Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

2017 (8) TMI 1301

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... the case of Smt. Asha George vs. ITO (2013 (1) TMI 545 - KERALA HIGH COURT) were examined by this Tribunal in the case of M.J. Thomas (2014 (10) TMI 353 - ITAT COCHIN). Hon’ble Madras High Court in the case of Shakuntala Vedachalam vs. Vanitha Manickavasagam (2014 (9) TMI 3 - MADRAS HIGH COURT) has also held that classification of land in revenue records, was clearly indicative of the nature of the land. In the circumstances, we are of the opinion that the subject land could only be considered as agricultural. Since it was situated beyond 8 kms. from the municipal limits, sale thereof would not result in any capital gains. Surplus could not have been treated as income from business since assessee had not ventured into the business of real estate. For the very same reason, we are of the opinion that the agricultural income returned by the assessee could not have been added to the total income since it was exempt u/s. 10(1) of the Act. - Decided in favour of assessee.
Shri Abraham P. George, AM And George George K., JM Assessee by : Shri R.Vijayaraghavan, CA Revenue by : Shri A. Dhanaraj, Sr. DR ORDER Per Abraham P. George, Accountant Member This appeal of the assessee is dir .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... on without making any changes to it. As per the assessee, there was no conversion in the land records nor any plotting of land. Vis-à-vis its main object mentioned by the Assessing Officer as a reason for treating the surplus as business income, reply of the assessee was that nothing in its Memorandum of Association prohibited it from using the land for agricultural purposes and such activity was covered by the objects which were incidental or ancillary to the main object. Further contention of the assessee was that it had procured the land with the intention of using it for agricultural purposes. Reliance was placed on the judgment of the Hon'ble Madras High Court in the case of CIT vs. K.E. Sundara Mudaliar (18 ITR 259) (Mad.), Hon'ble Gujarat High Court in the case of CIT vs. Rajshibhai Meramanbhai Odedra [(2013) 86 CCH 309)] and the decisions of the Panaji Bench of the Tribunal in the case of ACIT vs. Durgadas K.Prabhu Shastri (I.T.A. Nos. 129,130,144,156-161, 174, 175 & 178/2013), Jodhpur Bench of the Tribunal in the case of Supriya Sanwar (Smt.) vs. ITO (149 ITD 1) and that of the Hyderabad Bench of this Tribunal in the case of Harniks Park Pvt.Ltd. vs. ITO [(2014) 62 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ). The two sections do not add up all the facts of the instant case, (ii) The lands under reference were situated outside the stipulated boundary of 8 kilometres from the notified municipal area and were "agricultural lands" per the government records and Section 2( 14)(iii). CIT(A) Comments: The same reasons as in clause 7(gg)(i) above and the circumstances of fast-paced development and pursuant increases in land values stated in some of the judicial ratios found the conclusion that these facts alone will not result in tax-exemption u/s 10(1) on the sale of the impugned lands (iii)) 85 coconut trees were stated to be grown on the said land. The photographs or the lands taken on the date of their possession were submitted to the AO. The Appellant was stated to have earned agricultural income out of the said lands during the impugned A.Y. 2012-13, which income was stated to be the net or the proceeds of the sale of the coconuts less the attendant costs or sales and tree-maintenance expenses. CIT(A) comments: All of these do not prove the kernel fact and argument that there have been any agricultural operations. We only have static and meaningless visuals that project f .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ellant was "empowered to carry out all of the activities specified" irrespective of the other objects specified" CIT(A) comments: The fact that such pious statements have been made in the MoA are not denied but do not prove actual action on the ground.. No amount of syllogistic reasoning or legal interpretation on these can produce even a modicum of fact. The AO has only cited the MoA to explain the general context, circumstances and surroundings of the Appellant's existence, events and activities to in turn argue that against such a backdrop, the Appellant's sudden claims of interest and desire in agriculture appear unnatural and contrived and need to be viewed with misgivings and qualms by any reasonable person. The fact of immediate disposal of the purchased lands by the Appellant sans any activity to further its proclaimed interest only strcngthen the said skepticism. (vii) The said lands were purchased by the Appellant with the intent of using them for agricultural purposes, evidenced from the fact of the reporting of agricultural incomes in the returns of income and the certificate (referred to above) provided by the Agricultural Officer. CIT(A) comments: The .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... videnced. The fact of the lands being agricultural in the records alone do not automatically predicate tax Exemption u/s. 10(1) of the Act, The no-alterations-on-land scenario has eventualized because of lack or opportunity and the shortage of time and the sudden and serendipitous arrival of a buyer armed with a good price. The manner in which the lands have been treated in the accounts is an artifice and will not hold as held by the Hon'ble Supreme Court above. Such land should rightfully have been classified and accounted for as stock-in-trade and the profits from their sale declared for tax purposes as being from an adventure in the nature of trade assessable under the head business income. (xi) The Appellant's opinion is that the Assessing Officer grossly erred by merely alleging that the intention of the appellant behind the purchase of land was real estate business. CIT(A) Comments: The AO needed to evaluate the facts and the evidences against the applicable circumstances. He has done so. The Appellant's raison d'etre and alpha and omega were real estate activities. Although it (the Appellant) was not prevented from plunging into agricultural activities, any ste .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ents have only rhetorical value, They are unilateral assertions and obviously self-interested and in the absence of evidences as afore-stated do not survive the test of the independent audit, as the one carried out by the Assessing Officer. (xv) The Appellant's position is that the period of holding is irrelevant in determining the nature of the transaction. CIT(A) Cornmcnts: On the facts and circumstances of the case, and in a matter that seeks to determine the original intent as well as pit and distinguish amongst: a) investment and stock-in-trade, b) the purchase and sale of agricultural land and other real-estate transactions; c) an adventure in the nature of trade and a capital investment, et al, the period of holding is absolutely relevant in determining the nature or the transaction, (xvi) Per the Appellant, there are no restrictions imposed under the Income tax Act on the period of holding of agricultural land in determining its taxability. CIT(A) Comments:: This is true. However, the short period has also likely resulted in the Appellant carrying out no agricultural activity. The unseemly speed at which the land was sold when set against the background of overwhelm .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... the assessee purchased the agricultural land. According to him, the status of the land when the assessee sold it, remained the same and the nature of the land was clearly indicated it to be agricultural. Relying on the copy of a certificate issued by the Agricultural Officer, placed at paperbook pg. no. 100, Ld. AR submitted that the Agricultural Officer clearly certified the cultivation of coconut palms in the subject land and also considered the assessee as a bona fide cultivator of the subject land. Reliance was placed on the decision of the co-ordinate Bench of the Tribunal in the case of M.J. Thomas vs. Dy. CIT (I.T.A No. 224/Coch/2014 dated 06/06/2014) and the judgment of the Hon'ble Madras High Court in the case of Shakuntala Vedachalam vs. Vanitha Manickavasagam (369 ITR 558). 9. Per contra, Ld. DR strongly supporting the orders of the lower authorities, submitted that the CIT(A) had considered a host of judgments and had rightly reached a conclusion that the assessee could not show the land to be used for any agricultural purpose. As per the Ld. DR, the assessee being a real estate business, tit had no intention to do any agriculture, and the sale of land could only be co .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... or two instances of sale of agricultural land would not be sufficient to deem the assessee to be a real estate dealer. Especially so, when it is not disputed that land sold by the assessee was held by it as a fixed asset and not as a stock-in-trade. In fact the Balance sheet of the assessee for three years, which is placed at paperbook pg. 104, does not show any stock-in-trade at all. On the other hand, its investments were almost wholly reflected by shares of Kalabhavan Studios Limited, shares of GMR Infrastructure Ltd., Units of HDFC Mutual Fund, Units of HDFC Mutual Funds and Units of Birla Sun Life Dynamic Bond Funds. If the assessee had purchased property with an intention to do a business in real estate, it would have been a part of its stock-in-trade and not part of its fixed assets. Intention of the assessee, in our opinion, as coming out of the balance sheet P&L is that the subject land was not purchased to do a business. 12. Now coming to the question whether the land sold was agricultural or not, the Agricultural Officer's certificate placed at paperbook pg. no. 100 is reproduced below: "CERTIFICATE Certified that Sri E.P. George, Managing Director M/s. Fancy Mega pro .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... -tax Act in respect of agricultural land we have to take the mean ing \i! in common parlance. In common parlance, the land which is meant for cultivation is considered to be an agricultural land. This Tribunal finds a similar reference "Agricultural land" in Wealth-tax Act. Section 2(e) of the Wealth-tax Act, 1957 reads as follows: "2. In this Act, unless the context otherwise requires, -(a) to (d) xxxxxxxxxxxxxxxxxxx (e) "assets" includes property of every description, movable or immovable, but does not includes property of every description, movable or immovable, but does not include, - (1) in relation to assessment year commending on the 1st day of April, 1969, or any earlier assessment year - (1)Agricultural land and growing crops, grass or standing trees on such land. "Therefore agricultural land and growing crops, grass and standing trees on such land are excluded from the definition of 'asset' even under the Wealth-tax Act. An occasion arose before the Apex Court in CWT vs. Officer in charge (Court of Ward Paigah (1976) 105 ITR 133(SC) to consider the term "agricultural land" occurred in section 2(e) of the Wealth Tax Act. Therefore, this Tribuna .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... the Act. The Apex Court found that the assessee applying for permission to sell the land for non-agricultural purpose and immediately after application for conversion of land, the land was not cultivated for a period of four year. In those factual circumstances, the Apex court found that the land in question is not an agricultural land. In the case before us, the assessee has not applied for conversion of land for non-agricultural purpose. The land in question is classified as agricultural land and the village officer certified that the land was subjected to cultivation. The assessee is contributing to the Agricultural Labourer's Welfare Fund and also paying revenue tax as agricultural land which is evidence from Basic Tax Register. In view of the material available on record disclosing the cultivation of land, this Tribunal is of the considered opinion that judgment of the Apex Court in the case of Sarifabibi Mohmed Ibrahim And Others (supra) may not be applicable to the facts of the case." In our opinion, the intention of the owners to do agricultural operation in the subject land is clear from the attendant facts and they had returned agricultural income for various assess .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates