9911796707
TMI Blog2014 (9) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. On the facts and circumstances of the case, the ld. CIT(A) erred in holding that the transaction on sale of land at Bowrampet is not an adventure in the nature of the trade. 3. As facts are common in all the appeals, we will deal with the facts as involved in ITA No. 1751/Hyd/12. 4. Briefly the facts are, assessee is a company carrying on business as builders and developers. Assessee, originally had filed its return of income for AY 2007-08 on 31/10/2007 declaring income of Rs. 2,56,61,122. On 07/10/2009 a search and seizure operation u/s 132 of the Act was conducted in case of Venigella Anand Prasad and others within the group including the present assessee. As a consequence of search notice u/s 153A was issued to the assessee on 30/08/2010 calling for a return of income. In response to the said notice, assessee filed a revised return of income declaring total income of Rs. 2,89,62,423. During the assessment proceeding, AO noticed that assessee has purchased land admeasuring 57.2625 acres at Bowrampet under a number of sale deeds during the FY 2004-05. Out of the total land held, assessee has sold land admeasuring 30.2 acres to M/s Varun Constructions through an agreement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land record pahanis, on verification of which, as alleged by the AO, it was noticed that no crops were specified against the survey Nos. wherein the assessee and his associates have purchased and sold lands claiming it to be agricultural in nature. When the AO specifically questioned the VRO, the VRO explained that the records were not updated from 2004 onwards. Further, he stated that he has no idea of any crops being cultivated in these lands and also stated that normally the lands are fallow lands which cannot be cultivated easily. On the basis of the statement recorded from VRO, Bowrampet and the pahanis the AO concluded that no systematic agricultural activity was carried out in these lands and moreover the lands were also not conducive for agricultural operations. The AO was of the view that the land in possession of the assessee, a part of which was sold to M/s Varun Constructions, are fallow lands not amenable for cultivation or grazing that too in the midst of urban agglomeration. The AO observed that major part of the land was purchased by the assessee and others from M/s Deccan Townships Pvt. Ltd., a real estate company engaged in the purchase and sale of lands near urb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of trade. For coming to such conclusion, the AO relied upon the decision of the Hon'ble Supreme Court in case of Sarifabibi Mohamed Ibrahim and Others Vs. CIT, 204 ITR 631 and the decision of the ITAT, Hyderabad in case of GK Properties Pvt. Ltd., ITA No. 773/Hyd/07, dated 27/06/2008. So far as assessee's contention that the land in question is situated beyond 8 kms from the limits of nearest municipality, the AO also rejected the same by stating that as per notification dated 16/04/2007 Greater Hyderabad Municipal Corpn. was constituted by merging 12 municipalities and eight gram panchayats with the Municipal Corporation of Hyderabad and Qutubullapur was one of the municipalities. Accordingly, the AO held that land sold by assessee not being in the nature of agricultural land is a capital asset within the meaning of section 2(14) of the Act. Further, the AO held that the sale of land by the assessee being an adventure in the nature of trade the gains derived there from is to be treated as business income of the assessee. Accordingly, the AO held that the profit on sale of land amounting to Rs. 29,78,00,000/- is to be treated as undisclosed income of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and. * The land sold by the assessee being in the nature of agricultural land and located beyond 8 kms of any notified municipal limits is not a capital asset. The notification dated 16/04/2007 forming the GHMC has not so far been included in the Central Govt. notification for reckoning specified distance for purposes of urban agglomeration. * Ratio laid down in case of Sarifabibi Mohmed Ibrahim and Others Vs. CIT (supra) has no application to the facts of the assessee's case. * In the regular assessment made u/s 143(3) of the Act prior to the search, the AO had specifically enquired about the nature of gain from sale of the land and on the basis of information furnished by the assessee the AO accepted assessee's claim that lands sold were agriculture in nature and no capital gains arose. In the search assessment u/s 153A, the AO without having any further material or information cannot take a different view as it amounts to review of the original assessment order. * As the assessee had purchased agricultural land only and also sold it as agricultural land without changing its nature and character the transaction cannot be treated as adventure in the nature of trade. * ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to non-agricultural. So far as AO's reliance on the decision of Sarifabibi Mohamed Ibrahim and Others(supra), the CIT(A) after examining the ratio laid down therein found that it will not apply to the assessee's case for the following reasons: i) In case Sarifabibi Mohmed Ibrahim and others (supra) the land sold was located within Surat Municipal limits which influenced the court regarding the nature of land at the time of search whereas in assessee's case the land sold was situated beyond 8 kms of a notified municipality. ii) In case of Sarifabibi Mohmed Ibrahim and others (supra) a part of the land was converted into non-agricultural land whereas in assessee's case the nature of land remained the same viz., agricultural till the time of sale. iii) In case of Sarifabibi Mohmed Ibrahim and others (supra) the buyer started construction within 3 days of execution of sale deed which indicates that all the formalities were completed at the time of sale of land whereas in assessee's case the nature of land still remains to be agricultural and the assessee has not applied for conversion of the nature of land. 10. The CIT(A) on considering the aforesaid facts conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of trade as the assessee is engaged in the real estate business. Further, it was submitted that assessee's claim regarding agricultural operation and also the fact that the land in question is situated beyond 8 kms of a notified municipality needs to be verified. 12. The learned AR on the other hand strongly supporting the order of the CIT(A) submitted that there cannot be any tax liability on the assessee not only because the asset sold by the assessee is not a capital asset u/s 2(14) of the Act nor the transaction is an adventure in the nature of trade. The learned AR submitted, not only the assessee had been showing income from agricultural operation conducted over the said land but same has also been accepted by the AO. It was submitted that the nature and character of land at the time of purchase and sale by the assessee remained same viz. agricultural in the government records. Assessee has also not applied for conversion of land to non-agriculture. It was submitted that land in question is also situated beyond 8 kms from a notified municipality. It was submitted that Qutubullapur municipality was brought into the GHMC limits by notification dated 16/04/2007 i.e. after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Varun Constructions, remained the same i.e. agricultural not only in the revenue records but also in the pahanis. It is also a fact on record the assessee has shown income from agricultural operations carried on over the said land in the return of income filed for the impugned assessment year as well as the preceding assessment year which has been accepted by AO. In fact the AO has not totally ruled out agricultural operation, though according to him it is not substantial. In these circumstances, when the nature of land sold by the assessee still remains to be agricultural in the revenue records and the assessee has not applied for conversion of the land to non-agricultural it cannot be treated as non- agricultural land only because the AO was of the view that agricultural operation on the said land is not possible to the extent shown by the assessee. In this context it is to be noted that the certificate issued by the Dy. Collector and Mandal Revenue Officer, Qutubullapur Mandal ( at page 99 of assessee's paper book) clearly indicate that the land under the same survey nos. situated at Bowrampet Village are under cultivation by raising crops of paddy, cattle feed, maize, jow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttributes of an adventure in the nature of trade is present in the transaction. It will be pertinent to mention here that earlier a bench of this Tribunal had an occasion to examine similar nature of dispute arising out of similar nature of transaction relating to sale of agricultural land located in the same area in case of some other assessees, namely, Smt. M. Vijaya and others Vs. DCIT (ITA Nos. 306, 307, 309 & 311/Hyd/13 order dated 06/06/2014) who also sold their land to M/s Varun constructions. The Tribunal after examining the contentions of the parties and referring to a number of judgments held as under: 23. Adverting to the facts of the present case, the land in question is classified in the Revenue records as agricultural land and there is no dispute regarding this issue and actual cultivation has been carried on this land and income was declared from this land in the return of income filed by the assessee for the AY as agricultural income. It is also an admitted fact that the assessee has not applied for conversion of this agricultural land for non-agricultural purposes before sale of this property and the assessee has not put the land to any purposes other than agricul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence in support of the fact that the assessees have put the land in use for non- agricultural purposes has been brought on record. The nature of the crop and the person who cultivated the land are duly mentioned in the revenue records shows that at the relevant point of time the land was used for agricultural purposes only and nothing is brought on record to show that the land was put in use for non-agricultural purposes by the assessees. In view of the decision of the Hon'ble High Court in the case of Gopal C. Sharma vs. CIT (209 ITR 946) (Bom), it is also clear that the profit motive of the assessee in selling the land without anything more by itself can never be decisive to say that the assessee used the land for non-agricultural purposes. We may also refer to a decision of the Hon'ble Supreme Court in the case of N. Srinivasa Rao vs. Special Court (2006) 4 SCC 214 where it was observed that the fact that agricultural land in question is included in urban area without more, held not enough to conclude that the user of the same had been altered with passage of time. Thus, the fact that the land in question in the instant case is bought by Developer cannot be a determinin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsiderations, is notified by the Central Government in this behalf. Central Government in exercise of such powers has issued the above notification, as amended latest by Notification No. 11186 dated 28.12.1999 clearly clarifies that agricultural land situation in rural areas, areas outside the Municipality or cantonment board etc., having a population of not less than 10,000 and also beyond the distance notified by Central Government from local limits i.e. the outer limits of any such municipality or cantonment board etc., still continues to be excluded from the definition of 'capital asset'. Accordingly, in view of sub-clause (b) of section 2(14)(iii) of the Act even under the amended definition of expression 'capital asset', the agricultural land situated in rural 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 Rajarhat Municipality and that also 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-agricultural value of the land for which a purchaser may be prepared to pay a large price would not detract from its character as agricultural land at the date of the sale. The land in question was, therefore, agricultural land. 29. Further the word "Capital Asset" is defined in Section 2(14) to mean property of any kind held by an assessee, whether or not connected with his business or profession, but does not include- (iii) agricultural land in India, not being land situate- (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or (b) in any area within such 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efinition 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 from such limits, for the purposes of this provision. Such notification will be issued by the Central Government, having regard to the extent of, and scope for, urbanisation of such area, and, when any such area is notified by the Central Government, agricultural land situated within such area will stand included within the term "capital asset". Agricultural land situated in rural areas, i.e., areas outside any municipality or cantonment board having a population of not less than ten thousand and also beyond the distanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continues to be excluded from the definition of 'capital asset'. Accordingly, in view of sub-clause (b) of section 2(14)(iii) of the Act even under the amended definition of expression 'capital asset', the agricultural land situated in rural 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 Hyderabad Municipality and that also 8 km away from 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 G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the evidence brought on record suggest that the land is an agricultural land, hence, it is not liable for taxation. Accordingly, the addition made on this count is deleted in all the appeals under consideration. No evidence suggests that Dundigal village falls within Qutubullapur Municipality and also this Qutubullapur Municipality has not notified in the year under section 2(14)(iii) of the I.T. Act and Qutubullapur Municipality abolished and merged with Municipal Corporation of Hyderabad with effect from 16/04/2007. We have also gone through the record placed in the paper book at pages 76 & 77. At page 76, a copy of the intimation is placed issued by the Town Planning Officer, Quthbullapur , Circle - 15, GHMC vide Ref. No. G/1240/2008, dated 04/10/2008 informing that the land is not falling in the GHMC limits. At page 77, a copy of the agricultural land certificate is placed, issued by the Deputy Collector & Mandal Revenue Officer, Qutubullapur Mandal vide Ref. No. A/13607/2005, dated 20/08/2005 stating that the lands are under cultivation by raising crops i.e. paddy, cattle feed, maize, jowar, vegeteables etc. 37. Further, we make it clear that when the land which does not ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
