TaxTMI 
TaxTMI 
2023 (11) TMI 787
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....following premises i. M/s. AVS Constructions and M/s. AVS Readymix Concrete Products Pvt Ltd (M/s. AVS Tech Building Solutions India Pvt Ltd) No. 298, Sigcot Staff Housing Colony, Hosur - 635126, Hosur Taluk, Krishnagiri District. ii. M/s. Gurukrupa Service Station, 58/1, Singasandra, Hosur Road, Bangalore. iii M/s. Gurukrupa Auto Service, No. 15, 100 Ft Road, Near Pizza Hut, BTM Layout, Bangalore on 26-04-2018. 2.1 In the course of the search, the Search Team has found Sale Agreements of the aforesaid lands in the premises of the Purchaser M/s. AVS Tech Building Solutions India Pvt Ltd and as per the said Agreements the consideration agreed for sale was of Rs. 3,16,42,000/-, out of which a sum of Rs. 2,50,00,000/- was stated to have been received in cash by the assessee and his three family members and the balance of Rs 66,42,000/- was stated to have acknowledged as mentioned in the Sale Deed. The assessee has stated that the Sale Consideration of Rs. 66,42,000/- was mentioned in the sale deed on the basis of the prevailing guidance value applicable as on the date of sale. 2.2 The assessee in the return of income has not offered his 1/4^th share of....
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....clearly specify the nature of crops cultivated and sold in the past years. He observed that the assessee had purchased the property at Agraharam Village on 27-04-2011, at Shoolagiri on 27-04-2011, and Uddanapally on 28-02-2013 at the cost of Rs. 2,82,156/-, Rs. 49,129/- and Rs. 1,08,041 respectively. These properties were sold combined for Rs. 3,16,42,000/- to M/s. AVS Tech Building Solutions India Pvt. Ltd. The assessee, after purchase of property had not declared any agricultural income as exempt in any of the assessment years which clearly shows that the assessee was not carrying on any agriculture activity in the land sold. Further, the assessee has not furnished any evidence before ld. CIT(A) that shows that the land was put to agricultural use and the land was cultivated till it was sold. 3.1 The ld. CIT(A) further observed that the assessee had sold the aforesaid properties at very high prices amounting to Rs. 3,16,42,000/- to the M/s. AVS Tech Building which is engaged in the business of manufacturing concrete business. The prices at which land was sold undisputedly no genuine agriculturist would purchase a land at a high price as in the case in hand. The value of land a....
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....on the decisions of Hon'ble High Court of Gujarat in the case of Cordhanbhai Kahandas Dalvadi vs. CIT (1981) 127 ITR 664 wherein it was held that the character of the land to be considered as Agricultural Lands on the basis of the entries found recorded in the Revenue Records. In this connection, the Hon'ble Supreme Court in the case of State of UP vs. Nand Kumar Aggarwal AIR 1998 SC 473 held that the lands had been entered in the revenue records as agricultural lands would not make the lands agricultural lands. So the ld. CIT(A) opined that the reliance placed by the assessee on the decision of Hon'ble Gujarat High Court does not help. 3.5 In view of the above facts and circumstances of the case, the ld. CIT(A) observed that the land sold was not an agriculture land and therefore taxable under the head Long Term Capital Gains. So the addition made by the AO as Long Term Capital 'Gains amounting to Rs 76,30,419/- is justified and he confirmed the action of the ld. AO. Against this assessee is in appeal before us. 4. We have heard the rival submissions and perused the materials available on record. The assessee has raised legal issue before us in ground no.2 th....
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....O has rejected the Assessee's contention on the following grounds: i. No Bills/vouchers were produced in support of Sale of Agricultural products. ii. The revenue records submitted by the Assessee did not specify the nature of crops cultivated and sold in the earlier years. iii. No evidence was produced that the lands were put to agricultural use and actually cultivated till it was sold, the Assessee had no intention to bring it under cultivation at any time after the purchase of the lands. The purchaser to whom the lands were sold was engaged in the business of manufacturing concrete products. iv. The Assessee has not declared any agricultural income as exempt in any of the earlier assessment years. v. The Assessee has accepted to declare the respective shares of the ae Consideration to tax. 5.4 The ld. A.R. submitted that the AO has neither caused any inspection of the land nor obtained any information from the revenue department of -anvil Nadu, but unilaterally held that the land was not cultivated and no agricultural income was disclosed for earlier years. In this regard the appellant submits that the documents obtained from t....
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....ld that though the lands were shown in Revenue Records as Agriculture, but the same does not constitute-Agricultural land. The above decision is completely distinguishable and not applicable to the Assessee's case as the Assessee has used the land for cultivation as certified by the revenue authorities as per Annexure - C confirming the fact that the lands were under cultivation upto the end of March 2018. Therefore, he submitted that the ld. CIT(A) was not justified to rely upon the decision of the above case and hence the same is liable to be set aside. 5.7 The ld. A.R. for the assessee placed reliance on the decision of the ITAT Mumbai in the case of ACIT v/s. Ashok W Wesavkar in ITA No. 5147/Mum/2017 dtd: 02-05-2023 (on the basis of Third Member decision) wherein it was held that the lands were in cultivation and accordingly held as Agricultural lands which is not a capital asset u/s. 2(14)(iii) of the Act. 5.8 The ld. A.R. for the assessee submitted that the Ld. CIT(A) has confirmed the addition made by the AO without appreciating the documents submitted in the course of the Appellate Proceedings relating to cultivation of land and also distance of land. The Ld. CIT(....
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....ishnagiri Dist. confirming the fact that the distance of the land from municipality was 20 kms. away from the jurisdiction of the Hosur Municipality which had a population of 4000 in the year 2018, which is placed as Annexure E in paper book page 55. The contention of the ld. D.R. is that the above two certificates have no mention of date of issue of these certificates and he submitted that these certificates are not produced before lower authorities. Hence, he submitted that no credence could be given to these certificates. The assessee made argument before ld. CIT(A) and the same is reproduced herein below: 14. "The Appellant also produced a certificate from the President Uddanpalli Panchyath, Sholagiri Taluk, that the distance of the lands was more than 20 Kms from the end of the Hosur Municipality and the population was around four thousand and therefore the lands sold were not the capital assets as defined u/s. 2(14)(iii) of the Act and sub clause (a) and (b) thereunder. However the Ld. AO has not considered the above document and also no find was given in this regard. 15. Under these facts and circumstances it is submitted that the addition was made holding ....
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....elow: 7.4 Further, nothing has been brought on record to show that in this village of Uddanapally any infrastructure development has taken place. Without establishing and proving the fact that the land was put to use for non-agricultural purposes, it cannot be possible to treat the agricultural land as nonagricultural land. In the present case, during the relevant point of time of sale of the land in question, the surrounding area was totally undeveloped and mere possibility to put the impugned land for non-agricultural purposes would not change the character of the land into non-agricultural land at the relevant point of sale of land by the assessee. 7.5 The state government also prescribed the procedure for conversion of agricultural land into non-agricultural land. Being so, whenever the agricultural land to be treated as non-agricultural land, the same has to be converted in accordance with the provisions of State Act. To our understanding nature of land cannot be changed by itself and the land owners are required to apply to the concerned Revenue authorities for the purpose of conversion of the agricultural land into non-agricultural land and there is no automatic conver....
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....he user of the same had been altered with passage of time. Thus, the fact that the land in question in the instant case is brought in special zone cannot be a determining factor by itself to say that the land was converted into use for non-agricultural purposes. 7.7 Recently the Karnataka High Court in the case of CIT vs. Madhukumar N. (HUF) (2012) 78 DTR (Kar) 391 held as follows: "9. An agricultural land in India is not a capital asset but becomes a capital asset if it is the land located under Section 2(14)(iii)(a) & (b) of the Act, Section 2(14) (iii) (a) of the Act covers a situation where the subject agricultural land is located within the limits of municipal corporation, notified area committee, town area committee, town committee, or cantonment committee and which has a population of not less than 10,000. 10. Section 2(14)(m)(b) of the Act covers the situation where the subject land is not only located within the distance of 8 kms from the local limits, which is covered by Clause (a) to section 2(14)(iii) of the Act, but also requires the fulfilment of the condition that the Central Government has issued a notification under this Clause for the purpose ....
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.... 2.5 KM away from the outer limits of the said Municipality, assessee's land does not come within the purview of section 2(14)(iii) either under sub clause (a) or (b) of the Act, hence the same cannot be considered as capital asset within the meaning of this section. Hence, no capital gain tax can be charged on the sale transaction of this land entered by the assessee. Accordingly, we quash the assessment order qua charging of capital gains on very jurisdiction of the issue is quashed. The cross objection of the assessee is allowed." 7.9. It was held in the case of CIT vs. Manilal Somnath (106 ITR 917) as follows: "Under the Income-tax Act of 1961, agricultural lend situated in India was excluded from the definition of " capital asset" and any gain from the sale thereof was not to be included in the total income of an assessee tinder the head "capital gains". In order to determine whether a particular land is agricultural land or not one has to first find out if it is being put to any use. If it is used for agricultural purposes there is a presumption that it is agricultural land. If it is used for non-agricultural purposes the presumption is that it is non-agricult....
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....h distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette; 7.11. It is very clear from the above that the gain on sale of an agricultural land would be exigible to tax only when the land transferred is located within the jurisdiction of a municipality. The fact that all the expressions enlisted after the word municipality are placed within the brackets starting with the words 'whether known as' clearly indicates that such expressions are used to denote a municipality only, irrespective of the name by which such municipality is called. This fact is further substantiated by the provisions contained under clause (b) wherein it has been clearly provided that the authority referred to in clause (a) was only municipality. 7.12. We find force in the argument of the AR that clarifying within the brackets in the section 2(14)(iii)(a) is for the apparent reason that the name of the local body varies ba....
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....e wholly or partly the Municipal area; (vii) the members of the Council of States and the members of the Legislative Council of the State registered as electors within the Municipal area; (viii) the Chairpersons of the Committees constituted under clause (5) of article 243S: Provided that the persons referred to in paragraph (i) shall not have the right to vote in the meetings of the Municipality; (d) the manner of election of the Chairperson of a Municipality." Further, it is categorically provided that all the state laws dealing with the municipalities should be consistent with the provisions contained in Part- IXA. 7.14 We also perused the meaning of the term local authority as referred in section 10(20) of the Act. (20) the income of a local authority which is chargeable under the head "Income from house property", "Capital gains" or "Income from other sources" or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service [(not being water or electricity) within its own jurisdictional area or from the supply of water or electricity within or outside its own jurisdictional a....
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....1970, whereby s. 2(14) was amended so as to include the agricultural lands located within the jurisdiction of a municipality in the definition of the expression 'Capital Asset'. The relevant portion of the said memorandum is reproduced hereunder: "30. ... The Finance Act, 1970 has, accordingly, amended the relevant provisions of the Income-tax Act so as to bring within the scope of taxation capital gains arising from the transfer of agricultural land situated in certain areas. For this purpose, the definition of the term "capital asset" in section 2(14) has been amended so as to exclude from its scope only agricultural land in India which is not situate in any area comprised within the jurisdiction of a municipality or cantonment board and which has a population of not less than ten thousand persons according to the last preceding census for which the relevant figures have been published before the first day of the previous year. The Central Government has been authorised to notify in the Official Gazette any area outside the limits of any municipality or cantonment board having a population of not less than ten thousand up to a maximum distance of 8 kilometres fro....
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.... areas continues to be excluded from that definition. And as in the present case, admittedly, the agricultural land of the assessee is outside the Municipal Limits of any Municipality and that also 20 km away from Hosur Municipal Corporation and the population of the village is around 4000 as per Certificate furnished from President, Uddanapally panchayat placed as Annexure-E in paper book page 55, which is reproduced herein below: 7.20 The outer limits of this Municipality, assessee's land does not come within the purview of section 2(14)(iii) either under sub clause (a) or (b) of the Act, hence the same cannot be considered as capital asset within the meaning of this section. Hence, no capital gain tax can be charged on the sale transaction of this land entered by the assessee. This is supported by the order of Kolkata Bench of this Tribunal in the case of Arijit Mitra (cited supra), Harish V. Milani (supra) and M.S. Srinivas Naicker vs. ITO (292 ITR 481) (Mad). By borrowing the meaning from the above section, we are not able to appreciate that the land falls within the territorial limit of any municipality without notification of Central Government as held by the Karnatak....