Sri.T.C. Vavachan, Cochin V. The ITO, Aluva

ITA 2/COCH/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8641 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-05-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 02-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: T M SREEDHARAN
• Keywords: Capital asset
• Section: 2(14)

Judgement Text

ITA NO . 2/C/2015 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI B P JAIN , A M & G EORGE GEORGE.K , J M ITA NO . 02/COCH/2015 (ASST YEAR 2011 - 12 ) SHRI T C VAVACHAN THURUTHIPARAMBIL HOUSE BRAHMAPURAM AMBALAMEDU (VIA) COCHIN 683 303 VS THE INCOME TAX OFFICER WARD 4 ALUVA ( APPELLANT) (RESPONDENT) PAN NO. AGYPV9317K ASSESSEE BY SHRI T M SREEDHARAN REVENUE BY SHRI K P GOPAKUMAR, SR DR DATE OF HEARING 4 TH MAY 2016 DATE OF PRONOUNCEMENT 5 TH MAY 2016 OR D ER PER GEORGE GEORGE. K. J M: THIS APPEAL, AT THE INSTANCE OF THE ASSESSEE, IS DIRECTED AGAINST THE CIT(A) ORDER DATED 1.10.2014. THE RELEVANT ASSESSMENT YEAR IS 2011 - 12. 2 THE SOLITARY ISSUE THAT WAS ARGUED , IS WHETHER THE CIT(A) , IS JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 58,76,92 0/ - MADE BY THE AO UNDER THE HEAD CAPITAL GAINS. 3 THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS: ITA NO . 2/C/2015 2 D URING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2011 - 12 , THE ASSESSEE RECEIVED AN AMOUNT OF RS.90 , 61 , 029/ - ON ACQUISITION OF 12 . 50 ARES (30 CENTS O F LAND) IN SY . NO . 30/13 , LAC NO . 26/09 AFTER DEDUCTING THE TDS OF RS.1 0 , 37 , 128/ - . THE ABOVE LAND ALONG WITH ADJOINING LAND WAS COMPULSORILY ACQUIRED FOR THE PUBLIC PURPOSE BY THE COCHIN CORPORATION. THE LAND WAS ACQUIRED UNDER THE LAND ACQUISITION ACT 198 4 (CENTRAL ACT 1/1894) FOR THE IMPLEMENTATION OF BRAHMAPURAM WASTE PLANT PROJECT . THE ACQUISITION WAS FROM FINANCIAL YEARS 2008 - 09 TO 2010 - 11 ALONG W I TH PROPERTIES OF ABOUT 90 OTHER FAMILIES . 3.1 . IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS CONTENDED THAT THE LAND IN QUESTION WAS AGRICULTURAL LAND AND THE AMOUNT RECEIVED AS COMPENSATION IS NOT LIABLE FOR CAPITAL GAIN TAX . THE CLAIM WAS PARTIALLY ACCEPTED BY THE ASSESSING OFFICER . THE ASSESSING OFFICER WAS OF THE VIEW THAT THE AGRICULTURAL LAND WAS EXEM PT FROM THE DEFINITION OF CAPITAL ASSET U/S 2(14)(III), BUT NOT BUILDING AND LAND APPURTENANT THERETO . ACCORDING TO THE AO, THE 30 CENTS OF LAND ACQUIRED CONSISTED OF A RESIDENTIAL BUILDING WITH THE PL I NTH AREA OF 1200 SQ . FEET , A CATTLE SHED , A WELL , A PUMP HOUSE , SEPTIC TANK, COMPOUND WALL ETC ., AND I T WOULD BE FAIR AND REASONABLE TO HOLD THAT OUT OF 30 CENTS OF LAND, 20 CENTS OF LAND WAS REQUIRED TO ACCOMMODATE THE ABOVE STRUCTURES. THE ASSESSING OFF I CER HELD THAT 20 CENTS FELL WITHIN THE DEFINITION OF ' CAPITAL ASSET ' U/S 2(14) AND THE TRANSFER OF THE SAME IS LIABLE FOR CAPITAL GAINS . HE ACCORD I NGLY TREATED 1/ 3 RD OF THE VALUE OF THE LAND AS AGRICULTURAL AND 2/3RD OF THE VALUE ALONG WITH THE SURPLUS ITA NO . 2/C/2015 3 ATTRIBUTABLE TO THE BUILDING AS NON - AGRICULTURAL . IN OTH ER WORDS , A SUM OF RS.58,76 , 920/ - AS WORKED OUT IN PARAGRAPH - 5 OF THE ASSESSMENT ORDER WAS BROUGHT TO TAX AS NOT ELIGIBLE FOR EXEMPTION UNDER THE ACT . 4 . IN THE FIRST APPEAL , THE CIT(A) CONCURRED WITH THE FINDINGS OF THE ASSESSING OFFICER. THE RELEVANT F INDINGS OF THE CIT(A) READ AS FOLLOWS: 5 . . I H A VE G ONE THROU G H T HE A SSESSMENT ORDER A ND TH E SUBMISSIO N S OF T H E AS S ES S E E. .IT IS SEEN TH AT THI S LAND OF THE ASSES SEE I S BEI N G ACQUIRED BY THE C OR PORAT I ON OF COCHIN F O R T H E I M PL E MENTAT I ON O F BR AH M APURA M WAS T E PLAN T PR O J E C T . THAT IN THE PR EV IO US Y E AR I . E. 2009 - 10 A ND 2010 - 1 1 I T WA S ONL Y THE AG RI C UL T UR AL LAND THA T W A S AC QUI RE D AND HE N CE IN T HO SE Y E ARS THE SAME W A S T RE A T E D AS, AGRICULTURAL LAND ONL Y . HOWEVER , IN T HIS YEAR THE LAND ACQUIRED C O NSI ST ED OF A BUILDI N G , A CA T TL E SHED, A WELL, A P UMP H OUSE SEP T IC T ANK , C O MP OU N D WALL ETC., AND H E NCE AO TOOK A VIEW TH A T T HE WHOL E CANNOT BE TREATED AS AGRICULTURAL LAND AND TR EAT ED ONLY 1/3 RD OF S UC H LAN D A S AG R ICUL T URAL . I T IS SEEN FRO M THE CERTIFICATE FROM VILL A G E OFF I CE R THAT T H E LAND HA S BEEN CER T IFIED AS AG RI CU L TU R A L LAND. BU T AT T HE S A M E TIME T H E CER T IFICATE OF LAN D ACQUIS I T I ON O FFI CER SHOWS THAT THE LAND I S ' DRY L AN D' AND HENCE NO AGRICULTU R AL ACTIVITIES COULD HAVE BEEN CAR R IED O UT ON THIS L AND . THE S PE CI AL TAHS I LDAR (L A } , CO R PORATION OF CO CHLN VIDE AWA R D NO . LAC 26 / 200 9 DA T ED 02.08.20 1 0 C ER T I F IED THAT THE LAND HA S BEEN CLASSIFIED AS DR Y L AND HA VI NG A BUILDI N G, A CATTLE SHED, A WALL, A PUM P HOUSE SEPTIC TANK, COMPO U ND WALL ETC. L OCA TE D W I T I N THIS LAND. THE L A ND ACQU I SIT I ON O FFICER HAS ALSO GIVEN THE LIST OF TREES AVAI L ABLE ON THIS L AND AND IT IS SEE N THAT THESE A R E OLD TREES OF COCONU T , AR E CA NUT TREES TEAK WOOD, MAHAGAN I TREE, MA NGO TREES FOR WHICH N OT M U CH M A IN T EN A N C E I S REQU I RED. I N AN Y CASE THE ASSESSEE HAS ONLY S HOWN AN A GRICULTURAL INCOME OF RS . 50,OOOI - FROM THE PR ODUCE OF THESE TREES WHOSE VALUE H A S B EE N ASSESSED AT R S . 4 9 , 400/ - BY THE L AN D ACQUIS I TION O F FICER AND IT CANNOT BE SA ID THAT ANY EXTENSIVE AGRICULT U RAL O PERATI ON S ARE BEING CARRIED OUT ON THIS L A N D F OR LA S T TWO YEARS. IN ANY CASE GIVEN THE A RE A O F LAND ON WHICH BUI L DI NG E TC. A RE LO C ATE D , AO HAS TREATED 1 /3 RD OF THE T OT A L L AND AS AGRICULTURAL LAND WHICH IS R EAS ONABL E . A SSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS H AS ALSO RE LI E D ON THE CASE LAW OF M.J . THOMAS VS. D C IT (GROUP OF CASES) BY ITAT COC H IN B EN CH , TO SHOW T H AT THE LAND O F TH E A SSESSEE I S AGR I CULTUR AL L A ND. HOWEVER , I N THIS CASE SINCE THE CLA S SIF I CAT IO N O F T HE LAND BY THE SPECIAL TAHSI L DAR FOR THE PU R POSE OF LAND ACQU I SITIO N B Y TH E CORPORA TION OF COCHIN AS DRY L AND IT CAN N OT BE SAID THAT THE WHOLE LA N D IS A G RIC U L TU R AL IN NATURE. IN VIEW OF THE FOREGOING FACTS, AO IS JUSTIFIED IN TREATING ONLY 1/3 RD OF THE LAND AS AGRICULTURAL LAND AND COMPUTING APITL GAIN ON THE BALANCE LAND. ITA NO . 2/C/2015 4 5 AGGRIEVED , THE ASSESSEE IS IN APPEAL BEFORE US. THE LD COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE INCOME TAX AUTHORITIES. ON THE OTHER HAND, THE LD DR SUPPORTED THE ORDERS OF THE AO AND THE CIT(A). 6 WE HAVE HEARD THE RIVAL SUBMISSIONS AN D PERUSED THE MATERIAL ON RECORD. SECTION 2(14) (III) EXCLUDES AGRICULTURAL LAND FROM THE PURVIEW OF THE 'CAPITAL ASSET' . CLAUSE (III) TO SEC. 2(14) READ AS FOLLOWS: (III) AGRICULTURAL LAND IN INDIA, NOT BEING LAND SITUATE - ( A ) IN ANY AREA WHICH IS COMPRI SED WITHIN THE JURISDICTION OF A MUNICIPALITY OR A CANTONMENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR ( B ) IN ANY AREA WITHIN SUCH DISTANCE , NOT BEING MORE THAN EIGHT KILOMETERS , FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO ITEM (A) , AS THE CENTRAL GOVERNMENT MAY , HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR , URBANIZATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS , SPECIFY IN THIS BEHALF BY NOTIFICATION IN THE OFFICIAL GAZETTE . THE ABOVE TWO CATEGORIES OF LAND ARE EXCLUDED FR OM THE PURVIEW OF AGRICULTURAL LAND . 6.1 THE EXISTENCE OF RESIDENTIAL HOUSE, WELL, SEPTIC TANK , COMPO UND WALL , CATTLE SHED , PUMP HOUSE , CROPS , TREES , ETC . WHICH WERE SITUATED IN THE ACQUIRED LAND WOULD NOT MAKE ANY DIFFERENCE IN THE NATURE OF LAND AND WOULD NOT CONVERT THE AGRICULTURAL LAND INTO A NON - AGRICULTURAL LAND . T HE ASSESSEE HAD PRODUCED THE FOLLO WING DOCUMENTAR Y EVIDENCE BEFORE THE AO AND APPELLATE ITA NO . 2/C/2015 5 AUTHORITIES IN SUPPORT OF THE CLAIM THAT IMPUGNED LAND IS AGRICULTURAL LAND. I . CERTIFICATE FROM THE VILLAGE ADMINISTRATIVE OFF ICER, EVIDENCING THAT THE LAND IN QUESTION IS AN AGRICULTURAL LAND WITH CR OPS LIKE COCONUT, ARECANUT , NUTMEG , COFFEE, PEPPER , BANANA, ETC. THESE ARE THE AGRICULTURAL CROPS IN THE LAND FROM WHICH AN AGRICULTURAL INCOME WAS REALIZED AND THE SAME WAS DECLARED IN THE RETURN AND ACCEPTED . A COPY OF THE CERTIFICATE IS PRODUCED IN THE PAPER BOOK FILED BY THE ASSESSEE (PAGE NO.12) . II . CERTIFICATE FROM THE VILLAGE OFFICER , PUTHEN CRUZ STATING THAT THE ASSESSEE WAS LIVING IN THE HOUSE SITUATED IN TH E AFORESAID PROPERTY WHICH WAS ACQUIRED FOR THE PURPOSE OF COCHIN COR PORATION FOR IMPLEM ENTATION OF BRAHMAPURAM WASTE PLANT PROJECT (PAGE NO . 13IN THE PAPER BOOK) . IT I S ALSO STATED THAT IN THE ABOVE LAND , THE ASSESSEE HAS CULTIVATED CROPS LIKE , BANANA , COFFEE, TAPIOCA , ARECANUT TREE, NUTMEG , PEPPER , ETC . THE LAND WAS ALWAYS AGRICULTURAL LAND AS PER THE VILLAGE RECORD . CERTIFICATE IS ALSO PRODUCED TO SHOW THAT THE ASSESSEE WAS CONTRIBUTING FOR KERALA AGR ICULTURAL WORKERS WELFARE FUND BOARD IN RESPECT OF THE WAGES PAID TO THE AGRICULTURAL WORKERS . (PAGE NO.14 IN THE PAPER BOOK). III . THE ASS ESSEE ALSO PRODUCED EXTRACTS FROM THE VILLAGE RECO R DS T O SUBSTANTIATE THE CLAIM THAT THE LAND WAS ' NILAM ' (WET LAND) AND PURAYIDAM REFERRING TO THE HOUSE SITUATED THEREIN . IV. CERTIFICATE OF VALUATION OF COCHIN CORPORATION ESTIMATING THE VALUE O F IMPRO VEMENTS CERTIFIED BY THE TOWN PLANNING OFFICER , COCHIN CORPORATION WAS PRODUCED . (PAGE NO . 38) ITA NO . 2/C/2015 6 V A COPY OF THE NOTICE DATED 13.1.2014 ISSUED BY THE ASSESSING OFFICER ALONG WITH REPLY DATED 24 . 1 . 2014 SUBMITTED BY THE ASSESSEE ARE ALSO PRODUCED IN THE PAPER B OOK.(PAGE NO . 42) 6.2 SEC.2(1A) WHICH DEFINES AGRICULTURAL INCOME . AS PER CLAUSE - (C) OF SUB CLAUSE - (1A) OF SEC.2 - (C) ANY INCOME DERIVED FROM ANY BUILDING OWNED AND OCCUPIED BY THE RECEIVE R OF THE RENT OR REVENUE OF ANY SUCH LAND , OR OCCUPIED BY THE CUL TIVATOR OR THE RECEIVER OF RENT - IN - KIND , OF ANY LAND WITH RESPECT TO WHICH , OR THE PRODUCE OF WHICH , ANY PROCESS MENTIONED IN PARAGRAPHS - (II) AND (III) OF SUB CLAUSE - (B) IS CARRIED ON : PROVIDED THAT - ( I ) THE BUILDING IS ON OR IN THE IMMEDIATE VICINITY OF T HE LAND , AND IS A BUILDING WHICH THE RECEIVER OF THE RENT OR REVENUE OR THE CULTIVATOR , OR THE RECEIVER OF RENT - IN - KIND , BY REASON OF HIS CONNECTION WITH THE LAND , REQUIRES AS A DWELLING HOUSE , OR AS A STORE - HOUSE , OR OTHER OUT - BUILDING , AND ; ( II ) THE LAND IS EITHER ASSESSED TO LAND REVENUE IN INDIA OR IS SUBJECT TO A LOCAL RATE ASSESSED AND COLLECTED BY OFFICERS OF THE GOVERNMENT AS SUCH OR WHERE THE LAND IS NOT SO ASSESSED TO LAND REVENUE OR SUBJECT TO A LOCAL RATE , IT IS NOT SITUATED - ( A ) IN ANY AREA WHIC H 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 W HICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR ; OR ( B ) IN ANY AREA WITHIN SUCH DISTANCE , NOT BEING MORE THAN EIGHT KILOMETERS , FROM THE LOCAL LIMITS O F ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITEM (A) , AS THE CENTRAL GOVERNMENT MAY , HAVING REGARD TO THE EXTENT ITA NO . 2/C/2015 7 OF , AND SCOPE FOR, URBANIZATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS , SPECIFY IN THIS BEHALF BY NOTIFICATION IN THE OFFICIA L GAZETTE ' . 6.3 IN VIEW OF THE ABOVE DEFINITION OF AGRICULTURAL INCOME FOR THE PURPOSE OF ASSESSMENT TO A GRICULTURAL INCOME TAX, INCOME DERIVED FROM ANY BUILDING OWNED AND OCCUPIED BY THE RECEIVER OF THE RENT OR REVENUE OF ANY SUCH LAND IS ALSO REGARDED AS AGRICULTURAL INCOME UNDER THE ACT . SUCH BUILDING SHOULD BE ON OR IN THE IMMEDIATE VICINITY OF THE LAND AND I S OCCUPIED BY THE OWNER BY REASON OF HIS CONNECTION WITH THE LAND AND IS REQUIRED BY HIM FOR HIS DWELLING HOUSE OR AS A STORE HOUSE OR OTHER OU T BUILDING . ALL THESE QUALIFICATIONS ARE SATISFIED IN THE CASE OF T HE HOUSE WHERE THE ASSESSEE BY REASON OF HIS CONNECTION WITH THE LAND IS LIVING . 6.4 THE E NTIRE LAND OF 30 CENTS RETAINS THE CHARACTER OF THE AGRICULTURAL LAND . THE ASSESSEE IS ACTUALLY C ULTIVATING THE LAND WITH AGR I CULTURAL CROPS . THE LAND IS NOT WITHIN THE NOTIFIED AREA AND ADMITTEDLY WITHIN A PANCHAYAT FAR AWAY FROM THE NOTIFIED AREAS IN COCHIN CORPORATION AS PER NOTIFICATION NO . SO 10/6.1.1994. THE ASSESSING OFFICER HIMSELF ADMITS THAT 1/3 R D OF THE LAND COULD BE REGARDED AS AGRICULTURAL LAND. THE EXISTENCE OF WELL, SEPTIC TANK , COMPOUND WALL , CATTLE SHED, PUMP HOUSE , A SMALL HOUSE ETC., WOULD NOT MAKE ANY DIFFERENCE TO NATURE OF LAND BEING AGRICULTURAL IN NATURE. THE ASSESSEE HAD ALSO DECLARED AGRICULTURE INCOME AND THE SAME HAVE BEEN ACCEPTED IN THE ASST . ITA NO . 2/C/2015 8 ORDER. FOR THE AFORESAID REASONS, WE ARE OF THE VIEW THAT THE INCOME TAX AUTHORITIES WAS NOT JUSTIFIED IN TREATING 2/3 RD OF THE SUBJECT PROPERTY AS CAPITAL ASSET AND BRINGING THE SAME FOR TAX UNDER THE HEAD INCOME FROM CAPITAL GAINS. IT IS ORDERED ACCORDINGLY. 7 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF MA Y 2016 . SD/ - SD/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTA NT MEMBER JUDICIAL MEMBER COCHIN: DATED 5 TH M AY 2016 RAJ* COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT , 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN