Sunil Kumar Jolly, Gurgaon V. ITO, New Delhi

ITA 4607/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6719 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-01-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 30-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Assessee Lawyers: G S KOHLI
• Keywords: Capital asset; Salary income; Earning of tax free income; Cost of acquisition
• Section: 143(3); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER ITA NO.4607/DEL/2016 ASSESSMENT YEAR : 2011-12 SUNIL KUMAR JOLLY, C- 1/903, VATIKA CITY, SECTOR- 49, GURGAON. VS. ITO, WARD- 43(4), NEW DELHI. PAN : AEBPJ 8016 L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G. S. KOHLI, CA RESPONDENT BY : SHRI S. K. JAIN, SR.DR DATE OF HEARING : 30-01-2017 DATE OF PRONOUNCEMENT : 03-02-2017 O R D E R PER S.V. MEHROTRA, A.M : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 12.07.2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-34, DELHI, U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN S HORT THE ACT) RELATING TO ASSESSMENT YEAR 2011-12. 2. BRIEF FACTS OF THE CASE ARE THAT IN THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE WORKED AS MANAGER AT RESERVE BANK OF INDIA , LUCKNOW AND DECLARED SALARY INCOME FROM RBI APART FROM INTEREST INCOME EARNED FROM BANK ACCOUNTS. HE HAD FILED HIS RETURN OF INCOME D ECLARING TOTAL INCOME AT RS.13,73,240/-. IN THE COURSE OF ASSESSMENT PROCEE DINGS, THE ASSESSING 2 ITA NO.4607/DEL/2016 OFFICER NOTICED FROM THE BANK STATEMENT OF BANK OF INDIA, SAVINGS BANK A/C NO.603110100006432 THAT ASSESSEE HAD RECEIVED A SUM OF RS.4,00,000/- THROUGH ACCOUNT PAYEE CHEQUE CREDITED INTO HIS ACCO UNT ON 24.08.2010. HE FURTHER NOTICED FROM STATEMENT OF ASSETS AS ON MARC H 31, 2009 SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT AS SESSEE HAD DECLARED DEPOSIT TO GREEN FIELD SAMUHIK SEHKARI KRISHI SAMI TI LTD. FOR ALLOTMENT OF FARM HOUSE LAND AMOUNTING TO RS.40,000/-. THE ASS ESSEE IN RESPONSE TO SHOW-CAUSE NOTICE POINTED OUT THAT HE HAD RECEIVED COMPENSATION OF RS.4 LAKH FROM GREATER NOIDA DEVELOPMENT AUTHORITY. THE ASSESSING OFFICER HAS REPRODUCED CONTENTS OF ASSESSEES REPLY IN HIS ASSESSMENT ORDER AT PAGE 2, WHICH IS REPRODUCED HEREUNDER :- THAT I HAVE DEPOSITED RS 40,000/- FOR ALLOTMENT OF LAND IN THE SOCIETY DURING THE PERIOD 1983-1987 AND THE MEMBERSHIP DATE WAS 17/07/ 1983 AND FIRST PAYMENT WAS MADE DURING FINANCIAL YEAR 1983-84. THAT I WAS UNDER THE HONEST IMPRESSION THAT NO CAPITAL GAIN WILL BE ON THE SAID COMPENSATI ON. HOWEVER I OFFER TO LEVY THE CAPITAL GAIN ON COMPENSATION OF RS 4 LAKH BY APPLYI NG INDEXATION ON RS 40,000/- FROM FINANCIAL YEAR 1983-84.' 3. SUBSEQUENTLY, VIDE HIS LETTER DATED 11.03.2014 T HE ASSESSEE SUBMITTED THAT SALE OF LAND WAS AGRICULTURAL LAND AND, THEREF ORE, THE COMPENSATION RECEIVED WAS EXEMPT FROM TAXATION, RELEVANT PART OF REPLY HAS BEEN QUOTED AT PAGE 2 OF ASSESSMENT ORDER, WHICH IS REPRODUCED HER EUNDER :- ...FURTHER, AS INFORMED TO ME AND THE COPY OF AWAR D (THE COPY ENCLOSED HEREWITH) FOR THE COMPENSATION GIVEN TO ME BY THE S OCIETY, THE SOCIETY WAS HAVING 3 ITA NO.4607/DEL/2016 AGRICULTURAL LAND IN VILLAGE AMNABAD TEHSIL DADRI D ISTT GOTAM BUDH NAGAR WHICH IS BEYOND 8 KILOMETER FROM THE NAGAR PALIKA DADRI LIMIT AGAINST WHICH COMPENSATION WAS RECEIVED. TO JUSTIFY THE SAME A CO PY DULY CERTIFIED BY 'LEKHPAL' TEHSIL DADRI AND TEHSILDAR DADRI IS ENCLOSED HEREWI TH. THE AGRICULTURAL LAND WAS ACQUIRED BY GREATER NOIDA DEV ELOPMENT AUTHORITY, HENCE THE COMPENSATION RECEIVED WAS AGAINST AGRICULTURAL LAND BEYOND MUNICIPAL LIMITS WHICH IS NON TAXABLE AS THE SAME IS NOT A CAPITAL A SSET.' 4. THE ASSESSING OFFICER TREATED THE SUM OF RS.4 LA KH RECEIVED BY THE ASSESSEE IN THE CAPACITY OF MEMBER OF GREEN FIELD S AMUHIK SEHKARI KRISHI SAMITI LTD. AS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES, INTER- ALIA, OBSERVING AS UNDER :- (A) THAT THE INCOME EARNED BY WAY OF COMPENSATION IN NO WAY QUALIFIES AS CAPITAL GAIN IN VIEW OF THE CLEAR FAILURE ON THE PA RT OF THE ASSESSEE TO ESTABLISH THAT VALID TRANSFER OF ASSETS HAS BEEN TAKEN PLACE AND VALID EXECUTION OF SALE/PURCHASE/CONVEYANCE DEED WAS EXECUTED DURING P URCHASE OF LAND AND FURTHER DURING SALE OF LAND. (B) THAT THE ASSESSEE HAS FAILED TO PROVE WITH SUFF ICIENT EVIDENCE REGARDING THE QUANTUM OF COMPENSATION RECEIVED BY THE SOCIETY AND FURTHER DISTRIBUTION OF COMPENSATION TO EACH MEMBER. THE ONLY FACT THAT WAS BROUGHT INTO RECORD WAS THAT THE ASSESSEE HAS RECEIVED A SUM OF RS 4,00,000 /- FROM THE SOCIETY, IN LIEU OF MEMBERSHIP FEE OF RS 40,000/- DEPOSITED IN F YS 198 3-87. (C) THAT THE COMPENSATION RECEIVED IS ONLY FOR PART ING AWAY OF RIGHT ON PARTICULAR PURCHASE OF LAND VENTURE WHICH ALWAYS RE MAINED A NON STARTER AS PROPER EXECUTION OF CONVEYANCE DEED WITH THE SELLER OR OWNERS OF THE LAND WAS NEVER EXECUTED. (D) THAT IN FACT THE OWNERSHIP OF LAND WAS NOT TRAN SFERRED FULLY TO THE SOCIETY. IF AT ALL THE COMPENSATION TOWARDS AGRICULTURAL LAN D WAS TO BE CLAIMED TO BE EXEMPT FROM INCOME TAX, IT MAY BE AT THE HANDS OF V ILLAGERS OR REAL LAND OWNERS SUBJECT TO FULFILLMENT OF OTHER CONDITIONS AS ENVIS AGED IN THE ACT WHO ARE HOLDING THE AGRICULTURAL LAND AND NOT ON THE SOCIETY OR TO ITS MEMBERS. THE REAL LAND OWNERS ARE AGRICULTURALIST WHOSE LAND HAS BEEN ACQU IRED BY THE GREATER NOIDA AUTHORITY. .......... 13. TO PROVE THAT THE LAND ACQUIRED BY THE GREATER NOIDA AUTHORITY FROM THE SOCIETY ARE AGRICULTURAL LAND AND COMPENSATION RECE IVED ARE EXEMPT TO TAX, THE ASSESSEE HAS TO PROVE BASIC INGREDIENT REGARDING AG RICULTURAL ACTIVITIES 4 ITA NO.4607/DEL/2016 UNDERTAKEN IN THE SAID LAND. THE ASSESSEE HAS MISE RABLY FAILED TO ESTABLISH THE TRUE NATURE OF LAND AND CLAIM THAT COMPENSATION REC EIVED IS EXEMPT FROM TAX. TO ESTABLISH THE CLAIM, FOLLOWING INGREDIENTS ARE FAIL ED IN THE CASE OF THE ASSESSEE :- (I) PURCHASE DEED AND SALE DEED OF THE SALE OF THE LAND. (II) CERTIFICATE ISSUE SHOWING THE CHARACTERIZATION OF LAND. (III) THE CERTIFICATE OF TALATI REGARDING CROPS GRO WN WHETHER THE LAND IS IRRIGATED OR NOT AND THE INCOME FROM THE LAND AS SH OWN IN THE LAND REVENUE RECORDS. (IV) JANTRI RATES PREVAILING IN THE AREA. (V) EVIDENCES OF INCOME ARISING FROM AGRICULTURAL O PERATIONS IN THE FORM OF SALE BILLS ETC. (VI) EVIDENCES OF EXPENDITURE HAVING BEEN INCURRED ON AGRICULTURAL OPERATIONS BY CALCULATING BILLS OF EXPENDITURE ETC. (VII) DISTANCE OF THE LAND FROM THE AREAS SPECIFIED IN SECTION 2(14)(III)(A) & (B) OF THE I.T. ACT. (VIII) ANY PERMISSION HAS BEEN OBTAINED FROM THE RE VENUE AUTHORITIES TO CONVERT THE LAND USE TO NON AGRICULTURE. WHETHER THE PERMI SSION HAS BEEN OBTAINED BY THE VENDOR OR VENDEE. (IX) WHETHER LAND ITSELF WAS DEVELOPED BY PLOTTING AND PROVIDED WITH ROADS AND OTHER FACILITIES. (X) THE LAND USE IN THE SURROUNDING AREA TO INDICAT E WHETHER THE LAND WAS AGRICULTURAL OR NOT? (XI) WHETHER THERE WERE ANY PREVIOUS SALES OF PORTI ONS OF THE LAND FOR NON- AGRICULTURAL USE? THE ASSESSEE HAS FAILED TO PROVIDE ANY OF THE ABOVE DOCUMENTARY EVIDENCE TO ESTABLISH THAT THE ASSESSEE HAS RECEIVED COMPENSATI ON OUT OF SALE OF AGRICULTURAL LAND. . 16. NOTWITHSTANDING ALL ABOVE, AS PER PROVISIONS OF SECTION 10(37) OF THE ACT, THE EXEMPTION OF CAPITAL GAINS ON COMPENSATION RECE IVED ON COMPULSORY ACQUISITION OF AGRICULTURAL LAND SITUATED WITHIN SP ECIFIED URBAN LIMITS IS ONLY AVAILABLE TO INDIVIDUAL OR A HINDU UNDIVIDED FAMILY AND NOT TO SOCIETY (GREEN FIELD FARMS SOCIETY). WITH A VIEW TO MITIGATE THE HARDSHIP FACED BY THE FARMERS WHOSE AGRICULTURAL LAND SITUATED IN SPECIFIED URBAN LIMITS HAS BEEN COMPULSORILY ACQUIRED, THE FINANCE (NO.2) ACT, 2004 HAS INSERTED A NEW CLAUSE (37) IN SECTION 10 SO AS TO EXEMPT THE CAPITAL GAINS (WHETHER SHORT -TERMS OR LONG-TERM) ARISING TO AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY FROM TRAN SFER OF AGRICULTURAL LAND BY WAY OF COMPULSORY ACQUISITION WHERE THE COMPENSATIO N OR THE ENHANCED COMPENSATION OR CONSIDERATION, AS THE CASE MAY BE, IS RECEIVED ON OR AFTER 1-4- 2004. THE EXEMPTION IS AVAILABLE ONLY WHEN SUCH LA ND HAS BEEN USED FOR 5 ITA NO.4607/DEL/2016 AGRICULTURAL PURPOSES DURING THE PRECEDING TWO YEAR S BY SUCH INDIVIDUAL OR A PARENT OF HIS OR BY SUCH HINDU UNDIVIDED FAMILY. 5. THE ASSESSING OFFICER, ACCORDINGLY, INCLUDED RS. 3,60,000/- UNDER THE HEAD INCOME FROM OTHER SOURCES. LD. CIT(A) PARTL Y ALLOWED THE ASSESSEES APPEAL, INTER-ALIA, OBSERVING AS UNDER :- 6. AT THE APPELLATE STAGE THE APPELLANT REITERATED THE CONTENTIONS RAISED AT THE ASSESSMENT STAGE. THERE IS NO DISPUTE THAT THE LAND OWNED BY THE ABOVE SOCIETY WAS COMPULSORILY ACQUIRED. THERE IS NOT DI SPUTE THAT THE APPELLANT WAS A MEMBER OF THE SAID SOCIETY. THE LAND ACQUIRED WAS AN AGRICULTURAL LAND IN THE LAND REVENUE RECORDS. HOWEVER, NO EVIDENCE OF AGRI CULTURAL OPERATIONS ON THE SAID LAND OR THE KHASRA COULD BE FILED. THOUGH THE RECEIPTS AND PAYMENT A/C OF THE SOCIETY DOES SHOW SALE OF CROPS AND CORRESPONDI NG PROFITS, THE SOCIETY HAS NOT FILED ANY RETURN OF INCOME. 7. THOUGH THE MATTER WAS REMANDED TO THE AO AND THE REMAND REPORT DATED 18.04.2016, OBJECTED TO ADMISSION OF ADDITIONAL EVI DENCE REGARDING PAPERS OF SOCIETY, THE SAID ISSUE IS IRRELEVANT NOW IN VIEW O F FINDINGS IN PARA 8. 8. WITHOUT PREJUDICE TO THE ABOVE, THE ISSUES RAISE D BY THE AO ARE RELEVANT IN THE CASE OF THE ASSESSMENT OF THE COOPERATIVE SO CIETY. AS FAR AS APPELLANT IS CONCERNED IT HAS RECEIVED PROFIT IN RESPECT OF THE SHARES OF THE SAID COOPERATIVE SOCIETY AND NOT THE AGRICULTURAL LAND. THE ISSUE OF EXEMPTION FROM CAPITAL GAINS TAX IN RESPECT OF SALE OF LAND IS NOT RELEVANT IN T HE CASE OF THE APPELLANT. THIS CAN BE EXPLAINED WITH AN ILLUSTRATION. A PRIVATE LIMITE D COMPANY MAY EARN TAXABLE INCOME OR EXEMPT INCOME. BUT THE PROFIT FROM THE SA LE OF SHARES OF THE SAID COMPANY OR THE DISTRIBUTION OF PROFITS BY WAY OF DI VIDENDS OR THE PAYMENT MADE FOR BUY BACK OF SHARES IS TAXABLE IN THE HANDS OF T HE SHAREHOLDERS. BY THE SAME REASONING THE AMOUNT OF RS. 4,00,000/- RECEIVED BY THE APPELLANT IS TAXABLE IN HIS HANDS. HOWEVER, THE APPELLANT IS ENTITLED TO DEDUCT ION OF INDEXED COST OF ACQUISITION. SINCE THE AO HAS ADMITTED THAT THE LAS T PAYMENT WAS MADE IN THE YEAR 1987, THE INDEXATION BENEFIT IS TO BE ALLOWED FROM FY 1886-87 AND THE AMOUNT RECEIVED IS TO BE TAXED UNDER THE HEAD LONG TERM CAPITAL GAIN AND NOT UNDER THE HEAD OTHER SOURCES. 6. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBM ISSIONS MADE BEFORE LOWER REVENUE AUTHORITIES AND SUBMITTED THAT THE AG RICULTURAL LAND WAS LOCATED BEYOND 8 KILOMETERS FROM THE NAGAR PALIKA D ADRI AND, THEREFORE, IT 6 ITA NO.4607/DEL/2016 WAS AN ASSET EXEMPT FROM CAPITAL GAINS TAX BECAUSE IT DID NOT COME WITHIN THE DEFINITION OF CAPITAL ASSET. TO SUPPORT HIS CO NTENTIONS, HE REFERRED TO PAGE 59 OF THE MEMORANDUM OF GREEN FIELD SAMUHIK SE HKARI KRISHI SAMITI LTD. TO DEMONSTRATE THAT IT WAS CARRYING ON AGRICUL TURAL ACTIVITY. HE SUBMITTED THAT SINCE THE ASSESSEE HAD RECEIVED THE COMPENSATION BEING MEMBER OF SOCIETY, THEREFORE, THE NATURE OF RECEIPT IN THE HANDS OF THE ASSESSEE REMAINED THE SAME AS WAS IN THE HANDS OF S OCIETY AND IT CANNOT BE DISPUTED THAT THE AMOUNT OF COMPENSATION RECEIVED B Y SOCIETY WAS IN RESPECT OF AGRICULTURAL LANDS. HE, THEREFORE, SUBMITTED TH AT COMPENSATION RECEIVED BY ASSESSEE WAS ALSO EXEMPT BEING FOR AGRICULTURAL LAND. LD. DR RELIED ON THE ORDER OF LOWER REVENUE AUTHORITIES. 7. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND PERUSED THE RECORD OF THE CASE. ADMITTEDLY, THE ASSESSEE HAS R ECEIVED THE COMPENSATION IN HIS CAPACITY AS A MEMBER OF THE SOCIETY AND NOT AS AN AGRICULTURIST, THEREFORE, ASSESSEE CANNOT GET THE BENEFIT OF SECTI ON 10(37) WHICH EXEMPTS CAPITAL GAINS ARISING FROM THE TRANSFER OF AGRICULT URAL LANDS IN THE HANDS OF INDIVIDUAL OR HUF. THE AMOUNT RECEIVED BY ASSESSEE HAS TO BE TAXED AS CAPITAL GAINS AND NOT UNDER THE HEAD INCOME FROM O THER SOURCES BECAUSE ASSESSEE HAD PARTED WITH THE MEMBERSHIP OF SOCIETY. AS RIGHTLY HELD BY LD. CIT(A), HOWEVER, THE INDEXATION IS TO BE ALLOWED WI TH REFERENCE TO THE DATES 7 ITA NO.4607/DEL/2016 OF PAYMENTS MADE BY ASSESSEE TOWARDS DEPOSIT OF RS. 40,000/-. IN THE RESULT, GROUND NOS.1 TO 4 ARE DISMISSED AND GROUND NO.5 IS ALLOWED. 8. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 03 RD DAY OF FEBRUARY, 2017. SD/- (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED : 03-02-2017. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A)- 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI