DCIT, C-1(1), Chandigarh V. Shri Rajinder Pal Garg, Chandigarh

ITA 388/CHANDI/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8669 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 03-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: WAY OF GIFT; WAY OF PLANTING OF; WAY OF PLANTING OF TREES; GRAZING OF
• Assessee Lawyers: EQUITY SHARES RS.L PER SHARES; EQUITY SHARES RS. PER; WAY OF REGISTERED GIFT DEED WHICH HAD
• Keywords: Capital asset; Gift; Share purchase agreement; Cost of acquisition; Competent authority; Capital Gains
• Section: 2(14); 43

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “बी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ी एन.के .सैनी, उपा य! एवं ी स ु धांश ु ीवा&तव, या(यक सद&य BEFORE: SHRI. N.K.SAINI, VP & SHRI. SUDHANSHU SRIVASTAVA, JM आयकर अपील सं./ ITA NO. 388/Chd/2019 नधा रण वष / Assessment Year : 2013-14 The Dy. CIT Circle-1(1), Chandigarh बनाम Shri Rajinder Pal Garg H.No. 1832, Sec-34 D Chandigarh थायी लेखा सं./PAN NO: AFOPG1754J अपीलाथ /Appellant यथ /Respondent नधा रती क! ओर से/Assessee by : Shri Tejmohan Singh, Advocate राज व क! ओर से/ Revenue by : Shri Rohit Sharma, CIT DR स ु नवाई क! तार&ख/Date of Hearing : 29/06/2022 उदघोषणा क! तार&ख/Date of Pronouncement : 10/08/2022 आदेश/Order PER N.K. SAINI, VICE PRESIDENT This is an appeal by the Department against the order dt. 09/01/2019 of Ld. CIT(A)-1, Chandigarh. 2. Following grounds have been raised in this appeal. 1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing appeal of the assessee without appreciating the facts of the case. 2. On the facts and in circumstances, Ld. CIT(A) has erred in holding the land/property not a capital assets as per definition of section 2(14) of the Income Tax Act on which the assessee was not carrying out any agricultural activities with the human efforts and thus it cannot be said an agricultural land. 3. On the facts and in circumstances, Ld. CIT(A) has erred in deleting the addition of Long Term Capital Gain on transfer of land on which there was no agricultural activities done by the assessee and land in question was a "ghasni land", which is used for grazing of cattle and cannot be said to be an agricultural land. 4. On the facts and in circumstances, Ld. CIT(A) has erred in deleting the addition of Long Term Capital Gain on transfer of land ignoring that agricultural activities has been held to be an activity where human efforts has resulted in growing crops. 2 5. The appellant craves to leave to add or amend any grounds of appeal before the appeal is heard or disposed off. 6. It is prayed that the order of the Ld.CIT(A) 5 be cancelled and that of the assessing officer may be restored. 3. From the aforesaid grounds it would be clear that only grievance of the Department relates to the deletion of addition made by the AO on account Long Term Capital Gain (LTCG) on transfer of land. 4. The facts of the case in brief are that the assessee filed his return of income on 28/09/2013 declaring an income of Rs. 23,07,790/-. Later on the case was selected for scrutiny. 4.1 During the course of assessment proceedings the AO noticed the following facts relating to the sale of land situated at Jungle Naldehra, Tehsil & Distt Shimla (H.P.) by the assessee to its company M/s Gables Promoters Pvt. Ltd. 3.1 During the year under consideration the assessee has sold land measuring 01 -15-50 Hectares Khata/Khatoni No. 08/10, Khasra No. 36, situated at Jungle Naldehra, Tehsil & Distt. Shimla(H.P.) to its company M/S Gables Promoters Pvt. Ltd. for a consideration of Rs. 12,00,00,000/-. 3.2 The agreement to sell this land was entered into with M/S Gables Promoters Pvt. Ltd on 19.03.2012 whereas the registry was done on 24.07.2012. Both agreement and Registry are placed on record. 3.3 The land in question was transferred in the name of the assessee Sh. Rajinder Pal Garg by his brother Sh. Vijay Garg in the form of Gift on 28.09.2011. The gift deed dated 28.09.2011 was produced by the assessee and is placed on record. Sh. Vijay Garg purchased this land on 27.02.2006 for a consideration of Rs. 24,00,00/- only. Since the land was gifted by Sh. Vijay Garg to the assessee therefore no consideration was paid by the assessee to Sh. Vijay Garg. 3.4 After receiving the land as gift from his brother Sh. Vijay Garg in 2011, the assessee sold this land to its company M/S Gables Promoters Pvt. Ltd on 24.07.2012 for consideration of Rs. 12,00,00,000/-. The company has paid consideration to the assessee by issuing 1,20,00,000 equity shares @Rs.l0 per shares totaling to Rs. 12,00,00,000 on 24.07.2012. The total shareholding of the assessee in M/s Gables Promoters Pvt. Ltd therefore increased to 1,31,95,000 number of equity shares on 06.08.2012. 3.5 These shares were further transferred to M/S Mahindra Holidays & Resorts India Limited as per the Share Purchase Agreement with them on 28.04.2012. Thus all the shares of the company M/S Gables Promoters Pvt. Ltd were transferred to M/S Mahindra Holidays & Resorts India Limited. 3 3.6 The total payment received by the assessee was Rs. 13,49,48,864/-. This payment was received in two parts: (i) On 04.06.2012 Rs. 5,00,00,000/- (ii) On 27.08.2012 Rs. 8,49,48,864/- 3.7 Thus the assessee Sh. Rajinder Pal Garg received amount of Rs. 13.49 crores by making various book entries through its company M/S Gables Promoters Pvt.Ltd. 4.2 The AO asked the assessee to explain as to how and when the Authorised Share Capital of M/s Gables Promoters Pvt. Ltd. was increased from Rs. 1,00,000/- to Rs. 13.50 crores, since as on 31/03/2012 the said company had only 10,000 shares with face value of Rs. 10/- only. In response the assessee produced the copy of Notice for meeting of the Board of Directors for passing Resolution regarding increasing the Authorised Capital of the company. The AO reproduced the copy of the Notice and Explanatory statement at page no. 4 of the assessment order. In the said notice it was resolved that the Authorised Capital of the assessee be enhanced to Rs. 13.50 cores. He also mentioned that in the Explanatory Statement pursuant to the provisions of Section 173 of the Copanies Act, 1956, none of the directors was interested in the Resolution. He further observed that the Board resolution was passed by the Director on 10/07/2012 and copy of Form No. 5 was furnished for the intimation of the Board meeting to the Registrar of companies. The assessee intimated the Registrar of companies on 10/07/2012 that the authorized share capital had been increased from Rs. 1,00,000/- to Rs. 13.50 Crore. The AO observed that though the assessee had sold the land to the company M/s Gables Promoters Pvt. Ltd. against which he received shares worth Rs. 12,00,00,000( 1,20,00,00 shares @ Rs. 10 per share). However no capital gain was shown on the transaction, on queries the assessee stated that since the land in question was agricultural land no capital gain arose, to ascertain whether this land was a agricultural land, the AO recorded the statement of Shri Rajinder Pal Garg wherein he was asked to explain as to how this land was an agricultural land. The Assessee explained that this was a cattle grazing land called ‘Ghasni’ where he did not do any agricultural activity as such. The assessee explained that there were Deodar and Pine trees on this 4 land. The AO asked the assessee as to whether he had earned any agricultural income on this land, the assessee explained that no agricultural income had been earned by him. The AO reproduced the extract of statement of the assessee recorded on 18/03/2016 at page no. 7 & 8 of the assessment order, for the cost of repetition the same is not reproduced herein. 4.3 The AO observed that there was no agricultural activity done by the assessee on the land in question which was a ‘Ghasni’ and was used for the grazing of the cattles, so, it could not be said to be an agricultural land. The AO to ascertain whether this land falls under the definition of agricultural land wrote a letter to the Divisional Commissioner, Chotta Shimla on 03/03/2016 asking therein as to whether this land was lying within the 8 kms of the Municipal Limits. In response the SDO(C) Shimla Rural vide letter dt. 26/03/2016 intimated that the said land was located at a road distance of 7 kms 600 mts. away from Municipal Corporation of Shimla. The copy of the intimation letter of the SDO(C) has been reproduced by the AO at page no. 9 of the assessment order for the cost of repetition the same is not reproduced herein. The AO confronted the assessee with the information procured from the land records of the SDO, Shimla and asked the assessee to explain as to why this land be treated as non agricultural land and the capital gain be taxed accordingly. In response the assessee stated in his statement recorded on 28/03/2016 that the land was not a capital asset as per the provisions of section 2(14)(b) of the Act. 4.4 The AO however held that the assessee had not done any agricultural activity on this land and had sold it to his own company M/s Gables Promoters Pvt. Ltd. within few months, for the purpose of construction of Hotel & Resorts. Therefore the intention of the assessee was mainly to draw benefit out of this land by selling it to the company for the purpose of construction of Hotel & Resort. The AO referred to the decision of the Hon’ble Supreme Court in the following cases: • CIT Vs. Raja Benoy Kumar Sahas Roy reported in 32 ITR 466 (SC) 5 • Ramkrishna Deo reported in 35 ITR 312 (SC) • Sarifabibi Mohmed Ibrahim Vs. CIT [1993] 204 ITR 631 (SC) • Gemini Pictures Circuit Pvt. Ltd. reported in 220 ITR 43 (SC) 4.5 The AO further observed that the assessee held the land for less than a year, this land was received as a gift from his brother and there was no intention of doing any agricultural activity. The land was to be held as a capital asset on which assessee was liable to pay capital gain. The AO also reproduced the inquiry report received from DIT(I&CI) Chandigarh vide letter no. 761 dt. 29/01/2016 in assessee’s case which read as under: "As analysis of the above transactions reveal a consolidated and concerted tax avoidance mechanism to avoid/ minimize tax on capital gains in the hands of the shareholders of M/s Gables Promoters Pvt. Ltd. arising out of the transfer of their shares to M/s Mahindra Holidays & Resorts Ltd. Towards this end, a land with Nil cost was transferred to a group and controlled concern at an astronomically inflated price (i.e. land whose market value for stamp duty purpose was Rs. 3.89 Crores was sold for Rs. 12.00 Crores) through book entries only without the sales consideration being actually paid to the seller. The book value of the shares held by the promoters thereby underwent skyrocketing appreciation. Finally, the shares held by the promoter shareholders were transferred to another concern i.e. M/s Mahindra Hotels & Resorts Ltd. effectively implying the transfer of the land to the said concern. In the process, the cost of the land as acquired by the assessee for Rs. Nil was inflated through as series of artificial mosaic of \ steps to Rs. 12.00 Crores which resulted in the artificial increase in the value of shares associated with such asset. Finally when the shares were ultimately transferred, the tax liability on such transfer was minimized on , account of such artificial inflation of the cost of such shares. " 4.6 The AO observed that as per the aforesaid report the assessee was found to be making book entries by getting himself issued shares of M/s Gable Promoters Ltd. as sale consideration of land and further transferred those shares to M/s Mahindra Hotels & Resorts Ltd. Therefore the assessee was found to have earned capital gains on transfer of land to M/s Gable Promoters Ltd. 4.7 The AO pointed out that the statement of Shri Vijay Garg brother of the assessee was recorded wherein he said that the land in question was purchased on 27/02/2006 for consideration of Rs. 24,00,000/- on which stamp duty of Rs. 1,92,000/- was paid. The AO worked out the capital gain as under : 6 Sale consideration (2012-13): Rs. 12,00,00,000/- Less: Cost of Acquisition (date 27.02.2006) Rs. 24,00,000/- Stamp duty paid Rs. 1,92,000/- Rs. 25,92,000/- Indexed cost of Acquisition 25,92,000 x 852/497 = Rs. 44,43,428/- Rs. 44,43,428/- Rs. 11,55,56,572/- And the aforesaid amount of Rs. 11,55,56,572/- was added to the income of the assessee. 5. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and submitted as under: Addition on account of Capital Gain u/s 2(14)(b) of Income Tax Act. 1961:- On the facts and circumstances of the case the Learned Assessing Officer has erred in taxing agricultural land sold not being capital asset u/s 2(14)(b) of Income Tax Act. 1961. The basic facts of the case are that assessee sold agricultural land measuring 01-15-50 Hectares/Khata/Khatoni No 8/10, Khasra No 36 situated at Jungle Naldehra, Tehsil &Distt Shimla (H.P) to M/s Gables Promoters Limited for consideration of Rs 12,00,00,000. The agreement to sell this land was entered into on 19/03/2012 with Gables Promoters Limited. The registration of land was affected on 24/07/2012. The land was acquired by the appellant by way of gift from his brother on 28/09/2011 by way of gift deed. The appellant's brother had purchased agriculture land on 27/02/2006. The appellant had sold land to M/s Gables Promoters Limited for Rs 12 Crores against which he received 12 lakh shares of face value of Rs 10 each. The Assessing Officer has brought to tax the sale of Agricultural Land by appellant to Gables Promoters Limited on following grounds: a) The land in question is not Agricultural Land b) The land in question was located on road distance of 7.6 Km from Municipal Limits. c) The interest of the appellant was to draw benefit for purpose of construction of Hotel & Resort and such land cannot be held to be an agriculture land. The above observation of Assessing Officer is totailv illegal and unfounded . The land in question sold by the appellant was agriculture land and outside the definition of Capital Assets u/s 2(14)(b) of Income Tax Act, 1961. The appellant's brother had grown Pine and Deodar trees on above land and grass for fodder of animals. Moreover the land was in the state of Himachal Pradesh and outside the preview of Capital asset u/s 2(14)(b) Of Income Tax Act, 1961. Section 2(14(b) of Income Tax Act, 1961 is reproduced here under:- Section 2(14)(b) of Income Tax Act,1961 In any area within such distance, not being more than eight kilometer, from the local limits of any municipality or cantonment board referred to in item as the Central Government may, having regard to the extent of, and scope for 7 urbanization of that area and other relevant considerations specify in this behalf by the notification in the Official Gazette. Even the notification of CBDT excluded the State of Himachal Pradesh within the definition of capital asset. The same has been brought in the statute w.e.f A.Y 2014-15. Land has been defined by the Himachal Pradesh Tenancy and Land Reforms Act, 1972 as under:" Land" means land which is not occupied as the site of any building in a town or village and is occupied or has been let for agricultural purpose or for purpose subservient to agriculture, or for pasture and includes: i) The sites of buildings and other structures on such land ii) Orchards iii) Ghasnie iv) Banjar Land v) Private forests Thus the land in question is Agriculture Land. Even, otherwise it is outside the preview of definition of capital asset u/s 2(14)(b) of Income Tax Act, 1961 and not liable to tax at all. The Arial distance from municipal limits is not applicable to the state of Himachal Pradesh as the same has been excluded by CBDT in its notification. The case laws relied upon by the Assessing Officer are distinguishable on facts and law as agricultural activity was being carried out by the appellant by way of planting of trees and grazing of grass as fodder for animals. The agricultural land of the appellant was ghasnie land and such land has been classified as agricultural activity by the Himachal Pradesh Tenancy and land Reforms Act, 1972." 5.2 The Ld. CIT(A) after considering the submissions of the assessee observed that as per the provisions of Section 45 of the Act the capital gain is chargeable only on transfer of capital asset and not otherwise and if the transfer is not of a capital asset as defined in Section 2(14) of the Act, the question of any capital gain does not arise. The Ld. CIT(A) reproduced the provisions contained in Section 2(14)(iii)(a) of the Act and thereafter mentioned that the term agriculture land is not defined in the Act, only agricultural income is defined in Section 2(1A) of the Act which means that “any rent or revenue derived from land in India which is used for agricultural purposes and any income derived from such land by agriculture etc”. He further observed that the land which is beyond 8 Kms of municipal limits and performing agriculture operation or not or is lying vacant, is outside the definition of capital asset. Even less than 8 Kms has been specified for certain municipality but it cannot be more than 8 Kms. 8 5.3 The Ld. CIT(A) observed that Finance Act 2013 made an amendment in Section 2(14)(iii)(b) of the Act with effect from 01/04/2014 which read as under: (b) in any area within the distance, measured aerially,- (I) not being more than two kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh ;or (III) not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh. [Explanation- For the purposes of this sub-clause, "population" means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year. 5.4 The Ld. CIT(A) on the basis of the aforesaid amendment was of the view that up to A.Y 2013-14 if the land was not notified in the Official Gazette then the same was not liable for capital gain and that the land in Himachal Pradesh had not been notified up to A.Y. 2013-14 in the Official Gazette, therefore all the land situated in the state of Himachal Pradesh are outside the definition of capital asset as per notification under section 2(1A)(C) , proviso, clause (II)(B) and Section 2(14)(III)(B) of the Act. The Ld. CIT(A) further observed that as per the Himachal Pradesh Tenancy and Land Reforms Act, 1972. The land had been defined as follows: "Land" means land which is not occupied as the site of any building in a town or village and is occupied or has been let for agricultural purpose or for purpose subservient to agriculture, or for pasture and includes:-(a).The sites of buildings and other structures on such land, (b).Orchards, (c).Ghasnie, (d).Banjar Land, and (e). Private Forests. 5.5 The Ld. CIT(A) discussed the facts relating to the issue under consideration in para 4.6 of the impugned order which read as under: 4.6. The bare facts of the case are that the assessee has sold land measuring 01- 15-50 hectares Khata/Khatoni No. 08/10, Khasra No. 36, situated at jungle Naldehra, Tehsil & Distt. Shimla (H.P.) to its company M/s Gables Promoters Pvt. Ltd. for a consideration of Rs. 12,00,000,000/- during the year. The land in question was transferred in the name of Sh. Rajinder Pal Garg (RPG) by his brother Sh. Vijay Garg in the form of gift on 28.09.2011 by way of gift deed dated 28.09.2011 and no consideration was paid by the assessee to Sh. Vijay Garg. He in turn purchased this land on 27.02.2006 for a consideration of Rs.24,00,000/-. The RPG entered into Agreement to Sell with M/s Gables Promoters Pvt. Ltd on 19.03.2012 whereas the registry was done on 24.07.2012. After receiving the land as gift from his brother in 2011, the RPG sold this land to its company M/s Gables Promoters 9 Pvt. Ltd. on 24.07.2012 for consideration of Rs. 12,00,00,000/-. The company has paid consideration to the assessee by issuing 1,20,00,000 equity shares @Rs. 10 per share totaling to Rs. 12,00,00,000/- on 24.07.2012. The total shareholding of the assessee in M/s Gables Promoters Pvt. Ltd therefore increased to 1,31,95,000 number of equity shares on 06.08.2012. All these shares were further transferred to M/s Mahindra Holidays & Resorts India Limited as per the share purchase agreement with them on 28.04.2012. The assessee received total payment of Rs. 13,49,48,864/- in two parts i.e. (i) On 04.06.2012 Rs. 5,00,00,000/-, (ii) On 27.08.2012 Rs. 8,49,48,864/-. RPG filed copy of notice for meeting of the Board of Director for passing resolution regarding increasing the authorized capital of the company and copy of the Form No. 5 for the intimation of the Board meeting to the Registrar of companies. Meaning thereby that the assessee has intimated the Registrar of Companies that the authorized share capital of the company has been increased from Rs.1,00,000/- to Rs. 13.50 crores. On the basis of this increased authorized share capital, the shares were allotted to Sh. Rajinder Pal Garg which were then transferred to Mahindra Holidays & Resorts India Ltd. for a consideration of Rs. 13.49 crores. AO recorded statement of the RPG wherein he stated that since the land in question is an agricultural land no capital gains has been shown. He also explained that this land is a cattle grazing land called 'Ghasnie' where he does not do any agricultural activity as such. There are Deodar and Pine trees on this land. He further explained that no agriculture income has been earned by him. For this assessee submitted the Zamabandi i.e. copy of revenue wherein it is mentioned that the above land is Ghasnie Land. He also furnished a certificate from Office of Gram Panchayat Baldeyan wherein it is mentioned that the above land is Ghasnie. AO called for information from the Sub-Divisional Officer (C) Shimla Rural who vide his letter No. SDS(SDK)/Misc./25/15/585-86 dated 26.03.2016 intimated that the said land is located at a road distance of 7 kms 600 mts. AO concluded that since there was no agriculture activity done by the assessee and the land in question was a Ghasnie which is used for the grazing of the catties, it cannot be said to be an agriculture land. He further concluded that the assessee has neither done any agricultural activity nor had any intention of doing such activity. The land has been transferred to the company Gables Promoters Pvt. Ltd. for the purpose of construction of Hotel & Resorts. The assessee is himself engaged in the business of the construction and sale of cottages in Shimla hence the intention of assessee was mainly to draw benefit out of this land by selling it to the company for the purpose of construction of hotel & resort. Such land cannot be held to be an agriculture land. He relied on various case laws like CIT vs. Raja Benoy Kumar Saha Roy reported in 32 ITR 466 (SC), Ramakrishna Deo reported in 35 ITR 312 (SC), Sarifabibi Mohmed Ibrahim vs. CIT [1993] 204 ITR 632, Gemini Pictures Circuit Pvt. Ltd. reported in 220 ITR 43 (SC). He furthermore observed that the assessee held this land for less than a year and sold it to his own company Gables Promoters Pvt. Ltd. with the intention of building a hotel & resort. He is not an agriculturist but is a builder engaged in construction of hotels and resorts. The land received from the brother as gift was never used for the purpose of any agriculture activity. He also referred an enquiry report received from DIT(l&CI),Chandigarh. He assessed the capital gains at Rs. 11,55,56,572/- by treating of the gift of land not a transfer of any capital asset and treated the period of holding from the date of acquisition by the previous owner till it is transferred by the assessee. On the other hands, AR of the appellant has argued that the AO has brought to tax the sale of Agricultural Land by appellant to Gables Promoters Limited on following grounds i.e. a)The land in question is not Agricultural Land, b)The land in question was located on road distance of 7.6 Km from Municipal Limits, and c) The interest of the appellant was to draw benefit for purpose of construction of Hotel & Resort and such land cannot be held to be an agriculture land. He further submitted 10 that the land in question sold by the appellant was agriculture land and outside the definition of Capital Assets u/s 2(14)(b) of Income Tax Act, 1961. The appellant's brother had grown Pine and Deodar trees on above land and grass for fodder of animals. Moreover, the land was in the state of Himachal Pradesh and outside the preview of Capital Asset u/s 2(14)(b) of Income Tax Act, 1961. The Arial distance from municipal limits is not applicable to the state of Himachal Pradesh as the notification of CBDT excluded the State of Himachal Pradesh within the definition of capital asset. The same has been brought in the statute w.e.f A.Y 2014-15. Land has been defined by the Himachal Pradesh Tenancy and Land Reforms Act, 1972 as Ghasnie. Thus the land in question is Agriculture Land. Even, otherwise it is outside the preview of definition of capital asset u/s 2(14)(b) of Income Tax Act, 1961 and not liable to tax at all. The case laws relied upon by the Assessing Officer are distinguishable on facts and law as agricultural activity was being carried out by the appellant by way of planting of trees and grazing of grass as fodder for animals. The agricultural land of the appellant was ghasnie land and such land has been classified as agricultural activity by the Himachal Pradesh Tenancy and land Reforms Act, 1972. 5.6 The Ld. CIT(A) observed that the land in question was agricultural land in the light of the notification of the CBDT dt. 06/01/1994 as well as the Himachal Pradesh Tenancy and Land Reforms Act, 1972, the aerial distance from municipal limits was not applicable to the state of Himachal Pradesh for the relevant A.Y. 2013-14 and the assessee had Pine and Deodar trees also on the above land. He further observed that the Ghasni land is used for grazing of animals and this activity has been held for pasture of land as Agricultural activity in Himachal Pradesh. 5.7 The Ld. CIT(A) further observed that the nature of Capital Asset cannot be determined on the basis of intention of the assessee but on the basis of bare provisions of Act and evidence furnished by the assessee. The Ghasni land was gifted by brother of the assessee by way of registered Gift Deed which had been considered duly by Competent Authority as per section 118 of Himachal Pradesh Tenancy and Land Reforms Act, 1972 and the same had been found duly registered in Book No. 1, registration No. 1323/2011 reference no. 1604/2011 dt. 29/09/2011. The Ld. CIT(A) categorically stated that no evidence had been brought on record by the AO that the gift deed was bogus and that the AO in para 3.25 of the assessment order had himself admitted that there was no transfer of any capital asset as per the provisions of section 47(iii) of the Act by observing that in Section 47(iii) any transaction in which the asset is transferred 11 by way of gift is not treated as transfer of capital asset. Then the question of capital gain had not arisen in the case of the assessee, during the year under consideration. 5.8 The Ld.CIT(A) observed that the land was sold to M/s Gables Promoters Pvt. Ltd. and due sale deed had been entered into by paying the stamp duty, the purchaser being non agriculturist had duly obtained mandatory requisite permission under section 118 of the Himachal Pradesh Tenancy and Land Reforms Act, 1972, vide letter of Financial Commissioner-cum Secretary Revenue (HP) No. Reve-B-F(10) 168/2012 dt. 09/07/2012 for the purposes of construction of a Hotel & Resort and that the Zamabandi filed revealed that the land in question was Ghasnie land. He further observed that the AO had never brought any contrary evidence against the evidence filed by the assessee during the assessment proceedings and that how the report of the DIT(I&CI) rebuts the claim of the assessee that the said land was agriculture land. The Ld. CIT(A) also observed that the claim of the assessee that his brother had grown Pine and Deodar trees on above land and grass for fodder of animals, had never been controverted by the AO which was not akin to wild life growth of trees in forest, and the said land was not left lying fallow. 5.9 As regards to the issue of book entries of transfer of shares by M/s Gable Promoters Pvt. Ltd. to the assessee and finally to M/s Mahindra Hotels & Resorts Ltd. was concerned, the Ld. CIT(A) mentioned that the respective AO of M/s Gable Promoters Pvt. Ltd. in the case of said company relevant to the A.Y. 2013- 14 had assessed the income at returned income. 5.10 The Ld.CIT(A) held that the land under consideration did not fall in the category of “Capital Asset” as it did not fall under section 2(14) of the Act, being land situated in Himachal Pradesh, it was Ghasni land which falls in the category of Agricultural Land. The Ld. CIT(A) observed that the case laws relied by the AO were distinguishable on facts. The Ld.CIT(A) mentioned the facts of the cases relied by the AO and how those were distinguishable, in para 4.8.1 12 and 4.8.2 of the impugned order. The Ld. CIT(A) placed the reliance on the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Raja Benoy Kumar Sahas Roy reported at 1957 AIT 768 wherein pastures had been held as agricultural income and observed that in the present case the land in question was ghasni for pasture of cattles. Accordingly the addition made by the AO was deleted by observing in para 4.9 of the impugned order which read as under: 4.9 In the light of detailed discussion above, I am constrained to hold that the said asset does not fall in the category of "Capital Asset" as it does not fall under section 2(14) of the Act being land situated in Himachal Pradesh that is not covered by the Notification of the CBDT dated 06.01.1994. Hence, the land in question is Agriculture Land in the light of the above said Notification. Therefore, the arial distance from municipal limits is not applicable to the state of Himachal Pradesh for the relevant Assessment Year 2013-14. The land in question is Ghasnie Land which falls in Agricultural Land as per the Himachal Pradesh Tenancy and Land Reforms Act, 1972. In view of above discussion, AO is directed to delete the addition. 6. Now the Department is in appeal. 7. The Ld. DR submitted that the Secretary Revenue granted the assessee permission on 09/07/2012 to sell the land to a non agriculturist and legally changing the use of land to Hotel construction site and whatever was the nature of the land before the said date the land was legally a commercial land for construction of a Hotel and if the land was put to any other use after this date had revert back to the Government of Himachal Pradesh as per the provisions of section 118 of the Himachal Pradesh and Land Reforms Act 1972. It was submitted that the registered sale deed of the land was executed on 24/07/2012, on the said date the said land was legally and officially non agricultural but a commercial land for construction of Hotel as stated by the assessee himself, therefore, the capital gain was chargeable to tax on this transaction and the Ld. CIT(A) was not justified in deleting the addition without appreciating the facts in right perspective. It was further submitted that the AO had given the reasoning for his view as the land was not used for agriculture purposes and it was a commercial land. Therefore the capital gain was chargeable on the sale of land. 13 8. In his rival submissions the Ld. Counsel for the assessee reiterated the observations made by the CIT(A) particularly in para 4.2 to 4.9. It was submitted that the land in question does not fall in the definition of capital asset as defined by Himachal Pradesh Tenancy and Land Reforms Act, 1972, the land in question was outside the purview of capital asset under section2(14)(b) of the Act. It was further submitted that the assessee never applied for change of land use, a reference was made to page no. 24 of the assessee’s compilation and it was stated that the company M/s Gable Promoters Pvt. Ltd. only applied for “change of land use” and not the assessee. 9. We have considered the submissions of both the parties and perused the material available on the record. In the present case it is not in dispute that the land was situated in the State of Himachal Pradesh and was a Ghasni land the assessee got this land from his brother Shri Vijay Garg on 28/09/2011 by way of gift deed, the brother of the assesse purchased this land on 27/02/2006 and the assessee entered into an agreement to sell this land to M/s Gables Promoters Pvt. Ltd. on 19/03/2012, where as the registry was done on 24/07/2012 for a consideration of Rs. 12 Crores and the purchaser company paid consideration to the assessee by issuing 1,20,00,000 equity shares @Rs.l0 per share totaling to Rs. 12,00,00,000 on 24.07.2012. Now the question arises as to whether the capital gain was chargeable on the sale of the agriculture land. In the present case, it is not in dispute that the agricultural land has not been defined in the Act, however the Agriculture land is not an asset for the purposes of levying the capital gain. As per the notification of Himachal Pradesh Tenancy and Land Reforms Act, 1972. The Ghasni land is an agricultural land which is outside the purview of capital asset under section 2(14)(b) of the Act, as it was situated in the State of Himachal Pradesh. It is also noticed that the land situated in the Himachal Pradesh had not been notified up to the A.Y. 2013-14 in the Official Gazette. Moreover brother of the assessee Shri Vijay Garg had grown Pine and Deodar trees on the land in question which was Ghasni Land and used for grazing of animal, the said activity had been held as pasture of land and was 14 an agricultural activity as defined by the Himachal Pradesh Tenancy and Land Reforms Act, 1972. In the present case the department alleged that the assessee obtained “change in land use” certificate, however, the document placed at page no. 24 of the assessee’s compilation, clearly revealed that M/s Gable Promoters Pvt. Ltd. applied for change of land use and not the assessee. We therefore considering the totality of the facts as discussed herein above, do not see any valid ground to interfere with the detailed findings given by the Ld. CIT(A) in the impugned order on this issue and accordingly do not see any merit in this appeal of the Department. 10. In the result, appeal of the Department is dismissed. (Order pronounced in the open Court on 10/08/2022 ) Sd/- Sd/- स ु धांश ु ीवा&तव एन.के .सैनी, (SUDHANSHU SRIVASTAVA) ( N.K. SAINI) या(यक सद&य/ JUDICIAL MEMBER उपा य! / VICE PRESIDENT AG Date: 10/08/2022 आदेश क! त,ल-प अ.े-षत/ Copy of the order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकर आय ु /त/ CIT 4. आयकर आय ु /त (अपील)/ The CIT(A) 5. -वभागीय त न4ध, आयकर अपील&य आ4धकरण, च7डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड फाईल/ Guard File