SHRI SREEDHAR ASOK KUMAR V. THE COMMISSIONER OF INCOME TAX

ITA/251/2015

AI Insights

The case revolves around an appeal by Sreedhar Asok Kumar, the proprietor of the Indian Institute of Management, against the order of the ITAT which vacated the earlier decision of the Commissioner of Income Tax (Appeals) that had exempted his capital gains from tax. The dispute centered on whether the land sold by the appellant, located in Thrikkakara Panchayat, qualified as agricultural land, thereby exempting it from capital gains tax. The ITAT's majority decision, which the High Court upheld, concluded that the land was not agricultural as it was not used for agricultural purposes and the appellant was not an agriculturist.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 761282 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 11-12-2017
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v. Gemini Pictures Circuit Pvt.Ltd., Gopal C.Sharma v. Commissioner of Income Tax, Commissioner of Income Tax v. V.A.Trivedi, Sarifabibi Mohmed Ibrahim and others v. Commissioner of Income Tax, Asha George v. Income Tax Officer
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: K M V PANDALAI; CHRISTOPHER ABRAHAM
• Assessee Lawyers: T M SREEDHARAN; V P NARAYANAN; DIVYA RAVINDRAN
• Keywords: Agricultural Land; Assessment; Capital Gains; Exemption; Income Tax
• Section: 143(3); 2(14); 255(4); 45; 2(1A)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY, THE 11TH DAY OF DECEMBER 2017/20TH AGRAHAYANA, 1939 ITA.No. 251 of 2015 -------------------- AGAINST THE ORDER/JUDGMENT IN ITA 18/COCH/2012 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 07-05-2015 APPELLANT(S)/RESPONDENT/ASSESSEE: -------------------------------- SREEDHAR ASOK KUMAR PROPRIETOR, INDIAN INSTITUTE OF MANAGEMENT, AISWARYA BUILDINGS, VALANJAMBALAM,KOCHI 682 016 BY ADVS.SRI.T.M.SREEDHARAN (SR.) SRI.V.P.NARAYANAN SMT.DIVYA RAVINDRAN RESPONDENT(S)/APPELLANT/REVENUE: -------------------------------- THE COMMISSIONER OF INCOME TAX C.R BUILDING,I.S PRESS ROAD,COCHIN 682 018 R BY SRI.K.M.V.PANDALAI, SC, INCOME TAX DEPARTMENT SRI.CHRISTOPHER ABRAHAM, SC, INCOME TAX DEPARTMENT THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 11-12-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA.No. 251 of 2015 -------------------- APPENDIX --------- APPELLANT(S) ANNEXURES: ---------------------- ANNEXURE A: COPY OF ASSESSMENT DATED 30-12-2010 PASSED U/S.143(3) OF THE INCOME TAX ACT BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2 (1) KOCHI ALONG WITH COMPUTATION OF INCOME AND DEMAND NOTICE. ANNEXURE B: COPY OF THE ORDER OF THE CIT(A)-II, KOCHI DATED 15-11- 2011 IN ITA NO.125/R-2/E/CIT(A)-II/2010-11. ANNEXURE C: COPY OF THE ORDER OF THE JUDICIAL MEMBER OF THE ITAT, COCHIN BENCH IN ITA NO.18/COCH/2012 DATED 08/2014 ANNEXURE D: COPY OF THE ORDER OF THE ACCOUNTANT MEMBER OF THE ITAT, COCHIN BENCH IN ITA NO.18/COCH/2012 DATED 17-10-2014. ANNEXURE E: COPY OF ORDER U/S.255(4) OF THE INCOME TAX ACTD 1961 DATED 29-10-2014, OF THE ITAT, COCHIN BENCH IN ITA NO.18/COCH/2012. ANNEXURE F: COPY OF THE ORDER PASSED BY THE THIRD MEMBER OF THE ITAT, COCHIN BENCH DATED NIL IN ITA NO.18/COCH/2012. ANNEXURE G: COPY OF THE FINAL ORDER DATED 07-05-2015 IN ITA NO.18/ COCH/2012 OF THE ITAT, COCHIN BENCH. RESPONDENT(S) ANNEXURES: ----------------------- NIL. //TRUE COPY// PA TO JUDGE dkr. K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------- I.T.Appeal No. 251 of 2015 ------------------------------------------- Dated this the 11th day of December, 2017 J U D G M E N T Ashok Menon, J. The assessee has preferred this appeal challenging the findings of the Income Tax Appellate Tribunal in I.T.A.No.18/Coch/ 2012 for the assessment year 2008-09 allowing the departmental appeal by vacating Annexure B order of the first appellate authority. The appellant was assessed to income tax by the Deputy Commissioner of Income Tax, Circle (2)1, Kochi, for the assessment year 2008-09 determining a total income at Rs.10,86,71,781/- consisting of business income at Rs.38,78,390/-, long term capital gain amounting to Rs.10,34,89,809/- and the short term capital gain at Rs.13,03,582/-. A demand was raised for Rs.3,18,35,210/- as per assessment order dated 30-12-2010 at Annexure A. The appellant had executed an agreement on 10-10-2007 in favour of M/s Desai Homes for sale of land for Rs.11 crores. In the return of ITA.251/2015 2 income, the appellant had declared his income at Rs.12,71,577/-, after claiming exemption/deduction admissible under the relevant provisions of the Act regarding capital gain under Section 2(1A) stating that the appellant's agricultural land is situated in Kakkanad Village of Thrikkakara Panchayat, which is a rural area. Notifications issued by the CBDT under Section 2(14) of the Income Tax Act (the 'Act' for brevity) does not include the area; which is the basis of the claim of exemption as an agricultural land. 2. Aggrieved by the assessment made, the appellant filed an appeal before the Commissioner of Income Tax (Appeals)-II, Kochi. The assessee's appeal was allowed and the claim for exemption was accepted relying on the decision of this Court in ITA No.1295/2009, wherein it was held that the agricultural land is exempted from capital gains unless it is located in a municipal area or notified area. 3. The Revenue went on appeal before the Income Tax Appellate Tribunal, which was heard by a Bench of two Members, consisting one Judicial Member and one Accountant Member. There was difference of opinion between the Members. While Judicial ITA.251/2015 3 Member dismissed the appeal of the Revenue, the Accountant Member allowed the appeal and vacated the order of the Commissioner of Income Tax (Appeals). As a consequence of the difference of opinion, an order under Section 255(4) of the Act was passed directing the Registry to place the file before the President for nominating a third Member and as per Annexure E order dated 29-10-2014 the matter was referred to the third Member who agreed with the Accountant Member vide order at Annexure F. Copy of the final order dated 07-05-2015 of the Income Tax Appellate Tribunal, Cochin Bench is at Annexure G. This order is challenged before us. 4. We heard the learned Senior Counsel appearing for the appellant and the learned Counsel appearing for the respondent- Revenue. 5. The only question that arises for consideration in this appeal is whether the ITAT vide majority decision was justified in holding that the property in question was not an agricultural land, thus upholding the disallowance of the claim of the assessee for exemption from 'capital assets'. ITA.251/2015 4 6. The learned Senior Counsel submits that the subject property is an agricultural land and therefore, not a capital asset within the meaning of Section 2(14) of the Act. Consequential transfer of the said land would not raise capital gain chargeable to tax under Section 45 of the Act. The land is admittedly situated in Thrikkakara Panchayat, which is not a notified area and is more than 8 kms. away from Kochi Corporation. The earlier decision of the Division Bench of this Court in ITA No.1295/09 dated 21-11-2010 is binding on the Appellate Tribunal as it is in an identical case on facts and therefore the findings of the Tribunal needs to be upset. 7. Thrikkakara Panchayat of Ernakulam District was earlier a notified area for the purpose of Section 2(14) of the Act. But in 1993 when a revised notification was issued, the Panchayat was not included. The learned Senior Counsel for the appellant submits that the very purpose of de-notifying the area was to extent the benefit of agricultural land to the property situated therein. 8. In Commissioner of Income Tax v. Gemini Pictures Circuit Pvt.Ltd., [(1996) 220 ITR 43 (SC)] it was held that whether a particular land is agricultural land or not, is to be decided on the ITA.251/2015 5 totality of the relevant facts and circumstances. In Gopal C.Sharma v. Commissioner of Income Tax, [(1994) 209 ITR 946 (Bom)], it was held that when the land is used for agricultural purposes situated in an industrial area and not intended for agricultural purposes in future, that would give rise to capital gains. In Commissioner of Income Tax v. V.A.Trivedi, [(1988) 172 ITR 95 (Bom)] it was held that the character and the nature of land are relevant in determining whether the land is agricultural land or whether the land is put to use for agricultural purposes on the relevant date. The mere fact that the area in which the land is situated is not notified under Section 2(14) would not enable exclusion of the land from the definition of 'capital gains'. Only agricultural lands are excluded and such exclusion will not be applicable if the area is notified under Section 2(14)(iii)(b). 9. It is observed by the Tribunal that the assessee is not an agriculturist and is the Proprietor of a Management Institute, and there is no evidence to indicate that the land has been put to any agricultural use. In the decision reported in Sarifabibi Mohmed Ibrahim and others v. Commissioner of Income Tax, [(1993) 204 ITR ITA.251/2015 6 631 (SC)], it is held that the question whether a particular piece of land is agricultural or not is essentially a question of fact, to be decided after a consideration of circumstances appearing for and against the assessee. In the decision reported in Asha George v. Income Tax Officer, [(2013) 351 ITR 123 (Ker)], this Court held thus: “The crucial question is whether the land was actually being used for agricultural purpose during the two years prior to the date of transfer. We do not think that we can overturn a finding on fact, at any rate, based on our reappreciating the material which was considered by the Tribunal which is the final fact finding authority.” It is also held in the above decision that a Certificate of the Village Officer showing the land as “Nilam” (paddy land) alone may not be sufficient for the crucial question is whether the land was actually used for agricultural purposes during the two years prior to the date of transfer. The mere categorisation of the land as 'Nilam' in the revenue records would not hence, suffice to raise a valid claim of exemption. In the instant case, the Tribunal has concluded that the subject land has to be treated as capital asset within the meaning of ITA.251/2015 7 Section 2(14) of the Act. Ordinarily, the question whether a land is an agricultural land or not is a question of fact and the finding on the question of fact recorded by the Tribunal is final. We are not inclined to upset the decision of the Tribunal, and therefore, there is no merit in the argument advanced by the learned Senior Counsel for the assessee. The appeal will stand dismissed finding no question of law arising from the impugned order. No costs. Sd/- K.V INOD CHANDRAN Judge Sd/- ASHOK MENON Judge dkr True copy PA to Judge "