TaxTMI 
TaxTMI 
2020 (1) TMI 770
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....ssee will fall in the definition of Capital Asset under section 2(14) of the IT Act or it will fall in exclusion clause of section 2(14). 2. The assessee is an Individual and derives income from dairy business. During the assessment proceedings, the AO received AIR information that the assessee has sold property situated at village Mundia Ramsinghpura, Begus, Jaipur. The assessee contended before the AO that the agricultural land sold by the assessee was got converted into Farm House Scheme Yojna under 90B of Jaipur Development Authority (JDA) and, therefore, the main character of the land remained the same as agricultural purpose. Thus the assessee claimed before the AO that since the land in question is an agricultural land even after the same was converted into Farm House, it will retain the character as agricultural land and hence the same is not capital asset as per the definition under section 2(14) of the IT Act. Accordingly, the AO assessed the capital gain arising from sale of the said land. The assessee challenged the action of the AO before the ld. CIT (A) but could not succeed. 3. Before us, the ld. A/R of the assessee has submitted that the land in question is an....
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....issued by the JDA, the land in question was given only for environmental friendly residence/farm house. Further as per the conditions of conversion of the land to farm house, the activity permitted in the area is only construction of low coverage, low height structure for residential use. In the activities permitted on conversion of the land into farm house is restricted to the environmental friendly residence. Therefore, the land use was changed from agriculture to environmental friendly residence and no more an agricultural land. Once the land in question was no more an agricultural land at the time of transfer, then the same will not be considered as agricultural land for the purposes of section 2(14) of the Act. The sale deed dated 09.12.2009 clearly describes the intention of the parties not for agricultural use. Therefore, the very purpose and object of the incentive for giving the exemption under section 2(14) of the IT Act as per exclusion clause of the said section shall not be available once the actual use of the land is no more an agricultural. This Tribunal in case of ACIT vs. Sunil Bansal vide order dated 06.11.2018 in ITA No. 523/JP/2012 has held in para 7.2 & 7.3 as ....
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....dered the meaning of the expression 'agricultural land' is in CIT v . Raja Benoy Kumar Sahas Roy [1957] 32 ITR 466. But the question there was whether the income from forest land derived from sal and piyasal trees, 'not grown by human skill and labour' constitutes agricultural income? The decision that directly considered the issue, though under the Wealth-tax Act, 1957 is in CWT v. Officer-in-charge ( Court of Wards) [1976] 105 ITR 133 (SC) (hereinafter referred to as the Begumpet Palace case). It was an appeal from a Full Bench decision of the Andhra Pradesh High Court. The High Court had taken the view, following a decision of the Madras High Court in T. Sarojini Devi v. T. Sri Krishna AIR 1944 Mad. 401, that the expression 'agricultural land' should be given the widest meaning. It held that the fact that the land is assessed to land revenue as agricultural land under the State Revenue Law is a strong piece of evidence of its character as an agricultural land. On appeal, a Constitution Bench of this Court held that; (a) Inasmuch as agricultural land is exempted from the purview of the definition of the expression 'assets', it is 'impossible to....
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....rved that to ascertain the true character and the nature of the land, it must be seen whether it has been put to use for agricultural purposes for a reasonable span of time prior to the relevant date and further whether on the relevant date the land was intended to be put to use for agricultural purposes for a reasonable span of time in the future. Examining the facts of the case from the said point of view, the Bench held that the agreement entered into by the assessee with the Housing Society is the crucial circumstance since it showed that the assessee agreed to sell the land to Housing Society admittedly for utilisation for nonagricultural purposes. The sale-deeds were executed four months after the agreement of sale and even if any agricultural operations were carried on within the said span of four months, - the Bench held - it was evidently in the nature of a stopgap arrangement. On the date the land was sold, the Bench held, the land was no longer agricultural land which is evident from the fact that the assessee had obtained permission even in August 1966 to convert the said land to non-agricultural purposes." The Hon'ble Bombay High Court in the case of CIT Vs. V....
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....oon after obtaining the said permission they executed sale-deeds in the following month, i.e., in May 1969; the land was sold at the rate of Rs. 23 per sq. yd. and the purchaser-society commenced construction operations within three days of purchase. What is the inference that flows from a cumulative consideration of all the aforesaid contending facts? This question has to be answered keeping the criteria evolved in Begumpet Palace's case (supra) set out hereinbefore. In our opinion, the entering into the agreement to sell the land for housing purposes, the applying and obtaining the permission to sell the land for non-agricultural purposes under section 63 and its sale soon thereafter and the fact that the land was not cultivated for a period of four years prior to its sale coupled with its location, the price at which it was sold do outweigh the circumstances appearing in favour of the appellants' case. The aforesaid facts do establish that the land was not an agricultural land when it was sold. The appellants had no intention to bring it under cultivation at any time after 1965-66 certainly not after they entered into the agreement to sell the same to a Housing Cooperati....
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....t is likely to be used for non-agricultural purpose soon after its transfer is also a relevant factor germane to the determination of the issue. Merely because the land was used for agricultural purpose is remote past or it continue to be assessed to land revenue on the footing of agricultural land is not decisive. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 24. The learned counsel for the assessee mainly relied upon the Division Bench judgment of this Court in the case of CWT v. H.V. Mungale [19841145ITR 208, ratio of judgment of the Division Bench of this Court in the case of Wealth-tax Reference No. 5 of 1964 decided on 4-12-1973 and the judgment of this Court in CIT v. P.C. Joshi and B.C. Joshi [1993] 202 ITR 1017 . The thrust of the argument of the learned counsel for the assessee is that the fact that the land was lying vacant and not used for cultivation for several years was not of any legal consequence. The learned counsel for the assessee submitted that the Court must presume that the vacant land continued to be 'agricultural land' in nature and character once it was shown that the land was assessed to land revenue as an agricu....
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....that the authorities below did not apply the correct test or misdirected themselves in law or that the finding of fact arrived by the Tribunal was not supported by evidence. 26. In view of the above discussion we do not think it necessary to refer to the other authorities cited at the Bar. We uphold the finding of the Tribunal to the effect that the reference lands were not agricultural lands." It is held by the Hon'ble Bombay High Court that the future use of land was non-agricultural purpose and therefore, the same cannot be categorized as agricultural land at the time of sale. This fact of future use of land is not in dispute in the case before us even the assessee not an agriculturist and has no intention to carry out the agricultural operations on the lands in question clearly established the intended future use for non-agricultural purpose. Therefore, in facts and circumstances of the present case and applying the test as laid down by the Hon'ble Supreme Court and the Hon'ble Bombay High Court we have no hesitation to hold that the land in questions does not fall under the exclusion clause (iii) of Section 2(14) of the Act being the agricultural land....
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....ever it may be situated. 2. In this appeal, challenge to this order is based on many grounds and our attention has been drawn to several decisions not only taking similar but also a contrary view. The respondents having remained ex parte, we requested Shri Dhruv Mehta, the learned advocate, to assist the Court as amicus curiae. We are beholden for the valuable assistance rendered by him to the Court. 3. By the Finance Act, 1989, Explanation to section 2(1A) is inserted with effect from 1-4-1970 to supersede the view expressed in the order under appeal and several decisions setting out similar ratio. This declaratory amendment having retrospective operation though coming into force during the pendency of this appeal must be given effect to. The said Explanation clearly declares that the revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in section 2(14)( iii)(a) or (b). The upshot of the same is that income derived from sale of such agricultural lands cannot be treated as 'agricultural income'. Thus, the whole basis of the decision has been lost and, therefore, ....
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....eme and the object of providing these incentives to keep the income arising from agricultural land exempt from tax is to promote more and more agricultural operations by the agriculturists and the sole object of this incentive is not to tax the agriculturists who is dealing, cultivating and carrying out the agricultural operations on the agricultural land and then in case if the said land is sold the same is excluded from the purview of income tax either on capital gain or agricultural income. Therefore, claiming the said exemption by business person merely because he has purchased the land and then sold it would be defeating the very purpose of the incentive which is only for the genuine cultivator of the land. Hence, in view of the above discussion, various decisions and facts and circumstances of the case, we hold that the income arising on sale of the lands in question is not exempt from income tax either as a capital gain U/s 2(14)(iii) or as an agricultural income U/s 2(1A) of the Act. This issue is decided against the assessee and in favour of the revenue. The said decision of the Tribunal has been upheld by the Hon'ble Jurisdictional High Court in case reported in 415 IT....
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