TaxTMI 
TaxTMI 
2011 (4) TMI 514
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.....63 58.09 In Arasankalani village Acres Document Number 20.59 1740/06 20.59 3. The above land(s) as per the land revenue records, as on the date of sale, was shown as 'agricultural land'. Shri K. Subramania Mudaliar died on 23-11-2005, leaving the following six legal heirs namely - (i) Shri K.S.Ravikumar alias S. Ravi (ii) Smt. S. Rukmini Ammal (iii) Shri Sekar (iv) Smt. N. Kumari (v) Smt. S. Prabha (vi) Km. Narasinghan 4. The return of income, filed was enclosed with the following documents: (i) The statement of total income. (ii) The income adjusted statement. (iii) Receipts and payment account. (iv) Income and expenditure account (v) Balance Sheet (vi) Depreciation statement. (vii) A note on the receipt of 1/6th sale consideration from the sale of agricultural land belonging to assessee's father situated at Perumbakkam and Arasankalani villages. (viii)The details of lands located at Arasankalani and Perumbakkam villages. (ix) Copy of the Tehsildar's certificate stating that the lands are situat....
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....hem in plots giving scope for inference of business in real estate. Late K. Subramania Mudaliar has enjoyed the property as agricultural lands and the lands were classified as agricultural lands and yielding agricultural income in the revenue and Income-tax records. The agricultural incomes were admitted in the assessments of Late K. Subramania Mudaliar till his death in November 2005, therefore forms part of Income-tax records also. There is nothing in the assessment order to show that the appellant did not hold them as agricultural lands. Mr. K. Subramania Mudaliar died without selling any portion of the agricultural lands. All the lands were devolved to the Legal Heirs after the death of K. Subramania Mudaliar in November 2005. Since the investment in agricultural lands were in different names the Legal Heirs entered into a family arrangement, so that the investment in agricultural lands purchased and kept as investment could be sold for a better price by selling them in one lot. All the agricultural lands were kept as agricultural lands only till the date of sale and even the lands wherein the permission was obtained in 1995 were never been exploited by Late K. Subramania Mudal....
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.... agricultural land situated in the revenue estate of Perumbakkam and Arasankalani villages will not fall under the definition of 'capital asset' as specified under section 2(14)(iii) of the Act and hence, the gain arising out of the sale of these agricultural lands cannot be taxed as capital gains. He has also taken a clear view that it is not an 'Adventure in the Nature of Trade' either. He has concluded that this is a sale of 'agricultural land' which is not taxable under the Act. The revenue being aggrieved, filed these appeals, in which identical issues, as discussed above are involved. 7. We have heard both the parties and have perused the entire record available before us. The circumspection of the evidence available before reveals that there is no dispute between the parties with regard to the following facts :- (1) That Late Shri K. Subramania Mudaliar had acquired the lands in question which are the subject-matter of sale in piecemeal from the year 1964 and he only owned and maintained the same for more than ten years. (2) As per the family agreement, 1/6th share of the lands were divided and belonging to each of the assessee as has been mentione....
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....urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette; 8. After accepting the nomenclature of this trade as agricultural land, the Assessing Officer has tried to bring a case under sub-clause (b) by treating them falling within 8 K.ms. of Municipality limits. On his enquiries, he found that the lands were situated within the radius of 8 K.ms. from Sholinganallur Town Panchayat having population of more than 10,000. The Town Panchayats are governed by the Tamil Nadu Panchayat Act. The Assessing Officer has tried to enlarge the definition of 'Municipality' by stretching the definition of 'Town Panchayat' to connect with it municipality. This finding of the Assessing Officer has been rejected by ld. CIT(A). We are also in agreement with ld. CIT(A) and not in agreement with the Assessing Officer. The definition of 'Town Panchayats' which are governed by Tamil Nadu Panchayat Act cannot be pulled apart and stretch to be included in the definition of a Municipality. Otherwise, the lands in question are admittedly situated beyond the radius of 8 K.ms. from the local limits of any Municipality or Cantonment, Municipal Co....
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....tified area committee', 'town area committee' and 'town committee' all refer to urban local self-government institutions. The Panchayats are rural self-government institutions whether they are Town Panchayats or Village Panchayats. The Municipalities are governed by Municipal Act and the Panchayats are governed by Panchayat Act. The Hon'ble Madras High Court in the case of P.J. Thomas (supra), has observed thus: ".... as regards the second question, it is seen that under section 2(14) of the Income-tax Act, 1961, the exclusion of agricultural land as capital asset, would be applicable to land within the limits of a municipality and not a panchayat. The land sold by the assessee was situated in Koshancherry town and that was only a panchayat. Though learned counsel for the revenue strenuously contended that a panchayat would also be comprehended within section 2(14) of the Income-tax Act, 1961, we are unable to accept the contention. Section 2(14)(iii) refers to the exclusion as capital assets of agricultural lands situate in an area which is comprised within the jurisdiction of a municipality (whether known as municipality or municipal corporation, notified area committee, town ar....
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....on will keep the lands without selling for more than 12 years. In our considered opinion, the sale of the land by all the assessees simultaneously to one person cannot be treated as a single or isolated incidence of sale bringing the sale under the expression 'Adventure in the Nature of Trade'. While discussing this issue, the Assessing Officer has wrongly interpreted certain decisions. In the case of Estate Investment Co. Ltd. v. CIT [1980] 121 ITR 580/[1979] 1 Taxman 543 (Bom.), it has been held that "even a single transaction of purchase and sale outside the assessee's line of business may constitute as Adventure in the Nature of Trade", has been wrongly interpreted to fit in the facts of this case. Admittedly, no such single or isolated example of sale is evident in this case. The Assessing Officer has confused the term 'investment' with the term 'business'. If any person makes an investment particularly in agricultural land and if the entire land is sold after its value is appreciated, it would not become Adventure in the Nature of Trade. It is the nature of the transaction which defines the actual nature of the transaction. The Assessing Officer has himself discussed this iss....
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.... was admittedly sold jointly by them, this decision directly applies to the facts of the case. 10. Now, coming to the contention of the ld.DR that the portions of the land sold were being planned to be sold after developing that area as mentioned above. There is no dispute with regard to the factum of obtaining permission to do so, but it is also an undeniable and undisputed fact by the revenue that neither Late K. Subramania Mudaliar or his legal heirs indulged in any activity nor had any intention to enter into transaction which could be termed as an adventure in the nature of trade. Late K. Subramania Mudaliar never plotted out the land. The lands retained the character of agricultural lands till the date of sale in 2005. Admittedly, cultivation has been done till the date of sale of the said lands as per the revenue records also. The lands were sold on the basis of 'as is where is' condition which is evidenced from the sale deeds. The Sub-Registrar has also considered these lands as 'agricultural lands' while registering the sale deeds. There is no evidence which has been recorded by the Assessing Officer on record whereby it can be inferred that the assessees ever ventured to....