TaxTMI 
TaxTMI 
2016 (7) TMI 185
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....ssessing Officer may be restored." 2. The brief facts leading to the controversy are that the assessee has been buying and selling immovable properties. The assessee claimed the gain on sale of agricultural lands exempt from tax as per the provisions of section 2(14) of the income tax act. During the course of assessment proceedings the AO examined the said issue and found that the properties have been converted from agricultural land to non- agricultural lands for a non-agricultural use prior to the sale by the assessee. Thus, the AO noted that as on the date of sale, the properties were capital asset as per the definition under section 2(14) of the income tax act. The AO was of the view that the sale proceeds and gain thereon are required to be treated under the head capital gain. Accordingly, the AO brought to tax the long term capital gain and sort term capital gain arising from the sale transaction of the lands in question. The assessee challenged the action of the AO before the CIT (appeals) and contended that though the land were converted from agricultural to non- agricultural (industrial) purpose, the lands have not been utilised for industrial purpose till the date of ....
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....tions therefore, the AO accepted the lands in question as agricultural land for the purpose of assessing the income offered by the assessing. Since the lands were continued to be agricultural land on the date of transfer/sale, it will not lose its character of agriculture land merely because the lands were converted into non-agricultural use. The purpose for which the purchaser has purchased the lands is irrelevant when the assessee intended to use the land and actually used the lands in question for agriculture purpose till the date of sale, then it will remain agricultural land for the purpose of the meaning of capital assets as per the provisions of section 2(14) of the income tax act. In support of his contention he has relied upon the following decisions: i. M.S. Srinivasa Naicker & Others Vs. ITO 292 ITR 481 (Mad). ii. Hindustan Industrial Resources Ltd Vs. ACIT 180 taxman 114 (Delhi) iii. Order dated 28/11/2006 in case of H S Vijay Kumar Vs. CIT in ITA No.108/Bangalore/2005. iv. Order dt.13/06/2040 in case of Sri M.R. Seetharam Vs. ACIT in ITA No.1654/Bang/2012 and C.O. No.43/Bang/2014. v. Order dt.12/11/2013 in case of Shri Alamp....
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....6, and immediately thereafter sold on 18/07/2006. The intention and purpose of purchase of the lands on 13/05/2005 is clear from its period of holding which is about one year and further the lands were converted from agriculture to non-agricultural industrial use just 8 days prior to the sale. Even otherwise, when the assessee is engaged in the purchase and sale of the agricultural lands then the intention and purpose of purchase of the agricultural land by the assessee never be for carrying out the agricultural operations but it was only for resale of the same. While completing the assessment under section 143( 3) the AO had made the following additions: (i) Long term capital gain of Rs. 36, 70, 000/- (ii) Short term capital gain of Rs. 64, 67, 011/- The above addition clearly shows that the short term capital was almost double the amount of long term capital gain and therefore, the holding period of the lands was less than 3 years in majority of the cases. We further note that the lands in question were sold in terms of the agreement of sale dated 1/04/2005. There was a condition under clause 3 of the agreement that the buyer would buy the property only if th....
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....of the exemption given". The idea behind exempting the agricultural land is to encourage cultivation of land and the agricultural operations. " In other words this exemption had to be necessarily given a more restricted meaning than the very wide ambit given to it by the Full Bench of the Andhra Pradesh High Court". (b) What is really required to be shown is the connection with an agricultural purpose and user and not the mere possibility of user of land, by some possible future owner or possessor, for an agricultural purpose, It is not the mere potentiality, but its actual condition and intended user, which have to be seen for purposes of exemption. (emphasis * added). (c) "The person claiming an exemption of any property of his from the scope of his assets must satisfy the conditions of the exemption." (d) " The determination of the character of land, according to the purpose for which it is meant or set apart and can be used, is a matter which ought to be determined on the facts of each particular case." (e) The fact the land is assessed to land revenue as agricultural land under the State revenue law is certainly a relevant fact but it is not conclusive." In the said case th....
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....land, when the assessee had obtained permission to convert the said land to non-agriculture land prior to sale. After considering the various criteria and principles as laid down in the earlier decisions, the Hon'ble Supreme Court in case of Smt. Sarifabibi Mohmed Ibrahim held as under: " Now, we may consider the various circumstances appearing for and against the appellant's case. The facts in their favour are: the land being registered as agricultural land in the revenue records; payment of land revenue in respect thereof till the year 1968-69; absence of any evidence that it was put to any non-agricultural use by the appellants; that the land was actually cultivated till and including the agricultural year 1964- 65; that there were agricultural lands abutting the said land and that the appellants had no other source of income except the income from the said land. As against the above facts, the facts appearing against their case are: the land was situated within the municipal limits-it was situated at a distance of one kilometer from the Surat railway station; the land was not being cultivated from the year 1965-66, until it was sold in 1969; the appellants had entered ....
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....reement to sell the land for housing purposes by applying and obtaining the permission to sell the land for non-agricultural purpose and its sale soon after. 8. In a subsequent decision in the case of Gopal C. Sharma Vs. CIT 209 ITR 946the Hon'ble Bombay High Court has again considered this aspect of agricultural land and has observed at pages 956-957 as under: " The expression " agricultural land" is not defined under the Income Tax Act, 1961. The question as to whether the land in question was liable to be considered as agricultural land for purposes of income-tax is liable to be decided with reference to the criteria laid down by judicial decisions of the Supreme Court and High Courts. The underlying object of the Act to exempt " agricultural income" from income-tax is to encourage actual cultivation or de facto agricultural operations. Actual user of the land for agricultural purposes or absence thereof at the relevant time is undoubtedly one of the crucial tests for the determination of the issue. It is well settled that the nature and character of the land may undergo a change depending upon its situation, growth of the locality or zone in which it is situated and....
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....thorities cited at the Bar. We uphold the finding of the Income- tax Appellate Tribunal to the effect that the reference lands were not agricultural lands." Thus, it is settled proposition of law that merely showing the land as agriculture in the land record and the use for agriculture purpose in remote past are not the decisive factors but the future use of the land for non-agricultural purpose would change the character of the land from agriculture to non-agricultural at the time of sale. The scheme and object of exempting agricultural land from the definition of capital asset is to encourage cultivation of land and agricultural operations. Therefore, for the purpose of granting exemption, a restricted meaning has to be given to the expression "agricultural land" as contemplated under section 2(14) (iiib) of the act. In the case in hand, the purchase and sale of land within a short span of period is not in dispute and further, the assessee got converted the land in question from agriculture to non-agricultural industrial purpose with the sole purpose and intent to sell the land for industrial purpose. When the land was already converted from agriculture to non-agricultural ind....