M.Narayanan HUF, CHENNAI V. ITO, Kumbakonam

CO 43/CHNY/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8657 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-07-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 04-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 18-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: S SRIDHAR
• Keywords: Capital asset; Rule of consistency; Question of law
• Section: 143(3); 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO.218/MDS/2013 ASST. YEAR : 2008-09 & C.O. NO.43/MDS/2013 THE INCOME TAX OFFICER, WARD-I(3), KUMBAKONAM (APPELLANT) V. SHRI M. NARAYANAN (HUF), NO.3-48 SOUTH STREET, THIPPIRAJAPURAM, KUMBAKONAM TALUK. PAN : AAAHM4185N ( RESPONDENT / CROSS OBJECTOR) DEPARTMENT BY : SHRI S. DASGUPTA, JCIT ASSESSEE BY : SHRI S. SRIDHAR, ADVOCATE DATE OF HEARING : 04 JULY 2013 DATE OF PRONOUNCEMENT : 12 TH JULY 2013 ITA 218 & CO 43/MDS/13 2 O R D E R PER S.S. GODARA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE AND ASSESSEES CROSS OBJECTIONS, ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), TIRUCHIRAPALL I, DATED 19.11.2012 PASSED IN CASE APPEAL NO.303/2010-11, FO R ASSESSMENT YEAR 2008-09, IN PROCEEDINGS UNDER SEC. 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE REVENUE HAS PLEADED ITS GRIEVANCES AS FOLLO WS:- THE ORDER OF LEARNED CIT(A) IS CONTRARY TO LAW, FAC TS AND CIRCUMSTANCES OF THE CASE AND RELIES UPON CASES WHI CH ARE NOT APPLICABLE TO FACTS OF THE CASE. 2. THE LEARNED CIT(APPEALS) HAD ERRED IN DELETING THE ADDITION OF RS. 31,34,170/- ON ACCOUNT OF LONG TERM CAPITAL GAINS ARISING TO THE ASSESSEE. 2.1 THE LEARNED CIT(APPEALS) ERRED IN HOLDING THAT THE LANDS, ADMEASURING 4.52 ACRES AT ENANNALLUR PANCHAYA T, WERE AGRICULTURAL LANDS IN NATURE. 2.2 THE LEARNED CIT(APPEALS) ERRED IN RELYING UPON FRESH EVIDENCE IN THE FORM OF THE LETTER ISSUED BY SHRI K . GANESAN, DATED 07.07.2007, WITHOUT GIVINGF THE ASSESSING OFF ICER A REASONABLE OPPORTUNITY OF EXAMINING AND REBUTTING T HE SAME, AS PER RULE 46A OF THE INCOME TAX RULES,1962. ITA 218 & CO 43/MDS/13 3 2.3 THE LEARNED CIT(APPEALS) HAS ERRED IN RELYING UPON THE CONTENTS AND THE BONAFIDES OF THE LETTER DATED 07.0 7.2007, IGNORING THE FACT, THAT, THE IDEA OF CONVERTING THE SAID LAND INTO PLOTS FINDS MENTION, FOR THE FIRST TIME IN THE AGRE EMENT DATED 20.08.2007, ONLY. 2.4 THE LEARNED CIT(APPEALS) HAS ERRED IN NOT HOLD ING, THAT, THE SAID LAND WAS A 'CAPITAL ASSET' AS PER THE PROV ISIONS OF SECTION 2(14)(III) OF THE, INCOME TAX ACT, 1961, AS THE SAID LAND IS SITUATED AT A DISTANCE OF 4.5 KILOMETRES ONLY FR OM THE MUNICIPAL LIMITS OF KUMBAKONAM, WHICH IS WITHIN THE NOTIFIED DISTANCE OF 5 KILOMETRES FOR THE KUMBAKONAM MUNICIP ALITY. WHEREAS SUPPORTING THE ORDER OF COMMISSIONER OF IN COME TAX (APPEALS) IN PRINCIPLE, THE ASSESSEES CROSS OB JECTIONS ARE AS BELOW:- 1. THE GROUNDS OF APPEAL RAISED BY THE INCOME TAX OFFICER AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), TIRUCHIRAPPALLI - 620001 DATED 19.11.201 2 IN I.T.A.NO.303/10-11 FOR THE ABOVE MENTIONED ASSESSME NT YEAR IS CONTRARY TO LAW, FACTS, AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE CIT (APPEALS) ERRED IN MENTIONING ONLY THE LETTER OF THE PURCHASER DATED 07.07.2007 IN ISOLATION WITHOUT MENTIONING THE AGREEMENT DATED 20TH AUGUST 2007 TO DETERMINE T HE DATE OF TRANSFER EVEN THOUGH THE CONTENTS OF THE LETTER WERE TRANSLATED INTO THE AGREEMENT DATED 20.8.2007 WHICH WAS AVAILABLE IN THE RECORDS OF THE ASSESSING OFFICER A S WELL AS IN THE APPELLATE PROCEEDINGS CONDUCTED BY HIM. ITA 218 & CO 43/MDS/13 4 3. THE ITO CONSEQUENTLY FAILED TO APPRECIATE THAT THERE WAS NO VIOLATION OF THE RULE 46A OF THE INCOME TAX RULES, 1962 IN SO FAR AS TO THE REFERENCE TO THE LETTER DA TED 07.07.2007 AND OUGHT TO HAVE APPRECIATED THAT THE F ACT OF HANDING OVER OF POSSESSION ON 20.04.2007 BASED ON T HE AGREEMENT ENTERED INTO BETWEEN THE PARTIES ON THE S AID DATE WAS NOT IN DISPUTE AND IN AS MUCH AS FURTHER OUGHT TO HAVE APPRECIATED THAT THE GROUNDS CHALLENGING VIOLATION OF RULE 46A OF INCOME TAX RULES, 1962 WOULD BECOME ACADEMIC. 4. THE ITO FAILED TO APPRECIATE THAT HAVING NOT CH ALLENGED THE DECISION OF THE CIT(APPEALS) ON THE METHOD OF M EASURING THE DISTANCE, THE PERSISTENCE ON THE DISTANCE FROM THE NEAREST MUNICIPALITY AT 4.5 KMS. WITHOUT ANY EVIDENCE AND A PPARENTLY BASED ON CROW FLYING METHOD WHICH WAS REJECTED AS A IMPERMISSIBLE METHOD OF MEASUREMENT OF DISTANCE BOT H BY THE FIRST APPELLATE AUTHORITY AND FURTHER BASED ON THE DECISIONS CITED IN RELATION THERETO, IS NOT CORRECT AND WITHO UT ANY BASIS. 5. THE ITO FAILED TO APPRECIATE THAT THE PLEA FOR ANOTHER OPPORTUNITY ON THE STRENGTH OF THE RULE 46A OF THE INCOME TAX RULES, 1962 WAS UNREASONABLE ON THE FACTS AND IN TH E CIRCUMSTANCES OF THE CASE AND OUGHT TO HAVE APPRECI ATED THAT HAVING FAILED TO CROSS VERIFY WITH THE PURCHASER AT THE TIME OF FRAMING OF THE ASSESSMENT IN SPITE OF THE FACT OF C ROSS VERIFICATION OF VARIOUS FACTS INCLUDING THE FACTS O BTAINED FROM THE VILLAGE ADMINISTRATIVE OFFICER BEHIND THE BACK OF THE RESPONDENT, THE PLEA FOR ANOTHER OPPORTUNITY WAS UNSUSTAINABLE IN LAW. 3. IN THE COURSE OF HEARING, BOTH PARTIES REITERAT E THEIR RESPECTIVE PLEADINGS. IN ADDITION TO THIS, THE ASS ESSEE CITES CASE LAW OF ITAT CHENNAI IN ITA NO.1614/M/2010 DATED 4.5 .2012 TITLED AS ITO V. SHRI BAKTHAVATSALAM GOWTHAM TO SUB MIT THAT EVEN AN UNREGISTERED AGREEMENT INVOLVING TRANSFER O F POSSESSION ITA 218 & CO 43/MDS/13 5 AMOUNTS TO TRANSFER FOR THE PURPOSE OF SEC.2(47)(V) OF THE ACT. FURTHER TO CONTEST THE REVENUES ARGUMENTS THAT FOR MEASURING DISTANCE SO AS TO DETERMINE THE NATURE OF ASSET TRA NSFER UNDER SEC.2(14) OF THE ACT; CROWS FLIGHT METHOD HAD TO B E ADOPTED, THE ASSESSEE CITES CASE LAW OF CIT V. SATINDER PAL SINGH (2010) 229 CTR (P&H) 82. IN LIGHT THEREOF, A PRAYER HAS B EEN MADE BY THE ASSESSEE TO REJECT THE INSTANT APPEAL. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN HUF. IT IS MANAGED BY ITS KARTHA, NAMELY, SHRI M. NARAYANAN. ON 30.11.1959, IT HAD ACQUIRED A PARCEL OF AGRICULT URAL LAND MEASURING 4.52 ACRES THROUGH A REGISTERED SETTLEMEN T DEED, SITUATED IN VILLAGE ENALLURE, KUMBAKONAM TALUK, THA NJAVUR DISTT. THERE IS NO ISSUE BETWEEN THE PARTIES THAT THE SAID TALUK IS A MUNICIPALITY AND UPTO A DISTANCE OF 5 KMS THEREFRO M, THE ADJOINING LANDS HAVE BEEN NOTIFIED AS CAPITAL ASSE TS. ITA 218 & CO 43/MDS/13 6 5. IT IS NOTICED FROM THE FILE THAT ON 20.4.2007, THE ASSESSEE ENTERED INTO AN AGREEMENT TO SELL THE AFOR ESAID LAND FOR ` .37,96,800/- WITH A VENDEE BY THE NAME OF SHRI K. G ANESAN. IT WAS AN UNREGISTERED AGREEMENT. THE ASSESSEE HAD RE CEIVED AN ADVANCE SUM OF ` .5 LAKHS IN LIEU OF PARTING WITH THE POSSESSION OF THE LAND. A PERUSAL OF THE CASE FILE REVEALS THAT T HE SAID AGREEMENT IS AVAILABLE AT PAGES 93 TO 95. PER ASSE SSEE, THE ADVANCE MONEY IN QUESTION HAD BEEN DEPOSITED IN ITS SAVINGS BANK ACCOUNT MAINTAINED IN CITY UNION BANK, MANDAVE LI BRANCH AND TRANSACTIONS FROM 01.4.2007 TO 31.3.2008 ARE RE FLECTED AT PAGE 89 TO 92 OF THE PAPER BOOK. 6. AFTER PARTING WITH THE POSSESSION AND RECEIVING ADVANCE, ON 09.6.2007/09.7.2007, THE ASSESSEE IS ST ATED TO HAVE FILED AN APPLICATION TO THE VILLAGE PANCHAYAT SEEKI NG APPROVAL TO CARVE LAY OUT PLAN OF THE LAND. THE SAME WAS ACCEP TED ON 11.6.2007. ON 7.7.2007, THE VENDEE REQUESTED THE A SSESSEE TO SIGN VARIOUS DOCUMENTS IN THE SHAPE OF APPLICATION FOR THE PURPOSE OF CONVERTING THE LAND INTO PLOTS. THEREA FTER, ON ITA 218 & CO 43/MDS/13 7 20.7.2007, THE VILLAGE ADMINISTRATIVE OFFICER ISSUE D A CERTIFICATE CLASSIFYING THE LAND AS THARISU IE. WASTE LAND. ON 20.8.2007, THE ASSESSEE EXECUTED ANOTHER UNREGISTERED AGREEMEN T EXPRESSING ITS INTENTION TO EXECUTE POWER OF ATTORN EY IN FAVOUR OF THE VENDEE AND OBTAINED A SUM OF ` .15 LAKHS. THEREAFTER, ON 13.12.2007, IT RECEIVED FURTHER CONSIDERATION OF ` .8.50 LAKHS. ON 19.12.2007, THE ASSESSEE EXECUTED POWER OF ATTORNEY IN FAVOUR OF THE VENDEE FOR CONVERTING THE LAND INTO PLOTS. THEREAFTER, ON 25.3.2008, IT RECEIVED THE REMAINING SALE CONSIDERA TION OF ` .9,46,800/-. IN THIS MANNER, THE ASSESSEE GOT THE ENTIRE CONSIDERATION, THOUGH THE AGREEMENTS IN QUESTION R EMAIN UNREGISTERED. 7. COMING TO THE IMPUGNED ASSESSMENT YEAR, IT IS T O BE SEEN THAT ON 29.1.2008, THE ASSESSEE HAD FILED ITS RETURN DISCLOSING INCOME OF ` .3,76,609/- WITH AGRICULTURAL INCOME OF ` .35,53,400/-. IN THE COURSE OF SCRUTINY, THE ASS ESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAD CONVERTED ITS LAND INTO PLOTS BY TAKING IT AS STOCK IN TRADE UNDER SEC.2(47 )(IV) OF THE ACT ITA 218 & CO 43/MDS/13 8 LEADING TO ACCRUAL OF CAPITAL GAINS WHICH WERE LIAB LE TO BE TAXED. 8. ON BEING PUT UP TO A PRE-ASSESSMENT NOTICE, THE ASSESSEE CHOSE TO FILE A PETITION UNDER SEC.144A OF THE ACT DATED 11.11.2010 BEFORE THE JT. COMMISSIONER OF INCOME TA X (IN SHORT JCIT). IT IS EVIDENT FROM THE CASE FILE THAT THE S AME WAS DECIDED ON 20.12.2010. A PERUSAL OF THE ORDER MAKES IT CLE AR THAT THE JCIT WAS OF THE VIEW THAT THE DATE OF TRANSFER HAD TO BE TAKEN AS 28.8.2007 INSTEAD OF 20.4.2007 (SUPRA) IN VIEW OF THE FACT THAT THERE WAS NO EVIDENCE IN SUPPORT OF THE AGREEMENT A ND HELD THAT ONLY AN AMOUNT OF ` .5 LAKHS HAD BEEN PAID; WHEREAS IN THE MONTH OF AUGUST 2007, THE ASSESSEE HAD RECEIVED A SUM OF ` . 15 LAKHS. HE WAS ALSO OF THE OPINION THAT THE LAND IN QUESTION WAS AGRICULTURAL EARLIER, BUT CONVERTED TO NON-AGRI CULTURAL USED FOR HOUSING LAY OUT AS APPROVED BY THE VILLAGE PANC HAYAT. FURTHER, THE ASSESSEE HAD CONTENDED IN SEC. 144A PROCEEDINGS THAT THE LAND WAS SITUATED AT A DISTANC E OF 5.1 KMS, IF TRAVELLED BY ROAD. THE SAID PLEA HAD BEEN TURNE D DOWN BY THE JCIT BY OBSERVING THAT SINCE THE ROAD WAS ZIGZAG AS PER THE ITA 218 & CO 43/MDS/13 9 GOOGLE MAP, CROW FLY METHOD HAD TO BE ADOPTED WHI CH WOULD REDUCE THE DISTANCE TO 4.5 KMS IE. WITHIN 5 KMS NOT IFIED BY THE MUNICIPALITY WHICH WOULD MAKE THE LAND LIABLE TO BE TREATED AS A CAPITAL ASSET. ACCORDINGLY, THE ASSESSING OFFICER FINALIZED THE ASSESSMENT COMPUTING LONG TERM CAPITAL GAINS OF ` .31,34,170/- VIDE ORDER DATED 21.12.2010. 8. AGGRIEVED, THE ASSESSEE FILED APPEAL. IN THE C OURSE OF LOWER APPELLATE PROCEEDINGS, IT ALSO FILED A LET TER BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 07.7.200 7 (SUPRA). WE FIND THAT THE ASSESSEES APPEAL HAS BEEN ACCEPTE D BY THE COMMISSIONER OF INCOME TAX (APPEALS) BY OBSERVING A S UNDER :- 6. HAVING VERIFIED THE CONTENTIONS OF THE AUTH ORIZED REPRESENTATIVE OF THE APPELLANT AS WELL AS THE ASSE SSING OFFICER AND ALSO THE LEGAL POSITION, IT IS PERTINEN T TO RELY ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF SARIFABIBI MD. IB R AHIM 204 ITR 631(SC) WHICH CLEARLY DISTINGUISHES THE APPELLANT'S CASE WITH THAT OF TH E ABOVE DECISION AS UNDER:- ITA 218 & CO 43/MDS/13 10 S.NO . FACTS AS PER THE ABOVE DECISION FACTS AS PER THE P RESENT CASE L . LAND WA S SITUATED WITHIN THE MUNICIPAL LIMITS THE LANDS W E RE S ITUATED IN VADAPAKKAM AND WITHIN ONE KM O F SURAT RAILWA Y STATION VILLAGE , ENANALLURPANCHAYAT , KUMBAKON A M TALUK WITH A POPULATION OF LESS THAN 10000 AND WERE NOT FORMING PART OFKUMBAKONAM MUNICIPALITY , WHICH IS THE ONLY NEAREST MUNICIPAL AUTHORITY . IT DOES NOT FALL WITH THE LIMITS SPECIFIED IN SEC. 2(14). 2. THE LAND WA S NOT CULTIVATED AT THE RELEVANT THE LANDS WERE PUT TO A G RICULTURAL U S E BEF O R E POINT OF TIME. AND UP TO THE POINT OF SALE . 3. A PPLICATION FOR NON AGRICULTURAL USE OBTAINED NO SUCH APPLICATION FOR HOUSING PLOTS OR BEFORE S ALE CON S TRUCTION MADE BEF O RE S ALE OR EVEN AFT E R BY THE APPELLANT . 4. T HE LAND WA S SOLD IN Y ARDS THE LANDS WER E S OLD IN ACRE S AND A S AGRI C ULTURAL LAND S. 5. CO N S TRU C TI O N ACTI V IT Y C O MM E NCED WITHIN T HREE N O C ON S TRU C TI O N ACTIVIT Y W A S CO MM E N CE D D AYS OF S ALE EV ER AFT E R S ALE. T H E LAND S WERE N O T PUT AN Y ALTERNATIVE U S E TILL L O N G AFTER 6. PORTION O F THE LAND W A S PUT TO NON AGRICULTURAL NO PORTION OF THE LAND W AS PUT TO AN Y N O N - U S E E ARLI E R AGRICULTURAL U S E E ARLIER . 7. THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SRI M.S. SRINIVASA NAICKER VS. ITO (2007) 292 ITR 482 (MADRAS) ALSO SUPPORT THE DECISION MENTIONE D SUPRA IN FAVOUR OF THE APPELLANT THAT AGRICULTURAL LAND SOLD WERE PUT TO NON AGRICULTURAL USE BY THE PURCHASER / BUYER BUT THIS DOES NOT HAVE ANY BEARING ON THE CHARACTER OF THE LAND ON THE DATE OF SALE IN THE HANDS OF THE APPELL ANT . TH E FACT S WHICH ARE SIMILAR ARE SUBMITTED IN A TABULAR FORM WHICH IS REPRODUCED HEREUNDE R :- ITA 218 & CO 43/MDS/13 11 S. NO. FACTORS CONSIDERED BY HIGH COURT THAT SUPPORTED ITS DECISION THAT THE ASSESSEES LANDS WERE AGRICULTURAL LAND AND HENCE NOT A CAPITAL ASSET U/S.2(14) OF THE INCOME TAX ACT, 1961 APPLICABILITY OF THE FINDINGS TO THE PRESENT CASE. 1. THE LANDS WERE REGISTERED AS AGRICULTURAL LANDS EVEN IN THE INSTANT CASE THE LANDS WERE REGISTERED AS AGRICULTURAL LANDS IN ALL THE GOVT. RECORDS 2 LANDS IN QUESTION WERE NOT PUT TO ANY OTHER PURPOSES OTHER THAN AGRICULTURE LANDS WERE NOT PUT TO ANY ALTERNATIVE USE IN THIS CASE ALSO. 3 THERE WAS IN FACT, CULTIVATION TILL THE DATE OF SALE PADDY CULTIVATION TOOK PLACE TILL BEFORE THE SALE. 4 TAXATION OR EXEMPTION FROM TAXATION DEPENDS UPON THE SUBJECT OF TRANSFER ANSWERING OR NOT ANSWERING THE DEFINITION OF CAPITAL ASSET AT THE TIME OF TRANSFER AND AT NO OTHER POINT OF TIME AS ON THE RELEVANT DATE OF TRAN S FER , THE SUBJECT LAND BEING AGRICULTURAL IN CHARACTER AND BEING SITUATED BEYOND 5 KMS. FROM THE LOCAL LIMITS OF MUNICPALITY, THEY ARE NOT CAPITAL ASSET AND THEREFORE NOT EXIGIBLE TO CAPITAL GAINS TAX. 5 THE SUBSEQUENT TREATMENT HAS NO RELEVANCE IN THE MATTER OF CONSIDERING A CAPITAL ASSET THE LANDS WERE NOT PUT TO ANY NON-AGRICULTURAL USE BY THE APPELLANT TILL THE DATE OF SALE AGREEMENT (20.4.2007). HOWEVER, THIS DOES NOT HAVE ANY BEARING ON THE CHARACTER OF THE LAND ON THE DATE OF SALE AGREEMENT IN THE HANDS OF THE APPELLANT 8. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE SUBMISSION OF THE AR . I HAVE ALSO GONE THROUGH THE DECISIONS ITA 218 & CO 43/MDS/13 12 RELIED ON BY THE ASSESSING OFFICER AND THE AR. I H AVE ALSO PERUSED THE DOCUMENTS FURNISHED BY THE APPELLANT V IZ. CHITTA, PATTA BOOK, DISTANCE ON GOOGLE MAP ETC. THE AUTHORI ZED REPRESENTATIVE OF THE APPELLANT HAS ALSO DRAWN MY A TTENTION TO THE VARIOUS DECISIONS DELIVERED ON THE SIMILAR ISS UE BY SEVERAL AUTHORITIES IN FAVOUR OF THE APPELLANTS AS UNDER:- 1. KASTURI VS. CIT 251 ITR 532 (MAD.) 2. T K THAYYLU VS. CIT (2011) [202 TAXMAN 531 (KER) ] 3. 14 TAXMAN.COM 120 KARNATAKA 4. C RAVI VS. DCIT (2010) 325 ITR 417 (KER) 5. RADHA SOAWAMI VS. CIT (1992) 193 ITR 321 6. SATINDRA PAUL SINGH VS. CIT ITA OF 2009 (P&H) 9. THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT HAS ALSO DRAWN MY ATTENTION TO THE LETTER ISSUED BY SHRIK.GA NESAN, THE PURCHASER OF THE LAND FROM THE APPELLANT DATED 7.7. 2007 WHICH IS QUOTED AS UNDER:- PLEASE REFER TO THE SA L E AGREEMENT DATED 20.04 . 2007 ENTERED INTO BETWEEN US FOR PURCHASE OF 4.52 ACRES OF YOUR LANDS FOR ` 37,96,800/- ( THIRTY SEVEN LAKHS NINETY SIX THOUSAND AND EIGHT HUNDRED ONLY) . WE ARE NOW EXPLORING THE POSSIBILITY OF CONVERTING THE SUBJECT LANDS TO PLOTS. FOR THIS PURPOSE WE HAVE TO OBTAIN CERTAIN APPROVALS FROM VILLAGE PANCHAYAT AND OTHER AUTHORITIES. THE APPLICATION FOR THE SAME ARE TO BE SIGNED BY THE PERSON IN WHOSE NAME THE LANDS ARE STANDING AS ON THE DATE OF APPLICATION. SINCE THE ABOVE LANDS HAVE NOT BEEN REGISTERED IN OUR NAME ITA 218 & CO 43/MDS/13 13 THOUGH WE HAVE PURCHASED IT AND TAKEN POSSESSION ON 20.04 . 2007, THE APPLICATIONS ARE TO BE SIGNED BY YOU. TO AVOID DELAY , WE REQUEST YOU TO PLEASE SIGN THE ENCLOSED APPLICATION WHICH IS ON OUR BEHALF ONLY. THE NECESSARY EXPENSES IN CONNECTION WITH THE DEVELOPMENT OF LANDS, APPROVAL ETC, WILL BE INCURRED BY US. - (SD/ - ) K GANESAN. 10. KEEPING IN VIEW OF THE HON'BLE SUPREME COURT DE CISION IN THE CASE OF SARIFABIBI MD. IBRAHIM 204 ITR 631 A S WELL AS HON'BLE JURISDICTIONAL HIGH COURT DECISION IN TH E CASE OF M SRINIVASA NAICKER VS ITO 292 ITR 482 (MAD.) AS WE LL AS THE RATIOS HELD IN CASES RELIED UPON BY THE AUTHORI SED REPRESENTATIVE OF THE APPELLANT AS MENTIONED SUPRA WHICH CLEARLY STATE ONCE THE AGRICULTURAL LANDS SOLD BY T HE APPELLANT WAS NOT PUT TO ANY NON AGRICULTURAL PURPO SES BEFORE THE DATE OF SALE OF LANDS EITHER BY WAY OF S ALE AGREEMENT AND HANDING OVER THE POSSESSION OF THE LA NDS TO THE BUYER ON SALE OF LANDS BY WAY OF REGISTRATION W HICH BOTH ARE RECOGNIZED AS SALE, AS PER SECTION 2(47)(V) R.W .S 53A OF TRANSFER OF PROPERTY ACT . THEREFORE THERE IS NO LIABILITY ON THE PART OF THE APPELLANT FOR CAPITAL GAINS TAX ON THE SALE OF AGRICULTURAL LAND OF 4.52 ACRES AT ENANNALLUR PANCH AYAT SOLD BY THE APPELLANT FOR A SALE CONSIDERATION OF ` . 37 , 96 , 800 AS PER AGREEMENT OF SALE DATED 20.04.2007. SUBSEQU E NT TO THE DATE OF SALE OF AGRICULTURAL LANDS BY WAY OF SALE AGREEMENT AND ALSO POS S ESSION OF THE LANDS SOLD HANDED OVER ON THE SAME DATE TO THE BUYER , THERE IS NO ITA 218 & CO 43/MDS/13 14 BEARING ON THE CHARACTER OF THE LAND SUBSEQUENT TO THE DATE OF SALE BY WAY OF SALE AGREEMENT IN THE HANDS OF TH E APPELLANT WHETHER THE LANDS ARE USED FOR ANY NON- AGRICULTURAL PURPOSES BY THE BUYER LATER ON AS WAS HELD IN SEVERAL HIGHER JUDICIAL DECISION S AS MENTIONED SUPRA. KEEPING IN VIEW OF THE RATIOS HELD IN VARIOUS HIGHE R JUDICIAL PRONOUNCEMENTS AND RESPECTABLY FOLLOWING THE ABOVE DECISIONS, THE APPELLANT IS NOT LIABLE TO CAPITAL G AINS ON THE AGRICULTURAL LANDS SOLD TO SHRI K GANESAN. THEREFOR E THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITIO N MADE ON ACCOUNT OF CAPITAL GAINS TAX IN THE CASE OF THE APPELLANT TREATING THE SALE OF AGRICULTURAL LANDS AS CAPITAL A S SET . THE APPELLANT SUCCEEDS ON THIS ISSUE. 11. IN THE RESULT, THE APPEAL IS ALLOWED. IT IS IN THIS BACKDROP OF FACTS THAT THE REVENUE IS IN APPEAL, WHEREAS, THE ASSESSEE HAS PREFERRED CROSS OBJECTION SUPPORTING MAINLY THE FINDINGS UNDER CHALLENGE BEFORE US. 10. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE RIVAL CONTENTIONS AND PERUSED THE CASE LAW AS W ELL AS THE PAPER BOOK ON RECORD. THE FACTS OF THE CASE HAVE A LREADY BEEN NARRATED HEREIN ABOVE. THE FIRST ARGUMENT ADVANC ED BY THE ITA 218 & CO 43/MDS/13 15 REVENUE IS THAT THE LAND IN QUESTION IS NOT AGRICUL TURAL. AS WE HAVE ALREADY DISCUSSED, THE ASSESSEES PETITION UND ER SEC.144A OF THE ACT HAS BEEN DISPOSED OF BY JCIT VIDE ORDER DATED 20.12.2010(SUPRA). IT TRANSPIRES THAT IN THE SAID ORDER, THE LAND IN QUESTION HAS ALREADY BEEN HELD TO BE AGRICULTURA L BEFORE HOUSING LAY OUT AND APPROVAL WHICH HAS GONE UNREBUT TED BY THE REVENUE. MOREOVER, THE LAND IN QUESTION WAS ACQUIR ED IN THE YEAR 1959. EVEN THE VILLAGE ADMINISTRATIVE OFFICER HAD CERTIFIED THE SAME TO BE AGRICULTURAL BUT NOT CULTIVATED FOR MORE THAN TWO YEARS AS IN THE YEAR 2007. HENCE, WE HOLD THAT ON CE A PARCEL OF LAND IS AGRICULTURAL, THE MERE FACT THAT IT IS LYIN G UNCULTIVATED FOR A SHORT SPAN OF TIME WOULD NOT CHANGE ITS NATURE IN THE ABSENCE OF ANY OTHER MATERIAL CONTRARY TO THE SAME. THEREF ORE, WE DO NOT FIND MERIT IN THIS ARGUMENT RAISED BY THE REVEN UE. 11. THE NEXT SUBMISSION OF THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ADMITTED A DDITIONAL EVIDENCE IN VIOLATION OF RULE 46A OF INCOME-TAX RUL ES, IE. WITHOUT AFFORDING AN OPPORTUNITY OF HEARING TO THE ASSESSIN G OFFICER. ITA 218 & CO 43/MDS/13 16 AFTER PERUSING OPERATIVE PART OF THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS) HEREIN ABOVE, WE FIND THAT THO UGH THE ASSESSEE HAD PRODUCED THE SAID LETTER IN LOWER APPE LLATE PROCEEDINGS, THE SAME HAS BEEN NOWHERE TAKEN NOTE O F. THAT BEING THE CASE, IN OUR VIEW, NO PREJUDICE HAS BEEN CAUSED TO THE REVENUE SO AS TO RAISE THE ABOVE PLEA. ACCORDINGLY , THIS PLEA IS REJECTED. 12. IT HAS BEEN FURTHER ARGUED BY THE REVENUE THAT THE AGREEMENT IN QUESTION HAS BEEN EXECUTED BY THE ASSE SSEE WITH THE VENDEE ONLY ON 20.8.2007(SUPRA); WHEREAS THE SA ME HAS BEEN WRONGLY HELD TO HAVE BEEN EXECUTED ON 20.4.200 7. QUA THIS PLEA AS WELL, A PERUSAL OF THE FACTS OF THE CA SE WOULD MAKE IT CLEAR THAT ON 20.4.2007, THE ASSESSEE HAD EXECUTED UNREGISTERED AGREEMENT WITH THE VENDEE DELIVERING POSSESSION OF THE PROPERTY IN QUESTION. EVEN IN THE AGREEMENT DATED 20.8.2007 , THE PARTIES REITERATED THAT POSSESSION HAD ALREADY BEEN EXCHANG ED ON 20.4.2007. ADMITTEDLY, EVEN THE REVENUE DOES NOT D ISPUTE THE LATTER AGREEMENT WHICH LEADS TO AN INFERENCE THAT E VEN THE ITA 218 & CO 43/MDS/13 17 RECITAL DATED 20.8.2007 SUPPORT THE ASSESSEES STAN D. IN THIS REGARD, WE FIND THAT IN THE CASE LAW OF BAKTHAVATS ALAM GOWTHAM(SUPRA), IT HAS BEEN HELD THAT AS PER SEC.2( 47)(V) OF THE ACT, MERE PARTING OF POSSESSION OF AN IMMOVABLE PRO PERTY UNDER SEC.53A OF THE ACT IN CASE OF UNREGISTERED AGREEMEN T AMOUNTS TO A VALID TRANSFER. THE RELEVANT PORTION IS REPRODUC ED HEREIN BELOW:- 13. A READING OF THE ABOVE PROVISION SHOWS THAT THE MAIN INGREDIENT TO ATTRACT THE PROVISIONS OF THIS S ECTION IS THAT THERE SHOULD BE PARTING OF POSSESSION OF AN IMMOVABLE PROPERTY IN PART PERFORMANCE OF A CONTRAC T OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFE R OF PROPERTY ACT, WHICH READS AS UNDER AFTER AMENDMENT MADE IN 2001: PART PERFORMANCE. 53A. WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDER ATION ANY IMMOVABLE PROPERTY BY WRITING SIGNED BY HIM OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TR ANSFER CAN BE ASCERTAINED WITH REASONABLE CERTAINTY, AND THE TRAN SFEREE HAS, IN PART PERFORMANCE OF THE CONTRACT, TAKEN POSSESSION OF THE PROPERTY OR ANY PART THEREOF, OR THE TRANSFEREE, BE ING ALREADY IN POSSESSION, CONTINUES IN POSSESSION IN PART PERFOR MANCE OF THE CONTRACT AND HAS DONE SOME ACT IN FURTHERANCE OF TH E CONTRACT, AND THE TRANSFEREE HAS PERFORMED OR IS WILLING TO P ERFORM HIS PART OF THE CONTRACT, THEN NOTWITHSTANDING THAT WHERE TH ERE IS AN ITA 218 & CO 43/MDS/13 18 INSTRUMENT OF TRANSFER, THAT THE TRANSFER HAS NOT BEEN COMPLETED IN THE MANNER PRESCRIBED THEREOF OR BY THE LAW FOR THE TIME BEING IN FORCE, THE TRANSFERER OR ANY PERSON CLAIMING UNDER HIM SHALL BE DEBARRED FROM ENFORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMING UNDER HIM ANY RIGHT IN RESPECT OF THE PROP ERTY OF WHICH THE TRANSFEREE HAS TAKEN OR CONTINUED IN POSSESSION , OTHER THAN A RIGHT EXPRESSLY PROVIDED BY THE TERMS OF THE CONTR ACT: PROVIDED THAT NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT S OF A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF T HE CONTRACT OR OF THE PART PERFORMANCE THEREOF. 14. THUS, IN OUR CONSIDERED OPINION, MERELY BECAUSE AN AGREEMENT TO SALE HAS NOT BEEN REGISTERED, WHICH OTHERWISE IS IN THE NATURE OF AGREEMENT REFERRED TO IN SECTION 53A CANNOT BE TAKEN OUT OF AMBIT OF SECTION 2(47)(V) OF THE ACT WHEN PARTING OF THE POSSESSION O F IMMOVABLE PROPERTY HAS TAKEN PLACE. THE PROVISIONS OF CLAUSE 10 OF THE MOU DATED 20.11.2003 ENTERED INTO BETWEEN THE ASSESSEE ALONG WITH HIS BROTHER WITH THE PURCHASER READS AS UNDER: 10. AS FAR AS THE AREA OF LAND EARMARKED FOR THE DEVELOPER IS CONCERNED, THE DEVELOPER IS AT PERFECT LIBERTY TO PLAN FOR DEVELOPMENT/SALE OF THE SAID AR EA AND ACCORDINGLY DEVELOP OR SELL AND THE OWNERS WILL NOT INTERFERE WITH THE SAME. BUT, IT IS MADE CLEAR TO THE DEVELOPER THAT THE DEVELOPER SHOULD NOT PART WI TH POSSESSION OF THE PROPERTY EARMARKED FOR THE DEVELOPER EITHER AS A WHOLE OR IN PARTS WITHOUT HANDING OVER POSSESSION OF THE COMPLETED MULTI- STOREYED COMMERCIAL COMPLEX BUILDING TO THE OWNERS IN THE LAND WHICH IS MORE FULLY DESCRIBED IN THE SCHEDULE E HEREUNDER: ITA 218 & CO 43/MDS/13 19 ALTERNATIVELY, IT IS OPEN TO THE DEVELOPER TO GIVE NECESSARY AND REQUIRED SECURITY TO THE OWNERS TO PROTECT THEIR INTEREST IN RESPECT OF THE CONSTRUCTI ON TO BE PUT UP BY THE DEVELOPER IN THE LAND RETAINED BY THE OWNERS, WHICH IS MORE FULLY DESCRIBED IN THE SCHEDULE E' HEREUNDER. TAKING CUE FROM THE SAME WE ALSO HOLD THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGHTLY HE LD THAT ON 20.4.2007, THE ASSESSEE HAD TRANSFERRED THE LAND IN QUESTION TO THE VENDEE ABOVE SAID. THEREFORE, SUBSEQUENT APPRO VAL OF LAY OUT PLAN (SUPRA) RESULTING INTO CAPITAL GAINS; IF A NY, WOULD NOT BE TAXABLE IN ASSESSEES HANDS. SO, THIS ARGUMENT IS ALSO REJECTED. 13. THIS LEAVES WITH THE FOURTH CONTENTION OF THE REVENUE THAT THE LAND FELL WITHIN THE NOTIFIED AREA AS THE DISTANCE WAS WITHIN 4.5 KMS BY FOLLOWING CROW FLY METHOD. IN THIS REGARD, WE REITERATE OUR DISCUSSION HEREIN ABOVE TH AT THE ASSESSEES SPECIFIC CONTENTION WAS THAT ACTUAL ROAD DISTANCE BETWEEN MUNICIPALITY AND THE LAND TRANSFERRED WAS 5 .1 KMS IE. MORE THAN THE NOTIFIED AREA LIMIT OF 5 KMS. THE AS SESSING ITA 218 & CO 43/MDS/13 20 AUTHORITY AS WELL AS THE JCIT EXERCISING JURISDICTI ON UNDER SEC.144A OF THE ACT WERE OF THE VIEW THAT CROW FLY METHOD WOULD BE MORE APPROPRIATE ACCORDING TO WHICH THE DI STANCE IS 4.5 KMS ONLY. IN THIS BACKDROP, WE FIND THAT THE V ERY ARGUMENT HAS BEEN REJECTED IN CASE LAW OF SATINDER PAL SINGH (SUPRA) AND THE RELEVANT OBSERVATIONS READ AS FOLLOWS :- 5. HAVING HEARD THE LEARNED COUNSEL WE ARE OF THE CONSIDERED OPINION THAT THE VIEWS EXPRESSED BY THE TRIBUNAL ON THE PRINCIPLE OF MEASUREMENT MERITS ACCEPTANCE. THERE IS STATUTORY GUIDANCE AVAILABLE I N SECTION 2(14)(III) OF THE ACT. IT WOULD BE PROFITAB LE TO READ THE AFORESAID PROVISION WHICH IS AS UNDER: 2.14 CAPITAL ASSET' MEANS PROPERTY OF ANY KIND HE LD BY AN ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION, BUT DOES NOT INCLUDE - XXXXXXXX (III)AGRICULTURAL LAND IN INDIA, NOT BEING LAND SIT UATE- (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURISDICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNICIPAL CORPORATION, NOTIFIED AREA COMMITTEE, TOWN AREA COMMITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAME) OR A CANTONMENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSA ND ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIR ST DAY OF THE PREVIOUS YEAR; OR ITA 218 & CO 43/MDS/13 21 (B) IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MOR E THAN EIGHT KILOMETERS, FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITE M (A), AS THE CENTRAL GOVERNMENT MAY, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANIZATION OF TH AT AREA AND OTHER RELEVANT CONSIDERATIONS, SPECIFIED I N THIS BEHALF BY NOTIFICATION IN THE OFFICIAL GAZETTE . A PERUSAL OF THE AFORESAID PROVISION SHOWS THAT 'CAPITAL ASSET' WOULD NOT INCLUDE ANY AGRICULTURAL LAND WHICH IS NOT SITUATED IN ANY AREA WITHIN SUCH DISTA NCE AS MAY BE SPECIFIED IN THIS BEHALF BY A NOTIFICATIO N IN THE OFFICIAL GAZETTE WHICH MAY BE ISSUED BY THE CENTRAL GOVERNMENT. THE MAXIMUM DISTANCE PRESCRIBED BY SECTION 2(14)(III)(B) OF THE ACT WHIC H MAY BE INCORPORATED IN THE NOTIFICATION COULD NOT B E MORE THAN 8 KMS. FROM THE LOCAL LIMITS OF MUNICIPAL COMMITTEE OR CANTONMENT BOARD ETC. THE NOTIFICATION HAS TO TAKE INTO ACCOUNT THE EXTENT OF, AND SCOPE FORURBANIZATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS. THE RECKONING OF URBANIZATION AS A FACTOR FOR PRESCRIBING THE DISTANCE IS OF SIGNIFICA NT WHICH WOULD YIELD TO THE PRINCIPLE OF MEASURING DISTANCE IN TERMS OF APPROACH ROAD RATHER THAN BY STRAIGHT LINE ON HORIZONTAL PLANE. IF PRINCIPLE OF MEASUREMENT OF DISTANCE IS CONSIDERED STRAIGHT LINE DISTANCE ON HORIZONTAL PLANE OR AS PER CROW'S FLIGH T THEN IT WOULD HAVE NO RELATIONSHIP WITH THE STATU TORY REQUIREMENT OF KEEPING IN VIEW THE EXTENT OF URBANIZATION. SUCH A COURSE WOULD BE ILLUSORY. IT I S IN PURSUANCE OF THE AFORESAID PROVISION THAT NOTIFICAT ION NO. 9447 DATED 6.1.1994 HAS BEEN ISSUED BY THE CENTRAL GOVERNMENT. IN RESPECT OF THE STATE OF PUNJAB, AT ITEM NO.18 THE SUB DIVISION KHANNA HAS BEEN LISTED AT SERIAL NO.19. IT HAS INTER-ALIA BEEN SPECIFIED THAT AREA UPTO 2 KMS. FROM THE MUNICIPAL ITA 218 & CO 43/MDS/13 22 LIMITS IN ALL DIRECTIONS HAS TO BE REGARDED OTHER THAN AGRICULTURAL LAND. ONCE THE STATUTORY GUIDANCE OF TAKING INTO ACCOUNT THE EXTENT AND SCOPE OF URBANIZATION OF THE AREA HAS TO BE RECKONED WHILE ISSUING ANY SUCH NOTIFICATION THEN IT WOULD BE INCONGRUOUS TO THE ARGUMENT OF THE REVENUE THAT THE DISTANCE OF LAND SHOULD BE MEASURED BY THE METHOD OF STRAIGHT LINE ON HORIZONTAL PLANE OR AS PER CROW 'S FLIGHT BECAUSE ANY MEASUREMENT BY CROW'S FLIGHT IS BOUND TO IGNORE THE URBANIZATION WHICH HAS TAKEN PLACE. MOREOVER, THE JUDGEMENT OF THE MUMBAI BENCH APPEARS TO HAVE ATTAINED FINALITY. KEEPING IN VIEW THE PRINCIPLE OF CONSISTENCY AS LAID DOWN IN RADHASOAWAMI SATSANG V. CIT(1992) 193 ITR 321, WE ARE OF THE VIEW THAT THE OPINION EXPRESSED BY TH E TRIBUNAL DOES NOT SUFFER FROM ANY LEGAL INFIRMITY WARRANTING INTERFERENCE OF THIS COURT. ACCORDINGLY QUESTION NO. (1) IS ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE BY UPHOLDING THE ORDE R OF THE TRIBUNAL. 7. THE OTHER TWO QUESTIONS BEING BASED ON PURE FINDINGS OF FACT WOULD NOT CONSTITUTE SUBSTANTIVE QUESTION OF LAW AND THE FINDINGS RECORDED BY THE TRIBUNAL ARE HEREBY AFFIRMED. THE APPEALS ACCORDINGLY STAND DISPOSED OF. A PERUSAL THEREOF MAKES IT CLEAR THAT THERE IS NO FORCE IN THE ARGUMENT OF THE REVENUE IN RESPECT OF THE PL EA THAT CRO FLY METHOD HAS TO BE ADOPTED IN PLACE OF THE ACTUA L DISTANCE. ITA 218 & CO 43/MDS/13 23 14. ACCORDINGLY, WE AFFIRM THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND REJECT THE GROUNDS RAISED BY THE REVENUE. SINCE THE C.O. ONLY SUPPORT S THE COMMISSIONER OF INCOME TAX (APPEALS)S ORDER, THE S AME HAS BECOME INFRUCTUOUS. 14. THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 12 TH DAY OF JULY 2013, AT CHENNAI. SD/- SD/- ( N.S. SAINI ) ( S.S. GODA RA ) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED : 12 TH JULY 2013 JLS. COPY TO:- (1) APPELLANT (2) RESPONDENT (3) CIT(APPEALS) (4) COMMISSIONER OF INCOME TAX (5) D.R. (6) GUARD FILE.