L P RAMKUMAR (HUF),,TRICHY vs. ITO, WARD - 3 (2),, TRICHY

आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT:

3. The only issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of the AO in assessing the consideration received on account of sale of agricultural land as capital gains holding the same as capital asset assessable to capital gains tax.

account and claimed the same as exempt being sale of agricultural land. The AO during the course of assessment proceedings issued notice u/s.142(1) of the Act dated 10.03.2015 seeking explanation regarding the nature of land sold to SRM Institute of Science and Technology, copy of purchase and sale deed and crop grown on this land. The assessee requested for adjournment. In the mean time, the AO issued letter dated 12.10.2015 to Tahsildar, Mannachanallur calling for details regarding agricultural activity carried out during the financial year 2003-04, 2004-05, 2005-06 & 2007-08 on the land sold during financial year 2007-08. The assessee filed copy of purchase deed, sale deed, statement of total income, working of capital gain statement, etc. A reply letter dated 04.02.2016 received from Tahsildar, Mannachanallur on 12.02.2016 quoting survey number mentioned in tabular column which are reproduced at page Nos.12-13 of AO order that the agricultural land was not used for agricultural purposes and it was retained as waste land & plot from financial year 2003-04 to 2007-08. The assessee before AO contended that these lands were situated at village panchayat which is beyond the corporation limit of Tiruchirappalli limit and lands are being used for agricultural purpose and at the time of purchase these have been recorded in documents i.e., sale deeds. The Tahsildar, Mannachanallur submitted patta and adangal vide

R.C./B4/4604/2013 on 06.11.2013 from where the AO noted that the lands were not used for agricultural purposes, which were lying vacant throughout the year and without agricultural activity being carried out from the year 2003-04 onwards, after purchasing of this land by the assessee. The AO noted in addition to this that the reply received from Tahsildar, Mannachanallur dated 04.02.2016 mentioned that some of the lands mentioned in survey number, as per patta and adangal reproduced at pages 12 & 13 of AO’s order were remained as waste land and plots during 2003-04 to 2006-07 and finally, in the year 2007-08, the assessee sold to SRM Hospital. The AO finally noted that the surplus arising out of the sale of this land is capital gains and for this, he recorded his finding in para 13 of the order as under:- 13. As per the copies of purchase deed, the lands were purchased in the year of 2006, though the lands were purchased as agricultural land and maintained as vacant land, which were not utilized for agricultural purpose, and it was retained as non agricultural land, then immediately, they were sold to the SRM Institute of technology in the year of 2007 for constructing the educational institutes and following the sale, the construction was started. Further, these lands were also purchased from the marginal farmers at a very low price, at cost of Rs.16,22,749/- and sold it for huge profit within a short interval of time, for a consideration of Rs.1,08,88,206 to set up for the educational institution, which means that the assessee has sold these lands with an intention to make huge profit. 4.1 The AO also relied on the decision of Hon’ble Supreme Court in the case of Gemini Pictures Circuit Pvt. Ltd., 220 ITR 43 and finally, the AO noted that the income admitted by the assessee from sale of Rs.1,37,72,234/- is treated as income under the head ‘short term capital gain’. Aggrieved, assessee preferred appeal before CIT(A).

5. The CIT(A) noted the facts noted by AO and report of Tahsildar and noted that lands shown as agricultural lands in purchase documents when the assessee purchased in 2006 but had noted that these lands have kept vacant and no agricultural activity were taken place. But the CIT(A) fixed this appeal many times but dismissed as no details or no explanation was offered and held that land in question as non-agricultural lands and the AO has rightly made addition on sale of land. Aggrieved, now assessee is in appeal before the Tribunal.

6. Before us, the ld.counsel for the assessee argued that as per purchase deed at the time of purchase of lands by the assessee and sale deed at the time of sale of these lands both evidence that these lands are agricultural lands and even the Tahsildar in his report submitted along with patta and adangal noted that these are agricultural lands but remained as waste land and no agricultural activity is carried on. The ld.counsel referred to page 7 of the AO has discussed the Tahsildar report which reads as under:- On perusal of the Chitta and Adangal received from the Thasildar, Manachanallur vide in R.C./B4/4604/2013 on 06/11/2013, it is seen that the lands were not used for agricultural purposes, which were lying vacant throughout year, without any agricultural activities carried out from the year 2003-04 onwards, after purchasing lands by the assessee. In addition to that, reply letter received from the Thasildar, Manachanallur, dated 04/02/2016 has mentioned that some of the lands mentioned in survey numbers as per the tables at pages 12 & 13 of this order were remained as waste land during the year 2003-04 and 2005-06 and most of the survey numbers as mentioned in the page number 12 & 13 of this order were used as waste lands and plots during the year 2006-07. In the year of 2007-08, the land were sold to SRM Hospital.

The ld.counsel for the assessee took us through the receipt issued by the Revenue Department of TamilNadu Government whereby the assessee have paid rent for these lands as agricultural lands and also patta and adangal confirm agricultural produce grown on these lands i.e., maize. The ld.counsel for the assessee stated that from last two or three years, the assessee has declared agricultural income of Rs.1,65,000/- in assessment year 2007-08 and Rs.1,20,000/- in assessment year 2008-09. The assessee also produced the documents which is classification, given by TamilNadu Government in its portal ‘TNREGINET’, wherein data extracted from ‘reginet’ portal that relating to year 2007-2012 classified lands which include assessee’s lands is Dry-Rainfed and classified as Class-II land. The ld.counsel for the assessee stated that even TNREGINET portal has classified this land as Dry-Rainfed land in this village Irungalur falling in sub-registration office Mannachanallur. The assessee filed evidences from pages 42 to 55 of assessee’s appeal set. The assessee also filed subsequent documents issued by Sub-registrar, Taluk office, Mannachanallur, whereby this land was converted on the request of purchaser i.e., SRM Institute of Science & Technology dated 07.12.2017 i.e., CLU Certificate, whereby this land was converted from agricultural land to public use for construction of building and other educational activities. The certificate is enclosed in assessee’s appeal set from pages 57 to 58. In view of this, the ld.counsel for the assessee stated that the surplus arising out of sale of these lands is on account of agricultural lands and capital receipt exempt from capital gains tax. The ld.counsel also relied on the decisions of the Hon’ble Madras High Court in the case of CIT vs P.Ashok Kumar in Tax Case Appeal No.268 of 2011, order dated 02.01.2019 and also in the case of Mrs. Sakunthala Vedachalam vs. ACIT, 369 ITR 558.

1.

2. Judicial rulings: Supreme Court of India in Commissioner of Wealth-tax v. Officer-in- Charge (Court of Wards), as reported in [1976] 105 ITR 133 (SC), held as follows:  One of the objects of the exemption seemed to be to encourage cultivation or actual utilisation of land for agricultural purposes  "Agricultural land" must be land which could be said to either actually used or ordinarily used or meant to be used for agricultural purposes  Mere fact that property was classified in revenue records as agricultural land was not conclusive and such entries could raise only rebuttable presumption  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  If there is neither anything in its condition, nor anything in evidence to indicate the intention of its owners or possessors, so as to connect it with an agricultural purpose, the land could not be "agricultural land" for the purposes of earning an exemption under the Act 2.2 While deciding the case, the Honourable Supreme Court heavily relied on its earlier judgement in the case of Commissioner of Income-tax v. Raja

Benoy Kumar Sahas Roy, as reported in [1957] 32 ITR 466 (SC), wherein it was held that in the primary sense in which the term agriculture is understood is agar-field and cultra-cultivation, i.e., the cultivation of the field. 2.3 The Honourable Supreme Court while upholding a decision of Gujarat High Court in the case of Smt. Sarifabibi Mohmed Ibrahim vs Commissioner Of Income-Tax, as reported in (1993) 204 ITR 631 (SC), reiterated again that exemption of capital gain on transfer of agriculture land is available only if such land is found used for cultivation before, at the time of transfer and after transfer by the purchaser.

a. The land is classified as an agriculture land in the records of the state and b. The land is not situate within the arca specified under item (b) of sub- clause (ii) of section 2(14) of the Act and c. The land was continuously being used by the seller for the purpose of agriculture till the time of transfer and d. The land remained used for agriculture even after the transfer by the purchaser.

If even one of the above limbs is not proved/substantiated, the claim of land being an agriculture land within the meaning covered under section 2(14) of the Income Tax Act is not permissible. Sd/- (Sajit Kumar P) Sr.Ar-3, ITAT, Chennai

2005-06 and sold the land on 12.11.2007 in financial year 2007-08 relevant to assessment year 2008-09. There is no dispute about the quantum as recorded in the sale deed. Only dispute is whether these lands are agricultural lands and agricultural crops are grown or not. Admittedly, as per sale deed registered at the time of purchase of this land and sale of this land clearly classifies these lands as agricultural lands even the revenue tax paid by assessee i.e., land revenue paid and accepted by TamilNadu State Government issuing receipt of land revenue dated 12.02.2018 and adangal issued dated 25.04.2008 clearly reveals that maize is grown on this land. Even these are classified as Dry-Rainfed Class II agricultural lands as per TNREGINET, website of TamilNadu Registration Department. According to us, the allegation of revenue that there is no crop grown is also not correct. However, as elaborated by Hon’ble Madras High Court in the case of Mrs. Sakunthala Vedachalam, supra held that even if no agricultural operation prior to the date of sale is carried out is of no avail to the claim of land as agricultural land u/s.2(24) of the Act. The Hon’ble High Court held in paras 16 to 20 as under:- 16. Once the Tribunal has accepted that the classification of lands as per the reveue records are agricultural lands, which are evidenced by the adangal and the letter of the Tahsildar and satisfies other conditions of Section 2(14) of the Income Tax Act, we are of the view that the Tribunal has misdirected itself as stated above.

In the result, both the above Tax Case (Appeals) are allowed. No costs. Consequently, connected Miscellaneous Petitions are closed.

Further, similar view is expressed by Hon’ble Madras High Court in the case of Shri P. Ashok Kumar, supra, wherein it is held in para 5 & 6 as under:- 5. The Assessing Officer conducted inspection of the property in the presence of revenue officials and submitted a remand report, in which, it has been categorically stated that the land is situated at a distance of more than 8 kms away from the outer limits of St.Thomas Mount Cantonment Board. Thus, the remand report was taken into consideration by the CIT (A) as one of the factors for allowing the appeal filed by the assessee. Apart from that, CIT (A) also referred to the certificate issued by the Tahsildar and one of the important entry in the said certificate is by stating that the lands are classified as agricultural lands. Though the certificate may state that there is no cultivation carried on the lands as per the land records, there is nothing on record to show that the land in question was put to use for any non-agricultural purposes. Apart from that the assessee has also paid taxes which has been recorded by the CIT(A).

We noted that the Hon’ble Madras High Court in the case of Mrs. Sakunthala Vedachalam, supra, has also considered the case law cited by ld. Senior DR in his written submissions of Hon’ble Supreme Court in the case of CIT vs. Raja Benoy Kumar Sahas Roy, [1957] 32 ITR 466, hence, we are of the view that this issue is squarely

Hon’ble Madras High Court and on facts, the lands sold by assessee are agricultural land being capital asset not assessable to capital gains. In term of the above, we allow this issue of assessee’s appeal.

Order pronounced in the open court on 15th September, 2023 at Chennai.