T.S.R.Khannaiyann, CHENNAI V. DCIT, Coimbatore

ITA 804/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8148 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 10-10-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 31-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SASIKUMAR IRS
• Keywords: Capital asset; Business income; Charitable institution; Question of law
• Section: 2(14); 63

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , ! . '#'$ , % !& ' [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./I.T.A. NO. 804/MDS/2016 / ASSESSMENT YEAR : 2011-2012 SHRI. T.S.R. KHANNAIYANN, 67, AVARAM PALAYAM ROAD, K.R. PURAM, COIMBATORE 641 018. [PAN AFZPK 7832C ] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 2, COIMBATORE. ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI. SAROJ KUMAR PARIDA, ADV /RESPONDENT BY : SHRI. SASIKUMAR, IRS, JCIT. /DATE OF HEARING : 10-10-2016 ! /DATE OF PRONOUNCEMENT : 28-10-2016 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER IN THIS APPEAL FILED BY THE ASSESSEE, IT IS AGGR IEVED ON HIS GAINS FROM SALE OF LAND BEING TAXED UNDER THE HEAD INCOME FROM BUSINESS AND ALSO TREATING ONE SUCH SALE AS NOT O F AN AGRICULTURAL LAND. ASSESSEE HAD CONSIDERED ALL THE GAINS, EXCEP T THAT ARISING ON ITA NO.804/MDS/2016 :- 2 -: SALE OF A LAND CLAIMED AS AGRICULTURAL, UNDER THE H EAD CAPITALS GAINS, WHEREAS THE LD. ASSESSING OFFICER CONSIDERED THE SU RPLUS AS INCOME FROM BUSINESS. 2. FACT APROPOS ARE THAT ASSESSEE CARRYING ON BUSINESS OF MANUFACTURING AND SELLING TRANSFORMERS, HAD FILED HIS RETURN FOR THE IMPUGNED ASSESSMENT YEAR DISCLOSING TOTAL INCOME OF ?27,34,885/- AND AGRICULTURAL INCOME OF ?18,10,750/-. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE LD. ASSESSING OFFI CER THAT ASSESSEE HAD DECLARED LONG TERM CAPITAL GAINS OF ?33,52,365/ - ON SALE OF A LAND AT SOWRIPALAYAM AND CLAIMED THE GAINS ON SALE OF AN OTHER LAND AT OTHAKALMANDAPAM FOR ?5,26,80,000/- AS EXEMPT. THE LATTER SALE WAS EFFECTED TO M/S. HINDUSTAN EDUCATIONAL AND CHARITAB LE TRUST WHERE THE ASSESSEE WAS THE SOLE TRUSTEE. THE LAND WHICH WAS SOLD TO M/S. HINDUSTAN EDUCATIONAL AND CHARITABLE TRUST MEASURED 4.34 ACRES. IT WAS PURCHASED BY THE ASSESSEE ON 28.06.1995 FOR A C ONSIDERATION OF ?89,915/-. ASSESSEE MOORED ITS CLAIM FOR EXEMPTION BASED ON A PLEA THAT THE SAID LAND WAS REGISTERED AS AGRICULTURAL LAND AND ASSESSED TO LAND REVENUE AS AGRICULTURAL PROPERTY. HOWEVER, AS SESSING OFFICER WAS OF THE OPINION THAT LAND SOLD WAS CLASSIFIED BY THE REGISTRATION DEPARTMENT AS INDUSTRIES TYPE II AND THE GUIDELINE VALUE OF THE SAID ITA NO.804/MDS/2016 :- 3 -: LAND WAS MUCH LOWER THAN THE CONSIDERATION OF ?5, 26,80,000/- RECEIVED BY THE ASSESSEE FROM M/S. HINDUSTAN EDUCA TIONAL AND CHARITABLE TRUST. 3. ASSESSING OFFICER THEREAFTER MADE A STUDY OF THE VA RIOUS LAND TRANSACTIONS DONE BY THE ASSESSEE. ACCORDING TO HIM, IN PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2006-2007 ASSESSEE HAD PURCHASED AGRICULTURAL LAND AT K.R PURAM AND TRICHENGODE FOR ?3,67,00,000/- AND ALSO MADE INVESTMENT IN A LAND HELD BY M/S. STA NDARD MOTORS LTD, AND FURTHER EFFECTED SALE OF A LAND WORTH ?74,00,0 00/-. AGAIN, AS PER ASSESSING OFFICER DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007-2008 ASSESSEE HAD GIVEN ADVANCE OF ?2,41,11,52 2/- FOR PURCHASE OF LAND AND ALSO SOLD 4.28 ACRES AND 5.10 ACRES OF LANDS FOR ?22,81,450/- AND ?26,00,000/- RESPECTIVELY. AS PER ASSESSING OFFICER, ASSESSEE HAD ALSO EFFECTED SALE OF LAND BELONGING TO ONE M/S. GANESHAN GINNING CO. LAND TO M/S. DLF RETAIL DEVELO PERS DURING THE VERY SAME PREVIOUS YEAR. AGAIN AS PER THE LD. ASSE SSING OFFICER, ASSESSEE HAD DURING THE PREVIOUS YEAR RELEVANT TO A SSESSMENT YEAR 2009-2010 SOLD A PROPERTY TO M/S. HINDUSTAN EDUCAT IONAL AND CHARITABLE TRUST FOR A CONSIDERATION OF ?10,67,00,0 00/-. THIS PROPERTY, AS PER THE LD. ASSESSING OFFICER, WAS PURCHASED BY THE ASSESSEE IN 2003 AT A COST OF ?68,00,000/-. ACCORDING TO HIM, ALL THESE ITA NO.804/MDS/2016 :- 4 -: TRANSACTIONS WENT TO PROVE THAT ASSESSEE WAS IN TH E BUSINESS OF PURCHASING AND SELLING LAND. 4. ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE THAT LAND AT OTHAKALMANDAPAM SOLD TO M/S. HINDUSTHAN EDUCATIONAL AND CHARITABLE TRUST WAS AGRICULTURAL I N NATURE. ACCORDING TO HIM, THIS LAND WAS NOT ORDINARILY USED FOR AGRIC ULTURAL PURPOSE AND THE INCOME DERIVED FROM AGRICULTURAL OPERATIONS DID NOT BEAR ANY REASONABLE PROPORTION TO THE INVESTMENT. AS PER THE ASSESSING OFFICER, THIS LAND WAS SITUATED IN DEVELOPED AREA AND NATURE OF THE SURROUNDING LAND INDICATED THAT IT WAS NON AGRICUL TURAL IN NATURE. FURTHER, AS PER ASSESSING OFFICER THIS LAND WAS RE ADY FOR DEVELOPMENT AND GUIDELINE VALUE OF THE LAND WAS FIXED BY THE RE GISTRATION DEPARTMENT ON SQUARE FOOT BASIS NOT ON ACREAGE BASI S. IN THE OPINION OF LD. ASSESSING OFFICER, NO PERSON WOULD HAVE PURC HASED A LAND AT THE PRICE AT WHICH IT WAS SOLD, FOR DOING ANY AGRICULTU RAL OPERATION. RELYING ON THE HONBLE APEX COURT DECISION IN THE CASE OF SMT. SAARIFABIBI MOHAMED IBRAHIM AND OTHERS VS. CIT (1993) 204 ITR 6 31, THE ASSESSING OFFICER HELD THAT THE LAND SOLD BY THE AS SESSEE TO M/S. HINDUSTAN EDUCATIONAL AND CHARITABLE TRUST AT OTHAK ALMANDAPAM WAS NOT AGRICULTURAL IN NATURE. LD. ASSESSING OFFICER ALSO RELIED ON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. ITA NO.804/MDS/2016 :- 5 -: SIDDARTHA DESAI (139 ITR 628). ACCORDING TO HIM IF THE YARDSTICKS LAID DOWN BY THEIR LORDSHIP IN THE ABOVE JUDGMENT, WAS APPLIED, THE LAND SOLD BY THE ASSESSEE TO M/S. HINDUSTAN EDUCATI ONAL AND CHARITABLE TRUST COULD NEVER BE CONSIDERED AS AGRICULTURAL IN NATURE. 5. IN ANY CASE AS PER ASSESSING OFFICER FREQUENCY OF THE TRANSACTIONS INDULGED BY THE ASSESSEE BY WAY OF P URCHASE AND SALE OF LAND CLEARLY ESTABLISHED HIS INTENTION TO EARN PROF IT THROUGH AN ORGANIZED ACTIVITY. AS PER ASSESSING OFFICER LAND TRANSACTIONS DONE BY THE ASSESSEE IN EARLIER YEARS, ALONGWITH TRANSACTI ONS ENTERED DURING THE RELEVANT PREVIOUS YEAR, DEMONSTRATED ASSESSEES INTENTION TO DO BUSINESS OF PURCHASING AND SELLING OF LAND. THUS ACCORDING TO HIM, IRRESPECTIVE OF THE QUESTION WHETHER THE LAND SOLD WAS AGRICULTURAL OR NOT, THE PROFITS ARISING ON SALE HAD TO BE ASSESSE D UNDER HEAD BUSINESS INCOME. THUS, HE CONSIDERED SURPLUS ARIS ING TO THE ASSESSEE ON SALE OF LAND AT SOWRIPALAYAM WHICH ASSESSEE PLAC ED UNDER THE HEAD CAPITAL GAINS AND SURPLUS ARISING TO THE ASSESSEE ON SALE OF OTHAKALMANDAPAM WHICH ASSESSEE CLAIMED EXEMPT, AS PROFITS ON SALE OF LAND UNDER THE HEAD INCOME FROM BUSINESS. ASSESS MENT WAS COMPLETED ACCORDINGLY. 6. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE COMMISSI ONER OF INCOME TAX (APPEALS). AS PER ASSESSEE, 4.34 ACR ES OF LAND SOLD TO ITA NO.804/MDS/2016 :- 6 -: M/S. HINDUSTAN EDUCATIONAL AND CHARITABLE TRUST SIT UATED AT OTHAKALMANDPAM WAS PURELY AGRICULTURAL IN NATURE. CLAIM OF THE ASSESSEE WAS THAT GOVERNMENT RECORDS PROVED THE AGR ICULTURAL NATURE OF LANDS. ASSESSEE SUBMITTED THAT LAND WAS SITUATED FOURTEEN KILOMETERS FROM THE CITY LIMIT OF COIMBATORE CORPO RATION. RELYING ON U/S.2(14)(III) OF THE ACT, ASSESSEE ARGUED THAT THE SAID LAND HAD TO BE CONSIDERED AS EXCLUDED FROM THE DEFINITION OF CAPI TAL ASSETS, SINCE IT WAS AGRICULTURAL IN NATURE. FURTHER SUBMISSION OF THE ASSESSEE WAS THAT KIST PAYMENTS AND LAND RECORD ALSO PROVED T HE NATURE OF LAND. ASSESSEE ALSO DISPUTED THE FINDINGS OF THE ASSESSIN G OFFICER THAT LAND WAS CLASSIFIED AS INDUSTRIAL TYPE II BY THE REGISTR ATION DEPARTMENT. ARGUMENT OF THE ASSESSEE BEFORE COMMISSIONER OF INC OME TAX (APPEALS) WAS THAT ON APPLYING THE THIRTEEN INDICA TORS, LAID DOWN BY APEX COURT IN THE CASE OF SMT. SARIFABIBI MOHMED IBRAHIM (SUPRA ), IT WAS CLEAR THAT LAND SOLD WAS AGRICULTURAL IN NATUR E. ACCORDING TO HIM, ASSESSING OFFICER HAD COMMITTED A FACTUAL MISTAKE. 7. AS FOR THE VIEW TAKEN BY THE LD. ASSESSING OFFICER THAT THE TRANSACTIONS WERE IN THE NATURE OF BUSINESS, ASSES SEE SUBMITTED BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS) THA T THE SERIES OF TRANSACTIONS IN EARLIER YEARS HIGHLIGHTED BY THE AS SESSING OFFICER FOR REACHING THE ABOVE CONCLUSION, WAS EITHER FACTUALL Y INCORRECT OR ITA NO.804/MDS/2016 :- 7 -: WRONGLY INTERPRETED. ACCORDING TO THE ASSESSEE THO UGH IT HAD ATTEMPTED TO MAKE CERTAIN INVESTMENTS IN THE LAND OF M/S. STANDARD MOTORS LTD DURING THE PREVIOUS YEAR RELEVANT TO AS SESSMENT YEAR 2006-07, IT DID NOT FRUCTIFY SINCE THE SALE WAS CAN CELLED BY HIGH COURT. FURTHER, AS PER ASSESSEE ADVANCE OF ?241.11 LAKHS GIVEN FOR PURCHASE OF PROPERTY DURING THE PREVIOUS YEAR RELEVANT TO AS SESSMENT YEAR 2007-2008 WAS NOT BE RECKONED SINCE THERE WAS NO AC TUAL PURCHASE. COMING TO THE SALE OF LAND OF M/S.GANESHA GINNING C OMPANY LIMITED TO M/S. DLF RETAIL DEVELOPERS SUBMISSION OF THE ASS ESSEE WAS THAT THERE WAS NO TRANSACTION OF LAND BUT ONLY TRANSFER OF EQUITY SHARES. ASSESSEE ALSO POINTED OUT TO THE LD. COMMISSIONER O F INCOME TAX (APPEALS) THAT GAINS ARISING ON SALE OF LAND FOR PR EVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007-08 WAS CONSIDERED FOR ASS ESSMENT ONLY UNDER THE HEAD CAPITAL GAINS. AS PER ASSESSEE, LAN D WAS HELD BY HIM AS INVESTMENTS AND NOT AS STOCK IN TRADE. RELYING ON THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. E. UDAYAKUMAR (2006) (284 ITR 511 ) ASSESSEE ARGUED THAT PURPOSE FOR WHICH THE PURC HASER INTENDED TO USE THE LAND WAS NOT RELEVANT FOR DETER MINING THE NATURE OF THE LAND SOLD. 8. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE ARGUMENTS OF THE ASSESSEE WAS OF TH E OPINION THAT ON ITA NO.804/MDS/2016 :- 8 -: SALE OF 4.34 ACRES OF LAND AT A PRICE OF ?5,26,80,0 00/- TO M/S. HINDUSTAN EDUCATIONAL AND CHARITABLE TRUST, WHERE A SSESSEE WAS THE SOLE TRUSTEE, HE HAD EARNED MUCH HIGHER PROFIT THAN HE WOULD HAVE RECEIVED IF THE SALE WAS EFFECT AT THE GUIDELINE VA LUE. FURTHER AS PER LD. COMMISSIONER OF INCOME TAX (APPEALS) ON APPLYIN G THE TESTS LAID DOWN BY THE APEX COURT IN THE CASE OF SMT. SARIFABIBI MOHMED IBRAHIM (SUPRA ), IT WAS CLEAR THAT THE LAND SOLD WAS NOT AGRICULT URAL IN NATURE. THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) CONCLUDED THAT LAND SOLD BY THE ASSESSEE AT SOWRIPALAYAM WAS SIT UATED IN A RESIDENTIAL AREA AND LAND SOLD BY THE ASSESSEE IN OTHAKALMANDAPAM WAS IN A DEVELOPED AREA. FURTHER AS PER LD. COMMIS SIONER OF INCOME TAX (APPEALS) NO AGRICULTURIST WOULD HAVE OFFERED T HE PRICE FOR WHICH IT WAS SOLD. RELYING ON THE JUDGMENT OF HONBLE BOMB AY HIGH COURT IN THE CASE OF CIT VS. GOPAL RAMNARAYAN KASAT (2010) 328 ITR 559, LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT EVEN AN ISOLATED TRANSACTION COULD BE CONSIDERED AS ADVENTURE IN THE NATURE OF TRADE. AS PER LD.CIT(A) ONCE A CONTINUITY IN TRANSACTIONS WAS ESTABLISHED IT HAD TO BE CONSIDERED AS A BUSINESS ACTIVITY ONLY. F URTHER, AS PER LD. COMMISSIONER OF INCOME TAX (APPEALS) EVEN DURING TH E PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2009-2010 ASSESSEE HAD SOLD A PROPERTY WITH GUIDELINE VALUE OF ?68 LAKHS TO THE VERY SAME TRUST, FOR A PRICE OF ?10.67 CRORES. ACCORDING TO HIM, LD. ASSESSING OFFI CER HAD TAKEN A ITA NO.804/MDS/2016 :- 9 -: RIGHT VIEW THAT LAND OTHAKALMANDAPAM SOLD TO THE TRUST WAS NON AGRICULTURAL LAND AND THE TRANSACTIONS HAD TO BE C ONSIDERED UNDER THE HEAD INCOME FROM BUSINESS. HE THUS CONFIRMED THE AC TION OF THE LD. ASSESSING OFFICER. 9. NOW BEFORE US, LD. AUTHORISED REPRESENTATIVE STRONG LY ASSAILING THE ORDERS OF THE LOWER AUTHORITIES BELOW SUBMITTED THAT LAND AT OTHAKALMANDAPAM WAS WELL BEYOND 8KM PERIPHERY O F COIMBATORE CORPORATION. AS PER LD. AUTHORISED REPRESENTATIVE A DANGAL, CHITTA AS WELL AS OTHER REVENUE RECORDS CLEARLY PROVED THE LA ND TO BE AGRICULTURAL. RELIANCE WAS PLACED ON PAPER BOOK PA GE NO.102 TO 111 IN THIS REGARD. FURTHER, AS PER LD. AUTHORISED REPRES ENTATIVE, THE REGISTRATION DEPARTMENT HAD NEVER CLASSIFIED THE LA ND AS INDUSTRIAL IN NATURE. RELIANCE WAS PLACED ON CERTIFICATE OF REGI STRATION DEPARTMENT PLACED AT PAGE NO.101 IN THIS REGARD. THE MAIN THR UST OF THE ARGUMENT OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT THE LAND WAS ALL ALONG USED FOR AGRICULTURAL PURPOSE AND CERTIFICATE FROM REVENUE AUTHORITIES CONFIRMED THIS. AS PER LD. AUTHORISED REPRESENTATI VE ASSESSEE HAD HELD THE LAND FOR LONG PERIOD OF SIXTEEN YEARS BEFO RE SELLING IT. IT WAS NOT A CASE OF PURCHASE AND SALE OF LAND IN A CONTIN UING SERIES OF TRANSACTIONS. THE TRANSACTIONS OF LAND HIGHLIGHTED BY THE ASSESSING OFFICER, WERE NOT A PART OF ANY PRE-CONCEIVED SERI ES. AS PER LD. ITA NO.804/MDS/2016 :- 10 -: AUTHORISED REPRESENTATIVE, WITHOUT VERIFYING THE LO CATION OF THE LAND ASSESSING OFFICER HAD COME TO A WRONG CONCLUSION TH AT IT WAS SITUATED IN A DEVELOPED AREA. LAND SOLD, AS PER LD. AUTHORIS ED REPRESENTATIVE, WAS VALUED BY REGISTERED AUTHORITY ON ACREAGE BASIS NOT ON SQUARE FOOT BASIS. FURTHER AS PER LD. AUTHORISED REPRESENTATIV E PURPOSE FOR WHICH THE PURCHASER INTENTED TO USE THE LAND WAS NOT REL EVANT, WHEN ALL OTHER FACTORS CLEARLY PROVED THAT THE LAND SOLD WAS AGRICULTURAL IN NATURE. 10. ASSAILING THE VIEW TAKEN BY THE LOWER AUTHORITIES THAT THE TRANSACTIONS FELL UNDER THE HEAD INCOME FROM BUSINE SS, THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT LAND WAS H ELD BY THE ASSESSEE ONLY AS AN INVESTMENT AND SO, CLASSIFIED IN ITS BALANCE SHEET. AS PER LD. AUTHORISED REPRESENTATIVE ASSESSEE NEVER MADE ANY IMPROVEMENT IN THE LAND SOLD. RELIANCE WAS ONCE AGA IN PLACED IN THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE O F E. UDAYAKUMAR (SUPRA). LD. AUTHORISED REPRESENTATIVE ALSO SUBMITTED THAT EACH ASSESSMENT YEAR HAD TO BE CONSIDERED SEPARATELY AND FEW NUMBER OF TRANSACTIONS OF SALE OF LAND OVER NUMBER OF YEARS C OULD NOT CONVERT IT TO A BUSINESS VENTURE. LD. AUTHORISED REPRESENTATI VE STRONGLY PLACED RELIANCE ON THE DECISION OF JURISDICTIONAL HIGH COU RT IN THE CASE OF MRS. ITA NO.804/MDS/2016 :- 11 -: SAKUNTHALA VEDACHALAM VS. MRS. VANITHA MANICKAVASAG AM VS. (2014) 369 ITR 558 . 11. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT THE SERIES OF TRANSACTIONS ENTERED BY THE ASSESSEE OVER A NUMBER OF YEARS CLEARLY PROVED THAT IT WAS NOTHING BUT A VEN TURE IN THE NATURE OF BUSINESS. AS PER LD. DEPARTMENTAL REPRESENTATIVE, LOWER AUTHORITIES HAD CORRECTLY APPLIED THE YARDSTICKS LAID DOWN BY T HE HONBLE APEX COURT IN THE CASE OF SMT. SAARIFABIBI MOHAMED IBRAHIM (SUPRA) AND THAT OF GUJARAT HIGH COURT IN THE CASE OF SIDDARTHA DESAI (SUPRA), FOR COMING TO A CONCLUSION THAT LAND IN OTHAKALMANDAPA M SOLD TO M/S. HINDUSTAN EDUCATIONAL AND CHARITABLE TRUST WAS NON- AGRICULTURAL IN NATURE . FURTHER AS PER LD. DEPARTMENTAL REPRESENTATIVE GUID ELINE VALUE OF THE SAID LAND CAME TO ?12,45,580/- ONLY WHEREAS CONSIDERATION RECEIVED BY THE ASSESSEE WAS ?5,26,80,000/-. THE LAND WAS SOLD TO A TRUST OF WHICH ASSESSEE WAS THE MANAGING TRUSTEE. AS PER LD. DEPARTMENTAL REPRESENTATIVE NO PERSON WOULD HAVE ACQUIRED 4.34 ACRES OF LAND FOR A PRICE OF ?5,26,80,000/- FOR PUR SUING AGRICULTURAL ACTIVITY. THIS ITSELF ACCORDING TO HIM, PROVED THE LAND TO BE NON- AGRICULTURAL. ACCORDING TO HIM SURPLUS ON SALE OF LAND WAS RIGHTLY TAXED BY THE LD. ASSESSING OFFICER AS BUSINESS INCO ME. ITA NO.804/MDS/2016 :- 12 -: 12. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. THE FIRST ISSUE T HAT IS TO DECIDED IS WHETHER THE SALE OF LAND DONE BY THE ASSESSEE DURIN G THE RELEVANT PREVIOUS YEAR IS TO BE CONSIDERED AS PART OF A BUS INESS ACTIVITY OR NOT. ASSESSEE HAD SOLD TWO PIECES OF LAND DURING THE REL EVANT PREVIOUS YEAR. FIRST PIECE OF LAND AT SOWRIPALAYAM ON WHICH ASSESSEE RETURNED LONG TERM CAPITAL GAINS ?33,52,365/-. OBVIOUSLY, T HE LAND WAS MORE THAN THREE YEARS OLD SINCE ITS PURCHASE. SECOND PI ECE OF LAND SOLD BY ASSESSEE AT OTHAKALMANDAPAM, CLAIMED BY THE ASSESSE E AS AGRICULTURAL IN NATURE, MEASURED 4.34 ACRES. ITS LOCATION WAS BEYOND FOURTEEN KILOMETERS FROM COIMBATORE CORPORATION LIM ITS. THE SAID LAND WAS SOLD BY THE ASSESSEE TO A CHARITABLE TRUST OF W HICH ASSESSEE WAS THE MANAGING TRUSTEE, FOR A PRICE OF ?5,26,80,000/- . APART FROM THESE TWO TRANSACTIONS, THERE WERE CERTAIN OTHER LAND TRA NSACTIONS ENTERED BY THE ASSESSEE IN PREVIOUS YEARS RELEVANT TO ASSESSME NT YEARS 2006- 2007, 2007-08 AND 2009-10. IN THE PREVIOUS YEAR REL EVANT TO ASSESSMENT YEAR 2006-2007, THERE WAS PURCHASE OF AG RICULTURAL LAND FOR ?3,67,00,000/-. THOUGH DURING THAT YEAR ASSESSE E HAD ATTEMPTED TO MAKE INVESTMENTS IN LAND OF M/S. STANDARD MOTORS LTD IT HAD NOT FRUCTIFIED. THIS POSITION HAS NOT BEEN DISPUTED BY THE REVENUE. DURING THE VERY SAME YEAR ASSESSEE HAS SOLD LAND FO R ?74,00,000/-. THE NEXT TRANSACTION WAS DURING THE PREVIOUS YEAR ITA NO.804/MDS/2016 :- 13 -: RELEVANT TO ASSESSMENT YEAR 2007-08. ASSESSEE HAD SOLD LAND FOR ?48.81 LAKHS AND ALSO GIVEN AN ADVANCE OF ?241.11 L AKHS FOR PURCHASING ANOTHER LAND. THE ASSESSEE ALSO APPEA R TO HAVE SOLD SHARES OF M/S. GANESHA GINNING CO. LTD TO M/S. DLF RETAILS DURING THE SAID YEAR. HOWEVER, THIS IN OUR OPINION CANNOT B E EQUATED TO A LAND SALE. DURING THE PREVIOUS YEAR RELEVANT TO ASSESSME NT YEAR 2009-2010 ASSESSEE HAD SOLD A PIECE OF LAND FOR ?10.67 CRORE S. THERE OBVIOUSLY WAS NO PURCHASE OR SALE DURING THE RELEVANT PREVIOU S YEAR 2008-2009. IN OUR OPINION, ABOVE TRANSACTIONS WHICH HAPPENED OVER A NUMBER OF YEARS WERE SO SPORADIC THAT IT COULD NOT BE CONSID ERED AS ONE CREATING A SERIES WHICH COULD SHOW AN INTENTION TO TRADE I N LAND. NONE OF THE LAND SOLD BY THE ASSESSEE OVER THE PERIOD OF FIVE YEARS WAS DEVELOPED BY THE ASSESSEE OR PLOTTED BY THE ASSESSEE. ASSESSE E HAD SHOWN THE LAND ALWAYS AS INVESTMENTS IN ITS BALANCE SHEET. NO DOUBT IT WAS HELD THAT BOMBAY HIGH COURT IN THE CASE OF GOPAL RAMNARAYAN KASAT(SUPRA ) THAT EVEN AN ISOLATED TRANSACTION COULD QUALIFY A S AN ADVENTURE IN THE NATURE OF TRADE. BUT THEIR LORDS HIP ALSO HELD THAT A CONTINUITY WAS NECESSARY FOR REACHING A CONCLUSION THAT ASSESSEE WAS INDULGING IN A TRADE OR BUSINESS. IN OUR OPINION, P URCHASE AND SALE DONE BY THE ASSESSEE OVER A PERIOD OF FIVE YEARS WA S NOT OF SUCH FREQUENCY THAT COULD CREATE A CHAIN OR CONTINUITY , WHICH CAN PERSUADE US TO BELIEVE THAT ASSESSEE HAD AN INTENTION TO DO A BUSINESS OR TRADE ITA NO.804/MDS/2016 :- 14 -: OF PURCHASE AND SELLING A LAND. JUST LIKE ANY OTHER INVESTOR, ASSESSEE INVESTED IN LAND OVER A LONG PERIOD OF TIME AT DISP ARATE PLACES. IT EFFECTED SALE OF LAND WHENEVER AN OPPORTUNITY AROS E. IN SOME YEARS, THERE WERE MORE THAN ONE NUMBER OF SUCH TRANSACTION S. IN CERTAIN OTHER YEARS, THERE WERE NO TRANSACTION OF PURCHASE OR SALE OF LAND. IN OUR OPINION, THE CONCLUSION OF THE LOWER AUTHORITIE S THAT THERE EXISTED A SERIES OF TRANSACTIONS AND ASSESSEE HAD AN INTENTIO N TO TRADE IN LAND OR DO REAL ESTATE BUSINESS WAS INCORRECT. ESPECIALLY S O, SINCE ASSESSEE WAS IN THE BUSINESS OF MANUFACTURING TRANSFORMERS. THUS, ACCORDING TO US, SURPLUS ARISING OUT OF SALE OF LAND DURING THE RELEVANT PREVIOUS YEAR COULD NOT HAVE BEEN CONSIDERED UNDER THE HEAD INCOME FROM BUSINESS BUT ONLY UNDER THE HEAD CAPITAL GAINS. 13. THIS TAKES US TO SECOND ISSUE AS TO WHETHER 4.34 AC RES LAND SOLD BY THE ASSESSEE AT OTHAKALMANDAPAM TO M/S. HIN DUSTAN EDUCATIONAL AND CHARITABLE TRUST, WAS AGRICULTURAL OR NOT. IF IT WAS AGRICULTURAL LAND ASSESSEE WOULD NOT BE EXIGIBLE TO CAPITAL GAINS TAX, SINCE SECTION2(14)(III) OF THE ACT EXCLUDED AGRICU LTURAL LAND FROM THE DEFINITION OF CAPITAL ASSETS. CLAIM OF THE ASSESS EE WAS THAT THE SAID LAND WAS CLASSIFIED BY REVENUE DEPARTMENT AS AGRICU LTURAL IN REVENUE RECORDS. LD. ASSESSING OFFICER HIMSELF HAS STATED T HAT IN THE ASSESSMENT ORDER THAT THE LAND SOLD WAS CLASSIFIED IN THE REVENUE ITA NO.804/MDS/2016 :- 15 -: RECORDS AS AGRICULTURAL AND IT WAS SUBJECT TO PAYME NT OF LAND REVENUE. HOWEVER, AS PER ASSESSING OFFICER, THE LAND WAS NOT ACTUALLY USED FOR AGRICULTURAL PURPOSE. IN OUR OPINION THIS CONCLUSI ON WAS REACHED BY THE ASSESSING OFFICER WITHOUT ANY MATERIAL EVIDENCE . THE LAND WAS OWNED BY ASSESSEE SINCE 1995 AND WAS PURCHASED AT A COST OF ?89,915/- THEREFORE CONCLUSION OF THE ASSESSING OFF ICER THAT INCOME DERIVED FROM AGRICULTURAL OPERATION DID NOT BEAR A RATIONAL PROPORTION TO THE COST IS ITSELF INCORRECT. ASSESSEE HAD DECL ARED AGRICULTURAL INCOME OF ?18,10,750/- DURING THE RELEVANT PREVIOUS YEAR. ASSESSING OFFICER HAD ALSO COME TO A CONCLUSION THAT THE LAND WAS SITUATED IN A DEVELOPED AREA, WHEN IN REALITY THE LAND WAS SITUAT ED 14 KM FROM THE COIMBATORE CORPORATION LIMIT. THERE WAS NO PLOTTIN G OF LAND DONE BY THE ASSESSEE. CERTIFICATE FROM THE REGISTRATION DE PARTMENT PLACED AT PAGE 101 OF PAPER BOOK DOES NOT CLASSIFY THE LAND AS INDUSTRIAL LAND. IT SIMPLY MENTIONED THE LAND FELL UNDER A CATEGORY CALLED DRY SPECIAL TYPE OF LAND CLASS II. IT MIGHT BE TRUE THAT PURCH ASER OF LAND HAD NO INTENTION TO CARRY ON ANY AGRICULTURAL ACTIVITY IN THE SAID LAND. NO DOUBT HONBLE APEX COURT IN THE CASE OF SMT. SARIFABIBI MOHAMMED IBRAHIM (SUPRA ) HAS LAID DOWN THIRTEEN TESTS FOR DECLARING WHETHE R A PIECE OF LAND IS AGRICULTURAL OR NOT. HOWEVER IT DOES NOT REQUIRE A CUMULATIVE SATISFACTION OF ALL THE THIRTEEN INDICATORS. THE Q UESTION HAS TO BE ANSWERED, CONSIDERING THE ANSWERS TO ALL THE THIR TEEN INDICATORS. IN ITA NO.804/MDS/2016 :- 16 -: THE CASE BEFORE US, IT IS AN ADMITTED POSITION THA T THE REVENUE RECORDS CLASSIFIED THE LAND AS AGRICULTURAL IN NATURE. ASS ESSEE HAD HELD THE LAND FOR MORE THAN FIFTEEN YEARS BEFORE HE SOLD IT AND HAD ALSO SHOWN AGRICULTURAL INCOME IN HIS RETURNS. THERE IS NOTHI NG ON RECORD TO SHOW THAT ADJOINING AREAS WERE USED FOR NON AGRICULTURAL ONLY. THERE IS NOTHING ON RECORD TO SHOW THAT LAND WAS SOLD ON SQ UARE FOOT BASIS. ON THE OTHER HAND, COPY OF SALE DEED PLACED AT PAGE NO.65 TO 76 SHOW THAT LAND WAS SOLD ON ACREAGE BASIS. IN THE CASE OF SAKUNTHALA VEDACHALAM VS. VANITHA MANICKA VASAGAM (SUPRA) THE HONBLE JURISDICTIONAL HIGH COURT HAD AFTER CONSIDERING THE JUDGMENT OF GUJARAT HIGH COURT IN THE CASE SIDDARTHA DESAI (SUPRA) HELD AS UNDER:- 9. THE ISSUE INVOLVED IN THE ABOVE TAX CASE (APPE ALS) LIES ON THE NARROW COMPASS, VIZ., WHETHER THE LANDS SOLD BY THE ASSESS EES ARE AGRICULTURAL LANDS AND WHETHER THEY ARE ENTITLED TO THE BENEFIT OF EXE MPTION FROM CAPITAL GAINS TAX. 10. IT IS ON RECORD THAT IN A REPORT HAS BEEN SUBMI TTED BY THE REVENUE AUTHORITIES, IT IS ADMITTED THAT THE LANDS ARE CLAS SIFIED AS AGRICULTURAL LANDS IN THE REVENUE RECORDS AND THEY ARE DRY LANDS. THE REMAND REPORT OF THE ASSESSING OFFICER IN THIS REGARD READS AS FOLLOWS : 'DURING THE TIME OF ASSESSMENT PROCEEDINGS ITSELF, A CONFIRMATION WAS OBTAINED FROM THE HEADQUARTERS DEPUTY TAHSILDAR, TH IRUKA ZHUKUNDRAM, WHO HAS CERTIFIED IN HIS LETTER DATED DECEMBER 23, 2010 , REFERRED TO AT 2 ABOVE, THAT IN THE LANDS IN QUESTION CASUARINAS ARE GROWN FOR THE PAST ONE AND A HALF YEAR AND HENCE THE SAME ARE AGRI CULTURAL LANDS. HE HAS ALSO CONFIRMED IN THE SAID LETTER THAT THE LANDS ARE SITUATED AT ONE KILO METRE DISTANCE FROM THE TOWN PANCHAYAT OF MAMALLAPURAM (I.E., WITHIN THE SPECIFI ED DISTANCE FROM THE OUTER LIMITS OF THE NEAREST MUNICIPALITY/TOWN PANCHAYAT) AND THE POPULA TION OF THE MAMALLAPURAM TOWN PANCHAYAT AS PER THE 2001 CENSUS WAS 12,345.' 11. THE ASSESSEE HAS ALSO PRODUCED A COPY OF THE AD ANGAL AND THE LETTER FROM THE TAHSILDAR, WHICH SHOWED THAT THE LANDS WERE AGR ICULTURAL IN NATURE AND THE REVENUE HAS ALSO ACCEPTED THAT THE LANDS ARE FALLIN G WITHIN THE RESTRICTED ZONE IN TERMS OF SECTION 2(14) OF THE INCOME-TAX ACT. 12. HENCE, THE ONLY POINT THAT HAS TO BE CONSIDERED IS THAT WHETHER THE TEST AS LAID DOWN IN THE DECISION REPORTED IN CIT V. SIDDHA RTH J. DESAI [1983] 139 ITR ITA NO.804/MDS/2016 :- 17 -: 628 (GUJ) HAS BEEN SATISFIED BY THE ASSESSEES. IN THE SAID DECISION, IN PARAGRAPH 11, IT IS HELD AS FOLLOWS (PAGE 638) : 'ON A CONSPECTUS OF THESE CASES, SEVERAL FACTORS AR E DISCERNIBLE WHICH WERE CONSIDERED AS RELEVANT AND WHICH WERE WEIGHED AGAIN ST EACH OTHER WHILE DETERMINING THE TRUE NATURE AND CHARACTER OF THE LA ND. IT MAY BE USEFUL TO EXTRACT FROM THOSE DECISIONS SOME OF THE MAJOR FACT ORS WHICH WERE CONSIDERED AS HAVING A BEARING ON THE DETERMINATION OF THE QUE STION. THOSE FACTORS ARE : (1) WHETHER THE LAND WAS CLASSIFIED IN THE REVENUE RECORDS AS AGRI CULTURAL AND WHETHER IT WAS SUBJECT TO THE PAYMENT OF LAND REVEN UE ? (2) WHETHER THE LAND WAS ACTUALLY OR ORDINARILY USE D FOR AGRICULTURAL PURPOSES AT OR ABOUT THE RELEVANT TIME ? (3) WHETHER SUCH USER OF THE LAND WAS FOR A LONG PE RIOD OR WHETHER IT WAS OF A TEMPORARY CHARACTER OR BY WAY OF A STOP-GAP ARRANGE MENT ? (4) WHETHER THE INCOME DERIVED FROM THE AGRICULTURA L OPERATIONS CARRIED ON IN THE LAND BORE ANY RATIONAL PROPORTION TO THE INVEST MENT MADE IN PURCHASING THE LAND ? (5) WHETHER, THE PERMISSION UNDER SECTION 65 OF TH E BOMBAY 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 SUCH P ERMISSION WAS IN RESPECT OF THE WHOLE OR A PORTION OF THE LAND ? IF THE PERMISSION WAS IN RESPECT OF A PORTION OF THE LAND AND IF IT WAS OBTAINED IN THE PAST, WHAT WAS THE NATURE OF THE USER OF THE SAID PORTION OF THE LAND ON THE MATERIAL DATE ? (6) WHETHER THE LAND, ON THE RELEVANT DATE, HAD CEA SED TO BE PUT TO AGRICULTURAL USE ? IF SO, WHETHER IT WAS PUT TO AN ALTERNATIVE USE ? WHETHER SUCH CESSER AND/OR ALTERNATIVE USER WAS OF A PERMAN ENT, OR TEMPORARY NATURE ? (7) WHETHER THE LAND, THOUGH ENTERED IN REVENUE REC ORDS, HAD NEVER BEEN ACTUALLY USED FOR AGRICULTURE, THAT IS, IT HAD NEVE R BEEN PLOUGHED OR TILLED ? WHETHER THE OWNER MEANT OR INTENDED TO USE IT FOR A GRICULTURAL PURPOSES ? (8) WHETHER THE LAND WAS SITUATE IN A DEVELOPED ARE A ? WHETHER ITS PHYSICAL CHARACTERISTICS, SURROUNDING SITUATION AND USE OF T HE LANDS IN THE ADJOINING AREA WERE SUCH AS WOULD INDICATE THAT THE LAND WAS AGRI CULTURAL ? (9) WHETHER THE LAND ITSELF WAS DEVELOPED BY PLOTTI NG AND PROVID ING ROADS AND OTHER FACILITIES ? (10) WHETHER THERE WERE ANY PREVIOUS SALES OF PORTI ONS OF THE LAND FOR NON- AGRICULTURAL USE ? (11) WHETHER PERMISSION UNDER SECTION 63 OF THE BOM BAY TENANCY AND AGRICULTURAL LANDS ACT, 1948, WAS OBTAINED BECAUSE THE SALE OR INTENDED SALE WAS IN FAVOUR OF A NON-AGRICULTURIST ? IF SO, WHETH ER THE SALE OR INTENDED SALE TO SUCH NON-AGRICULTURIST WAS FOR NON-AGRICULTURAL OR AGRICULTURAL USER ? (12) WHETHER THE LAND WAS SOLD ON YARDAGE OR ON ACR EAGE BASIS ? ITA NO.804/MDS/2016 :- 18 -: (13) WHETHER AN AGRICULTURIST WOULD PURCHASE THE LA ND FOR AGRICULTURAL PURPOSES AT THE PRICE AT WHICH THE LAND WAS SOLD AN D WHETHER THE OWNER WOULD HAVE EVER SOLD THE LAND VALUING IT AS A PROPERTY YI ELDING AGRICULTURAL PRODUCE ON THE BASIS OF ITS YIELD ? AT THE RISK OF REPETITION, WE MAY MENTION THAT NOT ALL OF THESE FACTORS WOULD BE PRESENT OR ABSENT IN ANY CASE AND THAT IN EACH CASE ONE OR MORE OF THOSE FACTORS MAY MAKE APPEARANCE AND THAT THE ULTIMATE D ECISION WILL HAVE TO BE REACHED ON A BALANCED CONSIDERATION OF THE TOTALITY OF CIRCUMSTANCES.' 13. ACCORDING TO THE TRIBUNAL, THAT IF THE ABOVE TE STS ARE APPLIED, THE ASSESSEES COULD NOT SATISFY ANY OF THE CONDITIONS EXCEPT COND ITIONS NOS. 1, 5, 11 AND 12. THE TRIBUNAL HELD THAT THE ASSESSEES COULD NOT PROV E THAT THE LANDS WAS ACTUALLY OR ORDINARILY USED FOR AGRICULTURAL PURPOSES. THIS REASONING DOES NOT APPEAR TO BE CORRECT IN VIEW OF THE ABOVESAID DECISION OF THE GU JARAT HIGH COURT, WHEREIN IT WAS CLEARLY HELD IN CLAUSE (1) IN PARAGRAPH 11 THAT WHETHER THE LAND WAS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL A ND WHETHER IT WAS SUBJECT TO THE PAYMENT OF LAND REVENUE HAS TO BE CONSIDERED FO R GRANT OF EXEMPTION. 14. THUS, IT IS EVIDENT FROM THE ABOVE, WHICH CLEAR LY STATES THAT ANY ONE OF THE ABOVE FACTORS CAN BE PRESENT IN A CASE TO QUALIFY F OR THE BENEFIT OF CLASSIFICATION AS AGRICULTURAL LANDS. IN THIS CASE, THE ASSESSEES HAVE QUALIFIED UNDER CLAUSE 11(1) SINCE AS PER THE ADANGAL RECORDS, THESE LANDS WERE CLASSIFIED AS AGRICULTURAL LANDS AND THE ASSESSEES HAVE ALSO PAID REVENUE KIST, NAMELY, REVENUE PAYMENT. THEREFORE, THE TRIBUNAL HAS MISCON STRUED THE JUDGMENT OF THE GUJARAT HIGH COURT (SUPRA) THAT ALL CONDITIONS LAID DOWN IN PARAGRAPH 11 SHOULD BE SATISFIED, WHICH IS NOT A CORRECT INTERPRETATION . 15. TO GET EXEMPTION, THE ASSESSEE HAS TO SATISFY T HE CONDITIONS LAID DOWN IN SECTION 2(14) OF THE INCOME-TAX ACT, WHICH READS AS FOLLOWS : '2. (14) 'CAPITAL ASSET' MEANS PROPERTY OF ANY KIND HELD BY AN ASSES SEE, WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFE SSION, BUT DOES NOT INCLUDE (I) ANY STOCK-IN-TRADE, CONSUMABLE STORES OR RAW MATERIALS HELD FOR THE PUR POSES OF HIS BUSI NESS OR PROFESSION ; (II) PERSONAL EFFECTS, THAT IS TO SAY, MOVABLE PROP ERTY (INCLUDING WEARING APPAREL AND FURNITURE, BUT EXCLUDING JEWELLERY) HEL D FOR PER SONAL USE BY THE ASSESSEE OR ANY MEMBER OF HIS FAMILY DEPENDENT ON H IM : EXPLANATION.-FOR THE PURPOSES OF THIS SUB-CLAUSE, ' JEWELLERY' INCLUDES- (A) ORNAMENTS MADE OF GOLD, SILVER, PLATINUM OR ANY OTHER PRE CIOUS METAL OR ANY ALLOY CONTAINING ONE OR MORE OF SUCH PRECIOU S MET ALS, WHETHER OR NOT CONTAINING ANY PRECIOUS OR SEMI-PRECIOUS STONE, AND WHETHER OR NOT WORKED OR SEWN INTO ANY WEARING APPAREL ; ITA NO.804/MDS/2016 :- 19 -: (B) PRECIOUS OR SEMI-PRECIOUS STONES, WHETHER OR NO T SET IN ANY FURNITURE, UTENSIL OR OTHER ARTICLE OR WORKED OR SEWN INTO ANY WEARING APPAREL ; (III) AGRICULTURAL LAND IN INDIA, NOT BEING LAND SI TUATE (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURIS DICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNI CIPAL CORPORA TION, NOTIFIED AREA COMMITTEE, TOWN AREA COMMITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAME) OR A CANTONMENT BOARD AND WHICH HAS A POPU LATION OF NOT LESS THAN TEN THOUSAND ACCORDING TO THE LAST PR ECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFO RE 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, URBANISATIO N OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS, SPECIFY IN THIS BEHA LF BY NOTIFICATION IN THE OFFICIAL GAZETTE ; (IV) 6 PER CENT. GOLD BONDS, 1977, OR 7 PER CENT. GOLD BONDS, 1980, OR NATIONAL DEFENCE GOLD BONDS, 1980, ISSUED BY THE CE NTRAL GOVERNMENT ; (V) SPECIAL BEARER BONDS, 1991, ISSUED BY THE CENTR AL GOVERNMENT ; (VI) GOLD DEPOSIT BONDS ISSUED UNDER THE GOLD DEPOS IT SCHEME, 1999, NOTIFIED BY THE CENTRAL GOVERNMENT.' 16. ONCE THE TRIBUNAL HAS ACCEPTED THAT THE CLASSIF ICATION OF LANDS AS PER THE REVENUE RECORDS ARE AGRICULTURAL LANDS, WHICH ARE E VIDENCED BY THE ADANGAL AND THE LETTER OF THE TAHSILDAR AND SATISFIES OTHER CON DITIONS OF SECTION 2(14) OF THE INCOME-TAX ACT, WE ARE OF THE VIEW THAT THE TRIBUNA L HAS MISDIRECTED ITSELF AS STATED ABOVE. 17. YET OTHER REASON GIVEN BY THE TRIBUNAL IS THAT THE ADJACENT LANDS ARE PUT TO COMMERCIAL USE BY WAY OF PLOTS AND, THEREFORE, THE VERY CHARACTER OF THE LANDS OF THE ASSESSEES IS DOUBTED AS AGRICULTURAL IN NATU RE. THE MANNER IN WHICH THE ADJACENT LANDS ARE USED BY THE OWNER THEREIN IS NOT A GROUND FOR THE TRIBUNAL TO COME TO A CONCLUSION THAT THE ASSESSEES' LANDS ARE NOT AGRICULTURAL IN NATURE. THE REASON GIVEN BY THE TRIBUNAL THAT THE ADJACENT LANDS HAVE BEEN DIVIDED INTO PLOTS FOR SALE WOULD NOT MEAN THAT THE LANDS SOLD B Y THE ASSESSEES WERE FOR THE PURPOSE OF DEVELOPMENT OF PLOTS. ALSO THE REASONING GIVEN BY THE TRIBUNAL 'NO AGRICULTURISTS WOULD HAVE PURCHASED THE LAND SOLD B Y THE ASSESSEE FOR PURSUING ANY AGRICULTURAL ACTIVITY' IS BASED ON MERE CONJECT URES AND SURMISES. 18. THE PLEA OF THE LEARNED STANDING COUNSEL APPEAR ING FOR THE REVENUE THAT THERE WAS NO AGRICULTURAL OPERATIONS PRIOR TO THE D ATE OF SALE IS OF NO AVAIL AS THE DEFINITION UNDER SECTION 2(14) OF THE INCOME-TAX AC T HAS THE ANSWER TO SUCH A ITA NO.804/MDS/2016 :- 20 -: PLEA RAISED. FURTHERMORE, IT IS ALSO ON RECORD THAT THE LANDS ARE AGRICULTURAL LANDS CLASSIFIED AS DRY LANDS, FOR WHICH KIST HAS BEEN PA ID. 19. THE VIEW OF THE ASSESSEE IS FORTIFIED BY THE DE CISION REPORTED IN CIT V. RAJA BENOY KUMAR SAHAS ROY [1937] 32 ITR 466 (SC) WHEREIN, IT IS HELD AS FOLLOWS (PAGE 476) : 'THERE WAS AUTHORITY FOR THE PROPOSITION THAT THE E XPRESSION 'AGRI CULTURAL LAND' MENTIONED IN ENTRY 21 OF LIST II OF THE SEVENTH SCH EDULE TO THE GOVERNMENT OF INDIA ACT, 1935, SHOULD BE INTERPRETED IN ITS WIDER SIGNIFICANCE AS INCLUDING LANDS WHICH ARE USED OR ARE CAPABLE OF BEING USED F OR RAISING ANY VALUABLE PLANTS OR TREES OR FOR ANY OTHER PURPOSE OF HUSBAND RY (SEE SAROJINIDEVI V. SHRI KRISHNA ANJANNEYA SUBRAHMANYAM ILR [1945] MAD 61 AN D MEGH RAJ V. ALLAH RAKHIA [1942] FCR 53).' 20. FOR THE FOREGOING REASONS, WE PASS THE FOLLOWIN G ORDER : (I) ON THE QUESTION OF LAW RAISED, WE ARE OF THE VI EW THAT THE TRIBUNAL WAS NOT JUSTIFIED IN REJECTING THE EXEMPTION. ACCORDINGLY, THE QUESTIONS OF LAW ARE ANSWERED IN FAVOUR OF THE ASSESSEES ; (II) CONSEQUENTLY, THE ORDER OF THE TRIBUNAL DATED APRIL 11, 2013, IS SET ASIDE. IN THE RESULT, BOTH THE ABOVE TAX CASE (APPEALS) AR E ALLOWED. NO COSTS. CONSEQUENTLY, CONNECTED MISCELLANEOUS PETITIONS ARE CLOSED. THEIR LORDSHIP HAD CLEARLY HELD THAT NATURE OF USE OF ADJACENT LAND WAS NOT RELEVANT IN DECIDING THE NATURE OF LAND SOLD BY AN ASSESSEE. THEIR LORDSHIP HAD ALSO HELD THAT A PRESUMPTION COULD NEV ER BE TAKEN REGARDING THE PURPOSE FOR WHICH THE BUYER PURCHASED THE LAND. LORDSHIP ALSO OBSERVED THAT NATURE OF CLASSIFICATI ON OF LAND BY THE REVENUE AUTHORITIES IN THE REVENUE RECORD WAS OF PR IME IMPORTANCE IN DETERMINING THE NATURE OF LAND SOLD BY THE ASSESSEE . CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO APPLY ING THE LAW LAID DOWN BY HONBLE JURISDICTIONAL HIGH COURT IN THE C ASE OF SAKUNTHALA VEDACHALAM VS. VANITHA MANICKAVASAGAM (SUPRA), WE ARE OF THE ITA NO.804/MDS/2016 :- 21 -: OPINION THAT LOWER AUTHORITIES FELL IN ERROR IN CON SIDERING THE LAND MEASURING 4.34 ACRES AT OTHAKALMANDAPAM SOLD BY TH E ASSESSEE TO M/S. HINDUSTAN EDUCATIONAL AND CHARITABLE TRUST AS NON AGRICULTURAL IN NATURE AND EXIGIBLE TO CAPITAL GAINS. THE SAID LA ND COULD NOT BE CONSIDERED AS CAPITAL ASSET BY VIRTUE OF SEC. 2(14) (III) OF THE ACT. ASSESSEE WAS JUSTIFIED IN CLAIMING THAT SURPLUS ARI SING OUT OF SALE OF LAND AS NOT EXIGIBLE TO CAPITAL GAINS TAX. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS A LLOWED. ORDER PRONOUNCED ON FRIDAY, THE 28 TH DAY OF OCTOBER, 2016, AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! . '#'$ ) (ABRAHAM P. GEORGE) % / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 28TH OCTOBER, 2016 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF