2013 (9) TMI 559 - AT - Income Tax

Agricultural income or not - AO denied the exemption and treated the same as income from other sources - Held that - finding of the lower authorities goes against the revenue records which show that the land was under cultivation during the financial year 2006-07 and for 2004-05 and also against VRO s Certificate. Being so, in our opinion, the certificate issued by the VRO, who is concerned revenue authority to issue the said certificate has to be relied upon and it is not possible to reject the same without examining the deponent - the agricultural income declared by the assessee is to be accepted as agricultural income only. - decision of the Supreme Court in the case of Mehta Parikh & Company vs. CIT 1956 (5) TMI 4 - SUPREME Court followed - Decided in favor of assessee. Exemption u/s 54B - purchase of agriculture land - Computation of Capital Gains - Exemption u/s 54B - Treating the land sold by the assessee as nonagricultural land Held that - The lower authorities were justified in determining the land in question, as capital asset liable for income-tax - With regard to determination of cost of acquisition of the land disposed of, we are of the opinion that considering the proximity of the land to the city, it was reasonable to fix the value of as on 1.4.1981 at Rs.30,000 per acre, instead of Rs.10,000 determined by the Assessing Officer, as against Rs.1,40,000 claimed by the assessee. One of the reasons for which the claim of the assessee for relief under S.54B was rejected by the assessing officer was that what was paid by the assessee was only an advance for purchase, and unless it was actual purchase of land, assessee would not be entitled for relief under S.54B. There was some merit in this reasoning of the assessing officer - However, in terms of S.54B of the Act, assessee had to purchase the agricultural land within a period of two years. Hence, though mere payment of advance does not entitled the assessee for relief under S.54B of the Act, if ultimately whole transaction of purchase of land was completed within a period of two years as contemplated under S.54B of the Act, assessee was entitled for relief under S.54B of the Act - we set aside the orders of the lower authorities, and restored this issue to the file of the assessing officer for verifying whether the assessee had purchased the agricultural lands within a period of two years, so as to qualify for relief under S.54B of the Act, and accordingly re-decide this issue in accordance with law and after giving reasonable opportunity of hearing to the assessee.

Issues Involved:
1. Disallowance of agricultural income.
2. Assessment of long-term capital gains on the sale of land.
3. Disallowance of claim for relief under Section 54B.
4. Charging of interest under Section 234B and 234C.

Detailed Analysis:

1. Disallowance of Agricultural Income:
The assessee declared agricultural income, which the assessing officer disallowed, treating it as income from other sources due to a lack of evidence supporting agricultural activities. The CIT(A) confirmed this view. However, the tribunal noted that the assessee provided evidence such as the pahani patrika, the slab pass-book, and an affidavit from the Village Revenue Officer, which indicated the land was under cultivation. The tribunal relied on the Supreme Court's decision in Mehta Parikh & Company vs. CIT, which held that unchallenged affidavits should be accepted. Thus, the tribunal directed that the agricultural income declared by the assessee be accepted as agricultural income.

2. Assessment of Long-Term Capital Gains on Sale of Land:
The assessee claimed that the land sold was agricultural and not a capital asset under Section 2(14)(iii) of the Income-tax Act. The assessing officer treated the land as non-agricultural and taxed the capital gains. The tribunal noted that the land, although used for agricultural operations, was situated within 8 KM of the Hyderabad Municipal Corporation limits, making it an urban land and thus a capital asset. The tribunal also adjusted the cost of acquisition, setting it at Rs.30,000 per acre instead of Rs.10,000 as determined by the assessing officer.

3. Disallowance of Claim for Relief under Section 54B:
The assessee claimed exemption under Section 54B for the purchase of agricultural lands. The assessing officer disallowed this, stating that mere payment of advance without registration and possession did not qualify for exemption. The tribunal agreed that the actual purchase of land within two years is necessary for relief under Section 54B. The tribunal remanded the issue to the assessing officer to verify if the purchase was completed within the stipulated period and to decide accordingly.

4. Charging of Interest under Section 234B and 234C:
The assessee argued against the charging of interest under Sections 234B and 234C, citing the seizure of cash by the department. The tribunal held that the levy of interest is consequential and mandatory, thus rejecting the assessee's grounds on this issue.

Separate Judgments Delivered:
The tribunal delivered a consolidated order for all appeals, addressing each issue comprehensively. Appeals related to the assessment years 2002-03 to 2004-05 and 2006-07 were allowed, while the appeals for the assessment year 2008-09 were partly allowed for statistical purposes. The tribunal directed the assessing officer to re-examine specific issues, particularly the purchase of agricultural lands under Section 54B, and to provide a fresh decision based on the verification.

Conclusion:
The tribunal's judgment addressed the disallowance of agricultural income, the assessment of long-term capital gains, the disallowance of claims under Section 54B, and the charging of interest under Sections 234B and 234C. The tribunal provided detailed reasoning for each decision, ensuring that the assessee's claims were thoroughly examined and directed the assessing officer to re-evaluate certain aspects to ensure compliance with the law.

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