T. Suresh Gowda, Bangalore V. DCIT, Bangalore

ITA 1047/BANG/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5381 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-03-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 08-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L BHARATH
• Assessee Lawyers: G KAMALADHAR
• Keywords: Capital asset
• Section: 143(3); 2(14); 148; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI. LALIET KUMAR, JUDICIAL MEMBER SL. NO. ITA NOS. & ASSESSMENT YEAR APPELLANT RESPONDENT 1. ITA NO. 1046/BANG/2015 AY: 2005-06 SHRI. D. DASAPPA, 2 ND FLOOR, CENTRAL CHAMBERS, 2C AND D, GANDHINAGAR, BENGALURU-560009. PAN : ANAPD8675M DEPUTY COMMISISONER OF INCOME TAX, CENTRAL CIRCLE 1(3), BENGALURU. 2. ITA NO. 1047/BANG/2015 AY: 2005-06 SHRI. T. SURESH GOWDA, FLAT NO. 24, LAVELLE REGENCY, LAVELLE ROAD, BENGALURU. PAN : ASYPS3503Q 3. ITA NO. 1048/BANG/2015 AY: 2005-06 SHRI. T. PRASANNA GOWDA, NO. 2/1, RANGA 26 TH A MAIN, 4 T BLOCK, JAYANAGAR, BENGALURU. PAN : ACAPP6356J 4. ITA NO. 1058/BANG/2015 AY: 2005-06 SHRI. T. RAGHAVENDRA GOWDA, NO. 63, AYYAPPA NILAYA, VANIVILAS ROAD, BASAVANAGUDI, BENGALURU-560004. PAN : ABEPR3827R REVENUE BY : SHRI. L. BHARATH, CA ASSESSEE BY : SHRI. G. KAMALADHAR, STANDING COUNSEL DATE OF HEARING : 14.03.2017 DATE OF PRONOUNCEMENT : 17.05.2017 ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 2 OF 21 O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER SINCE IN ALL THESE APPEALS COMMON ISSUE IS INVOLVED , WE PROCEED TO DISPOSE THE SAME FOR THE SAKE OF CONVENIENCE VID E THIS CONSOLIDATED ORDER. FOR THE SAKE OF CLARITY AND CONVENIENCE, TH E FACTS RELEVANT TO THE ITA NO.1046/2015 IN THE CASE OF MR. D. DASAPPA ARE STATED HEREIN. 2. THE BRIEF FACTS OF THE CASE ARE THE APPELLANT IS AN INDIVIDUAL AND NO REGULAR RETURN OF INCOMES HAVE BEEN FILED. THE SEARCH AND SEIZE OPERATIONS WERE CONDUCTED IN THE CASE OF M/S. SPR D EVELOPERS PVT. LTD., ON 8.12.2011. DURING THE COURSE OF SEARCH AN D SEIZE OPERATIONS, IT WAS FOUND THAT THE APPELLANT WAS OWNING AGRICULTURA L LANDS AT MANCHANAYAKANAHALLI, BHEEMANAHALLI AND HAMPAPURA V ILLAGES AND THESE LANDS WERE TRANSFERRED TO M/S. VIJAYA BANK EM PLOYEES COOPERATIVE HOUSING SOCIETY LTD., THROUGH M/S. SPR DEVELOPERS. THE GAINS MADE ON TRANSFER OF LANDS WERE NOT OFFERED TO TAX. HENCE, NOTICE U/S 148 WAS ISSUED TO THE APPELLANT. THE BRIEF FACT S OF THE CASE AS SET OUT BY THE AO ARE EXTRACTED BELOW: ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 3 OF 21 ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 4 OF 21 ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 5 OF 21 ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 6 OF 21 ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 7 OF 21 ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 8 OF 21 ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 9 OF 21 3. FINALLY, THE CLAIM OF THE APPELLANT THAT THE AGR ICULTURAL LAND TRANSFERRED TO M/S. VIJAYA BANK EMPLOYEES HOUSING COOPERATIVE SOCIETY LTD., IS AN AGRICULTURAL LAND WAS NOT ACCEP TED BY THE AO BY SETTING OUT THE FOLLOWING REASONS MILITATING AGAINS T THE CASE OF THE APPELLANT THAT WHAT WAS SOLD IS AN AGRICULTURAL LAN D AND BROUGHT THE TRANSACTION OF SALE OF THE LAND TO TAX UNDER THE HE AD CAPITAL GAINS VIDE ASSESSMENT ORDER DATED 30.03.2013 PASSED U/S 143(3) R.W.S. 148 OF THE ACT: ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 10 OF 21 4. BEING AGGRIEVED BY THE AO, THE APPELLANT FILED T HE APPEAL BEFORE THE CIT(A) CONTENDING INTERALIA THAT THE APPELLANT HAD BEEN CULTIVATING THE SAID LAND BY GROWING CROPS LIKE RAGI, ETC., AND IN SUPPORT OF THIS, HE ALSO FILED THE COPIES OF LAND RECORDS. THE POSSESS ION OF THE SAID LAND WAS HANDED OVER TO M/S. SPR DEVELOPERS VIDE AGREEME NT OF SALE DATED 15.01.2004 AND THE CONVERSION OF THE SAID LAND FOR NON-AGRICULTURAL PURPOSE ALSO WAS UNDERTAKEN BY THE BUYER ONLY AND T HE SAID LAND WAS NOT SITUATED WITHIN THE PRESCRIBED AREA OF ANY MUNI CIPALITY AND HENCE IT DOES NOT CONSTITUTE TO THE CAPITAL ASSET AND THER E WAS NO TRANSFER ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 11 OF 21 UNDERTAKEN BY THE APPELLANT AFTER CONVERSION OF THE SAID LAND INTO NON- AGRICULTURAL PURPOSE AS THE POSSESSION OF LAND WAS ALREADY HANDED OVER TO THE M/S. SPR DEVELOPERS VIDE AGREEMENT OF SALE D ATED 15.01.2004. THUS IT WAS SUBMITTED THAT THE TRANSACTION OF SALE OF AGRICULTURAL LAND IS NOT EXIGIBLE TO TAX. THE SAID CONTENTIONS HAVE BEE N REJECTED BY THE CIT(A) VIDE PARA 8 TO 10 OF HIS ORDER WHICH READS A S UNDER: ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 12 OF 21 ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 13 OF 21 5. BEING AGGRIEVED, THE APPELLANT IS IN APPEAL BEFO RE THE TRIBUNAL IN THE PRESENT APPEALS. THE LEARNED AR OF THE ASSESSE E CONTENDED THAT THE SUBJECT LANDS ARE AGRICULTURAL LANDS AS THE ASSESSE E CONTINUED TO CARRY ON THE AGRICULTURAL ACTIVITY AS EVIDENT FROM THE LA ND REVENUE RECORDS. THE POSSESSION OF THE SAID LAND WAS HANDED OVER TO M/S. SPR DEVELOPERS ON 15.01.2004 PURSUANT TO THE AGREEMENT OF SALE ENTERED BETWEEN THE APPELLANT AND M/S. SPR DEVELOPERS IN TE RMS OF THE SAID AGREEMENT THE SAID POSSESSION OF THE LAND WAS HANDE D OVER TO M/S. SPR DEVELOPERS ON THE SAID DATE. HE FURTHER SUBMITTED THAT THE CONVERSION OF THE LAND INTO NON-AGRICULTURAL PURPOSE WAS UNDER TAKEN BY THE PURCHASER HIMSELF AND SAID CONVERSION TOOK PLACE ON 08.06.2004. THUS IT WAS SUBMITTED THAT WHEN THE LANDS WERE ACTUALLY TRANSFERRED PURSUANT TO THE AGREEMENT OF THE SALE, THE LAND WAS ACTUALLY AGRICULTURAL IN NATURE ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 14 OF 21 AND THEREFORE NOT LIABLE TO THE CAPITAL GAINS, CANN OT BE BROUGHT TO TAX. ON OTHER HAND, THE LEARNED STANDING COUNSEL VEHEMEN TLY CONTENDED THAT WHEN THE LANDS WERE TRANSFERRED, LAND WAS ALRE ADY CONVERTED INTO NON-AGRICULTURAL PURPOSE AND THEREFORE THE GAINS MA DE ON TRANSFER OF SUCH LANDS IS LIABLE TO TAX. 6. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ONLY ISSUE THAT ARISES FOR OUR CONSIDE RATION IS WHETHER PROFIT ARISING OUT OF SALE OF THE LAND SITUATED AT MANCHANAYAKANAHALLI, BHEEMANAHALLI AND HAMPAPURA VILLAGES SOLD TO M/S. V IJAYA BANK EMPLOYEES HOUSING COOPERATIVE SOCIETY LTD., THROUG H M/S. SPR DEVELOPERS ARE TAXABLE IN THE HANDS OF THE APPELLAN T. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE LANDS ARE NOT SITUAT ED WITHIN THE PRESCRIBED AREA OF ANY MUNICIPALITY OR CANTONMENT. THERE IS A LSO NO DISPUTE THAT THE AGRICULTURAL ACTIVITIES ARE CONTINUED TO BE CAR RIED ON THE SAID LAND TILL THE DATE OF SALE TO M/S. VIJAYA BANK EMPLOYEES HOUSING COOPERATIVE SOCIETY LTD. NO DOUBT AS ON THE DATE O F EXECUTION OF SALE DEED BETWEEN THE APPELLANT AND M/S. VIJAYA BANK EMP LOYEES HOUSING COOPERATIVE SOCIETY LTD., AND M/S. SPR DEVELOPERS I.E., 12.12.2005 THE LANDS WERE CONVERTED FOR NON-AGRICULTURAL PURPO SES ON 08.06.2004. ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 15 OF 21 IT IS NEEDLESS TO MENTION ONCE THE LANDS DOES NOT F ALL WITHIN THE DEFINITION OF THE CAPITAL ASSET AS DEFINED UNDER TH E PROVISIONS OF SECTION 2(14) OF THE ACT, THE QUESTION OF SUBJECTING THE PR OFIT ARISING ON SALE OF SUCH LAND TO TAX DOES NOT ARISE. THE PROVISIONS OF SECTION 2(14) ALSO EXCLUDES THE AGRICULTURAL LAND FROM THE PURVIEW OF DEFINITION OF THE CAPITAL ASSET. THEREFORE ONCE IT IS PROVED BEYOND DOUBT THAT THE SUBJECT LAND ARE AGRICULTURAL IN NATURE, THEN THE QUESTION OF LEVYING TAX ON THE PROFITS ARISING ON THE TRANSFER OF SUCH LAND DOES N OT ARISE. IN THE PRESENT CASE, THE ASSESSEE WAS CARRYING ON THE AGRI CULTURAL ACTIVITY ON THE SAID LAND AND THE LANDS WERE ALSO NOT SITUATED WITHIN THE PRESCRIBED AREA OF ANY MUNICIPALITY, THE ONLY FACTOR TO BE CON SIDERED IS AS ON THE DATE OF EXECUTION OF SALE DEED WHEN THE LAND WAS CO NVERTED FOR NON- AGRICULTURAL PURPOSES, WHETHER THIS FACT ALONE CAN CHANGE THE CHARACTER OF LAND. THE CONTENTION OF THE LEARNED AR OF THE A PPELLANT THAT THE TRANSFER OF THE LAND TOOK PLACE WHEN THE POSSESSION WAS HANDED OVER PURSUANT TO THE AGREEMENT OF SALE ENTERED ON 15.01. 2004 CANNOT BE ACCEPTED, FOR THE REASON THAT AGREEMENT OF SALE WAS NOT REGISTERED WHICH IS A MANDATORY CONDITION AS PER THE PROVISION S OF THE REGISTRATION ACT, 1862. IT IS AN UNDISPUTED FACT T HAT THE LANDS WERE CONVERTED FOR NON-AGRICULTURAL PURPOSES ON 08.06.20 04. IT IS ALSO AN ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 16 OF 21 UNDISPUTED FACT THAT THE CONVERSION FEES WAS PAID B Y THE BUYER AND NOT BY THE APPELLANT. THEREFORE THIS FACTOR GOES TO PR OVE THAT THE CONVERSION WAS TAKEN PLACE AT THE INSTANCE OF THE B UYER OF THE LAND. THE ONLY FACTOR AS MENTIONED (SUPRA) IS THAT AS ON DATE OF EXECUTION OF SALE DEEDS, THE LAND WAS ALREADY CONVERTED FOR NON- AGRICULTURAL PURPOSE. THEREFORE, THE ISSUE TO BE ADJUDICATED BY US IS WHETHER THIS FACTOR ALONE CAN MILITATE AGAINST THE APPELLANT TO CLAIM THAT IT IS AN AGRICULTURAL LAND. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. VAJULAL CHUNILAL 120 ITR 21 (GUJARAT) AFTER REF ERRING TO ITS EARLIER DECISION IN THE CASE OF SMT. CHANDRAVATI ATMARAM 11 4 ITR 302 (GUJ.) AND THE HONBLE SUPREME COURTS DECISION IN THE CAS E OF CWT V. OFFICER-IN-CHARGE (COURT OF WARDS) 105 ITR 133 HELD THAT THE LAND DOES NOT SEEM TO BE AGRICULTURAL LAND MERELY BECAUS E THE PERMISSION IS GRANTED FOR NON-AGRICULTURAL USE AND THE LAND WOULD CONTINUE TO BE AGRICULTURAL LAND UNTIL THE LAND IS PUT TO NON-AGRI CULTURAL USE BY THE PURCHASER HIMSELF. THE RELEVANT JUDGMENT IS EXTRAC TED BELOW: THE LEGAL POSITION AS TO WHEN LAND CAN BE SAID TO BE AGRICULTURAL LAND HAS BEEN CONSIDERED IN SEVERAL DECISIONS OF THIS HIGH COURT AND BY THE SUPREME COURT IN CWT V. OFFICER-IN-CHARGE (COURT OF WARDS) [1976] 105 ITR 133 . A DECISION RELATING TO THE LAW ON THE POINT AFTER CONSIDERING ALL THE DECISIONS AVAILABLE TILL THEN, THAT IS, TILL SEPTEMBER 15, 1977, WAS BY THIS COURT IN SMT. CHANDRAVATI ATMATAM PATEL V. CIT [1978] 114 ITR 302 (GUJ.). AT PAGE 312, THE POSITION WAS SUMMARISED AS UNDER : 'IN THIS CASE, THE LAW, THEREFORE, IS VERY CLEAR. I F THE LAND IS ACTUALLY USED FOR AGRICULTURAL PURPOSE AS SHOWN BY MANILAL SOMNATH'S CASE [1977] 106 ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 17 OF 21 ITR 917 (GUJ.) AND ALSO BY THE SUPREME COURT IN COMMISSION ER OF WEALTH-TAX V. OFFICER-IN-CHARGE COURT OF WARDS) [19 76] 105 ITR 133 , IT CAN BE SAID TO BE AGRICULTURAL LAND, AT LEAST, PRIM A FACIE, AS AGRICULTURAL LAND COULD BE SAID TO BE LAND WHICH IS EITHER ACTUA LLY USED OR ORDINARILY USED OR MEANT TO BE USED FOR AGRICULTURAL PURPOSES. IF IT IS ACTUALLY USED AT THE RELEVANT DATE FOR AGRICULTURAL PURPOSES AND THE RE ARE NO SPECIAL FEATURES, FOR EXAMPLE, BUILDING PLOT BEING ACTUALLY USED AS A STOP-GAP ARRANGEMENT FOR AGRICULTURAL PURPOSES OR A BUILDING SITE BEING USED FOR AGRICULTURAL PURPOSES, ACTUAL USER OR ORDINARY USE OR INTENTION TO USE THE LAND FOR AGRICULTURAL PURPOSES OR LAND IS MEANT TO BE USED FOR AGRICULTURAL PURPOSES, IT WOULD BE 'AGRICULTURAL LAND'. SECONDLY , POTENTIAL USE OF THE LANDS AS AGRICULTURAL LAND IS TOTALLY IMMATERIAL. T HIRDLY, ENTRIES IN THE RECORD OF RIGHTS ARE GOOD PRIMA FACIE EVIDENCE REGA RDING AGRICULTURAL LAND AND IF THE PRESUMPTION RAISED EITHER FROM ACTUAL US ER OF THE LAND OR FROM AGRICULTURAL USE OF THE LAND IS TO BE REBUTTED, THE RE MUST BE MATERIAL ON THE RECORD TO REBUT THAT PRESUMPTION. THE APPROACH OF T HE FACT-FINDING AUTHORITIES, NAMELY, THE INCOME-TAX AUTHORITIES AND THE TRIBUNAL SHOULD BE TO CONSIDER THE QUESTION FROM THE POINT OF VIEW OF PRESUMPTION ARISING FROM ENTRIES IN THE RECORD OF RIGHTS OR ACTUAL USER OF T HE LAND AND THEN CONSIDER WHETHER THAT PRESUMPTION IS DISLODGED BY THE PRESEN CE OF OTHER FACTORS IN THE CASE.' THIS DECISION IN SMT. CHANDRAVATI ATMARAM'S CASE [1 978] 114 ITR 302 (GUJ.) HAS BEEN SUBSEQUENTLY FOLLOWED IN THE CASE OF CHHOTALAL PRABHUDAS (HUF) (INCOME- TAX REFERENCE NO. 105 OF 1975) (SINCE REPORTED IN [ 1979] 116 ITR 631 (GUJ.)). THE TRIBUNAL, IN THE INSTANT CASE, IN THE COURSE OF ITS ORDER, HAS REFERRED TO THE FACT THAT THE ENTRIES IN PANIPATRAKS, THAT IS, REVENUE RECORD S, SHOW THAT THIS LAND WAS AGRICULTURAL LAND AND WAS BEING USED FOR AGRICULTUR AL PURPOSES. AS WE HAVE POINTED OUT EARLIER, PERMISSION FOR NON-AGRICULTURA L USE WAS OBTAINED BY THE CO- OPERATIVE HOUSING SOCIETY AFTER IT HAD PURCHASED TH E LAND FROM DEVIDAS. IN PARA. 9 OF ITS ORDER, THE TRIBUNAL HAS OBSERVED : 'NOW, IT APPEARS FROM THE RECORD OF RIGHTS AND THE AFORESAID ACCOUNTS PRODUCED BY THE ASSESSEE THAT GRASS AND VEGETABLES WERE GROWN ON THE LAND. THERE WERE ALSO FRUIT BEARING TREES ON THE LA ND. THERE IS NO EVIDENCE AS TO SHOW WHO WAS CULTIVATING THIS LAND AND GROWIN G GRASS AND VEGETABLES THEREON. THEREFORE, THE ONLY EVIDENCE WHICH WE HAVE REGARDING THE AGRICULTURAL OPERATIONS CARRIED ON ON THE LAND CONS ISTS OF THE ENTRIES MADE IN THE RECORD OF RIGHTS AND THE AFORESAID ACCOUNTS PRODUCED BY THE ASSESSEE. THE ACCOUNTS DO NOT APPEAR TO BE REGULARL Y MAINTAINED. WE DO NOT KNOW AS TO WHO MAINTAINED THE ACCOUNTS WHICH AR E PRODUCED BEFORE US. IN OUR OPINION, THE ACCOUNTS ARE NOT RELIABLE. WE A RE THEN LEFT WITH THE ENTRIES MADE IN THE RECORD OF RIGHTS. IN OUR OPINIO N, THESE ENTRIES ARE NOT SUFFICIENT TO ESTABLISH THAT AGRICULTURAL OPERATION S WERE CARRIED ON ON THE LAND.' THE QUESTION THAT HAS TO BE DECIDED IN THE PRESENT CASE IS NOT WHETHER WHO WAS CARRYING ON AGRICULTURAL OPERATIONS ON THE LAND, BU T WHETHER THE LAND WAS AGRICULTURAL LAND OR NOT, THAT IS, WHETHER THE LAND WAS BEING PUT TO AGRICULTURAL USE OR NOT. SECONDLY, AS POINTED OUT BY THE SUPREME COURT IN CWT V. OFFICER-IN- CHARGE ( COURT OF WARDS) [1976] 105 ITR 133 (SC), THE PRESUMPTIVE VALUE OF THE ENTRIES IN THE RECORD OF RIGHTS MUST BE BORNE I N MIND AND IF EVIDENCE IS NOT LED BY THE DEPARTMENT OR IF THE EVIDENCE IS NOT AVA ILABLE ON THE RECORD TO REBUT ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 18 OF 21 THE PRESUMPTION ARISING FROM THE ACTUAL USER OF THE LAND AS AGRICULTURAL LAND OR FROM THE ENTRIES IN THE RECORD OF RIGHTS, THE REVEN UE'S CASE MUST FAIL. THE TRIBUNAL HAS PROCEEDED ON THE FOOTING THAT AGRICULT URAL OPERATIONS APPEAR TO HAVE BEEN CARRIED ON BY WAY OF TEMPORARY ARRANGEMEN T. IN THE INSTANT CASE, IT MUST BE BORNE IN MIND THAT THE LAND WAS PURCHASED B Y THE ORIGINAL HOLDER, VAJULAL CHUNILAL, AS FAR BACK AS 1929 AND, SINCE TH AT DATE, IT WAS BEING USED AS AGRICULTURAL LAND. THE ENTRIES IN THE RECORD OF RIG HTS CONSISTENTLY GO TO SHOW THAT, OVER SEVERAL YEARS, CROPS ARE BEING GROWN, PL ANTATIONS OF KHAJURA TREES, CHIKU TREES AND OTHER CROPS WERE BEING REARED AND N URTURED ON THE LAND IN QUESTION, AND IT CANNOT BE SAID THAT FROM 1929 TO 1 966 IT WAS A TEMPORARY ARRANGEMENT. IN HIMATLAL GOVINDJI V. CWT [1977] 106 ITR 658 (GUJ.) A PLOT OF LAND WHICH WAS ALREADY CONVERTED TO NON-AGRICULT URAL USE FOR THE PURPOSE OF THE LAND REVENUE CODE WAS BEING CULTIVATED PENDING THE FINALISATION OF THE TRANSACTION OF SALE. IN THE INSTANT CASE, THE LAND WAS PUT TO AGRICULTURAL USE RIGHT TILL THE DATE OF SALE AND WAS BEING USED FOR AGRICU LTURAL PURPOSES. CROPS WERE BEING GROWN, GRASS, VEGETABLES AND OTHER MATERIALS WERE BEING GROWN ON THE FOUR SURVEY NUMBERS AS SHOWN BY THE PANIPATRAKS. TH E CIRCUMSTANCE THAT THE LAND WAS SURROUNDED BY RESIDENTIAL LOCALITY WOULD N OT RENDER THE LAND NON- AGRICULTURAL, IF, IN FACT, CONTINUOUSLY DURING THE YEARS FROM 1929 IT WAS BEING USED FOR AGRICULTURAL PURPOSES. THE QUESTION OF THE LAND UNDER CONSIDERATION BEING WANTED BY A CO-OPERATIVE SOCIETY OR BEING SUR ROUNDED BY HOUSING DEVELOPMENT WAS CONSIDERED BY THIS COURT IN CIT V. MANILAL SOMNATH [1977] 106 ITR 917 AND THAT FACTOR OF DEVELOPMENT COMING UP TO THE LAN D IN QUESTION WAS DISCOUNTED BY THE COURT. IN MANILAL SOMAATH'S C ASE [1977] 106 ITR 917 (GUJ.), THIS COURT ALSO POINTED OUT THAT THOUGH THE LAND MIGHT HAVE POTENTIAL NON- AGRICULTURAL VALUE, THAT FACTOR DID NOT MEAN THAT T HE LAND HAD CEASED TO BE AGRICULTURAL LAND OR THAT IT HAD LOST THE CHARACTER OF AGRICULTURAL LAND. IN THIS CASE, THE TRIBUNAL HAS OBSERVED AT THE END OF PARA. 9 : 'IN ANY CASE, WE HAVE NO DOUBT THAT THE CHARACTER OF THE LAND CHANGED TO THA T OF A NON-AGRICULTURAL ONE WHEN THE ASSESSEE OBTAINED PERMISSION UNDER SECTION . 63 OF THE BOMBAY TENANCY AND AGRICULTURAL LANDS ACT.' AT PAGE 929 OF THE REPORT IN MANILAL SOMNATH'S CASE [1977] 106 ITR 917 (GUJ.), IT HAS BEEN POINTED OUT : 'UNDER SECTION 63 OF THE TENANCY ACT, NO SALE OF AN Y LAND OR INTEREST THEREIN SHALL BE VALID IN FAVOUR OF A PERSON WHO IS NOT AN AGRICULTURIST UNLESS THE COLLECTOR OR AN OFFICER AUTHORISED BY THE STATE GOV ERNMENT IN THIS BEHALF GRANTS PERMISSION FOR SUCH SALE ON SUCH CONDITIONS AS MAY B PRESCRIBED. UNDER SECTION 2, SUB-SECTION (8) OF THE TENANCY ACT , 'LAND' MEANS LAND WHICH IS USED FOR AGRICULTURAL PURPOSES AND IT IS, THEREFORE OBVIOUS THAT IT WAS FOR THE SALE OF LAND USED FOR AGRICULTURAL PURP OSE FOR WHICH THE CITY DEPUTY COLLECTOR ACTING UNDER SECTION 63 OF THE BOM BAY TENANCY AND AGRICULTURAL LANDS ACT GRANTED PERMISSION. THERE IS NOTHING TO SHOW THAT BETWEEN THE DATE OF THE PERMISSION, NAMELY, MARCH 2 4, 1967 AND APRIL 7, 1967, THAT IS, THE EXECUTION OF THE SALE DEED BY TH E ASSESSEE IN FAVOUR OF TARAKKUNJ CO-OPERATIVE HOUSING SOCIETY LTD., AGRICU LTURAL OPERATIONS WHICH WERE BEING CARRIED ON WERE BY WAY OF STOP-GAP ARRANGEMENT. WE ARE NOT, IN THE PRESENT CASE, CONCERNED WITH THE QUESTI ON WHETHER AGRICULTURAL OPERATIONS WERE SUCH AS A PRUDENT AGRICULTURIST WOU LD CARRY OUT. THE SOLE QUESTION THAT WE HAVE TO DECIDE IS WHETHER ON THE D ATE OF THE SALE BY THE ASSESSEE-HINDU UNDIVIDED FAMILY TO TARAKKUNJ CO-OPE RATIVE HOUSING SOCIETY LTD. ON APRIL 7, 1967, THE LAND WAS AGRICUL TURAL LAND OR NOT. AS ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 19 OF 21 T.U. MEHTA J. HAS POINTED OUT IN NARANDAS MOTILAL'S CASE [1971] 80 ITR 39 (GUJ.), THE FACT THAT THE LAND WAS BEING USED FOR AGRICULTURAL PURPOSES TILL THE DATE OF THE SALE RAISES A PRIMA FACIE PRES UMPTION THAT IT WAS AGRICULTURAL LAND.' AT PAGE 931, IT WAS FURTHER OBSERVED : 'IT IS TRUE THAT PERMISSION TO SELL THE LAND TO TAR AKKUNJ CO-OPERATIVE HOUSING SOCIETY LTD. WAS GRANTED ON CONDITION THAT THE LAND WOULD BE USED FOR RESIDENTIAL PURPOSES AND THE APPLICATION FOR PE RMISSION UNDER SECTION 63 OF THE BOMBAY TENANCY AND AGRICULTURAL LANDS ACT WAS APPLIED FOR ON THE FOOTING THAT, AFTER THE SALE, THE LAND WOULD BE USED FOR RESIDENTIAL PURPOSES. BAT THAT ONLY GOES TO SHOW THAT, AFTER TH E DATE OF THE SALE, THIS LAND WAS TO CEASE TO BE AGRICULTURAL LAND. THE PERM ISSION GRANTED BY THE CITY DEPUTY COLLECTOR UNDER SECTION 63 OF THE BOMBA Y TENANCY AND AGRICULTURAL LANDS ACT CLEARLY GOES TO SHOW THAT IN CASE THE LAND DID NOT CEASE TO BE AGRICULTURAL LAND, THE PERMISSION WOULD BE TREATED AS CANCELLED AND, THEREFORE, THE SALE IN FAVOUR OF TARAKKUNJ CO- OPERATIVE HOUSING SOCIETY LTD. WOULD BE INFRUCTUOUS AND THE LAND WOUL D REVERT BACK TO THE ASSESSEE. IN SUCH AN EVENTUALITY, THE LAND WOULD ST ILL CONTINUE TO BE AGRICULTURAL LAND BECAUSE THE PERMISSION TO SELL TO A NON-AGRICULTURIST WOULD BE TREATED AS CANCELLED. THAT EVENTUALITY HAS NOT HAPPENED AND AS POINTED OUT IT WAS SOME TIME IN FEBRUARY, 1969, THA T THE PERMISSION FOR NON-AGRICULTURAL USE WAS GRANTED TO THE PURCHASER.. .' THE SAME REASONING WOULD ALSO APPLY TO THE FACTS OF THE PRESENT CASE. IT IS AXIOMATIC UNDER THE BOMBAY TENANCY AND AGRICULTURAL LANDS ACT THAT WHEN PERMISSION IS GRANTED BY THE AUTHORITIES CONCERNED FOR SALE OF AGRICULTURAL LAND TO A NON-AGRICULTURIST, THE LAND DOES NOT CEASE TO BE AGRICULTURAL LAND MERELY BECAUSE OF SUCH PERMISSION BEING GRANTED. IF THE CO NDITIONS OF THE PERMISSION ARE NOT COMPLIED WITH, THE LAND IN RESPECT OF WHICH PERMISSION WAS GRANTED UNDER SECTION 63 WOULD REVERT TO ITS ORIGINAL CHARA CTER OF AGRICULTURAL LAND. THEREFORE, THE LAND WAS AGRICULTURAL LAND AT THE DA TE OF THE SALE AND WOULD CONTINUE TO BE AGRICULTURAL LAND UNTIL PERMISSION F OR NON-AGRICULTURAL USE IS GRANTED AND THE LAND IS PUT TO NON-AGRICULTURAL USE BY THE PURCHASER, AS WAS CONTEMPLATED BY THE PERMISSION UNDER SECTION 63 ITS ELF. BUT, AS EMPHASISED IN MANILAL SOMNATH'S CASE [1977] 106 ITR 917 (GUJ.) MERE GRANTING OF THE PERMISSION UNDER SECTION 63 DOES NOT ALTER THE AGRI CULTURAL CHARACTER OF THE LAND AND ON THAT ASPECT OF THE MATTER, THE TRIBUNAL HAS OBVIOUSLY ERRED IN LAW AND THE LEGAL POSITION HAS NOW BEEN EXPLAINED IN MANILAL SO MNATH'S CASE [1977] 106 ITR 917 (GUJ.) AND CHANDRAVATI ATMARAM'S CASE [1978] 114 ITR 302 (GUJ.). THE TRIBUNAL'S CONCLUSION IS, THEREFORE, BASED ON T WO ERRORS IN LAW. ERROR NO. 1 IS THAT THE PRESUMPTION ARISING FROM THE ACTUAL USE R OF THE LAND FOR AGRICULTURAL PURPOSES HAS NOT BEEN GIVEN PROPER EFFECT AND, FURT HER, THE PRESUMPTION ARISING FROM THE ENTRIES IN THE RECORD OF RIGHTS HAS NOT BE EN CONSIDERED AT ALL. THE TRIBUNAL HAS NOT CONSIDERED, NOR IS THERE ANY MATER IAL ON THE RECORD TO SHOW, WHETHER THE PRESUMPTION ARISING FROM THESE TWIN FAC TORS OF ACTUAL USER AND ENTRIES IN THE RECORD OF RIGHTS IS REBUTTED OR NOT. SECONDLY, THE TRIBUNAL HAS ERRED IN LAW IN CONSIDERING THE EFFECT OF PERMISSIO N GRANTED UNDER SECTION 63 OF THE BOMBAY TENANCY AND AGRICULTURAL LANDS ACT. ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 20 OF 21 7. THERE IS NO DISPUTE THAT THE AGRICULTURAL OPERAT IONS CONTINUED TO BE CARRIED ON THE SAID LAND TILL THE DATE OF EXECUT ION OF THE SALE DEED IN FAVOUR OF M/S. VIJAYA BANK EMPLOYEES HOUSING COOPE RATIVE SOCIETY LTD., AND THE FACT THAT THE PERMISSION WAS OBTAINED FOR NON-AGRICULTURAL PURPOSES DOES NOT MILITATE AGAINST THE CLAIM OF THE APPELLANT THAT IT IS AGRICULTURAL LAND, IN THE LIGHT OF THE ABOVE DECISI ONS. THEREFORE, WE HOLD THAT THE PROFIT ARISING ON SALE OF THIS LAND C ANNOT BE BROUGHT TO TAX. THEREFORE, THE APPEAL FILED BY THE ASSESSEE IS ALLO WED. 8. THE FACTS IN THESE APPEALS ARE IDENTICAL AND THE REFORE FOR THE PARITY OF THE REASONING GIVEN IN THE ABOVE ORDERS, WE HOLD THE PROFIT ARISING ON SALE OF LANDS CANNOT BE BROUGHT TO TAX. THE APPEALS IN ITA NO.1047/BANG/2015, ITA NO.1048/BANG/2015 AND IT A NO.1058/BANG/2015 IN THE CASES OF SHRI. T. SURESH G OWDA, SHRI. T. PRASANNA GOWDA AND SHRI. T. RAGHAVENDRA GO WDA ARE ALLOWED. ITA NO.1046, 1047, 1048, 1058/BANG/2015 PAGE 21 OF 21 7. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF MAY, 2017. SD/- SD/- (LALIET KUMAR) (INTURI RAMA RAO) JUDICIAL MEMBER ACC OUNTANT MEMBER BANGALORE. DATED: 17 TH MAY, 2017. /NSHYLU/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.