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TMI Blog2014 (9) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain incriminating material with regard to sale of lands by the assessee to the above firm was found and forwarded the same to the present Assessing Officer. As per that information, the assessee sold lands at Aushapur village, Ghatkesar Mandal, Rangareddi District for a consideration of Rs. 2.39 crores including commission of Rs. 3 lakhs per acre for 7 acres 10 guntas. As per Annexure 1B/SH/06 page 57, the assessee was paid an amount of Rs. 2,17,50,000 for Acres 7.10 guntas @ Rs. 30 lakhs per acre and Rs. 21. 75 lakhs towards commission @ 3 lakhs per acre, totalling to Rs. 2,39,00,000. The above transaction was executed through a registered sale deed document No. 18495/06 dated 4-11-2006 in Sub-Registrar's Office, Ghatkesar. Since the assessee did not declare any capital gains on sale of the above lands, the AO held that income chargeable to tax escaped assessment and hence reopened the assessment u/s 147 of the Act. 4. During the assessment proceedings in reply to show-cause notice the assessee submitted the following as to why the sale consideration of Rs. 2.39 crores should not be brought to tax under the head long term capital gains: "At the outset I submit that the lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I humbly submit that the land which was situated in the village and gram Panchayat known as Aushapur and the lands and the land was recorded as agricultural lands in the village adangal/ pahani. To reinforce my submissions I draw your kind attention to Notification under section 2(1A)(c), proviso, clause (ii)(B) and section 2(14)(iii)(b) - Notification No. 50 Dated 6th January, 1994 wherein the municipalities are notified for the purpose of section 2(14)[1994] 205 ITR (Stat) 121. It is obvious that Ghatkesar did not find any place in the said notification. Even today the said notification is in force. Accordingly, I humbly reiterate the fact that the land which was sold by me and which was situated in Aushapur village and Gram Panchayat is purely an agricultural land and the gains derived from sale of such land are exempted from capital gains under the provisions of Income-Tax Act 1961" 6. After considering the explanation of the assessee, the Assessing Officer in order to ascertain whether the lands in question are agricultural lands or otherwise asked the assessee to furnish the details by letter dated 28.1.2013, the details asked by the Assessing Officer were as under: (a) Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pur and as such it was situated in an area outside any municipality or cantonment board, having a population of not less than ten thousand, and also beyond the distance notified by the Central Government from the limits of any such municipality or cantonment board. Thus, the land in question does not constitute a capital asset, as defined u/s 2(14) of IT Act, 1961. He further submitted that this position is also evident from the Memorandum explaining the provisions of Finance Act, 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'. 11. The AR submitted that even vide Notification u/s 2(1A)(c), proviso, clause (Il) (B) and Section 2(14)(iii)(b) CBDT Notification No. 164/3/87-ITA-1 dated 6-1-1994, wherein municipalities were notified for the purpose of Section 2( 14) (1994) 205 ITR (Stat) 121, and vide Notification No. 9947 dated 6-1-1994 and Notification No. SO 1302 dated 28-12-1999 reported in 248 ITR 258, published in the Gazette of India, Ministry of Finance, Dept. of Revenue, Ghatkeshar under which the Aushapur Village in which the lands of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was sold to the petty traders from the local area and such sale of produce at field to the local buyers is a regular practice in this region. 14. The AR relied on the decision of Vizag Bench of the Tribunal in the case of M. Narayana Chalamaiah vs ITO, in ITA No. 343 of 2007 dt. 24.09.2010, wherein the Tribunal that the claim of the assessee regarding actual cultivation of lands cannot be lightly rejected unless' some material is brought on record to reject such claim. He also relied on decision of the Tribunal, Hyderabad Bench in the case of Mr. T.C. Reddy, in ITA No. 469/Hyd/2009 and ITA No. 228/Hyd/2010, wherein held that as agriculture in this country is an unorganised sector and sale of agricultural produce is also not properly organized, one cannot blame the assessee for not maintaining the books of account for the purpose of cultivation and therefore non maintenance of books of account cannot be a ground to reject the claim of the assessee. It was submitted that non-production of tax payment receipts cannot be the basis for denial of the claim, in view of the fact that the revenue authorities never raised any tax demand and as such the question of payment of tax does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of evaluation and inference has to be drawn on a cumulative consideration of all the relevant facts, The Supreme Court has further stated that not all these factors or tests would be present or absent in any case and that in each case one or more of those factors may make appearance and that the ultimate decision will have to be reached on a balanced consideration of the totality of the circumstances. Accordingly, on a cumulative consideration of all the facts as existing in that case, the land in question was held to be non-agricultural. 18. The AR further submitted that the Hon'ble High Court of Bombay, after elaborately discussing the decision in the cases of Sarifabibi Mohmed Ibrahim cited above, held the land in question to be agricultural land in a later case i.e., CIT v. Minguel Chandra Pais 282 ITR 618 (Born), wherein the land under reference was adjacent to 4 five star hotels and the person to whom the land was sold, was said to be a sister concern of one of those hotels. While coming to the conclusion, the High Court made a cumulative consideration of the facts vis-a-vis the tests laid down and the facts which weighed in favour of the assessee were asunder: (i) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been held that the fact of non-agricultural user by the buyer will not alter the character of land in the case of seller. The CIT(A) held that the assessee satisfied the various steps laid down in the case of Sarifabibi Mohd. Ibrahim & Ors (204 ITR 631) for considering the land was agricultural land and, therefore, directed the Assessing Officer to delete the addition of Rs. 2,22,70,229 under the head long term capital gains and accepted the income returned by the assessee. 21. With respect to the ground No. 4 of the assessee against the determination of the sale consideration of Rs. 2,29,75,000 as against Rs. 77,50,000 claimed by the assessee he did not go into the merits of the sale consideration of Rs. 2,29,75,000 determined by the Assessing Officer as against sale consideration of Rs. 77,50,000 as claimed by the assessee and held the same to be redundant. Aggrieved, the Revenue is in appeal before us and raised the following grounds: (1) The order of the learned CIT(A) is erroneous both in law and on facts of the case; (2) The Learned CIT(A) ought to have appreciated the action taken by the Assessing Officer treating that the lands sold by the assessee are not agricultu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Mandal as follows: "Verified the Form-1 of RO, wherein except the Sy. Nos. 351 to 354, all the survey numbers are recorded as plots." The MRO in his report has reported that the petitioners are in possession of the land and were doing agriculture operations. 24. The learned counsel for the assessee relied on the ITAT Cochin Bench in the case of M.K. Abdul Rehiman vs. DCIT (16 Taxman 406). 25. We have heard both the parties. We shall draw our opinion based on the following points: (a) The agricultural land in question is located in Aushapur village and is situated in an area outside any notified municipal and cantonment board both having population of less than 10000 and also beyond distance notified by the Central Government from the limits of any such municipality or cantonment board. Thus the land in question does not constitute capital asset as stipulated u/s. 2(14) of the IT Act, 1961. (b) The land originally belongs to M. Yadaiah and Mrs. Balalaxmamma who were declared as Pattadar as per the court decree. The said persons seems to have taken possession of the land and have carried out agriculture operations, according to the order of the MRO, Ghatkesar Mandal which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord to suggest that it was not put to agricultural use at the relevant point of time. (iv) With regard to the observation of the A.O. that the land was sold for non-agricultural use, the assessee submitted that the Hon'ble High Court of Delhi observed, in the case of Hindustan Industrial Resources Ltd. v. Asst. CIT 335 ITR 77, held that whether the Assessee intended to use the land for industrial purpose or that the Assessee had not carried out any agricultural operation did not in any way alter the nature and character of the agricultural land. The intention of the land acquiring authority was a wholly irrelevant consideration for determining the character of land at the time of sale. It was observed that where the nature of the land both at the time of purchase and sale/compulsory acquisition was agricultural, it cannot be held that its character had undergone any change during the transitional period i.e., between the date of purchase and the date of sale/ compulsory acquisition and as such the said land retained the character of agricultural land at the time of sale. For coming to the conclusion, it relied upon the decisions of the Delhi High Court in D. L. F. Housing an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the result, appeal of the Department is dismissed.
C.O. No. 22/Hyd/2014
31. In the Cross Objection by the assessee the assessee raised the ground that the CIT(A) erred by not adjudicating on the ground relating to the actual sale consideration of the land sold by the assessee and the CIT(A) ought to have decided the issue based on merits of the case.
32. With regard to this ground the CIT(A) held that the lands sold by the assessee are agricultural lands and covered by s. 2(14)(iii)(a)(b) of the Act and not as a capital asset and exempt from capital gains and directed the AO to delete the addition of Rs. 2,22,70,229 made under the head 'long term capital gains', the question of going into the merits of sale consideration of Rs. 2,29,75,000 as opined by the AO, as against the sale consideration of Rs. 77,50,000 as claimed by the assessee, does not arise.
33. As we have decided the appeal of the Revenue against the Department and confirmed the order of the CIT(A), this ground needs no adjudication and becomes infructuous. Accordingly, this ground is dismissed as infructuous.
Pronounced in the open court on 31st July, 2014. X X X X Extracts X X X X X X X X Extracts X X X X
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