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TMI Blog2018 (5) TMI 1870X X X X Extracts X X X X X X X X Extracts X X X X ..... y pointed out that it was clear cut sale of agricultural land, and therefore, any Long Term Capital Gain arisen from sale of such land is to be treated as exempt u/s. 10. We do not find any infirmity in the order of the ld. CIT (A) that the gain on sale of such land cannot be taxed as capital gain. MAT - computation or taxation of book profit u/s. 115JB - HELD THAT:- No such grounds were raised in the original grounds of appeal by the Department. Apart from that, once Assessing Officer has not treated the said gain for the purposes of book profit then by way of such ground the issue cannot be raised by the Department. Otherwise also when the income of agricultural land is exempt from tax, then the said exempt income cannot be added to the books profit while calculating the MAT u/s. 115JB. Thus, the said ground raised by the Revenue cannot be entertained and same is dismissed. Receipts on account of compromise agreement and settlement - taxability as capital gain or not? - HELD THAT:- Looking to the nature of payment which is on account of compromise agreement and also settlement of withdrawal of cases, it cannot be held that the said amount received by the assessee is on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icultural operation on it. This land was sold during the previous year relevant to the Assessment Year 2006-07 for a total sale consideration of ₹ 10.30 crore to 'M/s. Maha Seer Hotels Resorts Pvt. Ltd.' The gain from the sale of land was claimed as exempt u/s. 10 on the ground that capital gain has arisen on account of sale of agricultural land, which is not an asset within the meaning of Section 2(14)(iii). In response to the show cause notice by the Assessing Officer, the assessee had filed various particulars and details from time to time and explained that the said land was an agricultural land. The details furnished before the Assessing Officer, has been highlighted in the impugned appellate order, which for the sake of ready reference is reproduced hereunder:- The copy of computation sheet showing claim of the assessee. The relevant page of balance sheet of the assessee company showing the impugned land was shown as agriculture land in its own balance sheet right from the beginning. Certificate of incorporation consequent upon change of name of assessee Company from M/s. Indana International Ltd. to M/s. Goman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent case, the construction is very old, since 1920 and now can be named as Heritage Property comes within 200 meters of the sea beach. (Kindly view attached map of Land). It means that old structure has no legal sanctity and has no commercial/Residential value in terms of rupees. Further it is submitted that this structure has been constructed only on 231.78 square meters, out of 76145 square meters area of Agricultural land. In other word only 0.03% area is constructed which is also too much old that does not have any commercial/residual value. Mere a small structure, i.e., 231.78 Sq. meters. Which is very old and have no legal sanctity on a very big land i.e. 76145 Sq. Meters does not change the characteristic of whole land. [Gowardhan Das Sons vs. CIT (2007) 158 Taxman 465/288 ITR 481 (Punj. Har.) Further it is submitted that in order to qualify for agricultural land in India . It must be agricultural land at the time of sale [T.S.M.O. Mohammad Orthuman vs. CIT: (1957) 31 ITR 480 (Madras)]. If the land is used for agricultural purpose or even if the agricultural use has ceased but it is apparent that the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th as per Annexure 4. Further, without prejudice, it is submitted that we have sold our agricultural land as such. No Charge of land Use i.e. CLU has been obtained by us or by the other party before sale of land. We have learnt that even till date the land is used for agricultural purposes only. We have further learnt that as per Regional Master Plan of Goa, No. CLU i.e. Change of Land Use is permitted. Your good self may kindly get all these facts verified by the Government and other sources. This land was Agricultural land and it is still agricultural land. Xxxxxxxxxxxxxxxxxx Note on structural house on Survey No. 212 it is respectfully submitted that the said structural house which is very old since 1920, constructed on 231.78 square meter of land meter of land only. Further that structure comes within 200 meters of sea beach/coastal zone area, Where no construction/development of building either residential/commercial is permitted as per bye laws of Coastal Zone Regulation Act 1986, defined by Ministry of Environment forest, (copy of coastal zone Regulation/India is enclosed herewith for your reference). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.11.2005 Ch. No. 252853/P.O. No. 296388 for Compromisesettlement for withdrawal of case 10,00,000 Total amount paid 10,50,00,000 2. Copy of bank statement for the period 01.04.2005 to 31.03.2006 where above transactions have been routed through. 3. We are assessed to Income Tax with Permanent Account No. AADCM9908M, Income Tax Officer-Ward 6(1), New Delhi (Copy of acknowledgement for A.Y. 2006-07 is enclosed herewith). 4. The present status of the land is the same as during the A.Y. 2006-07 at the time of purchase of the land at Goa by us on plot 'B' of the property, there was structure standing thereon being House No. 365 bearing Survey No. 212 at Manderm Village, Goa. From the perusal of the facts stated herein above and the evidence brought before Ld. A.O. following 3 things are established:- 1. The impugned land was purchased as agriculture land by the assessee company, 2. The impugned land was retained and used as agricu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord available. Q.4. Whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land? Ans. Not applicable. Since the assessee did not use the land for agricultural purposes as such there was no agricultural income. Q.5. Whether the land, on the relevant date, had ceased to be put to agricultural use? If so, whether it was put to an alternative use? Whether such user and/or alternative user was of a permanent or temporary nature? Ans. Cannot be determined in the absence of any evidence filed by the assessee. Q.6. Whether the land was sold on yardage or on acreage basis? Ans. The land was purchased and sold on the yardage basis. Q.7. Whether an agriculturist would purchase the land for agricultural purposes at the price at which the land was sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield? Ans. Probably not keeping in view the sales consideration of the land sold and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A.O. to hold otherwise that too on the basis of surmises and conjectures and without bringing any contrary material on record. Apart from the government records, certificate from a reputed firm of CA's was also submitted by Ld. A.O. The said land was open for verification by Ld. A.O. but unfortunately Ld. A.O. has displaced the claim of the assessee without there being any contrary material on record. The next doubt of Ld. A.O. was that the said land was sold to a prospective hotelier and therefore as such the future intended use was of non agriculture nature. Our respectful submission is that we fail to understand from where Ld. A.O. has picked up this intention. It is no where coming out from the sale deed that the said land was sold for commercial purposes. Even till date no permission for change in the land use has been obtained by the purchase. The land has been retained as it is and no commercial activity has been done. All these facts were before Ld. A.O. and he could not bring on record any contrary material from the concerned government authorities or the said purchaser and chose to make addition on the basis of his whims and fancies that too based u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract from its character of agricultural land on the date of sale. Apart from that, various other submissions were made from time to time as required by the ld. CIT (A) to clarify the entire facts which have been incorporated in the appellate order in detail. 8. Ld. CIT (A) after taking note of the arguments and contention raised by the Assessing Officer as well as by the assessee who has summarized the case of the Assessing Officer and assessee in the following manner:- The AO held that the appellant company could not claim the land sold by it as exempt on the following basis: 1. The land has never been used for agricultural purposes as no agriculture income had been declared by the assessee in the preceding years. 2. As per the memorandum of association of the company, the main objects of the company was business of hotel, restaurant etc. and the land was purchased with the intention of pursuing the main object. 3. No land revenue was applicable on this land as per the assessee's letter dated 26.12.2008. 4. The land was sold on yardage basis and not on acreage basis. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and has not been put to any non agricultural use over the period of holding of 12 years by the appellant company. The structure situated on the land covers an area of 231.78 square metres as against total land area of 76145 square metre of the total land. A large portion of the land comes within 200 metres of the coastal zone area where no construction is permitted. The registry does not reflect the sale of land on yardage basis but shows a consolidated amount as sale proceeds. The AOs observation that the land was not actually used for agricultural purposes in as much as no agricultural income was derived from this land and was not shown by the assessees in their income-tax returns has been explained on the basis that there were coconut trees in the land but the agricultural income derived by sale of the coconuts was just enough to maintain the land and there was no actual surplus. If an agricultural operation does not result in generation of surplus that cannot be a ground to say that the land was not used for agricultural purposes. Further, the decision of the jurisdictional high court is that not even carrying out agricultural operation does not alter the nature and character o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. The inference has to be drawn on cumulative consideration of all the relevant facts. In the instant case, the land was undoubtedly under cultivation up to and inclusive of the year 1964-65. For the years 1965-66 to 1967-68 the land was admittedly not cultivated. On account of floods in Tapti river, the land could not be cultivated even for year 1968-69. Further, in the instant case, the facts in assessees favour were land being registered as agricultural land in the revenue records; payment of land revenue in respect thereof till the year 1968-69; absence of any evidence that it was put to non-agricultural use by the assessees; that the land was actually cultivated till and including the agricultural year 1964-65; that there were agricultural lands abutting the said land and that the assessees had no other source of income except the income from the said land. The facts appearing against their case were: The land was situated within the municipal lands - it was situated at a distance of one kilometer from the Surat railway station; the land was not being cultivated from the year 1965-66 until it was sold in 1969; the appellants had entered int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n certified by the local authorities but also it was duly explained and proven from the material placed on record that; Firstly, the first objection of the Assessing Officer that there was a house in the said land and therefore, it is a sale of house property stands negated by the fact that it very old house built in the year 1920; and the land falls within coastal region which as per law of Coastal Zone Regulation of India, no residential or commercial building was permitted within 200 mtr. of sea beach. Hence there could not be sale of house property. Besides this the area in which old house was standing was around 0.02% which is very miniscule. Secondly, the assessee company has been using this land of agricultural operation only and no other use of this land has been taken at any time; Thirdly, the land was situated much beyond the prescribed municipal limit of 8 km and in fact it was around 25 km from the municipal area. Fourthly, at no point of time there was any change of use of land permitted by the authorities even when the assessee was holding the land and also after the sale of the land. In fact the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erused the relevant findings given in the impugned orders as well as the material referred to before us. Already the facts of the case, submissions of the assessee as well as the case of the Assessing Officer have been elaborately discussed in the foregoing paragraphs. To put in a succinct manner, the relevant facts and material are discussed hereunder:- i. The assessee company purchased a piece of land admeasuring 76145 sq. mtr at Village Mandram, Pernem Taluka, sub-District Pernem of North Goa, by way of two purchase deeds dated 16.04.1992 and 23.04.1992 for sums aggregating to ₹ 18,12,130/-. This land was sold during the relevant year for a sale consideration of ₹ 10.30 crores to M/s. Maha Seer Hotels Resorts Pvt. Ltd. and the gain from such sale of land has been claimed as exempt by the assessee, that is, it is an agricultural land not covered under the definition of assets u/s. 2(14)(iii). ii. The said land as per the Land Revenue records and also certified by the local authorities was used as agricultural land and such character of land remained the same at the time of purchase and also during the time of sale. The certificate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale also the land remained agricultural land in the hands of the seller and till date land used has not been changed and; lastly, even if land has been sold to a hotelier but if it is not used for commercial purpose even after the sale, then does not make any difference whether a prospective hotelier had purchased a land. All the facts and materials which has been discussed above clearly pointed out that it was clear cut sale of agricultural land, and therefore, any Long Term Capital Gain arisen from sale of such land is to be treated as exempt u/s. 10. 17. Coming to the decision of Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim Ors. vs. CIT (supra), we find that in that case part of the plot was converted into non agricultural purposes before the sale; secondly, the land was sold to a Co-operative Housing Society solely for non agricultural purpose, i.e., construction of house; and lastly, the said land was within 1 km of railway station of Surat and was within the municipal limit. Apart from that, permission to sale the land for non agricultural purpose was obtained and immediately thereafter sale deeds were executed. Thus, this deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 2 of 2002) [reported at (2006) 200 CTR (Bom) 152--Ed.] which involved identical issue. In those appeals, this Court has upheld the order of the Tribunal holding that the land was agricultural land and its sale did not invite the payment of capital gain. It is not disputed before us that the facts of the said cases were similar to the facts of the present cases. We are bound by the decisions in those cases. 18. Further in the case of Hindustan Industrial Resources Ltd. vs. ACIT (supra), the Hon'ble Jurisdictional High Court held that if the land in question was agricultural land at the time of purchase by the assessee and also at the time of acquisition, then the said land would clearly be held as agricultural land irrespective of the fact that assessee intended to use the land for industrial purposes and did not carried out any agricultural operations. Even then also no capital gain could be charged on sale of such agricultural land. Similar view has been taken in the case of DLF United Ltd. vs. CIT (supra). Thus, in view of our independent appraisal of facts on record and the ratio as culled out from the decision cited by the parties, we do not find any infir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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