Venkateswara hospital, CHENNAI V. DCIT, CHENNAI

ITA 1769/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7499 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 13-06-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: S SRIDHAR
• Keywords: Capital asset; Business income
• Section: 2(14)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI . . . , !'. . # $ % , ' () BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.1769/MDS/2016 * +* /ASSESSMENT YEAR: 2012-13 M/S.VENKATESWARA HOSPITAL, NO.36A, CHAMIERS ROAD, NANDANAM, CHENNAI-600 035. VS. THE DY. COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE-2, CHENNAI. [PAN: AADFV 4354 M ] ( ,- /APPELLANT) ( ./,- /RESPONDENT) ,- 0 1 / APPELLANT BY : MR.S.SRIDHAR, ADVOCATE ./,- 0 1 /RESPONDENT BY : MR.SHIVA SRINIVAS, JCIT # 0 2' /DATE OF HEARING : 02.02.2017 34+ 0 2' /DATE OF PRONOUNCEMENT : 17.03.2017 / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER DATED 18.03.2016 OF COMMISSIONER OF INCOME TAX (APPEALS)- 2, CHENNAI, IN ITA NO.224/CIT(A)-2/2014-15 FOR THE AY 2012-13 AND RAIS ED THE FOLLOWING GROUNDS OF THE APPEAL: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-2, CHENNAI DATED 18.03.2016 IN I.T.A.NO.224/CIT(A)-2/2014-15 F OR THE ABOVE MENTIONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS , AND IN THE CIRCUMSTANCES OF THE CASE. ITA NO.1769/MDS/2016 :- 2 -: 2. THE CIT (APPEALS) ERRED IN SUSTAINING THE ACTION OF THE ASSESSING OFFICER IN BRINGING TO TAX THE SURPLUS/PROFIT ON SALE OF AG RICULTURAL LANDS UNDER THE HEAD 'CAPITAL GAINS' WITHOUT ASSIGNING PROPER REASO NS AND JUSTIFICATION. 3. THE CIT (APPEALS) FAILED TO APPRECIATE THAT HAVING NOT DISPUTED THE FACT OF THE APPLICABILITY OF THE EXCEPTIONS CARVED OUT I N THE DEFINITION OF 'CAPITAL ASSET' IN SECTION 2(14) OF THE ACT TO THE FACTUAL M ATRIX OF THE CASE, THE SUSTENANCE OF THE ASSESSMENT OF THE CAPITAL GAINS ON SUCH SALE WA S WHOLLY UNJUSTIFIED. 4. THE CIT (APPEALS) FAILED TO APPRECIATE THAT HAVING FURTHER NOT DISPUTED THE FACT OF THE EVIDENCES PLACED ON RECORD BOTH IN THE ORIGINAL ASSESSMENT PROCEEDINGS AS WELL AS IN THE REMAND PROCEEDINGS FO R ESTABLISHING THE NATURE OF THE CAPITAL ASSET TRANSFERRED AND HAVING NOT REJECTED SUCH EVIDENCES, THE SUSTENANCE OF TAXING THE EXEMPTED IN COME/SURPLUS UNDER THE HEAD 'CAPITAL GAINS' WAS WRONG, ERRONEOUS, UNJU STIFIED, INCORRECT AND NOT SUSTAINABLE IN LAW. 5. THE CIT (APPEALS) FAILED TO APPRECIATE THAT HAVING NOT DISPUTED THE CHARACTER OF THE LANDS TRANSFERRED AS AGRICULTURAL LANDS, THE SUSTENANCE OF THE TAXATION OF THE PROFIT/SURPLUS FROM SALE OF SUC H LANDS BASED ON THE SUBSEQUENT EVENT WAS WHOLLY UNJUSTIFIED. 2.0 ALL THE GROUNDS OF THE APPEAL ARE RELATED TO THE C APITAL GAINS ON SALE OF AGRICULTURAL LANDS. DURING THE PREVIOUS YEAR RE LEVANT TO THE AY 2011- 12, THE ASSESSEE HAS SOLD 2 ACRES AND 78 CENTS OF A GRICULTURAL LAND AT THIRUTHERI VILLAGE, KATTANGALATHUR PANCHAYAT FOR RS .8,00,01,000/- TO ONE MR. K. DHANASEKAR, S/O SRI KANNAN REDDIAR, RESIDING AT DOOR NO.66, RAJENDRA PRASAD ROAD, CHROMPET, CHENNAI-600 044, BY DOCUMENT NO.11607 OF 2011 REGISTERED WITH SRO, JOINT 2, CHIN GLEPUT. THE ASSESSEE HAS CLAIMED THE CAPITAL GAINS ARISING ON THE SALE O F THE ABOVE LANDS AS EXEMPT ON THE GROUND THAT THE SAME IS ARISING ON SA LE OF AGRICULTURAL LANDS. IN SUPPORT OF CLAIM' FOR EXEMPTION, THE ASSE SSEE HAS FURNISHED VILLAGE OFFICER'S CERTIFICATE CERTIFYING THAT THE S AID LAND IS SITUATED BEYOND 8 KMS FROM MUNICIPAL LIMITS AND THE POPULATION IS L ESS THAN 10,000. 3.0 THE ASSESSING OFFICER (IN SHORT AO) PLACING RELI ANCE ON THE HONBLE SUPREME COURT JUDGMENT IN THE CASE OF SARIFABIBI MO HMED IBRAHIM & ORS. ITA NO.1769/MDS/2016 :- 3 -: V.CIT (1993) 204 ITR 631 (SC) DISALLOWED THE CLAIM OF THE ASSESSEE AND ASSESSED THE SALE PROCEEDS AS LONG TERM CAPITAL GAI NS. THE REASONING GIVEN BY THE AO FOR TAXING THE LTCG WAS THAT THE AS SESSEE PURCHASED THE LANDS DURING THE YEAR 2005 AS AGRICULTURAL LAND AND THE ASSESSEE HAS NOT DECLARED ANY AGRICULTURAL INCOME. THE ASSESSEE DEC LARED ONLY BUSINESS INCOME IN THE RETURNS. THE AO WAS OF THE VIEW THAT SINCE THERE WAS NO AGRICULTURAL INCOME DECLARED BY THE ASSESSEE AND NO EVIDENCE HAS BEEN PRODUCED IN RESPECT OF EXPENDITURE INCURRED FOR INP UT COSTS, LABOUR COSTS, ETC. LAND IN QUESTION WAS NOT USED FOR AGRICULTURA L PURPOSES AND HENCE NOT ENTITLED FOR EXEMPTION FROM CAPITAL GAINS. THE AO TREATED THE ASSET AS CAPITAL ASSET AND TAXED UNDER CAPITAL GAINS. THE A O RELIED ON THE DECISION OF CIT VS. SARIFABIBI MOHMED IBRAHIM REPORTED IN (1 982) 136 ITR 621 (GUJ) AND THE HONBLE SUPREME COURT DECISION IN THE CASE OF STATE OF UTTAR PRADESH VS. NAND KUMAR AND AGGARWAL & OTHERS DATED 19.11.1997 AND OTHER HOST OF CASE LAWS. 4.0 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WEN T ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) (HEREINAFTER REFERRED TO AS LD.CIT(A)) AND RELIED ON THE HOST OF CASE LAWS. THE LD.CIT(A) CONFIRMED THE ADDITION MADE BY THE AO HOL DING THAT THE ASSESSEE NEITHER REFLECTED AGRICULTURAL INCOME NOR BROUGHT ANY POSITIVE EVIDENCE IN SUPPORT OF ITS HAVING CARRIED AGRICULTU RAL OPERATIONS IN THE LAND AND ALSO RELIED ON THE DECISION OF SARIFABIBI MOHME D IBRAHIM & ORS. V.CIT (1993) 204 ITR 631 (SC). ITA NO.1769/MDS/2016 :- 4 -: 5.0 AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE ASSES SEE FILED APPEAL BEFORE US. DURING THE APPEAL HEARING, THE LEARNED AUTHORIZED REPRESENTATIVE (HEREINAFTER REFERRED TO AS LD.AR) SUBMITTED THAT THE ASSESSEE HAS PURCHASED AGRICULTURAL LAND IN 2005 AND CULTIVATING THE AGRICULTURAL LANDS AND HARVESTING THE PRODUCE. THOUGH, ASSESSEE HAS N OT DECLARED THE AGRICULTURAL INCOME, THE AGRICULTURAL PRODUCE WAS U SED FOR IN-HOUSE CONSUMPTION, CONSEQUENTLY HE DID NOT ADMIT AGRICULT URAL INCOME. THE LAND AT TIRUTTANI VILLAGE SITUATED AT A DISTANCE OF MORE THAN 8 KMS FROM THE NEARER MUNICIPALITY AND THE POPULATION WAS LESS THA N TEN THOUSAND. AGRICULTURAL OPERATIONS WERE CARRIED OUT BY THE ASS ESSEE BY CULTIVATING VEGETABLES, MANGOES, COCONUTS, ETC., IN THE SAID LA ND. ALL THE DETAILS WERE SUBMITTED BEFORE THE AO AS WELL AS LD.CIT(A), BUT B OTH THE LD.CIT(A) AND THE AO DISALLOWED THE CLAIM MERELY BECAUSE OF SALE CONSIDERATION WAS RS.8.00 CRS. AND ITS PROXIMITY TO MAHENDRA WORLD C ITY WITH A PRESUMPTION THAT THE LAND WAS NOT USED FOR THE AGRICULTURAL PUR POSES. ANOTHER REASON FOR DISALLOWING THE EXEMPTION WAS BUYER OF THE PROP ERTY HAS GOT APPROVAL FOR LAND FOR COMMERCIAL PURPOSES. SUCH CONSIDERATIO N OR SUCH PRESUMPTIONS CANNOT PUT THE ASSESSEE IN ADVERSE POS ITION. THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE JURISDICTIONA L HIGH COURT IN THE CASE OF M.S.SRINIVASA NAIKER & OTHERS VS. ITO (292 ITR 481) (MAD) WHEREIN IT WAS HELD THAT THE USE OF THE BUYER OF THE PROPERTY AFTE R THE SALE OF THE LAND IS IRRELEVANT TO DECIDE AS TO WHETHER THE LAND WAS AGR ICULTURAL OR NOT AT THE ITA NO.1769/MDS/2016 :- 5 -: TIME OF SALE OF THE LAND. THE ASSESSEE ALSO RELIED ON THE DECISION IN THE CASE OF MRS. SAKUNTHALA VEACHALAM & MRS. VANITHA MA NICKAVASAGAM VS. ACIT (2014) 369 ITR 558 (MAD) OF THE HONBLE JURISD ICTIONAL HIGH COURT. THE LD.AR, FURTHER, SUBMITTED THAT THE ASSESSEE HAS SUBMITTED ALL THE DOCUMENTS FROM THE REVENUE AUTHORITIES AS WELL AS T HE VILLAGE DEVELOPMENT OFFICER PROVING THAT THE LAND IN QUESTI ON WAS AGRICULTURAL LAND AND THE ASSESSEE WAS CARRYING OUT AGRICULTURAL OPERATIONS. THE AO HAS NOT DISPUTED THE CLAIM OF THE ASSESSEE AND SIMP LY REJECTED THE EXEMPTION CLAIMED BY THE ASSESSEE. ON THE OTHER HA ND, THE LEARNED DEPARTMENTAL REPRESENTATIVE (HEREINAFTER REFERRED T O AS LD.DR) ARGUED THAT THE ASSESSEE HAS NOT PRODUCED ANY POSITIVE EVI DENCE TO SHOW THAT IT WAS CARRYING OUT AGRICULTURAL OPERATIONS. THE ASSE SSEE IS ENGAGED IN THE BUSINESS OF HOSPITAL, NO AGRICULTURAL OPERATIONS WE RE CARRIED OUT BY THE ASSESSEE. THE LAND WAS LOCATED IN THE AREA WHERE T HE HEAVY REAL ESTATE BUSINESS IS IN FULL SWING AND ALSO VERY CLOSE PROXI MITY TO MAHENDRA WORLD CITY, WHICH IS AN INTEGRATED BUSINESS CITY. THE AS SESSEE PURCHASED THE LAND ONLY WITH AN INTENTION TO SELL THE LAND AS BUS INESS ASSET AND SOLD THE LAND FOR AN ASTRONOMIC FIGURE OF RS.8.00 CRORES WIT H APPRECIATION OF FIVE TIMES WITHIN THE SPAN OF SIX YEARS. THE ASSESSEES CASE IS SQUARELY FALLS IN THE HONBLE SUPREME COURT DECISION RELIED UPON BY T HE LD.CIT(A) AND ARGUED THAT THE LD.CIT(A) HAS RIGHTLY DISMISSED THE APPEAL OF THE ASSESSEE. ITA NO.1769/MDS/2016 :- 6 -: 6.0 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL PLACED BEFORE US. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS PUR CHASED AGRICULTURAL LAND OF 2.78 ACRES AT TIRUTTANI VILLAGE, KATTAMGALA THU IN 2005. THE LANDS WERE PURCHASED FOR CONSIDERATION OF RS.1,68,55,465/ - AND SOLD DURING THE PREVIOUS YEAR FOR A CONSIDERATION OF RS.8,00,01,000 /-. THE LD.AR OF THE ASSESSEE SUBMITTED PURCHASE DEEDS AND AS PER THE PU RCHASE DEEDS THE LANDS PURCHASED WERE AGRICULTURAL LANDS. THE ASSES SEE ALSO SUBMITTED 10(1) AND ADANGAL LAND REVENUE RECORDS AND AS PER T HE LAND REVENUE RECORDS, THE MANGO TREES AND COCONUTS TREES WERE GR OWN IN THE SAID LAND. FURTHER, THE ASSESSEE ALSO SUBMITTED A CERTIFICATE FROM VDO CERTIFYING THAT THE LANDS WERE AGRICULTURAL LANDS AND DISTANCE BETW EEN THE ABOVE MENTIONED LAND AND KATTAMGATHUL UNIT OFFICE IS AROU ND 9 KMS. ANOTHER CERTIFICATE WAS SUBMITTED BY THE ASSESSEE STATING T HAT THE POPULATION OF SATYA NAGAR TIRUTTANI VILLAGE IS 630. A COPY OF SA LE DEED WAS ALSO SUBMITTED BY THE ASSESSEE. 7.0 AS PER THE DOCUMENTARY EVIDENCES FURNISHED BY THE ASSESSE, THE LAND IN QUESTION WAS AGRICULTURAL LAND AND THE ASSE SSE IS CARRYING ON AGRICULTURAL ACTIVITY IN THE SAID LAND. THE LAND R EVENUE DOCUMENTS SHOWS THAT THE ASSESSE WAS HARVESTING MANGOES AND COCONUT S IN THE SAID LAND. THE AO REJECTED THE EXEMPTION MADE BY THE ASSESSE O N THE GROUND THAT THE ASSESSE HAS NOT BROUGHT ANY POSITIVE EVIDENCE, NO AGRICULTURAL INCOME WAS RETURNED DURING THE AY 2005-06 ONWARDS, THE LAN D WAS SITUATED NEAR ITA NO.1769/MDS/2016 :- 7 -: THE BUSINESS CITY/MAHENDRA WORLD CITY AND BUYER HAS TAKEN APPROVAL FOR CONVERSION OF LAND INTO COMMERCIAL ASSET FOR THE PU RPOSE OF REAL ESTATE. IN THE ASSESSEES CASE, THE ASSESSE HAS SHOWN ALL NECE SSARY EVIDENCES TO PROVE THAT THE LAND WAS AGRICULTURAL LAND AND THE A GRICULTURAL ACTIVITY WAS CARRIED ON BY THE ASSESSE IN THE SAID LAND. MERELY , BECAUSE THE LAND WAS SITUATED NEAR MAHENDRA WORLD CITY OR NO AGRICULTURA L INCOME WAS RETURNED BY THE ASSESSEE DOES NOT CHANGE THE CHARACTER OF TH E LAND INTO CAPITAL ASSET. AS PER SEC.2(14) THE ASSESSEE FALLS WITHIN THE EXCEPTIONS TO HOLD THE LAND AS AGRICULTURAL LAND. WHEN THE ASSESSE SU BMITTED THE EVIDENCES TO PROVE THAT THE LAND IN QUESTION WAS AGRICULTURAL LAND AND THE CROPS WERE GROWN IN THE FORM OF COCONUTS AND MANGOES BURDEN SH IFTS ON AO TO PROVE WITH THE DOCUMENTARY EVIDENCE THAT THE LAND WAS NOT USED FOR THE AGRICULTURAL PURPOSE OR NO AGRICULTURAL OPERATIONS WERE CARRIED OUT IN THE SUBJECT LAND. AGRICULTURAL INCOME IS EXEMPTED INCO ME AND MERELY BECAUSE THE ASSESSEE HAS NOT RETURNED AGRICULTURAL INCOME A ND NO EXPENDITURE WAS CLAIMED FOR AGRICULTURAL EXPENSES CANNOT BE CONCLUS IVE PROOF TO HOLD THAT SUBJECT LAND WAS NOT AGRICULTURAL LAND. THE ASSESS EES EXPLANATION THAT THE AGRICULTURAL INCOME IS EXEMPTED INCOME AND DUE TO NON DECLARATION AGRICULTURAL INCOME NO EXPENDITURE WAS CLAIMED APPE ARS TO BE REASONABLE EXPLANATION. THEREFORE, THE RATIO OF CASE LAWS REL IED UPON BY THE AO AS WELL AS LD.CIT(A) ARE NOT APPLICABLE IN THE ASSESSE ES CASE. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MRS. SAKUN THALA VEACHALAM & MRS. VANITHA MANICKAVASAGAM VS. ACIT (2014) 369 ITR 558 (MAD) HELD THAT MERELY BECAUSE OF THE ADJACENT LAND DIVIDED INTO PL OTS FOR SALE NOT A ITA NO.1769/MDS/2016 :- 8 -: REASON THAT THE LAND SOLD BY THE ASSESSE WERE FOR T HE PURPOSE OF DEVELOPMENT OF LAND. RECORDS ARE SHOWING THAT THE LANDS ARE AGRICULTURAL LAND, CLASSIFIED AS DRY LAND FOR WHICH KISTHU HAS B EEN PAID AND FALLS FAR EXCLUSION FROM THE DEFINITION OF CAPITAL ASSET U/S. 2(14) OF INCOME TAX ACT. THE CASE LAWS RELIED UPON BY THE ASSESSEE ARE SQUAR ELY APPLICABLE IN THE ASSESSEES CASE. THEREFORE, WE HOLD THAT THE LAND IN QUESTION SOLD BY THE ASSESSE WAS AGRICULTURAL LAND AND CANNOT BE HELD AS CAPITAL ASSET AND NO CAPITAL GAINS ARE CHARGEABLE AND HENCE WE SET-ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND THE ASSESSEES APPEAL IS ALLO WED. 8.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MARCH, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( !' . . # $ % ) (D.S.SUNDER SINGH) ' /ACCOUNTANT MEMBER /CHENNAI, 5 /DATED: 17 TH MARCH, 2017. TLN 0 .2$6 76+2 /COPY TO: 1. ,- /APPELLANT 4. # 82 /CIT 2. ./,- /RESPONDENT 5. 69 .2 /DR 3. # 82 ( ) /CIT(A) 6. '* < /GF