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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 ..... antation land, was an agricultural land both by classification and user till date of cutting of rubber trees. With the cutting of rubber trees, at best, the schedule property becomes arable land, which may not be an agricultural land with plantations. The user for agriculture is not denied by such cutting of rubber trees. This contention that barren land is not agricultural land is neither supported by authority nor material. This Court is of the view that the vacant agricultural land available upon cutting and carrying away of trees, at best, can be called arable land : meaning, land used for any agricultural purpose. Either to attract the meaning of capital asset or not to attract agricultural land, something more is required. The ipsi dixit objection, examined with admitted factors, would not decisively act in determining whether the schedule property satisfies capital asset or not. In the case on hand, the assessee both factually and legally did not change the character of land from agriculture to non-agriculture. The assessee has demonstrated that the classification of land continued to be agricultural land in the revenue records even as on the date of sale. Though it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and other trees standing on the schedule property and carry away the cut trees. The above clause and the cutting of trees by the assessee have been appreciated by the Assessing Officer as converting the schedule property into non-agricultural land, facilitating purchase by KSIDC. Thus, the objections raised by the assessee were rejected and assessment order was made including the sale consideration as exigible to capital gain and demanded tax of ₹ 3,28,51,692/- 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 asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se on hand, held that the schedule property was sold as agricultural land and the sale consideration received is not exigible to capital gains. Hence, the appeal at the instance of the Revenue. 4. The following substantial questions of law are raised by the Revenue: 1. Whether on the facts and on the circumstances of the case the Tribunal was right in holding that the land converted into a barren land to establish an industrial estate was an agricultural land u/s.2(14) and therefore, profit 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? Substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of sale deed. Admittedly, KSIDC, in due course of time, upon purchase from the assessee, converted the schedule property into an industrial estate. He argues that the case on hand does not satisfy the applicable cumulative tests referred to above and the findings recorded by the Tribunal, though are findings of fact, still, the findings are unavailable to the admitted circumstances of the case. It is contended that barren land cannot be included as agricultural land. According to Revenue, the order under appeal suffers from perversity and is liable to be set 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 Mohme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the broad tests/guidelines laid by the judicial precedents. Gujarat High Court in Commissioner of Income Tax, Gujarat-II v. Siddharth J. Desai 139 ITR 628 evolved thirteen factors/indicators which a case has to answer for being treated as agricultural land or non-agricultural land. The thirteen factors are as follows: (1) Whether the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue? (2) Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time? (3) Whether such user 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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. (emphasis supplied) 7.2 In M/s. Mansi Finance Chennai Ltd , the Madras High Court, while dealing with the importance of classification of land in the revenue records, 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. Classifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which they are canvassed. In our opinion what is required to be considered is: Was it agricultural land when it was sold? If the land is recorded as agricultural land in the revenue records and if till the date of its sale it is used and exploited as agricultural land and if the owner of the land had not taken any steps which would indicate his intention to exploit the land thereafter as non-agricultural land, then such a piece of land will have to be regarded as agricultural, even though it is included within the municipal limits or is sold as arable land without actual agriculture. Further, the determination of an issue in fact, whether the land is agricultural or not, is 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, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltural land with plantations. The user for agriculture is not denied by such cutting of rubber trees. This contention that barren land is not agricultural land is neither supported by authority nor material. This Court is of the view that the vacant agricultural land available upon cutting and carrying away of trees, at best, can be called arable land : meaning, land used for any agricultural purpose. Either to attract the meaning of capital asset or not to attract agricultural land, something more is required. The ipsi dixit objection, examined with admitted factors, would not decisively act in determining whether the schedule property satisfies capital asset or not. 8.3 The last 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndor is not dependent on an act of commission or omission of vendee. The vendor has no control on future use. What is very important is whether on the date of sale the land was agricultural land, both in record and use. The incidence to pay capital gains tax cannot be and ought not to be traced to an act of commission or omission by the transferee of the assessee. Being an absolute owner the transferee is always free to put the land to best use as the transferee thinks fit and proper. In the case on hand, the assessee both factually and legally did not change the character of land from agriculture to non-agriculture. The assessee has demonstrated that the classification of land continued to be agricultural 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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