TaxTMI 
TaxTMI 
2015 (11) TMI 980
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.... 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 there was escapement of wealth chargeable t....
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.... 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, perused the materials available on record and con....
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....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 revenue in written submissions dt.12.9.2014 as to why the order of the co....
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.... 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 assessee admittedly obtained an order of conversion to put the land to use for non-agricultural purposes. One of the mandatory conditions stipula....
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....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 Nos.1464 & 1465/Bang/2008; 177, 178, 262 & 305/Bang/2009 dt.30.12.2009). The Tribunal also placed reliance on the decision of the Hon'ble jurisdictional High Court of Karnataka in the case of - (iii) C....
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....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 Sale consideration No.ALNSR/94/98-99 DT.29.4.1999 No.ALNSR/8/2004-05 DT.10.5.2004 Total 75 77 15.15 16 17 86.1 87 3A 38G 3A 00G 0A 10G 4A 14G 2A 17G 5A 31G 5A 12G 23A 22G 7.4.2004 2.6.2004 Rs. 50,00,000 Rs.1,82,50,000 Rs.2,....
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.... 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 lands to non-agriculturists without getting the same converted. In this regard the co-ordinate bench of the Tribunal at paras 7.3.8 to 7.3.10 of its order has observed and held :- "7.3.8. Finally, the most important aspect which requires to be considered is that agriculture is a State subject and different States have different reforms (laws) as to who can purchase/own agricultu....
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.... 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 capital asset under section 2(14) of the Act and that if that land is used for agricultural purposes till the date of sale, despite the fact that it is converted to non-agricultural use are agricultural lands and not capital assets under section 2(14) of the Act. Whether BIAPPA can be treated as a Municipality and consequently the issue falls within the purview of section 2(14)(iii)(a) of the Act. ....
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....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 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 l....
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....uded 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 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-....
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....odge'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 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. Acc....
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....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 agricultural lands in question, in the order of assessment for Assessment Year 2008-09. 8. A similar issue came up for consideration before the coordinate bench of this tribunal in bunch of Wealth-tax cases in WTA No. 16/B/2014 to 29/B/2014, wherein the ITAT under similar set of facts held that the impugned lands are not urban lands exigible for wealth tax. The relevant portion is reproduced below. "Since the Tribunal, in the assesse's own case in income tax proceedings with regard to the same subject matter, has taken the stand and held t....