S.P.Nandakumar, CHENNAI V. ITO, CHENNAI

ITA 2137/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9008 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 05-05-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 09-11-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: Y SRIDH
• Keywords: Capital asset

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.2137/MDS/2015 / ASSESSMENT YEAR : 2011-12 SHRI S.P. NANDAKUMAR C/O M/S RAMESH AND RAMACHANDRAN CHARTERED ACCOUNTANTS NEW NO.39, OLD NO.29/3 VISWANATHAPURAM MAIN ROAD KODAMBAKKAM, CHENNAI 600 024 VS. THE ASSTT. COMMISSIONER OF INCOME-TAX BUSINESS WARD XIV(4) CHENNAI [PAN AAIPN 2416 R] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI Y. SRIDH AR, CA /RESPONDENT BY : SHRI A.V. SREEKANTH, JCIT / DATE OF HEARING : 05 - 05 - 2016 ! / DATE OF PRONOUNCEMENT : 23 - 6 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-7, CHENNA I, DATED 12.10.2015 AND PERTAINS TO ASSESSMENT YEAR 2011-1 2. 2. SHRI Y. SRIDHAR, LD. REPRESENTATIVE FOR THE ASSESS EE SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERAT ION IS WHETHER THE LAND SOLD BY THE ASSESSEE IS AGRICULTURAL LAND OR NOT. ACCORDING TO THE ITA NO. 2137/15 :- 2 -: LD. COUNSEL, DURING THE YEAR UNDER CONSIDERATION, T HE ASSESSEE HAS SOLD 33.640 ACRES OF AGRICULTURAL LAND FOR A TOTAL CONSIDERATION OF ` 6,07,45,000/-. THE LAND IS NOT WITHIN THE JURISDIC TION OF ANY MUNICIPALITY. ADMITTEDLY, IT WAS BEYOND 8 KMS RADI US OF THE NOTIFIED MUNICIPALITY. THEREFORE, THE ASSESSEE CLAIMED THE GAINS ARISING OUT OF THE SALE OF LAND AS EXEMPT FROM TAXATION. HOWEVER, THE ASSESSING OFFICER FOUND THAT PORTION OF THE LAND WHICH WAS US ED FOR PROCESSING OF THE TEA CANNOT BE CONSTRUED AS AGRICULTURAL LAND. A CCORDING TO THE LD. COUNSEL, THE PORTION OF THE LAND WHICH WAS USED FOR PROCESSING THE TEA HAS TO BE CONSTRUED AS USE OF THE LAND FOR AGRICUL TURAL PURPOSE. THE LD. REPRESENTATIVE CLARIFIED THAT THE ENTIRE 33.640 ACRES OF LAND ARE CLASSIFIED AS AGRICULTURAL LAND AND THE ASSESSEE C ULTIVATED TEA. A PORTION OF THE LAND WAS EARMARKED FOR PROCESSING T HE TEA WHICH WAS PLUCKED FROM THE LAND OWNED BY THE ASSESSEE. THER EFORE, THE PORTION OF THE LAND WHICH WAS USED FOR PROCESSING THE TEA W HICH WAS CULTIVATED BY THE ASSESSEE HAS TO BE CONSTRUED AS PART OF THE AGRICULTURAL LAND. THE ASSESSING OFFICER FOUND THAT THE TEA WAS PROCES SED BY THE PARTNERSHIP FIRM WHEREIN THE ASSESSEE AND HIS WIFE ARE PARTNERS. THEREFORE, THE PORTION OF THE LAND WHICH WAS USED F OR PROCESSING THE TEA HAS TO BE CONSTRUED AS USED FOR BUSINESS PURPOS E. ACCORDINGLY, HE ASSESSED THE SAME FOR CAPITAL GAINS. THE LD. REPRE SENTATIVE SUBMITTED THAT UNLESS THE ASSESSEE PROCESS THE TEA PLUCKED FROM THE TEA PLANT, ITA NO. 2137/15 :- 3 -: THE AGRICULTURAL LAND CANNOT BE EFFECTIVELY USED FO R CULTIVATION. THEREFORE, THE AREA WHICH WAS ACTUALLY USED FOR PRO CESSING THE AGRICULTURAL PRODUCE CULTIVATED BY THE ASSESSEE WO ULD FORM PART OF THE AGRICULTURAL LAND. THEREFORE, THE CIT(A) IS NOT JU STIFIED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER. 3. ON THE CONTRARY, SHRI A.V. SREEKANTH, LD. DEPARTMEN TAL REPRESENTATIVE SUBMITTED THAT ADMITTEDLY, THE ASSE SSEE HAS SOLD 33.640 ACRES OF LAND ALONG WITH A TEA FACTORY BUILD ING, MACHINERY AND OTHER INSTALLATIONS. APART FROM SALE OF THE AGRICU LTURAL LAND, THE ASSESSEE HAS SOLD MACHINERIES FOR A CONSIDERATION O F ` 2,62,25,000/-. THEREFORE, THE ASSESSING OFFICER FOUND THAT THE LAN D IN WHICH THE MACHINERIES WERE INSTALLED FOR PROCESSING THE TEA C ANNOT BE CONSTRUED AS PART OF THE AGRICULTURAL LAND. ACCORDINGLY, THE PROFIT ON SALE OF THE AREA OF THE LAND WHICH WAS USED FOR PROCESSING THE TEA WAS TREATED AS CAPITAL ASSET. THEREFORE, THE CIT(A) HAS RIGHTLY C ONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMI TTEDLY, THE ASSESSEE HAS SOLD 33.640 ACRES OF AGRICULTURAL LAND FOR A TOTAL CONSIDERATION OF ` 6,07,45,000/-. THE ASSESSING OFFICER FOUND THAT 4 ACRES OF LAND IN WHICH THE MACHINERIES WERE INSTALL ED FOR PROCESSING OF ITA NO. 2137/15 :- 4 -: THE TEA WAS SOLD FOR A CONSIDERATION OF ` 2,62,25,000/-. SINCE 4 ACRES OF LAND WAS USED FOR PROCESSING OF TEA, THE ASSESSI NG OFFICER FOUND THAT IT IS A BUSINESS ACTIVITY, THEREFORE, THE SAME HAS TO BE TREATED AS CAPITAL ASSET. THE FACT THAT THE ASSESSEE IS CULT IVATING TEA IS NOT IN DISPUTE. THE ENTIRE 33.640 ACRES OF LAND BELONGS TO THE ASSESSEE. THE ASSESSEE CONSTITUTED A PARTNERSHIP FIRM CONSISTING OF HIMSELF AND HIS WIFE AND ADMITTEDLY INSTALLED MACHINERY FOR PROCESS ING TEA IN AROUND 4 ACRES OF LAND. THE QUESTION ARISES FOR CONSIDERAT ION IS WHEN THE ASSESSEE EARMARKED CERTAIN PORTION OF THE LAND FOR THE PURPOSE OF PROCESSING THE AGRICULTURAL PRODUCE CULTIVATED BY H IM, WHETHER THAT LAND WOULD FORM PART OF THE AGRICULTURAL LAND OR IT HAS TO BE TREATED AS CAPITAL ASSET? THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE ASSESSEE ADMITTEDLY USED THE LAND AND MACHINER Y FOR PROCESSING THE TEA CULTIVATED BY HIM, THE SAME HAS TO BE TREAT ED AS PART OF THE AGRICULTURAL LAND. UNLESS THE ASSESSEE PROCESS TH E TEA, HE MAY NOT BE ABLE TO MARKET THE SAME AND EARN INCOME. SOME OF T HE CULTIVATORS MAY SELL THE TEA TO OTHER MANUFACTURERS. MERELY BE CAUSE THE ASSESSEE CHOOSE TO PROCESS THE TEA BY HIMSELF BY IN STALLING A MACHINERY THROUGH THE PARTNERSHIP FIRM WHICH CONSIS TS OF HIMSELF AND HIS WIFE, THE LAND IN WHICH THE MACHINERY WAS INSTA LLED CANNOT BE TREATED AS CAPITAL ASSET. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE LAND IN WHICH THE MACHINERIES WERE INSTALL ED WAS USED BY THE ITA NO. 2137/15 :- 5 -: ASSESSEE FOR PROCESSING THE TEA WHICH WAS CULTIVATE D BY HIM WOULD FORM PART OF THE AGRICULTURAL LAND. IN VIEW OF THE ABOVE DISCUSSION, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND THE ASSESSING OFFICER IS DIRECTED TO TREAT THE ENTIRE PORTION OF THE LAND AS AGRICULTURAL LAND. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JUNE, 2016, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 23 RD JUNE, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF