATE OF TRANSFER. 25. THE AAC AND THE TRIBUNAL WERE MORE THAN JUSTIFIED IN HIGHLIGHTING THE FACT THAT THE REFERENCE LANDS WERE SITUATE IN H EAVY INDUSTRIAL ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 14 ZONE AND THAT THE SAID LANDS WERE NOT IN FACT USED OR INTENDED TO BE USED FOR AGRICULTURAL PURPOSE AT THE RELEVANT TI ME SINCE SEVERAL YEARS. THE AAC ALSO RECORDED FINDING OF FACT BASED ON RELEVANT EVIDENCE THAT AT LEAST 10 ACRES OF THE LAND OUT OF 25 ACRES WAS IN FACT USED FOR NON-AGRICULTURAL PURPOSES BY LARSEN & TOUBRO LTD. SINCE THE YEAR 1960, I.E., FOR 7 YEARS PRIOR TO THE DATE OF TRANSFER OF THE LAND. IF THE RELEVANT TESTS LAID DOWN BY THE SUPREME COURT IN SMT SARIFABIBI MOHMED IBRAHIM'S CASE (SUPRA) AND THE TEST LAID DOWN BY THIS COURT IN V.A. TRIVEDI'S CASE (SUPRA) A RE TO BE APPLIED TO THIS CASE AS THEY OUGHT TO BE, IT WOULD BECOME O BVIOUS THAT THE FINDING OF FACT ARRIVED AT BY THE ITO, THE AAC AND THE TRIBUNAL CANNOT BE CHARACTERISED AS PERVERSE OR UNS UPPORTED BY EVIDENCE OR ERRONEOUS IN LAW. IT IS NOT POSSIBLE TO ACCEPT THE SUBMISSION MADE BY THE LEARNED COUNSEL FOR THE ASSE SSEE THAT THE AUTHORITIES BELOW DID NOT APPLY THE CORRECT TES T OR MISDIRECTED THEMSELVES IN LAW OR THAT THE FINDING OF FACT ARRIV ED BY THE TRIBUNAL WAS NOT SUPPORTED BY EVIDENCE. 26. IN VIEW OF THE ABOVE DISCUSSION WE DO NOT THINK I T NECESSARY TO REFER TO THE OTHER AUTHORITIES CITED AT THE BAR. WE UPHOLD THE FINDING OF THE TRIBUNAL TO THE EFFECT THAT THE REFE RENCE LANDS WERE NOT AGRICULTURAL LANDS. IT IS HELD BY THE HONBLE BOMBAY HIGH COURT THAT TH E FUTURE USE OF LAND WAS NON-AGRICULTURAL PURPOSE AND THEREFORE, THE SAME CA NNOT BE CATEGORIZED AS AGRICULTURAL LAND AT THE TIME OF SALE. THIS FACT OF FUTURE USE OF LAND IS NOT IN DISPUTE IN THE CASE BEFORE US EVEN THE ASSESSEE IS NOT AN AGRICULTURIST AND HAS NO INTENTION TO CARRY OUT THE AGRICULTURAL OPERATIO NS ON THE LANDS IN QUESTION CLEARLY ESTABLISHED THE INTENDED FUTURE USE FOR NON -AGRICULTURAL PURPOSE. THEREFORE, IN FACTS AND CIRCUMSTANCES OF THE PRESEN T CASE AND APPLYING THE ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 15 TEST AS LAID DOWN BY THE HON'BLE SUPREME COURT AND THE HON'BLE BOMBAY HIGH COURT WE HAVE NO HESITATION TO HOLD THAT THE LAND IN QUESTIONS DOES NOT FALL UNDER THE EXCLUSION CLAUSE (III) OF SECTION 2(14) O F THE ACT BEING THE AGRICULTURAL LAND. ACCORDINGLY, THE PROFIT EARNED B Y THE ASSESSEE OF SALE OF SUCH LAND CANNOT BE REGARDED AS EXEMPT INCOME U/S 2 (14) OR AS AN AGRICULTURAL INCOME IN TERMS OF DEFINITION U/S 2(1A ) OF THE ACT. THE LD AR OF THE ASSESSEE HAS GIVEN MUCH EMPHASIS ON THE EXPLANA TION TO SECTION 2(1A) OF THE ACT AND ALSO RELIED UPON THE DECISION OF HONBL E BOMBAY HIGH COURT IN THE CASE OF MANUBHAI A. SETH VS N.D. NIRGUDKAR, SECOND ITO AS WELL AS DECISION OF HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF J. RAGHOTTAMA REDDY VS ITO (SUPRA). SINCE THESE DECISIONS WERE BASED ON TH E FACT THAT THE LANDS WERE UNDISPUTEDLY AGRICULTURAL LANDS, THEREFORE, ONCE WE HOLD THAT THE LAND IN QUESTIONS CANNOT BE REGARDED AS AGRICULTURAL LAND A S THE SAME LOSES ITS CHARACTER OF AGRICULTURAL LAND THE MOMENT THE ASSES SEE PURCHASED THE LANDS FOR THE SOLE PURPOSE OF RESELLING TO THE COMPANIES IN WHICH THE ASSESSEE IS A DIRECTOR AND TO BE USED FOR NON-AGRICULTURAL PURPOS ES. THEREFORE, THESE DECISIONS CANNOT BE APPLIED IN THIS CASE. SECONDLY THOSE DECISIONS WERE CHALLENGED BY THE REVENUE BEFORE THE HON'BLE SUPREM E COURT AND THE HON'BLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. S. MUTHYAM REDDY (SUPRA) HAS HELD AS UNDER: 1. THIS APPEAL IS BY SPECIAL LEAVE AGAINST AN ORDE R PASSED BY THE HIGH COURT OF ANDHRA PRADESH IN A BATCH OF CASES. BY THA T ORDER, THE HIGH COURT CONSIDERED THE EFFECT OF A COMBINED READ ING OF SECTIONS 2(1A) AND 2(14 ) OF THE INCOME-TAX ACT, 1961 ('THE ACT') AND HAS HELD THAT (I) CAPITAL GAINS ARISING FROM SALE OF LA ND USED FOR AGRICULTURAL PURPOSES WOULD BE REVENUE DERIVED FROM SUCH LAND AND, THEREFORE, 'AGRICULTURAL INCOME' WITHIN THE DEFINIT ION UNDER SECTION 2(1A) WITH THE RESULT THAT PARLIAMENT WOULD HAVE NO LEGISLATIVE COMPETENCE TO TAX SUCH AGRICULTURAL INCOME; AND (II ) AMENDED ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 16 SECTION 2( 14)(III) SHOULD BE READ DOWN TO PRESERVE ITS CONSTITUTIONALITY. ALL LAND USED FOR AGRICULTURAL P URPOSES WHETHER SITUATED IN AREAS MENTIONED IN SECTION 2(14)( III)( A) AND (B) SHOULD BE HELD TO BE EXCLUDED FROM THE DEFINITION OF 'CAPI TAL ASSET'. THUS SECTION 2(14)( III) SHOULD READ AS EXCLUDING FROM C APITAL ASSET AGRICULTURAL LAND IN INDIA, NOT BEING LAND SITUATED IN THE AREAS MENTIONED THEREIN. UPON SUCH INTERPRETATION, SECTIO N 2(14)(III ) DOES NOT ENABLE LEVY OF TAX ON CAPITAL GAINS ARISING FRO M TRANSFER OF LAND WHICH IS USED FOR AGRICULTURAL PURPOSES WHEREVER IT MAY BE SITUATED. 2. IN THIS APPEAL, CHALLENGE TO THIS ORDER IS BASED ON MANY GROUNDS AND OUR ATTENTION HAS BEEN DRAWN TO SEVERAL DECISIO NS NOT ONLY TAKING SIMILAR BUT ALSO A CONTRARY VIEW. THE RESPON DENTS HAVING REMAINED EX PARTE, WE REQUESTED SHRI DHRUV MEHTA, T HE LEARNED ADVOCATE, TO ASSIST THE COURT AS AMICUS CURIAE. WE ARE BEHOLDEN FOR THE VALUABLE ASSISTANCE RENDERED BY HIM TO THE COUR T. 3. BY THE FINANCE ACT, 1989, EXPLANATION TO SECTION 2(1A) IS INSERTED WITH EFFECT FROM 1-4-1970 TO SUPERSEDE THE VIEW EXP RESSED IN THE ORDER UNDER APPEAL AND SEVERAL DECISIONS SETTING OU T SIMILAR RATIO. THIS DECLARATORY AMENDMENT HAVING RETROSPECTIVE OPE RATION THOUGH COMING INTO FORCE DURING THE PENDENCY OF THIS APPEA L MUST BE GIVEN EFFECT TO. THE SAID EXPLANATION CLEARLY DECLARES TH AT THE REVENUE DERIVED FROM LAND SHALL NOT INCLUDE AND SHALL BE DE EMED NEVER TO HAVE INCLUDED ANY INCOME ARISING FROM THE TRANSFER OF ANY LAND REFERRED TO IN SECTION 2(14)( III)(A) OR (B). THE U PSHOT OF THE SAME IS THAT INCOME DERIVED FROM SALE OF SUCH AGRICULTURAL LANDS CANNOT BE TREATED AS 'AGRICULTURAL INCOME'. THUS, THE WHOLE B ASIS OF THE DECISION HAS BEEN LOST AND, THEREFORE, THE ORDER UN DER APPEAL CANNOT BE SUSTAINED AND DESERVES TO BE SET ASIDE. ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 17 4. SHRI DHRUV MEHTA POINTED OUT THAT BY AN ARTIFICIA L DEFINITION INTRODUCED INTO THE ACT WHAT IS AGRICULTURAL INCOME CANNOT BE TREATED OTHERWISE. HE ALSO SOUGHT TO EXPLAIN THE SC HEME OF THE ENTRIES IN THE DIFFERENT LISTS OF THE CONSTITUTION IN SUPPORT OF HIS CONTENTION. 5. THE LEARNED COUNSEL FOR THE APPELLANTS POINTED OU T THAT UNDER ARTICLE 366(1) OF THE CONSTITUTION 'AGRICULTURAL INCOME' HA S THE SAME MEANING AS DEFINED UNDER ENACTMENTS RELATING TO INC OME-TAX. THERE IS DIVERGENCE OF OPINION AMONGST THE HIGH COU RTS AS TO THE EFFECT OF SECTION 2(14)(III ) AS AMENDED BY THE FIN ANCE ACT, 1970, AND HENCE THE PARLIAMENT INTRODUCED THE EXPLANATION BY THE FINANCE ACT, 1989 STATING THE MEANING THERETO WHICH IS IN CONFORMITY WITH THE VIEW EXPRESSED BY SOME HIGH COU RTS. HE SUBMITTED, THEREFORE, DOUBTS ARISING AS TO INTERPRE TATION BY REASON OF CONFLICT OF DECISIONS OF THE HIGH COURTS IS RESO LVED BY LAW AND SUCH A PROVISION CANNOT BE INVALID. 6. INASMUCH AS THERE IS NO CHALLENGE TO THE VALIDITY OF THE EXPLANATION TO SECTION 2(1A) INSERTED INTO THE ACT BY THE FINANCE ACT, 1989, WE ARE AFRAID, WE CANNOT EXAMINE THE CORRECTNESS OF THE SAID SUBMISSION. WE LEAVE OPEN T HIS QUESTION TO BE RAISED FOR CONSIDERATION IN AN APPROPRIATE PROCE EDING. 7. IN THE RESULT, WE ALLOW THIS APPEAL AND SET ASIDE THE ORDER OF THE HIGH COURT. NO ORDER AS TO COSTS. THUS, THE DECISIONS WERE SET ASIDE BY THE HON'BLE S UPREME COURT AS IT IS HELD IN PARA 3 OF THE HON'BLE SUPREME COURTS ORDER (SUP RA). ACCORDINGLY, THE DECISIONS RELIED UPON BY THE LD AR WOULD NOT HELP T HE CASE OF THE ASSESSEE. THE LD AR HAS ALSO RELIED UPON THE VARIOUS DECISION S OF THIS TRIBUNAL ON THIS POINT, HOWEVER, ALL THOSE DECISIONS WERE ON DIFFERE NT SET OF FACTS AND WERE ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 18 PASSED WITHOUT CONSIDERING THE DECISION OF THE HON' BLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. S. MUTHYAM REDDY (SUPRA) . ACCORDINGLY, THOSE DECISIONS ARE NO MORE A BINDING PRECEDENT. 7.3 IT IS PERTINENT TO NOTE THAT INCENTIVE OF EXEMP TING THE AGRICULTURAL LAND FROM DEFINITION OF CAPITAL ASSET AND CONSEQUENTLY F ROM CHARGEABILITY OF INCOME TAX IS TO ENCOURAGE THE CULTIVATION OF LAND AND PRE SERVE THE CHARACTER OF AGRICULTURAL LAND TO BE USED FOR CULTIVATION AND AG RICULTURAL OPERATIONS. THEREFORE, THE SCHEME AND THE OBJECT OF PROVIDING T HESE INCENTIVES TO KEEP THE INCOME ARISING FROM AGRICULTURAL LAND EXEMPT FR OM TAX IS TO PROMOTE MORE AND MORE AGRICULTURAL OPERATIONS BY THE AGRICULTURI STS AND THE SOLE OBJECT OF THIS INCENTIVE IS NOT TO TAX THE AGRICULTURISTS WHO IS DEALING, CULTIVATING AND CARRYING OUT THE AGRICULTURAL OPERATIONS ON THE AGR ICULTURAL LAND AND THEN IN CASE IF THE SAID LAND IS SOLD THE SAME IS EXCLUDED FROM THE PURVIEW OF INCOME TAX EITHER ON CAPITAL GAIN OR AGRICULTURAL INCOME. THEREFORE, CLAIMING THE SAID EXEMPTION BY BUSINESS PERSON MERELY BECAUSE HE HAS PURCHASED THE LAND AND THEN SOLD IT WOULD BE DEFEATING THE VERY PURPOSE OF THE INCENTIVE WHICH IS ONLY FOR THE GENUINE CULTIVATOR OF THE LAND. HENCE, IN V IEW OF THE ABOVE DISCUSSION, VARIOUS DECISIONS AND FACTS AND CIRCUMSTANCES OF TH E CASE, WE HOLD THAT THE INCOME ARISING ON SALE OF THE LANDS IN QUESTION IS NOT EXEMPT FROM INCOME TAX EITHER AS A CAPITAL GAIN U/S 2(14)(III) OR AS AN AG RICULTURAL INCOME U/S 2(1A) OF THE ACT. THIS ISSUE IS DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. 8. FOLLOWING THE ABOVE DECISION, IN THE INSTANT CAS E, THE ASSESSEE COMPANY IS IN THE BUSINESS OF REAL ESTATE DEVELOPMENT INCLU DING PURCHASE AND SALE OF LAND WHERE THE SOLE PURPOSE OF PURCHASE OF THE LAND IS TO SELL THE SAME TO THIRD PARTIES OR TO CARRY OUT NON-AGRICULTURAL DEVE LOPMENT ACTIVITIES. THE AO HAS ALSO GIVEN A FINDING THAT THE ASSESSEE HAS INCU RRED EXPENDITURE ON CONVERSION CHARGES ON THE PIECES OF LAND WHICH HAVE BEEN SOLD DURING THE ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 19 YEAR WHICH SHOWS CLEARLY THE FUTURE USE OF LAND FOR NON-AGRICULTURE PURPOSES AND THE SAID FINDING REMAIN UNCONTROVERTED BEFORE U S. THE LAND IN QUESTION THUS LOSES ITS CHARACTER AS AGRICULTURE LAND AND AN Y GAIN ARISING ON SALE OF SUCH LAND CANNOT BE REGARDED AS AGRICULTURE INCOME EXEMPT UNDER SECTION 10(1) OF THE ACT. 9. FURTHER, IN THE BOOKS OF ACCOUNT, THE ASSESSEE H AS SHOWN THIS INCOME AS PROFIT ON SALE OF AGRICULTURE LAND BEING CAPITAL GAINS AND NOT AS AGRICULTURE INCOME, WE AGREE WITH THE CONTENTION OF THE LD DR T HAT THE PROVISIONS OF SECTION 115JB IS A SELF CONTAINED CODE AND THE AO C ANNOT TINKER WITH THE BOOKS OF ACCOUNTS PREPARED BY THE ASSESSEE AS PER S CHEDULE-VI OF THE COMPANIES ACT AND ONCE THIS INCOME IN QUESTION IS N OT DECLARED BY THE ASSESSEE OR TREATED IN THE BOOKS OF ACCOUNT AS AGRI CULTURAL INCOME, THEN THE SAME CANNOT BE ALLOWED AS DEDUCTION AS PER THE PROV ISIONS OF SECTION 115JB. THE BOOKS PROFITS FOR THE PURPOSE OF SECTION 115JB OF THE ACT SHALL THEREFORE, INCLUDE THE AMOUNT OF RS. 2,43,15,546/-, BEING THE AMOUNT ON SALE OF IMPUNGED PIECES OF LAND. 10. BEFORE PARTING, WE MAY ADD THAT WE HAVE GONE TH ROUGH THE VARIOUS DECISIONS CITED BY THE LD AR AT THE BAR AND THE SAM E HAVE ALREADY BEEN DEALT WITH BY THE COORDINATE BENCH IN ABOVE REFERRED DECI SION IN CASE OF SUNIL BANSAL. THE SAID DECISIONS DOESNT SUPPORT THE CASE OF THE ASSESSEE AS THE SAME HAVE BEEN RENDERED IN PECULIAR FACTS OF THE CA SE AND WITHOUT CONSIDERING THE DECISION OF THE HON'BLE SUPREME COU RT IN THE CASE OF UNION OF INDIA VS. S. MUTHYAM REDDY (SUPRA). ACCORDINGLY, TH OSE DECISIONS ARE NO MORE A BINDING PRECEDENT. ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 20 11. IN THE RESULT, WE SET ASIDE THE ORDER OF THE LD . CIT(A) AND CONFIRMED THE FINDINGS OF THE ASSESSING OFFICER. IN THE RESULT, A PPEAL OF THE REVENUE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/12/2018. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 13/12/2018 * SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- ITO, WARD-2(3), ALWAR. 2. IZR;FKHZ@ THE RESPONDENT- M/S KRISH HOME PVT. LTD., NEW DELHI . 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 390/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR. ITA NO. 390/JP/2018 ITO VS. M/S KRISH HOME PVT. LTD. 21