THE DCIT CIR 19(2), MUMBAI V. M/S. KALPANA J. JAYAKAR, MUMBAI

ITA 2776/MUM/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 4676 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 06-09-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 22-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S SRIVASTAVA
• Assessee Lawyers: V G GINDE
• Keywords: Capital asset; Capital Gains
• Section: 2(14)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER. I.T.A. NO.2776/MUM/2008 ASSESSMENT YEAR : 2003-04. DEPUTY COMMISSIONER OF KALPANA J. JAYAKAR, INCOME-TAX-!9(2), MUMBAI. VS. JAY APARTMENT, 5 LINKING ROAD, SANTACRUZ (W), MUMBAI 400054. PANAABPJ2142B (APPELLANT) (RE SPONDENT) APPELLANT BY : SHRI R.S. SRIVASTAVA. RESPONDENT BY : SHRI V.G. GINDE. O R D E R PER J.SUDHAKAR REDDY, A.M. THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGA INST THE ORDER OF THE CIT(APPEALS)-XIX, MUMBAI DATED 19-02-2008 FOR THE ASSESSMENT YEAR 2003-04 ON THE FOLLOWING GROUND: 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF EXEMPTION U/S 2(14)(III) OF THE I.T. ACT, 1961 AMOUNTING TO RS.46,30,550/- ON ACCOUNT OF LONG TERM CAPITAL GAIN ON SALE OF AGRICULTURAL LAND WITHOUT APPRECIATING T HE FACT THAT THE GOVERNMENT OF MAHARASHTRA HAS DECLARED THAT SUBJECT MATTER OF LAND AS HILL STATION AREA MUCH PRIOR TO THE TRANSFER OF SALE BY THE ASSESSEE AND THEREFORE THE IMPUGNED LAND COMES UNDER THE INDUSTR IAL ZONE IN ORDER TO DEVELOP THE TOURISM. 2. FACTS IN BRIEF: THE ASSESSEE IS AN INDIVIDUAL AND DERIVES INCOME FROM SALARIES, PROFESSION AND HOUSE PROPERTY. DURING THE YEAR, TH E ASSESSEE HAS ALSO DERIVED INCOME FROM CAPITAL GAINS. THE ISSUE IN THIS APPEAL IS WHETHER THE LONG TERM CAPITAL GAINS ARISING FROM THE SALE OF LAND SHOULD BE TREATED AS EXEMPT ON THE GROUND THAT THE LANDS IN QUESTION ARE AGRICULTURAL LANDS OR NOT. THE AO AT PARA 2 PAGE 2 OF HIS ORDER BROUGHT OUT THE FACTS WHICH ARE EXTRACTED BELOW FOR READY REFERENCE: (I) 2 HECTORS & 89 ACRES LAND WAS PURCHASED FOR A SUM O F RS.1,20,000/- BY THE ASSESSEE AT VILLAGE AMBAVANE ON 15/12/1995 FROM KAM ALA ANU BANGERA. THE DATE OF CONVEYANCE SHOWS MRS. KALPANA JAYSEN JA YKAR, AGED 70 YEARS AND HER SON PRAMOD JAYSEN JAYKAR, AGED 36 YEARS, BO TH TO BE AN AGRICULTURIST AS DEFINED IN BOMBAY TENANCY & AGRICU LTURAL LANDS ACT, 1948. THE ANOTHER PEACE OF LAND SITUATED AT 8, SHAHAPUR W AS PURCHASED ON 26/11/1990 FOR A SUM OF RS.20,000/-. (II) BOTH THESE LANDS HAVE BEEN SOLD TO SAHARA INDIA COM MERCIAL LTD., LONAVALA, PUNE ON 22/10/2002 FOR A TOTAL CONSIDERAT ION OF RS.50,02,250/-. (III) THE COPY OF AGREEMENT RELEVANT TO THIS TRANSACTION MENTIONS THAT THE LAND IN QUESTION WAS NOTIFIED IN SEPTEMBER-1993 BY THE D RAFT REGIONAL PLAN FOR PUNE REGIONS TOURISM DEVELOPMENT ZONE (TDZ). AS A M ATTER OF FACT, THE STATE GOVERNMENT ANNOUNCED ITS NEW TOURISM POLICY, WHERE TOURISM WAS 3 RECOGNIZED AS A BONA FIDE INDUSTRY IN CONSONANCE WI TH THE INDUSTRIAL POLICY OF THE GOVERNMENT OF INDIA PRONOUNCED IN THE YEAR 1 991. THE TDZ INTENDED TO DEVELOP TOURISTS RESORTS, MOTELS, HEALT H FARMS, WATER SPORTS, GULF SPORTS ETC. (IV) ACCORDINGLY, THE STATE GOVERNMENT ANNOUNCED NEW IND USTRIAL POLICY IN 1993 TO DEREGULATE AND RATIONALIZE THE RULES AND P ROCEDURES RELATING TO SETTING UP NEW CENTERS IN THE STATE. ACCORDING TO T HE SAID INDUSTRIAL POLICY, NO PERMISSION OF THE COLLECTOR U/S. 42 OR 44 OF THE MAHARASHTRA LAND REVENUE COURT, 1966 FOR CONVERSION OF AGRICULTURAL LAND TO BONA FIDE INDUSTRIAL USE SHALL BE REQUIRED IF LAND IN QUESTIO N IS SITUATED WITHIN THE PROPOSED OR DRAFT INDUSTRIAL ZONE OF A DRAFT OR FIN AL REGIONAL PLAN OR DRAFT, INTERIM OR FINAL DEVELOPMENT PLAN OR DRAFT OR FINAL TOWN PLANNING SCHEME. LATER, A DRAFT WAS FINALLY NOTIFIED VIDE NOTIFICATI ON NO. TPS/1895/227/CR- 26/95/UD-13, DATED 25/11/1997 DECLARING VILLAGE AMB AVANE, TQ. MULSI, DISTRICT PUNE AS HILL STATION. THE ASSESSEE WHEN QUESTIONED, SUBMITTED THAT, A) MERELY BECAUSE THE BUYER DESIRED TO PUT THE SUBJECT LAND, FOR NON AGRICULTURAL USE, AFTER THE DATE OF TRANSFER, THE LAND DOES NOT CEASE TO BE AGRICULTURAL LAND. B) THE SAID LAND IS ENTERED IN THE REVENUE RECORDS AS AGRICULTURAL LAND RIGHT FROM THE TIME THE ASSESSEE HAS PURCHASED THE SAID LAND A ND TILL THE TIME SHE HAS SOLD SUCH AGRICULTURAL LAND TO THE BUYER. RELIANCE WAS PLACED ON A NUMBER DECISIONS. 3. THE AO REJECTED THE CONTENTIONS OF THE ASSESSEE. THE AOS CONCLUSIONS ARE BROUGHT OUT AT PAGE 3 AND 4 OF THE CIT(APPEALS) ORDER WHICH ARE EXTRACTED BELOW FOR READY REFERENCE : 4 I) IT WAS OBSERVED BY THE AO AFTER GOING THROUGH THE DEEDS THAT THE PROPERTY HAD CHANGED ITS CHARACTER FROM AGRICULTURA L LAND TO NONAGRICULTURAL LAND. IN THIS REGARD, IT WAS HIGHLI GHTED THAT THE LAND IN QUESTION WAS NOTIFIED IN SEPTEMBER 1993 BY THE DRAF T REGIONAL PLAN FOR PUNE REGION AS TOURISM DEVELOPMENT ZONE (TDZ). THE TDZ INTENDED TO DEVELOP TOURISTS RESORTS, MOTELS, HEALTH FARMS, WA TER SPORTS, GOLF SPORTS ETC. II) THE AO HAS SPECIFICALLY REFERRED TO SOME OF THE CLA USES IN PARA 4 OF THE ORDER WHICH HIGHLIGHTED THAT UNDER THE NEW INDUSTRI AL POLICY, NO PERMISSION OF THE COLLECTOR U/S. 42 OR 44 WOULD BE REQUIRED FOR CONVERSION OF AGRICULTURAL LAND TO BONAFIDE INDUSTRIAL USE, IF THE LAND IN QUESTION WAS SITUATED WITHIN THE PROPOSED INDUSTRIAL ZONE. IT WAS FURTHER HIGHLIGHTED IN THE SAME PARAGRAPH TH AT THE SAID PROPERTY HAD ACQUIRED THE STATUS OF DEEMED CAPITAL NA AS PER AMENDMENTS IN THE MLR CODE 1966, BT & AL ACT, 1948 AND PERTAINING TO THE NEW INDUSTRIAL POLICY OF STATE GOVERNMENT AND PROVISIONS OF THE RE GIONAL PLANS READ WITH THE HILL STATION REGULATIONS. III) THE AO HAS ALSO RELIED UPON SOME JUDICIAL PRONOUNCE MENTS IN WHICH IT HAS BEEN HIGHLIGHTED THAT IF THE LAND IS SOLD OR TRANSF ERRED TO A NON- AGRICULTURIST PURPOSES SOON AFTER ITS TRANSFER, IT IS ALSO A RELEVANT FACTOR FOR DETERMINING THE NATURE OF THE LAND. SIMILARLY, THE ISSUE REGARDING THE LAND BEING USED FOR AGRICULTURAL PURPOSES IN THE REMOTE PAST OR MERELY BEING RECORDED IN LAND REVENUE AS AGRICULTURAL LAND IS NOT DECISIVE. IV) THE AO HAS ALSO POINTED OUT IN THE ORDER THAT THE O NUS LIES ON THE ASSESSEE TO ESTABLISH THE BONAFIDE OF ANY CLAIM MADE IN HE R ETURN OF INCOME. IN THE PRESENT CASE THE DETAILS AS MENTIONED IN THE AGREEM ENT OF SALE THEMSELVES INDICATE THAT THE NATURE OF LAND HAS UNDERGONE A CH ANGE AND THERE IS NOTHING BROUGHT ON RECORD BY THE ASSESSEE TO ESTABL ISH THAT THE NATURE OF LAND IS AGRICULTURAL AND THEREFORE, EXEMPTION U/S. 2(14)(III) OF THE I.T. ACT, CAN NOT BE ALLOWED. 5 V) THE AO WAS ASKED TO PROVIDE FURTHER COMMENTS THROUG H A REMAND REPORT. IN HIS REPORT THE AR STATED THAT THE DOCUMENTS SUBM ITTED BEFORE THIS OFFICE HAS ALREADY BEEN SUBMITTED BEFORE HIM PRIOR TO THE FINALIZATION OF THE ASSESSMENT ORDER. IT IS FURTHER STATED THAT THE AO HAS CONSIDERED ALL THE SUBMISSIONS FILED WHILE FINALIZING THE ASSESSMENT O RDER. 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE FIRST APPELLATE AUTHORITY SUMMARIZED THE ARGUMENTS OF THE ASSESSEE AT PARA 16 AND 17 AND AT PAGE 19 HE HELD THAT NO CAPITAL GAINS CAN BE LEVIED ON THE SALE OF AGRICULTURAL LAND IN VIEW OF SECTION 2(14)(III). AGGRIEVED, THE REVEN UE IS IN APPEAL. 5. WE HAVE HEARD THE CONTENTIONS OF SHRI R.S. SRIV ASTAVA, THE LEARNED DR AND SHRI V.G. GINDE, THE LEARNED COUNSEL FOR THE A SSESSEE. 6. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIR CUMSTANCES OF THE CASE AND A PERUSAL OF THE PAPERS ON RECORD AND THE ORDER S OF THE AUTHORITIES BELOW, WE HOLD AS FOLLOWS. 7. THE CIT(APPEALS) AT PAGE 16 AND 17 OF HIS ORDER HAS BROUGHT OUT THE FOLLOWING : A) THE APPELLANT HAWS LAID THE EVIDENCES TO SHOW TH AT THE LAND UNDER CONSIDERATION WAS PURCHASED AS AGRICULTURAL LAND AS PER THE AGREEMENT FOR SALE AND THE SAME WAS SOLD AS AGRICULTURAL LAND. TH E APPELLANT HAD NEITHER OBTAINED NOR APPLIED FOR CONVERSION OF THE LAND TO CAPITAL NA. B) THE LAND HAS BEEN CLASSIFIED AS AGRICULTURAL LAND AND THE APPELLANT PAID LAND REVENUE ACCORDINGLY. C) THE APPELLANT HAS BEEN SHOWING AGRICULTURAL I NCOME IN HIS RETURNS AND THE REVENUE HAS NEVER DISPUTED THE SAME IN THE PAST YEARS EXTRACTS AS PER 7 X 12, HAVE FORMED THE BASIS OF AGRICULTURAL I NCOME SHOWN IN THE EARLIER YEARS. 6 D) OUT OF VARIOUS TESTS LAID DOWN THE APPELLANT HAS SATISFIED MOST OF THE TESTS INCLUDING THE FACT THAT ACTUALLY THE LAND WAS BEING USED FOR AGRICULTURAL TILL THE DATE OF SALE. THE AO HAS NO WHERE BROUGHT ANYTHING ON RECORD TO ESTABLISH THAT AGRICULTURAL ACTIVITY WAS NOT BEING CARRIED OUT ON THE PLOTS OF LAND. E) WHILE THE AO HAS RELIED UPON THE CREATION OF C APITAL TDZ AS PER THE POLICY OF THE GOVERNMENT, IT DOES NOT NECESSARILY I MPLY THAT ALL THE LAND IN THIS AREA AUTOMATICALLY SHOULD BE TREATED AS NON-AGRICUL TURAL LAND. IN VIEW OF THE PROVISIONS OF INCOME TAX ACT AS WELL AS THE PRINCIP LES LAID DOWN BY THE VARIOUS JUDICIAL PRONOUNCEMENTS, IT IS CLEAR THAT THE SPECI FIC FACTS NEEDS TO BE EXAMINED AND BROUGHT ON RECORD FOR ARRIVING AT THE CONCLUSION REGARDING THE NATURE OF LAND. F) THE APPELLANT HAS ALSO RELIED UPON OTHER JUDIC IAL PRONOUNCEMENTS LIKE HARESH V.MILANI VS. JCIT ITAT PUNE B BENCH ( 2207) 111 TTJ (PUNE) 310 WHERE IT HAS BEEN HELD THAT THE CHARACTER OF LAND W AS NOT CHANGE FROM AGRICULTURAL TO NON-AGRICULTURAL BECAUSE THE LAND I S SOLD TO THE COMPANY FOR SETTING UP FACTORY IF AT THE TIME OF SALE IT ACTUAL LY BORE THE CHARACTER OF AGRICULTURAL LAND ON THE TESTS REFERRED TO ABOVE. I N THE PRESENT CASE AT THE TIME OF SALE OF THE LAND THERE WERE NEITHER EVIDENC ES TO ARRIVE AT THE CONCLUSION THAT THE LAND WAS NOT AGRICULTURAL LAND AND ON THE OTHER HAND THERE WERE SEVERAL EVIDENCES TO ESTABLISH THAT THE NATURE OF THE LAND WAS AGRICULTURAL. THEREAFTER THE CIT(APPEALS) HELD THAT THE AO HAS ON LY RELIED UPON THE POLICY OF THE GOVERNMENT TO DEVELOP THE AREA AS TDZ AND HAS C OME TO A CONCLUSION THAT BY VIRTUE OF SUCH A DECLARATION, ALL THE LAND IN THE A REA WOULD BE NON AGRICULTURAL IN NATURE AND THAT THERE WAS NO OTHER EVIDENCE BROUGHT ON RECORD, BY THE AO THAT THE NATURE OF LAND WAS NON-AGRICULTURAL LAND. HE AL SO HELD THAT THE AO HAS NOT COUNTERED THE VARIOUS EVIDENCES PUT FORWARD BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM THAT THE LAND IS AGRICULTURAL LAND. IN VIEW O F THE ABOVE, HE ALLOWED THE 7 APPEAL OF THE ASSESSEE. WE FULLY AGREE WITH THESE F INDINGS. MERELY BECAUSE THE LANDS IN QUESTION WERE NOTIFIED IN SEPTEMBER,1993 B Y THE DRAFT REGIONAL PLAN FOR PUNE REGION AS TOURISM DEVELOPMENT ZONE AND BECAUSE TOURISM WAS RECOGNIZED AS AN INDUSTRY, THE AGRICULTURAL LAND WITHIN THE N OTIFIED REGION, DOES NOT CEASE TO BE AGRICULTURAL LAND. THE ASSESSEE HAS BEEN DECLARI NG AGRICULTURAL INCOME FOR THE LAST SO MANY YEARS AND THE REVENUE HAS BEEN ASSESSI NG SUCH INCOME. THE LAND WAS PURCHASED AS AN AGRICULTURAL LAND, USED AS AGRI CULTURAL LAND, AGRICULTURAL INCOME WAS DERIVED AND THE LAND WAS SOLD AS AGRICUL TURAL LAND. IT IS NOT WITHIN 8 KMS. FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR C ANTONMENT BOARD. THUS WE ARE OF THE CONSIDERED OPINION THAT THE ORDER OF THE FIR ST APPELLATE AUTHORITY HAS TO BE SUSTAINED. 8. THE HONBLE DELHI HIGH COURT IN THE CASE OF HIN DUSTAN INDUSTRIAL RESOURCES LTD. VS. ACIT 180 TAXMAN 114 (DEL.) HEL D AS FOLLOWS : SECTION 2(14) OF THE INCOME-TAX ACT, 1961 CAPIT AL GAINS CAPITAL ASSETS ASSESSEE-COMPANY PURCHASED AN AGRICULTURAL LAND IN 1989-SHORTLY THEREAFTER,SAID LAND WAS ACQUIRED UNDER LAND ACQUIS ITION ACT, 1894 AND COMPENSATION WS PAID TO ASSESSEE- ASSESSING OFFICER CHARGED CAPITL GAINSTHEREON HOLDING THAT ASSESSEE HAD PURCHASED LA ND TO SET UP AN INDUSTRY AND, HENCE, LAND CEASED TO BE N AGRICULTUR L LAND WHETHER SINCE AT POINT OF TIME WHEN ASSESSEE PURCHASED SAID LAND IT WAS AN GRICULTURAL LAND AND ON DATE OF ACQUISITION, CHARACTER OF LAND CONTI NUED TO BE AGRICULTURAL, MERE FACT THAT ASSESSEE INTENDED TO USE LAND FOR IN DUSTRIL PURPOSE DID NOT, IN ANY WAY, ALTER NATURE AND CHARACTER OF LAND HE LD, YES. 9. ON SIMILAR FACTS THE PUNE, B BENCH OF THE TRI BUNAL IN THE CASE OF HARESH V. MILANI VS. JCIT 114 ITD 428 (PUNE), HELD AS FOLLOWS : 8 SECTION 2(14) OF THE INCOME-TAX ACT,1961 CAPITAL GAINS CAPITAL ASSET ASSESSMENT YEAR 1995-96 ASSESSEE CLAIMED EXEMPTIO N OF LONG-TERM CAPITAL GAINS ARISING OUT OF SALE OF CERTAIN AGRICU LTURAL LAND ASSESSING OFFICER REJECTED SAID CLAIM ON GROUND THAT LAND IN Q UESTION WAS LOCATED IN AN INDUSTRIAL ZONE DESIGNATED BY STATE GOVERNMENT A ND, HENCE, WAS NOT AGRICULTURAL LAND AND IT WAS ALSO INDICATED THEREIN THAT AGRICULTURAL OPERATIONS WERE CARRIED OUT ON IT BY OWNER HIMSELF FURTHER, ADMITTEDLY, ASSESSEE HAD NOT APPLIED FOR CONVERSION OF LAND FOR NON-AGRICULTURAL PURPOSES AND NO SUCH PERMISSION WAS OBTAINED FROM C ONCERNED AUTHORITY- THUS, THERE WAS NO MATERIAL OR EVIDENCE TO SHOW THA T ASSESSEE HAD PUT THAT LAND INTO USE FOR NON-AGRICULTURAL PURPOSES AT TIME WHEN IT WAS SOLD WHETHER MERE INCLUSION OF LAND IN INDUSTRIAL ZONE W ITHOUT ANY INFRASTRUCTURE DEVELOPMENT THEREUPON OR WITHOUT EST ABLISHING AND PROVING THAT LAND WAS PUT INTO USE FOR NON-AGRICULTURAL PUR POSES DOES NOT AND CANNOT CONVERT AGRICULTURAL LAND INTO NON-AGRICULTU RAL LAND HELD, YES WHETHER THEREFORE, IT COULD BE SAID THAT LAND SOLD BY ASSESSEE WAS AN AGRICULTURAL LAND AND, AS SUCH, ANY GAIN ARISING FR OM SALE THEREOF WAS EXEMPTED FROM TAX HELD, YES. 10. APPLYING THE PROPOSITIONS LAID DOWN IN THESE CASE LAWS TO THE FACTS OF THIS CASE, WE UPHOLD THE CONTENTION OF THE ASSESSEE AND DISMISS THE REVENUES APPEAL. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 24 TH DAY OF SEPT., 2010. SD/- SD/- (V. DURGA RAO) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 24 TH SEPT. 2010. 9 COPY FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, H-BENCH //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI BENCHES WAKODE