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2026 Supreme(Online)(Mad) 26540
IN THE HIGH COURT OF JUDICATURE AT MADRAS
G. Jayachandran, Shamim Ahmed, JJ
M/s Pallava Resorts P Ltd – Appellant
Versus
The Deputy Commissioner of Income Tax, Company Circle V(1), Chennai – Respondent
Tax Case Appeal No. 31 of 2013
For the Appellants/Petitioners: Mr. A.S. Sriraman, M/s.S.Sridhar
For the Respondents: Mrs.V.Pushpa Senior Standing Counsel
Revenue records determine agricultural land status for capital gains exemption; Tribunal erred in ignoring them.
Headnote:The Income Tax Act, 1961 defines 'capital asset' under Section 2(14), excluding agricultural land situated outside specified municipal limits per Section 2(14)(iii). The assessee, engaged in hospitality and ancillary businesses, purchased land classified as agricultural in revenue records, evidenced by casuarina plantation and sales reflected in accounts. Lower authorities taxed short-term capital gains, holding the land non-agricultural based on location and guideline values. Substantial questions framed: whether Tribunal erred in upholding capital gains liability despite constitutional limits on agricultural land taxation (Entry 45, List II, Seventh Schedule), ignoring revenue records and precedents like jurisdictional rulings on similar facts. Court observed revenue records prevail for land classification, Tribunal's findings perverse, disregarding VAO reports, photos, and agricultural income disclosures. Tax Case Appeal allowed.
| Table of Content |
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| 1. assessee purchased and sold agricultural land with casuarina trees (Para 2 , 3 , 4 , 5) |
| 2. tribunal confirmed non-agricultural status, deleted deemed dividend (Para 7) |
| 3. arguments on revenue records vs location and section 2(14) (Para 8 , 9 , 10 , 11 , 12 , 13) |
| 4. revenue records prevail; constitutional prerogative of states (Para 15 , 16 , 17) |
| 5. questions answered for assessee; appeal allowed (Para 19 , 20) |
(Judgment of the Court was delivered by Dr.G.Jayachandran J.)
The appellant herein is a private limited company incorporated under the Companies Act in 2005. The main object of the company is to carry on the business running hotels, holiday resorts, motels, clubs, conference hall, cinema hall and etc. Ancillary to the main objects, the company is involved in media advisory services, liaising, printing, publishing, production of cinematographic films. Additionally, to lend and advance money, either with or without security, to firms or body corporate as per the terms and conditions deemed fit by the company.
2. Furthermore, the company carries on business in India and elsewhere as planters, growers, producers, curers, manufacturers, merchants and exporters of coffee, tea, rice, cardamom, cinchona, rubber, pepper, oranges and other fruits and vegetables and all other agricultural produce.
3. The appellant purchased an extent of 20.068 acres in Village No.162, Mamallapuram Village, Chengalpattu Taluk, Chengalpattu District through a sale deed dated 23.11.2005. The appellant subsequently sold this property in 2008. The Income Tax Department has raised a claim for capital gains tax against the assessee in respect of the sale of this land. Whereas the assessee has consistently contended that the land was purchased, held and sold as agricultural land and therefore, there cannot be any tax on the capital gains.
4. In the assessment order dated 30.12.2010, the Assessing Officer (AO) charged tax on the capital gains derived from the sale. The AO held that the assessee failed to provide details of agricultural returns or produce proof of any agricultural activities or income derived from the land during the previous year and it is vexatious attempt to claim exemption under Section 14 of the Income Tax Act. As these receipts were credited to the Profit and Loss account, they were assessed as taxable income.
5. The appeal preferred by the assessee before the Commissioner of Income Tax (Appeals V) was partly allowed to the extent that the property was purchased along with casuarina trees situated thereon. A portion of these trees was sold for Rs.2,08,350/- during the previous year (i.e., Assessment Year 2007-08) and the same has been reflected in the auditor's Profit and Loss account for the year ending 31.03.2007. Therefore, the income related to the sale of casuarina trees amounting to 2,08,350/-, being income from agricultural land, was deleted from the assessment. The Appellate Authority confirmed the rest of the assessment. Subsequently, a further appeal filed by the assessee (I.T.A.No.794/Mds/2011) and a cross -appeal filed by the Department (I.T.A.No.1261/Ads/2011) were disposed of by the Income Tax Appellate Tribunal by a common order dated 11.10.2012.
6. The Tribunal arrived at conclusion as below:-
“27.When all these facts are taken into consideration as a whole, we find that the property purchased and sold by the assessee was commercial property, non agricultural in nature. The property cannot be considered as an agricultural property only for the reason that there was a casual plantation of casuarina trees. The certificates issues by the concerned Revenue authorities are of no use in the present case.
28.Therefore, we confirm the findings of the lower authorities on this point and hold that the property sold by the assessee was non agricultural property. Short-term capital gains tax has been levied in accordance with law.”
7. Regarding the addition of Rs.5,61,86,557/- confirmed by the Commissioner of Income Tax (Ap
