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TMI Blog2014 (10) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... y capital gain tax. 3. Shri K.K. John, the ld.DR submitted that the assessee, Shri M.J. Thomas in ITA No.311/Coch/2011 owned and possessed 4.448 acres of land in survey No.647/1, 646/6, 646/5 and 646/4 at Kakkanad village. The said land was compulsorily acquired by Government of Kerala under Land Acquisition Act during the year under consideration. The assessee has received compensation from the government. The ld.DR further pointed out that Government of Kerala acquired the land for KINFRA project. The ld.representative further submitted that the assessee claimed the property as agricultural land. However, the assessing officer rejected the claim of the assessee and found that the subject land is not an agricultural land. According to the ld.DR, though the assessee returned agricultural income in the earlier assessment year, the department had no occasion to scrutinize the return of income. According to the ld.DR, mere acceptance of the return of income does not give any sanctity to the income declared in the return. According to the ld.DR, when the assessee claims that the subject land is agricultural land, the burden of proof heavily lies on his shoulder to prove that the subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al aspect, according to the ld.DR is whether the land is agricultural land or not?. In this case, this crucial aspect was not proved by the assessee. Referring to the judgment of the Kerala High Court in Smt. Asha George vs ITO ITA 542/Coch/2011, the ld.DR submitted that the Village Officer's certificate cannot be relied upon to hold that agricultural operations were carried on. According to the ld.DR, the Kerala High Court confirmed the view of this Tribunal in Smt. Asha George in ITA No.542/Coch/2011 dated 17-02-200 4, copy of which is available at page 16 of the paper book. The ld.representative has also produced copy of the decision of the Tribunal in M.K. Abdul Rehiman vs Dy.CIT ITA No. 301 (Coch) of 2009 dated October 21, 2011 and decision of the Chennai Bench of this Tribunal in Pallavaram Kothandraman vs ACIT ITA No. 1808/Mad/2011 dated 17-10-2012. The ld.DR has also placed on record the judgment of the Kerala High Court in Jalaja Dileep vs The Revenue Divisional Officer in WP (c) No.11784 of 2012 (W) dated July 13, 2012 and another judgment of the Kerala High Court in P.M Ashraf vs The District Collector & Ors WP(C) No.4832 of 2013 dated 27-02-2013. The ld.DR has also plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India. According to the ld.representative, admittedly, for the year under consideration, Trikkakara was a panchayat. In other words, Trikkakara was not a municipality for the year under consideration. It is also not a notified area. Referring to the notification issued by the CBDT dated 06-01-1994 the ld.representative submitted that in the State of Kerala, Cochin is a notified municipality. In the area falling outside the limits of municipality, the CBDT clearly mentioned that areas forming part of Eloor and Marad panchayats upto a distance of 8 kms from the municipal limits. Therefore, the property situated within the Cochin municipality and the property situated being part of Eloor and Marad panchayats upto a distance of 8 kms from Cochin Municipal limits alone to be considered as capital asset. In this case, the property is situated in Trikkakara panchayat which is admittedly beyond 8 kms radius of Cochin Municipality. Therefore, according to the ld.rperesentative, the land in question is agricultural land, therefore, the gain arising out of sale of such land does not attract any capital gain tax. The ld.representative further submitted that in the year 1973, the CBDT, in fact, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar contribution to Kerala Agricultural Workers' Welfare Fund as an agriculturist. According to the ld.representative, the agriculturists, who cultivate the land having more than 0.5 hectares has to pay agricultural workers' welfare fund. Referring to the Kerala Agricultural Workers Act, 1974, the ld.representative submitted that the assessee is liable to pay compensation under the Act since he was cultivating the land in question. On a query from the bench whether the State Government is maintaining any records for cultivation of the land, the ld.representative very fairly submitted that no government authority in the State of Kerala is maintaining any record for cultivation. Therefore, the assessee has no other way except to produce certificate from the village officer and agricultural officer. In the absence of any statutory record or other record maintained by state government in the course of its administrative action, according to the ld.representative, the assessee cannot be blamed for not producing any records. According to the ld.representative, the assessee has produced certificate from the village officer to show that the land is agricultural land was used for cul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccording to the ld.representative, when the land was cultivated with one crop it has to be made ready for another cultivation. Once the land is made ready, the agriculturists have to give a reasonable period for reclamation. This shows that the land was earlier cultivated and it was reclaimed for the purpose of next cultivation. Therefore, the agricultural officer confirmed that the land in question is an agricultural land. According to the ld.representative, the land in question was admittedly purchased in the year 1980s when the present Kakkanad was not even in dream. Therefore, according to the ld.representtive, in the absence of any other revenue records maintained by the state government for cultivation, the material available in the form of certificate of village officer and the classification made by the state government cannot be ignored. 9. Shri M.A. John, the ld.representative for the assessee in ITAT No.336/Coch/2013 submitted that the assessee, Shri George Thomas purchased 19.05 acres of paddy field on 18-03-1988 and 11 acres of sloping land. According to the ld.representative, the assessee was cultivating paddy in 19.50 acres of land and there were coconut trees and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the land in question has to be treated as agricultural land. Therefore, the assessing officer is not justified in treating the land as non agricultural land. The CIT(A) has simply followed the order of the assessing officer without applying is mind independently. 10. On the contrary Shri K.K. John adopted the arguments advanced in the case of M.J. George (supra). 11. Now coming to ITA No.561/Coch/2011 in the case of Smt. Mary John Poomkudy; Smt. Anitha Zacharias and Shri John Augusty alongwith the cross objections, the ld.DR, Shri K.K. John reiterated arguments advanced in the case of M.J. George (supra). 12. Shri P.K. Sasidharan, the ld.representative for the assessee submitted that the legislature has referred agricultural land in section 2(14)(iii) of the Income-tax Act. As per this definition, the legislature excluded any area which is comprised within the jurisdiction of the municipality notified or area of containment board, etc and has also excluded the area within such distance not being more than 8 kms which was notified in the official gazette. Referring to section 10(37), the ld.representative submitted that the profit/income rising on sale or compulsory acquisiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the use of the land for agricultural purpose is immaterial and what is required is that the land should be classified an agricultural land. In this case, according to the ld.representative, the land is classified as agricultural land in the revenue records. What is disputed by the revenue is that the land was not used for cultivation. Though the assessee claims that the land was subjected to cultivation for number of years, however, the assessee could not produce any records other than the certificate from the village officer and the agricultural officer. Therefore, according to the ld.represetnative, in the absence of any records maintained by state government for cultivation the assessee cannot be expected to produce any document. Furthermore, since the agricultural land situated outside the specified urban limit does not form part of the capital asset within the meaning of section 2(14), the gain arising out of such land on sale or by acquisition cannot be treated as capital gain. Unless and until the revenue brought on record some material to show that the land in question is a capital asset within the meaning of section 2(14) of the Act, the gain arising out of such transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r change of use. Therefore, according to the ld.representative, the CIT(A) has rightly allowed the claim of the assessee and deleted the addition made by the assessing officer. 15. On the contrary, Shri K.K. John, the ld.DR submitted that the assessee sold the land to real estate builder at a higher price. The assessing officer found that no agricultural activity was carried on in the entire area and most of the lands were used by affluent businessman as land bank anticipating higher value. The ld.DR further submitted that in the recent times developmental activities are taking place around Cochin particularly in Kakkanad and Trikkakara, area. However, the CIT(A) by placing reliance on the judgment of the Kerala High Court in CIT v. A. Aboobaker in ITA No.1295 of 2009, dated 21-12-2010 found that the property sold by the assessee was agricultural land, therefore, the profit arising on sale of such property are exempt from levy of capital gain. According to the ld.DR, the Kerala High Court in the case of A. Aboobaker (supra) is not applicable to the facts of the case. The High Court has only held that agricultural land outside the municipal limitsare not capital assets, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by an assessee, whether or not connected with his business or profession, but does not include - (i) Any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession; (ii) Personal effects, that is to say, movable property (including wearing apparel and furniture) held for personal use by the assessee or any member of his family dependent on him, but excludes - (a) jewellery; (b) archaeological collections; (c) drawings; (d) paintings; (e) sculptures; or (f) any work of art. Explanation.- For the purposes of this sub-clause, jewellery includes - (a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel; (b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel; (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltural land. Therefore, the agricultural land which is situated beyond the municipal limits and beyond 8 kms from the local limits of the notified municipality is exempt or excluded from the definition of capital asset. 17. The question now arises for consideration is whether the subject matter of the land which is situated in Kakkanad falls within the jurisdiction of the municipality or within 8 kms radius of the notified municipality. Admittedly, Kakkanad village where the property is situated in all the appeals falls within the territorial jurisdiction of Trikkakara panchayat at relevant point of time. Trikkakara panchayat was a notified area by the notification dated 06-02-1973. This notification dated 06-02-1973was superseded by another notification dated 06-01-1994 omitting / excluding wherein Trikkakara panchayat for the purpose of capital gain. It may not be necessary for this Tribunal to examine the reasons for exclusion or omission of Trikkakara panchayat from the notified area. Suffice to say that Trikkakara panchayat is not a notified area on and from 06-01-1994. In the notification dated 06-01-1994 the Cochin municipality is a notified municipality including part of E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 2(e) of the Wealth-tax Act, 1957 reads as follows: '2. In this Act, unless the context otherwise requires,- (a) to (d) (e) "assets" includes property of every description, movable or immovable, but does not include,- (1) in relation to assessment year commencing on the 1st day of April, 1969, or any earlier assessment year - (i) agricultural land and growing crops, grass or standing trees on such land:' Therefore, agricultural land and growing crops, grass and standing trees on such land are excluded from the definition of "asset" even under the Wealth-tax Act. An occasion arose before the Apex Court in CWT v. Officer-In-Charge(Court of Ward) [1976] 105 ITR 133 to consider the term "agricultural land" occurred in section 2(e) of the Wealth-tax Act. Therefore, this Tribunal is of the considered opinion that the interpretation given by the Apex Court in the case of Officer-In-Charge(Court of Ward) (supra) in respect of agricultural land under the context of Wealth-tax Act would be more appropriate and proper for defining the term "agricultural land". The Apex Court, after referring to the provisions of the Constitution of India, more particularly entry 86, List I to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compensation or consideration for such transfer received by such assessee on or after the 1st day of April, 2004. Explanation.- For the purposes of this clause, the expression "compensation or consideration" includes the compensation or consideration enhanced or further enhanced by any court, Tribunal or other authority;' Section 10(37) was introduced for the first time in the statute book by Finance Act, 2004 with effect from 01-04-2005. Section 10(37) excludes the capital gain arising from transfer of agricultural land which was being used for agricultural purpose immediately two preceding years. In view of section 10(37) transfer of agricultural land which is situated within the jurisdiction of municipality are excluded from capital gain tax provided such land is used for agricultural purpose during the period of two years immediately preceding the date of transfer. However, this condition or requirement of using the land for agricultural purpose during the two years immediately preceding the date of transfer was not provided in respect of agricultural land which situate outside the jurisdiction of the municipal limits in section 2(14) of the Act. Section 10(37) was intro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect land has any connection with agricultural purpose and whether it is used for agricultural purpose? The assessee claims that the state government has not maintained any records for cultivation of the landed properties except classification of the land as wetland, residential land, etc. The assessee also claims that the government is collecting agricultural workers' welfare fund from the land owners who cultivated the land. The basic tax register prepared by the village Administrative Officer for collection of tax also shows that the land is an agricultural land. The village Administrative Officer officer certifies that the land in question was a paddy field earlier and some of the lands were filled in subsequently and they have cultivated banana and ginger. In one appeal, the land was acquired by the government immediately after filling up for the purpose of cultivating the other crops, viz. banana and ginger. Therefore, the material now available on record to prove the usage of land for agricultural purpose or connection with agricultural purpose are - (i) the certificate issued by the village administrative officer; (ii) the certificate issued by the agricultural officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence for cultivation. Therefore, we called for a remand report directing the assessing officer to examine the concerned village Administrative Officer, Tahsildar, agricultural officer and any responsible officer in the collectorate. For the purpose of convenience, we are reproducing the order of the Tribunal calling for the remand report below: "I.T.A. No.311/Coch/2011 Assessment year 2007-08 Dy.CIT, Cir.2(2), Ernakulam Vs Shri M.J. Thomas, Mukkadayil House St. Vincent road, Ernakulam 08-10-2013 The assessee claims that he was cultivating 4.448 acres of land at Kakkanad which was compulsorily acquired by Government for KINFRA Smart City project. According to the assessee, while paying the compensation for land acquisition, the District Collector has not deducted any tax at source since it was agricultural land. According to the assessee, the land at Kakkanad, which is subject matter of appeal is used for cultivation of banana, ginger, etc. and the assessee also returned agricultural income regularly. The assessee has also produced the certificate from the Village Officer to support the claim that the land in question was cultivated before acquisition. On a query from the ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department, this Tribunal is of the considered opinion that the examination of the respective Village Officer and the Tahsildar with regard to records maintained by the State Government for cultivation of land would throw some light for effective disposal of this appeal. Therefore, the assessing officer is hereby directed to summon the Village Officer, Kakkanad Village and the concerned Tahsildar in person and examine them in respect of the following aspect: (1) Whether the Village Officer and the Tahsildar are maintaining any records for cultivation of land in their jurisdiction? If that is so, what kind of records are maintained and the copies of the respective records / accounts from the financial years 2003 to 2008 shall be obtained by the assessing officer for the land which is subject matter of appeal before this Tribunal? (2) In case, no records are maintained for cultivation of land, then ascertain how the statistical report with regard to estimation of the food production of the taluk is prepared. (3) What are the basic documents which are considered for estimation of the food production of the taluk while sending the statistical report to the District Collector. (4) I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; JUDICIAL MEMBER" 24. In pursuance to the remand report, the assessing officer examined the village Administrative Officer, Kakkanad, Additional Tahsildar and Agricultural Officer. For the purpose of convenience, we are reproducing remand report filed by the assessing officer before this Tribunal: "No.Remand Report/C-2(2)/2013-14 Dated:29-11-2013 To The Assistant Registrar, Income Tax Appellate Tribunal, Cochin Bench, Cochin Sir Sub: Calling for remand report in the case of - Sri M.J. Thomas for the Asst.Year 2007-08-reg.- Ref: ITA No.311/Coch/2011 dated 08/10/2013 Kindly refer to the above. A remand report has been called for by the Hon'ble ITAT in the case of Sri M.J. Thomas for the Asst.Year 2007-08 to carry out necessary verification regarding maintenance of records for cultivation of and by the State Govt. of Kerala. The Hon'ble ITAT directed the Assessing Officer to summon the Village Officer, Kakkanad Village and the concerned Tahsildar in person and examine them in respect of the following aspect: (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culturists alone and also that this levy has not been collected since 31.03.2005 in Kakkanad village. 4. The Village Officer deposed that he maintains no register except for Basic Tax Register (BTR) and Kerala Agricultural Workers Welfare fund (KAWWF). BTR records the basic character of land as 'Nilam' or 'Purayidom' which is 'wet land' and 'dry land' respectively. The wet land can be agricultural land which is paddy or otherwise and all other lands which are either water logged or likely to be water logged at some point of time in an year and also fallow land and also that they had no means of ascertaining whether this particular piece of land was fallow, cultivable or cultivated. 5. The Principal Agricultural Officer on being questioned deposed that she also does not have any record in her office or at the office of her subordinates to ascertain whether a particular piece of land was cultivated or not. However she deposed that a certificate is always granted by the Agricultural Officer of the panchayat for utilization of land after due inspection of property. Since the Agricultural Officer said that an inspection is always one before issuing, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer, Additional Tahsildar and Village Officer. 4. Copy of the levy collection report of Kerala Agricultural Labourer Welfare Board." 25. In order to give an opportunity to all the assessees copies of the remand report alongwith its enclosures were furnished to all the assessees. The assessee in the case of M.J. Thomas has filed his objections / reply. In respect of all other assessees they have not filed any reply. On a query from the bench, why they could not filed their reply / objection, they simply said that the remand report filed by the assessing officer is not against the assessees and the assessing officer has clarified that no records are maintained by the state government for the purpose of cultivation. Therefore, the effort taken by this Tribunal to find out the records maintained by the state government has ended in vain. 26. Now the question arises for consideration is in the absence of records maintained by the state government for cultivation whether the material filed by the assessees would be sufficient to prove to show that the assessees were using the land for agricultural purpose / and the land in question has any connection with agricultural purpose. All t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduce any evidence for cultivation of land maintained by Government of Kerala. From the remand report filed by the assessing officer the food production of the state appears to have been estimated on the basis of the farmers, who were registered on the records of paddy field without considering the actual cultivation. Therefore, the state government for the purpose of food production considers the paddy fields and the agriculturists as a basis for food production. In those situations, the assessee has produced certificates from the village officer to show that the subject lands were under cultivation. This Tribunal is of the considered opinion that in the absence of any other record maintained by the state government for cultivation of the land, the certificate given by the Village Administrative Officer, who is personally acquainted with the land may be one of the factors to be taken into consideration. This Tribunal cannot ignore the certificate given by the Village Administrative Officer on the basis of his acquaintance with the field certifying that the subject lands were subjected to cultivation. 28. We have carefully gone through the judgment of the apex court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate government as agricultural land; (iv) receipt for payment of contribution to agricultural workers' welfare fund; and (v) Basic Tax Register. From these materials, it appears that the state government has classified the subject land as agricultural land. The government is collecting tax as agricultural land which is evident from the Basic Tax Register. The assessees are also contributing towards Agricultural Workers' Welfare Fund. The Village Officer certified that the subject lands were subjected to cultivation. In those circumstances, this Tribunal is of the considered opinion that the subject lands were agricultural lands beyond the municipal limits or beyond 8 kms radius of the notified municipality. Therefore, the subject land cannot be treated as capital asset within the meaning of section 2(14) of the Act; hence not liable for capital gain tax under the Income-tax Act. 30. The revenue, in the cases of John Augusty and Smt. Mary John Poomkudy has taken one more ground with regard to interest on fixed deposits. 31. Shri K.K. John, the ld.DR submitted that the assessee, Smt. Mary John Poomkudy has received Rs. 76,87,732 towards interest on fixed deposit. However, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Dr. V.P. Gopinathan (supra), the orders of the CIT(A) on this issue are set aside and that of the assessing officer are restored. 34. Now coming to the assessee's appeal in ITA No.224/Coch/2011 in the case of Shri M.J. Thomas, the assessee has raised an issue with regard to commission. The only contention of the assessee is that the payment of commission was disallowed on the basis of the statement recorded from third parties. According to the ld.representative, the assessing officer had not furnished to the assessee the copies of the statements recorded from third parties. However, the same were used to disallow the claim of the assessee. We heard Shri K.K. John, the ld.DR also. 35. We have considered the rival submissions on either side and also perused the material available on record. No material is available on record to suggest that the statements said to be recorded from third parties with regard to commission payments were furnished to the assessee. This Tribunal is of the considered opinion that unless and until the copies of the statements recorded from third parties are furnished to the assessee, the same cannot be used against the assessee. Therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney was transferred to the account of the assessee. According to the ld.representative, the assessee has furnished permanent account number of Mrs. Sunitha Elizebath George. Therefore, according to the ld.representative, the genuineness of the transaction was also proved; hence, the CIT(A) has rightly allowed the claim of the assessee. 39. We have considered the rival submissions on either side and also perused the material available on record. The assessee claims that Rs. 97 lakhs was received as temporary loan from Mrs. Sunitha Elizebath George. The source for Mrs. Sunitha Elizebath George is said to be the sale proceeds of ancestral property. However, the fact remains is that the details of sale of agricultural property was not furnished to the assessing officer. The CIT(A) observed that the assessee has filed copies of the bank statements and permanent account number of Mrs. Sunitha Elizebath George. The fact remains is that Mrs. Sunitha Elizebath George has not filed any return of income for the year under consideration. The details of land sold are also not furnished to the assessing officer. The permanent account number and the bank statements appear to be filed for the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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