2020 (8) TMI 188 - AT - Income Tax

Nature of land sold appurtenant to the bungalow - whether agricultural land within the meaning of Section 2(14)(a)(iii) of the Act and hence, its sale proceeds are exempt from tax ? - one of the reason for rejecting assesse s claim is that the assesse has not declared any income from agriculture operations - HELD THAT - The Hon ble Bombay High Court in the case of CIT vs Debbie Alemo 2010 (9) TMI 560 - BOMBAY HIGH COURT has held that if a land is shown in the revenue records to be used for agriculture purpose and no permission was ever obtained for nonagriculture use, it is inconsequential whether any income from agricultural operation was declared by the assesse in the return of income or not. Thus, the objection of the revenue is without any merit. Department in the case of other two co-owners of the land has accepted their respective return of income wherein, the said co-owners have declared their respective share of income from sale of same agricultural land (as that of present assesse) as exempt. The Department cannot have two divergent views in case of two assessees who are on same footing, having common source of income germinating from same transaction. We find merit in the grounds raised by the assesse/appellant and direct the Assessing Officer to delete the addition qua sale of agriculture land, being exempt from tax. - Decided in favour of assessee. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT - Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited 2020 (5) TMI 359 - ITAT MUMBAI

Issues Involved:
1. Whether the land sold appurtenant to the bungalow is agricultural land within the meaning of Section 2(14)(a)(iii) of the Income Tax Act, 1961, and hence, its sale proceeds are exempt from tax.
2. Whether the Assessing Officer and the Commissioner of Income Tax (Appeals) erred in treating the proceeds from the sale of land as taxable under the head 'capital gains'.
3. Whether the exemption under Section 54EC of the Income Tax Act, 1961, was correctly granted by the CIT (A) to the extent of investment made by the assessee in NHAI Bonds.
4. Whether the Department's acceptance of the land as agricultural in the case of other co-owners should influence the decision in the present case.

Issue-wise Detailed Analysis:

1. Agricultural Land Classification and Tax Exemption:
The primary question was whether the land sold appurtenant to the bungalow qualifies as agricultural land under Section 2(14)(a)(iii) of the Income Tax Act, 1961, thereby making its sale proceeds exempt from tax. The Tribunal examined several documents submitted by the assessee, including:
- A certificate from the Tahsildar, Alibag, confirming the land's distance from the nearest municipal limits and the village population.
- 7/12 extracts showing rice cultivation on the land.
- Registered sale deed detailing the land and bungalow.

The Tribunal noted that the revenue records and the Tahsildar's certificate were not rebutted by the Revenue. Furthermore, the Tribunal emphasized that the revenue records should be given due weight in determining the nature of the land. Since there was no evidence of conversion of the land for non-agricultural purposes, the Tribunal held that the land was indeed agricultural and its sale proceeds were exempt from tax.

2. Assessment and Treatment of Sale Proceeds:
The Assessing Officer had rejected the assessee's claim of exemption on the proceeds from the sale of land, treating them as taxable under 'capital gains'. The CIT (A) confirmed this finding but granted partial relief by allowing exemption under Section 54EC. The Tribunal, however, found that the land was agricultural and thus exempt from tax, directing the Assessing Officer to delete the addition related to the sale of agricultural land.

3. Exemption under Section 54EC:
The CIT (A) had granted the benefit of exemption under Section 54EC of the Act to the extent of the investment made by the assessee in NHAI Bonds. The Tribunal did not specifically address this issue in detail, as the primary focus was on the classification of the land as agricultural and the resultant tax exemption.

4. Consistency in Department's Stance:
The Tribunal observed that in the case of other co-owners of the land, the Department had accepted their returns, declaring their share of income from the sale of the same agricultural land as exempt. The Tribunal held that the Department could not adopt divergent views for different assessees in identical circumstances. This consistency supported the assessee's claim for exemption.

Conclusion:
The Tribunal concluded that the land in question was agricultural, and its sale proceeds were exempt from tax. The appeal of the assessee was allowed, and the Assessing Officer was directed to delete the addition related to the sale of agricultural land. The decision in the related appeal (ITA No.443/Mum/2017) was similarly adjudicated, applying the same reasoning and conclusions.

Pronouncement Delay:
The Tribunal acknowledged the delay in pronouncement due to the COVID-19 lockdown, referencing a similar case (DCIT vs. JSW Ltd.) where the period of lockdown was excluded from the 90-day time limit for pronouncement of orders, as per Rule 34(5) of the ITAT Rules, 1963.

Final Order:
The appeals by the two different assessees were allowed, with the order pronounced on June 5, 2020, under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962.

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