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TMI Blog2020 (9) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... nces 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne Mrs. Leena Mascarenhas for a sum of ₹ 2 Crores, in the previous year relevant to AY 2013-14. The AO accepted the fact that the assessee was an agriculturist and the land in question was an agricultural land as per the revenue records. He was, however, of the view that the main business of assessee was trading in arecanut. In this regard, the AO also found that the assessee had agricultural land at Moodigere, Chikmagalur District, Karnataka and had been declaring huge income from 144 acres of plantation owned by him over the past several AYs. He also found that the person to whom the assessee sold the land was Mrs.Leena Mascarenhas, wife of Shri Rudoph Mascarenhas and that the assessee and the buyer s husband carried on several real estate projects in Bengaluru. The AO also found that though the Assessee owned the land in question for more than 16 years, he had not offered any agricultural income from the said land. The AO also observed that the assessee has not brought any material on record to show that he has conducted agricultural operations/activities over the property. The AO also found that the lands in the vicinity of assessee s land were leisure and entertainmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it was within 8 kms from the local limits of any municipality. There is therefore no dispute that the property did not fall within clauses of Sec.2(14)(iii)(a) or (b) of the Act. It needs to be clarified that the mere fact that a land is situate in an area outside the area referred to in clause (a) or (b) of sec.2(14)(iii) of the Act, does not automatically make it an Agricultural land and such land has to be used for agricultural purposes as laid down in several judicial pronouncements . 7. The AO took the view that to be called an agricultural land, the land must have been used for Agricultural purposes. According to the AO, the Assessee did not establish use of the land for agricultural purpose and other circumstances showed that the Assessee s land was not agricultural land and was sold as a capital asset and not as agricultural land and hence the gain on sale of the property was chargeable to tax as income under the head Capital Gain . The following were the relevant observations of the AO:- 7.16 In summation the assessee's claim of exemption on sale of land at Agarsure is not admissible u/s 2(14) of the Income Tax Act for the following reasons. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee took us through the reasons assigned by the AO for coming to a conclusion that the property is not Agricultural land. He submitted that none of the factors pointed out by the AO in the order of assessment are sufficient to come to a conclusion that the property is not Agricultural land. He firstly pointed out that the classification of the property in the revenue records is agricultural land and the Assessee has been paying land revenue charges levied by the Government. According to him this factor was a very vital factor in favour of the Assessee. He pointed out that the potential use of the property for non residential purpose due to presence of amusement and recreational activities in the vicinity of the property was an irrelevant consideration. In this regard, he relied on the following passages in the decision of Hon ble Madras High Court in the case of Mrs.Sakunthala Vedachalam -vs- The Assistant Commissioner of Income Tax, 369 ITR 558 (Madras) :- 13. According to the Tribunal that if the above tests are applied, the assessees could not satisfy any of the conditions except condition Nos.1,5,11 and 12. The Tribunal held that the assessees could not prove that the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised. Further more, it is also on record that the lands are agricultural lands classified as dry lands, for which kist has been paid. 19. The view of the assessee is fortified by the decision reported in (1937) 32 ITR 466 (Commissioner of Income-tax V. Raja Benoy Kumar Sahas Roy), wherein, it is held as follows: There was authority for the proposition that the expression agricultural land mentioned in Entry 21 of List II of the Seventh Schedule to the Government of India Act, 1935, should be interpreted in its wider significance as including lands which are used or are capable of being used for raising any valuable plants or trees or for any other purpose of husbandry (See Sarojinidevi v. Shri Krishna Anjanneya Subrahmanyam and other(1) and Megh Raj v. Allah Rakhia (2)). 10. The learned counsel for Assessee also placed reliance on decision of Hon ble Bombay High Court in the case of CIT vs. Smt. Debbie Alemao and Joaquim Alemao , reported in (2011) 331 ITR 59 (Bom.) wherein it was held that where the land is shown in revenue record as agricultural land and no permission was taken for conversion of land, it is immaterial whether any agricultural income is shown in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fact that a land is situate in an area outside the area referred to in clause (a) or (b) of sec.2(14)(iii) of the Act, does not automatically make it an Agricultural land and such land has to be used for agricultural purposes as laid down in several judicial pronouncements . The Hon ble Supreme Court in Sarifabibi Mohmed Ibrahim vs. CIT 204 ITR 631 (SC) laid down the principles to be followed in deciding the question as to what can be construed as Agricultural land as under:- (i) The first proposition laid down in the said decision was, 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. (ii) In as much as agricultural land is exempted from the purvie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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? 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ultural land for agricultural purposes, (5) the assessee's use of it was the normal use by an agriculturist, (6) it was nor within any Town Planning Scheme, and (7) no materials has been produced to show any development or building activity surrounding it. The facts which militated against the assessee's stand were three in number - namely: (1) the location or the Ajni land within the Corporation and the improvement trust limits; (2) the action of the assessee in obtaining on August 8, 1966, permission to convert the user of the Ajni land to non-agricultural purposes, and (3) the agreement to sell and the sale of the Ajni land for non-agricultural, i.e., building purposes. 18. The Bench observed that to ascertain the true character and the nature of the land, it must be seen whether it has been put to use for agricultural purposes for a reasonable span of time prior to the relevant date and further whether on the relevant date the land was intended to be put to use for agricultural purposes for a reasonable span of time the future. Examining the facts of the case from the said point of view, the Bench held that the agreement entered into by the assessee with the Housing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Sarifabibi Mohammed Ibrahim (supra) which was approved by the Hon ble Supreme Court, to the facts and circumstances of the case:- 18. Factors in favour of the Assessee: (i) The land in question is entered as agricultural land in revenue records and is assessed as such. (ii) The land is not converted to non-agricultural user. (iii) The Assessee as well as the purchaser are Agriculturalist. 19. Factors against the Assessee: (i) The land is too small for carrying out agricultural operations, considering the fact that the Assessee is basically a trader in betel nuts and carries on agricultural operation in Chikamagalur-Shimoga, a place far away from the land at Agarsure. (ii) The land is sold at a price comparable to the price fetched by building sites. (iii) The price is such that no bona fide agriculturist would purchase the same for genuine agricultural operations. (iv) No Evidence of Agricultural operations carried out have been placed on record. The Assessee was owner of the property in question for 16 years. The evidence filed regarding use of the land for agricultural purpose are sporadic not sufficient to discharge the burden on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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