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TMI Blog2017 (2) TMI 1364X X X X Extracts X X X X X X X X Extracts X X X X ..... ri D.Venkatesh & Others and together with Stamp Duty, the total cost of land come to Rs. 4,24,74,120/-. Within a short span of 6 1/2 months i.e. on 1.4.2010, the land was sold to M/s Vishram Infrastructure Pvt. Ltd., for a consideration of Rs. 9 crores. 3.1 The Assessing Officer found that as per the return of income of M/S Vishram Infrastructure Pvt. Ltd. for the AY 2011-12, the land was converted into Stock-in-trade and as per the Schedule-4 of the Balance Sheet of the company as on 31.3.2011, this land at Thalambur appears as Closing Stock of land of the company M/s Vishram Infrastructure Pvt. Ltd. The Assessing Officer also observed that in the year of purchase, the assessee had categorized the said land as an asset in this proprietary business of real estate and not as his personal asset. 3.2. Keeping in view the facts that the land in question was sold within a short span of 6 1/2 months, the assessee has been engaged in Real Estate business and the sale of land itself is made to M/s Vishram Infrastructure Pvt. Ltd., a company in which the assessee and his wife control the entire stake, the Assessing Officer held that the entire transaction of purchase and sale of land has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee before the lower authroities to prove the fact that the land held/sold by the assessee is agricultural land. 5.1. The AR submitted that the sale transaction effected by the assessee in respect of the above agriculture land constituted only sale of agriculture land, and by no stretch of imagination it can be treated as adventure in trade and so as to treat the same as 'business transaction' for the following reasons: i) Purchase and holding of land for a period and subsequent sale thereof itself cannot be an indicator to hold that the intention of the assessee was to carry on business with those assets. The intention cannot be presumed unless supported by evidence. In this case the treatment given by the assessee for this asset in the account books cannot indicate that the intention of the assessee is to hold the same as business asset to have good returns from the same. ii) The asset acquired was agriculture land as per the evidence brought on record on 16-09-2009 for Rs. 4,24,74,120/-(including stamp duty). It was sold on 1-4-2010 in the A.Y. 2011-12 for a consideration of Rs. 9 crores. Thus, the assessee held the agriculture land for about 6 ½ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction. It is the general human tendency to earn profit out of capital asset. No one invests to incur a loss. If the market condition suddenly goes up or down, it is always the tendency of a person to take a quick decision so that the realization on the investment is maximum or the loss is minimum. vii) As already mentioned the assessee carried on agricultural operations in the said agriculture land. In that process the assessee itself involved in the primary operation such as ploughing, tilling, sowing, watering etc. The assessee has declared agricultural income of Rs. 25,000/- in the assessment year under consideration. viii) By selling the above agriculture produce the assessee earned agriculture receipts which were brought into the account books of the assessee as shown in the statement of income as well as return of income. 5.2. From the above, it is clear that: a) The assessee purchased agriculture land now under consideration situated beyond 8 km from the municipal limits. b) The assessee treated the same as fixed asset in their books as land at Thalambur at Rs. 4,24,74,120/-. c) The land was identified as agriculture land in the revenue records. d) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision will have to be reached on a balanced consideration of the totality of the circumstances. 5.6. The expression 'agricultural land' is not defined in the Act, and now, whether it is agricultural land or not has to be determined by using the tests or methods laid down by the Courts from time to time. 5.7. The Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim (204 ITR 631) has approved the decision of a Division Bench of the Hon'ble Gujarat High Court in the case of CIT vs. Siddharth J. Desai (1982) 28 CTR (Guj) 148 : (1983) 139 ITR 628 (Guj) and has laid down 13 tests or factors which are required to be considered and upon consideration of which, the question whether the land is an agricultural land or not has to be decided or answered. We reproduce the said 13 tests as follows: (i) Whether the land was classified in the Revenue records as agricultural and whether it was subject to the payment of land revenue? (ii) Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time? (iii) Whether such user of the land was for a long period or whether it was of a temporary character or by any of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not conclusive. The land was already classified as agricultural land in the Revenue Records and the assessee carried on agricultural activities in the said land, which was confirmed by the Return of Income filed by the assessee for the assessment year under consideration as the assessee declared income from agricultural operations. The revenue earned from agricultural operations was reflected in the return of income filed before the Department. Since the intention of the company is not to use the agricultural land for non-agricultural purposes, there is no question of taking of any permission for conversion of the land. 6.1. The A.R submitted that assessee carried on agricultural operations in the land. The owner intended to use it for agricultural purposes only and the intention of the owner is fulfilled since the agricultural activities generated income. The land was situated in a area wherein lot of agricultural activities are being carried on. No development of the land was done by making plots and providing roads and other facilities. It is wrong to conclude that work has been done aiming to plotting, developing infrastructure because the land development was done in other l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basic operations are wanting, the subsequent operations do not acquire the characteristics of agricultural operations. The Constitution Bench of the Hon'ble Supreme Court in the aforesaid case observed that the entries in Revenue records were considered good prima facie evidence. 6.3. The Hon'ble Gujarat High Court in the case of Dr. Motibhai D. Patel vs. CIT (1982) 27 CTR (Guj) 238 : (1981) 127 ITR 671 (Guj) referring to the Constitution Bench of the Hon'ble Supreme Court had stated that if agricultural operations are being carried on in the land in question at the time when the land is sold and further if the entries in the Revenue records show that the land in question is agricultural land, then, a presumption arises that the land is agricultural in character and unless that 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Smt. Savita Rani (2004) 186 CTR (P&H) 240 : (2004) 270 ITR 40 (P&H) and has observed and held as under : "8. It is well settled in the case of CIT vs. Smt. Savita Rani (2004) 186 CTR (P&H) 240 : (2004) 270 ITR 40 (P&H), wherein it is held that the land being located in a commercial area or the land having been partially utilised for non-agricultural purposes or that the vendees had also purchased it for non-agricultural purposes, were totally irrelevant consideration for the purposes of application of s. 54B. 9. In the abovesaid case, the assessee an individual sold 15 karnals, 18 marlas of land out of her share in 23 karnals, 17 marlas land during the financial year 1990-91, relevant to the asst. yr. 1991-92, the sale was effected by three registered sale deeds. While filing her return of income, she claimed exemption from levy of capital gains under s. 54B 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, because the surrounding area was totally developed and mere possibility to put the land into use for nonagricultural purposes would not change the character of the agricultural land into non-agricultural land, when the land was sold by the assessee. It is also an admitted position that the assessee had not applied for conversion of the land in question into non-agricultural purposes and no such permissions were obtained from the concerned authority. 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 assessees herein to put the same for non-agricultural purposes at time of their ownership that land. No such finding has been given by the Department. No material or evidence in support of the fact that the assessees have put the land in use for non-agricultural purposes has been brought on record. At the relevant point of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment, having regard to the extent of, and scope for, urbanisation of such area, and, when any such area is notified by the Central Government, agricultural land situated within such area will stand included within the term "capital asset". Agricultural land situated in rural areas, i.e., areas outside any municipality or cantonment board having a population of not less than ten thousand and also beyond the distance notified by the Central Government from the limits of any such municipality or cantonment board, will continue to be excluded from the term "capital asset". 9.1 In view of the above discussion, we are of the opinion that the land in question cannot be considered as stock in trade in the hands of assessee. It is nothing but agricultural land in terms of Sec.2(14)(iii) r.w.s. 10(1) of the Act and transfer of that land cannot lead to taxable capital gains or income from business. 9.2 Further, it is also be noted that our above view is also supported by the recent judgment of Jurisdictional High Court in T.C.A.No. 483/2016 dated 1-9-2016 in the case of M/s Mansi Finance Chennai Ltd. In view of the above, we direct the AO to consider gain on sale of impugned land as exe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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