TaxTMI 
TaxTMI 
2021 (3) TMI 587
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....the views of the Assessing Officer in the assessment order as well as those in the remand report, called for by him, as well as nature ofthe subject land. b) The learned CIT (A) erred in not considering the material fact that the appellant has, all along, been showing the subject land, being agricultural, in its Balance Sheet right from the date of purchase, under Fixed Assets" schedule, thereby making its intentions clear. c) The learned CIT (A) erred in not considering the very fact that the subject land has all along been agricultural in nature, supported by Adangal, copy of the same was produced before the Assessing Officer in the course of assessment proceedings. d) The learned CIT (A) erred in not considering the material Fact that the subject land, being agricultural in nature, is not a capital asset, at all, more particularly because of its situation, warranting inclusion of the same in the taxable income. e) Without prejudice to the above, the learned CIT (A) erred in not considering the fact that not all the sales have taken place during the year under consideration. In other words, the learned CIT (A) erred in confirming the a....
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....land purchased by the assessee company on 06.10.2009 was never used for agricultural activities. Further, even before purchase there was no agricultural activities on the land and the land was not fit for agricultural operations. The assessee has also not claimed any agricultural income in its return of income. She further observed that soon after purchase, the assessee entered into oral agreement with Mr. K.Maruthapandian and Mr. Raja for developing lands during the year 2010 itself, which is clear from the sworn statement recorded from purchaser. She further observed that intention of the assesse company to purchase land was not for the purpose of carrying out agricultural operations, but for the purpose of real estate development, which is evident from the fact that directors of the company are into real estate business in their individual capacity. After purchasing land in the name of the company, they had also purchased adjacent lands in their individual capacity with an intention of reselling for making huge profit. If they had any intention of doing any agricultural activity, they could have brought it by executing sale deed and kept it as investment. Therefore, she opined t....
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.... land by a measure with reference to square yards and not acres. 4) Price being such as to be non-volatile, if the land is put to agricultural use by the purchases, while its more consistent with the price fetched for urban plots than for agricultural land. 5) Character of the land. 6) The purpose for which the land was held by the present owner, A firm/company which holds it may well be presumed to have held it as stack-in- trade and not for carrying out agricultural operations. 7] As regards to use of the land for agricultural purposes prior to sale, mere use in remote post though and revenue is paid, would not make it agricultural. 8) Mere capability of being used as agricultural land is not enough. 14. The underlying object of exemption for agricultural land, it was held is to encourage cultivation so that the interpretation should accord with such object. The applicability of the above mentioned tests is a pre-condition to consider a land as agricultural land. It is not the mere potentiality but its actual condition and intended use which have to be seen for purposes of exemption. The determination of the character of land,....
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....was advised to dig 10 bore-wells on the land so that each bore-well can cater to 5 acres of land. The Assessee approached TNEB for power connection. However, since the entire State of Tamilnadu was reeling under terrific power shortage, no new power connection for agriculture was entertained. Also. since the power connection was for agricultural orations, which have to be provided free of cost TNEB already under severe financial losses was not committing for the same. Hence, the Assessee was not in a position to dig bore-wells and commence agricultural operations. The caretaker of the land was however growing small crops (cholam) and cattle grass to meet his living apart from grazing of cattle. This growing of small craps is reflected in the Adangal extracts issued by the respective VAOs. In the Revenue records the land is agriculture in nature and your good-selves have already collected proof for the same. Thus the property is an Agricultural land situated outside 8 Kms limit from the nearest Municipality and is not a Capital Asset U/s.2(14) of the IT Act,1951." 18. The AR has enclosed a certificate from Dr.P.Sivasubramanian, Professor and Head, Department of Agr....
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....ad replied to this letter on 30th March 2009, requesting the Managing Director of the assessee company to approach their specialized agricultural banking department at Bangalore. In this letter, The Chief Manager had mentioned the following: "since the certificate that you have attached mentions of nonavailability of power supply in the area. please ensure power supply before submitting your application before dipping borewells." It is very clear from the above that the assessee was well aware about the non availability of power, much before the purchase of land on 06/10/2009 Therefore the submission of the AR, which is reiterated below is far from truth. The Assessee was advised to dip 10 bore-wells on the land so that each bore-well can cater to 5 acres of land. The Assessee approached TNEB far power connection. However, since the entire State of Tamilnadu was reeling under terrific power shortage, no new power connection for agriculture was entertained. Also since the power connection was far agricultural operations, which have to be provided free of cost, TNEB already under severe financial losses was not committing for the some. Hence, the Assessee was not in....
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.... assessee and only then approached the assessee. They paid Rs. 6 crates (during Oct, 2011 to Jan,2012) to Mr.C.Udhayasankar, who was holding adjoining lands on power, and Rs. 2 croes to the company during As per the learned Apr.2012 to June, 2012 as advance for purchase of the property of the agricultural lands belonging to the said individual and the company, respectively and separately. The owner of the adjoining land who had received Rs. 6 crates from the buyer paid that amount to the company on 5/06/2012, supported by a power of attorney dated 05/06/2012. These statements of the AR is absolutely false. Why should Mr. K. Maruthupandian, one of the developer pay 6 crores to Mr.C.Udayasankar, who was holding adjoining lands on power? Later, exactly on 03.06.2012, the adjoining Land holder paid it back to the company and on the same day company gave power of attorney to Mr.K.Maruthupandian, the developer. During the Asst Year 2012-13, 6 crores received as advance was not reflected in the books of the assessee company. When this was raised at the time of hearing, AR has come up with the story of making the payment to adjoining land holder. Since the adjoining land holder Sr....
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....rlier agreement prior to the one dated 05.06.2012, may be not a formal one. Had this agreement dated 05.06.2012 was the first agreement, then why the enhancement of rate? Even in this agreement there is a mention that due to delay from the earlier agreed date, Rs. 3 crores has to be paid in addition to the agreed rate. d) The contention of the AR that the Assessee has held the asset for more than 2 years and S months and hence cannot be called as stock-in -trade is not at all acceptable . Though the power of Attorney was given only on 05/06/2012, the developers were allowed to develop the land much before. The first instalment of Rs. 2 crores was received on 14.10.2011. Even the assessee bad agreed that the developers paid the money to the company by collecting it from the prospective purchasers of housing plot. Unless the land was developed and converted as housing plot, no one will be interested in investing in that land and the developers could not have collected 8 crores. Details of registrations collected from SRO, palladam shows that the developer , Mr.K. Maruthapandian, on receiving the power of attorney, sold about 310 plots in a span of 6 months. Initial ....
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.... as the adangal extracts relates to some other S.F Nos. Only S.F. No.282 of Madhapur village is appearing in these Adangal copies and is mentioned as nadapathai" meaning pathway. 23. From the above discussions it is clear that the AR's submissions are contradictory to the evidences submitted by him, before me at the time of hearing. From the activities of the company as detailed in this order, it is unambiguously proved the intention of the assessee was only to sell the land and to make huge profit out of that. The assessee had never even attempted to do any agricultural activities to claim that the intention of the purchase was for doing agriculture. In the light of the aforesaid facts, assessee's claim of ` 6,27,72,525/- as exempted income, being proceeds from sale of agricultural land is not accepted and is treated as business income from adventure in the nature of trade." 5. Being aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before, the learned CIT(A), the assessee has filed elaborate written submissions on the issue, which has been reproduced at para 5 on page 6 to 10 of learned CIT(A) order. The sum and substance o....
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....g the fact that assessee has made a solitary single transaction of purchase and sale of land, that too after a period of more than two years, therefore, it is incorrect on the part of authorities below to come to the conclusion that the assessee is indulged in the activity of business of purchase and sale of land for making huge profit. The AR further submitted that there is no dispute with regard to the fact that land in question was of agricultural land as per revenue records and further, same was situated beyond 8 kms from the vicinity of nearby municipality and hence, the same is outside the definition of capital asset as defined under section 2(14) of the Act and thus, any profit on sale of such land is outside the scope of capital gain tax. 7. The AR further referring to various observations of the Assessing Officer submitted that observations made by Assessing Officer in light of statement of purchaser that land was used for business purposes after the purchase, is not based on any evidence, because what is relevant to decide the issue is whether the land in question was agricultural land when it was sold, but subsequent development or purpose of buyer is immaterial to de....
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....htly assessed the income under the head income from business and their orders should be upheld. 9. We have heard both the parties, perused materials available on record and gone through orders of the authorities below along with various case laws cited by the learned counsel for the assessee. The solitary question that needs to be answered in the given facts and circumstances of the case is whether profit derived from sale of land is assessable under the head income from business as adventure in the nature of trade or commerce or capital receipt which is outside the scope of taxation under the provisions of Section 2(14) of the Income Tax Act, 1961. Admittedly, as per revenue record, impugned land in question was agricultural land, when it was purchased in the year 2009 and remains agricultural land, when it was sold in the year 2012-13. Further, the land is situated beyond 8 kms from the nearest municipality and is excluded from the definition of capital asset as per section 2(14) of the Act. In fact, the Assessing Officer as well as learned CIT(A) never disputed the fact that land in question was agricultural land and situated beyond 8 kms. from nearest municipality. But, the ....
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....nished letter from agricultural scientist, where he had clarified that the land is suitable for growing cotton. Therefore, when it comes to nature of land and purpose of purchase of land, the observation made by the Assessing Officer that land was not suitable for agricultural operations and the same was not purchased for agricultural operations is not supported by any evidence. Although, the Assessing Officer has stated that land was not connected with electricity and water, but every land in this country is not connected with electricity and water. The agriculturists in this country are carrying out agricultural operations with the help of rain water, wherever land is not connected with electricity and water facility. Even, agricultural operations can be carried out without electricity connection. Therefore, we are of the considered view that reasons given by the Assessing Officer to come to the conclusion that purpose of purchase of land is not for carrying out agricultural operations is not well founded and supported by any evidences. 11. Coming back to another observation of the Assessing Officer. The learned Assessing Officer has observed that the assessee has purcha....
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....mitted fraud on gullible investor and was booked by Economic Offences Wing of police department. In fact, the assessee has returned the advance to the investors. Therefore, based on the statement of proposed buyer, no adverse inference can be drawn against the assessee to conclude that assessee is engaged in the activity of adventure in the nature of trade or commerce. In our considered view to decide the nature of income, the facts and circumstances prevailing at the time of event needs to be considered, but not subsequent events which are not in the control of the assessee. In this case, there is no dispute with regard to the fact that land was agricultural land when it was purchased and sold and thus, profit derived from sale of such land is outside the scope of taxation, because the same is capital receipt as per the provisions of section 2(14) of the Income Tax Act. Insofar as observations of the Assessing Officer that assessee had transferred land through unregistered sale agreement and power of attorney, we find that registered power of attorney given in favour of the purchaser with all rights over the land is good conveyance for transferring rights over the land. It is not ....
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.... and there is no market for it and developers have landed up in economic offence wing for the frauds committed to buyers. The characteristic of land is agricultural land in the records of the revenue and further, certified as fit for cotton cultivation by agricultural scientist. The land was bought with sole aim of carrying on agriculture as a backward integration of the cotton textile unit. The certificate of the agricultural scientist, letter to the bank and reply received from the bank are ample proof to prove that purpose of purchase of land was to carry out agricultural operations. The land was shown under head fixed asset and not as current asset as stock-in-trade in the books of account. The land was actually fit for cultivation and the land cannot be used for any purpose other than agriculture. It is a black cotton soil and thus, suited for cotton crop. Therefore, we are of the considered view that evidences filed before us clearly prove that land in question was agricultural land and was held for the purpose of carrying out agricultural operations. The subsequent usage of land for non- agricultural purposes and the potential non- agricultural value of the land for which....
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....cultural purposes was based on cogent and relevant material. The Revenue record supported the claim- Even the records of the IT Department showed that the assessee had declared agricultural income from this land in her returns for he preceding two years. The land being located in commercial area or the land having been partially utilized tar nonagricultural purposes or that the vendees had also purchased it tar nonagricultural purposes, were totally irrelevant consideration for the purposes of application of s. 54B. 10. It is seen from the aforesaid decision that the agricultural land sold by the assessee with an intent to purchase another land within two years had also been permitted to claim exemption under s. 54B of the IT Act, 1961. In the instant case, even though there was no sale as such, the assessee owned agricultural land within the limits of Tirunelveli Corporation and he had not put up any construction thereon, the assessee is entitled to claim exemption from the WT Act for the assessment of wealth-tax. That the land in question is adjacent to the hospital is totally irrelevant." 14. The assessee has also relied upon the decision of the Hon'ble Jurisdict....