TaxTMI 
TaxTMI 
2015 (6) TMI 561
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....come for the year under consideration was filed by the assessee, declaring total income of Rs. 2,31,276 as originally returned. In the said return, profit arising from sale of land amounting to Rs. 97,20,000 was declared by the assessee as short term capital gains, and the same was claimed to be exempt on the ground that the land sold, being an agricultural land, was not a capital asset under S.2(14) of the Act. During the course f assessment proceedings, the claim of the assessee for this exemption was examined by the Assessing Officer in detail, and on such examination, he recorded his findings/observations as under- "(a) there is no agricultural activity in the land. (b) the land is not conducive for agriculture. (c) the land is adjacent to the industrial area of Dundigal, in fact there are running industries just opposite the survey No.s' 668 and 669 in which the land is present. (d) the purpose of land is for adventure in nature of trade, but not for tilling and sowing activities that characterize farming. (e) The land was sold to M/s. Varun Constructions, an associate of Amsri Developers, which is in the business of real estate. (f) out of two acres of land that wa....
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.... on the basis of which a view can be taken whether a3 land can be characterized has been agricultural in nature or not. (c) In the landmark decision rendered by the Supreme Court of India in the case of Sarifabibi Mohammad Vs. CIT, the Apex Court referred to various tests evolved by the Gujarat High Court in the case of CIT Vs. Sidharth J. Desai (1983) 139 ITR 62. According to those test, some of the important factors which stand against the assessee in this case are as under: (i) Whether the land is actually or ordinarily used for agricultural purposes at or about the relevant time. In this case, as on the date of enquiry, there was not sign of agricultural activity in the said land and in its vicinity either on the date of enquiry or in the near past. (ii) Whether such use of the land was for a long period or whether it was for a temporary character by way of a stop gap arrangement. The land was purchased vide deed no. 3895 dated 02.04.2005 and the land was sold on 12.03.2007. This shows that the holding period is below two years and cannot be classified as a long period. (iii) Whether the income derived from agricultural operations carried on in the land bore any ratio....
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....n the pahani as agricultural land would not come to rescue of the assessee. It is also pointed out that, had the assessee undertaken any agricultural activity in the said land there would have been an element of agricultural income from the land which would have been reflected in her returns of income. However, it is seen from her returns that the assessee has not admitted any amount of income from the said land in question. This clearly adds to the discussion made in the foregoing paragraphs and leads to the conclusion that the assessee failed to demonstrate the existence of any agricultural activity from the said land." 5. On the basis of the above findings/observations, the Assessing Officer held that the land sold by the assessee was not an agricultural land and the activity of purchase and sale of the said land being an adventure in the nature of trade, profit arising from such activity was liable to be taxed in her hands as business income. Accordingly, the profit arising from the sale of land of Rs. 97,20,000 was brought to tax by the Assessing Officer in her hands in the assessment competed under S.143(3) read with S.153C of the Act, vide order dated 30.9.2013. 6. Agains....
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....ions. The said land owners had also claimed the profit arising from the transfer their land to M/s. Varun Constructions as exempt on the ground that their lands, being agricultural lands, were not capital assets within the meaning of S.2(14). In their cases also, the claim was not allowed by the Assessing Officer and when the matter reached the Tribunal in the case of six of the said assessees, namely, M/s.Bhavya Constructions Pvt. Ltd., Shri M.S.Raghava Reddy, Shri R.Srinivasa Rao, Shri R.Uma Maheswar, Shri P.Shivakumar and Shri G.C.Subbanaidu, the coordinate bench of this Tribunal vide its order dated 28.8.2014 decided similar issue in favour of the assessee, holding that the land sold by the said assessees were agricultural lands, and therefore, the profits arising from the transfer of such lands, was not chargeable to tax in the hands of the assessees. The elaborate observations/findings recorded by the Tribunal, while coming to this conclusion, as contained in paragraphs and 14 are as under- "13. We have heard the parties and perused the materials on record as well as the orders of the revenue authorities. We have also applied our mind to the decisions placed before us. On go....
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....r proper application of mind had accepted the claim of the assessee that the asset being sold being agricultural land will not attract capital gain tax. The department has not brought any cogent evidence or material on record to disprove assessee's claim either in respect of agricultural income earned through agricultural operation conducted on the said land or the fact that the land is situated beyond the prescribed limit of the nearest municipality notified by the Central Government. In the aforesaid circumstances, the finding of the CIT(A) remains uncontroverted. Therefore, it has to be held that as the land sold by the assessee is in the nature of agricultural land and is situated beyond the prescribed limit of any municipality notified by the central govt. it cannot come within the definition of capital asset as envisaged u/s 2(14) of the Act. So far as the finding of the AO that the transaction entered into by the assessee is an adventure in the nature of trade, the same is also without merit for the strong and valid reasons recorded by the CIT(A). On a perusal of the assessment order, it appears, that the AO has treated the transaction as an adventure in the nature of trade ....
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....ture into non-agriculture then there is no question of conversion of this land for nonagricultural purposes by the Revenue authorities concerned. To our understanding nature of land cannot be changed by any State Government notification and the land owners are required to apply to the concerned Revenue authorities for the purpose of conversion of the agricultural land into non-agricultural land and there is no automatic conversion per se by State Government notification. 25. In the instant case, at the relevant point of sale of the land in question, the surrounding area was totally undeveloped and except mere future possibility to put the land into use for nonagricultural purposes would not change the character of the agricultural land into non- agricultural land at the relevant point of time 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 re....
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....tance of 8 kms from the local limits, which is covered by Clause (a) to section 2(14)(iii) of the Act, but also requires the fulfilment of the condition that the Central Government has issued a notification under this Clause for the purpose of including the area up to 8 kms, from the municipal limits, to render the land as a "Capital Asset. 11. In the present case, it is not in dispute that the subject land is not located within the limits of Dasarahalli City Municipal Council therefore, Clause (a) to section 2(14][iii] of the Act is not attracted. 12. However, though it is contended that it is located within 8 knits,, within the municipal limits of Dasarahalli City Municipal Council in the absence of any notification issued under Clause (b) to section 2(14)(iii) of the Act, it cannot be looked in as a capital asset within the meaning of Section 2(14)(iii)(b) of the Act also and therefore though the Tribunal may not have spelt out the reason as to why the subject land cannot be considered as a 'capital asset' be giving this very reason, we find the conclusion arrived at by the Tribunal is nevertheless the correct conclusion." 27. Further the Kolkata Bench of the Tribunal in t....
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....it is being put to any use. If it is used for agricultural purposes there is a presumption that it is agricultural land. If it is used for nonagricultural purposes the presumption is that it is non-agricultural land. This presumption arising from actual use can be rebutted by the presence of other factors. There may be cases where land which is admittedly non-agricultural is used temporarily for agricultural purposes. The determination of the question would, therefore, depend on the facts of each case. 'The assessee, Hindu, undivided family, had obtained some land on a partition in 1939. From that time, up to the time of its sale, agricultural operations were carried on in the land. There was no regular road to the land and it was with the aid of a tractor that agricultural operations were being carried on. The land was included within a draft town planning scheme. The assessee got permission of the Collector to sell the land for residential purposes and sold it. On the question whether the land was agricultural land: Held, that what had to be considered is not what the purchaser did with the land or the purchaser was supposed to do with the land, but what was the character o....
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....erused the meaning of the term local authority as referred in section 10(20) of the Act. (20) the income of a local authority which is chargeable under the head "Income from house property", "Capital gains" or "Income from other sources" or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service [(not being water or Electricity) within its own jurisdictional area or the supply of water or electricity within or outside its own jurisdictional area]. [Explanation. - For the purposes of this clause, the expression "local authority" means - (i) Panchayat as referred to in clause (d) of article 243 of the Constitution; or (ii) Municipality as referred to in clause (e) of article 243P of the Constitution; or (iii) Municipal Committee and District Board, legally entitled to, or entrusted by the Government with, the control or management of a Municipal or local fund; or (iv) Cantonment Board as defined in section 3 of the Cantonments Act, 1924 (2 of 1924); 32. It is also evident from the Memorandum explaining the provisions of Finance Act, 1970, whereby s. 2(14) was amended so as to include the agricultural lands located withi....
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....thin such distance, not being more than 8 km from the local limit of any municipality or cantonment board as referred to in sub-clause (a) of section 2(14)(iii) of the Act, as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette. 34. We have carefully gone through the notification issued by the Central Government u/s. 2(1A)(c) proviso (ii)(B) and 2(14)(3b) vide No. 9447 (F. No. 164/(3)/87/ITA-I) dated 6th January, 1994 as amended by notification No. 11186 dated 28th December, 1999. In the schedule annexed to the notification dated 6.1.1994, Entry No. 17 is relating to Hyderabad wherein mentioned that the areas up to a distance of 8 km from the municipal limits in all directions. In the notification 11186 dated 28.12.1999 there is no entry relating to Hyderabad. It is clear from these notifications that agricultural land situated in areas lying within a distance not exceeding 8 km from the local limits of Hyderabad Municipality (GHMC) is covered by the amended definitions of 'capital asset'. Central Government in exercise of such....
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....stances that a property is purchased in the hope that when sold later on it would leave a margin of profit, would not be sufficient to show, an intention to trade at the inception. In a case where the purchase has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding the property for himself or otherwise enjoying or using it, the presence of such an intention is a relevant factor and unless it is offset by the presence of other factors it would raise as strong presumption that the transaction is an adventure in the nature of trade. Even so, the presumption is not conclusive and it is conceivable that, on considering all the facts and circumstances in the case, the court may, despite the said initial intention, be inclined to hold that the transaction was not an adventure in the nature of trade. The presumption may be rebutted. In the present case, considering the facts and circumstances of the case it cannot be considered as an adventure in the nature of trade. The intention the assessee from the inception was to carry on agricultural operations. Merely because of the fact that the land was sold in a short period of ....