G.Harikrishnan, CHENNAI V. ITO, CHENNAI

ITA 785/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8715 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 22-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 13-04-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: U MOHAMED KHALILULLAH

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.785/MDS/2015 / ASSESSMENT YEAR : 2007-08 SHRI G. HARIKRISHNAN NO.22/88, TIRUPATHI NAGAR 3 RD MAIN ROAD, KOLATHUR CHENNAI 600 099 VS. THE INCO ME TAX OFFICER BUSINESS WARD XIII(3) CHENNAI [[PAN AIXPG 1990 J] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI U.MOHAMED KHALILULLAH /RESPONDENT BY : SHRI A.V. SREEKANTH, JCIT / DATE OF HEARING : 22 - 0 6 - 2016 ! / DATE OF PRONOUNCEMENT : 22 - 0 7 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-12, CHENN AI, DATED 27.11.2014 AND PERTAINS TO ASSESSMENT YEAR 200708. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS COMPUTA TION OF CAPITAL GAINS. ITA NO.785/15 :- 2 -: 3. SHRI U.MOHAMED KHALILULLAH, LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE PURCHASED AN AGRICULTURAL LAND IN THE YEAR 2006-07 FOR A TOTAL CONSIDERATION OF ` 4,50,000/-. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE PURCHASED THE LAND WITH AN INTENTION OF CARRYING ON AGRICULTURAL ACTIV ITIES. HOWEVER, THE ASSESSEE SOLD THE SAME DURING THE YEAR UNDER CONSID ERATION FOR A CONSIDERATION OF ` 67,05,000/-. THE ASSESSING OFFICER FOUND THAT THE PROPERTY WAS SOLD TO A REAL ESTATE AGENT, HENCE, IT IS NOT FOR AGRICULTURAL PURPOSES. ACCORDING TO THE LD. REPRES ENTATIVE, THE INTENTION OF THE PURCHASER OF THE LAND FROM THE AS SESSEE IS IMMATERIAL TO DETERMINE THE CHARACTER OF THE LAND. WHAT IS TO BE NECESSARY IS THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF THE LAND. THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE OF THE LAND IS NOT IN DISPUTE. WHEN THE ASSESSEE INTENDED TO CARRY ON C ULTIVATION AT THE TIME OF PURCHASE OF THE LAND, MERELY BECAUSE THE SA ME WAS SOLD TO A REAL ESTATE AGENT FOR NON-AGRICULTURAL PURPOSES, IT CANNOT BE SAID THAT THE AGRICULTURAL LAND WOULD LOSE ITS CHARACTER AS AGRICULTURAL LAND. REFERRING TO THE COPY OF THE SALE DEED, THE LD. REP RESENTATIVE SUBMITTED THAT THE ASSESSEE PURCHASED THE LAND ALO NGWITH ELECTRICITY CONNECTION. THE VILLAGE ADMINISTRATIVE OFFICER HAS CERTIFIED THAT THE LAND PURCHASED BY THE ASSESSEE IS AGRICULTURAL LAN D. THE VILLAGE ADMINISTRATIVE OFFICER HAS ALSO CERTIFIED THAT THE SAID LAND WAS BEYOND ITA NO.785/15 :- 3 -: 18 KMS FROM THE MUNICIPAL CORPORATION. THEREFORE, LD. REPRESENTATIVE FURTHER SUBMITTED THAT THE LAND WAS CLASSIFIED AS W ET LAND IN THE STATE REVENUE RECORDS. SINCE THE LAND IS AGRICULTURAL LA ND IN THE STATE REVENUE RECORDS, ACCORDING TO THE LD. REPRESENTATIV E, THE GAIN ARISING OUT OF THE SALE OF THE LAND CANNOT BE ASSESSED FOR CAPITAL GAINS. 4. ON THE CONTRARY, SHRI A.V. SREEKANTH, LD. DEPARTMEN TAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS NOT CARRIED OUT ANY AGRICULTURAL ACTIVITY ON THE SUBJECT LAND. WITHIN A SHORT SPAN OF TIME, THE ASSESSEE SOLD THE PROPERTY TO A REAL ESTATE AG ENT. THE ASSESSEE HIMSELF ADMITTED BEFORE THE ASSESSING OFFICER THAT THE LAND WAS SOLD DUE TO SUDDEN INCREASE IN PRICE IN THE SURROUNDING AREA. ACCORDING TO THE LD. DR, THE LAND IN QUESTION IS NOT AN AGRICULT URAL LAND AT ALL. ONCE THE LAND IS NOT AN AGRICULTURAL LAND, THE DISTANCE BETWEEN THE LAND AND THE MUNICIPALITY IS IMMATERIAL. THEREFORE, THE ASS ESSING OFFICER HAS RIGHTLY BROUGHT THE GAIN ON SALE OF THE LAND FOR AS SESSMENT. THE ASSESSEE SOLD THE LAND FOR A FABULOUS SALE CONSIDER ATION. WHEN THE NATURE OF THE LAND ITSELF WAS FOUND TO BE NON-AGRIC ULTURAL, ACCORDING TO THE LD. DR, THE ASSESSING OFFICER HAS RIGHTLY FOUND THAT THE GAINS ARISING OUT OF THE SALE OF THE LAND IS NOT EXEMPTED FROM TAXATION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE ITA NO.785/15 :- 4 -: ADMITTEDLY PURCHASED THE LAND DURING THE YEAR 2006- 07 AND SOLD THE SAME DURING THE YEAR UNDER CONSIDERATION AND EARNED SUBSTANTIAL PROFIT. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE IS DEALING IN REAL ESTATE. THE ONLY DISPUTE RAISED BY THE ASSE SSING OFFICER IS THAT THE LAND IN QUESTION IS NOT AN AGRICULTURAL LAND TH EREFORE, THE GAIN ARISING OUT OF THE SALE OF SUCH LAND HAS TO BE TREA TED AS CAPITAL GAIN. THE ASSESSEE PRODUCED THE COPIES OF THE CERTIFICAT E ISSUED BY THE VILLAGE ADMINISTRATIVE OFFICER WHICH CLEARLY SHOWS THAT THE LAND WAS CLASSIFIED AS WET LAND. THE EXTRACT OF VILLAGE 10 (1) ACCOUNT ALSO CLEARLY SHOWS THAT THE LAND IN QUESTION IS A WET LA ND. THE COPIES OF EXTRACTS FROM THE VILLAGE ACCOUNT NO.2 AND ADANGAL DO NOT SHOW ANY CULTIVATION. APPARENTLY, THE LAND IN QUESTION IS A WET LAND, THEREFORE, IRRIGATION FACILITY SHALL BE AVAILABLE TO THE SAID LAND. THERE MAY BE VARIOUS REASONS FOR NOT CULTIVATING THE LAND. ONE OF THE REASON MAY BE THERE WAS FAILURE OF MONSOON, CONSEQUENTLY, IRRIGAT ION SOURCE MIGHT HAVE ALSO FAILED TO SUPPLY WATER. THE COPY OF ADANG AL RELATES TO FASIL YEAR 1420. THE CLASSIFICATION OF LAND IS NOT CHANG ED DURING THE YEAR UNDER CONSIDERATION AND IT CONTINUES TO BE WET LAND . THE CLASSIFICATION OF LAND EITHER AS WET LAND OR DRY LAND IS WITHIN TH E EXCLUSIVE DOMAIN OF THE STATE GOVERNMENT. WHEN THE STATE GOVERNMENT CONTINUES TO RETAIN THE CLASSIFICATION AS WET LAND, MERELY BECAUSE THERE WA S NO CULTIVATION FOR ONE OF THE FASIL YEAR, THIS TRIBUNAL IS OF THE CON SIDERED OPINION THAT THE ITA NO.785/15 :- 5 -: NATURE OF THE LAND WILL NOT LOSE ITS CHARACTER AS AGRICULTURAL LAND. IN OTHER WORDS, EVEN THOUGH THE LAND WAS NOT SUBJECTED TO CULTIVATION FOR ONE YEAR IT CONTINUES TO BE AN AGRICULTURAL LAND SO LONG AS THE CLASSIFICATION OF THE LAND AS WET LAND CONTINUES. DUE TO FAILURE OF THE MONSOON AND ENCROACHMENT IN THE IRRIGATION CHANNELS , MANY OF THE WET LANDS IN THE COUNTRY REMAINED UNCULTIVATED. IT DOES NOT MEAN THAT THE WET LAND SHOULD NOT BE TREATED AS AGRICULTURAL LAND. THE FACT REMAINS THAT WET LAND IS ALWAYS CONTINUED TO BE AN AGRICULTURAL LAND UNLESS AND UNTIL THE STATE GOVERNMENT RECLASSIFY TH E LAND DEPENDING UPON THE NATURE OF THE USAGE. 6. THE ASSESSEE HAS PURCHASED THE LAND DURING THE YEA R 2006- 07 AND SOLD THE SAME IN THE YEAR 2007-08. THEREFOR E, IT CANNOT BE EXPECTED THAT THE ASSESSEE WOULD HAVE CULTIVATED T HE LAND. SINCE THERE WAS NO ALLEGATION THAT THE ASSESSEE WAS DEAL ING IN REAL ESTATE BUSINESS, IT CANNOT BE DOUBTED THAT THE ASSESSEE H AS PURCHASED THE LAND ONLY FOR CULTIVATION. MERELY BECAUSE THE LAND WAS SOLD TO A REAL ESTATE AGENT THAT CANNOT CHANGE THE CHARACTER OF TH E LAND. THE REAL ESTATE AGENT MIGHT HAVE USED THE LAND AFTER RECLASS IFICATION TO SOME OTHER PURPOSE. THAT WOULD NOT AFFECT THE ASSESSEE WHILE CLAIMING THE LAND AS AGRICULTURAL LAND. WHEN THE AGRICULTURIST PURCHASE THE LAND AND SOLD THE SAME IMMEDIATELY FOR A HIGHER PRICE, THIS TRIBUNAL IS OF THE ITA NO.785/15 :- 6 -: CONSIDERED OPINION THAT THAT CANNOT BE REASON FOR D ISALLOWING THE CLAIM OF THE ASSESSEE SO LONG AS THE LAND REMAINS AS AG RICULTURAL LAND. 7. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE CIT (A). THE CIT(A) EXTRACTED THE ORDER OF THIS TRIBUNAL IN THE CASE OF SHRI SUBRAMANIAM VADIVEL IN I.T.A.NO.2118/MDS/2012 DATED 20.2.2013. IT IS NOT KNOWN WHETHER THE LAND WAS CLASSIFIED AS WET LAND IN THIS CASE. THE ASSESSEE BEFORE THIS TRIBUNAL IN SHRI SUBRAMAN IAM VADIVEL (SUPRA) CULTIVATED CASUARINAS PLANTS. THERE WAS NO REFEREN CE IN THE ORDER OF THIS TRIBUNAL ABOUT THE CLASSIFICATION OF THE LAND MADE BY THE STATE GOVERNMENT. HOWEVER, IN THE CASE BEFORE US, THE MAT ERIAL AVAILABLE ON RECORD CLEARLY SHOWS THAT THE LAND IN QUESTION WAS CLASSIFIED AS WET LAND. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERE D OPINION THAT WHAT WAS SOLD BY THE ASSESSEE IS ONLY AN AGRICULTURAL L AND. SINCE IT IS NOT IN DISPUTE THAT THE LAND WAS SITUATED BEYOND 18 KMS OF THE NEIGHBOURING MUNICIPALITY, THE SAME HAS TO BE TREATED AS AGRICUL TURAL LAND, THEREFORE, NOT LIABLE FOR TAXATION OF THE GAIN ARISING OUT OF THE TRANSFER OF THE LAND. IN VIEW OF THE ABOVE DISCUSSION, WE ARE UNABLE TO U PHOLD THE ORDERS OF THE AUTHORITIES BELOW. ACCORDINGLY, THE SAME ARE S ET ASIDE AND THE ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. ITA NO.785/15 :- 7 -: 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JULY, 2016, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 22 ND JULY, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF