TaxTMI 
TaxTMI 
2019 (11) TMI 1562
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....ta, entered into two sale agreements of capital assets being land and building with M/s STP Ltd. of 6, Lyons Range, Kolkata for consideration of Rs. 2,32,55,910/- and Rs. 56,70,924/-. A requisition u/s 133(6) of the Act, was sent to the ADSR and copy of documents/sale deed of the land was obtained. 2.1. The Assessing Officer at para 5 of his order states as follows:- 2.2. In reply, to a showcause notice dt. 14/02/2014, as to why the income from sale of land should not be added to the total income of the assessee, the ld. Counsel for the assessee, submitted as follows:- a) The partnership firm M/s. Shree Annapurna Oil Mills, was constituted between the assessee's father and his two brothers. b) The assessee contributed to the firm a sum of Rs. 10 Lakhs/- c) The partnership firm had purchased agricultural lands in the year 2005-06, for a consideration of Rs. 20,00,000/-. d) The land was purchased by the firm as an investment and there was no income of the said firm as there was no business undertaken by the firm in any of the year except the purchase and sale of this land. A departmental inspector was deputed to make enquiries about the nature and type of land which was so....
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....ltural operations in consideration of undertaking that he would look after the lands for and on behalf of the partnership firm. A copy of the certificate dt. 26/08/2010 issued by "Pantra Gram Panchayat", was furnished. c) The Assessing Officer concluded that the submissions of the assessee was self-contradictory for the reason that, it was stated that the lands were purchased as investment and on the other hand it was claimed that certain person is carrying out agricultural activities for and on behalf of the partnership firm. Thereafter, the Assessing Officer held that the land in question is not agricultural land, by applying the few tests laid down by the Hon'ble Courts for determining whether a land is agricultural or not. The tests applied are as under:- i. Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time; ii. Whether the land, though entered in the Revenue records, had never been actually used for agriculture; whether the owner mean or intended to use it for agricultural purposes; iii. Whether the income derived from the agricultural operations bear any rational proportion to the investment made in purchasing th....
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....hat was the nature of the user of the said portion of the land on the material date? 6. Whether the land, on the relevant date, had ceased to be put to the agricultural use? If so, whether it was put to an alternative use? Whether, such cesser and/or alternative user was of a permanent or temporary nature? 7. Whether the land, though entered in 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? 8. Whether the land was situate 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? 9. Whether the land itself was developed by plotting and providing roads and other facilities? 10. Whether there were any previous sales of portions of the land for nonagricultural use? 11. Whether permission under section 63 of the Bombay Tenancy and Agricultural Lands Act, 1948, was obtained because the sale or intend ed sale was in favour of a non-agriculturist? If so, whether the sale or intended sale to such nonagriculturist was for n....
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....Mahaveer Enterprises vs. UOI [2001] 244 ITR 789/[1997] 95 Taxman 220." 5. Aggrieved, the assessee is in appeal before us on the following grounds:- "1. That, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) - 13, Kolkata erred in holding that the Capital Gains arising on sale of immoveable property being lands sold by the partnership firm M/s Shree Annapurna Oil Mills vide two documents bearing No. 4482 of 2010 and 4483 of 2010 registered with the Addl. Dist. Sub Registrar, Haripal was not an agricultural land. 2. That, the Learned Commissioner of Income Tax (Appeals) erred in concluding that the provisions of section 50C of the Act are applicable to this case since the land sold by the partnership firm M/s Shree Annapurna Oil Mill was not an agricultural land. 3. That the Learned Commissioner of Income Tax (Appeals) erred in drawing aforesaid conclusions that the Land sold by the partnership Firm M/s Shree Annapurna Oil Mills was not agricultural land when the same land was held to be the agricultural land by the Income Tax Officer, Ward 43(1), Kolkata in assessment order passed under section 143(3) of the Act in the case of Sr....
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....n 28.02.2014 to enquire about the nature, location & type of the subject land. The Land & Revenue officer confirmed that the said land was converted into Industrial Land by the purchaser i.e. M/s STP Ltd. to whom the land was sold by the assessee. He relied on this statement of the Land Revenue Officer clearly shows that the land was an agricultural land when the same was sold by the firm and that the buyer had got the same converted into an industrial land only after its purchase from the assessee. Reference was made to the assessment order for the Assessment Year 2011-12 passed by the AO under section 143(3) of the Act in the case of Sri Rajeev Kumar Goyal, the brother of the assessee who was also a partner in the firm M/s Shree Annapurna Oil Mills and who also signed the sale deed. The copy of the Assessment order is placed at pages 76 to 77 of the Paper Book. In this case the assessee therein contended that the property sold by the assessee was an agricultural land and therefore the question of capital gains did not arise. To verify the contentions of the assessee, the Income Tax Officer on investigation found that the property was an agricultural land which was beyond the radi....
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.... otherwise in the case of the seller of such land. The area was not notified for urbanisation in the latest Notification No. 11186 dated 28.12.1999 issued by the Central Government. Therefore the gain arising on sale of the same cannot be charged to capital gains. He relied on certain caselaw for this proposition, which we would be referring to as and when required. 6.2. On Ground Nos. 5 & 6, the ld. Counsel for the assessee submitted that the assessee has challenged the order of Ld. CIT(A) wherein he held that the provisions of section 50C are applicable since the land sold by the assessee was not an agricultural land. He submitted that the Ld. CIT(A) was not justified in confirming the action of the AO when the assessee sold agricultural land and confirming the application of section 50C of the Act even when the AO did not refer the valuation to DVO. The ld. Counsel for the assessee relied on the to the judgement of Hon'ble Calcutta High Court in the case of Sunil Agarwal vs. CIT in ITAT No. 221 of 2013 and GA No. 3686 of 2013 wherein Hon'ble High Court held that "For the aforesaid reasons, we are of the opinion that the valuation by the departmental valuation officer, contemp....
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....for being used for agricultural purposes. He pointed out that all the surrounding areas were industrial plots and the assessee's land even had an industrial shed. He took this Bench through the order of the Assessing Officer and the ld. CIT(A) and prayed that he order of the Assessing Officer be upheld. The ld. D/R further submitted that the assessee should not have any grievance in this case, as the ld. CIT(A) has deleted the addition in his hands. On the directions of the ld. CIT(A) given to the Assessing Officer, he submitted that such directions can be given and it is for the Assessing Officer to taken guidance from the same and that these directions of the ld. CIT(A) issued to the Assessing Officer, are not binding. 8. We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- 9. Ground No. 1 to 4 are on the issue as to whether the land in question is agricultural land or not. Several propositions of law were cited and these were supported by case-law. These are as follows:- Proposition 1:- The assessee claims that he la....
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....Kol ITAT) "7. We have considered the rival submissions on this issue and also perused the relevant material available on record. During the year under consideration, land owned jointly by both the assessees in the present case was sold and the gain arising from the said land was claimed to be exempt on the ground that the said land being an agricultural land was not a capital asset within the meaning of section 2(14). As defined in section 2(14), "capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include, inter alia, as per clause (iii) agricultural land in India not being land situated in any area within the distance, measured aerially, not being more than 8 Kms. from the local limits of any Municipality or Cantonment Board which has a population of more than 10 lakhs. In support of this claim, a certificate issued by the concerned Tehsildar of Tirupporur was submitted by the assessees showing that the land sold by them was located 20 Km. away from the limit of Chennai Municipal Corporation. Based on this certificate as well as the provisions of section 2(14)(iii), the claim of the assessees for ....
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....s. Even otherwise, the learned Tribunal had looked into the relevant materials including the revenue records, as also records which indicate that the respondent assessee ran a Nursery. 19. The learned Tribunal was of the view that whether there was agricultural income or not was not relevant. No fault can be found with the reasoning of the learned Tribunal. The fact that there was loss and not income could not have made any difference to the nature and character of the land." The SLP filed by Revenue against the aforesaid judgement of Hon'ble Madras High Court was dismissed by Hon'ble Supreme Court [2019] 102 taxmann.com 223 (SC) (iv) M. Vijaya v. DCIT [2014] 49 taxmann.com 26 (Hyd-ITAT) 37. Further, we make it clear that when the land which does not fall under the provisions of section 2(14)(iii) of the IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as non-agricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, in such circumstances, in our opinion,....
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....ile determining the true nature and character of the land. The major factors which are considered as having a leaning on the determination of the question are as follows : a. whether, the land was classified in the revenue record as agricultural and whether it was subject to the payment of land revenue, but this factor alone will not be conclusive; b. whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time; c. whether such user of the land was for a long period or whether it was of a temporary character or by way of stop-gap arrangement; d. whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land; e. whether the permission under section 65 of the Bombay Land Revenue Code, was obtained for the non-agricultural use of the lands: if so, when and by whom; 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 past, what was the nature of the user of the said portion of the land on the material date; f. whether the land, o....
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....elopment in the surrounding area or that the land itself was developed prior to its sale. The land was located on the outskirts of the village but it was not situate in the municipal limit. The land must, therefore, be taken as having been situate in a rural area and it continued to have an agricultural bias right up to the date of its sale. Further, there was no evidence or material on record to indicate that the price offered for the land by the society, even proceeding on the basis that" the intended user of his part was non-agricultural, would not have been offered by an agriculture who wanted to purchase the land for purely agricultural user. There being no evidence on record as regard the nature of the soil, its fertility, its suitability and adaptability for raising cash crops, the irrigation facility and such or similar factors which had a great bearing on the valuation of an agricultural land, it would be hazardous to come to the conclusion that the price offered was such that no agriculturist would have paid the same if he wanted to purchase the land for purely agricultural purposes. 3. Accordingly, the land was an agricultural land and the surplus realised on a sale th....
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....8 Kms. from the local municipality etc.; as the Central Government may, having regard to the extent/scope for urbanisation and other consideration, specifically in the behalf. ...." DCIT v. P. Ashok Kumar ITA No.1581/Mds/2010, Judgment dated 20.01.2011 (Chennai Trib.) "6. There are good reasons given by the ld.AR for explaining that the land was not recently used for cultivation. In our considered opinion, the noncultivation of a piece of land does not loose its character of agricultural land unless the user of the land has been specifically got changed before such sale. Likewise, the future use of this land will not disentitle the assessee from the benefit as was available to him at the time of the sale. Therefore, we reaffirm that the cumulative effect of the above mentioned facts and circumstances is that the land in question was 'agricultural land' at the time of sale and the assessee is entitled to Long Term Capital Gains thereon. 7. We have considered the rival submissions and have perused the entire records. The assessee had purchased 2.14 acres of agricultural land from one Shree Harikrishna Brick Works, Chennai, vide sale deed dated 27.9.1994 for a total considerat....
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....hat this land was being cultivated by one local person, namely Shri Murugan, but for assessment years 2005-06 and 2006-07, agricultural operations were carried out by him, he could not get food returns and that is why he did not admit any agricultural income in the returns filed. The report of the Tahsildar refers to non-cultivation of the land because an agricultural operation in a large scale was not carried out on this land. Hence, we hold that the land sold by the assessee is only agricultural land and not a capital asset. Therefore, no Long Term Capital Gain is attracted. Consequently, we confirm the order appealed against and dismiss the appeal of the Revenue." Hindustan Industrial Resources Limited vs. ACIT [2009] 180 Taxman 114 (Del) "9. Having considered the arguments advanced by the counsel for the parties, we are of the view that the assessee's contentions deserve to be upheld and the findings returned by the Income-tax Appellate Tribunal ought to be reversed. We are conscious that we are not merely reversing a finding of fact, what we are intending to do is to point out that the Tribunal's finding of fact is contrary to its own record and, therefore, is in....
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.... the assessee has earned sufficient huge amount of profit also cannot be a ground to treat the profit earned by the assessee on sale of agriculture land as business income." M. Vijaya v. DCIT [2014] 49 taxmann.com 26 (Hyd-ITAT) 37. Further, we make it clear that when the land which does not fall under the provisions of section 2(14)(iii) of the IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as non-agricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, in such circumstances, in our opinion, such transfer like the case before us cannot be considered as a transfer of capital asset or the transaction relating to sale of land was not an adventure in the nature of trade so as to tax the income arising out of this transaction as business income. CIT vs. Rajshibhai Meramanbhai Odedra [2014] 42 taxmann.com 497 (Guj) "3.2 It is mainly argued on behalf of the revenue that as the agricultural land was sold in favour of non-agriculturist and as per the law p....
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....ence on record to show that there was any development in the surrounding area or that the land itself was developed prior to its sale. The land was located on the outskirts of the village but it was not situate in the municipal limit. The land must, therefore, be taken as having been situate in a rural area and it continued to have an agricultural bias right up to the date of its sale. Further, there was no evidence or material on record to indicate that the price offered for the land by the society, even proceeding on the basis that" the intended user of his part was non-agricultural, would not have been offered by an agriculture who wanted to purchase the land for purely agricultural user. ....." Proposition 5:- When capital gains arising on sale of agricultural land by the coowner thereof was treated as exempt from capital gains tax then the capital gain arising to other co-owners could not be assessed to tax. "ITO vs. Malay Kumar Mitter ITA No.307/Kol/2012, Judgment dated 23.12.2013 (Kol Trib.) "7. We have heard the rival submissions and perused the material available on record. We find that this issue is squarely covered in favour of the assessee. The Tribunal in the ha....
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....er 249 ITR 219, had an occasion to consider whether it is open to revenue to accept a judgment in the case of one assessee, and appeal, against identical judgment, in the case of another assessee. Their Lordships held that such a differential treatment on the same set of facts was not permissible in law and observed that "it is not open to revenue to accept the judgment in the case of one assessee and challenge its correctness in the case of another assessee without just cause". The same were views of Hon'ble Supreme Court in the case of Berger India Ltd. 266 ITR 99 and were also followed by the Hon'ble Delhi High Court in the case of CWTvs- RKKR International Pvt. Ltd. 198 CTR 567 and CIT-vs- Neo Poly Pack (P) Ltd. 245 ITR 492." 10. Applying these proposition of law to the facts of this case, as the land in question is beyond 8 Kms from the nearest municipality and as the conversion of the land for agricultural land to industrial land was done after sale of land, the conclusion could only be that the asset in question is an agricultural land even if there was no agricultural activity on the same. 11. Ground No. 5 & 6 are on the issue as to whether the Assessing Officer h....