ITO,Wd - 3(4), Pune, Pune V. Shri Nitin M. Rajhans, Pune

ITA 150/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72545 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 27-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE; SUNITA BILLA
• Keywords: Capital asset
• Section: 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 150/PN/2012 (ASSESSMENT YEAR : 2008-09) INCOME TAX OFFICER, WARD 3(4), PUNE. . APPELLANT VS. SHRI NITIN M. RAJHANS, RAJAS PLOT NO. 8, SURVEY NO. 128/2, KOTHRUD, PUNE 411 029. PAN : ACUPR2936C . RESPONDENT DEPARTMENT BY : SHRI S. P. WALIMBE & SMT. SUNITA BILLA ASSESSEE BY : SHRI C. H. NANIWADEKAR ORDER PER G. S. PANNU, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, PUNE DATED 10.10.2011 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 22.12.2010 PAS SED BY THE ASSESSING OFFICER, U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2008-09. 2. ALTHOUGH, THE REVENUE HAS RAISED MULTIPLE GROUND S OF APPEAL BUT THE SOLITARY ISSUE RAISED IS WITH REGARD TO THE ACTION OF THE CIT(A) IN HOLDING THAT THE LAND IN QUESTION SOLD BY THE ASSESSEE WAS NOT A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14)(III)(B) OF THE ACT AND THU S THE SURPLUS ON SALE OF SUCH LAND WAS NOT LIABLE TO BE TAXED AS CAPITAL GAINS. 3. IN BRIEF, THE FACTS ARE THAT ASSESSEE IS AN INDI VIDUAL, WHO HAD PURCHASED AGRICULTURAL LAND LOCATED AT URAWADE TAL. MULSHI, A DMEASURING 3 HECTOR 19 AAR HAVING GAT NO. 794 FOR A SUM OF RS.2,00,000/- ON 10 .11.1993 IN CO-OWNERSHIP ITA NO. 150/PN/2012 A.Y. 2008-09 WITH ONE SHRI AJAY GAJANAN MAHENDALE, HAVING EQUAL SHARE. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE ALONGWITH THE CO-OWNE R SOLD THE LAND TO SMT. ROMA SURESH GALGALI AND OTHERS BY WAY OF A REGISTER ED SALE-DEED DATED 30.11.2007 FOR A TOTAL CONSIDERATION OF RS.2,60,00, 000/-. THE ASSESSEE RECEIVED HIS SHARE OF RS.1,30,00,000/- AND THE RE SULTANT SURPLUS ON SALE OF SUCH AGRICULTURAL LAND WAS CONSIDERED EXEMPT FROM T AX ON THE GROUND THAT THE AGRICULTURAL LAND WAS NOT A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14)(III) OF THE ACT. 4. IN THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSE E SUBMITTED THAT THE LAND WAS LOCATED BEYOND A DISTANCE OF 8 KILOMETERS FROM THE LOCAL LIMITS OF THE MUNICIPALITY AND THE POPULATION IN THE VILLAGE WHER E THE LAND WAS SITUATED WAS LESS THAN TEN THOUSAND AND THEREFORE, IT DID NOT FA LL WITHIN THE DEFINITION OF CAPITAL ASSET U/S 2(14)(III) OF THE ACT AND HENCE THE SURPLUS ON SALE OF SUCH LAND WAS CLAIMED NOT LIABLE FOR CAPITAL GAINS TAX. THE ASSESSING OFFICER DID NOT DISPUTE THE AFORESAID POSITION CANVASSED BY THE ASS ESSEE, SO HOWEVER, ACCORDING TO HIM IN ORDER TO EXCLUDE SUCH LAND FROM THE DEFINITION OF CAPITAL ASSET U/S 2(14)(III) OF THE ACT, IT WAS NECESSARY T HAT THE LAND MUST BE USED FOR AGRICULTURAL PURPOSES. IN ORDER TO SUPPORT THE CLA IM THAT THE LAND WAS BEING USED FOR AGRICULTURAL PURPOSES, ASSESSEE FURNISHED : (A) CERTIFICATE FROM TOWN PLANNING DEPARTMENT STATING THAT THE LAND LIES IN A N AGRICULTURAL ZONE; (B) LAND REVENUE RECORDS SHOWING THAT THE LAND WAS AGRICULTU RAL LAND; (C) COPIES OF 7/12 EXTRACT FOR THE PERIOD 2001-02 TO 2009-10 SHOW ING CULTIVATION OF LAND AND TAKING OF CROPS; AND, (D) LAND REVENUE PAYMENT RECE IPTS FROM THE DATE OF PURCHASE OF LAND IN 1993 TILL THE DATE OF SALE. IT WAS ALSO POINTED OUT BEFORE THE ASSESSING OFFICER THAT ASSESSEE HAD NEVER SOUGH T PERMISSION FROM THE DATE OF PURCHASE TILL THE SALE FOR CONVERSION OF TH E LAND TO ANY NON-AGRICULTURAL USE. THE ASSESSING OFFICER, HOWEVER, DISAGREED WIT H THE AFORESAID POINT OF THE ASSESSEE. THE ASSESSING OFFICER WAS OF THE VIE W THAT THE 7/12 EXTRACT INDICATED THAT ONLY GRASS WAS GROWN BETWEEN THE PER IOD 2001-02 TO 2009-10 ITA NO. 150/PN/2012 A.Y. 2008-09 AND THEREFORE ACCORDING TO HIM ON THE DATE OF SALE, THE LAND WAS NOT BEING USED FOR AGRICULTURAL PURPOSES. THE ASSESSING OFFI CER HELD THAT THE LAND IN QUESTION WAS A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14)(III) OF THE ACT AND THEREFORE THE SURPLUS ACCRUING ON ITS SALE WAS LIABLE TO BE TAXED AS CAPITAL GAIN. 5. ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) AND ASSAILED THE ACTION OF THE ASSESSING OFFICER BOTH IN LAW AND ON FACTS. FACTUALLY, ASSESSEE POINTED OUT THE FOLLOWING SALIENT FEATURES OF THE LAND : (I) THAT THE LAND IN QUESTION WAS ASSESSED TO LAND REVENUE AND AS PER THE LOCAL REVENUE RECORDS IT WAS CLASSIFIED AS AGRICULTURAL LAND; ( II) THAT THE SAID AGRICULTURAL LAND WAS SITUATED OUTSIDE MUNICIPAL LIMITS AND WAS NOT W ITHIN THE PURVIEW OF DEFINITION OF CAPITAL ASSETS LIABLE TO TAX AS CONTE MPLATED U/S 2(14)(III)(A) OF THE ACT; (III) THAT EVEN THE SURROUNDING LANDS ARE AGRI CULTURAL LANDS AND THUS THE PRESUMPTION WOULD BE IN FAVOUR OF HOLDING THAT THE LAND IN QUESTION WAS AN AGRICULTURAL LAND; (IV) THAT AS PER THE 7/12 EXTRAC T, ASSESSEE HAD TAKEN THE CROPS VIZ. JOWAR, ANIMAL/CATTLE FEED GRASS FOR TH E PERIOD 1993-94 TO 2003-04 AND ANIMAL/CATTLE FEED GRASS FOR THE PERIOD 2004- 05 TO 2006-07; (V) THAT THE ANIMAL/CATTLE FEED GRASS WAS SOLD OUT BUT THERE B EING NO SURPLUS AND NO INCOME WAS DECLARED; (VI) THAT THE LAND WAS PURCHAS ED IN 1993 WITH THE PURPOSE OF INVESTMENT WAS NEVER HELD AS A BUSINESS ASSET; (VII) THAT THE LAND WAS NEITHER CONVERTED INTO STOCK-IN-TRADE AND NOR C ONVERTED INTO NON- AGRICULTURAL LAND TILL IT WAS SOLD OUT; AND, (VIII) THAT ON THE DATE OF PURCHASE AS WELL AS ON THE DATE OF SALE, THE LAND WAS AN AGRICU LTURAL LAND. 6. APART THEREFROM, ASSESSEE RELIED ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE SMT. DEBBIE ALEMAO, J OAQUIM ALEMAO (2011) 331 ITR 59 (BOM) FOR THE PROPOSITION THAT SO LONG A S THE LAND WAS SHOWN IN THE STATE REVENUE RECORDS AS AGRICULTURAL LAND AND NO PERMISSION WAS EVER OBTAINED FOR NON-AGRICULTURAL USE BY THE ASSESSEE, IT HAS TO BE TREATED AS AN ITA NO. 150/PN/2012 A.Y. 2008-09 AGRICULTURAL LAND. ASSESSEE ALSO RELIED ON THE JUD GMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SARIFABIBI MOHD IBRAHI M AND OTHERS VS. CIT, 204 ITR 631 (SC) AND DEMONSTRATED THAT IF THE THIRTEEN TESTS LAID DOWN BY THE HONBLE SUPREME COURT WERE APPLIED, THE LAND OF THE ASSESSEE IS LIABLE TO BE TREATED AS AN AGRICULTURAL LAND. IN PARA 3.2 OF HI S ORDER, CIT(A) HAS REPRODUCED A TABULATION FURNISHED BY THE ASSESSEE, AS TO HOW A SSESSEES CASE FULFILLS THE THIRTEEN TESTS LAID DOWN BY THE HONBLE SUPREME COU RT FOR TREATING THE IMPUGNED LAND AS AN AGRICULTURAL LAND. 7. AFTER CONSIDERING THE LEGAL POSITION AS WELL AS THE FACTUAL MATRIX, CIT(A) HAS CONCURRED WITH THE ASSESSEE AND CONCLUDED THAT THE LAND IN QUESTION WAS RIGHTLY CONSIDERED BY THE ASSESSEE AS NOT FALLING W ITHIN THE MEANING OF A CAPITAL ASSET U/S 2(14)(III) OF THE ACT AND THERE FORE HE DIRECTED THE ASSESSING OFFICER TO TREAT THE SURPLUS ON SALE OF SUCH LAND A S EXEMPT FROM TAX. AGAINST THE SAID DECISION OF THE CIT(A), REVENUE IS IN APPE AL BEFORE US. 8. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE HAS PRIMARILY REITERATED THE OBJECTIONS RAISED BY THE ASSESSING O FFICER IN THE ASSESSMENT ORDER WHICH WE HAVE ALREADY NOTED IN PARA 4 ABOVE, AND THE SAME ARE NOT BEING REPEATED FOR THE SAKE OF BREVITY. 9. ON THE OTHER HAND, LEARNED REPRESENTATIVE FOR TH E RESPONDENT- ASSESSEE HAS RELIED UPON THE ORDER OF THE CIT(A) AN D HAS POINTED OUT THAT THE FACTS AND CIRCUMSTANCES OF THE CASE HAVE BEEN APPRO PRIATELY APPRECIATED BY THE CIT(A) AND NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE CIT(A). FURTHER, THE LEARNED REPRESENTATIVE HAS REFERRED TO THE PAPE R BOOK FILED WHEREIN IS PLACED THE RELEVANT MATERIAL WHICH WAS REFERRED TO AND CONSIDERED BY THE CIT(A) IN COMING TO CONCLUDE THAT LAND IN QUESTION WAS NOT A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14)(III) OF THE ACT . ITA NO. 150/PN/2012 A.Y. 2008-09 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE CRUX OF THE CONTROVERSY BEFORE US RELATES TO CONSIDERING WHETHE R THE LAND IN QUESTION FALLS WITHIN THE DEFINITION OF A CAPITAL ASSET U/S 2(14 ) OF THE ACT. THE CLAIM OF THE ASSESSEE IS THAT THE LAND IN QUESTION IS AN AGRICUL TURAL LAND LOCATED AT DISTANCE WHICH IS BEYOND 8 KILOMETERS FROM THE LOCAL LIMITS OF ANY MUNICIPALITY AND POPULATION OF THE VILLAGE IN WHICH SUCH LAND IS SIT UATED IS LESS THAN TEN THOUSAND AND THEREFORE, IT QUALIFIES TO BE AN AGRIC ULTURAL LAND WHICH IS EXCLUDIBLE FROM THE EXPRESSION CAPITAL ASSET AS P ER CLAUSE (III) TO SUB-SECTION (14) OF SECTION 2 OF THE ACT. ON THE CONTRARY, THE STAND OF THE REVENUE IS THAT THERE WAS NO EVIDENCE TO SHOW THAT AGRICULTURAL AC TIVITIES WERE CARRIED OUT ON THE SAID LAND AND THEREFORE IT WAS NOT EXCLUDIBLE F ROM THE EXPRESSION CAPITAL ASSET U/S 2(14)(III) OF THE ACT. 11. FACTUALLY SPEAKING, EVEN THE REVENUE DOES NOT D ISPUTE THE POSITION THAT THE LAND IN QUESTION IS CONSIDERED IN THE STAT E LAND REVENUE RECORDS AS AN AGRICULTURAL LAND. IN-FACT, APART FROM THE RECEIPT S OF PAYMENT OF LAND REVENUE PRODUCED BY THE ASSESSEE BEFORE THE ASSESSING OFFIC ER, A CERTIFICATE FROM TOWN PLANNING DEPARTMENT WAS ALSO FURNISHED STATING THAT THE LAND IS SITUATED IN AN AGRICULTURAL ZONE. COPIES OF SUCH MATERIAL A RE PLACED IN THE PAPER BOOK AT PAGES 16 17 AND 42 43 RESPECTIVELY. IT IS A LSO NOT IN DISPUTE THAT THE LAND IN QUESTION IS BEYOND A DISTANCE OF 8 KILOMETE RS FROM ANY MUNICIPALITY AND THE POPULATION OF THE VILLAGE IN WHICH IT IS LOCATE D IS LESS THAN TEN THOUSAND. THE RELEVANT CERTIFICATES FROM THE TEHSILDAR AND FR OM GRAMSEVAK OF THE GRAMPANCHAYAT, URAWADE REGARDING THE DISTANCE FROM THE NEAREST MUNICIPALITY AND THE POPULATION OF THE VILLAGE RESP ECTIVELY SUPPORT THE PLEA OF THE ASSESSEE. THESE ASPECTS ARE NOT IN DISPUTE. I N THIS BACKGROUND, IT IS PERTINENT TO REFER TO THE RELIANCE PLACED BY THE CI T(A) ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT. DEBBI E ALEMAO, JOAQUIM ALEMAO (SUPRA). IN THE CASE BEFORE THE HONBLE HIG H COURT, IT WAS FOUND THAT THE LAND WAS SHOWN IN THE LAND REVENUE RECORDS AS U SED FOR AGRICULTURAL ITA NO. 150/PN/2012 A.Y. 2008-09 PURPOSES AND NO PERMISSION WAS OBTAINED FOR NON-AGR ICULTURAL USE BY THE ASSESSEE. THE HONBLE HIGH COURT CONSIDERED THE PL EA OF THE REVENUE THAT THE LAND WAS NOT ACTUALLY USED FOR AGRICULTURAL PUR POSE AS NO AGRICULTURAL INCOME WAS DECLARED AND REJECTED IT IN VIEW OF THE LAND REVENUE RECORDS AND THE LAND WAS HELD TO BE AGRICULTURAL LAND. SIMILAR LY, THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF LAVLEEN SINGHAI VS. DCIT (2 007) 111 TTJ 326 (DEL) OBSERVED THAT WHERE A LAND IS RECOGNIZED AS AGRICUL TURAL LAND IN LAND REVENUE RECORDS AT THE TIME OF PURCHASE BY THE ASSESSEE AND NOTHING HAS BEEN DONE BY THE ASSESSEE FOR PUTTING IT TO NON-AGRICULTURAL USE, THE SAME COULD NOT BE TREATED AS NON-AGRICULTURAL LAND MERELY ON ACCOUNT OF ABSENCE OF AGRICULTURAL OPERATIONS FOR A PART OF THE PERIOD OF HOLDING. IN OUR CONSIDERED OPINION, IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT AFTER ACQUI RING THE LAND ASSESSEE HAS NOT TAKEN ANY STEPS TO PUT IT TO ANY NON-AGRICULTURAL U SE AND IT CONTINUES TO BE AN AGRICULTURAL LAND IN THE LAND REVENUE RECORDS; AND, FACTUALLY IT IS NOT DISPUTED THAT THE LAND IS SITUATED BEYOND A DISTANCE OF 8 KI LOMETERS FROM THE MUNICIPAL LIMITS AND IS LOCATED IN A VILLAGE HAVING POPULATIO N OF LESS THAN TEN THOUSAND. CONSIDERING THE ENTIRETY OF FACTS, THE SAID LAND IS EXCLUDIBLE FROM THE MEANING OF A CAPITAL ASSET IN TERMS OF SECTION 2(14)(III) OF THE ACT. 12. NOW, IN SO FAR AS THE OBJECTION OF THE REVENUE THAT THERE IS LACK OF EVIDENCE TO PROVE THE USE OF LAND FOR AGRICULTURAL PURPOSE IS CONCERNED, THE SAME HAS BEEN APPROPRIATELY ADDRESSED BY THE CIT(A) . IN THIS CONNECTION, THE ASSESSEE CANVASSED, ON THE BASIS OF 7/12 EXTRACT FO R THE PERIOD OF 2001-02 TO 2009-10, THAT THE LAND WAS BEING USED FOR AGRICULTU RAL PURPOSES. THE ASSESSING OFFICER DISPUTED THE FACT FOR THE REASON THAT DURING THE LAST TWO YEARS NO AGRICULTURAL CROP WAS GROWN AND ONLY CATTL E FEED I.E. GRASS WAS STATED TO HAVE BEEN GROWN. THE CIT(A) HAS APPRECIATED THE RIVAL STANDS ON THE BASIS OF MATERIAL ON RECORD AND CONCLUDED AS UNDER :- THE APPELLANT HAS, IN FACT, HELD THE SAID LAND FOR NEARLY 14 YEARS BEFORE THE SAME HAS BEEN SOLD/TRANSFERRED. THE A.O . HAS ALSO NOT DENIED THAT NO AGRICULTURAL OPERATIONS WERE EVER CARRIED OUT ON THE SAID LAND, IT WAS ONLY BEEN OBJECTED ON THE GROUND THAT DURING THE LAST 2 YEARS NO AGRICULTURAL CROPS ITA NO. 150/PN/2012 A.Y. 2008-09 WERE GROWN AND WHEN THE CATTLE FEED I.E. GRASS WAS STARTED TO HAVE BEEN GROWN. THEREFORE, THE LAND WHICH IS AGRICULTURAL FO R THE PAST 11 YEARS COULD NOT BECOME NON-AGRICULTURAL ONLY BECAUSE NO AGRICULTURA L OPERATIONS WERE CARRIED OUT DURING THE LAST TWO YEARS. 13. IN OUR CONSIDERED OPINION, NO ERROR HAS BEEN MA DE BY THE CIT(A) IN HOLDING THAT ON ACCOUNT OF THE OBJECTION OF THE ASS ESSING OFFICER THE LAND IN QUESTION COULD NOT BECOME NON-AGRICULTURAL LAND. A NOTHER ASPECT WHICH IS OF RELEVANCE IN THE PRESENT SITUATION IS THAT ASSESSEE POINTED OUT THAT THE LAND IN QUESTION WAS INDEED SOLD TO AN AGRICULTURIST AS IS BORNE OUT FROM THE SALE-DEED AND THEREFORE NO PERMISSION WAS REQUIRED TO BE OBTA INED U/S 3 OF BOMBAY TENANCY AND AGRICULTURAL LAND ACT, 1948. THIS ASPE CT OF THE MATTER HAS REMAINED UNCONTROVERTED FROM THE SIDE OF THE ASSESS ING OFFICER EVEN BEFORE THE CIT(A) AS WELL AS BEFORE US. QUITE CLEARLY, TH E AFORESAID WOULD SHOW THAT NOT ONLY THE SELLER-ASSESSEE BUT THE PURCHASER ALSO PERCEIVED THE LAND AS AN AGRICULTURAL LAND ON THE DATE OF SALE. UNDOUBTEDLY , IT IS ALSO NOT IN DISPUTE THAT IN THE ENTIRE PERIOD OF HOLDING OF LAND BY THE ASSE SSEE, RIGHT FROM THE DATE OF PURCHASE AND TILL THE DATE OF SALE, THE LAND HAS NO T BEEN PUT TO ANY NON- AGRICULTURAL USE. 14. CONSIDERING THE AFORESAID DISCUSSION, WE FIND T HAT THE CIT(A) MADE NO MISTAKE IN DISAGREEING WITH THE ASSESSING OFFICER A ND HE CORRECTLY HELD THAT THE LAND IN QUESTION WAS LIABLE TO BE EXCLUDED FROM THE DEFINITION OF CAPITAL ASSETS ON ACCOUNT OF SECTION 2(14)(III) OF THE ACT . ACCORDINGLY, THE SURPLUS ON THE SALE OF SUCH ASSET HAS BEEN RIGHTLY HELD TO BE OUTSIDE THE PURVIEW OF CAPITAL GAINS TAX. 15. ACCORDINGLY, THE ORDER OF THE CIT(A) IS HEREBY AFFIRMED AND THE REVENUE FAILS ON THIS ASPECT. 16. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ITA NO. 150/PN/2012 A.Y. 2008-09 ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER, 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 30 TH DECEMBER, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-II, PUNE; 4) THE CIT-II, PUNE; 5) THE DR, B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE