TaxTMI 
TaxTMI 
2013 (9) TMI 237
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....d a trading centre called "Smart Trade City" on the said land. The Department carried out search and seizure operations in the case of M/s Smart Trade City on 09-07-2008. During the course of search, a sale agreement dated 13-01-2006 entered between the assessees herein and Shri K. Abdu Haji for sale of above said land was seized. The said agreement revealed that a land having an extent of 222.93 cents in R.S. No. 45/3, Kottakkal Ansom Desom was agreed to be sold at a sale consideration of Rs. 3,27,500/- per cent. Thus the aggregate sale consideration worked out to Rs. 7,30,09,575/-, which was agreed to be paid to the sellers within 1-1/2 years after measurement of the property. However, the parties had declared the sale consideration as Rs.99,95,000/- only in the registered sale deeds executed subsequently on various dates. The assessing officer initiated proceedings in the hands of all the assessees herein u/s 153C of the Act. In response to the notices issued by the AO, they filed returns of income, but all of them claimed exemption of capital gains arising on sale of the above said land on the plea that the impugned land is an agricultural land. However, the Assessing Officer d....
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....t" in terms of sec. 2(14) of the Act. Before the Ld. CIT(A) the assessee had taken a plea that the possession of the land admeasuring 222.93 cents was handed over to the buyer in January, 2006 itself and accordingly, pleaded that the capital gains have to be assessed only in the assessment year 2006-07 as per the provisions of section 2(47)(v) of the Act. The first appellate authority accepted the claim of the assessee that the possession of property was parted in 2006 itself. However, the Ld. CIT(A) noticed that the assessees herein have received the sale consideration in instalments falling in the financial years relating to the assessment years 2006-07 to 2009-10. Accordingly, the Ld. CIT(A) took the view that the transfer has to be considered as having taken place in the assessment years 2006-07 to 2009-10 in proportion to the amount of sale consideration received in those years. 6. The Ld CIT(A) noticed that the assessees have sold 18.98 cents of land, vide document No.614/2008 dated 13.2.2008 to Sri Modieen Haji for a value of Rs.4,80,000/- as per the registered conveyance deed. The Ld CIT(A) further noticed that the assessing officer did not assess the capital gain arisin....
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....reliance mainly on the certificates issued by the Agricultural Officer, Kottakkal; Village Officer, Kottakkal and The Addl. Tahasildar, Tirur to substantiate their contention that the impugned lands were agricultural lands. The assessees have also relied upon a letter written by Village Officer to the Revenue Divisional Officer in connection with issuing certificate to the assessees. The Ld. CIT(A) examined these certificates and gave a finding that the authorities have given these certificates on the basis of submissions given by the assessees, i.e., they did not make any reference to any of the revenue records in order to come to the conclusion that the impugned land was agricultural land. Further the Ld. CIT(A) has examined the issue relating to the nature and character of land in detail by applying various tests laid down by various High Courts including the Jurisdictional Kerala High Court and has finally come to the conclusion that the impugned lands cannot be considered as agricultural lands. The findings given by Ld CIT(A) finds place in paragraphs 4(i)(5) to 4(i)(5)(4) of his order. We notice that the first appellate authority has applied the tests laid down by Hon'ble Guj....
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....sing Officer's letter dated 14.10.2010. Let us examine the content of the certificate with facts. As on 11.7.2008, out of 222.93 cents of land, 130.13 cents only was conveyed by registration. The balance 92.80 cents was registered on 21.8.2008 only i.e. after the issue of this certificate. From this, it is clear that the contents of the certificate viz. the sale of land and the crops cultivated, etc. are not based on government department's contemporaneous record but based on extraneous reasons. In view of the facts and circumstances, this certificate has no evidentiary value at all. (2) The second certificate: CERTIFICATE No. 2049/08 Date: 30-07-2008 Smt. T.P. Jameela W/o Paravakkal Muhammed Haji possessed a block of land in Bloc No. 39 R.S. No. 158/1, 158/5, 158/16 in Kottakkal village in Tirur Taluk.* I affirm that, I am convinced by the Agricultural Officer's affidavit and Regional enquiry Report that the above said land has been used for cultivation cashew, coconut tree etc. years back. This certificate is allowed to be produced before the Income-tax Officer, Calicut Village Officer, Kottakkal. *Emphasis supplied by the CIT(A) This certificate relies on th....
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....produce before the Income Tax Officer, Kozhikode. *Emphasis supplied by the CIT(A) (4) The fourth certificate: "CERTIFICATE' C2-7219/11 *On the basis of the report of Kottakkal Village Officer and Kottakkal Agricultural Officer, a block of 0.7964 hecares of land in block no. 39 R.S. No. 158/1, 158/5, 158/16, Kottakkal Village, Tirur Taluk inMalappuram district is a 'House Property'. We affirm that the possessors of the above said property, Mr. Paravakkal Muhammed Haji and his wife Mrs. T.P. Jameela and others have been cultivating coconut tree, areca nut tree, plantain, cashew *etc. till 2006 in the above said land. Place Tirur Additional Thahasildar, Tirur. Date : 15/07/2011" *Emphasis supplied by the CIT(A) The above two certificates were furnished by the appellant before the appellate authority. The fourth certificate relies on the third certificate dt. 24.2.2011 above, in that the Village officer (VO) once again relies on one of the appellant's assertion only. He has not issued the certificate based on any contemporaneous record. However, realizing the reality, the VO coins a new term "residential based agricultural land". Further, reports that the appel....
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....tions. The alleged receipt of Rs. 10,000/- per year towards just 1/16th share of 7/8th of the property comprising 223 cents without any credible evidence seems to suggest that it is a feeble attempt at securing evidence for some agricultural user of the land. Shri Usman Kutty is the only person among all the appellants, was assessed to tax in assessment year 2003-04, but he did not admit any agricultural income in the earlier years original returns and all other appellants have not shown any agricultural income in their respective returns filed before the Assessing Officer after the search and seizure operations. That is why the Assessing Officer refused to accept agricultural income claimed by Shri Usman Kutty and held that his process is a ploy, a deliberate attempt made to get agricultural income assessed and hence assessed the sum shown by him as an income from "other sources" in the earlier years. The most important aspect is that the appellants admittedly handed over the possession of the land to Shri Abdu Haji in 2006 itself. Shri Abdu Haji has commenced construction of the shopping complex called as Smart City in 2006 itself. However, the appellant, her brothers S/Shri Anwa....
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.... The appellants entered into a sale agreement on 13.01.2006 with Shri Abdu Haji and immediately handed over to him the possession of the property as is evidenced by the sale deeds and notarized affidavits dt. 17.12.2010 filed by the appellant and Shri Anwar Sadath. Shri Abdu Haji has also immediately started construction of a commercial complex by the name Smart City. The general description of the building is that it is partly 3 and partly 4 storied Reinforced Concrete Cement framed construction consisting of shops at cellar floor, first floor and second floor. The building has been constructed with central courtyard for ventilation and car parking and sitting place. The District Valuation Officer, Chennai, based on Shri Abdu Haji's submissions, reported under column 3.4 Table: period of const. 04/05 to 03/09 (April 2005 to March 2009). This report evidences that the construction started 2005 implies commencement of the construction when sale negotiation is going on. Shri Anwar Sadath who was the prime mover of the appellants family, was in real estate business and must have been a close associate of Shri Abdu Haji for a long time because Shri Anwar Sadath admitted by an affidav....
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....ased to be an agricultural land atleast from 2001 onwards, as stated under clauses(ii) and (iii) supra and was put to non agricultural use from 2001 onwards and such non agricultural use has become permanent. (vi) Whether the land, though entered in the Revenue record, had never been actually used for agriculture, that is, it had never been ploughed or tilled? Whether the owner meant or intended to use it for agricultural purposes? For the reasons stated under clause (i), (ii) and (iii) supra, there is no contemporaneous revenue record or other documents indicating user of agricultural purposes. There is no evidence of regular and systematic carrying on of the basic agricultural operations like ploughing, tilling of the land, manuring, watering, planting of saplings, sowing of seeds, etc. Even if there was existence of some coconut trees, cashew plants etc. it cannot clothe the land in question with the character of agricultural land. The Assessing Officer has brought materials for the usage of non agricultural purposes by the owners. Further (1) It is obvious that the user of the land was never held from 2001 onwards by the appellants as agricultural land for the reasons ....
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....From Shri Usman Kutty's statement dt. 16.7.2008 Qn 2: You have sold the land where Smart Trade City building is being constructed near Kottakkal Bus Stand to Shri Abdu Haji. Pl. Explain? Ans 2: This is the ancestral property in the name of myself, my mother and my brothers and sisters. This land is of nearly 3 acres, of which 35 cents have been given for fish market on rent with a rate of Rs. 70/- per day. A land of 20 cents adjacent to this plot was sold to a person in Thirurangadi before two years. Besides this, nearly 20 cents of land was sold 15 yrs back to a person named Enikutty. The remaining land coming to 2 acres 20 cents was sold to Shri Abdu Haji. The sale was fixed for Rs. 3,27,500/- per cent. We have received more than Rs. 7 crore towards transaction. This amount was received by our brother Shri Anwar Sadath on behalf of us. The details of the amount are written on the backide of the agreement (original). Qn 5: How much amount was received while selling 20 cents of land 2 years back? Ans 5: This was an exchange with the land where PNB is located in Kottakka town. I don't know its original price. Only Shri Anwar Sadath knows about this transaction. The amoun....
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....aluing it as a property yielding agricultural produce on the basis of its yield? No. For the investment of Rs. 7,30,09,075, no agriculturist would purchase this land at the rate at which it was sold by the appellant (xi) The real intention of the owner is to be ascertained and the character of the adjoining land is also to be seen,. Real intention is commercial and the character of the land also is a commercial land. If we take the all other factors and circumstances, such as its location, the user to which it was put by the appellants, their action in selling part of the land to others in 2006 itself, the purpose for which the major purchaser (Shri abdu Haji) used it even before registration, singularly and cumulatively go to establish that the land in question was never held as an agricultural land from 2001 onwards. Even if it was an agricultural land before 2001, it was converted into a non agricultural land from 2001 onwards. 4(i)(5)(1) Alternatively, we can examine as to whether the character of the land sold by the appellant is as an agricultural land or not as under: Whether a particular land is agricultural land or not must depend on the general nature or ch....
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....r cent. Rs. 50,00,000 was paid as an advance. Rs. 50,00,000 was t be paid in one month from 13.01.2006 and it was actually paid on 06.2.2006 itself and the balance must be paid within one and half years but the actual payments were made up to 07.07.2008. The registration formalities were undertaken between 12.02.2008 and 21.8.2008 and it was completed on 21.8.2008. (4) The appellant handed over possession of the property in 2006 itself. (5) The purchaser commenced construction of shopping complex in 2006 itself and completed before registration. He started selling/renting the properties in 2007 onwards. (6) Part of the properties were claimed to have been sold to others in 2006 itself although registration was done in 2008. (7) There is a tar road between the properties in the same plot. (8) Part of the property was rented out for fish market. If we take the all the factors and circumstances, it is clear from the above that the land was never sold as an agricultural land and the land did not retain the character of the agricultural land at all at the time of sale. The above analysis of the sale transaction, the mode, purpose and the manner in which the appellant s....
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.... the mere potentiality, which will only effect 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...." Again the Supreme Court observed: "....One of the objects of the exemption seemed to be to encourage cultivation or actual utilization 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....". The minimal test of 'agricultural land is laid down by the Supreme Court in these words: "....even if we could give a wider connotation to the term 'agricultural' than the one it carries with it in the Income-tax Act, we cannot dispense with credible evidence of at least appropriation or setting apart of the land for a purpose which could be regarded as agricultural land for which the land under consideration could be reasonably used without an alteration of its character. This, we think, is the minimal test of 'agricultural land' which shou....
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....ate that the land is agricultural in character. But a current user is by no means conclusive. During a period of food shortage, a building site which a prudent owner may never use for purposes of husbandry may be brought under cultivation because the need is great, the prices are high, and the expense is of no consideration. Similarly, during days of national peril, a scorched earth policy may be followed and farming land deprived of its vegetation. That too cannot necessarily mean that the land had lost its agricultural character. The test, as we have already indicated, should be whether a prudent owner would embark on an adventure in agriculture in respect of the lands concerned. The prudent owner is the common man of the common law, sane and sensible, reasonable and responsible, averse to gambling and speculative experiments, but nonetheless prepared for normal risks and legitimate expenditure" From the above two Kerala High Court decisions, it is obvious that unless the current user of the land for agricultural purposes is the natural, ordinary and prudent user of the land, it cannot have the benefit of exemption from Capital Gains tax. The land that was sold for Rs.3,27,....
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....mpugned land. The assessees have placed reliance on the certificates issued by village officer and the revenue authority. However, as pointed out by Ld CIT(A), those authorities have issued the certificates on the basis of assertion made by the assessees herein, i.e., they did not make any reference to the revenue records or other records maintained by the Government. The Ld CIT(A) has also pointed out that the certificate issued by a higher authority places reliance on the certificate given by the lower authority, who in turns places reliance on the assertion made by the assessees herein. The Ld CIT(A) has further pointed out that none of the assessees has declared any agricultural income even in the returns of income filed after the date of search. In the cash flow statements, meagre amount of agricultural income was shown by each of the assessees, but they could not give any credible evidence in support of the same. Even though these assessees have admitted that the possession of land was given in January 2006 itself, still they have shown agricultural income in the years relevant to the assessment years 2007-08 and 2008-09. These facts prove that the agricultural income shown i....
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....dvance of Rs.1.00 crore was handed over to the assessees herein as part consideration by 31.3.2006. There is also no dispute with regard to the fact that the possession of the property was handed over to the buyer in January, 2006 itself and he has immediately started the process of construction of commercial complex named "M/s Smart Trade City". Accordingly, the Ld CIT(A) has recorded a finding that the possession was handed over in 2006 itself. However, since the sale consideration was received in instalments covering a period of four years commencing from the year relevant to the assessment year 2006-07, the Ld CIT(A) held that the capital gains shall be assessable in all the four years in proportion to the amount of sale consideration received in each of the years. The assessee is disputing the said decision of Ld CIT(A). The Ld Counsel appearing for the assessee placed reliance on the decision dated 28-09-2012 rendered by this bench in the case of G. Sreenivasan Vs. DCIT (2013)(140 ITD 235)(Cochin) to contend that the capital gain is assessable in the year in which the possession was handed over to the buyer in part performance of contract as per the provisions of sec. 2(47)(v....
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....cessary to adjudicate those legal issues. 17. With regard to the enhancement made by Ld. CIT(A) on the taxability of capital gain arising on transfer of 18.98 cents made on 13/02/2008, we notice that the assessees could not substantiate their claim that the transfer had taken place much earlier to the actual date of registration. Under these circumstances, in our view, the Ld. CIT(A) was justified in holding that the transfer has taken place only on 13/02/2008, thereby the capital gain arising therefrom is assessable in the assessment year 2008-09. With regard to the direction to adopt the selling rate @ Rs. 3,27,500/- per cent, we are of the view that this issue needs examination afresh at the end of the Assessing Officer, since the Ld. CIT(A) has taken the decision without causing enquiries from the buyers of the property. Accordingly, we set aside the order of the Ld. CIT(A) on determination of actual sale consideration of 18.98 cents and restore the same to the file of the Assessing Officer with the direction to examine the issue afresh by carrying out necessary enquiries and take appropriate decision in accordance with law. 18. We shall now take up the appeals filed for ....
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....ce. The Ld CIT(A) also noticed that the assessees herein did not furnish any other evidence to contradict the value determined by the AO. Under these circumstances, the Ld CIT(A) upheld the rate of Rs.100/- per cent determined by the AO as the market value as on 1.4.1981. Before us, the assessees failed to submit any material to contradict the findings given by the AO. Under these circumstances, we have no other option, but to confirm the rate of Rs.100/- per cent confirmed by Ld CIT(A). 22. With regard to the substitution of sale consideration as Rs.3,27,500/- per cent in the place of Rs.20,192/- declared by the assessee, it was contended that the said action is not in conformity with the provisions of sec. 50C of the Act. However, we find that neither the AO nor the Ld CIT, did make any reference to the provisions of sec. 50C of the Act for the said purpose and hence, in our view, there is no necessity to refer to the provisions of sec. 50C of the Act. In any case, on a careful perusal of the provisions of sec. 50C of the Act, we notice that the said section is applicable only if the consideration received or accruing as a result of transfer of a capital asset, being land and ....