THE COMMISSIONER OF INCOME TAX-1, KOCHI V. M/S.COCHIN MALABAR ESTATES & INDUSTRIES LTD.

ITA/179/2014

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax-1, Kochi, against the order of the Income Tax Appellate Tribunal, Cochin, which had favored M/s. Cochin Malabar Estates & Industries Ltd. The dispute centered on whether the land sold by the assessee to KSIDC was agricultural land or had been converted to non-agricultural land, thereby attracting capital gains tax. The Tribunal had earlier ruled that the land was agricultural based on its use and classification at the time of sale, despite the removal of rubber trees by the assessee as per the Memorandum of Agreement with KSIDC. The High Court upheld the Tribunal's decision, emphasizing that the land's status as agricultural land should be assessed based on its condition and use at the time of sale, not influenced by subsequent developments or the buyer's intentions.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 733123 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 28-10-2021
• Assessment Year: misc
• Other Referred Cases: Sarifabibi Mohmed Ibrahim v. Commissioner of Income Tax, Gujarat, Commissioner of Income Tax v. V A Trivedi, Principal Commissioner of Income Tax v. Kalathingal Faizal Rahman, Commissioner of Income Tax, Gujarat-II v. Siddharth J. Desai, M/s. Mansi Finance Chennai Ltd v. Principal Commissioner of Income Tax 4, Chennai, Ms Srinivasa Naicker v. Income Tax Officer
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: A KUMAR; MINI; P J ANILKUMAR; P S SREE PRASAD
• Assessee Lawyers: P K MENON; JOSE JOSEPH
• Keywords: Agricultural Land; Capital Gains; Income Tax; Land sale; Non-Agricultural Land
• Section: 143(2); 2(14); 260A

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI THURSDAY, THE 28TH DAY OF OCTOBER 2021 / 6TH KARTHIKA, 1943 ITA NO. 179 OF 2014 AGAINST THE ORDER IN ITA 582/2011 OF I.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/S: THE COMMISSIONER OF INCOME TAX-1, KOCHI KOCHI. BY ADVS. SRI.P.K.RAVINDRANATHA MENON (SR.) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S: M/S.COCHIN MALABAR ESTATES & INDUSTRIES LTD. MALABAR HOUSE,W.ISLAND,KOCHI-682003. BY ADVS. SRI.A.KUMAR SMTG.MINI(1748) SRI.P.J.ANILKUMAR SRI.P.S.SREE PRASAD THIS INCOME TAX APPEAL HAVING RESERVED FOR JUDGMENT ON 21.10.2021, THE COURT ON 28.10.2021 DELIVERED THE FOLLOWING: I.T.A. No.179/2014 -2- J U D G M E N T S.V. Bhatti, J. The Commissioner of Income Tax-1, Kochi/Revenue is the appellant. M/s. Cochin Malabar Estates & Industries Ltd, Kochi/assessee is the respondent. 2. The Revenue being aggrieved by the order dated 28.03.2014 in ITA No.582/Coch/2011 of the Income Tax Appellate Tribunal (for short 'the Tribunal'), Cochin has filed the present appeal under Section 260A of the Income Tax Act 1961 (for short 'the Act'). The issues arise out of the returns filed by the assessee for the Assessment Year 1996-97. The Revenue and the assessee are contesting the levy and demand of capital gains on the land sold by the assessee through sale deed I.T.A. No.179/2014 -3- dated 16.03.1996 in favour of Kerala State Industrial Development Corporation Limited (for short ‘KSIDC’). 2.1 The assessee is a public limited company engaged in a range of activities such as cultivation, processing, and trading in tea, rubber, aquaculture; providing engineering services, etc. On 01.12.1995 the assessee entered into a Memorandum of Agreement (MoA) with KSIDC for the sale of schedule of property appended to the MoA dated 01.12.1995. Keeping in perspective the nature and extent of controversy between the parties in this behalf, in the present narrative, this Court prefers to refer to the subject matter of MoA as schedule property, instead of referring as capital asset or agricultural land. The details of the schedule property read thus: SCHEDULE PROPERTY Survey No. Acres Kanthalad village 1496/6 54.060 Quilandy taluk 1504/4 0.009 Kozhikode 1505/2 0.020 I.T.A. No.179/2014 -4- 1506/3 0.066 Resurvey Number Kinalur village 108 142.61 Quilandy taluk 94 0.55 Kozhikode 95/1 115.40 95/2 0.87 95/3 0.45 ------- 314.11 ====== 2.2 On 16.03.1996 the assessee executed and registered a regular deed of conveyance in favour of KSIDC. On 29.11.1996 the assessee filed return for the Assessment Year 1996-97 disclosing a loss of Rs.3,11,96,323/-. On 28.10.1997 income tax return was processed and a refund of Rs.6,08,136/- was ordered in favour of the assessee. Subsequently, scrutiny notice under Section 143(2) of the Act was issued to the assessee. The Assessing Officer, in the scrutiny assessment, examined the sale of schedule property by MoA dated 01.12.1995 read with sale deed dated 16.03.1996 for a sum of Rs.6,13,74,563/- and noted I.T.A. No.179/2014 -5- that the said amount was credited to the P&L Account. According to the Revenue, the assessee converted the schedule property as non-agricultural land for enabling the purchase of schedule property by KSIDC. The KSIDC purchased the schedule property for further development as an industrial estate. Hence, the claim of assessee for exemption from payment of capital gains tax on the sale consideration received from the sale of schedule property from KSIDC is attracted and that schedule property is not agricultural land for the purpose of Section 2(14) of the Act. 3. The case of the assessee is that the schedule property is situated in Kinalur and Kanthalad Villages in Quilandi Taluk, Kozhikode District but not within the area as notified by the Central Government under the provisions of Section 2(14)(iii)(b) of the Act. The schedule property sold in favour of KSIDC is not a capital asset under Section 2(14) of the Act. The assessee used I.T.A. No.179/2014 -6- the schedule property as agricultural land/rubber plantation on the date of sale, and the schedule property is situated in a very remote area where there is no infrastructure facility. The Assessing Officer refers to one of the clauses of MoA dated 01.12.1995, which is to the effect that the assessee agreed to deliver to KSIDC or its nominee upon receipt of due consideration and after removing all the rubber trees at the expense of the assessee and other trees standing on the schedule property and carry away the cut trees. The above clause and the cutting of trees by the assessee have been appreciated by the Assessing Officer as converting the schedule property into non-agricultural land, facilitating purchase by KSIDC. Thus, the objections raised by the assessee were rejected and assessment order was made including the sale consideration as exigible to capital gain and demanded tax of Rs.3,28,51,692/- vide assessment order dated 22.03.2002 I.T.A. No.179/2014 -7- (Annexure-A). 3.1 The assessee being aggrieved by the order in Annexure-A dated 22.03.2002 filed appeal before the Commissioner of Income Tax (Appeals) Kochi, and, through Annexure-B order, the appeal filed by the assessee was dismissed. The order of the CIT (Appeals) in Annexure-B is in great detail and adverts to the case law wherein the tests for classifying the land as agricultural land or capital asset are laid down. This Court is of the view that the gist of the order of CIT (Appeals) is stated and that would serve the completion of narration of events preceding the present appeal. The CIT (Appeals) laid emphasis on the clause in the MoA enabling the assessee to cut and carry away the rubber trees; on the date of the sale there was no plantation, and that the KSIDC converted the schedule property into an industrial estate. 3.2 The assessee filed second appeal before the Tribunal I.T.A. No.179/2014 -8- in ITA No.582/Coch/2011. The Tribunal through order dated 28.03.2014 in Annexure-C allowed the appeal filed by the assessee. The Tribunal firstly examined whether the schedule property is agricultural land or not. By referring to a few precedents on the point, recorded a finding that the schedule property was earlier used for agricultural purposes/rubber plantation, and that the possibility of using the schedule property for non-agricultural purposes (sic was stated as agricultural purposes in the order) does not become a capital asset and does not deny the classification as agricultural land. Stated in other words, the Tribunal held that the land should be actually used on the date of sale for agricultural purposes as an important criterion for attracting the expression of agricultural land. The Tribunal examined the circumstances in the leading case relied on by the parties, namely Sarifabibi Mohmed Ibrahim v. Commissioner of Income Tax, Gujarat1, and found that the 1 (1993) 204 ITR 631 (SC) I.T.A. No.179/2014 -9- schedule property in Sarifabibi Mohmed Ibrahim case was situated within the municipal limits of Surat city. The Tribunal noted that in the said reported case the land was not under cultivation for over four years preceding the sale. The assessee in the said reported case applied to the competent authority for conversion of agricultural land for non-agricultural purposes. The Tribunal found that the Assessing Officer and CIT (Appeals) fell in error in appreciating the principle in Sarifabibi Mohmed Ibrahim for holding that the schedule property was non- agricultural land on that date of sale in favour of KSIDC. It further held that the tests laid down by the Supreme Court and High Court are more in the nature of guidelines, and each case has to be examined on its merits. The Tribunal, thereafter, examined the circumstances preceding to the sale deed dated 16.03.1996, contemporaneous circumstances prevailing at the time of execution of sale deed, the future probable use by I.T.A. No.179/2014 -10- KSIDC, and recorded a finding that the future use by the purchaser is not the deciding factor. The Tribunal, from the cumulative effect of applicable tests to the case on hand, held that the schedule property was sold as agricultural land and the sale consideration received is not exigible to capital gains. Hence, the appeal at the instance of the Revenue. 4. The following substantial questions of law are raised by the Revenue: “1. Whether on the facts and on the circumstances of the case the Tribunal was right in holding that the land converted into a barren land to establish an industrial estate was an agricultural land u/s.2(14) and therefore, profit on sale not assessable to income tax for capital gains? 2. Whether, on the facts and in the circumstances of the case and in the light of the decision of Supreme Court in 204 ITR 631 - a) Can not the consideration on sale of land be subjected to income tax for capital gains? b) is not the conclusion of the Tribunal against law and perverse? I.T.A. No.179/2014 -11- 3. Whether, the Tribunal is right in finding that the subject land is admittedly agricultural land\"; \"the land was used for agricultural purpose\", \"the assessee used the land for agricultural operation till the date of sale and are not the findings factually wrong baseless unsupported by evidence and perverse? Substantial Question Nos: 1 to 3 5. Sri P K R Menon, learned Senior Advocate appearing for the Revenue, contends that the order under appeal is per se illegal and contrary to the binding precedents of the Supreme Court in Sarifabibi Mohmed Ibrahim; and High Courts in Commissioner of Income Tax v. V A Trivedi2; and Principal Commissioner of Income Tax v. Kalathingal Faizal Rahman3. 5.1 Summarised, the learned counsel's arguments are that the starting point relevant for determining whether the schedule property was sold as agricultural land or non- agricultural land was the date of execution of MoA dated 2 (1988) 172 ITR 95 (Bom) 3 (2019) 416 ITR 311 (Ker) I.T.A. No.179/2014 -12- 01.12.1995. MoA enables the assessee to cut and carry away standing rubber trees in schedule property. The assessee by cutting and carrying away the standing rubber trees shall not be allowed to contend that the schedule property which had rubber plantation could be continued/treated as agricultural land; that after the rubber trees were cut and carried away the schedule property remains as barren agricultural land. According to him, the schedule property was a barren land on the date of sale deed dated 16.03.1996. The schedule property, by applying the definition in Section 2(14) of the Act, could be said as non-agricultural land. The following three tests are important (i) to ascertain the true character or nature of the land, (ii) whether it has been put to use for agricultural purposes for a reasonable span of time prior to the relevant date; (iii) whether on the relevant date the land was intended to be put to use for agricultural purposes for a reasonable span I.T.A. No.179/2014 -13- of time in the future; and that the last criteria is very necessary from what has been laid down by the Supreme Court in Commissioner of Income Tax, Gujarat-II v. Siddharth J. Desai4, Ranchhodbhai Patel v. Commissioner of Income Tax5. 5.2 Summarily stated, the argument of the Revenue is that by cumulatively satisfying the three important tests which are applicable to the case on hand, the assessee can claim exemption from the purview of capital gains tax. In the case on hand, the assessee, at any rate, fails to satisfy the last test, namely that the schedule property could be put to use for agricultural purposes for a reasonable span of time in the near future from the date of sale deed. Admittedly, KSIDC, in due course of time, upon purchase from the assessee, converted the schedule property into an industrial estate. He argues that the case on hand does not satisfy the applicable cumulative tests 4 (1983) 139 ITR 628 5 (1971) 81 ITR 446 (Guj) I.T.A. No.179/2014 -14- referred to above and the findings recorded by the Tribunal, though are findings of fact, still, the findings are unavailable to the admitted circumstances of the case. It is contended that barren land cannot be included as agricultural land. According to Revenue, the order under appeal suffers from perversity and is liable to be set aside and schedule property be declared as non-agricultural land and income received from sale consideration is exigible to capital gains. 6. Mr A Kumar, learned counsel appearing for the assessee argues that the abstract appreciation and application of the decisions in V A Trivedi and Sarifabibi Mohmed Ibrahim cases are the main cause of confusion in the mind of Revenue. The judgments relied on by the Revenue are appreciated in the background of circumstances considered by the Nagpur Bench of Bombay High Court and the Supreme Court. The judgments arising under the Wealth Tax Act were considered in Sarifabibi I.T.A. No.179/2014 -15- Mohmed Ibrahim case and the Supreme Court has not laid down exhaustive tests for determining what constitutes agricultural land or a capital asset. It is always an issue of fact in each case. Referring to the circumstances of the case on hand, he explains by arguing that cutting and carrying away the rubber trees is merely removing the burden of overgrown plantations in the schedule property. The sale of the schedule property was not as is where is basis. The conveyance between the assessee and the KSIDC is the sale of land measuring 314.11 Acres alone, but not the aged trees. The assessee had cut and carried away the rubber trees. The assessee has not changed or applied for a change of classification of land under applicable local laws, from agricultural to non-agricultural use. On the contrary, the assessee paid the agricultural income tax, cess payable under Plantation Act, and treated the schedule property as agricultural land as long as the schedule property was held by I.T.A. No.179/2014 -16- the assessee. The tax liability of the assessee is primarily considered and decided referring to the state of affairs on the date of the sale deed, but not upon completion of the sale. Therefore, commission or omission of KSIDC in changing the land from agricultural to non-agricultural would not attract capital gains tax liability on the assessee. These commissions or omissions by the KSIDC are beyond the reach of assessee. The assessee held and treated the schedule property as agricultural land and sold the schedule property as agricultural land. Therefore, the levy of capital gains is per se illegal. He relies on the judgments reported in Ms Srinivasa Naicker v. Income Tax Officer6; and Principal Commissioner of Income Tax 4, Chennai v. M/s. Mansi Finance Chennai Ltd7 for the proposition that the judgment relied on by the Revenue is considered by the Madras High Court and it has been finally held that the nature of schedule 6 (2007) 292 ITR 481 7 2017 (1) TMI 1209 - Madras High Court I.T.A. No.179/2014 -17- property is dependent upon the examination of circumstances in each case. He invites our attention to the findings of the Tribunal and the judgments relied on by the Tribunal for recording those findings and argues that no substantial question of law arises in the circumstances of the case warranting interference under Section 260A of the Act. He prays for dismissing the appeal. 7. Let us now examine the broad tests/guidelines laid by the judicial precedents. Gujarat High Court in Commissioner of Income Tax, Gujarat-II v. Siddharth J. Desai8 evolved thirteen factors/indicators which a case has to answer for being treated as agricultural land or non-agricultural land. The thirteen factors are as follows: “(1) Whether the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue? 8 139 ITR 628 I.T.A. No.179/2014 -18- (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 period or whether it was of a temporary character or by way of a stop- gap arrangement? (4) Whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land? (5) Whether, the permission under Section 65 of the Bombay Land Revenue Code was obtained for the non-agricultural use of the land? If so, when and by whom (the vendor or the vendee)? Whether such permission 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 ceased 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 permanent or temporary nature? (7) Whether the land, though entered in revenue records, had never been actually used for agriculture, that is, it had never been ploughed or tilled? I.T.A. No.179/2014 -19- Whether the owner meant or intended to use it for agricultural purposes? (8) Whether the land was situate in a developed area? Whether its physical characteristics, surrounding situation and use of the lands in the adjoining area were such as would indicate that the land was agricultural? (9) Whether the land itself was developed by plotting and providing roads and other facilities? (10) Whether there were any previous sales of portions of the land for non-agricultural use? (11) Whether permission under Section 63 of the Bombay Tenancy and Agricultural Lands Act, 1948, was obtained because the sale or intended sale was in favour of a non- agriculturist was for non-agricultural or agricultural use? (12) Whether the land was sold on yardage or on acreage basis? (13) Whether an agriculturist would purchased the land for agricultural purposes at the price at which the land was sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield? 7.1 The Nagpur Bench of Bombay High Court in V A Trivedi laid the tests for ascertaining the true character or nature of the land as “it must be seen whether it has been put to use I.T.A. No.179/2014 -20- for agricultural purposes for a reasonable span of time prior to the relevant date. It must also be seen whether on the relevant date the land was intended to be put to use for agricultural purposes for a reasonable span of time in the future.” It is, at this juncture, apt to refer to what has been prefaced by the Supreme Court in Sarifabibi Mohmed Ibrahim case in paragraph 12 of the judgment in appreciating whether exhaustive tests are laid down by the Courts of Law in this behalf or not. Paragraph 12 is excerpted hereunder: “12. Whether a land is an agricultural land or not is essentially a question of fact. Several tests have been evolved in the decisions of this Court and the High Courts, but all of them are more in the nature of guidelines. The question has to be answered in each case having regard to the facts and circumstances of that case. There may be factors both for and against a particular point of view. The Court has to answer the question on a consideration of all of them - a process of evaluation. The inference has to be drawn on a cumulative consideration of all the relevant facts.” (emphasis supplied) I.T.A. No.179/2014 -21- 7.2 In M/s. Mansi Finance Chennai Ltd, the Madras High Court, while dealing with the importance of classification of land in the revenue records, particularly when the said classification is not rebutted, what is the extent to which such a factor will have a decisive influence in considering what constitutes agricultural land or not, held thus: “From the material on record, it could be deduced that the respondent has discharged his burden and proved that the lands were agricultural lands, at the time of transfer. Sufficient evidence has been adduced by the respondent, to prove that the subject lands have been put to agricultural operations before the sale. Classification of the lands, in the revenue records, as agricultural lands, is not varied and that is a determining factor.” 7.3 In Ms Srinivasa Naicker case the Madras High Court referred to the effect of subsequent treatment of the subject I.T.A. No.179/2014 -22- matter of sale transaction and whether it has any impact in determining the nature of asset sold by the assessee on the date of sale. In the said decision it has been held thus: “A perusal of section 45 shows that the requirement as on the date of sale or transfer is that the asset must be a capital asset, considering the description under the Act. The charge ability to tax under section 45 arises only if on the date of sale, the land in question retained its character as a capital asset, which means, an asset which does not answer the definition of a capital asset and which is an agricultural land falling within the definition of section 2(14) would automatically be outside the scope of section 45. In the decision in M. Venkatesan v. CIT reported in [1983] 144 ITR 886, this court, referring to the scope of section 45, held that \"taxation or exemption from taxation depends upon the subject of transfer answering or not answering the definition of capital asset at the time of transfer and at no other point of time.\" In the subsequent decisions reported in CIT v. P.J. Thomas [1995] 211 ITR 897 (Mad) and (CWT v. E. Udayakumar [2006] 284 ITR 511 (Mad)), it was held that the subsequent treatment has no relevance in the matter of considering a capital asset. It is no doubt true that the purpose for which the purchaser had purchased was totally different from what the I.T.A. No.179/2014 -23- transferor had intended to use the lands in question but as held in the decisions cited above, with the admitted finding that the lands in question were under agricultural operation on the date of sale for the purpose of considering the meaning of capital assets, it matters very little how the subsequent purchaser intended the land in question to be put to use.” 8. There is no dispute on the proposition that whether the sale of an asset constitutes sale of a capital asset or agricultural land, and is case-specific and to be determined on a case-to-case basis. This Court keeps in perspective the elucidation of the above position in law in paragraph 12 of the judgment in Sarifabibi Mohmed Ibrahim. This Court examines the contentions in the same order in which they are canvassed. In our opinion what is required to be considered is: Was it agricultural land when it was sold? If the land is recorded as agricultural land in the revenue records and if till the date of its sale it is used and exploited as agricultural land and if the I.T.A. No.179/2014 -24- owner of the land had not taken any steps which would indicate his intention to exploit the land thereafter as non-agricultural land, then such a piece of land will have to be regarded as agricultural, even though it is included within the municipal limits or is sold as arable land without actual agriculture. Further, the determination of an issue in fact, whether the land is agricultural or not, is not a one-stop remedy, but it is essentially a question of fact. Several tests have been evolved in the decisions of the Apex Court and various High Courts, but all of them are more in the nature of guidelines. The question has to be answered in each case having regard to the facts and circumstances of that case. There may be factors, both for and against, on a particular point of view. Therefore, the Court has to answer the question on a consideration of all of them, by a process of evaluation. Inference, therefore, has to be drawn on a cumulative consideration of all the relevant facts and I.T.A. No.179/2014 -25- applicable tests for appreciating the criteria laid down by the Courts. 8.1 The argument of Revenue is that till the date of entering into MoA the schedule property, no doubt, was a plantation/agricultural land. The assessee through MoA agreed to cut and carry away the rubber plantation in the schedule property by the assessee. Therefore, with the cutting and carrying away of rubber trees the schedule property becomes barren land. The barren land cannot be treated as agricultural land. The argument of the Revenue suffers from a basic infirmity. The nature and the character of the schedule property as stated in MoA, would not alter the land from its original classification. The thrust of the argument for the Revenue is that the assessee agreed to cut and carry away the rubber trees. This induces change in the user of land. This objection is preposterous. Neither the Revenue nor this Court I.T.A. No.179/2014 -26- ought to keep itself in the shoes of negotiating parties while entering into MoA dated 01.12.1995. The clause relied on by the Revenue is borne out in MoA. Upon independent consideration of what is agreed to be sold and purchased, this Court is of the view that standing trees are excluded from the scope of MoA. Therefore, they are cut and carried away by the assessee. The argument lays undue importance to a clause in MoA. The first objection of the Revenue is not falling within any of the tests admittedly laid down in the judgments referred to above. Therefore, we consider it independently and reject the argument as unavailable. 8.2 The next ancillary argument of Revenue is that with the cutting and carrying away of trees, the schedule property has become barren land, therefore, schedule property is not agricultural land. The said argument is equally fallacious inasmuch as there is difference between barren/wasteland on I.T.A. No.179/2014 -27- one hand and arable land on the other hand. The schedule property, as admitted by the parties, is located in Kinalur and Kanthalad village in Quilandi taluk, nearly 20 kms away from Kozhikode Municipal Corporation limits. The schedule property, a plantation land, was an agricultural land both by classification and user till date of cutting of rubber trees. With the cutting of rubber trees, at best, the schedule property becomes arable land, which may not be an agricultural land with plantations. The user for agriculture is not denied by such cutting of rubber trees. This contention that barren land is not agricultural land is neither supported by authority nor material. This Court is of the view that the vacant agricultural land available upon cutting and carrying away of trees, at best, can be called ‘arable land’: meaning, land used for any agricultural purpose. Either to attract the meaning of capital asset or not to attract agricultural land, something more is required. The ipsi dixit I.T.A. No.179/2014 -28- objection, examined with admitted factors, would not decisively act in determining whether the schedule property satisfies capital asset or not. 8.3 The last argument is that the land was sold in favour of the KSIDC, and the KSIDC has put the land to use as an industrial estate. Therefore, even if the first two tests are satisfied, the last test fails and a cumulative effect on the applicable tests is not achieved. The schedule property should be held as non-agricultural land. The genesis for the above argument is drawn from V A Trivedi and Sarifabibi Mohmed Ibrahim cases. This Court has carefully examined the circumstances which were considered by the Nagpur Bench of Bombay High Court in V A Trivedi case i.e., two parcels of land one situated in Ajni village and another in Binaki village. The assessee in the said case is not the first transferee and the first transaction is not subjected to capital gains. The assessee, in I.T.A. No.179/2014 -29- the reported case, since has sold his property to housing societies etc, the observations have been made. The observation of ensuring agricultural use for a reasonable span of time in the near future is case-specific inasmuch as in the said judgment the assessee has applied for conversion of land from agricultural to non-agricultural use etc. The test laid down in V A Trivedi case that it (i.e., land) must also be seen whether on the relevant date the land was intended to be put to use for agricultural purposes for a reasonable span of time in the future, as understood by the Revenue. As land is put to use for agricultural purposes by the vendee, we are unable to accept the said submission of the Revenue. In our understanding, the test stipulates that the subject matter of land is capable of being used for agricultural purposes without inhibition both in fact by change of user and by law by orders of conversion from agricultural to non-agricultural. Any other future independent I.T.A. No.179/2014 -30- application of said tests, is impractical from the perspective of sale and purchase. The judgment of this Court in Kalathingal Faizal Rahman case refers to the burden of proof, and that, what constitutes agricultural land essentially is a question of fact and the same has to be established by the assessee. While adverting to the future use, we are persuaded by the reasons given by the Madras High Court in Ms Srinivasa Naicker and M/s. Mansi Finance Chennai Ltd cases. This argument also fails and is rejected. 9. Now reverting back to the case on hand, the assessee was the owner of agricultural/plantation land. The assessee agreed to sell the schedule property without the burden of rubber trees. The cutting and the carrying away of rubber trees do not change the classification of land from agricultural to non-agricultural land. The assessee continued to treat the schedule property as agricultural land for the Financial Year ending 31.03.1995. The assessee cannot be expected to have I.T.A. No.179/2014 -31- control over the activities of his buyer once the transfer is completed. The incidence of exigibility of assessee/vendor is not dependent on an act of commission or omission of vendee. The vendor has no control on future use. What is very important is whether on the date of sale the land was agricultural land, both in record and use. The incidence to pay capital gains tax cannot be and ought not to be traced to an act of commission or omission by the transferee of the assessee. Being an absolute owner the transferee is always free to put the land to best use as the transferee thinks fit and proper. In the case on hand, the assessee both factually and legally did not change the character of land from agriculture to non- agriculture. The assessee has demonstrated that the classification of land continued to be agricultural land in the revenue records even as on the date of sale. Though it is a peripheral, it is an important matter in appreciating the I.T.A. No.179/2014 -32- character of land sold by the assessee; namely, had the land been converted for the non-agricultural purpose/laid out in plots, then the stamp duty payable on registration would be on the nature of land sold at the relevant point of time. The schedule property was described as land in conveyance deed. The schedule property consists of vast extents of agricultural land, admittedly outside a notified area. There is no change of user at the instance of assessee. The burden fastened on the assessee in the circumstances of the case has been discharged and the findings recorded by the Tribunal are available in the facts and circumstances of the case. We apply the principles enunciated in the cases referred to supra to the case on hand and the tests taken out as relevant by the Revenue and examined as tenable or not. The findings of fact recorded by the Tribunal, in the circumstances of the case, do not warrant interference of this Court. The three objections raised against I.T.A. No.179/2014 -33- the findings recorded by the Tribunal since are without merit, the substantial questions are answered in favour of the assessee and against the Revenue. The Income Tax Appeal fails. Hence, dismissed. No order as to costs. Sd/- S.V.BHATTI JUDGE Sd/- BASANT BALAJI JUDGE jjj I.T.A. No.179/2014 -34- APPENDIX OF ITA 179/2014 PETITIONER ANNEXURE ANNEXURE \"A\" COPY OF THE ASSESSMENT ORDER U/S.143(3)R.W.S.147 DATED 22.03.2002 PASSED BY THE ASSESSING OFFICER FOR AY 1996-97 ANNEXURE 'B' COPY OF THE CIT(A)'S ORDER No.80/DC/ R-1/E/CIT(A)- 11/2002-03 DATED 19.08.2011 ANNEXURE 'C' COPY OF THE ITAT'S ORDER ITA No.582/COCH/2011 DATED 28-3-2014 FOR ASSESSMENT YEAR 1996-97 ANNEXURE D TRUE COPY OF THE ARGUMENT DATED 01.12.1995 "