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TMI Blog2022 (2) TMI 1146X X X X Extracts X X X X X X X X Extracts X X X X ..... sale deed dated 16.03.1996 in favour of Kerala State Industrial Development Corporation Limited (for short 'KSIDC'). 2.1 The assessee is a public limited company engaged in a range of activities such as cultivation, processing, and trading in tea, rubber, aquaculture; providing engineering services, etc. On 01.12.1995 the assessee entered into a Memorandum of Agreement (MoA) with KSIDC for the sale of schedule of property appended to the MoA dated 01.12.1995. Keeping in perspective the nature and extent of controversy between the parties in this behalf, in the present narrative, this Court prefers to refer to the subject matter of MoA as schedule property, instead of referring as capital asset or agricultural land. The details of the schedule property read thus: SCHEDULE PROPERTY Survey No. Acres Kanthalad village 1496/6 54.060 Quilandy taluk 1504/4 0.009 Kozhikode 1505/2 0.020 1506/3 0.066 Resurvey Number Kinalur village 108 142.61 Quilandy taluk 94 0.55 Kozhikode 95/1 115.40 95/2 0.87 95/3 0.45 314.11 2.2 On 16.03.1996 the assessee executed and registered a regular deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,51,692/- vide assessment order dated 22.03.2002 (Annexure-A). 3.1 The assessee being aggrieved by the order in Annexure-A dated 22.03.2002 filed appeal before the Commissioner of Income Tax (Appeals) Kochi, and, through Annexure-B order, the appeal filed by the assessee was dismissed. The order of the CIT (Appeals) in Annexure-B is in great detail and adverts to the case law wherein the tests for classifying the land as agricultural land or capital asset are laid down. This Court is of the view that the gist of the order of CIT (Appeals) is stated and that would serve the completion of narration of events preceding the present appeal. The CIT (Appeals) laid emphasis on the clause in the MoA enabling the assessee to cut and carry away the rubber trees; on the date of the sale there was no plantation, and that the KSIDC converted the schedule property into an industrial estate. 3.2 The assessee filed second appeal before the Tribunal in ITA No.582/Coch/2011. The Tribunal through order dated 28.03.2014 in Annexure-C allowed the appeal filed by the assessee. The Tribunal firstly examined whether the schedule property is agricultural land or not. By referring to a few precedents on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit on sale not assessable to income tax for capital gains? 2. Whether, on the facts and in the circumstances of the case and in the light of the decision of Supreme Court in 204 ITR 631 - a) Can not the consideration on sale of land be subjected to income tax for capital gains? b) is not the conclusion of the Tribunal against law and perverse? 3. Whether, the Tribunal is right in finding that the subject land is admittedly agricultural land"; "the land was used for agricultural purpose", "the assessee used the land for agricultural operation till the date of sale and are not the findings factually wrong baseless unsupported by evidence and perverse? Substantial Question Nos: 1 to 3 5. Sri P K R Menon, learned Senior Advocate appearing for the Revenue, contends that the order under appeal is per se illegal and contrary to the binding precedents of the Supreme Court in Sarifabibi Mohmed Ibrahim; and High Courts in Commissioner of Income Tax v. V A Trivedi (1988) 172 ITR 95 (Bom); and Principal Commissioner of Income Tax v. Kalathingal Faizal Rahman (2019) 416 ITR 311 (Ker). 5.1 Summarised, the learned counsel's arguments are that the starting point relevant for dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t aside and schedule property be declared as non-agricultural land and income received from sale consideration is exigible to capital gains. 6. Mr A Kumar, learned counsel appearing for the assessee argues that the abstract appreciation and application of the decisions in V A Trivedi and Sarifabibi Mohmed Ibrahim cases are the main cause of confusion in the mind of Revenue. The judgments relied on by the Revenue are appreciated in the background of circumstances considered by the Nagpur Bench of Bombay High Court and the Supreme Court. The judgments arising under the Wealth Tax Act were considered in Sarifabibi Mohmed Ibrahim case and the Supreme Court has not laid down exhaustive tests for determining what constitutes agricultural land or a capital asset. It is always an issue of fact in each case. Referring to the circumstances of the case on hand, he explains by arguing that cutting and carrying away the rubber trees is merely removing the burden of overgrown plantations in the schedule property. The sale of the schedule property was not as is where is basis. The conveyance between the assessee and the KSIDC is the sale of land measuring 314.11 Acres alone, but not the aged tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the land was for a long period or whether it was of a temporary character or by way of a stopgap arrangement? (4) Whether the income derived from the agricultural operations carried on in the land bore any 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cords, particularly when the said classification is not rebutted, what is the extent to which such a factor will have a decisive influence in considering what constitutes agricultural land or not, held thus: "From the material on record, it could be deduced that the respondent has discharged his burden and proved that the lands were agricultural lands, at the time of transfer. Sufficient evidence has been adduced by the respondent, to prove that the subject lands have been put to agricultural operations before the sale. Classification of the lands, in the revenue records, as agricultural lands, is not varied and that is a determining factor." 7.3 In Ms Srinivasa Naicker case the Madras High Court referred to the effect of subsequent treatment of the subject matter of sale transaction and whether it has any impact in determining the nature of asset sold by the assessee on the date of sale. In the said decision it has been held thus: "A perusal of section 45 shows that the requirement as on the date of sale or transfer is that the asset must be a capital asset, considering the description under the Act. The charge ability to tax under section 45 arises only if on the date of sale, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not a one-stop remedy, but it is essentially a question of fact. Several tests have been evolved in the decisions of the Apex Court and various 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, on a particular point of view. Therefore, the Court has to answer the question on a consideration of all of them, by a process of evaluation. Inference, therefore, has to be drawn on a cumulative consideration of all the relevant facts and applicable tests for appreciating the criteria laid down by the Courts. 8.1 The argument of Revenue is that till the date of entering into MoA the schedule property, no doubt, was a plantation/agricultural land. The assessee through MoA agreed to cut and carry away the rubber plantation in the schedule property by the assessee. Therefore, with the cutting and carrying away of rubber trees the schedule property becomes barren land. The barren land cannot be treated as agricultural land. The argument of the Revenue suffers from a basic infirmity. The nature and the character of the schedule pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argument is that the land was sold in favour of the KSIDC, and the KSIDC has put the land to use as an industrial estate. Therefore, even if the first two tests are satisfied, the last test fails and a cumulative effect on the applicable tests is not achieved. The schedule property should be held as non-agricultural land. The genesis for the above argument is drawn from V A Trivedi and Sarifabibi Mohmed Ibrahim cases. This Court has carefully examined the circumstances which were considered by the Nagpur Bench of Bombay High Court in V A Trivedi case i.e., two parcels of land one situated in Ajni village and another in Binaki village. The assessee in the said case is not the first transferee and the first transaction is not subjected to capital gains. The assessee, in the reported case, since has sold his property to housing societies etc, the observations have been made. The observation of ensuring agricultural use for a reasonable span of time in the near future is case-specific inasmuch as in the said judgment the assessee has applied for conversion of land from agricultural to non-agricultural use etc. The test laid down in V A Trivedi case that it (i.e., land) must also be se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land in the revenue records even as on the date of sale. Though it is a peripheral, it is an important matter in appreciating the character of land sold by the assessee; namely, had the land been converted for the non-agricultural purpose/laid out in plots, then the stamp duty payable on registration would be on the nature of land sold at the relevant point of time. The schedule property was described as land in conveyance deed. The schedule property consists of vast extents of agricultural land, admittedly outside a notified area. There is no change of user at the instance of assessee. The burden fastened on the assessee in the circumstances of the case has been discharged and the findings recorded by the Tribunal are available in the facts and circumstances of the case. We apply the principles enunciated in the cases referred to supra to the case on hand and the tests taken out as relevant by the Revenue and examined as tenable or not. The findings of fact recorded by the Tribunal, in the circumstances of the case, do not warrant interference of this Court. The three objections raised against the findings recorded by the Tribunal since are without merit, the substantial question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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