The ITO, Ward-1, Tenali, Tenali V. Sri Viswanathapalli Venkateswara Rao,

ITA 296/VIZ/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0166 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 20-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 10-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M NARAYANA RAO
• Keywords: Capital asset; Question of law; Competent authority
• Section: 2(14); 142(1)

Judgement Text

ITA NO.296/VIZAG/2012 V. VENKATESWARA RAO, NIZAMPATNAM, GUNTUR DIST. 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , . . . . , $ $ $ $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.296/VIZAG/2012 ( / ASSESSMENT YEAR : 2009-10 ) ITO WARD - 1 TENALI VS. V. VENKATESWARA RAO NIZAMPATNAM, GUNTUR DIST. [ PAN : ABAPV 9922B ] ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) & ) / APPELLANT BY : SHRI M. NARAYANA RAO, DR '(& ) / RESPONDENT BY : SHRI D.L. NARASIMHA RAO, AR ) - / DATE OF HEARING : 20.11.2015 ) - / DATE OF PRONOUNCEMENT : 11/12/2015 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE CIT (A), GUNTUR DATED 12.6.2012 FOR THE ASSESSM ENT YEAR 2009-10. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: ITA NO.296/VIZAG/2012 V. VENKATESWARA RAO, NIZAMPATNAM, GUNTUR DIST. 2 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS BOTH ON FA CTS AND IN LAW. 2. THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE TOWARDS LONG TERM CAPITA! GAINS ON SALE OF LANDS USED FOR T HE BUSINESS OF AQUACULTURE ON THE GROUNDS THAT THE SAID LANDS WERE AGRICULTURAL LANDS WHOSE SALE IS EXEMPT FROM CAPITAL GAINS. 3. THE LD. CIT(A) OUGHT NOT TO HAVE RELIED ON THE CERT IFICATE OF THE VRO, NIZAMPATNAM TO CONCLUDE THAT THE LANDS IN QUES TION ARE AGRICULTURAL LANDS AS THERE IS NO REFERENCE AT ALL TO THE NATURE OF THE LANDS IN THE SAID CERTIFICATE. 4. THE LD.CIT(A) IS NOT JUSTIFIED IN RELYING ON THE CE RTIFICATE ISSUED BY THE PURCHASER M/S. VANPIC AS THE EXTENT OF LANDS UNDER EACH SURVEY NUMBER PURCHASED BY THE SAID CONCERN HAS NOT BEEN FURNISHED IN THE SAID CERTIFICATE. 5. THE LD.CIT(A) OUGHT NOT TO HAVE DRAWN SUPPORT FROM THE AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH THE ORIGINAL OWNE RS OF THE LAND DURING THE YEARS 1993, 1994 AND 2005 IN ORDER TO MA KE INFERENCE REGARDING THE NATURE OF LANDS IN VIEW OF THE LONG P ASSAGE OF TIME BETWEEN THE YEAR OF AGREEMENTS AND THE YEAR OF SALE . 6. THE LD.CIT(A) IS NOT JUSTIFIED IN INFERRING THAT TH E LANDS IN QUESTION WERE AGRICULTURAL LANDS BASED ON THE HYPOT HECATION AGREEMENT ENTERED INTO WITH SBI FOR OBTAINING CROP L OAN. THE LD.CIT(A) OUGHT TO HAVE SEEN THAT THE THIRD SCHEDUL E OF THE AGREEMENT WHERE THE SURVEY NUMBERS OF SOME OF THE LANDS IN QU ESTION WERE MENTIONED CONTAINS DETAILS OF THE LANDS WHERE HERD/FISH/FLOCK/SILKWORMS/COCOONS ARE REARED AS MEN TIONED IN CLAUSE 1(U) OF THE AGREEMENT, WHICH UNAMBIGUOUSLY SHOWS TH AT ASSESSEE CARRIED OUT AQUACULTURE IN THE SAID LANDS. 7. THE LD.CIT(A) ERRED IN DISREGARDING THE STATEMENT G IVEN BY THE ASSESSEE TO THE INSPECTOR OF INCOME TAX ON 25-11-20 11 WHEREIN IT WAS ADMITTED THAT THE LANDS SOLD BY HIM TO M/S. VAN PIC WERE AQUACULTURE LANDS. 8. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF H EARING. 2. THE BRIEF FACTS OF THE CASE, ARE THAT THE ASSESS EE IS AN INDIVIDUAL FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10, DECLARING ITA NO.296/VIZAG/2012 V. VENKATESWARA RAO, NIZAMPATNAM, GUNTUR DIST. 3 TOTAL INCOME OF RS.1,96,340/-, BESIDES AGRICULTURAL INCOME OF RS.1,50,000/-. THE CASE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTICES U/S 143(2) & 142(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT) WERE ISSUED. DURING THE COURS E OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAD RECEIVED AN AMOUNT OF RS.50,75,280/-, TOWARDS SALE OF AGRICULTURAL LAN DS TO M/S VANPIC PROJECTS PVT. LTD. AND CLAIMED EXEMPT FROM TAX. TH E A.O. ISSUED A SHOW CAUSE NOTICE AND ASKED WHY THE SALE PROCEEDS FROM L AND SHOULD NOT BE BROUGHT TO TAX UNDER THE HEAD CAPITAL GAINS AS THE LANDS WERE USED FOR AQUA CULTURE AND NOT FOR AGRICULTURAL PURPOSE. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT HE HAS SO LD THE AGRICULTURAL LANDS, WHICH WERE SITUATED IN A VILLAGE AND WHICH A RE USED FOR AGRICULTURAL PURPOSE RIGHT FROM THE BEGINNING. THE ASSESSEE FURTHER SUBMITTED THAT THESE LANDS ARE ASSIGNED BY THE GOVE RNMENT FOR THE PURPOSE OF CARRYING OUT AGRICULTURAL OPERATIONS AND HE IS HOLDING THE SAID LANDS IN HIS POSSESSION SINCE LAST 15 YEARS. THERE FORE, THE QUESTION OF PAYING CAPITAL GAINS TAX ON SALE OF AGRICULTURAL LA NDS DOES NOT ARISE. TO THIS EFFECT, HE HAS FILED A CERTIFICATE FROM VRO, T O THE FACT THAT THESE LANDS ARE AGRICULTURAL LANDS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TO ASCERTAIN THESE FACTS, THE A.O. DEP UTED INCOME TAX INSPECTOR(ITI) FOR INSPECTION OF LANDS, TO IDENTIFY WHETHER THE SAID LANDS ITA NO.296/VIZAG/2012 V. VENKATESWARA RAO, NIZAMPATNAM, GUNTUR DIST. 4 ARE AGRICULTURAL LANDS OR AQUA CULTURE LANDS. THE ITI, INSPECTED THE LANDS AND SUBMITTED HIS REPORT AND AS PER ITI REPOR T THESE LANDS IDENTIFIED AS AQUA CULTURE LANDS, SITUATED AMIDST T HE SEA WHERE THE ASSESSEE HAS TO GO BY BOAT. THE ITI, FURTHER REPOR TED THAT THESE LANDS ARE SALINE AND NOT FIT FOR CULTIVATION, THEREFORE, AGRICULTURAL ACTIVITIES CANNOT BE CARRIED ON IN THE SAID LANDS. THE A.O. B ASED ON THE REPORT OF THE ITI, HELD THAT THESE LANDS ARE NOT AGRICULTURAL LANDS AND USED FOR AQUA CULTURE, THEREFORE, COMING WITHIN THE DEFINITI ON OF CAPITAL ASSETS AS DEFINED UNDER SECTION 2(14) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT), AND EXIGIBLE FOR CAPITAL GAIN IN TERMS OF SECTION 45 OF THE ACT. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE CONTENDED THAT THESE LANDS ARE AGRICULTURAL LANDS, USED FOR A GRICULTURAL OPERATIONS FROM THE BEGINNING. THE ASSESSEE FURTHER CONTENDED THAT HE IS CULTIVATING THE LANDS, SINCE PAST 15 YEARS AND DECL ARING THE AGRICULTURAL INCOME REGULARLY IN HIS INCOME TAX RETURNS. THE AS SESSEE FURTHER SUBMITTED THAT THESE LANDS WERE ACQUIRED BY THE GOV ERNMENT FOR THE PURPOSE OF ESTABLISHMENT OF PORT AND ASSIGNED THE L ANDS TO M/S. VANPIC PVT. LTD. THEREFORE, HE HAS ASSIGNED HIS RIGHT IN FAVOUR OF M/S. VANPIC ITA NO.296/VIZAG/2012 V. VENKATESWARA RAO, NIZAMPATNAM, GUNTUR DIST. 5 PVT. LTD, FOR AGGREGATE PRICE OF RS.50,75,280/-. T HE ASSESSEE FURTHER SUBMITTED THAT THESE LANDS ARE AGRICULTURAL LANDS, SITUATED BEYOND 8 KMS FROM THE LIMITS OF LOCAL MUNICIPALITY, ARE EXEMPT F ROM CAPITAL GAINS AND HENCE, DID NOT DISCLOSED THE INCOME FROM SALE OF TH ESE LANDS FOR THE PURPOSE OF TAX. THE ASSESSEE FURTHER SUBMITTED THA T THE HOLDING OF THE ABOVE LANDS AND ALSO NATURE OF LAND IS AUTHENTICATE D BY THE CERTIFICATE ISSUED BY THE VRO, WHO IS THE COMPETENT AUTHORITY T O CERTIFY THE NATURE OF LAND AND ALSO FURNISHED COPIES OF THE SALE AGREE MENTS EXECUTED IN FAVOUR OF THE ASSESSE BY THE PREVIOUS OWNER, WHEREI N THESE LANDS WERE CLASSIFIED AS WET AGRICULTURAL LANDS. THE ASSESSEE FURTHER SUBMITTED THAT THE A.O. IS NOT CORRECT IN COMING TO THE CONCLUSION THAT THESE LANDS ARE NOT FIT FOR AGRICULTURAL OPERATIONS BASED ON THE RE PORT OF ITI, AS ITIS REPORT IS OBTAINED AFTER TWO YEARS OF THE SALE OF L ANDS WHICH CANNOT BE CONSIDERED AS AN EVIDENCE TO COME TO THE CONCLUSION THAT THE SAID LANDS ARE NOT AGRICULTURAL LANDS. THE ASSESSEE FURTHER S UBMITTED THAT HE HAS OBTAINED A CERTIFICATE FROM M/S. VANPIC PVT. LTD. S TATING THAT THE LANDS SOLD BY THE ASSESSEE IN QUESTION IS AGRICULTURAL LA ND AT THE TIME OF SALE. ALTERNATIVELY, THE ASSESSEE SUBMITTED THAT THESE LA NDS WERE ACQUIRED BY THE GOVERNMENT BY WAY OF A NOTIFICATION FOR THE PUR POSE OF ESTABLISHMENT OF PORT. THEREFORE, IT CANNOT BE CON SIDERED AS PRIVATE SALE FOR THE PURPOSE OF DETERMINING CAPITAL GAINS. THE ASSESSEE FURTHER ITA NO.296/VIZAG/2012 V. VENKATESWARA RAO, NIZAMPATNAM, GUNTUR DIST. 6 SUBMITTED THAT THE CHARACTERISTICS OF THE LAND SHOU LD BE MEASURED AT THE TIME OF SALE, BUT NOT AT THE TIME OF MAKING ASSESSM ENT. TO THIS EFFECT HE HAS RELIED UPON THE HONBLE HIGH COURT OF GUJARA T DECISION IN THE CASE OF GORDHANBHAI KAHANDAS DALWADI VS. CIT GUJARAT 12 7 ITR 664. THE A.R. FURTHER RELIED UPON THE HONBLE KOLKATA HIGH C OURT JUDGEMENT IN THE CASE OF CIT VS. BORHAT TEA CO. LTD. 138 ITR 783 AN D ARGUED THAT FOR THE PURPOSE OF LAND BEING AGRICULTURAL LAND, ACTUAL AGRICULTURAL OPERATIONS OR CULTIVATION OR TILLING TO THE LAND IS NOT NECESS ARY AND WHAT IS TO BE SEEN IS WHETHER SAID LAND IS CAPABLE OF DOING AGRIC ULTURAL OPERATIONS BEING CARRIED ON. THE CIT(A), AFTER CONSIDERED THE EXPLANATIONS FURNISHED BY THE ASSESSE, HELD THAT THE IMPUGNED LA NDS WOULD NOT FALL WITHIN THE DEFINITION OF CAPITAL ASSETS AS DEFINED IN SECTION 2(14) OF THE ACT AND ALSO THE TRANSACTION IN QUESTION MAY NOT BE HIT BY THE PROVISIONS OF SECTION 45 OF THE ACT, ACCORDINGLY, DIRECTED THE A.O. TO DELETE THE ADDITIONS. AGGRIEVED BY THE CIT(A) ORDER, THE REVE NUE IS IN APPEAL BEFORE US. 4. THE LD. D.R. SUBMITTED THAT THE CIT(A) WAS ERRED IN DELETING THE ADDITION MADE TOWARDS LONG TERM CAPITAL GAINS ON SA LE OF LANDS USED FOR THE PURPOSE OF BUSINESS OF AQUA CULTURE ON THE GROU ND THAT THE SAID LANDS WERE AGRICULTURAL LANDS AND ARE EXEMPT FROM C APITAL GAIN TAX. THE ITA NO.296/VIZAG/2012 V. VENKATESWARA RAO, NIZAMPATNAM, GUNTUR DIST. 7 D.R. FURTHER SUBMITTED THAT THE CIT(A) OUGHT NOT TO HAVE RELIED UPON THE CERTIFICATE OF THE VRO TO CONCLUDE THAT THE LANDS I N QUESTION ARE AGRICULTURAL LANDS AND AS THERE IS NO REFERENCE AS TO THE NATURE OF LANDS IN THE SAID CERTIFICATE. THE D.R. FURTHER ARGUED T HAT THE A.O. HAS PHYSICALLY INSPECTED THE LANDS BY DEPUTING THE INSP ECTOR OF INCOME TAX AND OBTAINED A REPORT AND AS PER THE ITI REPORT, TH E SAID LANDS WERE USED FOR THE PURPOSE OF AQUA CULTURE AND NOT FOR TH E PURPOSE OF AGRICULTURE. THEREFORE, THE CIT(A) WAS NOT AT ALL CORRECT IN DELETING THE ADDITIONS MADE BY THE A.O. BY HOLDING THAT THE LAN DS IN QUESTION WERE AGRICULTURE LANDS AND NOT LIABLE FOR CAPITAL GAINS TAX. 5. ON THE OTHER HAND, THE A.R. OF THE ASSESSEE SUBM ITTED THAT THESE LANDS WERE SITUATED IN A VILLAGE AND ALSO THESE LAN DS ARE USED FOR AGRICULTURAL PURPOSES FROM THE PAST 15 YEARS, THERE FORE CANNOT BE CONSIDERED AS CAPITAL ASSETS WITHIN THE MEANING OF SECTION 2(14) OF THE ACT. THE A.R. FURTHER SUBMITTED THAT THE A.O. BELI EVED THE ITI REPORT, TO COME TO THE CONCLUSION THAT THE LANDS IN QUESTION W ERE NOT FIT FOR DOING AGRICULTURAL OPERATIONS AND MADE THE ADDITIONS UNDE R THE HEAD CAPITAL GAINS. BUT, THE FACT IS THAT WHEN THE ITI VISITED THE LANDS, WHICH IS ALMOST TWO YEARS FROM THE DATE OF SALE, THEREFORE, THE CHARACTERISTICS OF THE LAND CANNOT BE JUDGED AT THE TIME OF MAKING ASS ESSMENTS. THE A.R. ITA NO.296/VIZAG/2012 V. VENKATESWARA RAO, NIZAMPATNAM, GUNTUR DIST. 8 FURTHER SUBMITTED THAT WHEN THE LANDS SOLD TO M/S. VANPIC PVT. LTD, THEY ARE AGRICULTURAL LANDS, WHICH IS EVIDENCED BY THE C ERTIFICATE ISSUED BY THE VRO, NIZAMPATNAM AND ALSO CERTIFICATE ISSUED BY THE M/S. VANPIC PVT. LTD., THE PURCHASER OF THE LANDS. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS BORROWED LOAN FROM BANK BY MORTGAGING THE SAID LANDS FOR THE PURPOSE OF RAISING CROPS AND TO THIS EFFECT FIL ED A COPY OF MORTGAGE DEED EXECUTED IN FAVOUR OF BANK, WHEREIN IT WAS CLE ARLY STATED THAT THESE LANDS WERE AGRICULTURAL LANDS AND THE LOAN WA S BORROWED FOR THE PURPOSE OF RAISING CROPS. THEREFORE, THE A.O. WAS NOT RIGHT IN COMING TO THE CONCLUSION THAT THESE LANDS WERE USED FOR AQUA CULTURE BY RELYING UPON THE REPORT OF ITI. HENCE, REQUESTED TO UPHOLD THE ORDER OF THE CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. THE A.O. MADE THE ADDITIONS T OWARDS SALE OF LAND ON THE GROUND THAT THESE LANDS WERE USED FOR AQUA C ULTURE AND NOT FOR AGRICULTURE PURPOSE, THEREFORE, COMING WITHIN THE D EFINITION OF CAPITAL ASSETS U/S 2(14) OF THE ACT AND EXIGIBLE FOR CAPITA L GAIN TAX. ACCORDING TO A.O., THE ASSESSE USED THE LANDS FOR THE PURPOSE OF AQUA CULTURE, SITUATED AT AMIDST OF SEA AND SALINE LANDS NOT FIT FOR AGRICULTURAL OPERATIONS. THE ASSESSEES CONTENTION IS THAT THESE LANDS ARE USED FOR ITA NO.296/VIZAG/2012 V. VENKATESWARA RAO, NIZAMPATNAM, GUNTUR DIST. 9 AGRICULTURAL PURPOSES SINCE PAST 15 YEARS, TO THIS EFFECT FILED CERTIFICATE FROM VRO. THE ASSESSEE FURTHER SUBMITTED THAT HE I S CARRYING OUT THE AGRICULTURAL OPERATIONS AND DECLARED AGRICULTURAL I NCOME FROM THESE LANDS IN HIS INCOME TAX RETURN FOR THE EARLIER YEAR S. THE ASSESSEE FURTHER CONTENDED THAT HE HAS BORROWED LOAN FROM THE BANKS BY MORTGAGING THE SAID LANDS FOR THE PURPOSE OF RAISING CROPS TO THIS EFFECT FURNISHED A COPY OF THE MORTGAGE DEED EXECUTED IN FAVOUR OF THE LEND ING BANK. THEREFORE, THESE LANDS ARE NOT A CAPITAL ASSETS AS DEFINED UND ER SECTION 2(14) OF THE ACT AND TRANSACTION IN QUESTION NOT HIT BY THE PROVISIONS OF SECTION 45 OF THE ACT. 7. SECTION 2(14) OF THE ACT, DEFINES THE AGRICULTUR AL LAND. AS PER SECTION 2(14) OF THE ACT, AGRICULTURAL LAND IN INDI A, NOT BEING LAND SITUATED IN ANY AREA WHICH IS COMPRISED WITHIN THE JURISDICTION OF A MUNICIPALITY OR A CANTONMENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN 10,000. SECTION 45 OF THE ACT, DEALS WIT H TRANSFER OF CAPITAL ASSETS AND AS PER THE SAID SECTION, ANY PROFITS OR GAINS ARISING FROM THE TRANSFER OF THE CAPITAL ASSETS, EFFECTED IN THE PRE VIOUS YEAR SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD CAPITAL GAI NS. THE QUESTION BEFORE US IS, WHETHER THE IMPUGNED LANDS ARE AGRICU LTURAL LANDS OR CAPITAL ASSETS LIABLE FOR CAPITAL GAIN TAX. THE AS SESSEE CONTENDED THAT ITA NO.296/VIZAG/2012 V. VENKATESWARA RAO, NIZAMPATNAM, GUNTUR DIST. 10 THESE LANDS ARE AGRICULTURAL LANDS, USED FOR AGRICU LTURAL OPERATIONS RIGHT FROM THE BEGINNING. TO THIS EFFECT, HE HAS FURNISH ED COPIES OF CERTIFICATE OBTAINED FROM VRO NIZAMPATNAM, WHEREIN THE VRO CERT IFIED THAT THESE LANDS ARE AGRICULTURAL LANDS. THE ASSESSEE ALSO OB TAINED A CERTIFICATE FROM M/S. VANPIC PVT. LTD., PURCHASER OF THE LAND, TO THE EFFECT THAT THESE LANDS IN QUESTION WERE AGRICULTURAL LANDS AT THE TIME OF SALE. THE ASSESSING OFFICERS ONLY CONTENTION IS THAT THESE L ANDS WERE SITUATED AT AMIDST OF THE SEA, SALINE AND NOT FIT FOR CARRYING OUT THE AGRICULTURAL OPERATIONS, THEREFORE COMING TO THE CONCLUSION THAT THESE LANDS ARE USED FOR AQUA CULTURE AND HENCE LIABLE FOR CAPITAL GAINS . WE DO NOT AGREE WITH THE STAND TAKEN BY THE A.R., FOR THE REASON TH AT THE CHARACTER OF THE LAND CANNOT BE JUDGED BASED ON THE USAGE OF LAN D. THE LAND MAY BE USED FOR AGRICULTURAL PURPOSE IN ONE YEAR AND NO N- AGRICULTURAL PURPOSE IN ANOTHER YEAR, WHICH IS DEPENDING UPON TH E CULTIVATOR OF LAND, WHO WOULD DECIDE WHETHER TO DO CULTIVATION OR OTHER WISE, DEPENDING UPON THE CONDITIONS PREVAILING AT THE RELEVANT TIME , I.E. RAINFALL ETC.,. FURTHER, FOR THE PURPOSE OF IDENTIFYING THE LAND BE ING AGRICULTURAL LAND OR NOT, THE BASIC AGRICULTURAL OPERATIONS OR CULTIVATI ON IS NOT NECESSARY AND WHAT HAS TO BE SEEN IS WHETHER SUCH LAND IS CAPABLE OF DOING AGRICULTURAL OPERATIONS OR NOT. ONCE, THE ASSESSE PROVED WITH N ECESSARY EVIDENCE ITA NO.296/VIZAG/2012 V. VENKATESWARA RAO, NIZAMPATNAM, GUNTUR DIST. 11 THAT THE LANDS ARE AGRICULTURAL LANDS, USED FOR AGR ICULTURAL PURPOSES, THEN THE ONUS SHIFTS TO A.O. TO PROVE OTHERWISE. 8. IN THE INSTANT CASE, THE ASSESSEE MADE OUT HIS CASE THAT THESE LANDS ARE USED FOR AGRICULTURAL OPERATIONS AT THE T IME OF SALE. ON PERUSAL OF THE CERTIFICATE ISSUED BY THE VRO, WHO IS A COMP ETENT AUTHORITY TO CERTIFY THE LAND, WHETHER THESE LANDS ARE AGRICULTU RAL LANDS OR NOT, HAD CONFIRMED THAT THESE LANDS ARE USED FOR THE PURPOSE OF AGRICULTURAL OPERATIONS. BUT, THE A.O. FAILED TO BRING ANY EVIDE NCE ON RECORD, TO PROVE THAT THE LANDS ARE NOT AGRICULTURAL LANDS, EX CEPT, THE REPORT OF HIS OWN INSPECTOR, WHO VISITED THE LAND AFTER TWO YEARS , WHICH CANNOT BE CONSIDERED AS SUFFICIENT EVIDENCE. IN OUR OPINION, THE A.O. WAS NOT RIGHT IN COMING TO THE CONCLUSION THAT THESE LANDS ARE US ED ONLY FOR AQUA CULTURE, BASED ON THE REPORT OF INSPECTOR OF INCOME TAX, THAT TOO AFTER TWO YEARS OF THE DATE OF SALE. WE FURTHER NOTICED THAT M/S. VANPIC PVT. LTD., THE PURCHASE OF LAND ALSO CONFIRMED THAT THE IMPUGNED LANDS PURCHASED BY IT WAS AGRICULTURAL LANDS AND ALSO USE D FOR AGRICULTURAL PURPOSES. FROM THE RECORDS, IT WAS PROVED THAT AT T HE TIME OF SALE, THESE LANDS ARE AGRICULTURAL LANDS, BUT AT THE TIME OF VI SIT OF THE ITI AFTER TWO YEARS, THERE MIGHT BE A CHANGE IN THE NATURE OF LAN D FOR WHICH ASSESSE CANNOT BE MADE RESPONSIBLE. THEREFORE CONSIDERING T HE FACTS AND ITA NO.296/VIZAG/2012 V. VENKATESWARA RAO, NIZAMPATNAM, GUNTUR DIST. 12 CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION TH AT THE IMPUGNED LANDS IN QUESTION ARE AGRICULTURAL LANDS USED FOR A GRICULTURAL OPERATIONS, CANNOT BE CONSIDERED AS CAPITAL ASSETS WITHIN THE M EANING OF SECTION 2(14) OF THE ACT AND EXIGIBLE FOR CAPITAL GAINS. 9. NOW COMING TO THE CASE LAWS, RELIED UPON BY THE A.R. THE A.R. RELIED UPON, HONBLE HIGH COURT OF GUJARAT DECISION IN THE CASE OF GORDHANBHAI KAHANDAS DALWADI VS. CIT, (1981) 127 IT R 664. THE HONBLE GUJARAT HIGH COURT, IN THE ABOVE CASE HELD THAT THE CORRECT TEST HAS TO BE APPLIED IS WHETHER ON THE DATE OF SALE TH E LAND WAS AGRICULTURAL OR NOT. JUST BECAUSE AFTER THE SALE, THE PURCHASER WAS GOING TO USE THE LAND AS NON-AGRICULTURAL LAND IT DOES NO T MEAN THAT THE LAND HAD SEIZED TO BE AGRICULTURAL LAND ON THE DATE OF T HE SALE. THE RELEVANT PORTION IS REPRODUCED HEREUNDER: HELD, THAT THE CORRECT TEST THAT HAD TO BE APPLIED WAS WHETHER ON THE DATE OF SALE THE LAND WAS AGRICULTURAL OR NOT. THAT THE PURCHASER WAS GOING TO PUT THE LAND TO NON-AGRICULTURAL USE A FTER THE SALE DID NOT MAKE THE LAND CEASE TO BE AGRICULTURAL LAND ON THE DATE OF SALE. THE IMPORTANCE OF THE POTENTIAL NON-AGRICULTURAL USE OF THE LAND MIGHT BE REFLECTED IN THE PRICE WHICH THE PURCHASER WAS PREP ARED TO PAY FOR THE AGRICULTURAL LAND BUT POTENTIAL NON-AGRICULTURAL US E DID NOT ALTER THE CHARACTER OF THE LAND FROM AGRICULTURAL LAND TO NON -AGRICULTURAL LAND. (II) THAT PERMISSION FOR NON-AGRICULTURAL USE WAS NOT OBTAINED BY THE ASSESSEE BEFORE HE SOLD THE LAND ON JANUARY 30, 1969, TO THE PURCHASER. ITA NO.296/VIZAG/2012 V. VENKATESWARA RAO, NIZAMPATNAM, GUNTUR DIST. 13 (III) THAT THE LAND REVENUE WHICH WAS BEING PAID B Y THE ASSESSEE WAS FOR AGRICULTURAL USE OF THE LAND AND THE SPECIA L RATES WHICH WERE FIXED FOR NON-AGRICULTURAL USE WERE NOT PAID BY THE ASSESSEE PRIOR TO THE DATE OF SALE. (IV) THE QUESTION WHETHER THE LAND WAS OR WAS NOT AGRICULTURAL LAND WAS A MIXED QUESTION OF LAW AND FACT AND THE A PPROACH OF THE TRIBUNAL ADOPTED IN COMING TO THIS CONCLUSION WEAS NOT IN STRICT ACCORDANCE WITH LAW. SINCE THE REVENUE RECORDS SHO WED THAT THE LAND WAS AGRICULTURAL LAND, THE APPROACH SHOULD HAVE BEE N TO SEE WHETHER THE PRESUMPTION THAT THE LAND WAS AGRICULTURAL LAND WAS REBUTTED BY ANY EVIDENCE ABOUT THE USER OF THE LAND OR ABOUT THE CH ANGE IN THE CHARACTER OF THE LAND PRIOR TO THE DATE OF SALE. N O SUCH EVIDENCE WAS POINTED OUT FROM THE RECORD OF THE CASE OR FROM THE FACTS FOUND BY THE TRIBUNAL AND CONSIDERATIONS OF OTHER DEVELOPMENTS I N THE LOCALITY OR OTHER LOCALITIES IN THE VICINITY OF THE LAND WERE N OT PROPER CONSIDERATIONS TO BE APPLIED. THEREFORE, THE TRIBUNAL WAS NOT RIGHT IN HOLDING T HAT THE LAND WAS NON-AGRICULTURAL IN CHARACTER ON THE DATE OF SALE. 10. THE HONBLE KOLKATA HIGH COURT, IN THE CASE OF CIT VS. BORHAT TEA COMPANY LTD. (1982) 138 ITR 783, HELD THAT FOR THE PURPOSE OF LAND BEING AGRICULTURAL LAND ACTUAL AGRICULTURAL OPERATI ONS OR CULTIVATION OR TILLING TO THE LAND IS NOT NECESSARY AND WHAT IS TO BE SEEN IS WHETHER SUCH LAND IS BEING CAPABLE OF DOING AGRICULTURAL OP ERATIONS OR NOT. THE RELEVANT PORTION IS REPRODUCED HEREUNDER: HELD, AFFIRMING THE DECISION OF THE TRIBUNAL, THAT THE LAND SOLD BY THE ASSESSEE WAS AGRICULTURAL LAND AS LAID DOWN IN S.2(14)(III) AND THE PROFIT REALIZED FROM THE SALE WAS NOT LIABLE TO CAP ITAL GAINS UNDER S. 45(1). 11. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO APPLYING THE RATIOS OF THE JUDGEMENT REFERRED ABOVE , WE ARE OF THE ITA NO.296/VIZAG/2012 V. VENKATESWARA RAO, NIZAMPATNAM, GUNTUR DIST. 14 OPINION, THAT THE LANDS IN QUESTION ARE AGRICULTURA L LANDS, USED FOR AGRICULTURAL PURPOSES CANNOT BE HELD AS CAPITAL ASS ETS WITHIN THE MEANING OF SECTION 2(14) OF THE ACT, EXIGIBLE FOR C APITAL GAINS. THE CIT(A), AFTER CONSIDERING THE EXPLANATIONS FURNISHE D BY THE ASSESSEE DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER . WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE ORDER OF THE CIT(A). THE REFORE, WE INCLINED TO UPHELD THE ORDER OF THE CIT(A) AND DISMISS THE GROU NDS RAISED BY THE REVENUE. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 11 TH DEC15. SD/- SD/- ( . ) ( . . . . ) ( (( ( V. DURGA RAO ) )) ) ( G. MANJUNATHA) / // / JUDICIAL MEMBER / // / ACCOUNTANT MEMBER /VISAKHAPATNAM: 3 / DATED : 11/12/2015 VG/SPS ) ' 4 / COPY OF THE ORDER FORWARDED TO :- 1. & / THE APPELLANT THE ITO WARD-1, TENALI 2. '(& / THE RESPONDENT SRI VISWANATHAPALLI VENKATESWARA RAO S/O BULLI ANJAIAH, 6-149, OPP. TELEPHONE EXCHANGE, NIZAMPATNA M POST, GUNTUR DIST. 3. 5 / THE CIT, GUNTUR 4. 5 () / THE CIT (A), GUNTUR ITA NO.296/VIZAG/2012 V. VENKATESWARA RAO, NIZAMPATNAM, GUNTUR DIST. 15 5. ' , , / // / DR, ITAT, VISAKHAPATNAM 6 . . . . / GUARD FILE / BY ORDER // TRUE COPY // 9: ( SR.PRIVATE SECRETARY ) , / // / ITAT, VISAKHAPATNAM SL. NO. DESCRIPTION DATE INITIALS 1. DATE OF DICTATION BY THE AUTHOR SR.PS 2. DRAFT PLACED BEFORE THE DICTATING MEMBER SR.PS 3. DRAFT PLACED BEFORE THE SECOND MEMBER SR. PS 4. DRAFT APPROVED BY THE SECOND MEMBER SR. PS 5. DATE OF APPROVED ORDER COMES TO THE SR. PS SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER SR. PS 7. DATE OF FILE SENT TO THE BENCH CLERK SR. PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK HD. C LK 9. DATE OF DISPATCH OF ORDER SR. PS