ITO 2(1)(2), MUMBAI V. APLANA SAMIR CHINAI, MUMBAI

ITA 1481/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0013 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 11-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: S C TIWARI; RUTUJA PAWAR
• Keywords: Capital asset; Business income; Cost of acquisition
• Section: 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 1481/MUM/2015 ( / ASSESSMENT YEA R: 2011 - 12 ) ITO - 2(1)(2), R. NO. 543, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 / VS. SMT. ALPANA SAMIR CHINAI 67 - A, PIRAMAL BHAVAN, POCHKANWALA ROAD, WORLI, MUMBAI - 400 025 ./ ./ PAN/GIR NO. A A CPC 9007 D ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI RAJESH KUMAR YADAV / RESPONDENT BY : SHRI S. C. TIWARI & MS. RUTUJA PAWAR / DATE OF HEARING : 04.04.2017 / DATE OF PRONOUNCEMENT : 30 .06.2017 / O R D E R PER SA KTIJIT DEY , J . M.: THIS IS AN A PPEAL BY THE DEPARTMENT AGAINST THE ORDER DATED 17.12.2014 OF COMMISSIONER OF INCOME TAX (APPEALS) - 4 , MUMBAI (CIT(A) FOR SHORT) FOR THE ASSESSMENT YEAR (A.Y.) 2011 - 12. T HE EFFECTIVE GROUNDS RAISED BY THE DEPARTMENT ARE AS UNDER: 1. THE ORDER OF CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2 ITA NO. 1481/MUM/2015 (A.Y. 2011 - 12) ITO VS. SMT. ALPANA SAMIR CHINAI 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT LAND WAS AGRICULTURAL LA ND AND THE INCOME ARISING AFTER THE SALE WAS EXEMPT IGNORING THE FACT THAT THE LAND HAD BEEN SOLD FOR NON - AGRICULTURAL PURPOSES AS EVIDENCED BY VARIOUS ACTIONS TAKEN BY THE ASSESSEE IN RELATION TO THIS LAND, WHICH INCLUDED NO CULTIVATION HAVE BEEN CARRIED OUT ON THE LAND PRIOR TO ITS SALE, SEEKING PERMISSION TO CONVERT THE LAND TO NON - AGRICULTURAL, MAKING A JOINT APPLICATION ALONG WITH THE PROPOSED PURCHASER FOR CARRYING OUT CONSTRUCTION ACTIVITY AND SUBMITTING LAYOUT AND BUILDING PLANS FOR APPROVAL, EVEN PRIOR TO THE SALE OF THE LAND. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE LAND WAS AGRICULTURAL LAND AND THE INCOME ARISING AFTER THE SALE WAS EXEMPT IGNORING THE FACT THAT THE LAND WAS SOLD ONLY AFTER THE ASSTT. DIRECTOR, TOWN PLANNING, DISTT. RAIGAD HAD RECOMMENDED THE APPROVAL OF THE LAYOUT AND BUILDING PLANS AND THE ORDER ULTIMATELY PASSED BY THE CONCERNED AUTHORITIES FOR CONVERSION OF THE LAND INTO NON - AGRICULTURAL BORE THE NAME OF T HE OWNER AS WELL AS THE PURCHASER. 2. BRIEFLY THE FACTS OF THE ISSUE ARE, THE ASSESSEE IS AN INDIVIDUAL . F OR THE ASSES SMENT YEAR UNDER CONSIDERATION S HE FILED HER RETURN OF INCOME ON 30.7.2011, DECLARING TOTAL INCOME OF RS.26,36,090/ - . IN THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (A.O.) FINDING THAT IN THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HAD SOLD A PIECE OF LAND OWNED BY HER AT ALIBAUG, DISTRICT - RAIGAD, BEARING G UT NO. 196 VIDE AGREEMENT DATED 19.5.2010 FOR RS.1,07,60,000/ - , WHEREA S , SHE DID NOT OFFER TO TAX CAPITAL GAIN ARISING THEREFROM , CALLED UPON THE ASSESSEE TO EXPLAIN THE REASON FOR NOT DOING SO. IN RESPONSE, IT WAS SUBMITTED BY THE ASSESSEE THAT SINCE THE SUBJECT LAND WAS AN AGRICULTURAL LAND, IT IS NOT A CAPITAL ASSET AS PE R SECTION 2(14) OF THE ACT. AFTER CALLING FOR VARIOUS DETAILS IN RELATION TO PURCHASE AND SALE OF THE CONCERNED LAND AND MAKING ENQUIRIES WITH THE REVENUE AUTHORITIES, THE A.O. FOUND THAT THE NATURE OF LAND WAS CONVERTED TO NON AGRICULTURAL AT THE TIME OF SALE. HE, THEREFORE, CALLED UPON THE 3 ITA NO. 1481/MUM/2015 (A.Y. 2011 - 12) ITO VS. SMT. ALPANA SAMIR CHINAI ASSESSEE TO EXPLAIN AS TO WHY THE INCOME ARISING FROM SALE OF LAND SHOULD NOT BE TREATED AS INCOME CHARGEABLE TO TAX. THOUGH , THE ASSESSEE OBJECTED TO THE PROPOSED ADDITION BY THE A.O. AND SUBMITTED VARIOUS DOCUMENTARY EVIDENCES TO IMPRESS UPON THE FACT THAT AT THE TIME OF SALE OF LAND, THE NATURE AND CHARACTER WAS STILL AGRICULTURAL , H OWEVER, THE A.O. DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE. H E OBSERVED THAT THOUGH THE LAND MAY HAVE BEEN USED FOR AGRICULTU RAL PURPOSES AND THOUGH IT MAY BE AN AGRICULTURAL LAND, HOWEVER, THE ASSESSEE PRIOR TO THE SALE OF LAND HAS APPLIED FOR CONVERSION OF THE NATURE OF LAND TO NON - AGRICULTURAL AND AT THE TIME OF SALE THE NATURE OF LAND WAS NON AGRICULTURAL. HE FURTHER OBSERVE D , SINCE PRIOR TO THE SALE OF LAND , THE ASSESSEE HAD APPLIED FOR CONVERSION OF NATURE OF LAND FROM AGRICULTURAL TO NON AGRICULTURAL , T HE TRANSACTION WOULD COME WITHIN THE AMBIT OF ADVENTURE IN THE NATURE OF TRADE. ACCORDINGLY, HE PROCEEDED TO COMPUTE INCOM E FROM SALE OF LAND AS BUSINESS INCOME . AFTER REDUCING THE PURCHASE COST OF LAND, HE DETERMINED THE INCOME FROM SALE OF LAND AT RS.72,36,996/ - , AND ADDED IT TO THE INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED OF THE ADDITION MADE BY THE A.O., THE ASSESSE E PREFERRED AN APPEAL BEFORE THE LD. CIT(A). 4. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND IN LIGHT OF THE FACTS AND MATERIAL S BROUGHT ON RECORD AS WELL AS RATIO LAID DOWN IN THE DECISIONS CITED BY THE ASSESSEE HELD THAT THE LAN D SOLD BY THE ASSESSEE BEING AN AGRICULTURAL LAND AND USED FOR THE PURPOSE OF AGRICULTURE AT THE TIME OF SALE , AND THE SAID LAND BEING 4 ITA NO. 1481/MUM/2015 (A.Y. 2011 - 12) ITO VS. SMT. ALPANA SAMIR CHINAI SITUATED MORE THAN 8 KMS AWAY FROM THE LIMIT OF ANY MUNICIPALITY , IT WILL NOT BE A CAPITAL ASSET AS PER SECTION 2(14). AC CORDINGLY, HE DELETED THE ADDITION MADE BY THE A.O. 5. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYING UPON THE OBSERVATIONS MADE BY THE A.O. SUBMITTED THAT THE FACT THAT THE ASSESSEE ALONG WITH THE PURCHASER HAD APPLIED FOR CONVERSION OF THE NATURE OF LAND FROM AGRICULTURAL TO NON AGRICULTURAL PRIOR TO THE DATE OF SALE INDICATES THAT THE ASSESSEE WAS INTENDING TO COMMERCIALLY EXPLOIT THE ASSET. HENCE, THE A.O. WAS JUSTIFIED IN REJECTING ASSESSEES CLAIM THAT THE SUBJECT LAND BEING AN AGRICULTURAL LAND IS NOT A CAPITAL ASSET. FURTHER , LOOKING AT THE INTENTION OF THE ASSESSEE, THE A.O. HAS RIGHTLY TREATED IT AS BUSINESS INCOME . 6. THE LD. AR STRONGLY OPPOSING THE CONTENTIONS OF THE LD. DR SUBMITTED THAT ON THE DATE OF EXECUTION OF SALE DEED DATED 19.5. 2010, THE NATURE AND CHARACTER OF THE LAND IN REVENUE RECORD WAS SHOWN AS AGRICULTURAL LAND. HE SUBMITTED , ONLY AFTER THE LAND WAS SOLD BY THE ASSESSEE, THE COLLECTOR ON 28.5.2010 PASSED AN ORDER CONVERTING THE NATURE OF LAND FROM AGRICULTURE TO NON AGRICU LTURE. THE LD. AR DRAWING OUR ATTENTION TO THE CERTIFICATES ISSUED BY THE CONCERNED TAHSILDAR AND TALATHI SUBMITTED THAT THE ASSESSEE THROUGH DOCUMENTARY EVIDENCE HAS CLEARLY ESTABLISHED THE NATURE AND CHARACTER OF THE LAND TO BE AGRICULTURAL. IN SUPPORT O F WHICH CONTENTION, THE LD. AR RELIED UPON THE FOLLOWING DECISIONS: 5 ITA NO. 1481/MUM/2015 (A.Y. 2011 - 12) ITO VS. SMT. ALPANA SAMIR CHINAI SR. NO. PARTICULARS CITATION 1 CIT V. SMT. SANJEEDA BEGUM (2006) 154 TAXMAN 346 (HC ALLH.) 2 M. S. SRINIVASA NAICKER V. ITO (2007) 292 ITR 481 (HC MAD.) 3 HINDUSTAN INDUSTRIAL RESOURCE S LTD. V. ACIT (2011) 335 ITR 77 (HC DEL.) 4 JANKI RAM BAHADUR RAM V. CIT (1965) 57 ITR 21 (SC) 5 CIT V. SUTLEJ COTTON MILLS SUPPLY AGENCY LTD. (1975) 100 ITR 706 (SC) 6 CIT V. H. HOLCK LARSEN (1986) 160 ITR 67 (SC) 7 . WE HAVE CONSIDERED THE RIVAL CON TENTIONS AND PERUSED THE MATERIAL BROUGHT ON RECORD. W E HAVE ALSO APPLIED OUR MIND TO THE CASE LAWS CITED BEFORE US. FROM THE FACTS AND MATERIAL BROUGHT ON RECORD IT IS EVIDENT THAT AT THE TIME OF PURCHASE OF LAND BY THE ASSESSEE ON 0 4 .0 4.2008 , THE NATURE AND CHARACTER OF LAND AS PER REVENUE RECORD WAS AGRICULTURAL. IT IS ALSO EVIDENT THAT THE NATURE AND CHARACTER OF LAND CONTINUED TO AS AGRICULTURAL LAND IN REVENUE RECORDS TILL THE LAND WAS SOLD BY THE ASSESSEE VIDE REGISTERED SALE DEED DATED 19.5.2010. TH IS IS ALSO ESTABLISHED FROM THE CERTIFICATE ISSUED BY TAHSILDAR OF ALIBAUG DATED 06. 0 1.2014, A COPY OF WHICH IS AT PAGE 90 OF THE PAPER BOOK. IN THE SAID CERTIFICATE , THE TAHSILDAR HAS ALSO CLARIFIED THAT AS PER THE REPORT SUBMITTED BY THE CONCERNED TALATH I, THE AGRICULTURAL ACTIVITY LIKE CULTIVATION OF PADDY AND GRASS CROP WERE CARRIED ON IN THE SAID LAND TILL THE SALE OF LAND. THE TAHSILDAR IN CLEAR WORDS HAS MENTIONED THAT AT THE TIME OF SALE OF LAND SINCE THE NATURE OF LAND WAS AGRICULTURAL LAND, THERE WAS NO NEED TO ISSUE A SEPARATE CERTIFICATE. IN FACT, THE A.O. HIMSELF HAS ACCEPTED THAT THE NATURE AND CHARACTER OF LAND WAS AGRICULTURAL AND SOME AGRICULTURAL ACTIVITY WAS BEING CARRIED OUT OVER THE SAID LAND. THE ONLY REASON WHICH PERHAPS LED THE A.O. T O REJECT ASSESSEES CLAIM IS , THE NATURE AND CHARACTER OF LAND WAS 6 ITA NO. 1481/MUM/2015 (A.Y. 2011 - 12) ITO VS. SMT. ALPANA SAMIR CHINAI CONVERTED TO NON - AGRICULTUR E BY VIRTUE OF AN APPLICATION MADE JOINTLY BY THE ASSESSEE ALONG WITH THE PURCHASER. HOWEVER , AS COULD BE SEEN FROM THE MATERIALS BROUGHT ON RECORD, THE TAHSILDAR PASSED THE ORDER CONVERTING THE NATURE OF LAND FROM AGRICULTURAL TO NON AGRICULTURAL ON 28.5.2010, I.E., AFTER SALE OF LAND BY THE ASSESSEE. THOUGH , IT MAY BE A FACT THAT IN THE APPLICATION FOR CONVERTING THE NATURE OF LAND MADE BY THE PURCHASER, THE ASSE SSEE MIGHT BE A SIGNATORY , HOWEVER THAT ALONE CANNOT BE A REASON FOR TREATING THE NATURE OF LAND SOLD BY THE ASSESSEE AS NON AGRICULTURAL. MOREOVER, THE CONCERNED TALATHI HAS ISSUED A CERTIFICATE STATING THAT THE AGRICULTURAL LAND SOLD BY THE ASSESSEE IS S ITUATED MORE THAN 8 KMS AWAY FROM THE LIMIT OF THE NEARBY MUNICIPALITY. THESE FACT HAD NOT BEEN DISPUTED BY THE A.O. MERELY BECAUSE THE NATURE AND CHARACTER OF THE LAND WAS CHANGED TO NON AGRICULTURAL PURPOSE AT THE INSTANCE OF THE PURCHASER , THAT TO O, AFT ER EXECUTION OF THE SALE DEED WILL NOT BE ENOUGH TO DENY ASSESSEESS CLAIM OF EXEMPTION OF CAPITAL GAIN ON THE GROUND THAT THE SUBJECT LAND BEING IN THE NATURE OF AGRICULTUR AL LAND IS NOT A CAPITAL ASSET IN TERMS OF SECTION 2(14). THE DECISION RELIED UPON BY THE LD. AR ALSO SUPPORT TH I S VIEW. FURTHERMORE, WE ARE NOT ABLE TO APPRECIATE HOW THE GAIN DERIVED FROM SALE OF LAND CAN BE TREATED AS BUSINESS INCOME. NEITHER THE ASSESSEE HAS SHOWN THE AGRICULTURAL LAND AS STOCK - IN - TRADE NOR A.O. HAS BROUGHT ANY MATER IAL ON RECORD TO DEMONSTRATE THAT THE ASSESSEE WAS INDULGING IN PURCHASE AND SALE OF LAND IN A SYSTEMATIC AND ORGANIZED MANNER. A SINGLE INSTANCE OF SALE OF LAND CANNOT MAKE IT AN ADVENTURE IN THE NATURE OF TRADE. IN VIEW OF THE AFORE - SAID, WE DO NOT FIND 7 ITA NO. 1481/MUM/2015 (A.Y. 2011 - 12) ITO VS. SMT. ALPANA SAMIR CHINAI ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) ON THE ISSUE. ACCORDINGLY, GROUNDS RAISED BY THE DEPARTMENT ARE DISMISSED. 8 . IN THE RESULT, THE DEPARTMENTS APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 30 TH , 201 7 SD/ - SD/ - ( RAJESH KUMAR ) (S A KTIJIT DEY ) / A CCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 30 . 0 6 .201 7 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE AP PELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI