TaxTMI 
TaxTMI 
TaxTMI 
2016 (10) TMI 1231
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....ted by the ld. Assessing Officer that assessee had declared long term capital gains of Rs. 33,52,365/- on sale of a land at Sowripalayam and claimed the gains on sale of another land at Othakalmandapam for Rs. 5,26,80,000/- as exempt. The latter sale was effected to M/s. Hindustan Educational and Charitable Trust where the assessee was the sole trustee. The land which was sold to M/s. Hindustan Educational and Charitable Trust measured 4.34 acres. It was purchased by the assessee on 28.06.1995 for a consideration of Rs. 89,915/-. Assessee moored its claim for exemption based on a plea that the said land was registered as agricultural land and assessed to land revenue as agricultural property. However, Assessing Officer was of the opinion that land sold was classified by the Registration Department as industries type II and the guideline value of the said land was much lower than the consideration of Rs. 5,26,80,000/- received by the assessee from M/s. Hindustan Educational and Charitable Trust. 3. Assessing Officer thereafter made a study of the various land transactions done by the assessee. According to him, in previous year relevant to assessment year 2006-2007 assessee had pur....
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....628). According to him if the yardsticks laid down by their lordship in the above judgment, was applied, the land sold by the assessee to M/s. Hindustan Educational and Charitable Trust could never be considered as agricultural in nature. 5. In any case as per Assessing Officer frequency of the transactions indulged by the assessee by way of purchase and sale of land clearly established his intention to earn profit through an organized activity. As per Assessing Officer land transactions done by the assessee in earlier years, alongwith transactions entered during the relevant previous year, demonstrated assessee's intention to do business of purchasing and selling of land. Thus according to him, irrespective of the question whether the land sold was agricultural or not, the profits arising on sale had to be assessed under head 'business income'. Thus, he considered surplus arising to the assessee on sale of land at Sowripalayam which assessee placed under the head 'capital gains' and surplus arising to the assessee on sale of Othakalmandapam which assessee claimed exempt, as profits on sale of land under the head income from business. Assessment was completed accordingly. 6. Aggr....
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.... gains. As per assessee, land was held by him as investments and not as stock in trade. Relying on the judgment of jurisdictional High Court in the case of CIT vs. E. Udayakumar (2006) (284 ITR 511) assessee argued that purpose for which the purchaser intended to use the land was not relevant for determining the nature of the land sold. 8. The ld. Commissioner of Income Tax (Appeals) after considering the arguments of the assessee was of the opinion that on sale of 4.34 acres of land at a price of Rs. 5,26,80,000/- to M/s. Hindustan Educational and Charitable Trust, where assessee was the sole trustee, he had earned much higher profit than he would have received if the sale was effect at the guideline value. Further as per ld. Commissioner of Income Tax (Appeals) on applying the tests laid down by the Apex Court in the case of Smt. Sarifabibi Mohmed Ibrahim (supra), it was clear that the land sold was not agricultural in nature. The ld. Commissioner of Income Tax (Appeals) concluded that land sold by the assessee at Sowripalayam was situated in a residential area and land sold by the assessee in Othakalmandapam was in a developed area. Further as per ld. Commissioner of Income Tax....
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.... basis. Further as per ld. Authorised Representative purpose for which the purchaser intented to use the land was not relevant, when all other factors clearly proved that the land sold was agricultural in nature. 10. Assailing the view taken by the lower authorities that the transactions fell under the head income from business, the ld. Authorised Representative submitted that land was held by the assessee only as an investment and so, classified in its balance sheet. As per ld. Authorised Representative assessee never made any improvement in the land sold. Reliance was once again placed in the decision of Jurisdictional High Court in the case of E. Udayakumar (supra). Ld. Authorised Representative also submitted that each assessment year had to be considered separately and few number of transactions of sale of land over number of years could not convert it to a business venture. Ld. Authorised Representative strongly placed reliance on the decision of jurisdictional High Court in the case of Mrs. Sakunthala Vedachalam vs. Mrs. Vanitha Manickavasagam vs. (2014) 369 ITR 558. 11. Per Contra, ld. Departmental Representative submitted that the series of transactions entered by the as....
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....sition has not been disputed by the Revenue. During the very same year assessee has sold land for Rs. 74,00,000/-. The next transaction was during the previous year relevant to assessment year 2007-08. Assessee had sold land for Rs. 48.81 lakhs and also given an advance of Rs. 241.11 lakhs for purchasing another land. The assessee also appear to have sold shares of M/s. Ganesha Ginning Co. Ltd to M/s. DLF Retails during the said year. However, this in our opinion cannot be equated to a land sale. During the previous year relevant to assessment year 2009-2010 assessee had sold a piece of land for Rs. 10.67 crores. There obviously was no purchase or sale during the relevant previous year 2008-2009. In our opinion, above transactions which happened over a number of years were so sporadic that it could not be considered as one creating a series which could show an intention to trade in land. None of the land sold by the assessee over the period of five years was developed by the assessee or plotted by the assessee. Assessee had shown the land always as investments in its balance sheet. No doubt it was held that Bombay High Court in the case of Gopal Ramnarayan Kasat(supra) that even an....
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....ed agricultural income of Rs. 18,10,750/- during the relevant previous year. Assessing Officer had also come to a conclusion that the land was situated in a developed area, when in reality the land was situated 14 km from the Coimbatore Corporation limit. There was no plotting of land done by the assessee. Certificate from the registration department placed at page 101 of paper book does not classify the land as industrial land. It simply mentioned the land fell under a category called dry special type of land class II. It might be true that purchaser of land had no intention to carry on any agricultural activity in the said land. No doubt Hon'ble Apex Court in the case of Smt. Sarifabibi Mohammed Ibrahim (supra) has laid down thirteen tests for declaring whether a piece of land is agricultural or not. However it does not require a cumulative satisfaction of all the thirteen indicators. The question has to be answered, considering the answers to all the thirteen indicators. In the case before us, it is an admitted position that the revenue records classified the land as agricultural in nature. Assessee had held the land for more than fifteen years before he sold it and had also sho....
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.... which were weighed against each other while determining the true nature and character of the land. It may be useful to extract from those decisions some of the major factors which were considered as having a bearing on the determination of the question. Those factors are : (1) Whether the land was classified in the revenue records as agri cultural and whether it was subject to the payment of land revenue Rs. (2) Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time Rs. (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 stop-gap arrangement Rs. (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 Rs. (5) Whether, the permission under section 65 of the Bombay Land Revenue Code was obtained for the non-agricultural use of the land Rs. If so, when and, by whom (the vendor or the vendee) Rs. Whether such permission was in respect of the whole or a portion of the land Rs. If the permission was in respect of a por....
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....f the abovesaid decision of the Gujarat High Court, wherein it was clearly held in clause (1) in paragraph 11 that whether the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue has to be considered for grant of exemption. 14. Thus, it is evident from the above, which clearly states that any one of the above factors can be present in a case to qualify for the benefit of classification as agricultural lands. In this case, the assessees have qualified under clause 11(1) since as per the adangal records, these lands were classified as agricultural lands and the assessees have also paid revenue kist, namely, revenue payment. Therefore, the Tribunal has misconstrued the judgment of the Gujarat High Court (supra) that all conditions laid down in paragraph 11 should be satisfied, which is not a correct interpretation. 15. To get exemption, the assessee has to satisfy the conditions laid down in section 2(14) of the Income-tax Act, which reads as follows : "2. (14) 'capital asset' means property of any kind held by an asses see, whether or not connected with his business or profession, but does not include- (....
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....he adjacent lands are put to commercial use by way of plots and, therefore, the very character of the lands of the assessees is doubted as agricultural in nature. The manner in which the adjacent lands are used by the owner therein is not a ground for the Tribunal to come to a conclusion that the assessees' lands are not agricultural in nature. The reason given by the Tribunal that the adjacent lands have been divided into plots for sale would not mean that the lands sold by the assessees were for the purpose of development of plots. Also the reasoning given by the Tribunal "No agriculturists would have purchased the land sold by the assessee for pursuing any agricultural activity" is based on mere conjectures and surmises. 18. The plea of the learned standing counsel appearing for the Revenue that there was no agricultural operations prior to the date of sale is of no avail as the definition under section 2(14) of the Income-tax Act has the answer to such a plea raised. Furthermore, it is also on record that the lands are agricultural lands classified as dry lands, for which kist has been paid. 19. The view of the assessee is fortified by the decision reported in CIT v. Ra....