Subsequent use of land by purchaser not relevant to decide nature of land when it was sold

George Gee Varghese Vs ITO (ITAT Chennai)

Assessee from Tamilnadu who had originally purchased land in Kerala in 2006 for Rs. 92 lakhs sold it to M/s. Rubber Board Employees Co-operative Housing Society for Rs. 6.81 crores in FY 2014-15. Assessee claimed that land sold is an agricultural land used for agricultural operations and is out of the scope of capital asset as defined u/s. 2(14). Assessee filed revenue records as maintained by the State Govt, certificate of Village Officer and also copies of tax paid to Kerala Agricultural Workers Welfare Fund Board.

Assessee filed various evidences to prove that the land was used for cultivating rubber plants, but because of decrease in rubber prices, the assessee stopped cultivating rubber plant and used land for cultivating seasonal crops like vegetables and plants, and this fact has been certified by the Village Officer . Land was an agricultural land when it was purchased and remained agricultural land when it was sold. When the land has been classified as agricultural land, it would remain to be an agricultural land as long as the appellant does not change the use or put the land for some other purpose. Simply because the land is situated in a place where proper road connection exists and further the land was sold to non-agriculturalist, it does not change the characteristics of land, for the purpose of taxation. Although the land has been sold to M/s. Rubber Board Employees Cooperative Housing Society, for the commercial purpose, but fact remains that when the land was sold by the assessee it was remained as agricultural land and thus, subsequent use of land by the purchaser is not relevant to decide the nature of land when it was sold. Purchaser of the land, after purchase has approached a legal authority for conversion and from the above it is very clear, if it is not an agricultural land at the time of sale, then what is the necessity to approach appropriate authority for conversion of said land. In the state of Kerala, conversion of Nilam land for non-agricultural purpose is not allowed and only Puraiyidam land can be converted subjected to approval of appropriate authorities. Since, land sold by the assessee is Puraiyidam land, the purchaser might have put to use the land for non-agricultural activities.

AO was not convinced with the explanation furnished by the assessee that the land is an agricultural land and according to him the assessee could not file necessary evidences to prove that said land is an agricultural land and used for carrying out agricultural operations. AO further noticed that the assessee is by profession is an educational consultant ordinarily residing at Chennai and therefore, it cannot be said that the land in Kerala were used for carrying out agricultural activities. Certificate issued by the Village Officer has not specified to the extent of land put into use for agricultural purposes. In the revenue records produced, no where any mention about the characteristics of the land as agricultural land. Assessee has invested an amount of Rs. 92 lakhs in the year 2006 for purchase of land, which is not commensurate with the return that the land has given. AO also noted that no income from agricultural is admitted in last 10 years. Therefore, the AO opined that land sold by the assessee at Village in Kerala is not an agricultural land .

Before the Tribunal, the Dept argued that

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