TaxTMI 
TaxTMI 
2015 (11) TMI 951
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....e appeals are that the assessees are all owners of land located in Akkalenahalli- Mallenahalli villages. All the assessees had filed their returns of income as well as wealth-tax returns for the relevant assessment year. During the income-tax assessment proceedings of all the assessees, the relevant Assessing Officers (AOs) noticed that all the assessees have transferred land during the relevant previous year and therefore long term capital gain has arisen on such transfer and that the assessee has also offered the same for taxation, and that subsequently, the assessees have filed revised returns of income claiming the entire capital gain admitted in the original returns of income filed, as exempt on account of treating the lands transferred as agricultural Land. The AO verified the wealth-tax returns filed by the assessees and observed that the assessees have not included the value of the 'urban land' in their wealth-tax returns for the relevant assessment years even though the assessees were holding the land at Akkalenahalli-Mallenahalli village. The AO, therefore, sought to reopen the assessments by issuing notice u/s 17 of the Wealth-tax Act, 1957 ('WT Act' for short). In respo....
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....ice for reopening of the assessment, asked for the reasons recorded, the AO has to supply the reasons for such reopening and if the assessee files objections to such reopening, the AO has to dispose of the same before proceeding with the re-assessment proceedings. He submitted that in the case before us, though the assessee has asked for reasons for reopening of the assessment, the assessee was not supplied with the same thereby violating the principles of natural justice as held by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) and in similar set of facts, the Tribunal at Bangalore in the case of Suez Tractebles S.A has set aside the reassessment as invalid and unsustainable in law. Copy of the said judgment is filed before us. 6. Having regard to the rival contentions and the material on record, we find that it is not disputed by the revenue that the assessee had filed a letter asking the AO to treat the original returns filed by them as returns in response to the notice u/s 17 of the WT Act. It is the case of the assessee that thereafter, the assessee has requested the AO to supply the reasons for reopening. It is also not in dispute that the re....
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....d under section 148 of the Act and therein also requested for provisions of the reasons recorded for initiating proceedings under section 148 of the Act. The failure of the Assessing Officer in providing the assessee with the reasons recorded for initiation of proceedings under section 148 of the Act, within a reasonable period of time so that the assessee could efficiently represent / file objections to the same is, in our opinion, amply evident beyond any doubt from the facts on record and our observations thereon. The fact of non-provision of the reasons recorded for initiation of proceedings under section 147 / 148 of the Act before the completion of assessment proceedings for the relevant period and the furnishing of the said reasons recorded at the appellate stage by the learned CIT(Appeals) will render the order of assessment dt.31.3.2006 for Assessment Year 2002-03 invalid and unsustainable in law. 14.5 The co-ordinate bench of this Tribunal in the case of M/s. Synopsys International Ltd. V DDIT (International Taxation), to which one of us is party to, after considering the decisions of the Hon'ble Apex Court in the case of GKN Driveshafts (India) Ltd. (supra);....
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....g the pendency of assessment proceedings, in spite of being requested to do so by the assessee's letter dt.27.4.2005, 22.6.2005 and 27.3.2006. The reasons as recorded by the Assessing Officer were furnished to the assessee by the learned CIT(Appeals) by letter dt.13.2.2009 as recorded in his appellate order at para 4.3 at page 11 thereof. In view of the undisputable fact that the reasons recorded by the Assessing Officer for initiating proceedings under section 148 of the Act for Assessment Year 2002-03 were never furnished to the assessee before the computation of assessment proceedings, the subsequent furnishing of the said reasons recorded by the learned CIT(Appeals) by letter dt.13.2.2009, about 45 months after the request was made by the assessee, does not achieve any purpose or mitigate the illegality of the action of depriving the assessee its right to raise objections against the initiation of proceedings under section 148 of the Act. In this view of the matter and following the decision of the co-ordinate bench of this Tribunal in the case of Synopsys International Ltd (supra), we hold that the order of assessment passed under section 143(3) r.w.s. 147 of the Act on 31....
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....rt of around 600 acres of lands known as 'Gokula Farm'being jointly cultivated by the family consisting of 10 children of Late Sri M.S. Ramaiah; and that the farm was a fully grown orchard comprising various fruit bearing trees besides seasonal crops such as tomato, pepper, ragi, paddy etc., and the income admitted by the assessee as agricultural income for the AYs 2004-05 to 2009-10 as accepted by the Department; That the capital asset as defined in s. 2(14) of the Act means property of any kind but does not include agricultural lands. The Income-tax Act has also not defined the agricultural land. Various Courts have recognized that the lands must not only be capable of being used for agricultural purposes but should have been actually used as such; and that if a land was ordinarily used for the purposes of agriculture or for purposes of agriculture or for purposes subservient to or allied to agriculture, it would be agricultural land. It was an un-denying fact that in the subjected lands, agricultural activities deriving agricultural income was conducted and, thus, the said land was put to use for extensive agricultural purposes. Thereby, the subject land was not a capit....
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....J 13] relied on by the CIT (A) were distinguishable as the facts of the above cited cases were not comparable to the assessee's case as the assessee has been carrying on agricultural activity even after the conversion of land; That without prejudice, the subject land was an agricultural land and was not a capital asset within the meaning of s 2(14); assuming but not conceding, if one were to accede with the reasoning of the CIT (A) that once the land was converted, it becomes a capital asset, then the cost of land for the purpose of indexation should be the guideline value issue by the Government or the market value of the said property as on the date of conversion and not the original value claimed by the assessee in its computation of income. Assuming, on the date of conversion the agricultural lands being an exempted asset becomes a capital asset and, thus, a new asset springs up. Therefore, the cost for such lands for the purpose of computing capital gains should be the market value as on the date of conversion and indexation should be allowed on the said market value. It was not appropriate to adopt the cost of land as it applies to agricultural land as on date ....
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....larly, in relation to land use, zoning, town planning etc., it was contended that BIAAPA performs only planning and zoning functions and does not perform any other municipal functions. Other major municipal functions were required to be performed by the respective municipalities/panchayats within the ambit of the area covered by BIAAPA and, thus, BIAAPA was a mere planning authority; Disputing the CIT(A)'s averment that municipality need not necessarily be an elected body, it was contended that Article 243P(e) of the Constitution defines 'Municipality' means an Institution of selfgovernment constituted under Article 243Q and Article 243R requires that all the seats in a Municipality shall be filled by persons chosen by direct election from the territorial constituencies in the Municipal area. Thus, a Municipality has to essentially be an elected body. BIAAPA is not an elected body and is an appointed body and, hence, BIAAPA does not qualify to be considered a Municipality. Relies on the case law in CIT v. Murali Lodge [194 ITR 125 (Ker)]; With regard to the CIT (A)'s stand that there were local bodies referred to in sub-clause such as notified area committee, town....
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....d) In conclusion, the learned AR pleaded that - (i) The subject land was an agricultural land and, thus, not liable to taxation; (ii) The CIT (A) had failed to appreciate that the conversion of land does not affect the character of it being agricultural land and more so when an extensive cultivation was being carried out and income from agriculture derived from the said land has been accepted by the Department; (iii) Without prejudice, the cost of acquisition in terms of s. 49 of the Act ought to have been taken as on the date of conversion and indexed up-to the date of sale; (iv) The BIAAPA was not a Municipality and it was merely a Planning Authority; & (v) The subject land was situated in Anneshwara Gram Panchayat and, therefore, doesn't fall within the jurisdiction of a Municipality; 7.1. On the other hand, the submissions made by the learned DR are summed up as under: That the lands in questions were located within 8 K.Ms from Devanahalli Municipal Limits; That the lands were located within the jurisdiction of BIAAPA which is an authority as per the definition of 'asset' in s. 2 (14) of the ....
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....e assessee-HUF had sold lands situated at Akklenahalli and Mallennahalli villages of DevanahalliTaluk to an extent of 6 acres and 1 gunta for a total consideration of Rs. 45,58,12,500/- vide a registered Sale Deed dated 12.4.2007 and, accordingly, admitted an income of Rs. 14,17,87,795/- as Capital Gains from the above transaction in its original return of income furnished to the Department. Subsequently, in its revised return of income dated 15.6.2009, the assessee had admitted income of Rs. 22,90,570/-, on the ground that the capital gains which arose on the sale of the said lands was wrongly offered in the original return in as much as the same was exempt from tax being agricultural lands and hence excluded from the definition of 'capital asset' as per the provisions of s. 2 (14)(iii) of the Act. 7.2.1.The prime issues for consideration before us are twofold, namely: (i) Whether the land can be treated as agricultural land even after conversion of agricultural land for non-agricultural/residential purpose? (ii) Whether the authorities below were justified in treating 'BIAAPA' as a municipality? 7.2.2. Before analysing the arguments of the asse....
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....purposes other than that of cultivation after conversion. This is evident from the fact that the incomes derived from such lands duly declared by the assessee which were accepted by the revenue. 7.2.5. Incidentally, the subject property was inspected on 10-4-2014 by us accompanied by the learned DR, the AO and the learned AR of the assessee. During the course of inspection, we have noticed that the subject property was a part of large track of land having agricultural operations which consist of fully grown up fruits-yielding trees such as mangoes, sapota, coconut, jack-fruit, apple, guava etc., appear to be existing in the subject property even on the date of sale. This clearly attributes the assessee's assertion that even on the date of transfer, the subject land was held to be agriculture. In this regard, we would like to refer to the Certificate of Senior Assistant Director of Horticulture (ZillaPanchayat) Devanahalli, Government of Karnataka, dated 23.4.2014 wherein it has been certified as under: "This is to certify that M.R.Seetharam, s/o (of) Late M.S. Ramaiah residing at Gokula House, Dr M.S. Ramaiah Road, Gokula, Bangalore, have, in their land situated i....
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....o, when and by whom [the vendor or the vendee]; whether such permission was in respect of the whole or a portion of the land; if the permission was in respect of a portion of the land and if it was obtained in the past, what was the nature of the user of the said portion of the land on the material date; (vi) Whether the land, on the relevant date, had ceased to be put to agricultural use, if so, whether it was put to an alternative use; whether such ceaser and / or alternative user was of a permanent or temporary nature; (vii) Whether the land, though entered in the revenue records, 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? (viii) Whether the land was situated in a developed area; whether its physical characteristics, surrounding situation and use of the lands in the adjoining area were such as would indicate that the land was agricultural? (ix) Whether the land itself was developed by plotting and providing roads and other facilities; (x) Whether there were any previous sales of portions of the land for non-agricu....
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.... Court in the case of CIT v. Smt. K.Leelavathy (supra). 7.3.1. It is a fact that the land which was hitherto agricultural land does not automatically become a capital asset upon a mere fact of its conversion to non-agricultural purpose. The land even though converted for nonagricultural purpose, continues to be agricultural land and does not become a capital asset u/s 2 (14) of the Act, if agricultural activities were being carried out on such a land as on the date of its sale despite a fact that the land stands converted for non-agricultural purpose. 7.3.2. In the present case, as already discussed, even though the subject property was converted for nonagricultural purpose vide Conversion Order dated 19.7.2004, the assessee continued the agricultural operations in the converted lands which was evident on our site visit and also from the fact that incomes derived from such agricultural operations on the said lands declared by the assessee in its returns of income which were accepted by the Revenue for the AYs 2004-05 to 2009-10. 7.3.3. At this juncture, we would like to refer to the findings of the earlier Bench of this Tribunal in the case of H.S.Vijaya ....
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....articular land is agricultural land or not has been the subject matter of dispute in many a cases. In each of the judgments broad outlines have been given and it is suffice to say that the unanimous view of all the Hon'ble Courts is that the issue should be decided on the facts and circumstances of the case. As we find that the facts of the case clearly point out that the land in question continued to be agricultural land and was put to use as such, prior to sale to Indian Oil Corporation, despite the permission obtained from the concerned authorities, we accept the contention of the assessee and hold that agricultural land in question are not a capital asset and, thus, the levy of capital gains is bad in law. 6.5. Before parting, we feel that mere evidences of Government Notification or orders on a likely use of a particular land would not ipso facto affect or on the same day change the character of the land. For example, the Government has notified many areas for setting up of special economic zones or industrial parks or for infrastructural developments such as roadways and railways. After identifying particular areas, the Government notifies that a particular area woul....
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.... this norm and while they did hold that the sale transaction in respect of the following extent of land: Conversion NotificationNo. and date Sy.No. Extent of area Date of sale Sale consideration No.ALNSR/94/98-99 DT.29.4.1999 75 77 3A 38G 3A 00G 7.4.2004 Rs. 50,00,000 No.ALNSR/8/2004-05 DT.10.5.2004 15.15 16 17 86.1 87 0A 10G 4A 14G 2A 17G 5A 31G 5A 12G 23A 22G 2.6.2004 Rs.1,82,50,000 Total Rs.2,32,50,000 In respect of the sale transaction dated June 2,2004, it was taken as a sale of capital asset as this sale was after the date of permission for non-agricultural use granted by the Asst. Commissioner, viz., after May 10,2004, whereas the earlier sale transaction dated April 7, 2004, is held to be in respect of an agricultural land. We do not find the reasoning and the principle enunciated by the Tribunal for making a distinction as to whether the land was agricultural land or otherwise in the case of T. Suresh (supra) apply to the present case to be obnoxious or violating any statutory provisions and, therefore, we do not find any illegality in the finding recorded by the Appellate C....
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....d that the potential non-agricultural use does not alter the character of the land. This was a case wherein the land was purchased in 1954 and, subsequently, sold in 1969. The entries in the revenue records showed that the land was agricultural continued to be so. The land revenue paid was for agricultural use, but permission for non-agricultural use was obtained but not before the date of the sale. In these circumstances, the Hon'ble High Court upheld the presumption that the land is agricultural. The Hon'ble High Court came to the above conclusion in spite of the fact that this land was situated in an industrially developed area where the potential use of the land as non-agricultural land was very high but the Hon'ble High Court held that the use of the land as non-agricultural is totally immaterial. Entries in the record of rights are good prima facie evidence regarding land being agricultural and if the presumption raised either from actual user of the land or from entries in revenue records is to be rebutted, there must be material on the record to rebut the presumption. The approach of the fact-finding authorities, namely, the income-tax authorities and the Tribunal, sh....
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....ssing officer. In this case, the assessing officer noticed that the assessee had sold land measuring 40 acres and 20 guntasat Seshagirihalli for Rs. 4,50,00,000/- on 7.4.04 to Tibetan Childrens' village and claimed exemption from capital gains which worked out to Rs. 3,68,01,771/- on the ground that the land situated in a rural area i.e., 8 Kms away from the limits of Bangalore MahanagaraPalike and the land is located as notified u/s 2 (14)(iii)(b) of the Act as the transaction relates to sale of agricultural land. The assessing officer observed that the land was converted for residential purpose before the sale and, therefore, it is immaterial whether the land was situated outside the city limits or beyond 8 KMs. He further held that the cultivation of land till disposal is also irrelevant. He further held that no documentary evidence was produced to the effect that the land converted was treated as agricultural land within the meaning of s. 2 (14)(iii)(b). ......................................................................................... 54. On similar issues in the connected case, we had held that the evidence produced by the assessee before the assessing o....
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....ities to utilise the subject land for non-agricultural purposes. However, the same law/rule is not prevalent in the neighbouring States of Tamil Nadu, Andhra Pradesh or in Maharashtra, Delhi etc. In other words, the agriculturists of the said States are free to sell their lands as shown in the revenue records to nonagriculturists/ Corporates without obtaining a conversion order. 7.3.9. Thus, it is evident from the fact that the agriculturists in other States can sell their agricultural lands without getting the same converted whereas the agriculturists in Karnataka cannot do so due to the Land Reforms Act prevailing in the State. As such, an agriculturist in Karnataka is on a different footing from his counterparts in other States. If one were to conclude that since the present assessee had obtained a conversion order to enable it to sell its lands to a non-agriculturist (a Corporate), the subject land ceased to be a non-agricultural and, thus, become a Capital asset, though the subject land remains an agricultural land, the assessee then stands discriminated in the eyes of law vis-à-vis its counter-parts in other States. Had the State Reforms Act permitted the asse....
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.... the community', and 'to ensure that most appropriate, economical and healthy development of the town takes place in accordance with the land use plan and its continued maintenance over the years." 8.1.1. During the course of hearing, the learned DR had placed strong reliance on the judgment of the Hon'ble Punjab and Haryana High Court in the case of CIT v. Smt Rani Tara Devi (2013) 214 Taxman 321 (P & H). 8.2. In its rebuttal, the assessee differed from the view taken by the Punjab & Haryana High Court in as much as the Hon'ble Court had come to the conclusion thatit had on the premise that the expression 'by any other name' appearing in Item (a) of clause (iii) of s. 2 (14) has to be read ejusdem generis with the earlier expression i.e., municipal corporation, notified area committee, town area committee. It was, further, submitted the fact that the Legislature took a conscious decision to specify the words 'whether known as municipality, municipal corporation, notified area committee, town area committee, town committee or any other name' in brackets. This mean, it was argued, that the body referred to must essentially be a municipality even though it may be kn....
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....thority is a Municipality?' as under: "(On page 127).............................................................................. From the plain and unambiguous language employed in the section [2(14)(iii)(a)], it is clear that, if the agricultural land is situated outside the jurisdiction of a municipality then no tax on any profits or gains arising from the transfer of such land will be chargeable under the head 'capital gains'. The question, therefore, is: Whether the agricultural land of the assessee sold in public auction can be said to be situated in an area which is comprised within the jurisdiction of a municipality. The case of the Revenue is that it is, because the GuruvayurTownship is a municipality within the meaning of that word in the section. On the other hand, counsel for the assesssee submits that the GuruvayurTownship, though a local authority cannot be said to be a municipality and, therefore, the agricultural land in dispute cannot be said to be situated in an area which is comprised within the jurisdiction of a municipality. The word 'municipality' used in the section considered in the light of the various expressions used in the brackets, namely, 'wh....
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....ea committee, town area committee, town committee or such other similar local authority'. In that event, the Guruvayur Township can be said to be a municipality. The plan language employed in the section, however, makes it clear that the intention of the Legislature is not to treat every local authority as a municipality; but, on the other hand, only those local authorities which have all the trappings of a municipality as stated above can be said to be municipalities within the meaning of the section. The Guruvayur Township, constituted under the Guruvayur Township Act, considered in this backdrop, cannot be said to be a municipality. The Guruvayur Township is not an autonomous body like a municipality. It is constituted by the Government by a Notification issued under the Guruvayur Township Act. To put it differently, the members of township committee are not elected representatives of the residents of the area. That the Central Government also has understood the position thus is obvious from the draft notification dated February 8, 1991, published in the Gazette issued under section 2 (14)(iii)(b) of the Income-tax Act......" 8.3.2. We have, with due regards, p....
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....ase (supra) in an identical issue, with the following observations: "29. With respect, we are unable to agree with the view expressed by the Kerala High Court in the aforesaid judgment. The expression 'by any other name' appearing in item (a) of clause (iii) of section 2(14) has to be read ejusdem generis with the earlier expressions i.e., municipal corporation, notified area committee, town area committee, town committee. The Court has also not considered the scope and ambit of section 3 (31) of the General Clauses Act defining local authority." 8.3.5. At this juncture, we would like to point out that there are two views on the issue, one in favour of the assessee as held by the Hon'ble Kerala High Court [in Murali Lodge's case] and other against the assessee as ruled by the Hon'ble P & H High Court (supra). Apparently, there is no judgment rendered by the Hon'ble jurisdictional High Court on this issue. In the given circumstances, following the judgment of the Hon'ble Supreme Court in the case of CIT v. Vegetable Products Limited reported in 88 ITR 192 (SC), we hold that where two views are possible on an issue, the view in favour of the assessee has to prevail.....