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TMI Blog2013 (11) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... the head capital gain when the land is not a capital asset either within the meaning of section 2(14)(iii)(a) or 2(14)(iii)(b) – Held that:- The land in question giving rise to capital gain was, in fact, urban land though agricultural operations have been carried out on them - The land is situated at Narsing Village of Rajendra Nagar Mandal, R.R. District which is within the municipal limits of Rajendra Nagar - This is urban land akin to the Hyderabad Municipality situated within 8 KM from the local limits of Hyderabad Municipal Corporation - Mere fact that the land in question was agricultural land cannot be a ground to claim for exemption under section 2(14) of the Act as the land is situated within the local limits of Hyderabad Municipal Corporation - Land in question is capital asset liable for income-tax – Following the decision of coordinate bench in the case of Smt. Gousia Begum and Others [2013 (9) TMI 559 - ITAT HYDERABAD]., held that the land in dispute cannot be considered as agricultural land so as to hold that it is exempt from capital gains – Decided against the Assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived the same was disbursed to the land owners as also to the developers. Details of payments are as under:- B. Vijay Kumar (Rs.) Total consideration received from PEBL - 21,73,35,000 Less: Paid to land owners - 7,02,37,500 Balance consideration with assessee - 14,70,97,500 Less: Paid to developers - 12,97,65,563 Balance - 1,73,31,937 B. Raghu Alekh Total consideration received from PEBL - 6,21,00,000 Less: Paid to land owners - 1,96,25,000 Balance consideration with the assessee - 4,24,75,000 Less: Paid to developers - 3,97,64,887 Balance - 27,10,113 4. The assessees filed returns of income showing short term capital gains by deducting from the full value of consideration the amounts paid to land owners, registration charges and cost of improvement being the amount paid to developers. The returns were filed showing STCG as because the assessees became the owner of the land by virtue of agreement of sale and irrecoverable GPA and then transferred the land to PEBL. Computation of incomes by the assessees: B. Vijay Kumar: Total sale consideration received 21,73,35,000 Less: Cost of land 7,02,89,500 Cost of improvement 13,89,95,500 20,92,85,000 Short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts were withdrawn, however, credits in some accounts were more than what was mentioned in the development agreement. 6. The AO relied on the statement of General Manager of PEBL recorded on 22/12/2009 wherein he had stated that the clause-3 in the registered sale deed indicating that the consideration was paid towards cost of land and cost of improvement, was not correct and the clause was inserted at the request of the assessee i.e. Shri Vijay Kumar. The AO examined one Sri N. Srinivas, the owner of the land, whose statement was recorded on 29/12/2009 wherein the owner stated that there was no leveling work on the land as agricultural operations were carried on by him on the same land. Therefore, the AO concluded that there was no physical barrier in the said land. Finally, the AO observed that the inspection of the land by the departmental authorities did not indicate any leveling work as being done in the land. 7. Aggrieved, the assessee carried the matter in appeal before the CIT(A) and submitted on two folds, i.e. i) regarding carrying out of development work on land and claim of deduction of cost of improvement while computing capital gain and ii) legal claim that the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t made by Mr. N. Srinivasan at a later stage wherein he had stated that a portion of the land was cultivable and the balance land was rocky. The AR further submitted that the AO had erred in utilizing the statement of Shri Raghunath Reddy, employee of the purchaser company and on cross examination and reexamination it was proved that the statement made by him was not correct. Lastly, the subsequent spot inspection after sale could not throw any light about the condition of land at the time of sale. It was submitted by the AR that Assessing Officer took existence of google earth images before the CIT(A) for the first time to state that there was no improvement on the land. The AR submitted that the basis on which the Assessing Officer came to a conclusion that the topography remained same all along was not known and satellite photography in Google earth is not live. It is not based on real time image and these are taken at intervals of few months to few years. The AR brought to the notice of the CIT(A) the disclaimer clause of Google earth, a print out of which was provided and the same is extracted below: "Google and its licensors (including but not limited to tele atlas and its s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and wrongly ignored the bifurcation of the consideration towards cost of land and cost of improvement. v) the observation of the Assessing Officer that the Chennai Parties could not be traced by the Department cannot be drawn as an adverse inference as the parties had left the place of work immediately after the work was completed. However, the amounts were paid to these parties by bank transfers and credited to their accounts. vi) The development work was done over a period of few days and not done within six days. vii)The spot inspection by the department and the google images do not have any evidentiary value. The learned counsel pointed out that the assessee never accompanied the Assessing Officer while taking photographs of the land and it is possible that the Assessing Officer had not identified the land properly. viii) The Assessing Officer should have appreciated that the transaction is with an Indian company, which is subsidiary of a foreign company. ix) Both Shri Raghurami Reddy and Shri N. Srinivas are departmental witnesses, who were examined behind the back of the assessee. For this proposition, the learned counsel relied on the decision in the case of Kishinch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and his son failed to discharge the onus of proving that development work had been executed by them and even the technical ability to carry out such works could not be proved. h) The bank accounts of the persons of the contractors, with whom the said development agreements were entered into showed withdrawals and transfer of amounts immediately after the receipt of the amounts from the assessee and his son. i) Even the bank account opening forms of the Chennai parties did not show that they were engaged in the works of the civil contracts or had expertise to carry out such works. j) The statement of Sri L. Raghu Rami Reddy showed that no development work was carried out in the entire land purchased by PEBL and that the clause regarding development had been inserted at the request of the assessee and his son. k) The physical inspection itself showed that the lands were not developed and still contained toddy trees. 20. The Assessing Officer has noted that for carrying out the development works of removing the rocks, boulders etc., heavy machinery, such as JCBs, Dozers etc., are required. However none of the parties mentioned above were filing their returns of income and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he possession of the assessee, who was carrying on agricultural operations on the same. He also submitted that the assessee has also filed before the assessing officer, an affidavit of the Village Revenue Officer, who mentioned that due to pressure of work, he had not filled in the column of 'cultivation' in the Pahani Patrika. The assessing officer did not give due weightage to this valuable piece of evidence, and proceeded to determine the lands in question as of non-agricultural nature. He also disputed the conclusion of the assessing officer in denying the assessee the relief under S.54B on the ground that payment of advances for purchase of land would not entitle the assessee to relief under S.54B, and submitted that the assessee ultimately concluded the transaction of purchase within time allowed by the statute, and possession of the lands in question was taken on 10.7.2009, viz. within a period of two years, and consequently, the assessee is entitled to relief under S.54B of the Act. He also disputed the rate taken into consideration by the assessing officer, for arriving at the cost of acquisition, by adopting the market value of the land as on 1.4.1981 at Rs.10,000 per acr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he lower authorities pahani patrika, VRO's Certificate and details of electricity Bill/slab pass Book etc. We have held on that basis in earlier paras that the assessee derived agricultural income. But, the question still remains whether the impugned land come within the meaning of "capital asset". The land is situated at Narsing Village of Rajendra Nagar Mandal, R.R. District which is within the municipal limits of Rajendra Nagar. According to the learned counsel for the assessee, Rajendra Municipality is not notified by the Central Government and therefore the agricultural lands which fall under the jurisdiction of the Rajendra Nagar Mandal cannot be considered as capital asset within the meaning of section 2(14) of the Income-tax Act. But, the fact is that this is urban land akin to the Hyderabad Municipality situated within 8 KM from the local limits of Hyderabad Municipal Corporation. In similar circumstances, the jurisdictional High Court in the case of CIT vs. Bola Ramaiah (174 ITR 154) held that the capital gains arising out of sale of land situated within 8 KM of local limits of Hyderabad Municipality, is liable for tax on capital gains irrespective of the fact whether it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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