TaxTMI 
TaxTMI 
2015 (11) TMI 980
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....ce, we have taken the facts from the A.Y. 2006-07. 2. Brief facts of the case are that the assessee is a HUF filed its return of net wealth for the A.Y. 2006-07 on 30-03-2007 declaring net wealth of Rs. 1,29,08,300/-.During course of income tax proceedings of the assessee for the A.Y. 2008-09, the AO noticed that the assessee has transferred certain lands and computed the capital gains and paid tax. Subsequently, the assessee has filed revised return and claimed the exemption on capital gain admitted in the original return, as the lands transferred is agricultural lands. The AO gathered information from the income tax proceedings, verified the wealth -tax returns filed by the assessee and observed that the assessee has declared the lands situated at Akkalenahalli- Mallenahalli Village in the return, but claimed same was not urban land as defined u/s 2(ea) of the Wealth - tax Act, 1957 as exempt assets. The Assessing Officer noticed that though, the assessee owned 61 acres 21 Gunts converted lands at Akkalenahalli- mallenahalli village and the land is situated within the limits of BIAAPA, the same were claimed exempt from Wealth-tax therefore, the Assessing Officer believed that ....
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....ose, situated within the limits of BIAAPA and BIAAPA is a municipality. With this observations, the CWT(A) confirmed the assessment order. Aggrieved by the order, the assessee is in appeal before us. 4. The learned authorised representative of the assessee submitted that the issue in this appeal is covered by assessee own case in ITA. No. 262/B/2013 for the A.Y.2008-09. He further, submitted that the ITAT in the assessee own case, for the A.Y. 2008-09 in income -tax proceedings, while deciding the issue of capital gains has held the impugned lands are agricultural lands and not capital assets under section 2(14) of the Act. The AR further, submitted that the issue is also covered in favour of assessee by the decision of ITAT orders in assessee family members case in WTA. No. 16/B/2014 to 29/B/2014. The ITAT, under similar facts and circumstances held that the impugned lands are not urban lands exigible to wealth-tax. Copies of relevant orders are furnished in paper book page No. 1 to 73. 5. The Departmental representative on the other hand, strongly supported the orders of Assessing Officer and CWT(A) and urged to confirm the CWT(A) order. 6. We have heard both the parties....
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.... these lands were converted for non-agricultural purposes, but no development was carried out by the assessee in respect of the said land. Agricultural activities were continued thereon right up to the date of sale thereof on 8.2.2008 and the same has been accepted by the Income Tax Department while determining the assessee's income and computing the taxes thereon. In fact no development activities have taken place on these lands even after six years after the date of sale and this was evident from the physical inspection undertaken by the Members of the Co-ordinate bench prior to the passing of the appellate order in the case of M.R.Seetharam (HUF). Considering the fact that the assessee's lands are contiguous to the lands of M.R.Seetharam (HUF) and have the same physical properties, they are identical to the lands which formed the subject matter of the order in the case of M.R. Seetharam and therefore we are in no doubt that the order passed in the case of M.R. Seetharam (HUF) in ITA No.1654/Bang/2012 dt.13.6.2014 is applicable to the appeal in the case on hand. 9.1 We now proceed to examine and take up for consideration the issues and reasons cited / raised by r....
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....ce or mischievous in nature. If mischievous, then Revenue would be well advised to avoid such tongue-in-check arguments. 9.2 On careful consideration of the above four reasons cited by Revenue (supra), we are of the considered view that none of them survive as they are wholly extraneous in arriving at a decision in accordance with the provisions of law. 10.0 We now proceed to carefully consider the several other issues raised by Revenue and examine these in the light of the order passed by the co-ordinate bench of this Tribunal in the case of M.R. Seetharam (HUF) (supra). On a careful reading of the above, we draw the following conclusions as regards the decision rendered in the order in the case of M.R. Seetharam (HUF) :- 10.1 There is no dispute as regards the fact that the lands in question stood converted, as on the date of sale, in the records of the land revenue authorities of the State Government, as but for this fact, the sale of the lands in question to corporates could not have taken place in the State of Karnataka. Thus the fact that the lands sold are therefore non-agricultural as on the date of sale is also not in dispute. 10.2 The a....
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....nd the assessee has also been declaring the agricultural income earned therefrom in the returns of income filed before the Department in this period; (b) The assessee did nothing to change the physical character of land from agricultural to non-agricultural even after obtaining the permission to convert; (c) The land continued to be agricultural land in actual physical condition even after a period of six years after its sale. (d) The assessee obtained permission to convert the land merely to facilitate its sale to corporate entity as the sale would otherwise not been possible. 10.4.1 The co-ordinate bench of this Tribunal only after satisfying itself that the above facts were present in the case of M.R. Seetharam (HUF) (supra) held that the lands sold are agricultural lands and not capital assets under section 2(41) of the Act. In coming to this decision, the co-ordinate bench of this Tribunal placed reliance of these earlier decisions of different co-ordinate benches of the Bangalore Tribunal, in the following cases :- (i) H.S. Vijaykumar V ACIT, Hassan (ITA No.108/Bang/2009 dt.28.11.2006). (ii) T. Suresh Gowda & Others (ITA N....
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....s agricultural land and the same is exempt from capital gains in view of section 2(14) read with sections 45 and 48 of the Act ? " 10.5 The Hon'ble Court after considering the averments of both parties and the orders of the authorities below held as under :- "5. We find from the record that the Appellate Commissioner as well as the Tribunal followed an earlier ruling of the Tribunal rendered on December 30, 2009, in the case of T.Suresh Gowda [ITA NO.262/Bang/2009] wherein it appears, the question was resolved by looking into the date of permission for conversion as the cut-off line to decide as to whether the land was an agricultural land or otherwise. 6. It appears, the Tribunal had opined that the land retained its agricultural character till the date of order permitting non-agricultural use and, thereafter, it is not an agricultural land and, therefore, can be treated as capital asset. 7. The Appellate Commissioner as well as the Tribunal has applied this norm and while they did hold that the sale transaction in respect of the following extent of land: Conversion Notification No. and date Sy. No. Extent of area Date of sale ....
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....of the Hon'ble jurisdictional High Court in the case of Smt. K. Leelavathy (supra) is only for the limited purpose of determining whether a land is agricultural land or a capital asset u/s.2 (14) of the Act and not to determine the definition of converted land in the state of Karnataka and other issues pertaining to the status of land as sought for by the Revenue in its written submissions. We also find that the decision in the case of Madhav Bhandhopanth Kulkarni 2003(5 Kar. LJ 13, relied on by Revenue, is not germane to decide the issue before us. 10.7 In the order of the co-ordinate bench in the case of M.R. Seetharam (HUF) (supra), the co-ordinate bench of this Tribunal at paras 7.3.8 to 7.3.10 of its order has also found merit in the arguments put forth by the learned Authorised Representative therein that owing to the peculiar features of the law prevailing in the state, an agriculturist in the state of Karnataka has to necessarily get his agricultural land converted if he has to sell the same to a non-agriculturist and hence is placed at a disadvantage as compared to an agriculturist in Tamil Nadu, Andhra Pradesh, etc. who can directly sell their agricultural la....
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....d earlier even after conversion, assessee was carrying on agricultural operation and conversion was done only to facilitate sale of subject property to a corporate entity/ non agriculturist. In substance, the Income-tax Act - a Central Act - is to be administered in such a manner to ensure that an assessee is not subjected to suffer due to different State laws. 7.3.10. Taking into account all the aspects as discussed in the fore-going paragraphs and also in conformity with the judicial pronouncements on the issue (supra), we are of the view that though the subject land was converted into non-agricultural purposes, cultivation of the land for agricultural purposes till the date of sale was continued unabated and as such, the land should have been treated as agricultural land and, thus, exempt from capital gains in view of s. 2 (14) of the Act. It is ordered accordingly." The extracted portion at paras 7.3.8 to 7.3.10 of the order in the case of M.R. Seetharam (HUF) (supra) indicates that the co-ordinate bench of this Tribunal came to the conclusion that mere conversion of land from agriculture to non-agriculture could not be taken as the sole criteria to hold it as a capita....
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....(Ker). The issue before the Hon'ble Court was Whether the land in question situated within Guruvayur Township can be treated as a capital asset within the definition of section 2(14) of the I.T. Act? After having considered the facts of the issue and also in conformity with the judgment of the Hon'ble Supreme Court in the case of Garden silk Weaving Factory v. CIT [(1991) 189 ITR 512 (SC)], the Hon'ble Kerala High Court had, comprehensively, dealt with the issue of 'Whether the local authority 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 Guruv....
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....at the said resolution is suspended or cancelled by the Government. The municipality contemplated under section 2(14)(iii)(a) must be one which satisfied the above requirements. All the local authorities included in the brackets must satisfy the above requirements to be known as a 'municipality'. The position, however, would have been different had the section contained a definition which takes in its fold the local authorities included in the brackets, namely, ' municipal corporation notified area 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 bo....
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....e other-side it was within a radius of 1 KM from the District headquarters, colleges, hospitals etc., whereas in the present case, the subject property was surrounded by lush green agricultural lands. Therefore, we are of the view that the case law relied on by the Revenue is not directly applicable to the issue on hand. 8.3.4. Further, while deciding the issue against the assessee, the Hon'ble Court had distinguished the judgment of Hon'ble Kerala High Court in Murali Lodge's case (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 H....
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....chards and coconut groves with thousands of fruit/nut bearing trees and not ".... some fruit bearing trees" as mentioned by Revenue in its written submissions. 14. In the light of the above discussion of the facts and circumstances of the case at paras 2.1 to 13 of this order (supra), we are of the considered view that the conclusions reached by the co-ordinate bench of this Tribunal in the case of M.R. Seetharam (HUF) (supra) squarely applies to the facts of the case on hand. We, therefore, following the decisions of the co-ordinate benches of this Tribunal in the cases of H.S. Vijayakumar (supra), T. Suresh Gowda and Others (supra), M.R. Seetharam (HUF) (supra) and the Hon'ble Karnataka High Court in the case of Smt. K. Leelavathy (supra) hold as under :- (i) The lands in question, which were sold in the case on hand, are agricultural lands and not capital assets under section 2(14) of the Act, and (ii) BIAPPA is not a Municipality as contemplated in section 2 (14) of the Act. We, accordingly, direct the Assessing Officer to delete the addition made to the income of the assessee under the head 'Capital Gains' on sale of the said agricultura....