2020 (9) TMI 236 - AT - Income Tax

Nature of land sold - Agricultural land or capital asset - Evidence of Agricultural operations carried out or not - claim of the Assessee that agricultural operations were carried out over the property and the property was actually used for agricultural purpose was sought to be established by relying on the classification of the property in revenue record - question of law or fact - HELD THAT - There is no evidence of availability of Agricultural produce and how they were dealt utilized. The Revenue also contends that the burden of proof that the property was agricultural land at the time of transfer to claim exemption was on the Assessee. As already observed, the question whether the land was Agricultural land has to be decided on facts of each case and decided cases are only guidelines to be kept in mind. Facts and all the circumstances are to be considered as a whole and an overall view is to be taken in deciding whether the land was an agricultural land. In a given case, large number of circumstances may be indicative of agricultural character, but one circumstance may outweigh all of them and on its basis the land would be held to be a non-agricultural land. Question whether land was used for agricultural purpose or not to be considered as Agricultural land is a question of fact to be decided on the basis of facts and circumstances of a given case. The decisions cited by the learned counsel for Assessee in the case of Venkateswara Hospital is a case where the Hon ble High Court of Madras refused to entertain an appeal on the ground that the question whether a property is Agricultural land or not is essentially a question of fact which action was confirmed by the Hon ble Supreme Court. 2018 (9) TMI 1101 - SC ORDER . If one considers the facts and circumstances of the present case as a whole and an overall view is to be taken in deciding whether the land was an agricultural land, one would come to a conclusion that the property cannot be considered as Agricultural land. Though the circumstance that the land is classified as Agricultural in the revenue records is in favour of the assessee, in our view, the other circumstances pointed out above outweighs all of the circumstances in favour of the Assessee and on the basis of those circumstances, we are inclined to conclude that the property was not an agricultural land. We therefore find no merits in this appeal and hence dismiss the same.

Issues Involved:
1. Whether the land sold by the assessee qualifies as agricultural land and thus is exempt from capital gains tax.
2. The relevance of the classification of land in revenue records as agricultural land.
3. The impact of the use of adjacent lands and the sale price on determining the nature of the land.
4. The burden of proof on the assessee to establish the land as agricultural.

Detailed Analysis:

1. Whether the land sold by the assessee qualifies as agricultural land and thus is exempt from capital gains tax:
The primary issue was whether the land sold by the assessee constituted agricultural land, which is exempt from capital gains tax under Section 2(14) of the Income-tax Act, 1961. The AO noted that the assessee did not declare the capital gain from the sale of the land, arguing it was agricultural land and therefore not a capital asset. However, the AO observed that the assessee did not provide sufficient evidence of agricultural activities on the land, such as tilling, ploughing, or planting, nor did he show any agricultural income from the land. The AO concluded that the land was not used for agricultural purposes and thus did not qualify for the exemption.

2. The relevance of the classification of land in revenue records as agricultural land:
The assessee argued that the land was classified as agricultural in the revenue records and that he paid land revenue charges, which should be a vital factor in determining its nature. He cited the Madras High Court decision in Mrs. Sakunthala Vedachalam, which stated that classification in revenue records and payment of land revenue are significant indicators of agricultural land. The Tribunal acknowledged this but emphasized that classification alone is not conclusive; the actual use of the land for agricultural purposes must also be demonstrated.

3. The impact of the use of adjacent lands and the sale price on determining the nature of the land:
The AO noted that the land was in proximity to holiday destinations and was sold at a high price, which suggested it was not intended for agricultural use. The Tribunal referred to the Supreme Court decision in Sarifabibi Mohmed Ibrahim, which emphasized considering multiple factors, including the land's use, the surrounding area's characteristics, and the sale price. The Tribunal found that the land's high sale price and its location near leisure spots indicated it was not primarily agricultural.

4. The burden of proof on the assessee to establish the land as agricultural:
The Tribunal reiterated that the burden of proof lies on the assessee to establish that the land was used for agricultural purposes. The assessee failed to provide sufficient evidence of agricultural activities or income from the land. The Tribunal noted that while the land was classified as agricultural in revenue records, other factors, such as the lack of evidence of agricultural operations and the high sale price, outweighed this classification.

Conclusion:
The Tribunal concluded that the land sold by the assessee could not be considered agricultural land. Despite its classification in revenue records, the lack of evidence of agricultural use and the high sale price indicated it was not used for agricultural purposes. The appeal was dismissed, and the gain from the sale was subject to capital gains tax.

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