INCOME TAX OFFICER, ALWAR vs. M/S KRISH HOME PVT. LTD., NEW DELHI

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 390/JP/2018 fu/kZkj.k o"kZ@Assessment Year : 2014-15. cuke The Income Tax Officer, M/s. Krish Home Pvt. Ltd., Vs. Ward 2(3), 203, Caxton House, Alwar. 2E, Jhandewalan Extension, New Delhi. LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AACCK 9397 D vihykFkhZ@Appellant izR;FkhZ@Respondent

jktLo dh vksj ls@ Revenue by : Shri A.K. Rawat (JCIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri Rajeev Sogani (CA) lquokbZ dh rkjh[k@ Date of Hearing : 18/09/2018. ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 13/12/2018. vkns'k@ ORDER

PER: VIKRAM SINGH YADAV, A.M.

This is an appeal filed by the Revenue against the order of ld. CIT(A), Jaipur dated 01.01.2018 for the Assessment Year 2014-15 wherein the Revenue has taken the following ground of appeal:-

“ On the facts and circumstances of the case and in law, ld. CIT (A) erred in allowing the claim of the assessee in respect of deduction of Rs. 2,43,15,546/- on account of gain on sale of agriculture land (rural) out of “Book Profit”, without appreciating the material facts of the case.

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. Rs. 1,26,493/- and agricultural income of Rs. 1,40,000/-. The case of the assessee was selected for scrutiny and in the scrutiny assessment, the AO noted that the assessee in the computation of book profit under section 115JB has reduced an amount of Rs. 2,43,15,546/- on account of gain on sale of agricultural land. The AO noted that during the year under consideration, the assessee sold some land and earned profit of Rs. 2,43,15,546/- thereon which has been claimed as deduction while computing the book profit under section 115JB. However, as per section 115JB, the deduction claimed by the assessee on account of gain on sale of agricultural land is not allowable as it is not an agricultural income covered under section 10(1) of the IT Act. In response, the assessee submitted that the gain on sale of agricultural land is an allowable deduction while computing the book profit under section 115JB. The AO did not accept this contention of the assessee and made this addition of Rs. 2,43,15,546/- to the book profit of the assessee computed under section 115JB for charging minimum alternate tax (MAT).

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. the agricultural income of Rs. 1,40,000/-. Only in the computation of book profits, the assessee has claimed deduction of this amount of Rs. 2,43,15,546/- as an allowable deduction. The ld. D/R has submitted that once the assessee in the books of account has not treated the said income as agricultural income, the same cannot be allowed as a deduction as the provisions of section 10(1) are not applicable on the said income of the assessee. The provisions of section 115JB is a self contained code and the AO cannot tinker with the books of accounts prepared by the assessee as per Schedule-VI of the Companies Act. Thus, in the books of account, the assessee has shown this income as profit on sale of agricultural land being capital gain, therefore, once this income in question is not declared by the assessee or treated in the books of account as agricultural income, then the same cannot be allowed as deduction as per the provisions of section 115JB. Once the capital gain arising on sale of land is not falling in the provisions of section 10(1) of the IT Act, no deduction is allowed under section 115JB while computing the book profit. Thus the ld. D/R has submitted that though the AO has accepted the capital gain arising from sale of agricultural land as not assessable to capital gain in view of the exclusion clause of section 2(14)(iii) of the IT Act, however, the same will not partake the character of agricultural income which is exempt under section 10(1) of the Act and consequently no deduction is allowable under section 115JB in respect of the said income. He has referred to the finding of the AO on this issue and submitted that the claim of the assessee is not supported by the books of account and, therefore, the same is not an allowable claim for computation of book profit.

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. taxable under capital gains tax in view of the provisions of section 2(14)(iii) of the Act. Thus the gain from sale of rural agricultural land would be in the nature of agricultural income as per section 2(1A) and Explanation-1 to said section. The ld. A/R has submitted that section 2(1A) defines the agricultural income being any rent or revenue derived from land which is situated in India and used for agricultural purpose. Before insertion of Explanation-1 to section 2(1A) by Finance Act, 1989 with retrospective effect from 01.04.1970, all income arising out of sale of agricultural land including urban agricultural land were held to be agricultural income by various Courts including Hon’ble Bombay High Court and Andhra Pradesh High Court in case of Manubhai A. Sheth vs. N.D. Nirgudkar 128 ITR 87 (Bom) and J. Raghottaama Reddy 169 ITR 174 (AP) respectively. The ld. A/R has thus submitted that Hon’ble Bombay High Court has held that the capital gains on sale of land situated in India, which is used for agricultural purpose, would be revenue derived from such land and, therefore, the same is agricultural income within the meaning of section 2(1) of the IT Act. It was also held that Parliament would have no legislative competence to tax such agricultural income. Similar view was taken by the Hon’ble Andhra Pradesh High Court in case of J. Raghottaama Reddy (supra) and held that the gain arising from sale of agricultural land is an agricultural income as per provisions of section 2(1A) of the IT Act. Following these decisions, the Tribunal in a series of decisions have taken the similar view even after insertion of Explanation-1 to section 2(1A) of the Act. The ld. A/R has submitted that in the Explanation, the revenue derived from land was excluded from the purview of agricultural income only in respect of the agricultural land which are treated as urban agricultural land or within the distance of 8 KM from the Municipal limits, therefore, the revenue derived from the agricultural land and any income arising from transfer of such land which is still a rural agricultural land beyond the distance of 8 KM from the Municipal limits fall in the definition Agricultural income as per section 2(1A)

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. of the Act. In support of his contention, he has relied upon the following decisions:- • Manubhai A. Sheth vs. N.D. Nirgudkar 128 ITR 87 (Bom) • J. Raghottaama Reddy 169 ITR 174 (AP) • Harrisons Malayalam Ltd. 32 SOT 497 (Cochin) • Agri Gold Foods & Farm Products Ltd. ITA No. 451/Vizag/2012 • The Nilgiri Tea Estate Ltd. ITA No. 37/Coch/2014

Thus the ld. A/R has submitted that as per the various decisions of this Tribunal, the income on transfer of agricultural land would be agricultural income and, therefore, the said income is not to be included in the total income as per the provisions of section 10(1) of the Act and consequently shall be reduced from the book profit as per provisions of section 115JB of the Act.

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. “7.2 On the alternative plea that even if the activity of the assessee considered as business, the income derived from sale of the agricultural land is an agricultural income, we find that before going into the said issue whether the sale of agricultural land results in agricultural income or capital gain not liable to tax U/s 2(14)(iii) of the Act, the expression agricultural land itself has to be taken into consideration. The question whether a particular land is agricultural land was first considered by the Constitutional Bench of the Hon'ble Supreme Court in the case of Commissioner of Wealth Tax Vs. Officer in Charge (Court of Wards) 105 ITR 133. The definition of agricultural land within the meaning of Section 2(e) of Wealth Tax Act was considered and it was observed by the Hon'ble Supreme Court that to determine 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. 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, which will only affect its valuation as part of "assets", but its actual condition and intended user which has to be seen for purposes of exemption from wealth-tax. The Hon'ble Supreme Court in a subsequent decision in the case of Smt. Sarifabibi Mohmed Ibrahim v. Commissioner of Income-tax 204 ITR 631 has referred to the decision of the Constitutional Bench in the case of Commissioner of Wealth Tax Vs. Officer in Charge (Court of Wards) (supra) at page 637 and 638 as under: “Whether a land is an agricultural land or not is essentially a question of fact. Several tests have been evolved in the decisions of this Court and the High Courts, but all of them are more in the nature of guidelines. The question has to be answered in each case having regard to the facts and circumstances of that case. There may be factors both for and against a particular point of view. The Court has to answer the question

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. on a consideration of all of them—a process of evaluation. The inference has to be drawn on a cumulative consideration of all the relevant facts.

The first decision of this Court which considered 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 adopt so wide a test as would obviously defeat the purpose 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

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. agricultural purpose. It is not the mere potentiality but its actual condition and intended user which has to be seen for purposes of exemption, (emphasis supplied) (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 that the land is assessed to the Land Revenue as agricultural land under the State Revenue Law is certainly a relevant fact but it is not conclusive.”

Whether a land is an agricultural land or nor is essentially a question of fact and several tests has to be applied as laid down by the Hon'ble Supreme Court and Hon'ble High Courts though all of them are mere in the nature of guidance. The question has to be answered in each case having regard to the facts and circumstances of the case. As it is clear that the Hon'ble Supreme Court has held that the land is assessed to land revenue as an agricultural land is not a conclusive fact and the question is to be decided by considering various factors including whether the land is used for cultivation and agriculture operations are carried out. Thus what is really required to be seen in connection with an agricultural land is the connection with agricultural purpose and user and not the mere possible of user of land by some possible future owner. The Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim v. Commissioner of Income-tax (supra) has also considered the decision of Hon’ble Bombay High Court in the case of CIT Vs. V.A. Trivedi 172 ITR 95 and observed at page 641 as under:

“ The Bench observed 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

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. 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 non-agricultural 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 stop-gap 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.A. Trivedi (supra) has laid down the principle for ascertaining the true character and nature of the land that it must be seen whether it has been put to use for agricultural purposes for a reasonable span of time prior to relevant date and further the land was intended to be put to use for agricultural purpose for a reasonable time period in future. If the principles laid down by the Hon'ble Supreme Court as well as the Hon'ble High Court are to be applied in the facts of the present case then one can safely say that the land purchased by the assessee, who is not an agriculturist for the intention to resale it to the company as per their predetermined plan loses its character the moment the assessee purchased the lands with the intention to be used in future for non- agricultural purposes. Hence, the land was no longer agricultural land when the assessee purchased it for resale and was converted to non-agricultural use at the time of sale to the company. The Hon'ble Supreme Court after

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. considering the various decisions on the point as well as the facts as held at page 642 and 643 as under: “ Now, we may consider the various circumstances appearing for and against the appellant's case. The facts in their favour are: 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 into an agreement sale with a Housing Co-operative Society to sell the said land for an avowed non-agricultural purpose, namely, construction of houses; they had applied in June 1968 and March 1969 for permission to sell the said land for non-agricultural purposes under section 63 of the Bombay Tenancy and Agricultural Lands Act and obtained the same on 22-4-1969; soon 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

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. 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 Co- operative Society. Though a formal permission under section 65 of the Bombay Land Revenue Code was not obtained by the appellants, yet their intention is clear from the fact of their application for permission to sell it for a non-agricultural purpose under section 63 of the Bombay Tenancy Agricultural Lands Act.

We are, therefore, of the opinion that the High Court was right in holding that the said land was not an agricultural land at the time of its sale and that the income arising from its sale was not exempt from the capital gains tax. The appeals, accordingly, fail and are dismissed. No costs.”

It was considered by the Hon'ble Supreme Court that the assessee entered into an agreement to sell the land for housing purpose after applying and obtaining the permission to sell the land for non-agricultural purpose and therefore, when the land was neither cultivated prior to the sale nor to be cultivated in future coupled with the factors of its locations and prices established that the land was not an agricultural land when it was sold. This issue was again considered by the Hon’ble Bombay High Court in the case of Gopal C Sharma Vs CIT 209 ITR 946 and by following the decision of Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim v. Commissioner of Income-tax (supra), the Hon'ble High Court has observed and held in para 13, 24 to 26 as under: 11

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. “13. The expression 'agricultural land' is not defined under the Act. The question as to whether the land in question was liable to be considered as agricultural land for purpose 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 defacto agricultural operations. Actual user of the land for agricultural purpose or absence thereof at the relevant time is undoubtedly one of the crucial tests for determination of the issue. It is well settled that the nature and character of land may undergo a change depending upon its situation, growth of locality, zone in which it is situate and its potentiality. According to recent decisions of the Supreme Court, the fact that the land is sold or transferred to a non-agriculturist for a non-agricultural purpose or that it 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. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxx 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 [1984] 145 ITR 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

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. 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 agricultural land. The learned counsel for the assessee relied upon the last two paragraphs from the judgment of Chandurkar, J. as his Lordship then was from H.V. Mungale's case (supra) wherein it was observed that unless the land was allowed to be converted for non-agricultural purpose by the order of Collector under the provisions of the Land Revenue Act, the initial presumption to the effect that the land was agricultural in nature would continue to operate. To some extent, some of the observations appear to be in conflict with the view now taken by the Supreme Court in Smt. Sarifabibi Mohmed Ibrahim's case (supra). It is far too obvious to us that the view taken by the Supreme Court in Sarifabibi Mohmed Ibrahim's case (supra) would prevail. In our opinion, the principles laid down by the Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim (supra) and by this Court in V.A. Trivedi's case (supra) do emphasise the factor of non-user of the land for cultivation for reasonable span of time prior to the date of transfer as a crucial factor for determination of the issue. Applying the ratio of the Supreme Court judgment in Smt. Sarifabibi Mohmed Ibrahim's case (supra) to the facts of the case, we hold that the reference lands could not be considered as 'agricultural lands' on the date of transfer.

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. zone and that the said lands were not in fact used or intended to be used for agricultural purpose at the relevant time since several years. The AAC also recorded finding of fact based on relevant evidence that at least 10 acres of the land out of 25 acres was in fact used for non-agricultural purposes by Larsen & Toubro Ltd. since the year 1960, i.e., for 7 years prior to the date of transfer of the land. If the relevant tests laid down by the Supreme Court in Smt Sarifabibi Mohmed Ibrahim's case (supra) and the test laid down by this Court in V.A. Trivedi's case (supra) are to be applied to this case as they ought to be, it would become obvious that the finding of fact arrived at by the ITO, the AAC and the Tribunal cannot be characterised as perverse or unsupported by evidence or erroneous in law. It is not possible to accept the submission made by the learned counsel for the assessee 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.

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 is 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

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. 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. Accordingly, the profit earned by the assessee of sale of such land cannot be regarded as exempt income U/s 2(14) or as an agricultural income in terms of definition U/s 2(1A) of the Act. The ld AR of the assessee has given much emphasis on the explanation to Section 2(1A) of the Act and also relied upon the decision of Hon’ble Bombay High Court in the case of Manubhai A. Seth Vs N.D. Nirgudkar, Second ITO as well as decision of Hon’ble Andhra Pradesh High Court in the case of J. Raghottama Reddy Vs ITO (supra). Since these decisions were based on the fact that the lands were undisputedly agricultural lands, therefore, once we hold that the land in questions cannot be regarded as agricultural land as the same loses its character of agricultural land the moment the assessee purchased the lands for the sole purpose of reselling to the companies in which the assessee is a Director and to be used for non-agricultural purposes. Therefore, these decisions cannot be applied in this case. Secondly those decisions were challenged by the revenue before the Hon'ble Supreme Court and the Hon'ble Supreme Court in the case of Union of India Vs. S. Muthyam Reddy (supra) has held as under: “1. This appeal is by special leave against an order passed by the High Court of Andhra Pradesh in a batch of cases. By that order, the High Court considered the effect of a combined reading of sections 2(1A) and 2(14 ) of the Income-tax Act, 1961 ('the Act') and has held that (i) capital gains arising from sale of land used for agricultural purposes would be revenue derived from such land and, therefore, 'agricultural income' within the definition under section 2(1A) with the result that Parliament would have no legislative competence to tax such agricultural income; and (ii) amended

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. section 2( 14)(iii) should be read down to preserve its constitutionality. All land used for agricultural purposes whether situated in areas mentioned in section 2(14)( iii)(a) and (b) should be held to be excluded from the definition of 'capital asset'. Thus section 2(14)( iii) should read as excluding from capital asset agricultural land in India, not being land situated in the areas mentioned therein. Upon such interpretation, section 2(14)(iii ) does not enable levy of tax on capital gains arising from transfer of land which is used for agricultural purposes wherever it may be situated.

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. 4. Shri Dhruv Mehta pointed out that by an artificial definition introduced into the Act what is agricultural income cannot be treated otherwise. He also sought to explain the scheme of the entries in the different lists of the Constitution in support of his contention.

There is divergence of opinion amongst the High Courts as to the effect of section 2(14)(iii ) as amended by the Finance Act, 1970, and hence the Parliament introduced the Explanation by the Finance Act, 1989 stating the meaning thereto which is in conformity with the view expressed by some High Courts. He submitted, therefore, doubts arising as to interpretation by reason of conflict of decisions of the High Courts is resolved by law and such a provision cannot be invalid.

Thus, the decisions were set aside by the Hon'ble Supreme Court as it is held in para 3 of the Hon'ble Supreme Court’s order (supra). Accordingly, the decisions relied upon by the ld AR would not help the case of the assessee. The ld AR has also relied upon the various decisions of this Tribunal on this point, however, all those decisions were on different set of facts and were 17

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. passed without considering the decision of the Hon'ble Supreme Court in the case of Union of India Vs. S. Muthyam Reddy (supra). Accordingly, those decisions are no more a binding precedent.

7.3 It is pertinent to note that incentive of exempting the agricultural land from definition of capital asset and consequently from chargeability of income tax is to encourage the cultivation of land and preserve the character of agricultural land to be used for cultivation and agricultural operations. Therefore, the scheme 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.”

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. year which shows clearly the future use of land for non-agriculture purposes and the said finding remain uncontroverted before us. The land in question thus loses its character as agriculture land and any gain arising on sale of such land cannot be regarded as agriculture income exempt under section 10(1) of the Act.

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd. 11. In the result, we set aside the order of the ld. CIT(A) and confirmed the findings of the Assessing Officer. In the result, appeal of the Revenue is allowed. Order pronounced in the open Court on 13/12/2018.

Sd/- Sd/- ¼fot; iky jko½ ¼foØe flag ;kno½ (Vijay Pal Rao) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 13/12/2018 *Santosh आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- ITO, Ward-2(3), Alwar. 2. izR;FkhZ@ The Respondent- M/s Krish Home Pvt. Ltd., New Delhi. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File { ITA No. 390/JP/2018} vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत.

ITA No. 390/JP/2018 ITO vs. M/s Krish Home Pvt. Ltd.