9911796707
TMI Blog2015 (11) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... : These appeals filed by the revenue are directed against the separate but, identical orders of the Commissioner of Wealth -tax (Appeals) -III, Bangalore, dated 9-1-2013 u/s 16(3) r.w.s. 17 of the Wealth Tax Act, 1957 for the A.Y. 2005-06, 2006-07 and 2007-08. 1.The assessee has raised common grounds for all the three assessment years, except for the A.Y. 2006-07, where the assessee has challenged the validity of the reassessment proceedings. The only issue evolved from the grounds of appeal is that whether the CWT(A) is right in holding that the impugned lands are urban lands within the definition of section 2(ea) of the Wealth tax act, 1957 and liable for wealth tax. For the sake of convenience, we have taken the facts from the A.Y. 2006-07. 2. Brief facts of the case are that the assessee is a HUF filed its return of net wealth for the A.Y. 2006-07 on 30-03-2007 declaring net wealth of ₹ 1,29,08,300/-.During course of income tax proceedings of the assessee for the A.Y. 2008-09, the AO noticed that the assessee has transferred certain lands and computed the capital gains and paid tax. Subsequently, the assessee has filed revised return and claimed the exemption on capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though, the lands are situated within local limits of BIAAPA, however, BIAAPA is only a planning authority and not a municipalityor notified area as defined in section 2(14)(iii). Further, the assessee contended that though the lands are converted for non-agricultural purpose, he is continued to carry on the agricultural operations and derived agricultural income from the said land. In support of his contention, the assessee relied upon plethora of case laws. Therefore, for the reasons stated above, he has prayed the CWT(A) to delete the impugned additions. However, the CWT(A) after considering the explanations, held that the impugned lands are converted from agricultural to non-agricultural purpose, situated within the limits of BIAAPA and BIAAPA is a municipality. With this observations, the CWT(A) confirmed the assessment order. Aggrieved by the order, the assessee is in appeal before us. 4. The learned authorised representative of the assessee submitted that the issue in this appeal is covered by assessee own case in ITA. No. 262/B/2013 for the A.Y.2008-09. He further, submitted that the ITAT in the assessee own case, for the A.Y. 2008-09 in income -tax proceedings, while deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M.R. Seetharam (HUF) in ITA No.16154/Bang/2012 dt.13.6.2014 is applicable to the facts of this case. The land in question, which are sold by the assessee and subjected to the charge of LTCG by the authorities below, became the properties of the assessee's by virtue of a family settlement of land purchased by Late Sri M.S. Ramaiah in 1951. In the said family settlement in 1970, the assessee and other family members including M.R. Seetharam were allotted lands belonging to the said family. The lands sold by the assessee, some other family members, as well as the lands sold by M.R. Seetharam are contiguous in nature and possess the same physical attributes. Admittedly these lands were converted for non-agricultural purposes, but no development was carried out by the assessee in respect of the said land. Agricultural activities were continued thereon right up to the date of sale thereof on 8.2.2008 and the same has been accepted by the Income Tax Department while determining the assessee's income and computing the taxes thereon. In fact no development activities have taken place on these lands even after six years after the date of sale and this was evident from the phys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any bearing on the Tribunal arriving at a decision which is in accordance with law. " 4. Most importantly the judgment in the above mentioned cases would decide a very important question- "what is the definition of a converted land in the state of Karnataka." " The order of this Tribunal will confine itself to deciding the taxability or otherwise of the gains arising from the sale of the lands in question in accordance with the provisions contained in the Income Tax Act, 1961. If Revenue expects this Tribunal to decide the question framed in the above cited reason, then such expectation is either borne out of ignorance or mischievous in nature. If mischievous, then Revenue would be well advised to avoid such tongue-in-check arguments. 9.2 On careful consideration of the above four reasons cited by Revenue (supra), we are of the considered view that none of them survive as they are wholly extraneous in arriving at a decision in accordance with the provisions of law. 10.0 We now proceed to carefully consider the several other issues raised by Revenue and examine these in the light of the order passed by the co-ordinate bench of this Tribunal in the case of M.R. Seetharam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of M.R.Seetharam (HUF) (supra) and has come to the following important conclusions :- (i) The lands in question do not cease to be agricultural lands merely because it stood converted in the records of the land revenue authorities of the state government. (ii) The land continued to be agricultural land for the limited purpose of determining whether the same falls under the definition of capital asset under section 2(14) of the Act in view of the following facts :- (a) The said land was put to use as agricultural land by the assessee right up to the date of sale and the assessee has also been declaring the agricultural income earned therefrom in the returns of income filed before the Department in this period; (b) The assessee did nothing to change the physical character of land from agricultural to non-agricultural even after obtaining the permission to convert; (c) The land continued to be agricultural land in actual physical condition even after a period of six years after its sale. (d) The assessee obtained permission to convert the land merely to facilitate its sale to corporate entity as the sale would otherwise not been possible. 10.4.1 The co-ordinate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellate authorities were correct in holding that the land which is the subject matter of sale is agricultural land as on the date of sale without taking into consideration the conversion of land to nonagricultural purpose and consequently recorded a perverse finding ? 2. Whether the appellate authorities were correct in holding that though the land is converted into nonagricultural, in view of the cultivation of the land till the date of sale, the land should be treated as agricultural land and the same is exempt from capital gains in view of section 2(14) read with sections 45 and 48 of the Act ? " 10.5 The Hon'ble Court after considering the averments of both parties and the orders of the authorities below held as under :- "5. We find from the record that the Appellate Commissioner as well as the Tribunal followed an earlier ruling of the Tribunal rendered on December 30, 2009, in the case of T.Suresh Gowda [ITA NO.262/Bang/2009] wherein it appears, the question was resolved by looking into the date of permission for conversion as the cut-off line to decide as to whether the land was an agricultural land or otherwise. 6. It appears, the Tribunal had opined t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r V ACIT, Hassan (supra), T. Suresh Gowda & Others (supra) and Smt. K. Leelavathy. 10.6 It is important to take note of the fact that the decisions rendered by the various co-ordinate benches of this Tribunal in the cases of H.S. Vijayshankar (supra), T. Suresh Gowda & Others (supra) and M.R. Seetharam (HUF) (supra) and that of the Hon'ble jurisdictional High Court in the case of Smt. K. Leelavathy (supra) is only for the limited purpose of determining whether a land is agricultural land or a capital asset u/s.2 (14) of the Act and not to determine the definition of converted land in the state of Karnataka and other issues pertaining to the status of land as sought for by the Revenue in its written submissions. We also find that the decision in the case of Madhav Bhandhopanth Kulkarni 2003(5 Kar. LJ 13, relied on by Revenue, is not germane to decide the issue before us. 10.7 In the order of the co-ordinate bench in the case of M.R. Seetharam (HUF) (supra), the co-ordinate bench of this Tribunal at paras 7.3.8 to 7.3.10 of its order has also found merit in the arguments put forth by the learned Authorised Representative therein that owing to the peculiar features of the law p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of other States (supra), the assessee would not then be required to get the land converted merely to facilitate its sale to a corporate and the gains arising from such sale would not have been exigible to Capital Gains tax which is the subject of a Central Act (Income-tax Act).In the instant case as mentioned earlier even after conversion, assessee was carrying on agricultural operation and conversion was done only to facilitate sale of subject property to a corporate entity/ non agriculturist. In substance, the Income-tax Act - a Central Act - is to be administered in such a manner to ensure that an assessee is not subjected to suffer due to different State laws. 7.3.10. Taking into account all the aspects as discussed in the fore-going paragraphs and also in conformity with the judicial pronouncements on the issue (supra), we are of the view that though the subject land was converted into non-agricultural purposes, cultivation of the land for agricultural purposes till the date of sale was continued unabated and as such, the land should have been treated as agricultural land and, thus, exempt from capital gains in view of s. 2 (14) of the Act. It is ordered accordingly." The e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, an appointed body and, therefore, BIAAPA does not qualify to be considered as a Municipality. 8.3.1. To strengthen the above view, it is appropriate to refer to the judgment of the Hon'ble Kerala High court in the case of CIT v. Murali Lodge reported in (1992) 194 ITR 125 (Ker). The issue before the Hon'ble Court was Whether the land in question situated within Guruvayur Township can be treated as a capital asset within the definition of section 2(14) of the I.T. Act? After having considered the facts of the issue and also in conformity with the judgment of the Hon'ble Supreme Court in the case of Garden silk Weaving Factory v. CIT [(1991) 189 ITR 512 (SC)], the Hon'ble Kerala High Court had, comprehensively, dealt with the issue of 'Whether the local authority is a Municipality?' as under: "(On page 127)……………………………………………………………… ...... From the plain and unambiguous language employed in the section [2(14)(iii)(a)], it is clear that, if the agricultural land is situated outside the jurisdiction of a munici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uncillors. They are elected by the residents of the area coming within the jurisdiction of the municipality. The chairman and vice-chairman of the municipality are elected by the members of the council. The commissioner is appointed by the Government in consultation with the council. It is the duty of the commissioner to carry into effect the resolutions of the council unless it be that the said resolution is suspended or cancelled by the Government. The municipality contemplated under section 2(14)(iii)(a) must be one which satisfied the above requirements. All the local authorities included in the brackets must satisfy the above requirements to be known as a 'municipality'. The position, however, would have been different had the section contained a definition which takes in its fold the local authorities included in the brackets, namely, ' municipal corporation notified area committee, town area committee, town committee or such other similar local authority'. In that event, the Guruvayur Township can be said to be a municipality. The plan language employed in the section, however, makes it clear that the intention of the Legislature is not to treat every local authority as a mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act would include a local authority; & (iv) in view of the above, it was held the land, subject matter of acquisition, was a capital asset falling within the scope of clause (iii) of s. 2 (14). 8.3.3. In this connection, we would like to point out that the said land was situated between the developed sectors of Panchkula on one side and on the other-side it was within a radius of 1 KM from the District headquarters, colleges, hospitals etc., whereas in the present case, the subject property was surrounded by lush green agricultural lands. Therefore, we are of the view that the case law relied on by the Revenue is not directly applicable to the issue on hand. 8.3.4. Further, while deciding the issue against the assessee, the Hon'ble Court had distinguished the judgment of Hon'ble Kerala High Court in Murali Lodge's case (supra) in an identical issue, with the following observations: "29. With respect, we are unable to agree with the view expressed by the Kerala High Court in the aforesaid judgment. The expression 'by any other name' appearing in item (a) of clause (iii) of section 2(14) has to be read ejusdem generis with the earlier expressions i.e., municipal corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture (i.e. having orchards, etc.) as on the date of sale. The presence or absence of the present owners at the time of the inspection, in our view, is immaterial in coming to a satisfaction about the physical characteristics of the land in question. It was apparent from the physical inspection that there were mango orchards and coconut groves with thousands of fruit/nut bearing trees and not "…. some fruit bearing trees" as mentioned by Revenue in its written submissions. 14. In the light of the above discussion of the facts and circumstances of the case at paras 2.1 to 13 of this order (supra), we are of the considered view that the conclusions reached by the co-ordinate bench of this Tribunal in the case of M.R. Seetharam (HUF) (supra) squarely applies to the facts of the case on hand. We, therefore, following the decisions of the co-ordinate benches of this Tribunal in the cases of H.S. Vijayakumar (supra), T. Suresh Gowda and Others (supra), M.R. Seetharam (HUF) (supra) and the Hon'ble Karnataka High Court in the case of Smt. K. Leelavathy (supra) hold as under :- (i) The lands in question, which were sold in the case on hand, are agricultural lands and not cap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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