Ajay G. Mehandale, Pune V. IT Ward= 9(3), Pune

ITA 2305/PUN/2012

• Counselvise Citation: 230524514 RSA 2012
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 23-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Capital asset; Salary income; Cost of acquisition
• Section: 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER. ITA.NO.2305/PN/2012 (ASSESSMENT YEAR 2008-09) AJAY G. MEHANDALE, PROP. NEW HINDUSTAN BAKERY, PLOT 6. S.NO.171, STATION ROAD, CHINCHWADGAON, PUNE-411033 PAN NO. ADEPM8973B .. APPELLANT VS. ITO, WARD-9(3), AKURDI, PUNE. .. RESPONDENT ASSESSEE BY : SHRI C.H.NANIWADEKAR REVENUE BY : SHRI S.P. WALIMBE DATE OF HEARING : 27-02-2014 DATE OF PRONOUNCEMENT : 27-02-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 16-10-2012 OF THE CIT(A)-V, PUNE RELATING TO ASSESS MENT YEAR 2008-09. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE READS AS UNDER : THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRM ING THE ACTION OF THE A.O. WHEREBY THE A.O. HAD MADE AN ADDITION OF RS.1,2 5,25,101/- AS CAPITAL GAINS ON ACCOUNT OF SALE OF LAND, BY HOLDING THE SAME TO BE NON- AGRICULTURAL LAND AND HENCE NOT EXEMPT U/S.2(4)(III) OF THE ACT, THEREBY TAXING THE CAPITAL GAINS ON SALE OF THE LAND. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS AN INDIVIDUAL AND WAS DERIVING INCOME FROM SALARY, CAPITAL GAIN AND I NCOME FROM OTHER SOURCES. THE ASSESSING OFFICER IN THE INSTANT CASE WAS INFORMED BY THE ITO, WARD-3(4), PUNE THAT A LAND SITUATED AT GAT NO .794, URAWAD, TALUK: 2 MULSHI, DIST: PUNE WAS SOLD BY THE ASSESSEE FOR RS. 2,60,00,000/- VIDE SALE DEED DATED 30-11-2007. THE SAID LAND WAS JOIN TLY HELD BY SHRI NITIN MADHAV RAJHANS AND SHRI AJAY GAJANAN MEHANDALE. IT HAS BEEN CONCLUDED IN THE ASSESSMENT PROCEEDINGS OF SHRI NIT IN MADHAV RAJHANS THAT THE LAND SOLD IS NOT COVERED WITHIN THE MEANIN G OF SECTION 2(14)(III) OF THE I.T. ACT CHARGEABLE TO CAPITAL GAIN TAX. AC CORDINGLY, CAPITAL GAIN OF HALF SHARE (RS.1,30,00,000/-) OF SHRI NITIN MADH AV RAJHANS WAS BROUGHT TO TAX IN HIS HAND. SINCE SHRI AJAY GAJANA N MEHANDALE WAS THE CO-OWNER OF THE SAID PROPERTY AND WAS HOLDING SHA RE IN THE SAID PROPERTY, THE ASSESSING OFFICER ISSUED NOTICE U/S.1 48 OF THE I.T. ACT TO THE ASSESSEE. 2.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE SUBMITTED THAT THE LAND IN QUESTION WAS AGRICULTURA L LAND AND LOCATED BEYOND 8 KMS FROM THE MUNICIPAL LIMITS OF PUNE AND THEREFORE IT WAS NOT A CAPITAL ASSET FALLING WITHIN THE SECTION 2(14)(II I) OF THE I.T. ACT. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE A BOVE CONTENTION OF THE ASSESSEE ON THE GROUND THAT THE LAND IN QUESTIO N WAS GRASS LAND AND AS PER 7/12 EXTRACTS THE SAME WAS ALSO SHOWN AS GRASS LAND. REJECTING THE EXPLANATION GIVEN BY THE ASSESSEE THE ASSESSING OFF ICER TREATED THE LAND AS CAPITAL ASSET AND TAXED THE SAME UNDER LONG TER M CAPITAL GAIN AFTER ALLOWING INDEXED COST OF ACQUISITION. 3. IN APPEAL THE LD.CIT(A) REJECTING THE EXPLANATIO N GIVEN BY THE ASSESSEE AND RELYING ON VARIOUS DECISIONS INCLUDING THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF SUR ESH KR. D. SHAH VS. DCIT REPORTED IN 49 SOT 341 (HYD.), THE DECISION OF THE ITAT, CHENNAI 3 BENCH OF THE TRIBUNAL IN THE CASE OF CHEMMANCHERRY ESTATES CO. REPORTED IN 117 TTJ 691 (CHENNAI), THE PUNE BENCH O F THE TRIBUNAL IN THE CASE OF HARESH V. MILANI VS. JCIT REPORTED IN 1 11 TTJ 310 (PUNE) HELD THAT THE LAND IN QUESTION IS NOT AN AGRICULTUR AL LAND AND THEREFORE THE ASSESSING OFFICER WAS RIGHT IN TREATING THE LAND AS CAPITAL ASSET CHARGEABLE TO TAX UNDER THE HEAD LONG TERM CAPITAL GAIN. 3.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE. 4. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET D REW THE ATTENTION OF THE BENCH TO THE ORDER OF THE TRIBUNAL IN THE CA SE OF THE OTHER CO- OWNER SHRI NITIN M. RAJHANS WHEREIN THE TRIBUNAL HA S DISMISSED THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF TH E CIT(A). HE SUBMITTED THAT IN THE SAID ORDER THE CIT(A) HAD HEL D THAT THE LAND IN QUESTION SOLD BY THE ASSESSEE WAS NOT A CAPITAL ASS ET WITHIN THE MEANING OF SECTION 2(14)(III)(B) OF THE I.T. ACT AND THUS T HE SURPLUS ON SALE OF SUCH LAND WAS NOT LIABLE TO BE TAXED AS CAPITAL GAI N. HE ACCORDINGLY SUBMITTED THAT THIS BEING A COVERED MATTER THE APPE AL FILED BY THE ASSESSEE SHOULD BE ALLOWED. 5. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND WHILE SUPPORTING THE ORDER OF LD.CIT(A) FAIRLY CONCEDED T HAT THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECIS ION OF THE TRIBUNAL IN THE CASE OF THE OTHER CO-OWNER. 4 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES. WE FIND THE TRIBUNAL IN THE CASE OF THE OTHER CO-OW NER OF THE LAND IN QUESTION NAMELY MR. NITIN M. RAJHANS HAS DECIDED TH E ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY UPHOLDING T HE ORDER OF THE CIT(A) WHO HAS HELD THAT THE LAND IN QUESTION SOLD BY THE ASSESSEE WAS NOT A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2 (140(III)(B) OF THE I.T. ACT AND THUS THE SURPLUS ON SALE OF SUCH LAND WAS N OT LIABLE TO BE TAXED AS CAPITAL GAIN. THE RELEVANT OBSERVATION OF THE T RIBUNAL FROM PARA 10 TO 14 OF THE ORDER READS AS UNDER : 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS. THE CRUX OF THE CONTROVERSY BEFORE US RELATES TO CONSIDERING WHETHER 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 AGRICULTURAL LAND LOCATED AT DISTANCE WHICH IS BEYO ND 8 KILOMETERS FROM THE LOCAL LIMITS OF ANY MUNICIPALITY AND POPULATION OF THE VILLAGE IN WHICH SUCH LAND IS SITUATED IS LESS THAN TEN THOUSA ND AND THEREFORE, IT QUALIFIES TO BE AN AGRICULTURAL LAND WHICH IS EXCLU DIBLE FROM THE EXPRESSION CAPITAL ASSET AS PER CLAUSE (III) TO S UB-SECTION (14) OF SECTION 2 OF THE ACT. ON THE CONTRARY, THE STAND O F 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 EXCLU DIBLE FROM THE EXPRESSION CAPITAL ASSET U/S 2(14)(III) OF THE AC T. 11. FACTUALLY SPEAKING, EVEN THE REVENUE DOES NOT D ISPUTE THE POSITION THAT THE LAND IN QUESTION IS CONSIDERED IN THE STATE LAND REVENUE RECORDS AS AN AGRICULTURAL LAND. IN-FACT, APART FROM THE RECEIPTS OF PAYMENT OF LAND REVENUE PRODUCED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER, A CERTIFICATE FROM TOWN PLAN NING DEPARTMENT WAS ALSO FURNISHED STATING THAT THE LAND IS SITUATE D IN AN AGRICULTURAL ZONE. COPIES OF SUCH MATERIAL ARE PLACED IN THE PA PER BOOK AT PAGES 16 17 AND 42 43 RESPECTIVELY. IT IS ALSO NOT I N DISPUTE THAT THE LAND IN QUESTION IS BEYOND A DISTANCE OF 8 KILOMETERS FR OM ANY MUNICIPALITY AND THE POPULATION OF THE VILLAGE IN WHICH IT IS LO CATED IS LESS THAN TEN THOUSAND. THE RELEVANT CERTIFICATES FROM THE TEHSI LDAR AND FROM GRAMSEVAK OF THE GRAMPANCHAYAT, URAWADE REGARDING T HE DISTANCE FROM THE NEAREST MUNICIPALITY AND THE POPULATION OF THE VILLAGE RESPECTIVELY SUPPORT THE PLEA OF THE ASSESSEE. THE SE ASPECTS ARE NOT IN DISPUTE. IN THIS BACKGROUND, IT IS PERTINENT TO REFER TO THE RELIANCE PLACED BY THE CIT(A) ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT. DEBBIE ALEMAO, JOAQUIM AL EMAO (SUPRA). IN THE CASE BEFORE THE HONBLE HIGH COURT, IT WAS FOUN D THAT THE LAND WAS SHOWN IN THE LAND REVENUE RECORDS AS USED FOR AGRIC ULTURAL PURPOSES AND NO PERMISSION WAS OBTAINED FOR NON-AGRICULTURAL USE BY THE ASSESSEE. THE HONBLE HIGH COURT CONSIDERED THE PL EA OF THE REVENUE THAT THE LAND WAS NOT ACTUALLY USED FOR AGR ICULTURAL PURPOSE AS NO AGRICULTURAL INCOME WAS DECLARED AND REJECTED IT IN VIEW OF THE 5 LAND REVENUE RECORDS AND THE LAND WAS HELD TO BE AG RICULTURAL LAND. SIMILARLY, THE DELHI BENCH OF THE TRIBUNAL IN THE C ASE OF LAVLEEN SINGHAI VS. DCIT (2007) 111 TTJ 326 (DEL) OBSERVED THAT WHERE A LAND IS RECOGNIZED AS AGRICULTURAL LAND IN LAND REV ENUE RECORDS AT THE TIME OF PURCHASE BY THE ASSESSEE AND NOTHING HAS BE EN DONE BY THE ASSESSEE FOR PUTTING IT TO NON-AGRICULTURAL USE, TH E 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 ACQUIRING THE LAND ASSESSEE HAS NOT TAKEN ANY STEPS TO PUT IT TO ANY NON-AGRICULTURAL USE AND IT CONTINUES TO BE AN AGRI CULTURAL LAND IN THE LAND REVENUE RECORDS; AND, FACTUALLY IT IS NOT DISP UTED THAT THE LAND IS SITUATED BEYOND A DISTANCE OF 8 KILOMETERS FROM THE MUNICIPAL LIMITS AND IS LOCATED IN A VILLAGE HAVING POPULATION OF LE SS 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 AGRICULTUR AL PURPOSE IS CONCERNED, THE SAME HAS BEEN APPROPRIATELY ADDRESSE D BY THE CIT(A). IN THIS CONNECTION, THE ASSESSEE CANVASSED, ON THE BASIS OF 7/12 EXTRACT FOR THE PERIOD OF 2001-02 TO 2009-10, THAT THE LAND WAS BEING USED FOR AGRICULTURAL PURPOSES. THE ASSESSING OFFI CER DISPUTED THE FACT FOR THE REASON THAT DURING THE LAST TWO YEARS NO AGRICULTURAL CROP WAS GROWN AND ONLY CATTLE FEED I.E. GRASS WAS STATE D 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. T HE A.O. HAS ALSO NOT DENIED THAT NO AGRICULTURAL OPERATIONS WERE EVER CARRIED OUT ON THE SAID LAND, IT WAS ONLY BEEN OBJE CTED ON THE GROUND THAT DURING THE LAST 2 YEARS NO AGRICULTURAL CROPS WERE GROWN AND WHEN THE CATTLE FEED I.E. GRASS WAS START ED TO HAVE BEEN GROWN. THEREFORE, THE LAND WHICH IS AGRICULTUR AL FOR THE PAST 11 YEARS COULD NOT BECOME NON-AGRICULTURAL ONL Y BECAUSE NO AGRICULTURAL 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 ASSESSING OFFICER THE LAND IN QUESTION COULD NOT BECOME NON-A GRICULTURAL LAND. ANOTHER 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 AN D THEREFORE NO PERMISSION WAS REQUIRED TO BE OBTAINED U/S 3 OF BOM BAY TENANCY AND AGRICULTURAL LAND ACT, 1948. THIS ASPECT OF THE MA TTER HAS REMAINED UNCONTROVERTED FROM THE SIDE OF THE ASSESSING OFFIC ER EVEN BEFORE THE CIT(A) AS WELL AS BEFORE US. QUITE CLEARLY, THE AF ORESAID 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 ASSESSEE, RIGHT FROM THE DATE OF PURCHASE AND TILL THE DATE OF SALE, THE LAND HAS NOT BEEN PUT TO ANY NON-AGRICULTURAL USE. 6 14. CONSIDERING THE AFORESAID DISCUSSION, WE FIND T HAT THE CIT(A) MADE NO MISTAKE IN DISAGREEING WITH THE ASSESSING O FFICER AND HE CORRECTLY HELD THAT THE LAND IN QUESTION WAS LIABLE TO BE EXCLUDED FROM THE DEFINITION OF CAPITAL ASSETS ON ACCOUNT OF SE CTION 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 G AINS TAX. 6.1 SINCE THE TRIBUNAL IN THE CASE OF THE CO-OWNER HAS ALREADY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF THE CO- OWNER OF THE LAND IN QUESTION AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE, THE GROUND RAISED BY THE ASS ESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF, I.E. ON 27-02-2014. SD/- SD/- (R.S.PADVEKAR ) ( R.K. PAN DA ) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE, DATED 27 TH FEBRUARY 2014 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-V, PUNE 4. THE CIT-V, PUNE 5. THE DR B BENCH, PUNE. 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE