GRK Reddy & Sons (HUF), CHENNAI V. ITO Business Ward III(4), CHENNAI

ITA 2685/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3346 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 19-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D ANAND
• Keywords: Capital asset; Benefit of exemption

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI , , ' BEFORE SHRI GEORGE MATHAN , JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.2685/CHNY/2018 /ASSESSMENT YEAR: 2008-09 M/S.GRK REDDY & SONS (HUF), NO.38, CASA CHALLA, NO.16, SOUTH MADA STREET, SAIDAPET, CHENNAI-600 015. VS. THE INCOME TAX OFFICER, BUSINESS WARD-III(4), CHENNAI-600 034. [PAN: AAEHG 3164 P ] ( ) /APPELLANT) ( *+) /RESPONDENT) ) , / APPELLANT BY : MR.D.ANAND, ADV. *+) , /RESPONDENT BY : MR.SRIDHAR DORA, JCIT , /DATE OF HEARING : 19.02.2019 , /DATE OF PRONOUNCEMENT : 19.02.2019 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : ITA NO.2685/CHNY/2018 IS AN APPEAL FILED BY THE AS SESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-14, CHENNAI, IN ITA NO.118/CIT(A)-14/2014-15 DATED 26.04.2018 FOR T HE AY 2008-09. 2. MR.SRIDHAR DORA, JCIT REPRESENTED ON BEHALF OF T HE REVENUE AND MR.D.ANAND, ADVOCATE, REPRESENTED ON BEHALF OF THE ASSESSEE. ITA NO.2685/CHNY/2018 :- 2 -: 3. IN THE ASSESSEES APPEAL, THE ASSESSEE RAISED TH E FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME (APPEALS)-14, IS WRONG, ILLEGAL AND OPPOSED TO FACTS OF THE INSTANT CASE. 2. THE LEARNED CIT(A)- 14 ERRED IN LAW IN CONFIRMIN G THE LEVY OF CAPITAL GAINS TAX ON SALE OF LAND WHICH IS CLASSIFIED AS AG RICULTURAL LAND BY THE REVENUE DEPARTMENT AND AS PER THE DEED OF PURCHASE AND SALE MADE BY THE APPELLANT. 3. THE LEARNED CIT(A)-14 OUGHT TO HAVE SEEN THAT TH E IMPUGNED LAND IS CLASSIFIED AS AGRICULTURAL LANDS AS PER REVENUE REC ORDS AND IS LOCATED 8 KMS AWAY FROM THE NEAREST MUNICIPAL LIMITS OR CORPORATI ON AND THAT THE APPELLANT HAS ALSO CARRIED ON AGRICULTURAL ACTIVITY . THE LEARNED CIT(A) FAILED TO SEE THAT THE APPELLANT HAD CLAIMED THE INCOME FR OM THE SALE OF SAID LAND AS EXEMPT SINCE THE SAME IS NOT A CAPITAL ASSET AS PER THE PROVISIONS OF SECTION 2(14)(III) OF THE INCOME TAX ACT. FOR THESE AND OTHER GROUNDS THAT MAY BE RENDERED AT THE TIME OF HEARING IT IS MOST HUMBLY PRAYED THAT THE HONBLE TRIBUNAL MAY BE PLEASED TO ALLOW THE APPELLANTS CLAIM AND THUS RENDER JUSTICE. 4. IT WAS SUBMITTED BY THE LD.AR THAT THE ASSESSEE IS A HUF WHICH IS HAVING AGRICULTURAL INCOME AND SHARES. THE ASSESSEE , HUF HAD PURCHASED 41.76 ACRES OF AGRICULTURAL LAND DURING THE FY 2006 -07 UNDER THE NAME AND STYLE OF JAI FARMS. THE ASSESSEE HAD DONE AGRI CULTURAL OPERATIONS ON THE SAID LANDS FOR THE RELEVANT YEAR AND HAD SHOWN AGRICULTURAL INCOME OF RS.1,80,000/-. SUBSEQUENTLY, AS THE ASSESSEE FOUND THAT THE SAID LANDS WERE NOT SUITABLE FOR LARGE SCALE AGRICULTURAL OPER ATIONS ON ACCOUNT OF CERTAIN DEFECTS IN THE LANDS, THE ASSESSEE SOLD THE SAME DURING THE RELEVANT AY. IT WAS A SUBMISSION THAT THE ASSESSEE HAD PURCHASED THE SAID LANDS FOR A CONSIDERATION OF RS.1,71,98,876/- DURING THE FY 2006-07 AND THE SAME LANDS WERE SOLD DURING THE FY 2007-08 FOR A CONSIDERATION OF RS.4,38,48,000/- TO A PROPERTY DEVELOPER, A GROUP C ONCERN, NAMELY M/S.NEW CHENNAI TOWNSHIP (P) LTD. IT WAS A SUBMIS SION THAT WHEN THE ITA NO.2685/CHNY/2018 :- 3 -: LAND WAS PURCHASED, IT WAS AGRICULTURAL LAND AND IN THE REVENUE RECORDS, THE SAME WAS SHOWN AS AGRICULTURAL LAND. IT IS ALS O AN ACCEPTED FACT THAT THE AGRICULTURAL OPERATIONS WERE CARRIED OUT ON THE SAID LANDS AS HAS BEEN RECORDED BY THE AO IN PARA NO.12 OF HIS ORDER THAT CERTAIN DRY CROPS SUCH AS MANILA/GINGILY, ETC., HAD BEEN GROWN PRIOR TO TH E ACQUISITION BY THE ASSESSEE. IT WAS A SUBMISSION THAT THE AO STATES T HAT NO AGRICULTURAL OPERATIONS HAD BEEN DONE BY THE ASSESSEE. IT WAS A SUBMISSION THAT THIS IS NOT TRUE. THE ASSESSEE HAD ATTEMPTED VARIOUS AG RICULTURAL OPERATIONS AND WHEN IT WAS FOUND THAT THE SAID LAND COULD NOT BE USED FOR LARGE SCALE AGRICULTURAL OPERATIONS. 31.14 ACRES DRY AND BARREN LAND HAD BEEN SOLD BY THE ASSESSEE. IT WAS A SUBMISSION THAT EVEN AT THE TIME OF SALE, THE REVENUE RECORDS CLEARLY SHOWED THAT THE LAND WAS AG RICULTURAL LAND. IT WAS A SUBMISSION THAT THE ASSESSEE CLAIM OF AGRICUL TURAL INCOME OF RS.1,80,000/- HAS ALSO NOT BEEN REJECTED. THOUGH, THE EVIDENCE HAD BEEN PRODUCED WITH REGARD TO THE DETAILS OF THE AGRICULT URAL ACTIVITIES CARRIED ON BY THE ASSESSEE, THE SAME WAS DOUBTED. IT WAS A FU RTHER SUBMISSION THAT IN THE COURSE OF THE ASSESSMENT, THE VILLAGE ADMINI STRATIVE OFFICERS (IN SHORT VAOS) HAD BEEN CALLED BY THE AO FOR EXAMINA TION AND AS PER THE EXAMINATION, IT WAS CLEAR THAT THE ASSESSEE HAD SOL D 12.50 ACRES OF DRY LAND AT ACHIVILAGAM VILLAGE AND 29.26 ACRES OF LAND AT VELLUR VILLAGE. THE ASSESSEE HELD MORE THAN 90 ACRES OF LAND. THE EXAMI NATION ALSO CLEARLY SHOWED THAT THE SAID LANDS WERE AGRICULTURAL LANDS IN THE REVENUE RECORDS, MAJOR PORTION OF THE LANDS WERE DRY LANDS AND DRY C ROPS HAD ALSO BEEN GROWN PRIOR TO THE ACQUISITION BY THE ASSESSEE. IT WAS ALSO NOTICED THAT ITA NO.2685/CHNY/2018 :- 4 -: THE SAID LANDS WERE BEYOND THE PRESCRIBED 8 KMS LIM IT FROM THE NEAREST MUNICIPALITY. IT WAS A SUBMISSION THAT CONSEQUENTL Y, AS THE ASSESSEE HAD SOLD THE AGRICULTURAL LAND, THE ASSESSEE HAD CLAIME D EXEMPTION U/S.10(1) OF THE ACT AND THE AO HAD DENIED THE SAID CLAIM OF EXEMPTION U/S.10(1) ON THE GROUND THAT THERE WAS NO EVIDENCE TO SHOW THAT THE AGRICULTURAL ACTIVITIES HAD BEEN DONE ON THE SAID LANDS AND ON T HE GROUND THAT WHAT HAD BEEN TRANSFERRED WERE LAND ON WHICH NO AGRICULT URAL OPERATIONS HAD BEEN DONE BY THE ASSESSEE AND THIRDLY THAT THE LAND WAS SOLD TO REAL ESTATE DEVELOPER FOR SETTING UP A SEZ. CONSEQUENTLY , THE AO HAD BROUGHT THE GAINS FROM THE SALE OF THE SAID LANDS AS LIABLE FOR SHORT TERM CAPITAL GAINS TAX. IT WAS A SUBMISSION THAT THE LD.CIT(A) HAD CONFIRMED THE ORDER OF THE AO. IT WAS A SUBMISSION THAT THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF ASHOK KUMAR RATHI REPORTED IN (2018) 404 ITR 0173 (MAD) HAS CLEARLY HELD THAT APART FROM REVENUE RECORDS CL ASSIFYING THE LAND AS AGRICULTURAL LAND, AO ACCEPTED AGRICULTURAL INCOME DECLARED FROM THE SAID PROPERTY FOR THE AY AND COMPLETED THE ASSESSMENT, M ERELY BECAUSE THE PROPERTY FETCHED AN INCOME ONLY OF RS.65,300/- DURI NG THE RELEVANT AY, IT WAS NOT A GROUND TO DISCREDIT THE ASSESSMENT BY ITS ELF WHICH HAD DETERMINED THE CHARACTER OF THE LAND TO BE AGRICULT URAL LAND. THE LD.AR FURTHER RELIED UPON THE DECISION OF THE HONBLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF M.S.SRINIVASA NAICKER REPORTED IN (2007 ) 292 ITR 0481 WHEREIN IT HAD BEEN HELD THAT THE FACT THAT THE PUR CHASER INTENDED TO PUT THE LAND IN QUESTION TO A TOTALLY DIFFERENT USE IS NOT RELEVANT FOR DETERMINING ITS CHARACTER. IT WAS A SUBMISSION THA T THE ORDER OF THE ITA NO.2685/CHNY/2018 :- 5 -: LD.CIT(A) AND THAT OF THE AO IS LIABLE TO BE REVERS ED AND THE ASSESSEE WAS ENTITLED TO CLAIM THE EXEMPTION U/S.10(1) OF THE AC T. 5. IN REPLY, THE LD.DR VEHEMENTLY SUPPORTED THE ORD ER OF THE AO AND THE LD.CIT(A). IT WAS SUBMITTED BY THE LD.DR THAT THE EXAMINATION OF THE VAOS CLEARLY SHOWED THAT THE LAND IN QUESTION W AS NOT SUITABLE FOR AGRICULTURAL OPERATIONS AND CONSEQUENTLY, COULD NOT BE TREATED AS AGRICULTURAL LAND. IT WAS A SUBMISSION THAT THE OR DER OF THE AO AND THE LD.CIT(A) WAS LIABLE TO BE UPHELD. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. 7. A PERUSAL OF THE FACTS IN THE PRESENT CASE CLEAR LY SHOWS THAT THE ASSESSEE IS A HUF WHICH IS PRIMARILY DOING AGRICULT URAL ACTIVITIES AND INVESTMENT IN SHARES. THE ASSESSEE HAD ADMITTEDLY PURCHASED THE AGRICULTURAL LAND DURING THE FY 2006-07. BEFORE TH E AO AS ALSO BEFORE THE LD.CIT(A), THE ASSESSEE HAS BEEN MAINTAINING THAT I T WAS UNABLE TO DO THE AGRICULTURAL OPERATIONS WHICH DESIRES ON A LARGE SC ALE, CONSEQUENTLY, THE ASSESSEE WAS FORCED TO LIQUIDATE THE SAID LANDS WIT HIN ONE YEAR OF ITS PURCHASE ITSELF. CLEARLY THE AO HAS NOT MADE ANY A DDITION ON ACCOUNT OF THE REJECTION OF THE ASSESSEES CLAIM OF AGRICULTUR AL INCOME. THAT THE ASSESSEE OWNED MORE THAN 90 ACRES OF LAND IS ALSO N OT DISPUTED. A PERUSAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE AO HAS EXAMINED THE VAOS OF THE VARIOUS VILLAGES WHEREIN THE ASSESS EE PROPERTIES ARE ITA NO.2685/CHNY/2018 :- 6 -: SITUATED. IT IS ALSO NOTICED THAT THE SAID VAOS WE RE NOT PROVIDED FOR CROSS- EXAMINATION TO THE ASSESSEE. A PERUSAL OF WHAT HAS BEEN EXTRACTED BY THE AO IN RESPECT OF THE VAO STATEMENTS RECORDED CLEARL Y SHOWS THAT AS PER THE REVENUE RECORDS, THE SAID LANDS WERE AGRICULTUR AL LANDS DURING THE RELEVANT PERIOD. THE EXAMINATION OF THE VAOS HAS ALSO BROUGHT OUT THE FACT THAT THE AGRICULTURAL OPERATIONS HAD BEEN DONE ON THE SAID LANDS. HOW THE AO DRAWS THE CONCLUSION THAT THE LANDS WERE LEFT BARREN AFTER PURCHASE BY THE ASSESSEE IS NOT COMING OUT OF THE A SSESSMENT ORDER. IT IS ALSO AN ADMITTED FACT THAT THE SAID LANDS ARE BE YOND 8 KMS FROM THE NEAREST MUNICIPALITY. THUS, CLEARLY, THE SAID LAND S DO NOT FALL WITHIN THE PURVIEW OF THE DEFINITION OF CAPITAL ASSET UNDER IN COME TAX ACT. ONCE, THE REVENUE RECORDS CLEARLY SHOWS THAT THE SAID LANDS A RE AGRICULTURAL LANDS AND IT IS ALSO NOTICED THAT THE AGRICULTURAL OPERAT IONS HAVE BEEN DONE ON THE SAID LANDS, JUST BECAUSE, THE ASSESSEE HAS NOT BEEN ABLE TO GENERATE DESIRED AGRICULTURAL INCOME FROM THE SAID LANDS AND THE ASSESSEE HAD SOLD THE SAID LANDS WITHIN ONE YEAR OF ITS PURCHASE, WOU LD NOT CHANGE THE CHARACTER OF AGRICULTURAL LAND TO A NON-AGRICULTURA L LAND. THIS VIEW OF OURS IS SUPPORTED FROM THE PRINCIPLES LAID DOWN BY THE H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M.S.SRINIVASA NAICKER REF ERRED TO SUPRA AS ALSO THE DECISION IN THE CASE OF ASHOK KUMAR RATHI REFER RED TO SUPRA. THIS BEING SO, WE ARE OF THE VIEW THAT WHAT HAS BEEN SOL D BY THE ASSESSEE IS AN AGRICULTURAL LAND AND CONSEQUENTLY THE ASSESSEE IS ENTITLED TO CLAIM THE BENEFIT OF EXEMPTION U/S.10(1) OF THE ACT. CONSEQU ENTLY, THE ORDER OF THE LD.CIT(A) IS SET-ASIDE AND THE AO IS DIRECTED TO GR ANT THE ASSESSEE THE ITA NO.2685/CHNY/2018 :- 7 -: BENEFIT OF EXEMPTION U/S.10(1) AS CLAIMED IN RESPEC T OF THE SALE OF THE SAID AGRICULTURAL LANDS. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 19 TH DAY OF FEBRUARY, 2019 IN CHENNAI. SD/- SD/- ( ) ( INTURI RAMA RAO ) /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) /JUDICIAL MEMBER /CHENNAI, 3 /DATED: 19 TH FEBRUARY, 2019. TLN , *45 65 /COPY TO: 1. ) /APPELLANT 4. 7 /CIT 2. *+) /RESPONDENT 5. 5 * /DR 3. 7 ( ) /CIT(A) 6. /GF