DCIT, CHENNAI V. N.Jayamurugan, CHENNAI

ITA 482/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9496 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 03-03-2016
• Court: TRIBUNAL
• Department Lawyers: SUNDAR RAOCIT
• Assessee Lawyers: S VIDHYAC A
• Keywords: Capital asset; Business income; Cost of acquisition
• Section: 143(3); 54B; 2(14); 153A; 234B; 54; 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , ! ' #! ' $ . %& ' () BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NOS.2356 TO 2362 /MDS./2015 ( / ASSESSMENT YEARS :2007-08 TO2013-14) MR.N.JAYAMURGAN , OLD NO.20,NEW NO.4,CHITTARANJAN ROAD, TEYNAMPET, CHENNAI 600 018. VS. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(1), CHENNAI. PAN AAIPM 4723 G ( *+ / APPELLANT ) ( ,-*+ / RESPONDENT ) ./ I.T.A.NOS.480 TO 486 /MDS./2016 ( / ASSESSMENT YEARS :2007-08 TO2013-14) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(1), CHENNAI. VS. MR.N.JAYAMURGAN , OLD NO.20,NEW NO.4,CHITTARANJAN ROAD, TEYNAMPET, CHENNAI 600 018. PAN AAIPM 4723 G ( *+ / APPELLANT ) ( ,-*+ / RESPONDENT ) ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 2 ASSESSEE BY : MR.S.VIDHYA,C.A REVENUE BY : MR.SUNDAR RAO,CIT, D.R / DATE OF HEARING : 16.03.2016 /DATE OF PRONOUNCEMENT : .04.2016 . / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE SEVEN CROSS APPEALS ARE DIRECTED AGAINST TH E COMMON OF THE LD.CIT(A)-18,CHENNAI DATED 07.12.2015 FOR ASSES SMENT YEARS 2007-08 TO 2013-14 PASSED U/S.143(3) R.W.S. 153A OF THE INCOME TAX ACT, 1961. SINCE ISSUES INVOLVED IN ALL THESE CROSS APPEALS ARE COMMON IN NATURE, THESE APPEALS ARE CLUBBED TOGETHE R, HEARD TOGETHER, DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF REAL ESTATE AND IS TH E PROMOTER, DIRECTOR AND MAJOR SHARE HOLDER OF MANY COMPANIES. THE ASSE SSEE IS THE PARTNER IN SOME OF THE FIRMS TO NAME A FEW ARE L.S. DISTRIBUTORS, LUCKY DISTRIBUTORS ETC. AND IS ALSO PROPRIETOR OF M/S.NAN DHINI PALACE. A ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 3 SEARCH U/S.132 OF THE ACT WAS CONDUCTED IN THE RESI DENTIAL AND BUSINESS PREMISES OF THE ASSESSEE ON 12.05.2012 AND M/S.NANDHINI PALACE ON 15.05.2012. THE LD. ASSESSING OFFICER IS SUED STATUTORY NOTICES AND COMPLETED THE ASSESSMENT U/S.143(3) R. W.S.153A OF HE ACT FOR ALL THE ASSESSMENT YEARS FROM 2007-08 TO 20 13-14 BY MAKING ADDITIONS ON THREE COUNTS I) AGRICULTURAL INCOME II ) DIFFERENCE IN TURNOVER & III) ON ACCOUNT OF REAL ESTATE BUSINESS. SINCE THE GROUNDS ARE COMMON IN ASSESSEES APPEAL, WE DISPOSE OFF ALL THESE APPEALS BY ADJUDICATING IN EACH GROUND RELATING TO ALL THE ASSESSMENT YEARS COLLECTIVELY. ASSESSEES APPEALS IN ITA NOS.2356 TO 2362/MDS/15 3. THE FIRST GROUND IN THESE APPEALS IS WITH REGAR D TO ASSESSMENT OF JURISDICTION U/S.153A OF THE ACT IN SPITE OF TH E FACT THAT THERE WAS NO SEIZED / INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH AS SUCH ASSESSMENT OF JURISDICTION U/S.153A OF THE ACT IS BAD IN LAW. AT THE TIME OF HEARING, LD.A.R IS NOT PRESSED THIS GROUND AND ACCORDINGLY MADE AN ENDORSEMENT TO THIS EFFECT. HE NCE, THIS GROUND IN ALL THE ASSESSEES APPEALS ARE DISMISSED AS NOT PRESSED. ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 4 4. THE NEXT GROUND IN THE ASSESSEES APPEALS IS WI TH REGARD TO THE ACTION OF THE LD.CIT(A) CONFIRMING THE ADDITION TOW ARDS AGRICULTURAL INCOME AS BY TREATING IT AS INCOME FROM OTHER SOURC ES AT 50% IN SPITE OF THE FACT ASSESSEE IS HOLDING HUGE AGRICULTURAL L AND. THE REVENUE IS ALSO IN APPEAL BEFORE US FOR ALL THE ASSESSMENT YEARS CHALLENGING THE DELETION OF ADDITION OF 50%, THOUGH THE ASSESSE E FAILED TO PROVE THE AGRICULTURAL INCOME. THE FACTS OF THE ISSUE IN ALL THESE APPEALS ARE THAT IN THESE ASSESSMENT YEARS ASSESSEE CLAIMED THE AGRICULTURAL INCOME AS FOLLOWS:- A.Y AGRICULTURAL INCOME AS FOLLOWS 2007-08 6,00,000 2008-09 6,50,000 2009-10 11,25,000 2010-11 12,69,200 2011-12 12,69,200 2012-13 5,94,200 2013-14 5,96,250 THE ASSESSEE HAS TAKEN THE PLEA BEFORE THE AO THAT ASSESSEE IS OWNING 150 ACRES OF AGRICULTURAL LAND IN AND AROUND SRIPEURAMBUDUR TALUK, CHENGALPET & KANCHEEPURAM DISTRICT WHICH WAS PURCHASED MAINLY DURING THE PERIOD 2003-04. THE AGRICULTURAL INCOME RECEIVED ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 5 FROM CULTIVATION OF CROPS SUCH AS COCONUTS, MANGOES , VEGETABLES, SEEDS AND PADDY FROM THE SAID AGRICULTURAL LAND. T HE ASSESSEE SAID THAT THE ASSESSEE HAS SOLD THE AGRICULTURAL PRODUCE IN LOCAL MARKET AND THE ASSESSEE ALSO SUBMITTED PROOF FOR OWNING TH E AGRICULTURAL LAND FOR ALL THE ASSESSMENT YEARS. ACCORDING TO TH E LD. ASSESSING OFFICER, ASSESSEE HAS NOT GIVEN SPECIFIC DETAILS LI KE, WHICH LAND WAS CULTIVATED, WHAT WAS THE CROP ON THAT LAND, WHAT WA S THE EXPENDITURE OF THAT CROP, WHAT WAS THE GROSS YIELD FROM THAT PA RTICULAR CROP, HOW MANY CROPS ARE CULTIVATED IN A YEAR, IN A PARTICULA R PIECE OF LAND AND ITS PERIOD, IF ALL THE LAND WAS CULTIVATED OR ONLY FEW LAND IS CULTIVATED, AS SUCH IT IS NOT POSSIBLE TO LD. ASSESSING OFFICER TO CONCLUDE THE INCOME DECLARED BY THE ASSESSEE AS AGRICULTURAL INC OME. THUS, HE TREATED THE AGRICULTURAL INCOME DECLARED BY THE ASS ESSEE AS NON- AGRICULTURAL INCOME. HOWEVER, ON APPEAL, THE LD.CI T(A) OBSERVED THAT SPECIFICALLY IN ASSESSMENT YEAR 2009-10 THAT T HE ASSESSEE HAS NOT KEPT ANY ACCOUNTS FOR AGRICULTURAL INCOME. HOW EVER, THERE IS NO DISPUTE THAT THE ASSESSEE OWNS 150 ACRES OF AGRICUL TURAL LAND. IT IS NOT EASY IN AGRICULTURAL SECTOR TO MAINTAIN THE BIL LS, VOUCHERS, SALES BILLS ETC. THEREFORE,, CONSIDERING THE LAND HOLDI NGS OF THE ASSESSEE ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 6 AND DETAILS OF THE ACRES OF CULTIVATED, PLACE OF CU LTIVATION, VILLAGE NAME, TYPE OF CROPS CULTIVATED AND NET INCOME EARNE D FROM EACH CROP OF CULTIVATION, FROM EACH PARCEL OF LAND. THE LD.CI T(A) WAS OF THE OPINION THAT 50% OF AGRICULTURAL INCOME DECLARED BY THE ASSESSEE TO BE TREATED AS AGRICULTURAL INCOME AND BALANCE 50% T O BE TREATED AS INCOME FROM OTHER SOURCES. AGAINST THIS FINDINGS O F LD.CIT(A), BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL BEFORE U S. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. LD.A.R SUBMITTED THAT THE OWNING OF AGRIC ULTURAL LAND WAS NOT DISPUTED BY THE REVENUE AUTHORITIES. THE ONLY REAS ON FOR DISALLOWANCE IS NON-PRODUCTION OF CERTAIN DOCUMENTS REGARDING CARRYING OUT THE AGRICULTURAL OPERATIONS AND SALE O F AGRICULTURAL PRODUCE. THE ASSESSEE HAS PLACED EVIDENCE CONTAINI NG DETAILS OF ACRES OF CULTIVATED LAND, PLACE OF CULTIVATION, VIL LAGE NAME, TYPE OF CULTIVATED AND NET INCOME EARNED ON EACH CROP OF CU LTIVATION FROM EACH PIECE OF LAND. FURTHER, IT IS ALSO STATED BY THE LD.A.R THAT THE ASSESSEE FILED RETURN OF INCOME FOR THE ASSESSMENT YEARS 2007-08 TO 2011-12 BEFORE THE DATE OF SEARCH I.E. 15.05.2012 A ND THE ASSESSEES ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 7 RETURNS WERE SAID TO BE ACCEPTED BY THE DEPARTMENT AS THERE WAS NO SCRUTINY FOR THESE ASSESSMENT YEARS. AS THE TIME L IMIT TO ISSUE OF NOTICE U/S.143(2) OF THE ACT WAS ALREADY LAPSED, TH ESE ARE ASSESSMENTS U/S.143(3) R.W.S. 153A OF THE ACT. THE RE IS NO INCRIMINATING MATERIAL FOUND DURING THE SEARCH ACTI ON TO SUGGEST THAT THE ASSESSEE IS NOT CARRIED ON ANY AGRICULTURAL OPE RATION IN THESE ASSESSMENT YEARS I.E. 2007-08 TO 2013-14. THE LD. ASSESSING OFFICER AND LD.CIT(A) IN ARBITRARY MANNER OBSERVING THAT AS SESSEES AGRICULTURAL INCOME CANNOT BE TREATED GENUINE ONE, THOUGH THERE IS EVIDENCE IN THE FORM OF OWNING AGRICULTURAL LAND OF 150 ACRES. THERE IS NO ALLEGATION THAT THESE LANDS WERE KEPT IDLE AN D NO AGRICULTURAL OPERATION WAS CARRIED ON BY THE ASSESSEE. CONSIDER ING THE VAST AREA OF AGRICULTURAL LAND OWNED BY THE ASSESSEE AND AGRICULTURAL OPERATIONS CARRIED ON BY THE ASSESSEE, IT IS NOT PO SSIBLE TO HOLD IN ALL ASSESSMENTS COMPLETED U/S.143(3) R.W.S.153A OF THE ACT, THE ASSESSEES INCOME NOT FROM AGRICULTURAL INCOME AND IT IS FROM OTHER SOURCES AS THERE IS NO EVIDENCE FOUND DURING THE SE ARCH TO SAY OTHERWISE. HENCE, IN OUR OPINION, WHEN NO INCRIMIN ATING MATERIAL FOUND AT THE TIME OF SEARCH TO SUGGEST THAT THE ASS ESSEE SHOWN NON- ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 8 AGRICULTURAL INCOME AS AGRICULTURAL INCOME AND ARB ITRARILY DISALLOWING THE SAME BY THE AO AND CONFIRMING THE CIT(A) AT 50% OF THAT DISALLOWED BY THE AO, IS NOT JUSTIFIED. ACCORDINGL Y, THE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE HAS TO BE ACCEPTED IN TOTO. THIS GROUND IN ALL THESE APPEALS OF THE ASSESSEE IS ALL OWED AND THE GROUND RAISED BY THE REVENUE IN ALL ITS APPEALS ARE DISMISSED. 6. THE NEXT GROUND IN ASSESSEES APPEAL FOR ALL TH E ASSESSMENT YEARS IS WITH REGARD TO ADDITION TOWARDS DIFFERENCE IN TURNOVER BETWEEN THE SEIZED MATERIAL AND TURNOVER DECLARED IN THE FINANCE STATEMENT, IN SPITE OF THE FACT THAT DIFFERENCE WAS PROPERLY EXPLAINED BEFORE HE AO BY WAY OF RECONCILIATION STATEMENT ALO NG WITH EVIDENCE. 7. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF SEARCH CONDUCTED IN THE PREMISE OF M/S.HOTEL NANDHINI PALA CE, THE PROPRIETARY CONCERN OF THE ASSESSEE, A GREEN COLOR FILE WRITTEN NANDHINI MONTHLY TURNOVER FILE, WAS SEIZED, WHICH C ONTAINS LOOSE SHEETS PAGE NUMBERED 1 TO 54. THE SALES TURNOVER R EPORTED IN THESE LOOSE SHEETS WERE COMPARED WITH TURNOVER REPORTED I N THE AUDITED ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 9 FINANCIAL STATEMENT SUBMITTED FOR SCRUTINY. ON COMP ARISION, THE AO FOUND THAT THE SALES TURNOVERS ARE UNDER REPORTED TO THE TUNE OF ` 50,72,828 BEING THE DIFFERENCE BETWEEN TURNOVER AS PER SEIZED MATERIALS AMOUNTING TO ` 2,89,80,082/- AND TURNOVER AS PER TALLY ACCOUNTS AMOUNTING TO ` 2,39,07,254/-. THE ASSESSEE SUBMITTED A RECONCILIATION STATEMENT ON 23.3.15 STATING THAT TH E DIFFERENCE IN TURNOVER IS DUE TO NON-EXCLUSION OF LUXURY TAX, DIS COUNT, COMPLIMENTARY FOODS, OTHER RECEIPTS ETC. HOWEVER, T HE AO REJECTED THE EXPLANATION OF THE ASSESSEE FULLY AND MADE ADDI TION TO THE TUNE OF ` 31,75,370/-. AGAINST THIS ORDER, THE ASSESSEE WENT IN APPEAL BEFORE THE LD.CIT(A). ON APPEAL, THE ASSESSEE SUBMITTED DI FFERENT SET OF RECONCILIATION STATEMENT IN THE APPELLATE PROCEEDIN GS. IT SHOWS THAT THE ASSESSEE IS TRYING TO FILL THE DIFFERENCE IN TU RNOVER REPORTED IN THE AUDITED PROFIT AND LOSS ACCOUNT AND SEIZED MATERIAL WITH SOME NUMERICAL FIGURE AS HE COULD NOT EXPLAIN THE DIFFER ENCE. THE LD.A.R SUBMITTED THAT IF THE AFORESAID ITEMS ARE REDUCED F ROM THE TURNOVER AS PER SEIZED MATERIALS, THE RESULTANT TURNOVER WILL T ALLY WITH TURNOVER AS PER AUDITED ACCOUNTS. THE LD.CIT(A) OBSERVED THAT THOUGH RECONCILIATION STATEMENT WAS SUBMITTED, THE ASSESSE E COULD NOT BRING ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 10 ANY EVIDENCE ON RECORD TO PROVE THE DIFFERENCE. TH E ASSESSEE SIMPLY STATED THAT THE MAIN DIFFERENCE IS ON ACCOUNT OF DO UBLE TIME BOOKING OF COMPLIMENTARY FOODS SUPPLIED TO CUSTOMERS. THE TURNOVER REPORT SEIZED BY THE DEPARTMENT IS MEANT FOR INCENTIVE CAL CULATION TO THE STAFF WHEREIN, COMPLIMENTARY FOOD COST INCLUDED TWI CE IN KITCHEN AND RESTAURANT REPORTS. THEREFORE, LD.CIT(A) CONFIRMED THE ADDITION MADE BY THE AO ON THIS ACCOUNT. AGAINST THIS, THE ASSES SEE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE MAIN PLEA OF THE ASSESSEE IS THAT THE TURNOVER MENTIONED IN THE SEIZED MATERIAL DOES NOT TALLY WITH THE BOOK S OF ACCOUNTS AS ON THE DATE OF SEARCH, SINCE IT REQUIRES RECONCILIATIO N. TO THIS EFFECT, HE HAS FILED STATEMENT SHOWING THE RECONCILIATION OF T URNOVER WHICH IS AS FOLLOWS:- ASSESSMENT YEAR 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 TURNOVER AS PER MATERIAL SEIZED ADD : MISTAKEN IN A.O PAGE 6.POINT NO.6.4(PAGE NO. OF LOOSE SHEET NO.48- JAN& FEB ONLY TAKEN MARCH,12 NOT TAKEN) 237,37,902 279,54,365 289,80,082 285,89,426 305,53, 905 324,25,987 (A) 237,37,902 279,54,365 289,80,082 285,89,426 305,53, 905 337,82,968 ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 11 LESS: LUXURY TAX PAID DISCOUNT BAR & ROOM-FOOD INCLUDED TWICE(IN SEIZED MATERIAL) SERVICE CHARGES /TAX(R) SALES TAX PAYABLE MISC.RECEIPTS(LIK TELEPHONE,LAUNDRY ETC. ADJUSTED WITH RELATED EXPENSES) 9,55,513 4,40,461 20,87,326 1,56,826 53,543 1,29,502 10,30,783 5,39,941 24,77,837 2,73,084 2,02,821 59,807 10,64,178 8,33,280 27,93,185 4,40,778 (58,592) 9,96,689 8,03,485 29,67,703 2,17,365 4,87,423 (394) 10,64,669 12,35,582 30,39,233 7,22,515 24,797 12,40,053 15,68,774 32,58,590 8,74,038 6,37,250 (3,67,758) (B) 38,23,170 45,84,273 50,72,829 54,72,270 60,86,795 7 2,10,947 ( A) - (B) 199,14,732 233,70,092 239,07,253 231,17,156 244,67, 110 265,72,021 AS PER BOOKS OF ACCOUNTS 199,14,732 233,70,092 239,07,253 231,17,156 244,67, 110 265,72,021 DIFFERENCE (0) (0) -- -- -- (0) THE OBSERVATION OF THE CIT(A) IS THAT THE ASSESSEE HAS NOT RECONCILED PROPERLY WHILE COMPLETING THE PROCEEDING S BEFORE HIM. THE ASSESSEE FILED ABOVE STATEMENT RECONCILING THE TURNOVER IN SEIZED MATERIAL WITH THE BOOKS OF ACCOUNT MAINTAINE D BY THE ASSESSEE. IN THE INTEREST OF JUSTICE, IT IS APPROP RIATE TO GO THROUGH IT BY THE AO, DECIDE THE ISSUE AFRESH. ACCORDINGLY, T HE ISSUE RELATING TO ADDITION TOWARDS DIFFERENCE IN TURNOVER BETWEEN SEI ZED MATERIAL AND TURNOVER WITH BOOKS OF ACCOUNTS IS REMITTED BACK TO THE FILE OF LD. ASSESSING OFFICER FOR FRESH CONSIDERATION AFTER GIV ING ADEQUATE ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 12 OPPORTUNITY OF HEARING , THE AO SHALL DECIDE THE IS SUE AFRESH. THIS GROUND IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. REVENUES APPEALS: ITA NOS.481,482 & 485/MDS./16 9. THE NEXT GROUND IN ITA NOS.481, 482 & 485/MDS./ 2016 IS WITH REGARD TO DELETION OF ADDITION MADE BY THE AO IN RE SPECT OF INCOME FROM SALE OF AGRICULTURAL LAND BY TREATING IT AS RE AL ESTATE BUSINESS. 10. WE CONSIDER THE FACTS IN APPEAL NO.482/MDS./1 6.(A.Y.2009-10) THE FACTS OF THE CASE ARE THAT IN THE COMPUTATION OF INCOME, THE ASSESSEE HAD CLAIMED EXEMPTION FROM INCOME TAX FO R THE SALE PROCEEDS RECEIVED FROM SALE OF LAND MEASURING 50.84 ACRES SITUATED AT NAVALIUR, SRLPERUMBUDUR. TALUK, KANCHEEPURAM DIS TRICT. THE ASSESSEE HAD CLAIMED THAT THE TOTAL COST OF PURCHAS E WAS ` 12,56,02,4411- AND THE TOTAL SALE CONSIDERATION WAS ` 50,49,54,375/- AND THE ASSESSEE HAD CLAIMED THE NE T PROCEEDS OF ` 37,93,51,934/- IS EXEMPTED FOR THE AY 2009-10 AS TH E ASSESSEE HAS TREATED THE SALE PROCEED AS RECEIPT FROM SALE OF AG RICULTURE LAND. IN ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 13 THIS RESPECT, THE PURCHASE AND SALE DEEDS WERE CALL ED FOR FROM THE ASSESSEE. ON VERIFICATION OF THE SALE DEEDS, IT WAS FOUND BY THE AO THAT THE LAND WAS SOLD AFTER CONVERTING THE LAND IN TO RESIDENTIAL PLOTS WITH THE APPROVAL OF DEPARTMENT OF TOWN AND COUNTRY PLANNING VIDE APPROVAL DATED 26-02-2008. IT WAS FOUND THAT THE L AND WAS PURCHASED AS AGRICULTURAL LAND AND WAS SOLD AS AGRI CULTURAL LAND AND THE LAND WAS UNDER ACTUAL CULTIVATION OF PADDY TILL , THE DATE OF SALE. THE ASSESSEE ALSO PRODUCED CHITTAL ADANGAL COPIES BEFORE THE AO. IT IS SUBMITTED THAT THE LAND WAS NEVER PUT TO THE USE FOR NON- AGRICULTURAL PURPOSE BEFORE OR AT THE TIME OF SALE. IT IS FACT THAT THE LAND WAS SOLD TO A BUYER MR. RAMESH, AND HE DEVELOP ED THE AGRICULTURE LAND INTO LAY OUT FOR HOUSING PURPOSE W HICH IS IRRELEVANT FOR THE ISSUE UNDER CONSIDERATION. AS PER ALL THE REVEN UE RECORDS THE LAND SOLD BY APPELLANT IS AGRICULTURAL LAND. THE LAND W AS SOLD TO MR. RAMESH, AGREEMENT HOLDER, THROUGH SALE AGREEMENT ON 1 ST OF DECEMBER, 2007 AND HANDED OVER THE POSSESSION OF TH E AGRICULTURAL LAND ON THE SAME DAY TO MR.RAMESH. DETAILS OF EXPEN DITURE INCURRED FOR CULTIVATION OF CROP WERE AVAILABLE WITH THE AS SESSEE AND WAS LOST IN THE MONTH OF MAY, 2008 AS EVIDENCED BY POLICE CO MPLAINT. IT IS THE ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 14 SUBMISSION OF THE APPELLANT THAT DIFFERENT PRICES W ERE PAID TO DIFFERENT PARTIES DEPENDING ON THE QUALITY OF THE AGRICULTURA L LAND AND AVAILABILITY OF IRRIGATION FACILITY. IT WAS SUBMISS ION OF THE ASSESSEE THAT SOME APPROVALS WERE TAKEN BEFORE THE SALE AGREEMENT DATED 1ST OF DECEMBER, 2007. THE APPLICATIONS FOR THOSE APPROVAL S WERE NOT DONE BY APPELLANT, IT MIGHT POSSIBLE THAT MR. RAMESH OR SOME MEDIATORS MIGHT HAVE APPLIED FOR APPROVALS EVEN BEFORE THE DA TE OF AGREEMENT WITH MR RAMESH IF THE FACT THAT THE APPROVALS WERE TAKEN BEFORE THE DATE OF SALE OF AGREEMENT WAS KNOWN, TILE APPELLANT WOULD HAVE SOLD THE LAND AT A HIGHER PRICE. THE PRICE AT WHICH THE APPELLANT HAD SOLD TO MR. RAMESH WAS ONLY AT THE PREVAILING PRICE FOR AGR ICULTURAL LAND. BUYING OTHER LANDS SIMULTANEOUSLY ALONG WITH NAVALI UR LAND CANNOT ALTER THE NATURE OF THE LAND UNDER DISCUSSION. ASSE SSMENT TO LAND REVENUE AS AGRICULTURE LAND IS A STRONG PIECE OF EV IDENCE OF ITS CHARACTER. THE ASSESSEE DID NOT TAKE ANY STEP TO C ONVERT THE AGRICULTURAL LAND TO RESIDENTIAL LAY OUTS AND HAD N OT DONE ANY AMOUNT OF WORK BEFORE THE DATE OF SALE. THE INTENTION OF T HE APPELLANT WAS TO DO AGRICULTURAL ACTIVITY. EVEN THOUGH AGRICULTURE W AS DONE FOR ONLY A BRIEF PERIOD, THE CHARACTER OF LAND WILL NOT CHANGE . THE APPELLANT SOLD ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 15 AGRICULTURAL LAND AS HE WAS IN NEED OF FUNDS TO STA RT UP BREWERIES BUSINESS ACTIVITIES WHICH WERE IN PROGRESS. FURTHER , PRICE APPRECIATION OF THE AGRICULTURAL LAND CANNOT ALTER THE CHARACTER OF AGRICULTURAL LAND. THE APPELLANT HAS NOT SOLD APPROVED LAY OUT TO M /S GANDHI NAGAR HOUSING SOCIETY LTD. THE ASSESSEE WAS NOT IN REAL E STATE BUSINESS FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION, H E DID NOT DEVELOP ANY AGRICULTURE LAND. THE ASSESSEE NEVER DID ANY R EAL ESTATE BUSINESS TILL TODAY. 10.1 ACCORDING TO A.O, THE LAND PURCHASED BY THE A SSESSEE CANNOT BE FOR AGRICULTURAL LAND SINCE HE CANNOT HOLD SO MU CH LAND WHICH AGAINST THE LAND CEILIING ACT. THE ASSESSEE IS INRE AL ESTATE BUSINESS. THE ASSESSEE HAD AGGREGATED THE LANDS BY PURCHASIN G FROM 38 PARTIES AND BROUGHT THEM UNDER SINGLE OWNERSHIP AND ALL THE LANDS WERE MADE AND BECAME A SINGLE UNIT AFTER PURCHASE/ AGGREGATION. THE ASSESSEE HAD TAKEN STEPS TO CONVERT THE AGRICUL TURAL LANDS IN TO RESIDENTIAL PLOTS SIMULTANEOUSLY WITH THE PURCHASE OF LANDS .THE ASSESSEE HAD TAKEN STEPS AND COMPLETED A SUBSTANTI AL AMOUNT OF WORK EVEN BEFORE ENTERING INTO A MEMORANDUM OF AGRE EMENT TO SELL WITH MR. R.RAMESH ON 1.12.2007. THE APPELLANT CONTI NUED HIS EFFORT ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 16 TO GET APPROVAL FOR THE LAY OUT FROM DTCP AND FINAL LY THE ASSESSEE GOT APPROVAL AND CONVEYED THE APPROVED LAY OUT LAND TO THE ULTIMATE PURCHASER M/ S GANDHI NAGAR HOUSING SOCIETY LTD. THI IS EVIDENT FROM THE FACT THAT NOT ONLY BEFORE THE DATE OF SALE OF AGREEMENT THAT IS DECEMBER, 2007 BUT EVE N AFTER,. EVERY APPLICATION WAS MADE IN THE ASSESSEES NAME AND APP ROVAL WAS ALSO GIVEN IN THE ASSESSEES NAME THE ASSESSEE HAD HELD THE LAND IN HIS POSSESSION FOR A PERIOD LESS THAN ONE YEAR FROM THE DATE OF PURCHASE TO DATE OF SALE DEED DATED 14.05.2008. IN SOME CASE S, IT IS JUST SEVEN MONTHS. THE TIME GAP BETWEEN PURCHASES OF LAND ARID MEMORANDUM OF AGREEMENT FOR SALE DATED 01.12.2007 IS LESS THA N EIGHT MONTHS. IN SOME CASES, IT IS LESS THAN TWO MONTHS. THE APPRECI ATION IN LAND VALUE IS 300% AND IN ONE CASE IT IS 653 %. WHILE EN TERING INTO SALE AGREEMENT WITH MR. RAMESH, THE APPELLANT HAD NEGOTI ATED THE PRICE ON SQUARE. FEET BASIS. THE ASSESSEE HAD THE INTENT ION TO DEVELOP THE LAND INTO RESIDENTIAL PLOTS AND THE ASSESSEE CONVE RTED THE INTENTION INTO ACTION BY GETTING NOC TO PUT THE AGRICULTURAL LAND INTO RESIDENTIAL PURPOSE FINALLY THE APPELLANT GOT THE NECESSARY APP ROVAL FROM DTCP AND SOLD APPROVED AND DEVELOPED LAY OUT. THE SALE T OOK PLACE ON ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 17 14.05.20.08,TILL THE DATE OF 14 05 2008 THE ASSESSE E CONTINUED TO BE THE ABSOLUTE OWNER OF THE PROPERTY. THE POSSESSION WAS HANDED OVER TO N S GANDHI NAGAR HOUSING SOCIETY ON 14.05.2008. THE ASSET SOLD IS A NON-AGRICULTURAL LAND AND A DEVELOPED AND APPR OVED LAY-OUT. THE CLAUSE [III) TO SUB SECTION [14] TO SECTION 2 OF AC T 1961 IS NOT APPLICABLE TO ASSESSEES CASE. THE APPELLANT IS IN REAL ESTATE BUSINESS. THE SALE AND HANDING OVER OF POSSESSION T OOK PLACE ON 14.05.2008. THE PROPERTY CONVEYED WAS APPROVED AND A DEVELOPED LAY OUT AND NOT AN AGRICULTURAL LAND. THE CONVEYED PROPERTY IS A BUSINESS ASSET AND NOT A CAPITAL ASSET. THE PROCEED S FROM SALE OF RAND AT NAVALLUR ARE INCOME FROM BUSINESS. ALL THES E CLEARLY ESTABLISH THE FACT THAT THE APPELLANT IS ENGAGED IN REAL ESTA TE BUSINESS AND THE INCOME GENERATED FROM SALE OF APPROVED AND DEVELOPE D LAY OUT AT NAVALLUR IS FROM BUSINESS ACTIVITY. HENCE THE, SALE PROCEEDS FROM, IT ON WHICH APPELLANT HAD CLAIMED EXEMPTION IS DISALLO WED AND TREATED AS INCOME EARNED UNDER SECTION 28 OF THE ACT AND AD DED TO THE INCOME OF THE ASSESSEE. IT IS SUBMITTED THAT ON CON VERSION OF AGRICULTURAL LAND INTO RESIDENTIAL PLOTS THE PROPER TY IS NO MORE AN AGRICULTURAL LAND WHAT WAS SOLD BY THE ASSESSEE WAS DEVELOPED: ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 18 RESIDENTIAL PLOTS. THE AGREEMENT ENTERED WITH MR. R AMESH IS AN INEFFECTIVE DOCUMENT THROUGH INEFFECTIVE DOCUMENT I MMOVABLE PROPERTY CANNOT BE TRANSFERRED. THE APPELLANT DID N OT PROVIDE EVIDENCE TO SHOW THAT HE DID AGRICULTURE ACTIVITY I N THESE LANDS. ON THE CONTRARY, ENOUGH EVIDENCE WAS FOUND TO PROVE TH AT THE ASSESSEE DID NOT CULTIVATE THE LAND. THE SAME WAS MENTIONED IN THE ASSESSMENT ORDER. IT IS A MISTAKE ON THE PART OF TH E ASSESSEE TO KEEP IT AS CAPITAL ASSET. HE SHOULD HAVE KEPT THE LAND P URCHASED FOR TRADING PURPOSE AS STOCK IN TRADE. FOR STOCK IN TRA DE, THE CRITERIA OF DISTANCE FROM CITY LIMIT ARE IRRELEVANT. THERE ARE TWO VAO CERTIFICATES DATED 30.09.2008 AND 06.06.2009. IT IS TO BE NOTED THAT IT IS MENTIONED THAT THE ASSESSEE IS OWNER OF THE LAND IN QUESTION ON THOSE DATES ARID THE NATURE OF LAND IS AGRICULTURAL . 10.2 IT IS SUBMITTED THAT BOTH THE FACTS ARE WRON G. BEFORE THESE DATES, THE RESIDENTIAL PLOTS WERE TRANSFERRED TO M/ S GANDHL NAGAR HOUSING SOCIETY LIMITED THROUGH SALE DEED DATED 14. 05 2008 IN THE SALE DEED. IT IS MENTIONED THAT RESIDENTIAL PLOTS W ERE DEVELOPED. IT WAS CONTENTION OF ASSESSEE THAT THE LAND WAS NOT TR ANSFERRED TO MR. R.RAMESH AND THE A.O CONTINUED TO BE THE LAND OWNER TILL ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 19 14.05.2008. MOREOVER, THE ASSESSEE RECOGNISED THE S ALE PROCEEDS ONLY ON TRANSFER OF LANDS TO M/S GANDHI NAGAR HOUSI NG SOCIETY LIMITED., IT IS A JOINT DEVELOPMENT BY THE ASSESSEE AND MR P RAMESH THE MEMORANDUM OF AGREEMENT DATED 26.03.2008SAY TH AT THE ASSESSEE TO THE NECESSARY APPROVAL FOR CONVERSION O F LAND. THE AGREEMENT DATED 0112.2007 WAS NOT HONOURED AND THE LAND WAS NOT TRANSFERRED TO MR RAMESH THROUGH THAT AGREEMENT IT IS AN INEFFECTIVE DOCUMENT IT IS TO BE NOTED THAT THE ADVANCE OF ` 10 LAC WAS MADE TO BE REPAID BY THE PURCHASER TO MR R RAMEH. 10.3 THE FIGURE OF ` 50,49,54,375/ WAS TAKEN FROM COMPUTATION OF INCOME AS SUBMITTED BY ASSESSEE AND THE SAME IS NOT IN RECOGNITION OF SALE AGREEMENT WHICH WAS NOT HONORED AND INEFFEC TIVE ENTERED BETWEEN THE ASSESSEE AND MR RARNESH IT IS REQUESTED TO ENHANCE THE RECEIPT FROM SALE OF RESIDENTIAL PLOTS FROM ` 50,49,54,375/- TO ` 57,90,14,350/- AS PER THE SALE DEED DATED 14.05.200 8. A PERSON WHO WAS NOT IN A POSITION TO PAY THE SALE CONSIDERA TION OBVIOUSLY CANNOT FULFILL HIS OBLIGATION OF THE AGREEMENT. IN SUCH A SITUATION, THE SALE AGREEMENT DATED 01.12.2007 HAS NO SANCTITY. IT IS TO BE NOTED THAT THE ASSESSEE HAD TWO CHANCES TO FILE THE CORRE CT RETURN OF INCOME ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 20 ONE UNDER SECTION 139(1) AND THE SECOND ONE IS UNDE R SECTION 153A OF ACT. ON BOTH THE OCCASIONS, THE ASSESSEE TREATED THE LAND AS TRANSFERRED IN AY 2009-10 ONLY. IT CLEARLY SHOWS T HAT THE ASSESSEE RECOGNIZED THE SALE DEED DATED 14.05.2008. THE SUBM ISSION OF THE ASSESSEE THAT THE ASSESSEE BELIEVED THAT IT WAS AN EXEMPTED INCOME, HE DOES HAVE THE LIBERTY TO DECLARE IN WHAT EVER THE YEAR HE WANTS, WHICH IS NOT CORRECT. WHAT IS NEEDED IS THE PROOF FOR CULTIVATION OF LAND BY THE ASSESSEE TO SHOW THAT HIS INTENTION WAS TO CULTIVATE THE LAND. IT IS SUBMITTED THAT THEY ARE NOT APPLICATION S AND THEY ARE ONLY NO OBJECTION CERTIFICATES TO PUT THE LAND FOR DEVEL OPMENT OF RESIDENTIAL PLOTS. IT CAN BE SIGNED ONLY BY REVENUE AUTHORITIES OF GOVERNMENT OF TAMIL NADU. THE ASSESSEE CLAIMS THAT HE SOLD THE LAND ONLY AT PREVAILING MARKET PRICE. THE PREVAILIN G MARKET PRICE WILL NOT GO UP FROM RS.12,56,02,44L TO RS57,90,14,350/- WITHIN A YEAR UNLESS THE NATURE OF LAND IS CHANGED BY VALUE ADDI TION. THE LAND WAS NOT SOLD TO MR. RAMESH BUT TO M/S GNHSL. BUYING OTH ER LANDS SIMULTANEOUSLY ALONG WITH NAVALLUR LAND SHOWS THAT THE ASSESSEE IS IN THE PROCESS OF LAND CONSOLIDATION AND ENGAGED IN SERIES OF TRANSACTION. WHAT WAS THE NATURE OF LAND; WHAT WAS THE INTENTION; IN ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 21 WHAT PERIOD WAS HELD AS AGRICULTURAL LAND IS IMPORT ANT FACTORS. THE TIMELINE IS MORE IMPORTANT. EVERYTHING CANNOT BE SW EPT UNDER A SINGLE BLANKET BY SAYING IT WAS ASSESSED TO LAND REVENUE. THE APPROVED LAYOUT ADJACENT TO THE LAND IN QUESTION IS AN IMPOR TANT FACTOR THAT ALLURED THE ASSESSEE TO JUMP INTO THE VENTURE OF N AVALLUR PROJECT. 10.4 THE ASSESSEE HAS NOT PRODUCED ANY PROOF TO SH OW THAT THE CULTIVATED THE LAND. THE NATURE OF LAND WAS CHANGED BEFORE THE DATE OF SALE BY CONVERTING IT INTO RESIDENTIAL PLOTS. TH E COMPANY SNJ DISTILLERS PVT. LTD. VAS NOT INCORPORATED ON 17.04. 2008. A BUSINESS WILL NOT BE STARTED ALL OF A SUDDEN. IT WOULD HAVE BEEN IN THE MIND OF THE ASSESSEE FOR QUITE SOME TIME. IDENTIFICATION OF LAN D FOR THE FACTORY AND OTHER PREPARATORY WORK MUST START MUCH EARLIER. HE WOULD HAVE ESTIMATED THE INVESTMENT NEEDED. IT CAN BE CONSTRUE D VERY WELL THAT THE ASSESSEE VENTURED INTO NAVALLUR PROJECT TO GENE RATE MONEY FOR INVESTMENT. THIS CLEARLY SHOWS THAT THE INTENTION O F THE ASSESSEE WAS TO TRADE IN THE LAND AND NOT TO DO CULTIVATION. IT IS NOT A MERE APPRECIATION OF LAND PRICE. IF LAND APPRECIATES WIT H REASONABLE TIME INTERVAL IT IS QUITE NORMAL. APPRECIATION WITHIN A YEAR IS BECAUSE OF ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 22 VALUE ADDITION DONE TO THE LAND WHICH NECESSARILY A BUSINESS ACTIVITY. IN THIS CASE, VALUE ADDITION WAS DONE BY LAND AGGRE GATION AND DEVELOPMENT OF RESIDENTIAL PLOTS. IT IS NEITHER ASS UMPTION NOR PURE GUESS WORK. THE STATUTORY PROVISIONS, WAS NOT GIVEN A GO BY AND THE ASSESSEE WAS NOT TAXED SOMEHOW. IT WAS TAXED AFTER ANALYZING ALL THE RELEVANT FACTS AND APPLICATION RELEVANT TO PROVISIO NS OF ACT. IT IS NOT NECESSARY THAT THE ASSESSEE NEEDS TO BE IN THE REA L ESTATE BUSINESS FOR HIS ENTIRE LIFE. IN AY 2008-09 AND 2012-13, THE ASSESSEE WAS TAXED TO REAL ESTATE BUSINESS. ANYBODY CAN START AN Y BUSINESS AT ANY POINT OF TIME. THE REASON HE WAS NOT ASSESSED TO RE AL ESTATE INCOME FOR THE AY2004-05 AND 2005-06 DO NOT HAVE ANY FORCE . EVEN SOLITARY TRANSACTIONS WERE HELD AS ADVENTURE IN THE NATURE O F TRADE BY VARIOUS JUDGMENTS. THE 50.84 ACRES OF LAND PURCHASED WAS AL ONE INVOLVED A SERIES OF MORE THAN 38 TRANSACTIONS. THE ASSESSEE H AD NOT PRODUCED ANY PROOF THAT HE CULTIVATES 150 ACRES OF LAND. MOR E SPECIFICALLY, HE DID NOT PRODUCE ANY PROOF TO SHOW THAT THE CULTIVAT ED NAVALILOR LAND. AFTER THE AMENDMENT OF SECTION 53A AND 17(1A) OF TR ANSFER OF PROPERTY ACT, IN THE YEAR 2001, THE WRITTEN CONTRAC T MUST BE REGISTERED. UNREGISTERED DOCUMENT IS AN INEFFECTIVE DOCUMENT. HE ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 23 RELIED ON THE JUDGMENT OF HON. HIGH COURT OF MADRAS (JURISDICTIONAL HIGH COURT) IN THE CASE OF K. MAN! VS M. D. JAYAVEL AND OTHERS IN S A NO 1464 AND 1465 OF 2010 DATED 10.06 2011. 10.5 THE ASSESSEE HAS STATED THAT THE TRANSFEREE M UST HAVE PERFORMED OR BE WILLING TO PERFORM HIS PART OF THE CONTRACT IS ONE OF THE CONDITIONS UNDER SECTION 53A OF IT ACT. GOING B Y THE ASSESSEES STATEMENT, MR.RAMESH MUST HAVE PURCHASED BY PAYING THE SALE CONSIDERATION DETERMINED AS PER THE SALE AGREEMENT DATED 1.12.2007, BUT HE DID NOT DO THAT. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE THE LD.CIT(A). 11.1 ON APPEAL, LD.CIT(A) OBSERVED THAT THE ASSESS EE PURCHASED THE LAND AS AGRICULTURAL LAND AS EVIDENCED BY VARIO US PURCHASE DEEDS, WHICH IS NOT IN DISPUTE AND WAS SOLD AS AGRI CULTURAL LAND AS EVIDENCED BY SALE AGREEMENT BY THE APPELLANT WITH M R. RAMESH PURCHASER AND THE LAND WAS UNDER ACTUAL CULTIVATION OF PADDY TILL THE DATE OF SALE. THE AGRICULTURAL LAND PURCHASED HELD AS FIXED ASSETS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE AGRICULTU RAL LAND SITUATED ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 24 BEYOND SPECIFIED LIMITS OF MUNICIPALITY AS EVIDENCE D BY AS THE CERTIFICATE ISSUED BY VILLAGE ADMINISTRATIVE OFFICE R, SRIPERAMBATTUR TALUK. THESE DOCUMENTS WERE PRODUCED BEFORE THE ASS ESSING OFFICER. THE ASSESSEE ALSO PRODUCED CHITTA/ADANGAL COPIES B EFORE THE ASSESSING OFFICER. IT IS SUBMISSION OF THE ASSESSEE THAT THE LAND WAS NEVER PUT TO THE USE FOR NON-AGRICULTURAL PURPOSE B EFORE OR AT THE TIME OF SALE. IT IS FACT THAT THE LAND WAS SOLD TO A BUY ER, MR RAMESH AND HANDED OVER THE POSSESSION OF THE PROPERTY ON THE D ATE OF AGREEMENT WHICH IS EVIDENCED BY THE SALE AGREEMENT DATED 01-1 2-2007 AND ALSO AFFIDAVIT FILED BEFORE THE ASSESSING OFFICER BY MR RAMESH. AS PER PAGE NO 4 OF THE SALE DEED REGISTERED ON 14 TH MAY 2008, CLEARLY MENTIONED THAT, MR.RAMESH HAD MADE DEVELOPMENT AND PROMOTED THE PROPERTY MORE FULLY DESCRIBED IN THE SCHEDULE H EREUNDER. EXTRACT OF THE SAME IS REPRODUCED HEREIN BELOW: MR. RAMESH, IN PURSUANCE TO THE AGREEMENT DATED .0 1-12- 2007 ENTERED INTO WITH THE VENDOR HEREIN, HAD MADE DEVELOPMENT, AND PROMOTED THE PROPERTY MORE FULLY DESCRIBED IN THE SCHEDULE-A HEREUNDER BY INCURRING HIS MONEY FOR PROMOTION AND DEVELOPMENT OF THE SAID PRO PERTY INTO A LAYOUT AFTER LEVELING THE LAND SURFACE, DEMA RKING INTO SEVERAL PLOTS, LAYING BOUNDARY STONES FOR EACH PLOT AREA, PROVIDING THE ROAD APPROACHES, PROVIDING CIRCLES TH E JUNCTION OF ROADS, COMMON PARK PLACE, 2 WELL AND 2 WATER TANKS WITH PIPE CONNECTIONS TO EACH PLOT AREA AND O THER ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 25 COMMON AMENITIES ETC WHICH LAYOUT IS KNOWN AND TERM ED AS GREENS GROVE JAYAM NAGAR IN THE AFORESAID LAND, A ND HAS OBTAINED LAYOUT APPROVAL FROM THE COMPETENT AUTHORI TY OF TOWN AND COUNTRY PLANNING DEPARTMENT IN THEIR APPRO VAL NO. LP/DTCP NO.25/2008 DATED 26.02.2008). THE AGREEMENT BETWEEN THE APPELLANT AND MR.RAMESH W AS INCORPORATED IN THE REGISTERED SALE DEED ALSO ON WH ICH THE LEARNED ASSESSING OFFICER RELYING ON COPY OF PAGE NO.4 OF T HE SALE DEED. IT IS ALSO TO BE NOTED THAT, THE ASSESSEE RECEIVED ` 10 LAC. AS TOKEN ADVANCE FROM MR,RAMESH BY WAY OF CHEQUE NO. 014455, DATED 1 ST DECEMBER 2007 DRAWN ON AXIS BANK, RADHA KRISHNA ROA D, MYLAPORE BRANCH, CHENNAI AND THE SAME WAS DEPOSITED IN THE A SSESSEE BANK ACCOUNT AND CREDITED ON 05.02.2008. THE ABOVE FACT, CLEARLY ESTABLISHES THAT THERE WAS AGREEMENT EXECUTED ON 01 .12.2007 BETWEEN THE APPELLANT AND MR.RAMESH FOR THE SALE OF AGRICULTURAL LAND, OR A TOTAL CONSIDERATION OF ` 50,49,54,375/-. I.E. BEFORE THE EXECUTION OF THE SALE DEED DATED 14TH MAY 2008. TH E ASSESSEE ENTERED INTO SALE DEED ON L4 MAY 2008, THE TOTAL CO NSIDERATION MENTIONED IN THE SALE DEED WAS ` 57,90,14,350/- THE ASSESSING OFFICER, WHILE COMPUTING THE ALLEGED BUSINESS INCOM E ON THIS TRANSACTION, TAKEN THE TOTAL SALE CONSIDERATION AS ` 50,49,54,375/- THE ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 26 ABOVE FACT CLEARLY SHOWS THAT, MR.RAMESH IS THE FIR ST PURCHASER OF THE PROPERTY UNDER DISCUSSION AND HE IS NOT A MEDIATOR, OR CO-DEVELOPER FOR THIS PROPERTY. ONLY FOR THE, PURPOSE OF FINANC IAL ARRANGEMENT, MR RAMESH BROUGHT M/S GANDHI NAGAR HOUSING SOCIETY LTD INTO THIS TRANSACTION AND MR. RAMESH ARRANGED THE EXECUTION O F SALE DEED BY THE APPELLANT ON 14TH MAY 2008. AS PER THE SALE A GREEMENT DATED 5 TH DECEMBER 2007 AT PAGE NO. 2, IT IS AN OBLIGATION OF THE APPELLANT TO EXECUTE THE SALE DEED RELATING TO THE SCHEDULE P ROPERTY, EITHER FAVOURING THE PURCHASER MR.RAMESH OR HIS NOMINEES A S, DECIDED BY THE PURCHASER MR.RAMESH. THE PURCHASER MR RAMESH, I N HIS AFFIDAVIT DATED 4TH MARCH 2015, BEFORE THE ASSESSING OFFICER CLEARLY MENTIONED THAT, HE HAS PURCHASED THE AGRICULTURAL LAND FOR TH E ASSESSEE, AS PER AGREEMENT DATED 1 DECEMBER 2007 AND HAD TAKEN THE P OSSESSION OF THE LAND ON THE VERY SAME DAY. HE ALSO MENTIONED TH AT, HE HAS DEVELOPED THE SAID LAND AND TO MANAGE THE FINANCIAL CONSIDERATION, HE APPROACHED M /S GANDHI NAGAR HOUSING SOCIETY LTD FOR SALE OF LAND AND AS PER THE SALE AGREEMENT THE ASSESSEE EXE CUTED THE SALE DEED IN FAVOUR OF THE M/S GANDHI NAGAR HOUSING SOC IETY LTD. THE SAID AGRICULTURAL LAND IS NOT REGARDED AS CAPITAL A SSETS BY LEGAL ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 27 PRESCRIPTION UNDER SECTION 2(14) AND ITS SALE OR TR ANSFER WOULD NOT GIVE RAISE TO TAXABLE CAPITAL GAIN. SINCE THE ENTIR E GAIN ON SALE OF AGRICULTURAL LAND IS NOT TAXABLE AS PER SECTION 2(1 4) OF THE ACT, AS AGRICULTURAL LAND IS NOT A CAPITAL ASSET, DECLARING SUCH TRANSACTION EITHER IN THE ASSESSMENT YEAR 2008-09 OR 2009-10, DO NOT MAKE ANY DIFFERENCE. MR. RAMESH DEVELOPED THE AGRICULTURE LA ND INTO LAY OUT FOR HOUSING PURPOSE WHICH IS IRRELEVANT FOR THE ISSUE U NDER CONSIDERATION. AS PER ALL THE REVENUE RECORDS, THE LAND SOLD BY AP PELLANT IS AGRICULTURAL LAND. 11.2 THE CONDITIONS LAY DOWN IN SECTION 2(14) OF I T ACT WERE FULFILLED. DETAILS OF EXPENDITURE INCURRED FOR CULTIVATION OF CROP WERE AVAILABLE WITH THE APPELLANT AND WAS LOST IN THE MONTH OF MAY , 2008 AS EVIDENCED BY POLICE COMPLAINT. IT IS THE SUBMISSIO N OF THE APPELLANT THAT DIFFERENT PRICES WERE PAID TO DIFFERENT PARTIE S DEPENDING ON THE QUALITY OF THE AGRICULTURAL LAND AND AVAILABILITY O F IRRIGATION FACILITY. THE PADDY CROP, WAS CULTIVATED IN THE, MONTH OF SEPTEMB ER, 2006 AND HARVESTED IN THE MONTH OF JANUARY, 2007 AS EVIDENCE D BY ADANGAL ISSUED IN THE NAME OF MR. VARATHAPPA NAYEKAR. ALL T HE APPROVALS ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 28 WERE OBTAINED BY MR RAMESH IN THE NAME OF THE ASSE SSEE AS PER AGREEMENT. THE LEARNED ASSESSING OFFICER POINTED OU T THAT SOME APPROVALS WERE TAKEN BEFORE THE DATE OF AGREEMENT. DURING THE COURSE OF APPEAL PROCEEDINGS ALSO, THE LEARNED ASSE SSING OFFICER, STATED THAT, THE APPELLANT HAS OBTAINED NOC EVEN BE FORE THE DATE OF AGREEMENT DATED 1 ST DECEMBER 2007. IT IS FOUND FROM THE COPY OF THE APPLICATION PLACED AT PAGE NO. A3 TO A10 OF THE ASS ESSMENT ORDER, THE APPELLANT HAS NOT SIGNED THE APPLICATION. THE A PPLICATIONS FOR THOSE APPROVALS WERE NOT DONE BY APPELLANT. IT MIGH T BE POSSIBLE THAT MR. RAMESH OR SOME MEDIATORS MIGHT HAVE APPLIED FOR APPROVALS EVEN BEFORE THE DATE OF AGREEMENT WITH THE APPELLAN T. IF THE FACT THAT THE APPROVALS WERE TAKEN BEFORE THE DATE OF AGREEME NT WAS KNOWN, THE APPELLANT WOULD HAVE SOLD THE LAND AT A MUCH HI GHER PRICE. THE PRICE AT WHICH THE APPELLANT HAD SOLD TO MR. RAMESH AS ONLY AT THE PREVAILING PRICE FOR AGRICULTURAL LAND 11.3. BUYING OTHER LANDS SIMULTANEOUSLY ALONG WITH NAVLLUR LAND CANNOT ALTER THE NATURE OF THE LAND UNDER CONSIDERA TION. ASSESSMENT TO LAND REVENUE AS AGRICULTURAL LAND IS A STRONG PI ECE OF EVIDENCE OF ITS CHARACTER. APPROVED LAYOUT ADJACENT TO SOLD LAN D DID NOT ALTER THE ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 29 CHARACTER OF APPELLANT LAND. THE APPELLANT DID NOT TAKE ANY STEP TO CONVERT THE AGRICULTURAL LAND TO RESIDENTIAL LAY OU TS AND HAD NOT DONE ANY AMOUNT OF WORK BEFORE THE DATE OF SALE. THE INT ENTION OF THE ASSESSEE WAS TO DO AGRICULTURAL ACTIVITY. EVEN THOU GH AGRICULTURE WAS DONE FOR ONLY A BRIEF PERIOD, THE CHARACTER OF LAND WILL NOT CHANGE. THE APPELLANT SOLD AGRICULTURAL LAND AS HE WAS IN NEED OF FUNDS FOR BUSINESS ACTIVITY TO START UP SNJ DSTIILERS AND SNJ BREWERIES PROJECT. THERE ARE SEVERAL JUDGMENTS IN FAVOUR OF THE ASSESS EE THAT APPRECIATION OF THE AGRICULTURAL LAND PRICE CANNOT ALTER THE CHARACTER OF AGRICULTURAL LAND. THE FINDING OF THE ASSESSING OFF ICER IS THAT, THE ASSESSEE WAS ENGAGED IN VARIOUS ACTIVITIES OF REAL ESTATE DEVELOPMENT; THEREFORE, AN INFERENCE HAS BEEN DRAWN THAT THE APPELLANT ALSO SHOULD BE DEEMED TO BE ENGAGED IN RE AL ESTATE BUSINESS THE ASSUMPTION F THE ASSESSING OFFICER IS AMOUNTS TO A PURE GUESS WORK AND CONJECTURE THE ASSESSING OFFICER HOL DING THAT, THE ASSESSEE WAS INTO ADVENTURE OF NATURE OF TRADE, THE STATUTORY PROVISIONS SHOULD BE GIVEN A GO BYE AND ASSESSEE IS TO BE SOMEHOW HELD AS ENGAGED IN THE ADVENTURE OF NATURE OF TRADE .AND TAXED ON NON-TAXABLE INCOME. IT IS FOUND THAT, SO LONG AS TH E ASSESSEE HOLDS ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 30 THE SPECIFIED AGRICULTURAL LAND IN TERMS OF SECTION 2(14) I.E, NOT BEING A CAPITAL ASSET, ITS TRANSFER WILL NEITHER ATTRACT CA PITAL GAIN TAX NOR CAN BE TREATED AS BUSINESS INCOME. 11.4 THE ASSESSEE DID NOT SELL APPROVED LAY OUT T O M/S GANDHI NAGAR HOUSING SOCIETY LTD. THE APPELLANT WAS NOT IN THE REAL ESTATE BUSINESS FOR HIS ENTIRE LIFE TIME AND HE DID NOT DE VELOP ANY LAND IN HIS LIFE TIME. HE NEVER OFFERED ANY INCOME OF THE REAL ESTATE BUSINESS FOR HIS ENTIRE LIFE. EVEN THE DEPARTMENT NOT ASSESSED A NY REAL ESTATE BUSINESS INCOME IN HIS SCRUTINY ASSESSMENT DONE UND ER SECTION 143(3) OF THE ACT, FOR THE ASSESSMENT YEAR 2004-200 5 AND 2005- 2006. THE APPELLANT OWNS MORE THAN 200 ACRES OF THE LAND IN AND AROUND SRIPERUMBATTUR, CHENGALPET AND KANCHIPURAM D ISTRICT. IN THE YEAR UNDER CONSIDERATION, HE SOLD AROUND 50 ACRES O F LAND TO MR.RAMESH FOR THE PURPOSE OF EXPANDING HIS BUSINESS ACTIVITY AND HE IS STIIL CONTINUING AGRICULTURAL OPERATION IN THE B ALANCE 150 ACRES OF LAND. THIS CLEARLY SHOWS THAT, THE INTENTION OF THE APPELLANT IS TO DO AGRICULTURAL ACTIVITY ONLY. 11.5 AS PER SECTION 2[47](V) OF THE IT ACT, ANY TR ANSACTION INVOLVING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE, TAKEN OR RETAINED ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 31 IN PART PERFORMANCE OF THE CONTRACT OF THE NATURE R EFERRED TO IN SECTION 53A OF THE TRANSFER PROPERTY ACT 1882, IS TO BE TRE ATED AS TRANSFER. THUS, TRANSFER IS COMPLETED IN THE PREVIOUS YEAR 20 07-08 RELEVANT TO THE ASSESSMENT YEAR 2008- 09. HE RELIED ON THE ORDE R OF TRIBUNAL IN THE CASE OF DR.MAYA SHENOY VS ACIT, HYDERABAD. THE FOLLOWING POSTULATES ARE SINE QUA NON FOR BASING A CLAIM ON S ECTION 53A OF THE TP ACT: (A) THERE MUST BE A CONTRACT TO TRANSFER FO R CONSIDERATION ANY IMMOVABLE PROPERTY. IN THE PRESENT CASE, THERE IS A CONTRACT TO HANDOVER POSSESSION OF IMMOVABLE PROPERTY FOR CONSI DERATION OF ` 50.50 CRORES (B) THE CONTRACT MUST BE IN WRITING, S IGNED BY THE TRANSFEROR, OR BY SOMEONE ON HIS BEHALF NONE OF THE SE FACTS IS IN DISPUTE AND THE CONDITIONS ARE FULFILLED (C) THE WR ITING MUST BE IN SUCH WORDS FROM WHICH THE TERMS NECESSARY TO CONSTRUE TH E TRANSFER CAN BE ASCERTAINED IN THE PRESENT CASE, THE SAME IS SAT ISFIED (D) THE TRANSFEREE MUST IN PART PERFORMANCE OF THE CONTRACT TO TAKE POSSESSION OF THE PROPERTY, OR OF ANY PART THEREOF . THE FACT THAT THE PURCHASER MR. RAMESH, HAD TAKEN POSSESSION AS PER T HE SALE AGREEMENT AND AFFIDAVIT FILED BY MR. RAMESH. (E) TH E TRANSFEREE MUST HAVE DONE SOME ACT, IN FURTHERANCE OF THE CONTRACT. IN THE PRESENT ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 32 CASE, THE PURCHASER, MR. RAMESH, HAS DEVELOPED THE PROPERTY AS EVIDENCE BY THE SALE DEED EXECUTED ON 14 MAY 2008 T HUS, HE HAS PERFORMED HIS PART OF THE CONTRACT. (F) THE TRANSF EREE MUST HAVE PERFORMED OR BE WILLING TO PERFORM HIS PART OF THE CONTRACT. WE HAVE ALREADY MENTIONED AT (E) ABOVE, THAT THE PURCHASER MR. RAMESH HAD ALREADY PERFORMED HIS PART OF THE AGREEMENT. THUS, IF THESE PRINCIPLES ARE APPLIED TO THE PRESENT CASE, POSSESSION OF THE LAND BEING ONE OF THE INTERESTS IN PROPERTY HAS BEEN TRANSFERRED TO T HE PURCHASER BY HANDING OVER THE POSSESSION OF THE LAND, THE TRANS FER IS OVER AS PER THE INCOME TAX ACT. ON THE DATE OF TRANSFER, THE A SSESSEE SOLD ONLY THE AGRICULTURAL LAND AND NOTHING ELSE. THE SURPLUS ARISING OUT OF THE SALE OF THE AGRICULTURAL LAND IS NOT TAXABLE EITHER UNDER SECTION 45 OF THE ACT OR UNDER SECTION 28 OF THE ACT. 11.6 EVEN THOUGH THE ASSESSING OFFICER MENTIONED IN HIS LETTER DATED 13.11.2005 THAT HE HAD RECEIVED THE AFFIDAVIT OF MR.RAMESH, ON 24TH MARCH 2015, BUT FOR THE REASONS KNOWN TO HIM, HE DID NOT DISCUSS THE AFFIDAVIT IN HIS ASSESSMENT ORDER DATED 30TH MARCH, 2015. THIS, AFFIDAVIT IS A STRONG PIECE OF EVIDENCE TO PR OVE THAT THE APPELLANT SOLD THE AGRICULTURAL LAND TO MR. RAMESH. MR. RAMES H IS IN THE ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 33 BUSINESS OF REAL ESTATE AND HE DEVELOPED SEVERAL LA YOUTS IN AND AROUND NAVALLUR, NOT ONLY IN THE ASSESSEES AGRICU LTURE LAND BUT ALSO ADJACENT TO THE APPELLANTS LAND. 11.7 LD.CIT(A) OBSERVED THAT THERE IS NO DISPUTE T HAT THE APPELLANT ACQUIRED THE AGRICULTURE LAND OF 50.84 ACRES AS EVI DENCED BY PURCHASE DEEDS AS PER ALL REVENUE RECORDS, NAMELY, CHITTA, AGRICULTURAL LAND TO MR. RAMESH. MR. RAMESH IS IN T HE BUSINESS OF REAL ESTATE AND HE DEVELOPED SEVERAL LAYOUTS IN AND AROUND NAVALLUR, NOT, ONLY IN THE APPELLANT AGRICULTURE LAND BUT ALS O ADJACENT TO THE ASSESSEES LAND. AS PER ADANGAL AND CERTIFICATE FRO M VILLAGE ADMINISTRATIVE OFFICER, SRIPERUMBUDUR THAT THE PROP ERTY SOLD BY THE ASSESSEE IS AGRICULTURE LAND AND THE SAME IS SITUA TED BEYOND LIMITS PRESCRIBED UNDER SECTION 2[14] OF THE ACT. HE FOUND THAT, AS PER THE SALE AGREEMENT DATED 01-12-2007, THE ASSESSEE SOLD AGRICULTURE LAND TO MR. RAMESH. IT IS THE SUBMISSION OF THE ASSESSIN G OFFICER IS THAT THE AMOUNT RECEIVED ON SALE OF THIS AGRICULTURAL PROPER TY IS NOTHING BUT ON ACCOUNT OF ADVENTURE IN THE NATURE OF TRADE AND THE SAME WAS ASSESSED AS BUSINESS. IT IS FOUND THAT THE ASSESSEE HELD THE LAND ALWAYS AS INVESTMENT AND NOT AT ALL CONVERTED INT O STOCK-IN-TRADE ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 34 THE CHARACTER OF THE LAND IN THE HANDS OF THE ASSES SEE HAS NOT CHANGED. THERE IS NO COGENT MATERIAL ON RECORD TO S HOW THAT THE APPELLANT CARRIED ON ACTIVITIES OF BUYING AND SELLI NG OF LAND IN A SYSTEMATIC MANNER SO AS TO JUSTIFY THE ACTION OF TH E ASSESSING OFFICER IN TREATING THE ACTIVITIES OF THE ASSESSEE AS ADVE NTURE IN THE NATURE OF TRADE. THE LAND WAS SOLD BY THE ASSESSEE AS IS WHE RE-IS CONDITION AND NOT BY MAKING PLOTS. THE SALE AGREEMENT ALONG W ITH THE DELIVERY OF POSSESSION OF THE FLAT ENTERED BETWEEN THE ASSES SEE AND MR. RARNESH IS ONLY THE POINT OF SALE. IN THE CASE UNDE R CONSIDERATION, THE ASSESSEE HAD ABUNDANTLY PROVED THAT THE SUBJECT LAN D SOLD BY HIM WAS AGRICULTURAL LAND AT THE POINT OF SALE, NOT ONL Y AS CLASSIFIED IN THE REVENUE RECORDS, BUT ALSO IT WAS SUBJECTED TO THE P AYMENT OF LAND REVENUE AND THAT IT WAS ACTUALLY AND ORDINARILY USE D FOR AGRICULTURAL PURPOSE AT THE RELEVANT POINT OF TIME. HE OBSERVED THAT IN THE CASE OF CIT VS. MANILAL SOMNATH REPORTED IN 106 ITR 917, WH EREIN THE HONBLE GUJARAT HIGH COURT OBSERVED THAT THE POTENT IAL NON- AGRICULTURAL VALUE OF THE LAND FOR WHICH A PURCHASE R MAY BE PREPARED TO PAY A LARGE PRICE WOULD NOT DETRACT FROM ITS CHA RACTER AS AGRICULTURAL LAND ON THE RELEVANT DATE OF SALE. IN THE CASE OF GOPAL C ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 35 SIARMA VS CIT [209 ITR 946] IN WHICH, THE CASE OF S MT SARIFABIBI MOHAMECI IBRAHIM [204 ITR 631] WAS REFERRED TO AND RELIED, AMONGST OTHER CASES. IN THIS CASE, THE DIVISION BENCH OF TI E BOMBAY HIGH COURT HAS STATED THAT THE PROFIT MOTIVE OF THE APPE LLANT SELLING THE LAND WITHOUT ANYTHING MORE BY ITSELF CAN NEVER BE DECISI VE FOR DETERMINATION OF THE ISSUE AS TO WHETHER THE TRANSA CTION AMOUNTED TO AN ADVENTURE IN THE NATURE OF TRADE. IN OTHER WORDS , THE PRICE PAID IS NOT DECISIVE TO SAY WHETHER THE LAND IS AGRICULTURA L OR NOT. 11.8 IN THE PRESENT CASE, THE LAND IN QUESTION WAS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL LAND, ACTUAL CULTIV ATION HAS BEEN CARRIED ON THIS LAND AS EVIDENCED BY CHITTA/ADANGAL AND INCOME WAS DECLARED FROM THIS LAND IN THE RETURN OF INCOME FIL ED BY THE APPELLANT FOR THE ASSESSMENT YEAR AS AGRICULTURAL INCOME. IN THE REVENUE RECORDS, THE LAND IS CLASSIFIED AS AGRICULTURAL LAN D AND HAS NOT BEEN CHANGED FROM AGRICULTURAL LAND TO NON-AGRICULTURAL LAND AT THE RELEVANT POINT OF TIME WHEN THE LAND WAS SOLD BY THE ASSESSE E. IT IS ALSO NOT IN DISPUTE THAT THERE WAS NO ACTIVITY UNDERTAKEN BY TH E ASSESSEE OF DEVELOPING THE LAND BY PLOTTING AND PROVIDING ROADS AND OTHER ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 36 FACILITIES AND THERE WAS NO INTENTION ALSO ON THE P ART OF THE APPELLANT TO PUT THE SAME FOR NON-AGRICULTURAL PURPOSES AT TI ME OF THEIR OWNERSHIP THAT LAND. IN VIEW OF THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF GOPAL C SHARMA (SUPRA), IT IS ALSO C LEAR THAT THE PROFIT MOTIVE OF THE ASSESSEE IN SELLING THE LAND WITHOUT ANYTHING MORE BY ITSELF CAN NEVER BE DECISIVE TO SAY THAT THE ASSESS EE USED THE LAND FOR NON-AGRICULTURAL PURPOSES, HONBLE SUPREME COURT IN THE CASE OF N.SRINIVASA RAO V SPECIAL COURT REPORTED IN 4 SCC 2 14, WHERE IT WAS OBSERVED THAT THE FACT THAT AGRICULTURAL LAND IN QU ESTION IS INCLUDED IN URBAN AREA WITHOUT MORE, HELD NOT ENOUGH TO CONCLUD E THAT THE USER OF THE SAME HAD BEEN ALTERED WITH PASSAGE OF TIME. THUS, THE FACT THAT THE LAND IN QUESTION IN THE INSTANT CASE IS BO UGHT BY DEVELOPER CANNOT BE A DETERMINING FACTOR BY ITSELF TO SAY THA T THE LAND WAS CONVERTED INTO USE FOR NON-AGRICULTURAL PURPOSES. FURTHER THE WORD CAPITAL ASSET IS DEFINED IN SECTION 2(14) TO MEAN PROPERTY OF ANY KIND HELD BY AN ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION, BUT DOES NOT INCLUDE (I) AGRICULTURAL LAND IN INDIA, NOT BEING LAND SITU ATE ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 37 (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURIS DICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNI CIPAL CORPORATION, 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 ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED B EFORE THE FIRST DAY OF THE PREVIOUS YEAR; OR (B) IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MOR E THAN EIGHT KILOMETRES, FROM THE LOCAL LIMITS OF ANY MUNICIPALI TY OR CANTONMENT BOARD REFERRED TO IN ITEM (A), AS THE CENTRAL GOVER NMENT MAY, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANIZATIO N OF THAT AIEA AND OTHER RELEVANT CONSIDERATIONS, SPECIFY IN THIS BEHA LF BY NOTIFICATION IN THE OFFICIAL GAZETTE, IT IS VERY CLEAR FROM THE ABOVE THAT THE GAIN ON SA LE OF AN AGRICULTURAL LAND WOULD BE EXIGIBLE TO TAX ONLY WHEN THE LAND TR ANSFERRED IS LOCATED WITHIN THE JURISDICTION OF A MUNICIPALITY. FROM THE FACTS AND CIRCUMSTANCES OF THE CASE, AS NARRATED BEFORE HIM, IT IS IMPORTANT TO NOTE THAT WHAT THE INTENTION OF THE ASSESSEE WAS AT THE TIME OF ACQUIRING THE LAND. THOUGH INTENTION SUBSEQUENTLY F ORMED MAY BE ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 38 TAKEN INTO ACCOUNT, IT IS THE INTENTION AT THE INCE PTION IS CRUCIAL. ONE OF THE ESSENTIAL ELEMENTS IN AN ADVENTURE OF THE TRADE IS THE INTENTION TO TRADE THAT INTENTION MUST BE PRESENT AT THE TIME OF PURCHASE. THE MERE CIRCUMSTANCES THAT A PROPERTY IS PURCHASED IN A HOPE THAT WHEN SOLD ALTER ON IT WOULD LEAVE A MARGIN OF PROFIT, WO ULD NOT BE SUFFICIENT TO SHOW, AN INTENTION TO TRADE AT THE INCEPTION. IN THE PRESENT CASE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , IT CANNOT BE CONSIDERED AS AN ADVENTURE IN THE NATURE OF TRADE. THE INTENTION OF THE APPELLANT FROM THE INCEPTION WAS TO CARRY ON AG RICULTURAL OPERATIONS. IT WAS DUE TO CERTAIN COMPELLING CIRCUM STANCES CAME INTO PICTURE AT A LATER STAGES, THE ASSESSEE SOLD THE LA ND. MERELY BECAUSE OF THE FACT THAT THE LAND WAS SOLD IN A SHORT PERIO D OF HOLDING, IT CANNOT BE HELD THAT INCOME ARISING FROM THE SALE OF LAND A S TAXABLE AS PROFIT ARISING FROM THE ADVENTURE IN THE NATURE OF TRADE. THE PERIOD OF HOLDING SHOULD NOT SUGGEST THAT THE ACTIVITY WAS AN ADVENTURE IN THE NATURE OF TRADE. FURTHER, WHEN THE LAND WHICH DOES NOT FALL UNDER THE PROVISIONS OF SECTION 2(14)(III) OF THE IT ACT AND AN ASSESSEE WHO IS ENGAGED IN AGRICULTURAL OPERATIONS IN SUCH AGRICULT URAL LAND AND ALSO BEING SPECIFIED AS AGRICULTURAL LAND IN REVENUE REC ORDS, THE LAND IS ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 39 NOT SUBJECTED TO ANY CONVERSION AS NON-AGRICULTURAL LAND BY THE ASSESSEE, TRANSFERS SUCH AGRICULTURAL LAND, AS IS W HERE IS BASIS, IN SUCH A CIRCUMSTANCES, SUCH A TRANSFER IN THE INSTAN T CASE CANNOT BE CONSIDERED AS A TRANSFER OF CAPITAL ASSET, OR THE T RANSACTION RELATING TO SALE OF LAND WAS NOT AN ADVENTURE IN THE NATURE OF TRADE, SO AS TO TAX THE INCOME ARISING OUT OF THIS TRANSACTION AS BUSIN ESS INCOME. 11.9 IT WAS FOUND THAT ANY IMMOVABLE PROPERTY CAN BE SOLD TO ANOTHER PARTY BY DELIVERY OF POSSESSION O PROPERTY ALONG WITH THE AGREEMENT. IT EVIDENT FROM DEFINITION OF SALE AS PER SECTION 54 OF THE TRANSFER OF PROPERTY ACT THAT IN THE CASE OF TANGIB LE IMMOVABLE PROPERTY, SUCH TRANSFER MAY BE MADE EITHER BY A REG ISTERED INSTRUMENT OR BY DELIVERY OF THE PROPERTY. DELIVERY OF TANGIBLE IMMOVABLE PROPERTY TAKES PLACE WHEN THE SELLER PLAC ES THE BUYER IN POSSESSION OF THE PROPERTY. IN THE CASE UNDER CONSI DERATION, THE APPELLANT ENTERED INTO AGREEMENT WITH DELIVERY OF T HE POSSESSION OF THE AGRICULTURE LAND WITH MR.RAMESH ON 1 ST DAY OF DECEMBER, 2007 AND HENCE, THE SALE OF THE LAND TOOK PLACE ON 01-12 -2007 AND IT HAS HAPPENED FOR THE PROMISE MADE AND PART PAYMENT WAS MADE AS PER ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 40 AGREEMENT DATED 01-12-2007. ALL THE SUBSEQUENT AGRE EMENTS AND REGISTRATION IS IRRELEVANT TO THE ISSUE UNDER CONSI DERATION. ONCE THE DELIVERY OF THE POSSESSION OF THE AGRICULTURE LAND WAS GIVEN, THE APPELLANT IS NO MORE THE OWNER OF THE PROPERTY. SIN CE MR. RAMESH COULD NOT ABLE TO FULFILL ALL THE OBLIGATIONS AND PERFORMANCE TO THE ASSESSEE, THE ASSESSEE ENTERED INTO TRIPARTITE AGR EEMENT. THE AGREEMENT FOR SALE ENTERED ON 1.12.2007 IS THE FINA L ONE. AS PER THE CERTIFICATE ISSUED BY THE REVENUE AUTHORITIES, THE LAND FULFILLS THE CONDITIONS LAID DOWN U/S. 2(14)(III) OF THE ACT. IT IS PERTINENT TO NOTE THAT THE TESTS LISTED IN THIS CLAUSE ARE APPLICABLE FOR AGRICULTURAL LANDS WHICH ARE FULFILLED. ONCE THE ASSESSEE HAS QUALIFIE D UNDER SECTION 2[14) OF THE ACT, AS PER REVENUE RECORDS, AS AGRIC ULTURE LANDS, THE AO IS NOT RIGHT IN TREATING THE GAIN AS BUSINESS IN COME. THE SUBMISSION OF THE ASSESSEE IS THAT HE PURCHASED THE LAND AS AGRICULTURAL LAND AND SOLD AS AGRICULTURAL LAND AND THE LAND WAS UNDER ACTUAL CULTIVATION OF PADDY TILL THE DATE OF SALE. THE ASSESSEE ALSO PRODUCED COPY OF CHITTA ADANGAL COPIES BEFORE THE A O AT THE TIME OF ASSESSMENT. HENCE, THE LAND WAS NEVER PUT TO THE US E FOR NON- AGRICULTURAL PURPOSE BEFORE OR AT THE TIME OF SALE. AS PER ALL THE ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 41 REVENUE RECORDS THE LAND SOLD BY ASSESSEE IS AGRICU LTURAL LAND. THE CONDITIONS LAY DOWN IN SECTION 2(14) OF IT ACT WERE FULFILLED. THE LAND WAS SOLD TO MR. RAMESH, AGREEMENT HOLDER, THROUGH S ALE AGREEMENT ON 15T OF DECEMBER, 2007 AND HANDED OVER THE POSSES SION OF THE AGRICULTURAL LAND ON THE SAME DAY TO MR. RAMESH. AS PER CHITTA/ADANGAL, THE PADDY CROP. WAS CULTIVATED IN T HE MONTH OF SEPTEMBER, 2006 AND HARVESTED IN THE MONTH OF JANUA RY, 2007 AS EVIDENCED BY ADANGAL ISSUED IN THE NAME OF MR VARAT HAPPA NAYEKAR. AS PER THE SALE AGREEMENT ALL THE APPROVALS IS TO B E OBTAINED BY MR. RAMESH. THE ASSESSEE IS ONLY SIGNATORY TO THE APPL ICATIONS FILED FOR LAYOUT PERMISSION. AS PER THE SALE AGREEMENT, THE B UYER OF THE LAND IS MR. RAMESH. AS PER THE SALE DEED DATED 14.05.2008, MR. RAMESH HAD DEVELOPED THE LAND AND HE ULTIMATELY SOLD THE L AND TO GANDHI NAGAR HOUSING SOCIETY. IF THE APPELLANT IS IN THE B USINESS OF THE REAL ESTATE, THERE IS NO NEED TO SELL THE LAND TO MR. RA MESH. THE APPELLANT WOULD HAVE DEVELOPED THE AGRICULTURE AND INTO RESID ENTIAL LAYOUT ON HIS, OWN. THE INTENSION OF THE APPELLANT IS NOT TO DO REAL ESTATE BUSINESS AS HE SOLD THE AGRICULTURE LAND TO MR. RAM ESH AS AGRICULTURE LAND ONLY. BUYING OTHER LANDS SIMULTANEOUSLY ALONG WITH NAALLUR LAND ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 42 CANNOT ALTER THE NATURE OF THE LAND UNDER DISCUSSI ON. ASSESSMERT TO LAND REVENUE AS AGRICULTURAL LAND IS A STRONG PIECE OF EVIDENCE OF ITS CHARACTER. APPROVED LAYOUT ADJACENT TO SOLD LAND DI D NOT ALTER THE CHARACTER OF ASSESSEES LAND. THE PRICE FIXATION O N SQ. FT. BASIS IS MAY BE TO FACILITATE THE PAYMENT TO THE ASSESSEE. T HE INTENTION OF THE APPELLANT WAS TO DO AGRICULTURAL ACTIVITY. EVEN THO UGH AGRICULTURE WAS DONE FOR ONLY A BRIEF PERIOD, THE CHARACTER OF LAND WILL NOT CHANGE. HENCE, THE ASSESSEE SOLD AGRICULTURAL LAND AS HE WA S IN NEED OF FUNDS FOR BUSINESS ACTIVITY. THERE ARE SEVERAL JUDG MENTS IN FAVOUR OF THE ASSESSEE THAT APPRECIATION OF PRICE OF THE AGRI CULTURAL LAND CANNOT ALTER THE CHARACTER OF AGRICULTURAL LAND. FOR THE A .Y 2003-04 AND 2004- 05, THE ASSESSMENTS WERE COMPLETED UNDER SECTION 14 3(3) OF THE ACT ON 31.10.2006 AND 12.12.2007 RESPECTIVELY. AS PER T HESE ASSESSMENT ORDERS, THE ASSESSEE WAS IN THE BUSINESS OF RUNNING BOARDING AND LODGING AND HOTEL BUSINESS AND NO REAL ESTATE BUSINESS INCOME WAS ASSESSED TO TAX IN THESE ASSESSMENT YEAR S. HE NEVER OFFERED ANY INCOME FROM REAL ESTATE BUSINESS FOR TH E ASSESSMENT YEARS UNDER CONSIDERATION WHICH CLEARLY PROVES THAT THE ASSESSEE WAS NOT IN REAL ESTATE BUSINESS. THE CASE LAWS RELI ED ON BY THE AO IS ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 43 DISTINGUISHABLE ON FACTS. ALL THE ABOVE FACTORS CLE ARLY ESTABLISHES THAT THE FACT THAT THE ASSESSEE IS NOT ENGAGED IN REAL ESTATE BUSINESS AND THE INCOME ARISING OUT OF THE SALE OF AGRICULTURE L AND CANNOT BE TREATED AS INCOME EARNED UNDER SECTION 28 OF THE AC T. THEREFORE, THE GAIN IS EXEMPTED FROM CAPITA GAIN TAX. ACCORDINGLY, THE ASSESSEE SUCCEEDS IN THIS GROUND OF APPEAL. HENCE, THE GROUN DS RAISED IN THIS REGARD ARE ALLOWED BEFORE CIT(A). AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 12. LD.D.R SUBMITTED THAT THE SALE OF LAND BY ASSE SSEE IS TO BE CONSIDERED AS REAL ESTATE BUSINESS. SINCE THE ASSE SSEE HAS GOT APPROVAL FOR LAYOUT AND ALSO ASSESSEE CONVERTED TH E LAYOUT, ONCE IT IS APPROVED FOR DEVELOPING THE LAND, THEN IT CANNOT BE CONSIDERED AS AGRICULTURAL LAND AND IT IS TO BE CONSIDERED AS BUS INESS ASSET OF THE ASSESSEE AND NOT REMAINED AS A CAPITAL ASSET. FURT HER, HE SUBMITTED THAT ASSESSEE ENTERED INTO MOU WITH M/S.SARAVANA FI NANCE LTD., ON 18.05.2006 WHEREIN THE ASSESSEE REQUESTED FOR PURCH ASE OF 200 ACRES OF AGRICULTURAL LAND. AS TAMILNADU LAND REFOR MS (FIXING OF CEILING OF LAND) ACT, 1961, A PERSON CANNOT HAVE AN AGRICULTURAL LAND ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 44 MORE THAN 15 ACRES, SINCE THE ASSESSEE HAS CONSISTE NTLY BROUGHT LAND FROM 38 PARTIES AND POOLED IT INTO ONE PIECE O F LANCE BY AGGREGATION AND NOT FOR THE PURPOSE OF AGRICULTURAL ACTIVITIES AND CONVERTED THE AGRICULTURAL LAND INTO RESIDENTIAL PL OT WITH THE SOLE INTENTION OF REAL ESTATE BUSINESS. THE ASSESSEE GO T APPROVAL FOR THE LAYOUT FOR DTCP AND SOLD THE LAND TO M/S.GANHI NAGA R HOUSING SOCIETY LTD., FOR THE PURPOSE OF RESIDENTIAL LAYOUT AND SALE WAS MADE ON 14.05.2008, WHICH IS LESS THAN ONE YEAR FROM THE DATE OF PURCHASE OF THE LAND. HOWEVER, HE SUBMITTED THAT:- 1 . THE TIME GAP BETWEEN PURCHASES OF LAND AND MEMORANDUM OF AGREEMENT FOR SALE DATED 1.12.2007 IS LESS THAN EIGHT MONTHS. IN SOME CASES IT IS LESS THAN TW O MONTHS AND IN ONE CASE IT IS JUST ONE DAY. 2. THE APPRECIATION IN LAND VALUE IS 300 % AND IN O NE CASE IT IS 653 %. WHILE ENTERING INTO SALE AGREEMENT WITH MR. RAMESH THE ASSESSEE HAD NEGOTIATED THE PRICE ON SQUARE FEE T BASIS. 3. THE ASSESSEE HAD THE INTENTION TO DEVELOP THE LA ND INTO RESIDENTIAL PLOTS AND THE ASSESSEE CONVERTED THE IN TENTION INTO ACTION BY GETTING NOC TO PUT THE AGRICULTURAL LAND TO RESIDENTIAL ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 45 PURPOSE PERIODICALLY EVEN BEFORE FINDING A MEDIATOR TO SELL AND A BUYER TO BUY. FINALLY THE ASSESSEE GOT THE NECESS ARY APPROVAL FROM DTCP AND SOLD APPROVED AND DEVELOPED LAY OUT. 4.THE ASSESSEE ULTIMATELY SOLD THE LAND TO M/S GAND HI NAGAR HOUSING SOCIETY LTD ON SQUARE FEET BASIS 5.THE AGREEMENT FOR SALE ENTERED ON 1.12.2008 DID N OT MATERILAISE AND IT WAS NOT FINAL ONE. THE SALE TOOK PLACE ON 14.05.2008. 6.TILL THE DATE OF 14.05.2008 THE ASSESSEE CONTINUE D TO BE THE ABSOLUTE OWNER OF THE PROPERTY 7.THE POSSESSION WAS HANDED OVER TO M/S GANDHI NAGA R HOUSING SOCIETY ON 14.05.2008 8.THE ASSESSEE SOLD AND HANDED OVER THE POSSESSION OF THE APPROVED AND DEVELOPED LAY OUT TO M/S GANDHI NAGAR HOUSING SOCIETY LTD. 9.THE ASSESSEE HAD PUMPED IN LOT OF ENERGY, TIME, M ONEY AND MANPOWER IN THIS PROCESS 10,THE ASSESSEE HAD MOBILISED MONEY FOR INDUSTRIAL ACTIVITY THROUGH THIS PROCESS AND INVESTED IN ASSESSEES BUS INESS. ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 46 11.THE ASSESSEE HAD BORNE THE RISK OF DEVELOPMENT A ND MARKETING ALONG WITH THE DEVELOPER AS EVIDENT FROM VARIOUS CLAUSES OF TRIPARTITE MEMORANDUM OF AGREEMENT DATED 26.03.2007 AND SALE DEED DATED 14.05.2008. 12.THE DEVELOPMENT IS NOTHING BUT A JOINT DEVELOPME NT 13.THE ASSET SOLD IS A NON-AGRICULTURAL LAND AND A DEVELOPED AND APPROVED LAY OUT. 14 .THE CLAUSE (III) TO SUB SECTION 14 TO SECTION 2 OF IT ACT 1961 IS NOT APPLICABLE TO ASSESSEES CASE. 12.1 THE LD.A.R SUBMITTED THAT THE ASSESSEE PURC HASED THE LAND AS AGRICULTURAL LAND AS EVIDENCED BY VARIOUS P URCHASE DEEDS, WHICH IS NOT IN DISPUTE AND WAS SOLD AS AGRICULTURA L LAND AS EVIDENCED BY SALE AGREEMENT BY THE ASSESSEE WITH MR.RAMESH PU RCHASER AND THE LAND WAS UNDER ACTUAL CULTIVATION OF PADDY TILL THE DATE OF SALE. THE AGRICULTURAL LAND PURCHASED HELD AS FIXED ASSETS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE AGRICULTURAL LAND SITU ATED BEYOND ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 47 SPECIFIED LIMITS OF MUNICIPALITY AS EVIDENCED BY AS THE CERTIFICATE ISSUED BY VILLAGE ADMINISTRATIVE DOCUMENTS WERE PRO DUCED BEFORE THE ASSESSING OFFICER.. THE ASSESSEE ALSO PRODUCED CHITTA/ADANGAL COPIES BEFORE THE ASSESSING OFFICER. IT IS SUBMISSI ON OF THE ASSESSEE THAT THE LAND WAS NEVER PUT TO THE USE FOR NON-AGRI CULTURAL PURPOSE BEFORE OR AT THE TIME OF SALE. IT IS FACT THAT THE LAND WAS SOLD TO A BUYER, MR. RAMESH AND HANDED OVER THE POSSESSION OF THE PROPERTY ON THE DATE OF AGREEMENT WHICH IS EVIDENCED BY THE SALE AGREEMENT DATED 01-12-2007 AND ALSO AFFIDAVIT FILED BEFORE TH E ASSESSING OFFICER BY MR. RAMESH. 12.2 AS PER PAGE NO. 4 OF THE SALE DEED REGISTERED ON 14TH MAY 2008, CLEARLY MENTIONED THAT, MR.RAMESH HAD MADE DE VELOPMENT AND PROMOTED THE PROPERTY MORE FULLY DESCRIBED IN T HE SCHEDULE HEREUNDER. EXTRACT OF THE SAME IS REPRODUCED HEREIN BELOW: MR. RAMESH, IN PURSUANCE TO THE AGREEMENT DATED 01- 12-2007 ENTERED INTO WITH THE VENDOR HEREIN, HAD MADE DEVEL OPMENT AND PROMOTED THE PROPERTY MORE FULLY DESCRIBED IN THE S CHEDULE-A HEREUNDER BY INCURRING HIS MONEY FOR PROMOTION AND DEVELOPMENT OF THE SAID PROPERLY. INTO A LAYOUT AFT ER LEVELING THE LAND SURFACE, DEMARKING INTO SEVERAL PLOTS, LAYING BOUNDARY STONES FOR EACH PLOT AREA, PROVIDING TAR ROAD APPRO ACHES, PROVIDING CIRCLES ON THE JUNCTION OF ROADS, COMMON PARK PLACE, ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 48 2 WELL AND 2 WATER TANKS WITH PIPE CONNECTIONS TO E ACH PLOT AREA AND OTHER COMMON AMENITIES ETC WHICH LAYOUT IS KNOWN AND TERMED AS GREEN GROVE JAYAM NAGAR IN THE AFOR ESAID LAND, AND HAS OBTAINED LAYOUT APPROVAL FROM THE COM PETENT AUTHORITY OF TOWN AND COUNTRY PLANNING DEPARTMENT I N THEIR APPROVAL NO. LP/DTCP NO.25/2008 DATED 26-02-2008) THE AGREEMENT BETWEEN THE ASSESSEE AND MR.RAMESH WA S INCORPORATED IN THE REGISTERED SALE DEED ALSO ON WH ICH THE LEARNED ASSESSING OFFICER RELYING ON. COPY OF PAGE NO.4 OF THE SALE DEED IS ENCLOSED HEREWITH. IT IS ALSO TO BE NOTED THAT, THE ASSESSEE RECEIVED RS.10 LAC AS TOKEN ADVANCE FROM MR.RAMESH BY WAY OF CHEQUE NO. 014455, DATED 1ST DECEMBER 2007 DRAWN ON AXIS BANK, RADHA KRISHNA ROAD, MYLAPORE BRANCH, CHENNAI AND THE SAME WAS DEPOSITED IN THE ASSESSEE BANK ACCOUNT AND CREDITED ON 05.02.2008. THE ABOVE FACT, CLEARLY ESTABLISHES THAT THERE WAS AGREEMENT EXECUTED ON 01.12.2007 BETWEEN THE ASSESSEE AND MR. RAMESH FOR THE SALE OF AGRICULTURAL LAND, FOR A TOTAL CONSIDER ATION OF ` 50,49,54,375/-. I.E., BEFORE THE EXECUTION OF THE S ALE DEED DATED 14TH MAY 2008. THE ASSESSEE ENTERED INTO SALE DEED ON 14 TH MAY 2008, THE TOTAL CONSIDERATION MENTIONED IN THE SALE DEED WAS ` 57,90,14,350/-. THE ASSESSING OFFICER, WHILE COMPUT ING THE ALLEGED ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 49 BUSINESS INCOME ON THIS TRANSACTION, TAKEN THE TOTA L SALE CONSIDERATION AS ` 50,49,54,375/-. THE ABOVE FACT CLEARLY SHOWS THAT, MR.RAMESH IS THE FIRST PURCHASER OF THE PROPERTY UN DER DISCUSSION AND HE IS NOT A MEDIATOR OR CO-DEVELOPER FOR THIS P ROPERTY. ONLY FOR THE PURPOSE OF FINANCIAL ARRANGEMENT, MR.RAMESH BRO UGHT M /S GANDHI NAGAR HOUSING SOCIETY LTD INTO THIS TRANSACT ION AND MR.RAMESH ARRANGED THE EXECUTION OF SALE DEED BY TH E ASSESSEE ON 14TH MAY 2008. 12.3 AS PER THE SALE AGREEMENT DATED 1ST DECEMBER 2007 AT PAGE NO. 2, IT IS AN OBLIGATION OF THE ASSESSEE TO EXECU TE THE SALE DEED RELATING TO THE SCHEDULE PROPERTY, EITHER, FAVOURIN G, THE PURCHASER MR.RAMSH OR HIS NOMINEES AS DECIDED BY THE PURCHAS ER, MR.RAMESH. PLEASE READ PAGE NO.2 OF THE SALE AGREEM ENT, UNDER THE HEAD OBLIGATION OF THE VENDOR. THE PURCHASER MR.RAM ESH, IN HIS AFFIDAVIT DATED 14TH MARCH 2015, BEFORE THE ASSESSI NG OFFICER CLEARLY MENTIONED THAT, HE HAS PURCHASED THE AGRICULTURAL L AND FOR THE ASSESSEE, AS PER AGREEMENT DATED 18 TH DECEMBER 2007 AND HAD TAKEN THE POSSESSION OF THE LAND ON THE VERY SAME D AY. HE ALSO ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 50 MENTIONED THAT, HE HAS DEVELOPED THE SAID LAND AND TO MANAGE THE FINANCIAL CONSIDERATION, HE APPROACHED M/S GANDHI N AGAR HOUSING SOCIETY LTD FOR SALE OF LAND AND AS PER THE SALE AG REEMENT THE ASSESSEE EXECUTED THE SALE DEED IN FAVOUR OF THE M /S GANDHI NAGAR HOUSING SOCIETY LTD. THE SAID AGRICULTURAL LAND IS NOT REGARDED AS CAPITAL ASSETS BY LEGAL PRESCRIPTION UNDER SECTION 2(14) AND ITS SALE OR TRANSFER WOULD NOT GIVE RAISE TO TAXABLE CAPITAL GA IN. SINCE THE ENTIRE GAIN ON SALE OF AGRICULTURAL LAND IS NOT TAXABLE AS PER SECTION 2(14) OF THE ACT, AS AGRICULTURAL LAND IS OF A CAPITAL ASSET , DECLARING SUCH TRANSACTION EITHER IN THE ASSESSMENT YEAR 2008-09 O R 2009-10, DO NOT MAKE ANY DIFFERENCE. MR. RAMESH DEVELOPED THE AGRIC ULTURE LAND INTO LAY OUT FOR HOUSING PURPOSE WHICH IS IRRELEVANT FOR THE ISSUE UNDER CONSIDERATION. AS PER ALL THE REVENUE RECORDS, THE LAND SOLD BY ASSESSEE IS AGRICULTURAL LAND. THE CONDITIONS LAY D OWN IN SECTION 2(14) OF. IT ACT WERE FULFILLED. DETAILS OF EXPENDI TURE INCURRED FOR CULTIVATION OF CROP WERE AVAILABLE WITH THE ASSESSE E AND WAS LOST IN THE MONTH OF MAY, 2008 AS EVIDENCED BY POLICE COMPL AINT. IT IS THE SUBMISSION OF THE ASSESSEE THAT DIFFERENT PRICES WE RE PAID TO DIFFERENT PARTIES DEPENDING ON THE QUALITY OF THE AGRICULTURA L LAND AND ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 51 AVAILABILITY OF IRRIGATION FACILITY. THE PADDY CROP WAS CULTIVATED IN THE MONTH OF SEPTEMBER, 2006 AND HARVESTED IN THE MONTH OF JANUARY, 2007 AS EVIDENCED BY ADANGAL ISSUED IN THE NAME OF MR. VARATHAPPA NAYEKAR. 12.4 ALL THE APPROVALS WERE OBTAINED BY MR. RAMESH IN THE NAME OF THE ASSESSEE AS PER AGREEMENT. THE LEARNED ASSESSIN G OFFICER POINTED OUT THAT SOME APPROVALS WERE TAKEN BEFORE T HE DATE OF AGREEMENT. DURING THE COURSE OF APPEAL PROCEEDINGS ALSO, THE LEARNED ASSESSING OFFICER, STATED THAT, THE ASSESSE E HAS OBTAINED NOC EVEN BEFORE THE DATE OF AGREEMENT DATED 1ST DEC EMBER 2007. WE FIND FROM THE COPY OF THE APPLICATION PLACED AT PAGE NO. A3 TO A10 OF THE ASSESSMENT ORDER, THE ASSESSEE HAS NOT SIGNE D THE APPLICATION. THE APPLICATIONS FOR, THOSE APPROVALS WERE NOT DONE BY ASSESSEE. IT MIGHT BE POSSIBLE THAT MR. RAMESH OR S OME MEDIATORS MIGHT HAVE APPLIED FOR APPROVALS EVEN BEFORE THE DA TE OF AGREEMENT WITH THE ASSESSEE. IF THE FACT THAT THE APPROVALS W ERE TAKEN BEFORE THE DATE OF SALE OF AGREEMENT WAS KNOWN, THE ASSESSEE W OULD HAVE SOLD THE, LAND AT A MUCH HIGHER PRICE. THE PRICE AT WHIC H THE ASSESSEE HAD ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 52 SOLD TO MR. RAMESH WAS ONLY AT THE PREVAILING PRICE FOR AGRICULTURAL LAND. 12.5 BUYING OTHER LANDS SIMULTANEOUSLY ALONG WITH NAVALLUR LAND CANNOT ALTER THE NATURE OF THE LAND UNDER DISCUSSIO N. ASSESSMENT TO LAND REVENUE AS AGRICULTURAL LAND IS A STRONG PIECE OF EVIDENCE OF ITS CHARACTER. APPROVED LAYOUT ADJACENT TO SOLD LAND DI D NOT ALTER THE CHARACTER OF ASSESSEES LAND. 12.6 THE ASSESSEE DID NOT TAKE ANY STEP TO CONVERT THE AGRICULTURAL LAND TO RESIDENTIAL LAY OUTS AND HAD NOT DONE ANY A MOUNT OF WORK BEFORE THE DATE OF SALE. THE INTENTION OF THE ASSES SEE WAS TO DO AGRICULTURAL ACTIVITY. EVEN THOUGH AGRICULTURE WAS DONE FOR ONLY A BRIEF PERIOD, THE CHARACTER OF LAND WILL NOT CHANGE. THE ASSESSEE SOLD AGRICULTURAL LAND AS HE WAS IN NEED OF FUNDS FOR BU SINESS ACTIVITY TO START UP SNJ DISTILLERS AND SNJ BREWERIES PROJECT. THERE ARE SEVERAL JUDGMENTS IN FAVOUR OF THE ASSESSEE THAT APPRECIATI ON OF THE AGRICULTURAL LAND CANNOT ALTER THE CHARACTER OF AGR ICULTURAL LAND. THE FINDING OF THE ASSESSING OFFICER, IS THAT, THE ASSE SSEE WAS ENGAGED IN VARIOUS ACTIVITIES OF REAL ESTATE DEVELOPMENT; THER EFORE, AN INFERENCE ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 53 HAS BEEN DRAWN THAT THE ASSESSEE ALSO SHOULD BE DEE MED TO BE ENGAGED IN REAL ESTATE BUSINESS. THE ASSUMPTION OF THE ASSESSING OFFICER IS AMOUNTS TO A PURE GUESS WORK AND CONJECT URE. THE ASSESSING OFFICER HOLDING THAT, THE ASSESSEE WAS IN TO ADVENTURE OF NATURE OF TRADE, THE STATUTORY PROVISIONS SHOULD BE GIVEN A GO BYE AND ASSESSEE IS TO BE SOMEHOW HELD AS ENGAGED IN THE AD VENTURE OF NATURE OF TRADE AND TAXED ON NON-TAXABLE INCOME. IT IS OUR SUBMISSION THAT, SO LONG AS THE ASSESSEE HOLDS THE SPECIFIED A GRICULTURAL LAND IN TERMS OF SECTION 2(14) I.E., NOT BEING A CAP[ITAL A SSET, ITS TRANSFER WILL NEITHER ATTRACT CAPITAL GAIN TAX NOR CAN BE TREATED AS BUSINESS INCOME. THE ASSESSEE DID NOT SELL APPROVED LAY OUT TO M/S. GANDHI NAGAR HOUSING SOCIETY LTD. THE ASSESSEE WAS NOT IN THE RE AL ESTATE BUSINESS FOR HIS ENTIRE LIFE AND HE DID NOT DEVELOP ANY LAND IN HIS LIFE TIME. HE NEVER OFFERED ANY INCOME OF THE REAL ESTAT E BUSINESS FOR HIS ENTIRE LIFE. EVEN THE DEPARTMENT NOT ASSESSED ANY R EAL ESTATE BUSINESS INCOME IN HIS SCRUTINY ASSESSMENT DONE UND ER SECTION 143(3) OF THE ACT, FOR THE ASSESSMENT YEAR 2004-200 5 AND 2005- 2006. ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 54 12.7 THE ASSESSEE OWNS MORE THAN 200 ACRES OF THE LAND IN AND AROUND SRIPERUMBATTUR, CHENGALPET AND KANCHIPURAM D ISTRICT IN THE YEAR UNDER CONSIDERATION. HE ONLY SOLD AROUND 50 AC RES OF LAND TO MR.RAMESH FOR THE PURPOSE OF EXPANDING HIS BUSINESS ACTIVITY AND HE IS STILL CONTINUING AGRICULTURAL OPERATION IN THE BALANCE 150 ACRES OF LAND. THIS CLEARLY SHOWS THAT, THE INTENTION OF THE ASSESSEE IS TO DO AGRICULTURAL ACTIVITY ONLY. 12.8 AS PER SECTION 2[47](V) OF THE IT ACT, ANY T RANSACTION INVOLVING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE T AKEN OR RETAINED IN PART PERFORMANCE OF THE CONTRACT OF THE NATURE R EFERRED TO IN SECTION 53A OF THE TRANSFER PROPERTY ACT 1882, IS TO BE TRE ATED AS TRANSFER. THUS, TRANSFER IS COMPLETED IN THE PREVIOUS YEAR 20 07-08 RELEVANT TO THE ASSESSMENT YEAR 2008-09. PLEASE REFER IN THE CA SE OF DR.MAYA SHENOY VS. ACIT, HYDERABAD. COPY ENCLOSED HEREWITH. THE FOLLOWING POSTULATES ARE SINE QUA NON FOR BASING A CLAIM ON SECTION 53A OF THE TP ACT (A). THERE MUST BE A CONTRACT TO TRANSFER FOR CONSIDERATION ANY IMMOVABLE PROPERTY. IN THE PRESEN T CASE, THERE IS A CONTRACT TO HANDOVER POSSESSION OF IMMOVABLE PROPER TY FOR ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 55 CONSIDERATION OF ` 50.50 CRORES (B) THE CONTRACT MUST BE IN WRITING, SIGNED BY THE TRANSFEROR, OR BY SOMEONE ON HIS BEHA LF. NONE OF THESE FACTS IS IN DISPUTE AND THE CONDITIONS ARE FULFILLE D. (C) THE WRITING MUST BE IN SUCH WORDS FROM WHICH THE TERMS NECESSARY TO CONSTRUE THE TRANSFER CAN BE ASCERTAINED. IN THE PRESENT CASE, T HE SAME IS SATISFIED (D) THE TRANSFEREE MUST IN PART PERFORMANCE OF THE CONTRACT TO TAKE POSSESSION OF THE PROPERTY, OR OF ANY PART THEREOF. THE FACT IS THAT THE PURCHASER MR. RAMESH HAS TAKEN POSSESSION AS PER TH E SALE AGREEMENT AND AFFIDAVIT FILED BY MR. RAMESH. (E) TH E TRANSFEREE MUST HAVE DONE SOME ACT IN FURTHERANCE OF THE CONTRACT. IN THE PRESENT CASE, THE PURCHASER, MR. RAMESH, HAS DEVELOPED THE PROPERTY AS EVIDENCE BY THE SALE DEED EXECUTED ON 14TH MAY 2008 . THUS, HE HAS PERFORMED HIS PART OF THE CONTRACT. (F) THE TRANSFE REE MUST HAVE PERFORMED OR BE WILLING TO PERFORM HIS PART OF THE CONTRACT. WE HAVE ALREADY MENTIONED AT (E) ABOVE, THAT THE PURCHASER MR. RAMESH HAD ALREADY PERFORMED HIS PART OF THE AGREEMENT AND THU S, IF THESE PRINCIPLES ARE APPLIED TO THE PRESENT CASE, POSSESS ION OF THE LAND BEING ONE OF THE INTERESTS IN PROPERTY HAS BEEN TRA NSFERRED TO THE PURCHASER BY HANDING OVER THE POSSESSION OF THE LAN D, THE TRANSFER IS ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 56 OVER AS PER THE INCOME TAX ACT. ON THE DATE OF TRAN SFER, THE ASSESSEE SOLD ONLY THE AGRICULTURAL LAND AND NOTHIN G ELSE. THE SURPLUS ARISING OUT OF THE SALE OF THE AGRICULTURAL LAND IS NOT TAXABLE,EITHER UNDER SECTION 45 OF THE ACT OR UNDER SECTION 28 OF THE ACT. 12.9 EVEN THOUGH THE ASSESSING OFFICER MENTIONED IN HIS LETTER DATED 13. 11 .2005 ADDRESSED TO YOUR GOOD SELF THAT HE HAD RECEIVED THE AFFIDAVIT OF MR. RAMESH, ON 24TH MARCH 2015, BU T FOR THE REASONS KNOWN TO HIM, HE DID NOT DISCUSS THE AFFIDAVIT IN H IS ASSESSMENT ORDER DATED 30TH MARCH 2015. THIS AFFIDAVIT IS A STRONG P IECE OF EVIDENCE TO PROVE THAT THE ASSESSEE SOLD THE AGRICULTURAL LAND TO MR.RAMESH. MR. RAMESH IS IN THE BUSINESS OF REAL ESTATE AND HE DEV ELOPED SEVERAL LAYOUTS IN AND AROUND NAVALLUR, NOT ONLY IN THE ASS ESSEES AGRICULTURE LAND BUT ALSO ADJACENT TO THE ASSESSEES LAND. HENC E, WE REQUEST YOUR HONOR TO CONFIRM THE ORDER OF THE CIT-A ON THI S ISSUE. 13.1 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IT IS AN ADMITTED FACT THAT THE LAND WAS HE LD BY THE ASSESSEE AS A CAPITAL ASSET FROM THE DATE OF PURCHASE TILL T HE DATE OF SALE. THERE IS NO EVIDENCED BROUGHT ON RECORD BY REVENUE TO SHOW THAT ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 57 THE LAND WAS HELD BY ASSESSEE AS STOCK-IN-TRADE. THE ASSESSEE'S CONTENTION IS THAT IT IS INTENDED TO RETAIN THE AGR ICULTURAL LAND ACQUIRED AS A CAPITAL ASSET. THE ASSESSEE NEVER TREATED THE LAND AS STOCK IN TRADE. THE ASSESSEE CARRIED ON AGRICULTURAL OPERATI ONS. THIS AGRICULTURAL LAND IS SITUATED BEYOND 8 KM FROM THE MUNICIPAL LIMITS OF CHENNAI. THE LAND WAS SOLD TO MR.RAMESH, AGAINST SA LE AGREEMENT DATED 01.12.2007. THE LAND WAS UNDER CULTIVATION TI LL THE DATE OF SALE. THE ASSESSEE ALSO PRODUCED CHITTA/ADANGAL WHICH WAS ISSUED BY THE STATE REVENUE AUTHORITY BEFORE LOWER ASSESSING AUTH ORITIES AND THE LAND WAS NEVER PUT TO USE FOR NON-AGRICULTURAL PURP OSE AS THE ASSESSEE COMPANY NEVER HAD ANY INTENTION TO MAKE TH E LAND INTO PLOTS AND CARRY ON REAL ESTATE BUSINESS IN RESPECT OF THE LAND. THUS, THE ASSESSEE NEVER CREATED AN ASSET AS STOCK IN TRA DE BUT TREATED IT AS CAPITAL ASSET (AGRICULTURAL LAND). THE ASSESSEE HAS SOLD LAND AND THE SAID LAND IS BROUGHT EVIDENCE ON RECORD BY THE ASSESSEE TO PROVE THE FACT THAT THE LAND HELD/SOLD BY THE ASSESSEE IS AGRICULTURAL LAND. 13.2 THE AR SUBMITTED THAT THE SALE TRANSACTION EF FECTED BY THE ASSESSEE IN RESPECT OF THE ABOVE AGRICULTURE LAND C ONSTITUTED ONLY ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 58 SALE OF AGRICULTURE LAND, AND BY NO STRETCH OF IMAG INATION IT CAN BE TREATED AS ADVENTURE IN TRADE AND SO AS TO TREAT TH E SAME AS 'BUSINESS TRANSACTION' FOR THE FOLLOWING REASONS: (I) PURCHASE AND HOLDING OF LAND FOR A PERIOD AND SUBSEQUENT SALE THEREOF ITSELF CANNOT BE AN INDICATOR TO HOLD THAT THE INTENTION OF THE ASSESSEE WAS TO CARRY ON BUSINESS WITH THOSE ASSETS . THE INTENTION CANNOT BE PRESUMED UNLESS SUPPORTED BY EVIDENCE. IN THIS CASE, THE TREATMENT GIVEN BY THE ASSESSEE FOR THIS ASSET CLEA RLY INDICATES THAT THE INTENTION OF THE ASSESSEE IS TO HOLD THE SAME A S CAPITAL ASSET TO HAVE GOOD RETURNS FROM THE SAME. (II) THE ASSESSEE HAD ACQUIRED THE LAND DURING THE PERIOD 02.01.2007 TO 30.11.2007. THE ASSET ACQUIRED WAS AGRICULTURE L AND AS PER THE EVIDENCE BROUGHT ON RECORD. THE ASSESSEE HAS ENTE RED INTO MOU FOR SALE WITH MR.R.RAMESH ON 01.12.2007. THEREAFTE R, ENTERED INTO TRIPARTITE MOA WITH MR.R.RAMESH, GANDHI NAGAR CO-OP ERATIVE HOUSING SOCIETY LTD., ON 26.03.2008 AND FINAL SALE DEED WAS EXECUTED ON 14.05.2008.THUS, THE ASSESSEE HELD THE AGRICULTURE LAND FOR SHORT PERIOD. DURING THAT PERIOD THE ASSESSEE C ARRIED ON REGULAR AGRICULTURAL OPERATIONS IN THE LAND. IN THE LIGHT O F FAVOURABLE MARKET CONDITIONS THE ASSESSEE THOUGHT IT GOOD TO SELL THE ASSET TO REALIZE A GOOD AMOUNT. REALIZATION OF BETTER PRICE IN A BOOMI NG MARKET CANNOT BE CONSIDERED AS AN ADVENTURE IN TRADE. ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 59 (III) THE EXPRESSION ADVENTURE IN THE NATURE OF TR ADE OCCURS IN THE DEFINITION OF BUSINESS UNDER SECTION 2(13) BUT THE EXPRESSION ADVENTURE IN THE NATURE OF TRADE HAS NOT BEEN DEFIN ED IN THE ACT. IT MAY BE PERTINENT TO MENTION HERE THAT A SPECIFIC TR ANSACTION PARTAKE THE CHARACTER OF BUSINESS OR AN ADVENTURE IN THE NA TURE OF TRADE OR REALIZATION OF CAPITAL ASSET OR A MERE CONVERSION O F ASSET HAS TO BE DECIDED DEPENDING UPON FACTS OF EACH CASE. (IV) IN DECIDING AS TO WHETHER A PARTICULAR TRANSA CTION IS AN ADVENTURE IN THE NATURE OF TRADE, THE ASSESSING OFFICER MUST CONSIDER ALL THE RELEVANT AND PROVED FACTS AND CIRCUMSTANCES. REALIZ ATION OF INVESTMENTS CONSISTING OF PURCHASE OF AGRICULTURAL LAND AND RESALE, THOUGH PROFITABLE ARE CLEARLY OUTSIDE THE DOMAIN OF ADVENTURE IN THE NATURE OF TRADE. (V) THE ASSESSEE TREATED THE ASSETS AS INVESTMENT I N AGRICULTURAL LAND. THEREFORE DISPOSAL OF THE SAME WOULD NOT CONV ERT, WHAT WAS A CAPITAL ACCRETION, TO AN ADVENTURE IN THE NATURE OF TRADE. TO MAKE IT MORE CLEAR, SALE OF AGRICULTURAL LAND BY THE ASSESS EE AND REALISATION OF GOOD PRICE WOULD NOT ALTER THE BASIC NATURE AND CHARACTERISTIC OF THE TRANSACTION. IN THE CASE OF THE ASSESSEE, LAND WAS ACQUIRED BY THE ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 60 ASSESSEE AND TREATED AS FIXED-ASSETS. THE ASSESSEE NEVER TREATED THE LAND AS STOCK-IN-TRADE AND REFLECTED IN PROFIT AND LOSS ACCOUNT (CLOSING STOCK). THERE WAS NO ELEMENT OF TRADE ATTA CHED TO THE ACTIVITY OF THE ASSESSEE IN PURCHASE AND SALE OF THE LAND. A CONTINUOUS BUSINESS REQUIRES MORE ACTIVITY AND GREATER ORGANIZ ATION. THIS IS ABSENT IN THE TRANSACTION OF SALE OF LAND BY THE AS SESSEE. THEREFORE, ALTHOUGH THERE IS PROFIT IN THE TRANSACTION THE TRA NSACTION CANNOT BE CHARACTERIZED AS AN ADVENTURE IN THE NATURE OF TRAD E. (VI) WHETHER A TRANSACTION IN RESPECT OF AN ASSET IS CAPITAL OR BUSINESS INCOME BEING ADVENTURE IN THE NATURE OF TR ADE DEPENDS ON THE FACTS AND CIRCUMSTANCES OF THE CASE. THERE ARE MANY FACTORS LIKE FREQUENCY OF TRANSACTIONS, PERIOD OF HOLDING, INTEN TION FOR RESALE ETC, WHICH DETERMINE WHETHER THE GAIN ARISING OF A TRANS ACTION IS IN THE PROCESS OF REALISATION OF INVESTMENT OR IN THE COUR SE OF BUSINESS. THE MERE FACT THAT THE PERSON HAS PURCHASED A LAND AND SUBSEQUENTLY SOLD IT, GIVING RISE TO A SUBSTANTIAL PROFIT CANNOT CHANGE THE CHARACTER OF THE TRANSACTION. IT IS THE GENERAL HUMAN TENDENC Y TO EARN PROFIT OUT OF CAPITAL ASSET. NO ONE INVESTS TO INCUR A LOSS. I F THE MARKET CONDITION SUDDENLY GOES UP OR DOWN, IT IS ALWAYS THE TENDENCY OF A PERSON TO ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 61 TAKE A QUICK DECISION SO THAT THE REALIZATION ON TH E INVESTMENT IS MAXIMUM OR THE LOSS IS MINIMUM. (VII) AS ALREADY MENTIONED THE ASSESSEE CARRIED ON REGULAR AGRICULTURAL OPERATIONS IN THE SAID AGRICULTURE LAN D. IN THAT PROCESS THE ASSESSEE ITSELF INVOLVED IN THE PRIMARY OPERATION S UCH AS PLOUGHING, TILLING, SOWING, WATERING ETC. THE ASSESSEE HAS GRO WN CROPS SUCH AS COCONUT, PADDY, MANGO, VEGETABLES ETC. THE ASSESSEE CARRIED ON THE OPERATIONS OF CULTIVATION. (VIII) BY SELLING THE ABOVE AGRICULTURE PRODUCE THE ASSESSEE EARNED AGRICULTURE RECEIPTS WHICH WERE BROUGHT INTO TAXATI ON. 13.3 FROM THE ABOVE, IT IS CLEAR THAT: (A) THE ASSESSEE PURCHASED AGRICULTURE LAND NOW UND ER CONSIDERATION SITUATED BEYOND 8 KM FROM THE MUNICIP AL LIMITS. (B) THE ASSESSEE TREATED THE SAME AS FIXED ASSET IN THEIR BOOKS. (C) THE LAND WAS IDENTIFIED AS AGRICULTURE LAND IN THE REVENUE RECORDS. (D) THE ASSESSEE CARRIED ON ROUTINE AGRICULTURE OPE RATIONS SUCH AS GROWING COCONUT, PADDY, MANGO, VEGETABLES ETC . (E) THE ASSESSEE DID NOT CARRY ON ANY COMMERCIAL AC TIVITY WITH REFERENCE TO THAT LAND SUCH AS GETTING OF APPROVAL FOR CONVERTING INTO ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 62 SITES, PLOTTING OF THE SAME INTO SITES ETC., AND SA ME WAS DONE BY THE AGREEMENT HOLDER MR.RAMESH. THUS, THE CHARACTER OF THE LAND I.E., AGRICULTURE NATURE WAS CONTINUING TILL THE SAME WAS SOLD BY THE ASSESSEE COMPANY. (F) BECAUSE OF FAVOURABLE MARKET CONDITIONS THE ASS ESSEE SOLD THE LAND AND THE SAME FETCHED THEM A GOOD PRICE. 13.4. THEREFORE, IN THE PRESENT CASE THERE IS NO DI SPUTE THAT THE ASSESSEES ACQUIRED AGRICULTURAL LAND. THERE IS ALSO NO DISPUTE THAT THERE WAS AGRICULTURAL OPERATION IN THIS LAND BEFOR E SALE OF THIS LAND. 13.5 THE ASSESSING OFFICER WAS OF THE OPINION THAT THE AMOUNT RECEIVED ON SALE OF THIS AGRICULTURAL PROPERTY IS N OTHING BUT ON ACCOUNT OF ADVENTURE IN THE NATURE OF TRADE AND THE SAME WA S BROUGHT INTO INCOME FROM BUSINESS. IN THIS CASE, THE ASSESSEE HE LD THE LAND ALWAYS AS INVESTMENT (FIXED ASSETS) AND NOT AT ALL CONVERTED INTO STOCK-IN-TRADE. THE CHARACTER OF THE LAND IN THE HA NDS OF THE ASSESSEES HAS NOT CHANGED. THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE CARRIED ON ACTIVITIES OF BUYING A ND SELLING OF LAND IN A SYSTEMATIC MANNER SO AS TO JUSTIFY THE ACTION OF THE AO IN TREATING ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 63 THE ACTIVITIES OF THE ASSESSEE AS ADVENTURE IN THE NATURE OF TRADE. THE LAND WAS SOLD BY THE ASSESSEES IN ACREAGE AND NOT B Y MAKING PLOTS. 13.6 NOW THE QUESTION AS TO WHETHER A LAND IS AGRIC ULTURAL LAND OR NOT IS ESSENTIALLY A QUESTION OF FACT. THE QUESTION HAS TO BE ANSWERED IN EACH CASE HAVING REGARD TO THE FACTS AND CIRCUMSTAN CES OF THAT CASE. THERE MAY BE FACTORS BOTH FOR AND AGAINST A PARTICU LAR POINT OF VIEW. WE HAVE TO ANSWER THE QUESTION ON A CONSIDERATION O F ALL OF THEM, A PROCESS OF EVALUATION AND THE INFERENCE HAS TO BE D RAWN ON A CUMULATIVE CONSIDERATION OF ALL THE RELEVANT FACTS. IT MAY BE STATED HERE THAT NOT ALL THE FACTORS OR TESTS WOULD BE PRE SENT OR ABSENT IN ANY CASE AND THAT IN EACH CASE ONE OR MORE OF THE FACTO RS MAY MAKE APPEARANCE AND THAT ULTIMATE DECISION WILL HAVE TO BE REACHED ON A BALANCED CONSIDERATION OF THE TOTALITY OF THE CIRCU MSTANCES. 13.7 THE EXPRESSION 'AGRICULTURAL LAND' IS NOT DEFI NED IN THE ACT, AND NOW, WHETHER IT IS AGRICULTURAL LAND OR NOT HAS TO BE DETERMINED BY USING THE TESTS OR METHODS LAID DOWN BY THE COURTS FROM TIME TO TIME. ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 64 13.8 THE HON'BLE SUPREME COURT IN THE CASE OF SMT. SARIFABIBI MOHMED IBRAHIM V. CIT [[1993] 204 ITR 631] HAS APP ROVED THE DECISION OF A DIVISION BENCH OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SIDDHARTH J. DESAI (SUPRA) AND HAS LAID DOW N 13 TESTS OR FACTORS WHICH ARE REQUIRED TO BE CONSIDERED AND UPO N CONSIDERATION OF WHICH, THE QUESTION WHETHER THE LAND IS AN AGRIC ULTURAL LAND OR NOT HAS TO BE DECIDED OR ANSWERED. WE REPRODUCE THE SAI D 13 TESTS AS FOLLOWS: '1. WHETHER THE LAND WAS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL AND WHETHER IT WAS SUBJECT TO THE PAYMENT OF LAND R EVENUE? 2. WHETHER THE LAND WAS ACTUALLY OR ORDINARILY USED FOR AGRICULTURAL PURPOSES AT OR ABOUT THE RELEVANT TIME? 3. WHETHER SUCH USER OF THE LAND WAS FOR A LONG PER IOD OR WHETHER IT WAS OF A TEMPORARY CHARACTER OR BY ANY OF A STOPGAP ARRANG EMENT? 4. WHETHER THE INCOME DERIVED FROM THE AGRICULTURAL OPERATIONS CARRIED ON IN THE LAND BORE ANY RATIONAL PROPORTION TO THE INV ESTMENT MADE IN PURCHASING THE LAND? 5. WHETHER, THE PERMISSION UNDER S. 65 OF THE BOMBA Y LAND REVENUE CODE WAS OBTAINED FOR THE NON-AGRICULTURAL USE OF T HE LAND? IF SO, WHEN AND BY WHOM (THE VENDOR OR THE VENDEE)? WHETHER SUC H PERMISSION WAS IN RESPECT OF THE WHOLE OR A PORTION OF THE LAN D? IF THE PERMISSION ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 65 WAS IN RESPECT OF A PORTION OF THE LAND AND IF IT W AS OBTAINED IN THE PAST, WHAT WAS 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 CEAS ED TO BE PUT TO AGRICULTURAL USE? IF SO, WHETHER IT WAS PUT TO AN A LTERNATIVE USE? WHETHER SUCH LESSER AND/OR ALTERNATIVE USER WAS OF A PERMANENT OR TEMPORARY NATURE? 7. WHETHER THE LAND, THOUGH ENTERED IN REVENUE RECO RDS, 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 AGRICULTURAL PURPOSES? 8. WHETHER THE LAND WAS SITUATED IN A DEVELOPED ARE A? WHETHER ITS PHYSICAL CHARACTERISTICS, SURROUNDING SITUATION AND USE OF THE LAND IN THE ADJOINING AREA WERE SUCH AS WOULD INDICATE THAT THE LAND WAS AGRICULTURAL? 9. WHETHER THE LAND ITSELF WAS DEVELOPED BY PLOTTIN G AND PROVIDING ROADS AND OTHER FACILITIES? 10. WHETHER THERE WERE ANY PREVIOUS SALES OF PORTIO NS OF THE LAND FOR NON- AGRICULTURAL USE? 11. WHETHER PERMISSION UNDER S. 63 OF THE BOMBAY TE NANCY AND AGRICULTURAL LAND ACT, 1948, WAS OBTAINED BECAUSE T HE SALE OR INTENDED SALE WAS IN FAVOUR OF A NON-AGRICULTURIST? IF SO, W HETHER THE SALE OR ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 66 INTENDED SALE TO SUCH NON-AGRICULTURISTS WAS FOR NO N-AGRICULTURAL OR AGRICULTURAL USER? 12. WHETHER THE LAND WAS SOLD ON YARDAGE OR ON ACRE AGE BASIS? 13. WHETHER AN AGRICULTURIST WOULD PURCHASE THE LAN D FOR AGRICULTURAL PURPOSES AT THE PRICE AT WHICH THE LAND WAS SOLD AN D WHETHER THE OWNER WOULD HAVE EVER SOLD THE LAND VALUING IT AS A PROPE RTY YIELDING AGRICULTURAL PRODUCE ON THE BASIS OF ITS YIELD?' 13.9 A REFERENCE COULD BE MADE TO THE CASE OF CWT V. OFFICER-IN- CHARGE (COURT OF WARDS) [1976] 105 ITR 133(SC) WHER EIN THE CONSTITUTION BENCH OF THE HON'BLE SUPREME COURT STA TED THAT THE TERM 'AGRICULTURE' AND 'AGRICULTURAL PURPOSE' WAS NOT DE FINED IN THE INDIAN IT ACT AND THAT WE MUST NECESSARILY FALL BACK UPON THE GENERAL SENSE IN WHICH THEY HAVE BEEN UNDERSTOOD IN COMMON PARLANCE. THE HON'BLE SUPREME COURT HAS OBSERVED THAT THE TERM 'AGRICULTU RE' IS THUS UNDERSTOOD AS COMPRISING WITHIN ITS SCOPE THE BASIC AS WELL AS SUBSEQUENT OPERATIONS IN THE PROCESS OF AGRICULTURE AND RAISING ON THE LAND ALL PRODUCTS WHICH HAVE SOME UTILITY EITHE R FOR SOMEONE OR FOR TRADE AND COMMERCE. IT WILL BE SEEN THAT THE TERM ' AGRICULTURE' RECEIVES A WIDER INTERPRETATION BOTH IN REGARD TO I TS OPERATION AS WELL AS THE RESULT OF THE SAME. NEVERTHELESS THERE IS PR ESENT ALL THROUGHOUT ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 67 THE BASIC IDEA THAT THERE MUST BE AT THE BOTTOM OF ITS CULTIVATION OF THE LAND IN THE SENSE OF TILLING OF THE LAND, SOWING OF THE SEEDS, PLANTING AND SIMILAR WORK DONE ON THE LAND ITSELF AND THIS B ASIC CONCEPTION IS ESSENTIAL SINE QUA NON OF ANY OPERATION PERFORMED O N THE LAND CONSTITUTING AGRICULTURAL OPERATION AND IF THE BASI C OPERATIONS ARE THERE, THE REST OF THE OPERATIONS FOUND THEMSELVES UPON THE SAME, BUT IF THE BASIC OPERATIONS ARE WANTING, THE SUBSEQUENT OPERATIONS DO NOT ACQUIRE THE CHARACTERISTICS OF AGRICULTURAL OPERATI ONS. THE CONSTITUTION BENCH OF THE HON'BLE SUPREME COURT IN THE AFORESAID CASE OBSERVED THAT THE ENTRIES IN REVENUE RECORDS WERE CONSIDERED GOOD PRIMA FACIE EVIDENCE. 13.1.1 THE HON'BLE GUJARAT HIGH COURT IN THE CASE O F DR. MOTIBHAI D. PATEL V. CIT [1981] 127 ITR 671/5 TAXMAN 147 REFERR ING TO THE CONSTITUTION BENCH OF THE HON'BLE SUPREME COURT HAD STATED THAT IF AGRICULTURAL OPERATIONS ARE BEING CARRIED ON IN THE LAND IN QUESTION AT THE TIME WHEN THE LAND IS SOLD AND FURTHER IF THE E NTRIES IN THE REVENUE RECORDS SHOW THAT THE LAND IN QUESTION IS A GRICULTURAL LAND, THEN, A PRESUMPTION ARISES THAT THE LAND IS AGRICUL TURAL IN CHARACTER ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 68 AND UNLESS THAT PRESUMPTION IS REBUTTED BY EVIDENCE LED BY THE REVENUE, IT MUST BE HELD THAT THE LAND WAS AGRICULT URAL IN CHARACTER AT THE TIME WHEN IT WAS SOLD. THE DIVISION BENCH OF TH E HON'BLE GUJARAT HIGH COURT FURTHER HELD THAT THERE WAS NOTHING ON R ECORD TO SHOW THAT THE PRESUMPTION ROSE FROM THE LONG USER OF THE LAND FOR AGRICULTURAL PURPOSE AND ALSO THE PRESUMPTION ARISING FROM THE E NTRIES OF THE REVENUE RECORDS ARE REBUTTED. 13.1.2 THE HON'BLE BOMBAY HIGH COURT IN THE CASE O F CWT V. H.V. MUNGALE [1984] 145 ITR 208/12 TAXMAN 201HELD THAT T HE HON'BLE SUPREME COURT HAD POINTED OUT THAT THE ENTRIES RAIS ED ONLY A REBUTTABLE PRESUMPTION AND SOME EVIDENCE WOULD, THE REFORE, HAVE TO BE LED BEFORE TAXING AUTHORITIES ON THE QUESTION OF INTENDED USER OF THE LAND UNDER CONSIDERATION BEFORE THE PRESUMPTION COULD BE REBUTTED. THE COURT FURTHER HELD THAT THE SUPREME C OURT HAD CLEARLY POINTED OUT THAT THE BURDEN TO REBUT THE PRESUMPTIO N WOULD BE ON THE REVENUE. THE HON'BLE BOMBAY HIGH COURT HELD THAT TH E RATIO OF THE DECISION OF THE SUPREME COURT WAS THAT WHAT IS TO B E DETERMINED IS THE CHARACTER OF THE LAND ACCORDING TO THE PURPOSE FOR WHICH IT WAS MEANT OR SET APART AND CAN BE USED. IT IS, THEREFOR E, OBVIOUS THAT THE ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 69 ASSESSEE HAD ABUNDANTLY PROVED THAT THE SUBJECT LAN D SOLD BY THEM WAS AGRICULTURAL LAND NOT ONLY AS CLASSIFIED IN THE REVENUE RECORDS, BUT ALSO IT WAS SUBJECTED TO THE PAYMENT OF LAND RE VENUE AND THAT IT WAS ACTUALLY AND ORDINARILY USED FOR AGRICULTURAL P URPOSE AT THE RELEVANT TIME. 13.1.3 WE MAY ALSO REFER TO THE CASE OF CIT V. MAN ILAL SOMNATH [1977] 106 ITR 917(GUJ.), WHEREIN THE DIVISION BENC H OF THE HON'BLE GUJARAT HIGH COURT OBSERVED THAT THE POTENTIAL NON- AGRICULTURAL VALUE OF THE LAND FOR WHICH A PURCHASER MAY BE PREPARED T O PAY A LARGE PRICE WOULD NOT DETRACT FROM ITS CHARACTER AS AGRIC ULTURAL LAND ON THE RELEVANT DATE OF SALE. 13.1.4 WE MAY ALSO REFER TO THE CASE OF GOPAL C. S HARMA V. CIT [1994] 209 ITR 946/72 TAXMAN 353(BOM), IN WHICH, TH E CASE OF SMT. SARIFABIBI MOHAMED IBRAHIM (SUPRA) WAS REFERRED TO AND RELIED, AMONGST OTHER CASES. IN THIS CASE, THE DIVISION BEN CH OF THE BOMBAY HIGH COURT HAS STATED THAT THE PROFIT MOTIVE OF THE ASSESSEE SELLING THE LAND WITHOUT ANYTHING MORE BY ITSELF CAN NEVER BE DECISIVE FOR DETERMINATION OF THE ISSUE AS TO WHETHER THE TRANSA CTION AMOUNTED TO ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 70 AN ADVENTURE IN THE NATURE OF TRADE. IN OTHER WORDS , THE PRICE PAID IS NOT DECISIVE TO SAY WHETHER THE LAND IS AGRICULTURA L OR NOT. 13.1.5 WE MAY REFER TO A JUDGMENT OF THE HON'BLE M ADRAS HIGH COURT IN THE CASE OF CIT V. E. UDAYAKUMAR [2006] 284 ITR 511WHERE THE HON'BLE MADRAS HIGH COURT HAS REFERRED TO THE DECIS ION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. S MT. SAVITA RANI [2004] 270 ITR 40/[2003] 133 TAXMAN 712AND HAS OBSE RVED AND HELD AS UNDER : '8. IT IS WELL SETTLED IN THE CASE OF CIT V. SMT. S AVITA RANI (2004) 186 CTR (P&H) 240: (2004) 270 ITR 40(P&H), WHEREIN IT I S HELD THAT THE LAND BEING LOCATED IN A COMMERCIAL AREA OR THE LAND HAVING BEEN PARTIALLY UTILISED FOR NON-AGRICULTURAL PURPOSES OR THAT THE VENDEES HAD ALSO PURCHASED IT FOR NON-AGRICULTURAL PURPOSES, WE RE TOTALLY IRRELEVANT CONSIDERATION FOR THE PURPOSES OF APPLICATION OF S. 54B. 9. IN THE ABOVESAID CASE, THE ASSESSEE AN INDIVIDUA L SOLD 15 KARNALS, 18 MARLAS OF LAND OUT OF HER SHARE IN 23 KARNALS, 1 7 MARLAS LAND DURING THE FINANCIAL YEAR 1990-91, RELEVANT TO THE ASST. Y R. 1991-92, THE SALE WAS EFFECTED BY THREE REGISTERED SALE DEEDS. WHILE FILING HER RETURN OF INCOME, SHE CLAIMED EXEMPTION FROM LEVY OF CAPITAL GAINS UNDER S. 54B OF THE ACT ON THE GROUND THAT THE LAND SOLD BY HER WAS AGRICULTURAL LAND AND THE SALE PROCEEDS WERE INVESTED IN THE PURCHASE OF AGRICULTURAL LAND WITHIN TWO YEARS. THE AO REJECTED THE CLAIM OF THE ASSESSEE HOLDING THAT THE LAND SOLD BY THE ASSESSEE WAS NOT AGRICULTURAL LAND AND THIS WAS UPHELD BY THE CIT(A). ON FURTHER APPEA L, THE TRIBUNAL ACCEPTED THE CLAIM OF THE ASSESSEE HOLDING THAT THE TRANSACTION IN ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 71 QUESTION DULY FULFILLED THE CONDITIONS SPECIFIED FO R RELIEF. ON FURTHER APPEAL TO THE HIGH COURT, THE PUNJAB & HARYANA HIGH COURT FOUND THAT THE FINDING THAT THE LAND HAD BEEN USED FOR AGRICUL TURAL PURPOSES WAS BASED ON COGENT AND RELEVANT MATERIAL. THE REVENUE RECORD SUPPORTED THE CLAIM. EVEN THE RECORDS OF THE IT DEPARTMENT SH OWED THAT THE ASSESSEE HAD DECLARED AGRICULTURAL INCOME FROM THIS LAND IN HER RETURNS FOR THE PRECEDING TWO YEARS. THE LAND BEING LOCATED IN COMMERCIAL AREA OR THE LAND HAVING BEEN PARTIALLY UTILISED FOR NON- AGRICULTURAL PURPOSES OR THAT THE VENDEES HAD ALSO PURCHASED IT FOR NONAG RICULTURAL PURPOSES, WERE TOTALLY IRRELEVANT CONSIDERATION FOR THE PURPO SES OF APPLICATION OF S. 54B. 10. IT IS SEEN FROM THE AFORESAID DECISION THAT THE AGRICULTURAL LAND SOLD BY THE ASSESSEE WITH AN INTENT TO PURCHASE ANOTHER LAND WITHIN TWO YEARS HAD ALSO BEEN PERMITTED TO CLAIM EXEMPTION UN DER S. 54B OF THE IT ACT, 1961. IN THE INSTANT CASE, EVEN THOUGH THER E WAS NO SALE AS SUCH, THE ASSESSEE OWNED AGRICULTURAL LAND WITHIN T HE LIMITS OF TIRUNELVELI CORPORATION AND HE HAD NOT PUT UP ANY C ONSTRUCTION THEREON, THE ASSESSEE IS ENTITLED TO CLAIM EXEMPTIO N FROM THE WT ACT FOR THE ASSESSMENT OF WEALTH-TAX. THAT THE LAND IN QUESTION IS ADJACENT TO THE HOSPITAL IS TOTALLY IRRELEVANT.' 13.1.6 ADVERTING TO THE FACTS OF THE PRESENT CASE, THE LAND IN QUESTION IS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURA L LAND AND THERE IS NO DISPUTE REGARDING THIS ISSUE AND ACTUAL CULTIVAT ION HAS BEEN CARRIED ON THIS LAND AND INCOME WAS DECLARED FROM T HIS LAND IN THE RETURN OF INCOME FILED BY THE ASSESSEE FOR THE EARL IER YEARS AS AGRICULTURAL INCOME. IT IS ALSO AN ADMITTED FACT TH AT THE AO HAS NOT ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 72 BROUGHT ON RECORD ANY EVIDENCE TO SHOW THAT THE AGR ICULTURAL LAND WAS USED FOR NON-AGRICULTURAL PURPOSES AND THE ASSESSEE HAS NOT PUT THE LAND TO ANY PURPOSES OTHER THAN AGRICULTURAL PURPOS ES. IT IS ALSO AN ADMITTED FACT THAT NEITHER THE IMPUGNED PROPERTY NO R THE SURROUNDING AREAS WERE SUBJECT TO ANY DEVELOPMENTAL ACTIVITIES AT THE RELEVANT POINT OF TIME OF SALE OF THE LAND. 13.1.7 IT IS ALSO AN ADMITTED POSITION THAT WITHOU T ESTABLISHING AND PROVING THAT THE LAND WAS PUT INTO USE FOR NON-AGRI CULTURAL PURPOSES BY THE ASSESSEE DOES NOT AND CANNOT CONVERT THE AGR ICULTURAL LAND INTO NON-AGRICULTURAL LAND. IN THE INSTANT CASE, AT THE RELEVANT POINT OF SALE OF THE LAND IN QUESTION, THE SURROUNDING AREA WAS TOTALLY UNDEVELOPED AND EXCEPT MERE FUTURE POSSIBILITY TO P UT THE LAND INTO USE FOR NON-AGRICULTURAL PURPOSES WOULD NOT CHANGE THE CHARACTER OF THE AGRICULTURAL LAND INTO NON-AGRICULTURAL LAND AT THE RELEVANT POINT OF TIME WHEN THE LAND WAS SOLD BY THE ASSESSEE. IN THE REVENUE RECORDS, THE LAND IS CLASSIFIED AS AGRICULTURAL LAN D AND HAS NOT BEEN CHANGED FROM AGRICULTURAL LAND TO NON-AGRICULTURAL LAND AT THE RELEVANT POINT OF TIME WHEN THE LAND WAS SOLD BY THE ASSESSE E FROM MR.RAMESH. NO MATERIAL OR EVIDENCE IN SUPPORT OF TH E FACT THAT THE ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 73 ASSESSEES HAVE PUT THE LAND IN USE FOR NON-AGRICULT URAL PURPOSES HAS BEEN BROUGHT ON RECORD. AT THE RELEVANT POINT OF TI ME THE LAND WAS USED FOR AGRICULTURAL PURPOSES ONLY AND NOTHING IS BROUGHT ON RECORD TO SHOW THAT THE LAND WAS PUT IN USE FOR NON-AGRICU LTURAL PURPOSES BY THE ASSESSEE. IN VIEW OF THE DECISION OF THE HON'BL E BOMBAY HIGH COURT IN THE CASE OF GOPAL C. SHARMA (SUPRA), IT I S ALSO CLEAR THAT THE PROFIT MOTIVE OF THE ASSESSEE IN SELLING THE LAND W ITHOUT ANYTHING MORE BY ITSELF CAN NEVER BE DECISIVE TO SAY THAT THE ASS ESSEE USED THE LAND FOR NON-AGRICULTURAL PURPOSES. WE MAY ALSO REFER TO A DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF N. SRINIVASA R AO V. SPECIAL COURT [2006] 4 SCC 214 WHERE IT WAS OBSERVED THAT T HE FACT THAT AGRICULTURAL LAND IN QUESTION IS INCLUDED IN URBAN AREA WITHOUT MORE, HELD NOT ENOUGH TO CONCLUDE THAT THE USER OF THE SA ME HAD BEEN ALTERED WITH PASSAGE OF TIME. THUS, THE FACT THAT T HE LAND IN QUESTION IN THE INSTANT CASE IS BOUGHT BY DEVELOPER CANNOT B E A DETERMINING FACTOR BY ITSELF TO SAY THAT THE LAND WAS CONVERTED INTO USE FOR NON- AGRICULTURAL PURPOSES. ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 74 13.1.8 RECENTLY THE KARNATAKA HIGH COURT IN THE CA SE OF CIT V. MADHUKUMAR N. (HUF) [2012] 208 TAXMAN 394/23 TAXMAN N.COM 341HELD AS FOLLOWS: '9. AN AGRICULTURAL LAND IN INDIA IS NOT A CAPITAL ASSET BUT BECOMES A CAPITAL ASSET IF IT IS THE LAND LOCATED UNDER SECTI ON 2(14)(III)(A) & (B) OF THE ACT, SECTION 2(14) (III) (A) OF THE ACT COVERS A SITUATION WHERE THE SUBJECT AGRICULTURAL LAND IS LOCATED WITHIN THE LIM ITS OF MUNICIPAL CORPORATION, NOTIFIED AREA COMMITTEE, TOWN AREA COM MITTEE, TOWN COMMITTEE, OR CANTONMENT COMMITTEE AND WHICH HAS A POPULATION OF NOT LESS THAN 10,000. 10. SECTION 2(14)(M)(B) OF THE ACT COVERS THE SITUA TION WHERE THE SUBJECT LAND IS NOT ONLY LOCATED WITHIN THE DISTANC E OF 8 KMS FROM THE LOCAL LIMITS, WHICH IS COVERED BY CLAUSE (A) TO SEC TION 2(14)(III) OF THE ACT, BUT ALSO REQUIRES THE FULFILMENT OF THE CONDIT ION THAT THE CENTRAL GOVERNMENT HAS ISSUED A NOTIFICATION UNDER THIS CLA USE FOR THE PURPOSE OF INCLUDING THE AREA UP TO 8 KMS, FROM THE MUNICIPAL LIMITS, TO RENDER THE LAND AS A 'CAPITAL ASSET. 11. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE SUBJECT LAND IS NOT LOCATED WITHIN THE LIMITS OF DASARAHALLI CITY MUNIC IPAL COUNCIL THEREFORE, CLAUSE (A) TO SECTION 2(14][III] OF THE ACT IS NOT ATTRACTED. 12. HOWEVER, THOUGH IT IS CONTENDED THAT IT IS LOCA TED WITHIN 8 KNITS,, WITHIN THE MUNICIPAL LIMITS OF DASARAHALLI CITY MUN ICIPAL COUNCIL IN THE ABSENCE OF ANY NOTIFICATION ISSUED UNDER CLAUSE (B) TO SECTION 2(14)(III) OF THE ACT, IT CANNOT BE LOOKED IN AS A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14)(III)(B) OF THE ACT ALSO AN D THEREFORE THOUGH THE TRIBUNAL MAY NOT HAVE SPELT OUT THE REASON AS T O WHY THE SUBJECT LAND CANNOT BE CONSIDERED AS A 'CAPITAL ASSET' BE G IVING THIS VERY ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 75 REASON, WE FIND THE CONCLUSION ARRIVED AT BY THE TR IBUNAL IS NEVERTHELESS THE CORRECT CONCLUSION.' 13.1.9 FURTHER THE KOLKATA BENCH OF THE TRIBUNAL I N THE CASE OF DY. CIT V. ARIJIT MITRA [2011] 48 SOT 544/16 TAXMANN.CO M 66(KOL.) HELD AS FOLLOWS: '7. FROM THE ABOVE, IT IS CLEAR THAT AGRICULTURAL L AND SITUATED IN AREAS LYING WITHIN A DISTANCE NOT EXCEEDING 8 KM FROM THE LOCAL LIMITS OF SUCH MUNICIPALITIES OR CANTONMENT BOARDS ARE COVERED BY THE AMENDED DEFINITIONS OF 'CAPITAL ASSET', IF SUCH AREAS ARE, HAVING REGARD TO THE EXTENT OF AND SCOPE FOR THEIR URBANIZATION AND OTHE R RELEVANT CONSIDERATIONS, IS NOTIFIED BY THE CENTRAL GOVERNME NT IN THIS BEHALF. CENTRAL GOVERNMENT IN EXERCISE OF SUCH POWERS HAS I SSUED THE ABOVE NOTIFICATION, AS AMENDED LATEST BY NOTIFICATION NO. 11186 DATED 28.12.1999 CLEARLY CLARIFIES THAT AGRICULTURAL LAND SITUATION IN RURAL AREAS, AREAS OUTSIDE THE MUNICIPALITY OR CANTONMENT BOARD ETC., HAVING A POPULATION OF NOT LESS THAN 10,000 AND ALSO BEYON D THE DISTANCE NOTIFIED BY CENTRAL GOVERNMENT FROM LOCAL LIMITS I. E. THE OUTER LIMITS OF ANY SUCH MUNICIPALITY OR CANTONMENT BOARD ETC., STI LL CONTINUES TO BE EXCLUDED FROM THE DEFINITION OF 'CAPITAL ASSET'. AC CORDINGLY, IN VIEW OF SUB-CLAUSE (B) OF SECTION 2(14)(III) OF THE ACT EVE N UNDER THE AMENDED DEFINITION OF EXPRESSION 'CAPITAL ASSET', THE AGRIC ULTURAL LAND SITUATED IN RURAL AREAS CONTINUES TO BE EXCLUDED FROM THAT DEFI NITION. AND AS IN THE PRESENT CASE, ADMITTEDLY, THE AGRICULTURAL LAND OF THE ASSESSEE IS OUTSIDE THE MUNICIPAL LIMITS OF RAJARHAT MUNICIPALI TY AND THAT ALSO 2.5 KM AWAY FROM THE OUTER LIMITS OF THE SAID MUNICIPAL ITY, ASSESSEE'S LAND DOES NOT COME WITHIN THE PURVIEW OF SECTION 2(14)(I II) EITHER UNDER SUB CLAUSE (A) OR (B) OF THE ACT, HENCE THE SAME CANNOT BE CONSIDERED AS ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 76 CAPITAL ASSET WITHIN THE MEANING OF THIS SECTION. H ENCE, NO CAPITAL GAIN TAX CAN BE CHARGED ON THE SALE TRANSACTION OF THIS LAND ENTERED BY THE ASSESSEE. ACCORDINGLY, WE QUASH THE ASSESSMENT ORDE R QUA CHARGING OF CAPITAL GAINS ON VERY JURISDICTION OF THE ISSUE IS QUASHED. THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED.' 14.1 IT WAS HELD IN THE CASE OF MANILAL SOMNATH ( SUPRA) AS FOLLOWS: 'UNDER THE INCOME-TAX ACT OF 1961, AGRICULTURAL LEN D SITUATED IN INDIA WAS EXCLUDED FROM THE DEFINITION OF 'CAPITAL ASSET' AND ANY GAIN FROM THE SALE THEREOF WAS NOT TO BE INCLUDED IN THE TOTAL INCOME OF AN ASSESSEE TINDER THE HEAD 'CAPITAL GAINS'. IN ORDER TO DETERMINE WHE THER A PARTICULAR LAND IS AGRICULTURAL LAND OR NOT ONE HAS TO FIRST FIND OUT IF IT IS BEING PUT TO ANY USE. IF IT IS USED FOR AGRICULTURAL PURPOSES THERE IS A PRESUMPTION THAT IT IS AGRICULTURAL LAND. IF IT IS USED FOR NON-AGRICULTUR AL PURPOSES THE PRESUMPTION IS THAT IT IS NON-AGRICULTURAL LAND. TH IS PRESUMPTION ARISING FROM ACTUAL USE CAN BE REBUTTED BY THE PRESENCE OF OTHER FACTORS. THERE MAY BE CASES WHERE LAND WHICH IS ADMITTEDLY NON-AGR ICULTURAL IS USED TEMPORARILY FOR AGRICULTURAL PURPOSES. THE DETERMIN ATION OF THE QUESTION WOULD, THEREFORE, DEPEND ON THE FACTS OF EACH CASE. 'THE ASSESSEE, HINDU, UNDIVIDED FAMILY, HAD OBTAINED SOME LAND ON A PARTITION IN 1939. FROM THAT TIME, UP TO THE TIME OF ITS SALE, AGRICUL TURAL OPERATIONS WERE CARRIED ON IN THE LAND. THERE WAS NO REGULAR ROAD T O THE LAND AND IT WAS WITH THE AID OF A TRACTOR THAT AGRICULTURAL OPERATI ONS WERE BEING CARRIED ON. THE LAND WAS INCLUDED WITHIN A DRAFT TOWN PLANNING SCHEME. THE ASSESSEE GOT PERMISSION OF THE COLLECTOR TO SELL TH E LAND FOR RESIDENTIAL PURPOSES AND SOLD IT. ON THE QUESTION WHETHER THE L AND WAS AGRICULTURAL LAND: HELD, THAT WHAT HAD TO BE CONSIDERED IS NOT WHAT TH E PURCHASER DID WITH THE LAND OR THE PURCHASER WAS SUPPOSED TO DO WITH T HE LAND, BUT WHAT WAS ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 77 THE CHARACTER OF THE LAND AT THE TIME WHEN THE SALE TOOK PLACE. THE FACT THAT THE LAND WAS WITHIN MUNICIPAL LIMITS OR THAT I T WAS INCLUDED WITHIN A PROPOSED TOWN PLANNING SCHEME WAS NOT BY ITSELF SUF FICIENT TO REBUT THE PRESUMPTION ARISING FROM ACTUAL USE OF THE LAND. TH E LAND HAD BEEN USED FOR AGRICULTURAL PURPOSES FOR A LONG TIME AND NOTHI NG HAD HAPPENED TILL THE DATE OF THE SALE TO CHANGE THAT CHARACTER OF THE LA ND. THE POTENTIAL NON- AGRICULTURAL VALUE OF THE LAND FOR WHICH A PURCHASE R MAY BE PREPARED TO PAY A LARGE PRICE WOULD NOT DETRACT FROM ITS CHARAC TER AS AGRICULTURAL LAND AT THE DATE OF THE SALE. THE LAND IN QUESTION WAS, THEREFORE, AGRICULTURAL LAND. 14.2 FURTHER THE WORD 'CAPITAL ASSET' IS DEFINED I N SECTION 2(14) TO MEAN PROPERTY OF ANY KIND HELD BY AN ASSESSEE, WHET HER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION, BUT DOES NOT INCLUDE '(III) AGRICULTURAL LAND IN INDIA, NOT BEING LAND S ITUATE (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURIS DICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNI CIPAL CORPORATION, NOTIFIED AREA COMMITTEE, TOWN AREA COM MITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAME) OR A CANTONME NT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN T EN THOUSAND ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIR ST DAY OF THE PREVIOUS YEAR; OR ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 78 (B) IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MOR E THAN EIGHT KILOMETRES, FROM THE LOCAL LIMITS OF ANY MUNICIPALI TY OR CANTONMENT BOARD REFERRED TO IN ITEM (A), AS THE CE NTRAL GOVERNMENT MAY, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANIZATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS, SPECIFY IN THIS BEHALF BY NOTIFICAT ION IN THE OFFICIAL GAZETTE;' 14.3 IT IS VERY CLEAR FROM THE ABOVE THAT THE GAI N ON SALE OF AN AGRICULTURAL LAND WOULD BE EXIGIBLE TO TAX ONLY WHE N THE LAND TRANSFERRED IS LOCATED WITHIN THE JURISDICTION OF A MUNICIPALITY. THE FACT THAT ALL THE EXPRESSIONS ENLISTED AFTER THE WORD MU NICIPALITY ARE PLACED WITHIN THE BRACKETS STARTING WITH THE WORDS 'WHETHE R KNOWN AS' CLEARLY INDICATES THAT SUCH EXPRESSIONS ARE USED TO DENOTE A MUNICIPALITY ONLY, IRRESPECTIVE OF THE NAME BY WHICH SUCH MUNICI PALITY IS CALLED. THIS FACT IS FURTHER SUBSTANTIATED BY THE PROVISION S CONTAINED UNDER CLAUSE (B) WHEREIN IT HAS BEEN CLEARLY PROVIDED THA T THE AUTHORITY REFERRED TO IN CLAUSE (A) WAS ONLY MUNICIPALITY. ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 79 14.4 FURTHER IT IS NOBODY'S CASE THAT THE PROPER TY FALLS WITHIN ANY AREA WHICH IS COMPRISED WITHIN THE JURISDICTION OF A MUNICIPALITY OR CANTONMENT BOARD OR WHICH HAS A POPULATION OF NOT L ESS THAN 10,000 ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PRE VIOUS YEAR. IN OTHER WORDS, THE LAND DOES NOT FALL IN SUB-CLAUSE (A) OF SECTION 2(14)(III) OF THE ACT AS THE LAND IS OUTSIDE OF ANY MUNICIPALITY. FURTHER WE HAVE TO SEE WHETHER THE LAND FALLS IN CLAUSE (B) OF SECTION 2(14)(III). THIS SECTION PRESCRIBES THAT ANY AREA WITHIN SUCH DISTAN CE, NOT BEING MORE THAN 8 KM FROM THE LOCAL LIMIT OF ANY MUNICIPALITY OR CANTONMENT BOARD AS REFERRED TO IN SUB-CLAUSE (A) OF SECTION 2(14)(I II) OF THE ACT, AS THE CENTRAL GOVERNMENT MAY, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANISATION OF THAT AREA AND OTHER RELEVANT C ONSIDERATIONS, SPECIFY IN THIS BEHALF BY NOTIFICATION IN THE OFFIC IAL GAZETTE. 15.1 WE HAVE CAREFULLY GONE THROUGH THE NOTIFICATI ON ISSUED BY THE CENTRAL GOVERNMENT U/S. 2(1A)(C) PROVISO (II)(B) AN D 2(14)(3B) VIDE NO. 9447 (F. NO. 164/(3)/87/ITA-I) DATED 6TH JANUAR Y, 1994 AS AMENDED BY NOTIFICATION NO. 11186 DATED 28TH DECEMB ER, 1999. IN ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 80 THE SCHEDULE ANNEXED TO THE NOTIFICATION DATED 6.1. 1994 WHEREIN MENTIONED THAT THE AREAS UP TO A DISTANCE OF 8 KM F ROM THE MUNICIPAL LIMITS IN ALL DIRECTIONS. IN THE NOTIFICATION 11186 DATED 28.12.1999 THERE IS NO ENTRY RELATING TO THIS PROPERTY. IT IS CLEAR FROM THESE NOTIFICATIONS THAT AGRICULTURAL LAND SITUATED IN AR EAS LYING WITHIN A DISTANCE NOT EXCEEDING 8 KM FROM THE LOCAL LIMITS O F CHENNAI CITY CORPORATION IS COVERED BY THE AMENDED DEFINITIONS O F 'CAPITAL ASSET'. CENTRAL GOVERNMENT IN EXERCISE OF SUCH POWERS HAS I SSUED THE ABOVE NOTIFICATION, AS AMENDED LATEST BY NOTIFICATION NO. 11186 DATED 28.12.1999 CLEARLY CLARIFIES THAT AGRICULTURAL LAND SITUATED IN RURAL AREAS, AREAS OUTSIDE THE MUNICIPALITY OR CANTONMENT BOARD ETC., HAVING A POPULATION OF NOT LESS THAN 10,000 AND ALS O BEYOND THE DISTANCE NOTIFIED BY CENTRAL GOVERNMENT FROM LOCAL LIMITS I.E. THE OUTER LIMITS OF ANY SUCH MUNICIPALITY OR CANTONMENT BOARD ETC., STILL CONTINUES TO BE EXCLUDED FROM THE DEFINITION OF 'CA PITAL ASSET'. ACCORDINGLY, IN VIEW OF SUB-CLAUSE (B) OF SECTION 2 (14)(III) OF THE ACT EVEN UNDER THE AMENDED DEFINITION OF EXPRESSION 'CA PITAL ASSET', THE AGRICULTURAL LAND SITUATED IN RURAL AREAS CONTINUES TO BE EXCLUDED FROM THAT DEFINITION. AND AS IN THE PRESENT CASE, ADMITT EDLY, THE AGRICULTURAL ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 81 LAND OF THE ASSESSEE IS OUTSIDE THE MUNICIPAL LIMIT S OF CHENNAI CITY CORPORATION AND THAT ALSO 8 KM AWAY FROM THE OUTER LIMITS OF THIS MUNICIPALITY, ASSESSEE'S LAND DOES NOT COME WITHIN THE PURVIEW OF SECTION 2(14)(III) EITHER UNDER SUB CLAUSE (A) OR ( B) OF THE ACT, HENCE THE SAME CANNOT BE CONSIDERED AS CAPITAL ASSET WITH IN THE MEANING OF THIS SECTION. HENCE, NO CAPITAL GAIN TAX CAN BE CHA RGED ON THE SALE TRANSACTION OF THIS LAND ENTERED BY THE ASSESSEE. T HIS IS SUPPORTED BY THE ORDER OF KOLKATA BENCH OF THIS TRIBUNAL IN THE CASE OF ARIJIT MITRA (SUPRA), HARISH V. MILANI V. JT. CIT [2008] 114 ITD 428(PUNE) AND M.S. SRINIVAS NAICKER V. ITO [2007] 292 ITR 481/169 TAXMAN 255(MAD.). BY BORROWING THE MEANING FROM THE ABOVE SECTION, WE ARE NOT ABLE TO APPRECIATE THAT THE LAND FALLS WITHIN T HE TERRITORIAL LIMIT OF ANY MUNICIPALITY WITHOUT NOTIFICATION OF CENTRAL GO VERNMENT AS HELD BY THE KARNATAKA HIGH COURT IN THE CASE OF MADHUKUMAR N. (HUF) (CITED SUPRA). 15.2 FROM THE FACTS AND CIRCUMSTANCES OF THE CASE, AS NARRATED BEFORE US, IT IS IMPORTANT TO NOTE THAT WHAT WAS TH E INTENTION OF THE ASSESSEES AT THE TIME OF ACQUIRING THE LAND OR INTE RVAL ACTION BY THE ASSESSEE BETWEEN THE PERIOD FROM PURCHASE AND SALE OF THE LAND AND ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 82 THE RELEVANT IMPROVEMENT/DEVELOPMENT TAKEN PLACE DU RING THIS TIME IS RELEVANT FOR DECIDING THE ISSUE WHETHER TRANSACTION WAS IN THE NATURE OF TRADE. THOUGH INTENTION SUBSEQUENTLY FORMED MAY BE TAKEN INTO ACCOUNT, IT IS THE INTENTION AT THE INCEPTION IS CR UCIAL. ONE OF THE ESSENTIAL ELEMENTS IN AN ADVENTURE OF THE TRADE IS THE INTENTION TO TRADE; THAT INTENTION MUST BE PRESENT AT THE TIME O F PURCHASE. THE MERE CIRCUMSTANCES THAT A PROPERTY IS PURCHASED IN THE HOPE THAT WHEN SOLD LATER ON IT WOULD LEAVE A MARGIN OF PROFI T, WOULD NOT BE SUFFICIENT TO SHOW, AN INTENTION TO TRADE AT THE IN CEPTION. IN A CASE WHERE THE PURCHASE HAS BEEN MADE SOLELY AND EXCLUSI VELY WITH THE INTENTION TO RESELL AT A PROFIT AND THE PURCHASER H AS NO INTENTION OF HOLDING THE PROPERTY FOR HIMSELF OR OTHERWISE ENJOY ING OR USING IT, THE PRESENCE OF SUCH AN INTENTION IS A RELEVANT FACTOR AND UNLESS IT IS OFFSET BY THE PRESENCE OF OTHER FACTORS IT WOULD RA ISE AS STRONG PRESUMPTION THAT THE TRANSACTION IS AN ADVENTURE IN THE NATURE OF TRADE. EVEN SO, THE PRESUMPTION IS NOT CONCLUSIVE A ND IT IS CONCEIVABLE THAT, ON CONSIDERING ALL THE FACTS AND CIRCUMSTANCES IN THE CASE, THE COURT MAY, DESPITE THE SAID INITIAL I NTENTION, BE INCLINED TO HOLD THAT THE TRANSACTION WAS NOT AN ADVENTURE I N THE NATURE OF ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 83 TRADE. THE PRESUMPTION MAY BE REBUTTED. IN THE PRES ENT CASE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IT CANNOT BE CONSIDERED AS AN ADVENTURE IN THE NATURE OF TRADE. THE INTENTION OF THE ASSESSEE FROM THE INCEPTION WAS TO CARRY ON AGR ICULTURAL OPERATIONS AND EVEN THERE WAS NO INTENTION TO SELL THE LAND IN FUTURE AT THAT POINT OF TIME. IT WAS DUE TO THE BOOM IN REAL ESTATE MARKET CAME INTO PICTURE AT A LATER STAGE, THE ASSESSEE HAS SOL D THE LAND. MERELY BECAUSE OF THE FACT THAT THE LAND WAS SOLD FOR PROF IT, IT CANNOT BE HELD THAT INCOME ARISING FROM THE SALE OF LAND WAS TAXAB LE AS PROFIT ARISING FROM THE ADVENTURE IN THE NATURE OF TRADE. THE PERI OD OF HOLDING SHOULD NOT SUGGEST THAT THE ACTIVITY WAS AN ADVENTU RE IN THE NATURE OF TRADE. 15.3 FURTHER, WE MAKE IT CLEAR THAT WHEN THE LAND WHICH DOES NOT FALL UNDER THE PROVISIONS OF SECTION 2(14)(III) OF THE I T ACT AND AN ASSESSEE WHO IS ENGAGED IN AGRICULTURAL OPERATIONS IN SUCH AGRICULTURAL LAND AND ALSO BEING SPECIFIED AS AGRIC ULTURAL LAND IN REVENUE RECORDS, THE LAND IS NOT SUBJECTED TO ANY C ONVERSION AS NON- AGRICULTURAL LAND BY THE ASSESSEE OR ANY OTHER CONC ERNED PERSON, TRANSFERS SUCH AGRICULTURAL LAND AS IT IS AND WHERE IT IS BASIS, IN SUCH ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 84 CIRCUMSTANCES, IN OUR OPINION, SUCH TRANSFER LIKE T HE CASE BEFORE US CANNOT BE CONSIDERED AS A TRANSFER OF CAPITAL ASSET OR THE TRANSACTION RELATING TO SALE OF LAND WAS NOT AN ADVENTURE IN TH E NATURE OF TRADE SO AS TO TAX THE INCOME ARISING OUT OF THIS TRANSACTIO N AS BUSINESS INCOME. 16.1 IN ITA NOS.481 & 485/MDS./2016 FOR ASSESSMEN T YEAR 2008-9 & ITA NO.482/MDS./2016 FOR ASSESSMENT YEAR 2012-13, THE REVENUE HAS RAISED SIMILAR GROUND WITH REGARD TO DELETION O F ADDITION MADE BY THE AO TOWARDS INCOME FROM BUSINESS IN REAL ESTATE. 16.2 THE FACTS OF THE ISSUE FOR ASSESSMENT YEAR 2 008-09 ARE THAT THE ASSESSEE HAD PURCHASED THE LAND SITUATED AT KAL LAPIRANPURAM VILLAGE, MADHURANTAKAM TALUK, KANCHEEPURAM DISTRICT FROM THREE PARTIES ON 10.02.2006, MEASURING 2.71 ACRES, THE T OTAL PURCHASE COST ` 19,23,884/- INCLUDING REGISTRATION CHARGES. THE SAI D LAND WAS SOLD ON 12.06.2007 FOR THE SALE CONSIDERATION OF ` 34,27,200/- TO M/S.CHENNAI BUSINESS PARK PVT. LTD. THE AO BROUGHT INTO TAX A SUM OF ` 15,03,316/- AS BUSINESS INCOME FROM REAL ESTATE. ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 85 16.3. IN THE ASSESSMENT YEAR 2012-13, THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAS PURCHASED A LAND SITUATED AT ERUMB EDU VILLAGE ON 17.05.2006 FOR CONSIDERATION OF ` 4,36,485/- INCLUDING REGISTRATION CHARGES. THE SAID LAND WAS SUBJECT MATTER OF COMPU LSORY ACQUISITION BY THE GOVERNMENT OF TAMILNADU VIDE INTIMATION DATE D 23.07.2008. THE ASSESSEE RECEIVED COMPENSATION OF ` 55.3 LAKHS ON 02.09.2011. THE AO BROUGHT THE INCOME OF ` 50,93,515/- AS INCOME FROM REAL ESTATE BUSINESS. 16.4. AGAINST THESE TWO ASSESSMENT YEARS, THE ASSE SSEE WENT IN APPEALS BEFORE THE LD.CIT(A). ON APPEAL, THE LD.CI T(A) DELETED THE ADDITION HOLDING THAT THE ASSESSEE HAS TRANSFERRED ONLY AGRICULTURAL LAND IN TERMS OF SEC.2(14)(III) OF THE ACT. AGAINS T THIS, THE REVENUE IS IN APPEAL BEFORE US. 16.5. SINCE THE ISSUE IN THOSE TWO APPEALS FOR ASS ESSMENT YEARS 2008-09 & 2012-13 IS SIMILAR AS IN ITA NO.482/MDS./ 2013 FOR ASSESSMENT YEAR 2009-10 AS WE DISCUSSED IN EARLIER PARA NO.13, WE ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 86 ARE INCLINED TO CONFIRM THE DELETION OF ADDITION BY THE LD.CIT(A). ACCORDINGLY, THIS GROUND OF THE REVENUE IN BOTH THE SE APPEALS IS DISMISSED. 17. ONE MORE GROUND IN ITANO.2361/MDS/15 IS WITH REGARD TO LEVY OF INTEREST U/S.234A & 234B OF THE ACT. FURTHER, I NTEREST UNDER SECTION 234A IS CHARGEABLE FROM THE DATE OF EXPIRY OF THE N OTICE PERIOD GIVEN UNDER SECTION 153A TO THE DATE OF COMPLETING THE AS SESSMENT UNDER SECTION 143(3) R.W.S. 153A AS HELD BY THE TRIBUNAL IN THE CASE OF ACIT V. VN. DEVADOSS [93 DTR 73 CHENNAI (TRIB.). THE INT EREST UNDER SECTION 234B IS TO BE LEVIED ONLY ON THE ADDITIONAL TAX LEVIED ON THE ENHANCED INCOME DETERMINED UNDER SECTION 143(3) R.W .S. 153A. THEREFORE, THE PERIOD OF CHARGING OF INTEREST SHOUL D BE FROM THE DATE OF DETERMINATION OF INCOME UNDER SECTION 143(1) OR 143(3) TO THE DETERMINATION OF ENHANCED INCOME UNDER SECTION 143( 3) R.W.S. 153A OF THE ACT. ITA NOS.2356 TO 2362/MDS/2015 ITA NOS.480 TO 486/MDS./2016 87 18. IN THE APPEALS OF THE ASSESSEE IN ITA NO.2356 TO 2361/MDS./15 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND IT A NOS.2362/MDS./15 IS ALLOWED AND ALL THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON WEDNESDAY , THE 27 TH OF APRIL,2016 AT CHENNAI. SD/- SD/- ( . !' ) ( DUVVURU RL REDDY ) ) ( ( $ % & ' ) ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 27 TH APRIL,2016 . K S SUNDARAM. ) * + ,- . - /COPY TO: 1. /0 /APPELLANT 2. +1/0 /RESPONDENT 3. 2 () /CIT(A) 4. 2 /CIT 5. -34 + 5 /DR 6. 4' 6 /GF