TaxTMI 
TaxTMI 
2022 (9) TMI 147
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....in on transfer of land on which there was no agricultural activities done by the assessee and land in question was a "ghasni land", which is used for grazing of cattle and cannot be said to be an agricultural land. 4. On the facts and in circumstances, Ld. CIT(A) has erred in deleting the addition of Long Term Capital Gain on transfer of land ignoring that agricultural activities has been held to be an activity where human efforts has resulted in growing crops. 5. The appellant craves to leave to add or amend any grounds of appeal before the appeal is heard or disposed off. 6. It is prayed that the order of the Ld.CIT(A)5 be cancelled and that of the assessing officer may be restored. 3. From the aforesaid grounds it would be clear that only grievance of the Department relates to the deletion of addition made by the AO on account Long Term Capital Gain (LTCG) on transfer of land. 4. The facts of the case in brief are that the assessee filed his return of income on 28/09/2013 declaring an income of Rs. 23,07,790/-. Later on the case was selected for scrutiny. 4.1 During the course of assessment proceedings the AO noticed the following facts relati....
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....ables Promoters Pvt. Ltd. was increased from Rs. 1,00,000/- to Rs. 13.50 crores, since as on 31/03/2012 the said company had only 10,000 shares with face value of Rs. 10/- only. In response the assessee produced the copy of Notice for meeting of the Board of Directors for passing Resolution regarding increasing the Authorised Capital of the company. The AO reproduced the copy of the Notice and Explanatory statement at page no. 4 of the assessment order. In the said notice it was resolved that the Authorised Capital of the assessee be enhanced to Rs. 13.50 cores. He also mentioned that in the Explanatory Statement pursuant to the provisions of Section 173 of the Copanies Act, 1956, none of the directors was interested in the Resolution. He further observed that the Board resolution was passed by the Director on 10/07/2012 and copy of Form No. 5 was furnished for the intimation of the Board meeting to the Registrar of companies. The assessee intimated the Registrar of companies on 10/07/2012 that the authorized share capital had been increased from Rs. 1,00,000/- to Rs. 13.50 Crore. The AO observed that though the assessee had sold the land to the company M/s Gables Promoters Pvt. Lt....
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....rs Pvt. Ltd. within few months, for the purpose of construction of Hotel & Resorts. Therefore the intention of the assessee was mainly to draw benefit out of this land by selling it to the company for the purpose of construction of Hotel & Resort. The AO referred to the decision of the Hon'ble Supreme Court in the following cases: • CIT Vs. Raja Benoy Kumar Sahas Roy reported in 32 ITR 466 (SC) • Ramkrishna Deo reported in 35 ITR 312 (SC) • Sarifabibi Mohmed Ibrahim Vs. CIT [1993] 204 ITR 631 (SC) • Gemini Pictures Circuit Pvt. Ltd. reported in 220 ITR 43 (SC) 4.5 The AO further observed that the assessee held the land for less than a year, this land was received as a gift from his brother and there was no intention of doing any agricultural activity. The land was to be held as a capital asset on which assessee was liable to pay capital gain. The AO also reproduced the inquiry report received from DIT(I&CI) Chandigarh vide letter no. 761 dt. 29/01/2016 in assessee's case which read as under: "As analysis of the above transactions reveal a consolidated and concerted tax avoidance mechanism to avoid/ minimize tax on capi....
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....g aggrieved the assessee carried the matter to the Ld. CIT(A) and submitted as under: Addition on account of Capital Gain u/s 2(14)(b) of Income Tax Act. 1961:- On the facts and circumstances of the case the Learned Assessing Officer has erred in taxing agricultural land sold not being capital asset u/s 2(14)(b) of Income Tax Act. 1961. The basic facts of the case are that assessee sold agricultural land measuring 01-15-50 Hectares/Khata/Khatoni No 8/10, Khasra No 36 situated at Jungle Naldehra, Tehsil &Distt Shimla (H.P) to M/s Gables Promoters Limited for consideration of Rs 12,00,00,000. The agreement to sell this land was entered into on 19/03/2012 with Gables Promoters Limited. The registration of land was affected on 24/07/2012. The land was acquired by the appellant by way of gift from his brother on 28/09/2011 by way of gift deed. The appellant's brother had purchased agriculture land on 27/02/2006. The appellant had sold land to M/s Gables Promoters Limited for Rs 12 Crores against which he received 12 lakh shares of face value of Rs 10 each. The Assessing Officer has brought to tax the sale of Agricultural Land by appellant to Gables Promoters Limited on foll....
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....law as agricultural activity was being carried out by the appellant by way of planting of trees and grazing of grass as fodder for animals. The agricultural land of the appellant was ghasnie land and such land has been classified as agricultural activity by the Himachal Pradesh Tenancy and land Reforms Act, 1972." 5.2 The Ld. CIT(A) after considering the submissions of the assessee observed that as per the provisions of Section 45 of the Act the capital gain is chargeable only on transfer of capital asset and not otherwise and if the transfer is not of a capital asset as defined in Section 2(14) of the Act, the question of any capital gain does not arise. The Ld. CIT(A) reproduced the provisions contained in Section 2(14)(iii)(a) of the Act and thereafter mentioned that the term agriculture land is not defined in the Act, only agricultural income is defined in Section 2(1A) of the Act which means that "any rent or revenue derived from land in India which is used for agricultural purposes and any income derived from such land by agriculture etc". He further observed that the land which is beyond 8 Kms of municipal limits and performing agriculture operation or not or is lying vac....
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....see has sold land measuring 0115-50 hectares Khata/Khatoni No. 08/10, Khasra No. 36, situated at jungle Naldehra, Tehsil & Distt. Shimla (H.P.) to its company M/s Gables Promoters Pvt. Ltd. for a consideration of Rs. 12,00,000,000/- during the year. The land in question was transferred in the name of Sh. Rajinder Pal Garg (RPG) by his brother Sh. Vijay Garg in the form of gift on 28.09.2011 by way of gift deed dated 28.09.2011 and no consideration was paid by the assessee to Sh. Vijay Garg. He in turn purchased this land on 27.02.2006 for a consideration of Rs.24,00,000/-. The RPG entered into Agreement to Sell with M/s Gables Promoters Pvt. Ltd on 19.03.2012 whereas the registry was done on 24.07.2012. After receiving the land as gift from his brother in 2011, the RPG sold this land to its company M/s Gables Promoters Pvt. Ltd. on 24.07.2012 for consideration of Rs. 12,00,00,000/-. The company has paid consideration to the assessee by issuing 1,20,00,000 equity shares @Rs. 10 per share totaling to Rs. 12,00,00,000/- on 24.07.2012. The total shareholding of the assessee in M/s Gables Promoters Pvt. Ltd therefore increased to 1,31,95,000 number of equity shares on 06.08.2012. All th....
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.... was mainly to draw benefit out of this land by selling it to the company for the purpose of construction of hotel & resort. Such land cannot be held to be an agriculture land. He relied on various case laws like CIT vs. Raja Benoy Kumar Saha Roy reported in 32 ITR 466 (SC), Ramakrishna Deo reported in 35 ITR 312 (SC), Sarifabibi Mohmed Ibrahim vs. CIT [1993] 204 ITR 632, Gemini Pictures Circuit Pvt. Ltd. reported in 220 ITR 43 (SC). He furthermore observed that the assessee held this land for less than a year and sold it to his own company Gables Promoters Pvt. Ltd. with the intention of building a hotel & resort. He is not an agriculturist but is a builder engaged in construction of hotels and resorts. The land received from the brother as gift was never used for the purpose of any agriculture activity. He also referred an enquiry report received from DIT(l&CI),Chandigarh. He assessed the capital gains at Rs. 11,55,56,572/- by treating of the gift of land not a transfer of any capital asset and treated the period of holding from the date of acquisition by the previous owner till it is transferred by the assessee. On the other hands, AR of the appellant has argued that the AO has ....
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....nnot be determined on the basis of intention of the assessee but on the basis of bare provisions of Act and evidence furnished by the assessee. The Ghasni land was gifted by brother of the assessee by way of registered Gift Deed which had been considered duly by Competent Authority as per section 118 of Himachal Pradesh Tenancy and Land Reforms Act, 1972 and the same had been found duly registered in Book No. 1, registration No. 1323/2011 reference no. 1604/2011 dt. 29/09/2011. The Ld. CIT(A) categorically stated that no evidence had been brought on record by the AO that the gift deed was bogus and that the AO in para 3.25 of the assessment order had himself admitted that there was no transfer of any capital asset as per the provisions of section 47(iii) of the Act by observing that in Section 47(iii) any transaction in which the asset is transferred by way of gift is not treated as transfer of capital asset. Then the question of capital gain had not arisen in the case of the assessee, during the year under consideration. 5.8 The Ld.CIT(A) observed that the land was sold to M/s Gables Promoters Pvt. Ltd. and due sale deed had been entered into by paying the stamp duty, the purch....
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....et" as it does not fall under section 2(14) of the Act being land situated in Himachal Pradesh that is not covered by the Notification of the CBDT dated 06.01.1994. Hence, the land in question is Agriculture Land in the light of the above said Notification. Therefore, the arial distance from municipal limits is not applicable to the state of Himachal Pradesh for the relevant Assessment Year 2013-14. The land in question is Ghasnie Land which falls in Agricultural Land as per the Himachal Pradesh Tenancy and Land Reforms Act, 1972. In view of above discussion, AO is directed to delete the addition. 6. Now the Department is in appeal. 7. The Ld. DR submitted that the Secretary Revenue granted the assessee permission on 09/07/2012 to sell the land to a non agriculturist and legally changing the use of land to Hotel construction site and whatever was the nature of the land before the said date the land was legally a commercial land for construction of a Hotel and if the land was put to any other use after this date had revert back to the Government of Himachal Pradesh as per the provisions of section 118 of the Himachal Pradesh and Land Reforms Act 1972. It was submitted that the....