9911796707
TMI Blog2016 (6) TMI 518X X X X Extracts X X X X X X X X Extracts X X X X ..... prietor of M/s.Nandhini palace. A search u/s.132 of the Act was conducted in the residential and business premises of the assessee on 12.05.2012 and M/s.Nandhini Palace on 15.05.2012. The ld. Assessing Officer issued 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 2013-14 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 assessee's appeal, we dispose off all these appeals by adjudicating in each ground relating to all the assessment years collectively. Assessee's Appeals in ITA Nos.2356 to 2362/Mds/15 3. The first ground in these appeals is with regard to assessment of jurisdiction u/s.153A of the Act in spite of the 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. Hence, this ground in all the assessee's appeals are dismissed as not pressed. 4. The next ground in the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rop of cultivation, from each parcel of land. The Ld.CIT(A) was of the opinion that 50% of agricultural income declared by the assessee to be treated as agricultural income and balance 50% to be treated as income from other sources. Against this findings of Ld.CIT(A), both the assessee and the Revenue are in appeal before us. 5. We have heard both the parties and perused the material on record. Ld.A.R submitted that the owning of agricultural land was not disputed by the Revenue Authorities. The only reason for disallowance is non-production of certain documents regarding carrying out the agricultural operations and sale of agricultural produce. The assessee has placed evidence containing details of acres of cultivated land, place of cultivation, village name, type of cultivated and net income earned on each crop of cultivation 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 and the assessee's returns were said to be accepted by the Department as there was no scrutiny for these assessment years. As the time limit to issue of notice u/s.14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per seized materials amounting to Rs. 2,89,80,082/- and turnover as per tally accounts amounting to Rs. 2,39,07,254/-. The assessee submitted a reconciliation statement on 23.3.15 stating that the difference in turnover is due to non-exclusion of luxury tax, discount, complimentary foods, other receipts etc. However, the AO rejected the explanation of the assessee fully and made addition to the tune of Rs. 31,75,370/-. Against this order, the assessee went in appeal before the Ld.CIT(A). On appeal, the assessee submitted different set of reconciliation statement in the appellate proceedings. It shows that the assessee is trying to fill the difference in turnover reported in the audited profit and loss account and seized material with some numerical figure as he could not explain the difference. The ld.A.R submitted that if the aforesaid items are reduced from the turnover as per seized materials, the resultant turnover will tally with turnover as per audited accounts. The Ld.CIT(A) observed that though reconciliation statement was submitted, the assessee could not bring any evidence on record to prove the difference. The assessee simply stated that the main difference is on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween seized material and turnover with books of accounts is remitted back to the file of ld. Assessing Officer for fresh consideration after giving adequate opportunity of hearing , the AO shall decide the issue afresh. This ground is partly allowed for statistical purposes. Revenue's 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 respect of income from sale of agricultural land by treating it as real estate business. 10. We consider the facts in appeal No.482/Mds./16.(A.Y.2009-10) The facts of the case are that in the computation of income, the assessee had claimed exemption from Income tax for the sale proceeds received from sale of land measuring 50.84 acres situated at Navaliur, Srlperumbudur. Taluk, Kancheepuram District. The assessee had claimed that the total cost of purchase was Rs. 12,56,02,4411- and the total sale consideration was Rs. 50,49,54,375/- and the assessee had claimed the net proceeds of Rs. 37,93,51,934/- is exempted for the AY 2009-10 as the assessee has treated the sale proceed as receipt from sale of agriculture land. In this respect, the purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icultural activity. Even though 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 to start 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 estate business for all the assessment years under consideration, he did not develop any agriculture land. The assessee never did any real estate business till today. 10.1 According to A.O, the land purchased by the assessee cannot be for agricultural land since he cannot hold so much land which against the Land ceilIing Act. The assessee is inreal estate business. The assessee had aggregated the lands by purchasing 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 agricultural lands in to residential plots simultaneously with the purchase of lands .The assessee had taken steps and completed a su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as income earned under section 28 of the Act and added to the income of the assessee. It is submitted that on conversion of agricultural land into residential plots the property is no more an agricultural land what was sold by the assessee was developed: residential plots. The agreement entered with Mr. Ramesh is an ineffective document through ineffective document Immovable property cannot be transferred. The appellant did not provide evidence to show that he did agriculture activity in these lands. On the contrary, enough evidence was found to prove that the assessee did not cultivate the land. The same was mentioned in the assessment order. It is a mistake on the part of the assessee to keep it as capital asset. He should have kept the land purchased for trading purpose as stock in trade. For stock in trade, 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 wrong. Before these dates, the residential plots were t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... go up from Rs. 12,56,02,44l to Rs. 57,90,14,350/- within a year unless the nature of land is changed by value addition. The land was not sold to Mr. Ramesh but to M/s GNHSL. Buying other 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 what period was held as agricultural land is important factors. The timeline is more important. Everything cannot be swept under a single blanket by saying it was assessed to land revenue. The approved layout adjacent to the land in question is an important factor that allured the assessee to jump into the venture of Navallur project. 10.4 The assessee has not produced any proof to show that the cultivated the land. The nature of land was changed before the date of sale by converting it into residential plots. The 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 land for the factory and other preparatory work must start much earlier. He would hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchase deeds, which is not in dispute and was sold as agricultural land as evidenced by sale agreement by the appellant with Mr. 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 agricultural land situated beyond specified limits of municipality as evidenced by as the certificate issued by Village Administrative Officer, Sriperambattur Taluk. These documents were produced before the assessing officer. The assessee also produced Chitta/Adangal copies before the assessing officer. It is submission of the assessee 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 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 the assessing officer by Mr Ramesh. As per page no 4 of the sale deed registered on 14th May 2008, clearly mentioned that, Mr.Ramesh had made development and promoted the property more fully described in the schedule hereunder. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to the schedule property, either favouring the purchaser Mr.Ramesh or his nominees as, decided by the purchaser Mr.Ramesh. The purchaser Mr Ramesh, in his affidavit dated 4th March 2015, before the assessing officer clearly mentioned that, he has purchased the agricultural land for the assessee, as per agreement dated 1 December 2007 and had taken the possession of the land on the very same day. He also mentioned that, 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 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 gain. Since the entire gain on sale of agricultural land is not taxable as per section 2(14) 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 land into lay out for housing purpose which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business activity to start up SNJ DstiIlers and SNJ Breweries Project. There are Several judgments in favour of the assessee that appreciation of the agricultural land price cannot alter the character of agricultural land. The finding of the assessing officer 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 real estate business The assumption f the assessing officer is amounts to a pure guess work and conjecture The assessing officer holding 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 the assessee holds the specified agricultural land in terms of section 2(14) i.e, not being a capital asset, its transfer will neither attract capital gain tax nor can be treated as business income. 11.4 The assessee did not sell approved lay out to M/s Gandhi Nagar Housing Society Ltd. The appellant was not in the real estate business for his entire life time and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the purchaser by handing over the possession of the land, the 'Transfer' is over as per the Income Tax Act. On the date of transfer, the assessee 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 prove that the appellant sold the agricultural land to Mr. Ramesh. Mr. Ramesh is in the business of real estate and he developed several layouts in and around Navallur, not only in the assessee's agriculture land but also adjacent to the appellant's land. 11.7 Ld.CIT(A) observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1] was referred to and relied, amongst other cases. In this case, the Division Bench of tie Bombay High Court has stated that the profit motive of the appellant selling the land without anything more by itself can never be decisive for determination of the issue as to whether the transaction amounted to an adventure in the nature of trade. In other words, the price paid is not decisive to say whether the land is agricultural or not. 11.8 In the present case, the land in question was classified in the Revenue records as agricultural land, actual cultivation has been carried on this land as evidenced by Chitta/Adangal and Income was declared from this land in the return of income filed by the appellant for the assessment year as agricultural income. In the Revenue records, the land is classified as agricultural land 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 assessee. It is also not in dispute that there was no activity undertaken by the assessee of developing the land by plotting and providing roads and other facilities and there was no intention also on the part of the appellant to put the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, would 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 agricultural operations. It was due to certain compelling circumstances came into picture at a later stages, the assessee sold the land. Merely because of the fact that the land was sold in a short period of holding, it cannot be held that income arising from the sale of land as 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 agricultural land and also being specified as agricultural land in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er put to the use for nonagricultural purpose before or at the time of sale. As per all the revenue records the land sold by assessee is agricultural land. The conditions lay down in section 2(14) of IT Act were fulfilled. The land was sold to Mr. Ramesh, agreement holder, through sale agreement on 15t of December, 2007 and handed over the possession of the agricultural land on the same day to Mr. Ramesh. As per Chitta/Adangal, 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. As per the sale agreement all the approvals is to be obtained by Mr. Ramesh. The assessee is only signatory to the applications filed for layout permission. As per the sale agreement, the buyer 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 land to Gandhi Nagar Housing Society. If the appellant is in the business of the real estate, there is no need to sell the land to Mr. Ramesh. The appellant would have developed the agriculture and into residential layout on his, own. The intension of the appellant is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 18.05.2006 wherein the assessee requested for purchase of 200 acres of agricultural land. As Tamilnadu Land Reforms (Fixing of Ceiling of land) Act, 1961, a person cannot have an agricultural land more than 15 acres, since the assessee has consistently brought land from 38 parties and pooled it into one piece of lance by aggregation and not for the purpose of agricultural activities and converted the agricultural land into residential plot with the sole intention of real estate business. The assessee got approval for the layout for DTCP and sold the land to M/s.Ganhi Nagar 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 two months and in one case it is just one day. 2. The appreciation in land value is 300 % and in one case it is 653 %. While entering into sale agreement with Mr. Ramesh the assessee had negotiated the price on square feet basis. 3. The assessee had the intention to develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the 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 development and promoted the property more fully described in the 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 development and promoted the property more fully described in the schedule-A hereunder by incurring his money for promotion and development of the said properly. into a layout after leveling the land surface, demarking into several plots, laying boundary stones for each plot area, providing Tar Road approaches, providing circles on the junction of Roads, common Park place, 2 Well and 2 Water Tanks with pipe connections to each plot area and other common amenities etc which Layout is known and termed as "Green Grove Jayam Nagar" in the aforesaid land, and has obtained Layout Approval from the competent Authority of Town and Country P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 gain. 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 or 2009-10, do not make any difference. Mr. Ramesh developed the agriculture 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 down in section 2(14) of. IT Act were fulfilled. Details of expenditure incurred for cultivation of crop were available with the assessee and was lost in the month of May, 2008 as evidenced by police complaint. It is the submission of the assessee that different prices were paid to different parties depending on the quality of the agricultural land and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and assessee is to be somehow held as engaged in the adventure of nature of trade and taxed on non-taxable income. It is our submission that, so long as the assessee holds the specified agricultural land in terms of section 2(14) i.e., not being a cap[ital asset, 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 real 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 estate business for his entire life. Even the department not assessed any real estate business income in his scrutiny assessment done under section 143(3) of the Act, for the assessment year 2004-2005 and 2005- 2006. 12.7 The assessee owns more than 200 Acres of the Land in and around Sriperumbattur, Chengalpet and Kanchipuram District in the year under consideration. He only sold around 50 Acres 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2005 addressed to your good self 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 prove that the assessee sold the agricultural land to Mr.Ramesh. Mr. Ramesh is in the business of real estate and he developed several layouts in and around Navallur, not only in the assessee's agriculture land but also adjacent to the assessee's land. Hence, we request your honor to confirm the order of the CIT-A on this issue. 13.1 We have heard both the parties and perused the material on record. It is an admitted fact that the land was held by the assessee as a capital asset from the date of purchase till the date of sale. There is no evidenced brought on record by Revenue to show that the land was held by assessee as stock-in-trade. The assessee's contention is that it is intended to retain the agricultural land acquired as a capital asset. The assessee never treated the land as stock in trade. The assessee carried on agricultural operations. This agricultural land is situated beyond 8 km from the municipal li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the expression adventure in the nature of trade has not been defined in the Act. It may be pertinent to mention here that a specific transaction partake the character of business or an adventure in the nature of trade or realization of capital asset or a mere conversion of asset has to be decided depending upon facts of each case. (iv) In deciding as to whether a particular transaction is an adventure in the nature of trade, the Assessing Officer must consider all the relevant and proved facts and circumstances. Realization 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 in agricultural land. Therefore disposal of the same would not convert, what was a capital accretion, to an adventure in the nature of trade. To make it more clear, sale of agricultural land by the assessee 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 assessee and treated as fixed-assets. The assessee never treated the land as stock-in-trade and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement 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 assessee sold the land and the same fetched them a good price. 13.4. Therefore, in the present case there is no dispute that the assessees acquired agricultural land. There is also no dispute that there was agricultural operation in this land before sale of this land. 13.5 The Assessing Officer was of the opinion that the amount received on sale of this agricultural property is nothing but on account of adventure in the nature of trade and the same was brought into income from business. In this case, the assessee held the land always as investment (fixed assets) and not at all converted into stock-in-trade. The character of the land in the hands of the assessees has not changed. There is no material on record to show that the assessee carried on activities of buying and selling of land in a systematic manner so as to justify the action of the AO in treating the activities of the assessee as adventure in the nature of trade. The land was sold by the assessees in acreage and not by making p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 lesser 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? Whether the owner meant or intended to use it for agricultural purposes? 8. Whether the land was situated in a developed area? 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 plotting and providing roads and other facilities? 10. Whether there were any previous sales of portions of the land for nonagricultural use? 11. Whether permission under s. 63 of the Bombay Tenancy and Agricultural Land Act, 1948, was obtained because the sale or intended sale was in favour of a non-agriculturist? If so, whether the sale or intended sale to such non-agriculturists was for non-agricultural or agricultural user? 12. Whether the land was sold on yar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presumption is rebutted by evidence led by the Revenue, it must be held that the land was agricultural in character at the time when it was sold. The Division Bench of the Hon'ble Gujarat High Court further held that there was nothing on record to show that the presumption rose from the long user of the land for agricultural purpose and also the presumption arising from the entries of the Revenue records are rebutted. 13.1.2 The Hon'ble Bombay High Court in the case of CWT v. H.V. Mungale [1984] 145 ITR 208/12 Taxman 201held that the Hon'ble Supreme Court had pointed out that the entries raised only a rebuttable presumption and some evidence would, therefore, 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 Court had clearly pointed out that the burden to rebut the presumption would be on the Revenue. The Hon'ble Bombay High Court held that the ratio of the decision of the Supreme Court was that what is to be determined is the character of the land according to the purpose for which it was meant or set apart and can be used. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B 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 appeal, the Tribunal accepted the claim of the assessee holding that the transaction in question duly fulfilled the conditions specified for relief. On further appeal to the High Court, the Punjab & Haryana High Court found that the finding that the land had been used for agricultural purposes was based on cogent and relevant material. The Revenue record supported the claim. Even the records of the IT Department showed 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 nonagricultural purposes, were totally irrelevant consideration for the purposes of application of s. 54B. 10. It is seen from the aforesaid decision that the agricultural land sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and was put in use for non-agricultural purposes by the assessee. In view of the decision of the Hon'ble Bombay High Court in the case of Gopal C. Sharma (supra), it is also clear that the profit motive of the assessee in selling the land without anything more by itself can never be decisive to say that the assessee 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 Rao v. Special Court [2006] 4 SCC 214 where it was observed that the fact that agricultural land in question is included in urban area without more, held not enough to conclude 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 bought by Developer cannot be a determining factor by itself to say that the land was converted into use for nonagricultural purposes. 13.1.8 Recently the Karnataka High Court in the case of CIT v. Madhukumar N. (HUF) [2012] 208 Taxman 394/23 taxmann.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 Section 2(14)(iii)(a) & (b) of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation of not less than 10,000 and also 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 'capital asset'. Accordingly, in view of sub-clause (b) of section 2(14)(iii) of the Act even under the amended definition of expression 'capital asset', the agricultural land situated in rural areas continues to be excluded from that definition. And as in the present case, admittedly, the agricultural land of the assessee is outside the Municipal Limits of Rajarhat Municipality and that also 2.5 KM away from the outer limits of the said 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 within the meaning of this section. Hence, no capital gain tax can be charged on the sale transaction of this land entered by the assessee. Accordingly, we quash the assessment order qua charging of capital gains on very jurisdiction of the issue is quashed. The cross objection of the assessee is allowed." 14.1 It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not connected with his business or profession, but does not include "(iii) agricultural land in India, not being land situate (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal 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 before the first day of the previous year; or (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette;" 14.3 It is very clear from the above that the gain on sale of an agricultural land would be exigible to tax only when the land transferred is located within the jurisdiction of a municipality. The fact that all the expressions enlisted after the word municipality are pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulation of not less than 10,000 and also 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 'capital asset'. Accordingly, in view of sub-clause (b) of section 2(14)(iii) of the Act even under the amended definition of expression 'capital asset', the agricultural land situated in rural areas continues to be excluded from that definition. And as in the present case, admittedly, the agricultural land of the assessee is outside the Municipal Limits 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 within the meaning of this section. Hence, no capital gain tax can be charged on the sale transaction of this land entered by the assessee. This 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 Naicke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit, it cannot be held that income arising from the sale of land was 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. 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 IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as nonagricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, in such circumstances, in our opinion, such transfer like the 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 the nature of trade so as to tax the income arising out of this transaction as business income. 16.1 In ITA Nos.481 & 485/Mds./2016 for assessment year 2008-9 & ITA No.482/Mds./2016 for assessment year 2012-13, the Revenue has raised similar ground with regard to deletion of addition made by the AO toward ..... 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