ACIT, Alwar V. FAKIRA GURJAR, Alwar

ITA 287/JPR/2011

• Counselvise Citation: 28723114 RSA 2011
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 31-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MEENA
• Keywords: Capital asset
• Section: 54B; 2(14); 142(1); 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO. 287/ JP/2011 ASSESSMENT YEAR 2005-06 PAN: AALPF 0837 D THE ACIT VS. SHRI FAKIRA GURJAR CIRCLE- 2 S/O SHRI GOVINDA GURJAR ALWAR VILLAGE: SAIDPUR TEHSIL TIJARA, ALWAR (APPELLANT ) (RESPONDENT) DEPARTMENT BY : SHRI K.C. MEENA ASSESSEE BY: NONE (A.D. ON RECORD) DATE OF HEARING: 19-09-2011 DATE OF PRONOUNCEMENT: 23-09-2011 ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORD ER OF THE LD. CIT(A), ALWAR DATED 18-01-2011 FOR THE ASSESSMENT YEAR 20 05-06. 2.1 THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN HOLDING THAT THE AGRICULTURAL LAND IN QUESTION IS NOT A CAPITAL ASSE T AS DEFINED U/S 2(14) OF INCOME TAX ACT, 1961 EVEN WHEN THE ASSESSEE HIMSELF HAS CLAIMED DEDUCTION U/S 54B FOR 2 INVESTMENT IN PURCHASE OF ANOTHER AGRICULTURAL LAND AND DELETED THE ADDITION ON ACCOUNT OF LONG TERM CAPIT AL GAIN OF RS. 15,87,624/- AS MADE BY THE AO. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN HOLDING THAT THE AGRICULTURAL LAND IN QUESTION IS NOT A CAPITAL ASSE T AS DEFINED U/S 2(14) OF THE ITAT EVEN WHEN THE AGRICUL TURAL LAND IN QUESTION IS SITUATED AT VILLAGE SAIDPUR W HICH WAS DECLARED AS URBAN AREA BY THE STATE GOVT. V IDE NOTIFICATION NO. F.10(2)UDH/III/86 DATED 28-08-1986 AND NO. F10(2)UDH/80 DATED 04-10-1995 AND MEANING THEREBY IT WAS HAVING TOWN COMMITTEE AS DEFINED IN PROVISIONS OF SECTION 2(14)(III) PRIOR TO BE A PART OF URBAN IMPROVEMENT TRUST, BHIWADI. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS AND CIRCUMSTANCES OF THE CASE IN ADJUDICATING UPON AN ISSUE WHICH IS EXPRESSLY CONTRARY TO THE DETAILS FURNISHED BY THE ASSESSEE DURING ASSESSMENT PROCEED INGS. 2.2 THE AO HAS RECEIVED INFORMATION FROM LD. CIT (C IB) THAT THE ASSESSEE HAS SOLD THE IMMOVABLE PROPERTY TO THE EXTENT OF RS . 86,77,500/-. ON THE BASIS OF THIS INFORMATION, THE AO ISSUED NOTICE U/S 142(1). THE ASSESSEE FILED THE RETURN ON 28 TH DEC. 2007 VIDE WHICH INCOME OF RS. 46,680/- WAS DISCLOSED ALONGWITH AGRICULTURAL INCOME OF RS. 20,0 00/-. THE ASSESSEE STATED THAT THE AGRICULTURAL LAND SOLD WAS BELONGED TO HIM AND HIS BROTHER AND THE SALE PROCEEDS WHICH WERE RECEIVED BY THE ASSESSEE W ERE TO THE EXTENT OF RS. 3 43,38,750/-. THE ASSESSEE HAS PURCHASED THE AGRICUL TURAL LAND TO THE EXTENT OF RS. 23,19,064/-. WHILE COMPUTING THE CAPITAL GAIN, THE ASSESSEE CLAIMED VARIOUS EXPENSES UNDER THE HEAD COST OF IMPROVEMEN T. THESE EXPENSES HAVE BEEN INCURRED DURING VARIOUS FINANCIAL YEARS. THE NATURE OF EXPENDITURE, QUANTUM OF EXPENDITURE AND THE FINANCI AL YEAR IN WHICH EXPENDITURE HAS BEEN INCURRED HAVE BEEN GIVEN BY TH E AO AT PAGE 1 OF THE ASSESSMENT ORDER. WHEN SUCH EXPENSES WERE INDEXED A S PER COST INDEX RATE, THE AMOUNT TO BE DEDUCTED FOR THE PURPOSE OF COMPUT ING THE CAPITAL GAIN CAME TO RS. 20,19,686/-. THE AO REQUIRED THE ASSESS EE TO FILED THE EVIDENCE IN RESPECT OF THE EXPENSES INCURRED. THESE EXPENS ES WERE NOT ALLOWED AND THE AO COMPUTED THE LONG TERM CAPITAL GAIN AT RS. 1 5,87,624/-. THE AO IN HIS ORDER HAS MENTIONED THAT URBAN IMPROVEMENT TRUS T, ALWAR DECLARED 19 VILLAGES OF BHIWADI AS PART OF 'URBAN AREA' IN THE YEAR 1996 AND THE VILLAGE IN WHICH LAND OF THE ASSESSEE SITUATED WAS ALSO COV ERED BY NOTIFICATION GIVEN BY THE URBAN IMPROVEMENT TRUST, BHIWADI. THE AO THE REFORE, HELD THAT AGRICULTURAL LAND LOCATED IN VILLAGE SAIDPUR IS COV ERED UNDER CAPITAL ASSET AS DEFINED IN SECTION 2 (14) OF THE ACT. 2.3 THE LD. CIT(A) HAS OBSERVED THAT AGRICULTURAL L AND SITUATED IN THE JURISDICTION OF MUNICIPALITY OR CANTONMENT BOARD IS COVERED UNDER THE 4 DEFINITION OF CAPITAL ASSET. THE MUNICIPALITY IS DE FINED IN ARTICLE 243Q OF THE CONSTITUTION. URBAN IMPROVEMENT TRUST IS NOT A MUNI CIPALITY. THE LD. CIT(A) THEREFORE, HELD THAT THE ASSESSEE IS NOT LIA BLE TO CAPITAL GAIN AFTER OBSERVING AS UNDER:- 4.3 I HAVE PERUSED THE ASSESSMENT ORDER AS WELL AS SUBMISSION OF THE ASSESSEE AND CASE LAWS RELIED UPON BY THE LD. AO, THE ASSESSEE HAS CLAIMED VARIOUS EXP ENSES ON ACCOUNT OF LAND IMPROVEMENT, LEVELING KACHI BOUNDARY AND WIRING. THE ASSESSEE'S EVIDENCE WERE CONSIDERED BY THE LD. AO AT THE TIME OF ASSESSMENT ORDER BUT NO EVIDENCE OF EXPENSES WERE FILED BEFORE THE A O. THE ASSESSEE HAS GIVEN SUFFICIENT OPPORTUNITY AT AP PEAL LEVEL AND THERE ARE NO EVIDENCE WITH THE ASSESSEE T O PROVE THAT EXPENSES CLAIMED WERE GENUINE AND INCURRED ON AGRICULTURE LAND WITH SOURCE OF EXPENSES. THEREFORE , THERE IS NO FORCE ON THIS GROUND OF APPEAL. ACCORDINGLY, APPEAL IS REJECTED. WHATEVER, AGRICULTURE INCOME SHOWN BY THE ASSESSEE IS NOT SUFFICIENT TO INCUR THESE EXPENSES AFTER MEETING THE OTHER EXPENSES OF AGRICULTURE AS WELL A S ON HOUSE HOLD EXPENSES. IN THIS CASE, AO ISSUED NOTICE U/S 142(1) ON 07-08- 2007 AND ALSO GIVEN VARIOUS OPPORTUNITY TO THE ASSE SSEE TO FILE THE EVIDENCE FOR CLAIMING OF LONG TERM CAPI TAL GAIN EXEMPTED. THE LD. AO HAS PASSED ORDER U/S 144 ON 5 OR NEAR TIME BARRING DATE OF THE ASSESSMENT. THE LD . AO HAS RIGHTLY DECIDED THE CASE AFTER PROPERTY OPPORTU NITY OF THE ASSESSEE. THIS GROUND OF APPEAL IS REJECTED. THIS ANCESTRAL LAND WAS SITUATED IN VILLAGE SAIDPUR IN BHIWADI AREA WHERE THERE IS NO MUNICIPALITY BUT UIT IS LOOKING AFTER THE DEVELOPMENT OF THE AREA IN BHIWAD I. FOR TAXING THE ANY ASSET, IT SHOULD BE CAPITAL ASSET WH ICH HAS BEEN DEFINED IN SECTION 2(14) OF THE INCOME TAX ACT AS SUBMITTED BY THE LD. AR IN HIS REPLY BUT DOES NOT I NCLUDE AGRICULTURE LAND NOT SITUATED IN MUNICIPAL AREA WHE RE POPULATION IS NOT LES THAN TEN THOUSAND OR DISTANCE NOT MORE THAN 8 KILOMETERS FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD. IN THIS CASE ANY CONDITION HAS NOT BEEN FULFILLED. THEREFORE, THIS S ALE OF AGRICULTURE LAND DOES NOT COME UNDER THE DEFINITION OF THE CAPITAL ASSET. IN CASE OF HARESH V MILANI VS. JCIT (2008), 114 ITD 428 (PUNE), HON'BLE ITAT HAS HELD THAT MERE INCLUSION OF LAND IN THE INDUSTRIAL ZONE WITHO UT ANY INFRASTRUCTURE DEVELOPMENT THEREUPON OR WITHOUT ESTABLISHING AND PROVIDING THAT THE LAND WAS PUT IN TO USE FOR NON -AGRICULTURAL LAND. THE MERE FUTURE POSSIBI LITIES TO PUT THE LAND INTO USE FOR NON-AGRICULTURAL PURPOSE WOULD NOT CHANGE THE CHARACTER OF LAND. THEREFORE, NO CAP ITAL GAIN IS LIABLE TO BE TAXED IN THE CASE OF THE ASSES SEE AS THE 6 LAND SOLD WAS AGRICULTURAL LAND. THEREFORE, APPEAL ON THIS POINT IS ALLOWED. 2.4 WE HAVE HEARD THE LD. DR AND PERUSED THE RECORD . BEFORE WE PROCEED FURTHER, IT WILL BE USEFUL TO REPRODUCE THE DEFINIT ION OF CAPITAL ASSETS AS GIVEN IN SECTION 2 (14) OF THE ACT. (14) 'CAPITAL ASSET' MEANS PROPERTY OF ANY KIND HEL D BY AN ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSINES S OR PROFESSION, BUT DOES NOT INCLUDE- (III) AGRICULTURAL LAND IN INDIA, NOT BEING LAND SI TUATE- (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURIS DICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNI CIPAL CORPORATION, NOTIFIED AREA COMMITTEE, TOWN AREA COM MITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAME) OR A CANTONME NT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THO USAND 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 MOR E THAN EIGHT KILOMETRES, FROM THE LOCAL LIMITS OF ANY MUNICIPALI TY OR CANTONMENT BOARD REFERRED TO IN ITEM (A), AS THE CE NTRAL GOVERNMENT MAY, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANISATION OF THAT AREA AND OTHER RELEVANT CONSID ERATIONS, SPECIFY IN THIS BEHALF BY NOTIFICATION IN THE OFFIC IAL GAZETTE ; 7 AS PER ARTICLE 243P (E) OF THE CONSTITUTION, MUNICI PALITY MEANS AN INSTITUTION OF SELF GOVT CONSTITUTED UNDER ARTICLE 243Q. ARTICLE 243R OF THE CONSTITUTION SAYS THAT ALL THE SEATS IN THE MUNICIP ALITIES SHALL BE FILLED BY THE PERSONS CHOSEN BY DIRECT ELECTION FROM TERRITORIAL CONSTITUENCY IN THE MUNICIPAL AREA AND FOR THIS PURPOSE, EACH MUNICIPAL AREA SHALL BE DIVIDED INTO TERRITORIAL CONSTITUENCY TO BE KNOWN AS WARDS . IN ADDITION TO THE ELECTED REPRESENTATIVES, THE LEGISLATURE OF THE STA TE MAY PROVIDE REPRESENTATION IN MUNICIPALITY IN RESPECT OF CERTAI N SPECIFIED PERSONS. THE AGRICULTURAL LAND SITUATED IN A MUNICIPALITY IS TO BE CONSIDERED AS CAPITAL ASSET. THE BASICS PURPOSE OF SECTION 2(14) IS TO IN CLUDE THE AGRICULTURAL LAND WHICH IS WITHIN THE TERRITORIAL AREA GOVERNED BY T HE LOCAL SELF GOVERNANCE. THIS HAS BEEN HELD BY THE HON'BLE KERALA HIGH COUR T IN THE CASE OF CIT VS. MURALI LODGE, 194 ITR 125. IT WILL BE USEFUL TO REP RODUCE THE HEAD NOTE AS UNDER:- FROM THE PLAIN AND UNAMBIGUOUS LANGUAGE EMPLOYED IN SECTION 2(14)(III)(A) OF THE INCOME-TAX ACT, 1961, IT IS CLEAR THAT, IF THE AGRICULTURAL LAND IS SITUATED OUTSIDE THE JU RISDICTION OF A MUNICIPALITY, THEN NO TAX ON ANY PROFITS OR GAINS A RISING FROM THE TRANSFER OF SUCH LAND WILL BE CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS'. THE WORD MUNICIPALITY HAS NOT BEEN DEFINED IN THE INCOME-TAX ACT, 1961. GENERALLY UNDERSTOOD, 8 'MUNICIPALITY' MEANS A LEGALLY INCORPORATED OR DULY AUTHORISED ASSOCIATION OF INHABITANTS OF A LIMITED AREA FOR LO CAL GOVERNMENTAL OR OTHER PUBLIC PURPOSES. THIS IS REFL ECTED IN THE PROVISIONS CONTAINED IN CHAPTER III OF THE KERALA M UNICIPALITIES ACT, 1960. THE LANGUAGE EMPLOYED IN SECTION 2(14) M AKES IT CLEAR THAT THE INTENTION OF THE LEGISLATURE IS NOT TO TREAT EVERY LOCAL AUTHORITY AS A MUNICIPALITY; BUT, ON THE OTHE R HAND, ONLY THOSE LOCAL AUTHORITIES WHICH HAVE ALL THE TRAPPING S OF A MUNICIPALITY CAN BE SAID TO BE ONE WITHIN THE MEANI NG OF THE SECTION. THE GURUVAYUR TOWNSHIP IS NOT AN AUTONOMOU S BODY LIKE A MUNICIPALITY. IT IS CONSTITUTED BY THE GOVER NMENT BY A NOTIFICATION ISSUED UNDER THE GURUVAYUR TOWNSHIP AC T. TO PUT IT DIFFERENTLY, THE MEMBERS OF THE TOWNSHIP COMMITT EE ARE NOT ELECTED REPRESENTATIVES OF THE RESIDENTS OF THE ARE A. THAT THE CENTRAL GOVERNMENT ALSO HAS UNDERSTOOD THE POSITION THUS IS OBVIOUS FROM THE DRAFT NOTIFICATION DATED FEBRUARY 8, 1991, PUBLISHED IN THE GAZETTE ISSUED UNDER SECTION 2(14) (III)(B). AREAS LYING WITHIN THE JURISDICTION OF THE GURUVAYU R TOWNSHIP CANNOT BE SAID TO BE AREAS LYING WITHIN THE JURISDI CTION OF A MUNICIPALITY. 2.5 THE URBAN IMPROVEMENT TRUST, BHIWADI WAS ESTABL ISHED BY THE GOVT. ON 4 TH JULY 1960, JULY FOR THE OVERALL DEVELOPMENT OF BHI WADI URBAN AREA. THE TRUST IS HEADED BY THE PUBLIC CHAIRMAN AS WELL AS DISTT COLLECTOR WITH SECRETARY AS EXECUTIVE OFFICER. IT CONSISTS OF GOVT . OFFICIALS AND NOMINATED 9 PERSONS AS TRUSTEES. IT IS THEREFORE; CLEAR THAT UR BAN IMPROVEMENT TRUST IS NOT AN INSTITUTION IN WHICH THE ELECTED REPRESENTATIVES ARE MEMBERS OR TRUSTEE. HENCE, URBAN IMPROVEMENT TRUST CANNOT BE CONSIDERED AS MUNICIPALITY, NOTIFIED AREA COMMITTEE, TOWN AREA COMMITTEE OR TOW N COMMITTEE. HENCE, THE AGRICULTURAL LAND SITUATED IN SAIDPUR, G OVERNED BY NOTIFICATION OF URBAN IMPROVEMENT TRUST, ALWAR AS URBAN AREA IS NOT A CAPITAL ASSET AS PER SECTION 2(14) OF THE ACT. WE THEREFORE, HOLD THAT T HE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. 3. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED.. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 23-09 -2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 23 /09/2011 *MISHRA COPY FORWARDED TO :- 1. THE ACIT, CIRCLE- 2, ALWAR 2. SHRI FAKIRA GURJAR, ALWAR 3. THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5. THE LD.DR 6. THE GUARD FILE (ITA NO.287/JP /11) A.R, ITAT, JAIPUR 10 11 12