VIRENDRA SINGH V. INCOME TAX OFFICER

ITA/98/2018

AI Insights

The case involves two appeals by Virendra Singh and Surendra Singh against the Income Tax Officer, Ward 2(1), Alwar, concerning the denial of deductions under Section 54B of the Income Tax Act, 1961, on capital gains from the sale of agricultural land. The appellants argued that the lands were used for agricultural purposes, qualifying them for deductions. However, the Income Tax Officer and the Tribunal found that the lands were not used for agricultural purposes in the two years prior to the sale, leading to the dismissal of their claims. The High Court agreed with the Tribunal's findings, citing a lack of evidence supporting the appellants' claims and the applicability of precedents that did not favor their position.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 750902 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 17-04-2018
• Assessment Year: misc
• Other Referred Cases: ACIT vs. N. Raghuverma (2013) 42 ITS 421 Hyd., Commissioner of Wealth Tax vs. Officer-in-Charge [1976] 105 ITR 133 (SC), Gordhanbhai Kahandas Dalwadi vs. Commissioner of Income Tax [1981] 127 ITR 664 (Gujarat)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: ASHISH SHARMA
• Keywords: Agricultural Land; Capital Gain; Income tax appeal; Section 54B
• Section: 54B

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 98/2018 Virendra Singh, S/o Late Shri Prahlad Singh, Aged About 43 Years, R/o Chajju Singh Ki Gali, Outside Malakheda Gate, Alwar. ----Appellant Versus Income Tax Officer, Ward 2(1), Alwar. ----Respondent Connected With D.B. Income Tax Appeal No. 99/2018 Surendra Singh, S/o Late Shri Prahlad Singh, Aged About 48 Years, R/o Chajju Singh Ki Gali, Outside Malakheda Gate, Alwar. ----Appellant Versus Income Tax Officer, Ward 2(1), Alwar. ----Respondent For Appellant(s) : Mr. Ashish Sharma For Respondent(s) : HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Judgment 17/04/2018 In both appeals common questions of law and facts are involved, hence, they are decided by this common judgment. By way of these appeals, the appellants have challenged the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeal of the assessee and appeal of Surendra Singh has partly allowed confirming the order of AO as well as CIT(A). (2 of 7) [ITA-98/2018] Counsel for the appellant has framed following questions of law:- In DBITA No. 98/2018 “i) Whether in the facts and circumstances of the case the learned ITAT was justified in rejecting the claim of the assessee under Section 54B claimed on account of capital gain on transfer of land used for agricultural purposes amounting to Rs. 9,01,332/-? ii) Whether in the facts and circumstances of the case, the ITAT was justified in holding the order of the Coordinate Bench of ITAT Hyderabad completely at variance without discussing and considering the facts of the case of the assessee as also the facts of the case of ACIT vs. N. Raghuverma (2013) 42 ITS 421 Hyd.? iii) Whether in the facts and circumstances of the case, ITAT was justified in holding that the lands under consideration (khasra Nos. 886 & 890) were not used for agricultural purposes?” In DBITA No. 99/2018 “i) Whether in the facts and circumstances of the case the learned ITAT was justified in rejecting the claim of the assessee under Section 54B claimed on account of capital gain on transfer of land used for agricultural purposes amounting to Rs. 8,05,540/-? ii) Whether in the facts and circumstances of the case, the ITAT was justified in holding the order of the Coordinate Bench of ITAT Hyderabad completely at variance without discussing and considering the facts of the case of the assessee as also the facts of the case of ACIT vs. N. Raghuverma (2013) 42 ITS 421 Hyd.? iii) Whether in the facts and circumstances of the case, ITAT was justified in holding that the lands under consideration (khasra Nos. 886 & 890) were not used for agricultural purposes?” Though counsel for the appellant has relied upon the decision in the case of Commissioner of Wealth Tax vs. Officer-in-Charge reported in [1976] 105 ITR 133 (SC) wherein it has been held as under:- “For the reasons already given, we do not think that the term \"agricultural land\" had such a wide scope as the Full Bench appears to have given it for the purposes of the Act we have before us. We agree that the determination of the character of land, according to the purpose for which it is meant or set apart and can be used, is a matter which ought to be determined on the facts of each particular case. (3 of 7) [ITA-98/2018] What is really required to be shown is the connection with an agricultural purpose and user and not the mere possibility of user of land, by some possible future owner or possessor, for an agricultural purpose. It is not the mere potentiality, which will only affect its valuation as part of \"assets\", but its actual condition and intended user which has to be seen for purposes of exemption from wealth-tax. One of the objects of the exemption seemed to be to encourage cultivation or actual utilisation of land for agricultural purposes. If there is neither anything in its condition, nor anything in evidence to indicate the intention of its owners or possessors, so as to connect it with an agricultural purpose, the land could not be \"agricultural land\" for the purposes of earning an exemption under the Act. Entries in revenue records are, however, good prima facie evidence. We do not think that all these considerations were kept in view by the taxing authorities in deciding the question of fact which was really for the assessing authorities to determine having regard to all the relevant evidence and the law laid down by this Court. The High Court should have sent back the case to the assessing authorities for deciding the question of fact after stating the law) correctly.” He has further relied upon the decision of Gujarat High Court in case of Gordhanbhai Kahandas Dalwadi vs. Commissioner of Income Tax reported in [1981] 127 ITR 664 (Gujarat) wherein it has been held as under:- “In Chhotalal Prabhudas' case MANU/GJ/0006/1978 : [1979]116ITR631(Guj) , in 1952 non-agricultural use of the land was discontinued and permission was obtained for use of land for purely agricultural purposes and thereafter for some years after 1952 the land was allowed to lie fallow and thereafter agricultural operations were resumed on the land, and in the light of those facts, this court held that the land was agricultural land. In that case, the land was used for brick-making for nearly two decades before it was returned to agricultural operations in 1952. In the instant case, we have non-agricultural use for brick-making for a period of two years and thereafter the land was allowed to lie fallow and agricultural operations were started and bajri was grown in this land in the revenue year 1964-65. We may point out that under the Bombay Tenancy and Agricultural Lands Act, 1948, \"land\" has been defined in s. 2, sub-s. (8), to mean, inter alia, land which is used for agricultural purposes or which is sometimes used as agricultural land, but is allowed to lie fallow, is agricultural land for the purposes of the Tenancy Act, and it is that agricultural land for the sale of which to (4 of 7) [ITA-98/2018] non-agriculturist permission under s. 63 is necessary and it is in the light of this definition which has obviously to be borne in mind when permission under s. 63 is obtained, that the question has to be approached. It must be pointed out that in CIT v. Manilal SOMNATH MANU/GJ/0009/1976 : [1977]106ITR917(Guj) , this court has observed that merely because land is surrounded by development or that development has caught up with the land in question it should not be held that the land had ceased to agricultural land. It is nobody's case that permission for non-agricultural use under s. 63 of the Bombay Land Revenue Code had been obtained by the vendor , the assessee, before he sold the land on January 30, 1969, to the purchaser. The importance of the potential non- agricultural use of the land may be reflected in the price which the purchaser is prepared to pay for the agricultural land, but potential non-agricultural use does not alter the character of the land from agricultural land to non- agricultural land. In the instant case, it has been found that the assessment which was being paid was for agricultural use of the land and special rates which are fixed for non-agricultural use were not being paid by the assessee prior to the date of the sale. Under these circumstances, since the correct tests which are required by law to be applied for determining as to of what date the character of the land is to be found and, secondly, in the right of what tests the question has to be decided, have not been applied by the Tribunal, we are applying the correct tests to the facts found and, in our opinion, applying the principles laid down by this court in CWT v. Narandas Motilal MANU/GJ/0021/1970 : [1971]80ITR39(Guj) , Manilal Somnath's case MANU/GJ/0009/1976 : [1977]106ITR917(Guj) , Smt. Chandravati Atmaram Patel v. CIT MANU/GJ/0021/1977 : [1978]114ITR302(Guj) and Chhotalal Prabhudas v. CIT MANU/GJ/0006/1978 : [1979]116ITR631(Guj) , read in the light of the observations of the Supreme Court in Begumpet Palace's case MANU/SC/0232/1976 : [1976]10ITR133(SC) , it is clear that the Tribunal was in error when it held on the facts found that in law the land was not agricultural land. The conclusion that it was not agricultural land was a mixed question of law and fact and the approach of the Tribunal adopted in coming to this conclusion was not in strict accordance with law. Since the revenue records showed that this was agricultural land, the approach should have been whether the presumption that this was agricultural land was being rebutted by any evidence about user of the land or about the character of the land having been changed prior to the date of the sale. No such evidence has been pointed out from the records of this case or from the facts found by the Tribunal and considerations of other development in the locality or other locality in the vicinity of the land are not proper considerations (5 of 7) [ITA-98/2018] to be applied, as was pointed out in Manilal Somnath's case MANU/GJ/0009/1976: [1977]106ITR917(Guj).” However, the AO has recorded the following findings:- “Claim of deduction u/s 54B:- i) Uses of land for agricultural purposes: In the computation of the return of income the assessee has shown chargeable long term capital gain at NIL after claiming deduction u/s 54B of Rs. 25,14,850/- against the investment made in purchase of land of Rs. 28,92,480/-. As per provisions of section 54B(1), the deduction is allowable only where the capital gain arises from transfer of a capital asset being land which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his for agricultural purposes. With reference to query made in this regard, vide note sheet dated 10/01/2014, the A.R. vide his written replies filed on 28/01/2014 has submitted that:- 1. A photo copy of Girdawari of just preceding year of sale of land is enclosed which indicating what type of crops were sawed and produce. This aspect were examined by the A.O in the A.Y. 2010-11 and considered the same as well as found in ourder. 2. The agricultural land sold out during the year under consideration were given on contract Batai to agriculturist and taken one time payment for year as per practice here Girdawari indicating nature of crops sowed by the Kastkar cultivator was known as Mulla Ji of Kesarpur village adjoining to the Bhugore as per past practice. The agricultural land was given on batai orally year to year. In the just preceding year the ld. AO completed the assessment of sale of land the same was provided to him accordingly this aspect was examined by the ld. A.O., while passing the assessment order and no adverse inference was drawn. Since assessee taken one time payment no other details can be given of buyer of produce etc. On considering the above submission of the A.R., there is no option to examine the lands sold were being used by the assessee within two years immediately preceding the transfer took place except the Khasra Girdawari (four year) from samvat 2065 to samvat 2068 furnished in the case of his brother for the same A.Y. who also solds their share of lands in similar Khasra’s. As per sale deeds, the lands/plots sold pertain to Khasra No. 890, 886 & 887. The Vikram Samvat of the year in which plots sold is Samvat 2067 (i.e. F.Y. 2010-11/ previous year of the assessment year under consideration. In this regard, the position of crops grown in these kharsa within the period of two years (Samvat 2065 & 2066) reveals as under:- (6 of 7) [ITA-98/2018] [kljk la- ¼{ks=½ Leor 2065 ¼foRr o\"kZ 2008&09½ lEor 2066 ¼foRr o\"kZ 2009&10½ [kjhQq jch [kjhQ jch 890 ¼0-62 gS0½ ¼xSj eqefdu iMr½ ¼xSj eqefdu iMr½ 886 ¼0-01 gS0½ ¼xSj eqefdu iMr½ ¼xSj eqefdu iMr½ 887 ¼1-10 gS0½ Tokj ¼1-10 gS0½ Ljlksa ¼1-10 gS0½ ¼xSj eqefdu iMr½ From the above details, it is observed that the land pertaining to Khasra No. 887 (involving area of measuring 1.10 Hectare) was being used for agricultural activates/purposes within two year from the date of transfer. The land measuring 0.01 Hec. Pertaining to Khasra No. 886 pertainsn to the land covered for the any means of irrigation. The remaining land of Khasra No. 890 measuring 0.62 Hec. Has remained vacant (i.e. being not used for agricultural purposes) within the period of two years from the date of transfer of plots out of it. Accordingly, out of the total land involved in three Khasra’s of measuring (0.62+0.01+1.10) =1.73 hec, the land measuring 0.62 haec which comes to 0.62/1.73 hec=35.84% of total lands involved in three khasra’s., is not eligible for deduction u/s 54B (1) of the IT Act, 1961. thus out of the claim of total deduction u/s 54B of Rs. 28,92,480/- the deduction to the extent of Rs. (2514850x35.84%) = 9,01,.322/- is hereby withdrawn/disallowed on account of land sold was not being used for agricultural purposes within last 2 years from the date of sale for the purpose of computing income chargeable of “Capital Gains” in this case.” The above finding was confirmed by the CIT(A) as well as the Tribunal. The Tribunal while considering the matter has observed as under:- “7. I have heard the rival contentions of both the parties and perused the material available on the record. I have also perused the order of the Coordinate Bench of ITAT, Hyderabad Bench, but the facts of these assessees cases are completely at variance. There is no evidence in support of the contentions raised in the submissions by the ld AR. It is admitted fact that there was no agriculture activity on these lands in the two preceding years from the sale of the land. Therefore, I have no alternate but to confirm the findings recorded by the ld. CIT(A) on this issue. Ground No. 1 of both these appeals stand dismissed.” (7 of 7) [ITA-98/2018] We are in complete agreement with the view taken by the Tribunal. In our considered view, in view of the concurrent finding, no substantial question of law arises. Hence, the appeals stand dismissed. (INDERJEET SINGH),J (K.S.JHAVERI),J A.Sharma/4-5 "