Ita/179/2014 Of The Commissioner Of Income Tax-1, Kochi v. M/S.cochin Malabar Estates & Industries Ltd

IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI THURSDAY, THE 28 DAY OF OCTOBER 2021 / 6TH KARTHIKA, 1943 ITA NO. 179 OF 2014 AGAINST THE ORDER IN ITA 582/2011 OF I.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/S: THE COMMISSIONER OF INCOME TAX-1, KOCHIKOCHI.BY ADVS.SRI.P.K.RAVINDRANATHA MENON (SR.)SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S: M/S.COCHIN MALABAR ESTATES & INDUSTRIES LTD.MALABAR HOUSE,W.ISLAND,KOCHI-682003.BY ADVS.SRI.A.KUMARSMTG.MINI(1748)SRI.P.J.ANILKUMARSRI.P.S.SREE PRASAD THIS INCOME TAX APPEAL HAVING RESERVED FOR JUDGMENT ON21.10.2021, THE COURT ON 28.10.2021 DELIVERED THE FOLLOWING: I.T.A. No.179/2014 J U D G M E N T S.V. Bhatti, J. The Commissioner of Income Tax-1, Kochi/Revenue is the appellant. M/s. Cochin Malabar Estates & Industries Ltd,Kochi/assessee is the respondent. 2.The Revenue being aggrieved by the order dated28.03.2014 in ITA No.582/Coch/2011 of the Income Tax Appellate Tribunal (for short 'the Tribunal'), Cochin has filedthe present appeal under Section 260A of the Income Tax Act1961 (for short 'the Act'). The issues arise out of the returnsfiled by the assessee for the Assessment Year 1996-97. TheRevenue and the assessee are contesting the levy and demand ofcapital gains on the land sold by the assessee through sale deed I.T.A. No.179/2014 -3- dated 16.03.1996 in favour of Kerala State IndustrialDevelopment Corporation Limited (for short ‘KSIDC’). 2.1The assessee is a public limited company engaged in arange of activities such as cultivation, processing, and tradingin tea, rubber, aquaculture; providing engineering services, etc.On 01.12.1995 the assessee entered into a Memorandum ofAgreement (MoA) with KSIDC for the sale of schedule ofproperty appended to the MoA dated 01.12.1995. Keeping inperspective the nature and extent of controversy between theparties in this behalf, in the present narrative, this Courtprefers to refer to the subject matter of MoA as scheduleproperty, instead of referring as capital asset or agriculturalland. The details of the schedule property read thus: SCHEDULE PROPERTY 2.2On 16.03.1996 the assessee executed and registered a regular deed of conveyance in favour of KSIDC. On 29.11.1996the assessee filed return for the Assessment Year 1996-97disclosing a loss of Rs.3,11,96,323/-. On 28.10.1997 income taxreturn was processed and a refund of Rs.6,08,136/- was orderedin favour of the assessee. Subsequently, scrutiny notice underSection 143(2) of the Act was issued to the assessee. TheAssessing Officer, in the scrutiny assessment, examined the saleof schedule property by MoA dated 01.12.1995 read with saledeed dated 16.03.1996 for a sum of Rs.6,13,74,563/- and noted I.T.A. No.179/2014 that the said amount was credited to the P&L Account. According to the Revenue, the assessee converted the scheduleproperty as non-agricultural land for enabling the purchase ofschedule property by KSIDC. The KSIDC purchased the scheduleproperty for further development as an industrial estate.Hence, the claim of assessee for exemption from payment ofcapital gains tax on the sale consideration received from thesale of schedule property from KSIDC is attracted and thatschedule property is not agricultural land for the purpose ofSection 2(14) of the Act. 3.The case of the assessee is that the schedule propertyis situated in Kinalur and Kanthalad Villages in Quilandi Taluk,Kozhikode District but not within the area as notified by theCentral Government under the provisions of Section 2(14)(iii)(b)of the Act. The schedule property sold in favour of KSIDC is nota capital asset under Section 2(14) of the Act. The assessee used I.T.A. No.179/2014 3.The case of the assessee is that the schedule propertyis situated in Kinalur and Kanthalad Villages in Quilandi Taluk,Kozhikode District but not within the area as notified by theCentral Government under the provisions of Section 2(14)(iii)(b)of the Act. The schedule property sold in favour of KSIDC is nota capital asset under Section 2(14) of the Act. The assessee used I.T.A. No.179/2014 the schedule property as agricultural land/rubber plantation onthe date of sale, and the schedule property is situated in a veryremote area where there is no infrastructure facility. TheAssessing Officer refers to one of the clauses of MoA dated01.12.1995, which is to the effect that the assessee agreed todeliver to KSIDC or its nominee upon receipt of dueconsideration and after removing all the rubber trees at theexpense of the assessee and other trees standing on theschedule property and carry away the cut trees. The aboveclause and the cutting of trees by the assessee have beenappreciated by the Assessing Officer as converting the scheduleproperty into non-agricultural land, facilitating purchase byKSIDC. Thus, the objections raised by the assessee were rejectedand assessment order was made including the saleconsideration as exigible to capital gain and demanded tax ofRs.3,28,51,692/- vide assessment order dated 22.03.2002 I.T.A. No.179/2014 (Annexure-A). 3.1The assessee being aggrieved by the order in Annexure-A dated 22.03.2002 filed appeal before theCommissioner of Income Tax (Appeals) Kochi, and, throughAnnexure-B order, the appeal filed by the assessee wasdismissed. The order of the CIT (Appeals) in Annexure-B is ingreat detail and adverts to the case law wherein the tests forclassifying the land as agricultural land or capital asset are laiddown. This Court is of the view that the gist of the order of CIT(Appeals) is stated and that would serve the completion ofnarration of events preceding the present appeal. The CIT(Appeals) laid emphasis on the clause in the MoA enabling theassessee to cut and carry away the rubber trees; on the date ofthe sale there was no plantation, and that the KSIDC convertedthe schedule property into an industrial estate. 3.2The assessee filed second appeal before the Tribunal I.T.A. No.179/2014 in ITA No.582/Coch/2011. The Tribunal through order dated28.03.2014 in Annexure-C allowed the appeal filed by theassessee. The Tribunal firstly examined whether the scheduleproperty is agricultural land or not. By referring to a fewprecedents on the point, recorded a finding that the scheduleproperty was earlier used for agricultural purposes/rubberplantation, and that the possibility of using the scheduleproperty for non-agricultural purposes (sic was stated asagricultural purposes in the order) does not become a capitalasset and does not deny the classification as agricultural land.Stated in other words, the Tribunal held that the land should beactually used on the date of sale for agricultural purposes as animportant criterion for attracting the expression of agriculturalland. The Tribunal examined the circumstances in the leadingcase relied on by the parties, namely Sarifabibi Mohmed Ibrahimv. Commissioner of Income Tax, Gujarat[1], and found that the1(1993) 204 ITR 631 (SC) I.T.A. No.179/2014 I.T.A. No.179/2014 schedule property in Sarifabibi Mohmed Ibrahim case was situatedwithin the municipal limits of Surat city. The Tribunal notedthat in the said reported case the land was not under cultivationfor over four years preceding the sale. The assessee in the saidreported case applied to the competent authority forconversion of agricultural land for non-agricultural purposes.The Tribunal found that the Assessing Officer and CIT (Appeals)fell in error in appreciating the principle in Sarifabibi MohmedIbrahim for holding that the schedule property was non-agricultural land on that date of sale in favour of KSIDC. Itfurther held that the tests laid down by the Supreme Court andHigh Court are more in the nature of guidelines, and each casehas to be examined on its merits. The Tribunal, thereafter,examined the circumstances preceding to the sale deed dated16.03.1996, contemporaneous circumstances prevailing at thetime of execution of sale deed, the future probable use by I.T.A. No.179/2014 -10- KSIDC, and recorded a finding that the future use by the purchaser is not the deciding factor. The Tribunal, from thecumulative effect of applicable tests to the case on hand, heldthat the schedule property was sold as agricultural land and the sale consideration received is not exigible to capital gains.Hence, the appeal at the instance of the Revenue. 4.The following substantial questions of law are raised by the Revenue: “1.Whether on the facts and on the circumstances of thecase the Tribunal was right in holding that the land convertedinto a barren land to establish an industrial estate was anagricultural land u/s.2(14) and therefore, profit on sale notassessable to income tax for capital gains? 2. Whether, on the facts and in the circumstances of the caseand in the light of the decision of Supreme Court in 204 ITR 631 - a) Can not the consideration on sale of land be subjected toincome tax for capital gains? b) is not the conclusion of the Tribunal against law andperverse? I.T.A. No.179/2014 3. Whether, the Tribunal is right in finding that the subject landis admittedly agricultural land"; "the land was used foragricultural purpose", "the assessee used the land foragricultural operation till the date of sale and are not thefindings factually wrong baseless unsupported by evidence andperverse? Substantial Question Nos: 1 to 3 5.Sri P K R Menon, learned Senior Advocate appearing for the Revenue, contends that the order under appeal is per seillegal and contrary to the binding precedents of the SupremeCourt in Sarifabibi Mohmed Ibrahim; and High Courts inCommissioner of Income Tax v. V A Trivedi[2]; and Principal.Commissioner of Income Tax v. Kalathingal Faizal Rahman[3] 5.1Summarised, the learned counsel's arguments are that the starting point relevant for determining whether theschedule property was sold as agricultural land or non-agricultural land was the date of execution of MoA dated 2(1988) 172 ITR 95 (Bom)3(2019) 416 ITR 311 (Ker)3(2019) 416 ITR 311 (Ker) I.T.A. No.179/2014 01.12.1995. MoA enables the assessee to cut and carry away Substantial Question Nos: 1 to 3 5.Sri P K R Menon, learned Senior Advocate appearing for the Revenue, contends that the order under appeal is per seillegal and contrary to the binding precedents of the SupremeCourt in Sarifabibi Mohmed Ibrahim; and High Courts inCommissioner of Income Tax v. V A Trivedi[2]; and Principal.Commissioner of Income Tax v. Kalathingal Faizal Rahman[3] 5.1Summarised, the learned counsel's arguments are that the starting point relevant for determining whether theschedule property was sold as agricultural land or non-agricultural land was the date of execution of MoA dated 2(1988) 172 ITR 95 (Bom)3(2019) 416 ITR 311 (Ker)3(2019) 416 ITR 311 (Ker) I.T.A. No.179/2014 01.12.1995. MoA enables the assessee to cut and carry away standing rubber trees in schedule property. The assessee bycutting and carrying away the standing rubber trees shall notbe allowed to contend that the schedule property which hadrubber plantation could be continued/treated as agriculturalland; that after the rubber trees were cut and carried away theschedule property remains as barren agricultural land.According to him, the schedule property was a barren land onthe date of sale deed dated 16.03.1996. The schedule property,by applying the definition in Section 2(14) of the Act, could besaid as non-agricultural land. The following three tests areimportant (i) to ascertain the true character or nature of theland, (ii) whether it has been put to use for agriculturalpurposes for a reasonable span of time prior to the relevantdate; (iii) whether on the relevant date the land was intendedto be put to use for agricultural purposes for a reasonable span I.T.A. No.179/2014 of time in the future; and that the last criteria is very necessary from what has been laid down by the Supreme Court inCommissioner of Income Tax, Gujarat-II v. Siddharth J. Desai[4],. Ranchhodbhai Patel v. Commissioner of Income Tax[5] 5.2Summarily stated, the argument of the Revenue isthat by cumulatively satisfying the three important tests whichare applicable to the case on hand, the assessee can claimexemption from the purview of capital gains tax. In the case onhand, the assessee, at any rate, fails to satisfy the last test,namely that the schedule property could be put to use foragricultural purposes for a reasonable span of time in the nearfuture from the date of sale deed. Admittedly, KSIDC, in duecourse of time, upon purchase from the assessee, converted theschedule property into an industrial estate. He argues that thecase on hand does not satisfy the applicable cumulative tests 4 (1983) 139 ITR 628 5 (1971) 81 ITR 446 (Guj) I.T.A. No.179/2014 referred to above and the findings recorded by the Tribunal, though are findings of fact, still, the findings are unavailable tothe admitted circumstances of the case. It is contended thatbarren land cannot be included as agricultural land. Accordingto Revenue, the order under appeal suffers from perversity andis liable to be set aside and schedule property be declared asnon-agricultural land and income received from saleconsideration is exigible to capital gains. 6. Mr A Kumar, learned counsel appearing for the assessee argues that the abstract appreciation and applicationof the decisions in V A Trivedi and Sarifabibi Mohmed Ibrahimcases are the main cause of confusion in the mind of Revenue.The judgments relied on by the Revenue are appreciated in thebackground of circumstances considered by the Nagpur Benchof Bombay High Court and the Supreme Court. The judgmentsarising under the Wealth Tax Act were considered in Sarifabibi I.T.A. No.179/2014 6. Mr A Kumar, learned counsel appearing for the assessee argues that the abstract appreciation and applicationof the decisions in V A Trivedi and Sarifabibi Mohmed Ibrahimcases are the main cause of confusion in the mind of Revenue.The judgments relied on by the Revenue are appreciated in thebackground of circumstances considered by the Nagpur Benchof Bombay High Court and the Supreme Court. The judgmentsarising under the Wealth Tax Act were considered in Sarifabibi I.T.A. No.179/2014 Mohmed Ibrahim case and the Supreme Court has not laid downexhaustive tests for determining what constitutes agriculturalland or a capital asset. It is always an issue of fact in each case.Referring to the circumstances of the case on hand, he explainsby arguing that cutting and carrying away the rubber trees ismerely removing the burden of overgrown plantations in theschedule property. The sale of the schedule property was not asis where is basis. The conveyance between the assessee and theKSIDC is the sale of land measuring 314.11 Acres alone, but notthe aged trees. The assessee had cut and carried away therubber trees. The assessee has not changed or applied for achange of classification of land under applicable local laws,from agricultural to non-agricultural use. On the contrary, theassessee paid the agricultural income tax, cess payable underPlantation Act, and treated the schedule property asagricultural land as long as the schedule property was held by I.T.A. No.179/2014 the assessee. The tax liability of the assessee is primarily considered and decided referring to the state of affairs on thedate of the sale deed, but not upon completion of the sale.Therefore, commission or omission of KSIDC in changing theland from agricultural to non-agricultural would not attractcapital gains tax liability on the assessee. These commissions oromissions by the KSIDC are beyond the reach of assessee. Theassessee held and treated the schedule property as agriculturalland and sold the schedule property as agricultural land.Therefore, the levy of capital gains is per se illegal. He relies onthe judgments reported in Ms Srinivasa Naicker v. Income TaxOfficer[6]; and Principal Commissioner of Income Tax 4, Chennai v. M/s.Mansi Finance Chennai Ltd[7] for the proposition that the judgmentrelied on by the Revenue is considered by the Madras HighCourt and it has been finally held that the nature of schedule 6 (2007) 292 ITR 481 7 2017 (1) TMI 1209 - Madras High Court I.T.A. No.179/2014 property is dependent upon the examination of circumstances in each case. He invites our attention to the findings of theTribunal and the judgments relied on by the Tribunal forrecording those findings and argues that no substantialquestion of law arises in the circumstances of the casewarranting interference under Section 260A of the Act. Heprays for dismissing the appeal. 7.Let us now examine the broad tests/guidelines laid by the judicial precedents. Gujarat High Court in Commissioner of Income Tax, Gujarat-II v. Siddharth J. Desai[8] evolved thirteenfactors/indicators which a case has to answer for being treatedas agricultural land or non-agricultural land. The thirteen factors are as follows: “(1) Whether the land was classified in the revenue records asagricultural and whether it was subject to the payment of landrevenue? I.T.A. No.179/2014 -18- (2) Whether the land was actually or ordinarily used foragricultural purposes at or about the relevant time? (3) Whether such user of the land was for a long period orwhether it was of a temporary character or by way of a stop-gap arrangement? (4) Whether the income derived from the agriculturaloperations carried on in the land bore any rational proportionto the investment made in purchasing the land? (5) Whether, the permission under Section 65 of the Bombay Land Revenue Code was obtained for the non-agricultural useof the land? If so, when and by whom (the vendor or thevendee)? factors are as follows: “(1) Whether the land was classified in the revenue records asagricultural and whether it was subject to the payment of landrevenue? I.T.A. No.179/2014 -18- (2) Whether the land was actually or ordinarily used foragricultural purposes at or about the relevant time? (3) Whether such user of the land was for a long period orwhether it was of a temporary character or by way of a stop-gap arrangement? (4) Whether the income derived from the agriculturaloperations carried on in the land bore any rational proportionto the investment made in purchasing the land? (5) Whether, the permission under Section 65 of the Bombay Land Revenue Code was obtained for the non-agricultural useof the land? If so, when and by whom (the vendor or thevendee)? Whether such permission was in respect of the whole or aportion of the land? If the permission was in respect of aportion of the land and if it was obtained in the past, what wasthe nature of the user of the said portion of the land on thematerial date? (6) Whether the land, on the relevant date, had ceased to be putto agricultural use? If so, whether it was put to an alternativeuse? Whether such cesser and/or alternative user was of apermanent or temporary nature? (7) Whether the land, though entered in revenue records, hadnever been actually used for agriculture, that is, it had neverbeen ploughed or tilled? I.T.A. No.179/2014 -19- Whether the owner meant or intended to use it for agriculturalpurposes? (8) Whether the land was situate in a developed area? Whetherits physical characteristics, surrounding situation and use ofthe lands in the adjoining area were such as would indicate thatthe land was agricultural? (9) Whether the land itself was developed by plotting andproviding roads and other facilities? (10) Whether there were any previous sales of portions of the land for non-agricultural use? (11) Whether permission under Section 63 of the BombayTenancy and Agricultural Lands Act, 1948, was obtainedbecause the sale or intended sale was in favour of a non-agriculturist was for non-agricultural or agricultural use? (12) Whether the land was sold on yardage or on acreage basis? (13) Whether an agriculturist would purchased the land foragricultural purposes at the price at which the land was soldand whether the owner would have ever sold the land valuing itas a property yielding agricultural produce on the basis of itsyield? 7.1The Nagpur Bench of Bombay High Court in V A Trivedi laid the tests for ascertaining the true character or nature of the land as “it must be seen whether it has been put to use I.T.A. No.179/2014 -20- for agricultural purposes for a reasonable span of time prior to the relevant date. It must also be seen whether on the relevant date theland was intended to be put to use for agricultural purposes for areasonable span of time in the future.” It is, at this juncture, apt torefer to what has been prefaced by the Supreme Court inSarifabibi Mohmed Ibrahim case in paragraph 12 of the judgmentin appreciating whether exhaustive tests are laid down by theCourts of Law in this behalf or not. Paragraph 12 is excerptedhereunder: “12. Whether a land is an agricultural land or not is essentiallya question of fact. Several tests have been evolved in thedecisions of this Court and the High Courts, but all of them aremore in the nature of guidelines. The question has to beanswered in each case having regard to the facts andcircumstances of that case. There may be factors both for andagainst a particular point of view. The Court has to answer the-question on a consideration of all of them a process ofevaluation. The inference has to be drawn on a cumulativeconsideration of all the relevant facts.” (emphasis supplied) I.T.A. No.179/2014 -21- “12. Whether a land is an agricultural land or not is essentiallya question of fact. Several tests have been evolved in thedecisions of this Court and the High Courts, but all of them aremore in the nature of guidelines. The question has to beanswered in each case having regard to the facts andcircumstances of that case. There may be factors both for andagainst a particular point of view. The Court has to answer the-question on a consideration of all of them a process ofevaluation. The inference has to be drawn on a cumulativeconsideration of all the relevant facts.” (emphasis supplied) I.T.A. No.179/2014 -21- 7.2In M/s. Mansi Finance Chennai Ltd, the Madras HighCourt, while dealing with the importance of classification ofland in the revenue records, particularly when the saidclassification is not rebutted, what is the extent to which such afactor will have a decisive influence in considering whatconstitutes agricultural land or not, held thus: “From thematerial on record, it could be deduced that the respondent hasdischarged his burden and proved that the lands were agriculturallands, at the time of transfer. Sufficient evidence has been adduced bythe respondent, to prove that the subject lands have been put toagricultural operations before the sale. Classification of the lands, inthe revenue records, as agricultural lands, is not varied and that is adetermining factor.” 7.3In Ms Srinivasa Naicker case the Madras High Courtreferred to the effect of subsequent treatment of the subject In Ms Srinivasa Naicker case the Madras High Court I.T.A. No.179/2014 -22- matter of sale transaction and whether it has any impact in determining the nature of asset sold by the assessee on the date of sale. In the said decision it has been held thus: “A perusal of section 45 shows that the requirement as on thedate of sale or transfer is that the asset must be a capital asset,considering the description under the Act. The charge ability totax under section 45 arises only if on the date of sale, the landin question retained its character as a capital asset, whichmeans, an asset which does not answer the definition of acapital asset and which is an agricultural land falling within thedefinition of section 2(14) would automatically be outside thescope of section 45. In the decision in M. Venkatesan v. CIT reported in [1983] 144ITR 886, this court, referring to the scope of section 45, heldthat "taxation or exemption from taxation depends upon thesubject of transfer answering or not answering the definition ofcapital asset at the time of transfer and at no other point oftime." In the subsequent decisions reported in CIT v. P.J.Thomas [1995] 211 ITR 897 (Mad) and (CWT v. E. Udayakumar[2006] 284 ITR 511 (Mad)), it was held that the subsequenttreatment has no relevance in the matter of considering acapital asset. It is no doubt true that the purpose for which thepurchaser had purchased was totally different from what the I.T.A. No.179/2014 transferor had intended to use the lands in question but as heldin the decisions cited above, with the admitted finding that thelands in question were under agricultural operation on the dateof sale for the purpose of considering the meaning of capitalassets, it matters very little how the subsequent purchaserintended the land in question to be put to use.” I.T.A. No.179/2014 transferor had intended to use the lands in question but as heldin the decisions cited above, with the admitted finding that thelands in question were under agricultural operation on the dateof sale for the purpose of considering the meaning of capitalassets, it matters very little how the subsequent purchaserintended the land in question to be put to use.” 8.There is no dispute on the proposition that whetherthe sale of an asset constitutes sale of a capital asset oragricultural land, and is case-specific and to be determined on acase-to-case basis. This Court keeps in perspective theelucidation of the above position in law in paragraph 12 of thejudgment in Sarifabibi Mohmed Ibrahim. This Court examines thecontentions in the same order in which they are canvassed. Inour opinion what is required to be considered is: Was itagricultural land when it was sold? If the land is recorded asagricultural land in the revenue records and if till the date of itssale it is used and exploited as agricultural land and if the owner of the land had not taken any steps which would indicate his intention to exploit the land thereafter as non-agriculturalland, then such a piece of land will have to be regarded asagricultural, even though it is included within the municipallimits or is sold as arable land without actual agriculture.Further, the determination of an issue in fact, whether the landis agricultural or not, is not a one-stop remedy, but it isessentially a question of fact. Several tests have been evolvedin the decisions of the Apex Court and various High Courts, butall of them are more in the nature of guidelines. The questionhas to be answered in each case having regard to the facts andcircumstances of that case. There may be factors, both for andagainst, on a particular point of view. Therefore, the Court hasto answer the question on a consideration of all of them, by aprocess of evaluation. Inference, therefore, has to be drawn ona cumulative consideration of all the relevant facts and I.T.A. No.179/2014 applicable tests for appreciating the criteria laid down by theCourts. 8.1The argument of Revenue is that till the date ofentering into MoA the schedule property, no doubt, was aplantation/agricultural land. The assessee through MoA agreedto cut and carry away the rubber plantation in the scheduleproperty by the assessee. Therefore, with the cutting andcarrying away of rubber trees the schedule property becomesbarren land. The barren land cannot be treated as agriculturalland. The argument of the Revenue suffers from a basicinfirmity. The nature and the character of the scheduleproperty as stated in MoA, would not alter the land from itsoriginal classification. The thrust of the argument for theRevenue is that the assessee agreed to cut and carry away therubber trees. This induces change in the user of land. Thisobjection is preposterous. Neither the Revenue nor this Court The argument of Revenue is that till the date of ought to keep itself in the shoes of negotiating parties while entering into MoA dated 01.12.1995. The clause relied on by theRevenue is borne out in MoA. Upon independent considerationof what is agreed to be sold and purchased, this Court is of theview that standing trees are excluded from the scope of MoA.Therefore, they are cut and carried away by the assessee. Theargument lays undue importance to a clause in MoA. The firstobjection of the Revenue is not falling within any of the testsadmittedly laid down in the judgments referred to above.Therefore, we consider it independently and reject theargument as unavailable. 8.2The next ancillary argument of Revenue is that withthe cutting and carrying away of trees, the schedule propertyhas become barren land, therefore, schedule property is notagricultural land. The said argument is equally fallaciousinasmuch as there is difference between barren/wasteland on 8.2The next ancillary argument of Revenue is that withthe cutting and carrying away of trees, the schedule propertyhas become barren land, therefore, schedule property is notagricultural land. The said argument is equally fallaciousinasmuch as there is difference between barren/wasteland on The next ancillary argument of Revenue is that with one hand and arable land on the other hand. The schedule property, as admitted by the parties, is located in Kinalur andKanthalad village in Quilandi taluk, nearly 20 kms away fromKozhikode Municipal Corporation limits. The schedule property,a plantation land, was an agricultural land both by classificationand user till date of cutting of rubber trees. With the cutting ofrubber trees, at best, the schedule property becomes arableland, which may not be an agricultural land with plantations.The user for agriculture is not denied by such cutting of rubbertrees. This contention that barren land is not agricultural landis neither supported by authority nor material. This Court is ofthe view that the vacant agricultural land available uponcutting and carrying away of trees, at best, can be called ‘arableland’: meaning, land used for any agricultural purpose. Eitherto attract the meaning of capital asset or not to attractagricultural land, something more is required. The ipsi dixit I.T.A. No.179/2014 objection, examined with admitted factors, would not decisively act in determining whether the schedule property satisfiescapital asset or not. 8.3The last argument is that the land was sold in favourof the KSIDC, and the KSIDC has put the land to use as anindustrial estate. Therefore, even if the first two tests aresatisfied, the last test fails and a cumulative effect on theapplicable tests is not achieved. The schedule property shouldbe held as non-agricultural land. The genesis for the aboveargument is drawn from V A Trivedi and Sarifabibi MohmedIbrahim cases. This Court has carefully examined thecircumstances which were considered by the Nagpur Bench ofBombay High Court in V A Trivedi case i.e., two parcels of landone situated in Ajni village and another in Binaki village. Theassessee in the said case is not the first transferee and the firsttransaction is not subjected to capital gains. The assessee, in I.T.A. No.179/2014 the reported case, since has sold his property to housingsocieties etc, the observations have been made. Theobservation of ensuring agricultural use for a reasonable spanof time in the near future is case-specific inasmuch as in thesaid judgment the assessee has applied for conversion of landfrom agricultural to non-agricultural use etc. The test laid downin V A Trivedi case that it (i.e., land) must also be seen whetheron the relevant date the land was intended to be put to use foragricultural purposes for a reasonable span of time in thefuture, as understood by the Revenue. As land is put to use foragricultural purposes by the vendee, we are unable to acceptthe said submission of the Revenue. In our understanding, thetest stipulates that the subject matter of land is capable of beingused for agricultural purposes without inhibition both in fact bychange of user and by law by orders of conversion fromagricultural to non-agricultural. Any other future independent application of said tests, is impractical from the perspective ofsale and purchase. The judgment of this Court in KalathingalFaizal Rahman case refers to the burden of proof, and that, whatconstitutes agricultural land essentially is a question of fact andthe same has to be established by the assessee. While advertingto the future use, we are persuaded by the reasons given by theMadras High Court in Ms Srinivasa Naicker and M/s. Mansi FinanceChennai Ltd cases. This argument also fails and is rejected. application of said tests, is impractical from the perspective ofsale and purchase. The judgment of this Court in KalathingalFaizal Rahman case refers to the burden of proof, and that, whatconstitutes agricultural land essentially is a question of fact andthe same has to be established by the assessee. While advertingto the future use, we are persuaded by the reasons given by theMadras High Court in Ms Srinivasa Naicker and M/s. Mansi FinanceChennai Ltd cases. This argument also fails and is rejected. 9. Now reverting back to the case on hand, the assesseewas the owner of agricultural/plantation land. The assesseeagreed to sell the schedule property without the burden ofrubber trees. The cutting and the carrying away of rubber treesdo not change the classification of land from agricultural tonon-agricultural land. The assessee continued to treat theschedule property as agricultural land for the Financial Yearending 31.03.1995. The assessee cannot be expected to have control over the activities of his buyer once the transfer iscompleted. The incidence of exigibility of assessee/vendor isnot dependent on an act of commission or omission of vendee.The vendor has no control on future use. What is veryimportant is whether on the date of sale the land wasagricultural land, both in record and use. The incidence to paycapital gains tax cannot be and ought not to be traced to an actof commission or omission by the transferee of the assessee.Being an absolute owner the transferee is always free to put theland to best use as the transferee thinks fit and proper. In thecase on hand, the assessee both factually and legally did notchange the character of land from agriculture to non-agriculture. The assessee has demonstrated that theclassification of land continued to be agricultural land in therevenue records even as on the date of sale. Though it is aperipheral, it is an important matter in appreciating the character of land sold by the assessee; namely, had the land been converted for the non-agricultural purpose/laid out inplots, then the stamp duty payable on registration would be onthe nature of land sold at the relevant point of time. Theschedule property was described as land in conveyance deed.The schedule property consists of vast extents of agriculturalland, admittedly outside a notified area. There is no change ofuser at the instance of assessee. The burden fastened on theassessee in the circumstances of the case has been dischargedand the findings recorded by the Tribunal are available in thefacts and circumstances of the case. We apply the principlesenunciated in the cases referred to supra to the case on handand the tests taken out as relevant by the Revenue andexamined as tenable or not. The findings of fact recorded bythe Tribunal, in the circumstances of the case, do not warrantinterference of this Court. The three objections raised against the findings recorded by the Tribunal since are without merit,the substantial questions are answered in favour of the assesseeand against the Revenue. The Income Tax Appeal fails. Hence, dismissed. No orderas to costs. Sd/-S.V.BHATTIJUDGE Sd/- BASANT BALAJI JUDGE jjj PETITIONER ANNEXUREANNEXURE "A" ANNEXURE 'B'ANNEXURE 'C' ANNEXURE D APPENDIX OF ITA 179/2014 COPY OF THE ASSESSMENT ORDER U/S.143(3)R.W.S.147 DATED 22.03.2002 PASSED BY THE ASSESSING OFFICER FOR AY 1996-97COPY OF THE CIT(A)'S ORDER No.80/DC/ R-1/E/CIT(A)-11/2002-03 DATED 19.08.2011COPY OF THE ITAT'S ORDER ITA No.582/COCH/2011 DATED 28-3-2014 FOR ASSESSMENT YEAR 1996-97TRUE COPY OF THE ARGUMENT DATED 01.12.1995