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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 ..... l Land. 3. The Ld. CIT (Appeal) erred, in law and on the facts and circumstances of the case, in not appreciating and directing the AO to determine the tax payable on the book profit (including the profit on sale of land) as per the provision of section 115JB. 4. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing." 2. The facts in brief are that the assessee company had purchased an agricultural land admeasuring 76145 sq. mtr at village Mandrem, Pernem Taluka, sub-District Pernem of North Goa at a cost of Rs. 18,12,130/-, by way of two purchase deeds; one dated 16.04.1992; and other dated 23.04.1992, falling in the Assessment Year 1993-94. The said land was surrounded by agricultural land and the Arabian Sea. Since the time of purchase the assessee company was holding the said land and stated to have been carried out some agricultural operation on it. This land was sold during the previous year relevant to the Assessment Year 2006-07 for a total sale consideration of Rs. 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same comes under the rural area. Letter dated 23-12-08 sent by the concerned govt, authority that is mamlatdar to Ld. AO, in response to his letter u/s. 133(6) confirming that the said authority has issued certificate about the said land being agriculture land. 3. Apart from above documents, the detailed explanation was also submitted before the Assessing Officer which again for the sake of ready reference is reproduced hereunder:- "This is to bring to your kind notice that as per Coastal Zone Regulation/India, defined by Ministry of Environment & Forests, No Construction/Development of Building either residential/commercial is permitted within the 200 meters of the sea beach. In the Present 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d they consumed Part of it. Remaining part was given to Assessee Company in the form of coconuts. This fact can be verified from the revenue record also as well as Office of Mamlatdar of Pernemn Taluka, Pernerm Goa." Applicability of Bombay Tenancy and Agricultural Land Act, 1948. "This is respectfully submitted that the said Act is not applicable to the state of Goa. As per section 1(2) of the said Act, is extended to the Bombay area of the state of Maharashtra. Extracts of section 1(2) of the said Act is enclosed herewith 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 agriculture land by the assessee company and 3. The impugned land was sold as agriculture land by the assessee company. Thus, in view of the above submissions the resultant gain arising on the sale of impugned land would be exempt under the Income Tax. Act, 1961." 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d/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 agricultural income being derived by the assessee company ever since its purchase as per the record available. Further, the land has been sold to a prospective hotelier as such the future intended use is also of non agricultural nature." 5. Accordingly, he held that it was not a sale of agricultural land and worked out the Long Term Capital after giving index cost of acquisition at Rs. 9,89,61,307/-. 6. Before the ld. CIT(A) after reiterating the details furnished before the Assessing Officer, assessee rebutted the objections raised by the Assessing Officer in the following manner: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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 upon his surmises and conjectures. Further, without prejudice to the above submissions it is respectfully submitted that as per law it was not assessee's concern as to the intention of the purchaser of the land with respect to the future user of the land. The assessee had purchased the agriculture land and kept it as agriculture land and used it as agriculture land and sold it as agriculture land and that is end the matter. Reliance is placed on the recent judgment of the jurisdictional High Court in the case of Hindustan Industrial Resources Ltd. vs. Assistant Commissioner of Income Tax (221 CTR, 710 Del). Thus, the assessee's case is very strongly in its favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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. 5. The land had been sold to a prospective hotelier. 6. The land had been sold along with certain structures built on it and as such the sale of the land was treated as sale of house property with land appurtenant thereto. The appellant on the other hand relied on the following point for claiming it as an agricultural land 1. The land is shown as agricultural land in the balance sheet of the appellant company. 2. The purchase deed and the sale deed show the land as agricultural land. 3. The certificate issued by M/s. Rajan Ramani & Co. certified that the land was purchased as agricultural land and was classified as garden/cultivable area under land revenue records of the government of Goa. 4. The Form No. I and XIV issued by the officer in charge land records clearly show the entire area as a cultivable area. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al purposes. Further, the decision of the jurisdictional high court is that not even carrying out agricultural operation does not alter the nature and character of the land. The judicial pronouncements thus squarely cover the case of the appellant company. The sale proceeds of the land are therefore treated as income from sale of agricultural land and therefore exempt from capital." 10. Before us the learned Department Representative after referring to the various observations made by the Assessing Officer, strongly relied upon the judgment of Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim & Ors. vs. CIT, : 204 ITR 0631 (SC) wherein the Hon'ble Supreme Court on following facts: "The assessees were co-owners of a plot of land situated within municipal limits and at a distance of 1 km./from the Surat railway station. A portion of the said plot was converted to non-agricultural purposes while the remaining extent continued to be registered as agricultural land. On 15-3-1967 the assessees agreed to sell remaining part of land to a housing co-operative society. To enable them to complete the transaction, the assessees applied on 12-6-1968 and 19-3-1969 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year 1965-66 until it was sold in 1969; the appellants had entered into an agreement of sale with a housing cooperative society to sell the said land for an avowed non-agricultural purpose, namely, construction of houses; they had applied in June 1968 and March 1969 for permission to sell the said land for non-agricultural purposes under section 63 of the Bombay Tenancy and Agricultural Lands Act and obtained the same on 22-4-1969; soon after obtaining the said permission they executed sale deeds and the purchaser society commenced construction operations within three days of purchase. In view of the criteria evolved in CWT v. Officer-in-Charge (Court of wards) [1976] 105 ITR 133 (SC). the entering into the agreement to sell the land for housing purposes, the applying and obtaining of the permission to sell the land for non-agricultural purposes under section 63 and its sale soon thereafter and the fact that the land was not cultivated for a period of four years prior to its sale coupled with its location, the price at which it was sold, did outweigh the circumstances in favour of the assessee's case. The land was not an agricultural land when it was sold and the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer in fact has made inquiry from the purchaser, namely M/s. Maha Seer Hotels & Resorts Pvt. Ltd., who has confirmed to the Assessing Officer that the impugned land was an agricultural land even as on date and the same status of the land is maintained. The relevant portion of the reply filed by the purchaser has already been incorporated in the foregoing paragraphs; and Lastly, nowhere it is borne out from the record or from the inquiry that the said land was sold for any commercial purpose or there was any permission granted for change of the land used by the purchaser. Thus on these facts, ld. CIT(A) has rightly upheld the contention of the assessee. 13. In so far as the judgment of Hon'ble Supreme Court as relied upon by the Assessing Officer as well as by the learned DR, he submitted that the said judgment, first of all, is not applicable at all because the land in question in the said case was beyond the municipal land; and secondly; the said land was not cultivated for years and assessee had entered into agreement to sale to a Housing Co-operative Society for use of non agricultural purposes, construction of houses and the said land use for non agricu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from municipal centre). The Assessing Officer had carried out inquiry from the concerned local authorities and in response, Mamalatdar confirmed that he issued the certificate about the said land being the agricultural land. iv. Inquiry was made from the purchaser by the Assessing Officer, who duly confirmed that the present status of the land continues to be agricultural and it is retained and used as agricultural land only and no conversion of used land has taken place and no commercial activity has been done till present date. v. In so far as the small structure standing therein, it has been explained that it was old structure built in the year 1920 with an area of 231.78 sq. mtre and such a structure comes within 200 mtr. of Coastal Regulation Zone which prohibits any kind of residential and commercial building, and therefore, the said structure being prior to such Regulation, 1986 had no commercial/residential value. 15. On the other hand, the case of the Assessing Officer was that, no agricultural income has been declared by the assessee in the earlier years; and one of the main objects of the assessee-company was business of hotel and restaurant and the said land was pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d i.e. garden or orchard. The Tribunal also held that the land was recorded in the revenue records as an agriculture land. This is not disputed by the Revenue. It is however contended that the land was not actually used for agriculture in as much as no agricultural income was derived from this land and was not shown by the respondents in their IT return. This was explained by the respondents by saying 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. Hence, no agricultural income was shown from this land. In our opinion, 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 the agricultural purpose. It is not disputed that the land was shown in the revenue record to be used for agricultural purpose and no permission was ever obtained for non-agricultural use by the respondents. Sec. 30 of the Goa, Daman and Diu Land Revenue Code, 1968, provides that no land used for agriculture shall be used for any non-agricultural purpose and no land assessed for one non-agricultural purpose shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 20. In the result, the appeal of the Revenue is dismissed. 21. In the Cross Objection, the assessee has raised following grounds:- "1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not treating the full amount of Rs. 9,89,61,307 as exempt from tax and has further erred in sustaining the action of Ld. AO in treating the amount of Rs. 20,00,000/- received on account of compromise agreement and settlement as taxable under capital gain tax and that too by recording incorrect facts and findings." 22. The amount of Rs. 20 lacs have been received by the assessee on account compromise agreement as compensation received upon termination on agreement for sale dated 02.08.1990 and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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