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TMI Blog2023 (5) TMI 1270X X X X Extracts X X X X X X X X Extracts X X X X ..... nd it is not the case of the department that it has ever been used or intended to be Zo ted Yor non-agricultural purposes. Since the land is situated in hill area and there was no direct source of irrigation, therefore, agriculture produce, under the circumstances, cannot be in proportionate to the land area. However, that fact cannot, in any manner, be said to affect the nature of the land being an agricultural land . Lands in hilly areas are generally dependent upon rain waters for irrigation purposes. It is not the case of the Revenue that the assessee has ever applied to the concerned authorities for the change of land user.Though, it has been alleged that as per the revenue records for many years that no agricultural activity has been carried out at major chunk of the land, however, the assessee, in this respect, has explained that vegetables and other minor millets grown are not mentioned in the revenue records of the land situated in Raigad District. Merely because of certain reason, whatever it may be, if an assessee cannot cultivate the land or incapacitated to do so, that will not change the nature of the land from agricultural to non-agricultural especially when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case and in law, the Ld. CIT(A) erred in coming to conclusion, by referring the order of the DCIT Circle-3, Thane in the case of one of the co-owner, that the impugned land was agricultural land despite referring to the actual verification (spot visit ) of the land by the Inspector of the DDIT which also included the photograph of the land showing that the land was barren where no agricultural activity has taken place at any point of time. 3. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in granting above relief to the assessee without appreciating the fact that the land under consideration is situated on hilly area devoid of any irrigation facilities and where no agricultural operation is possible. 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in granting above relief to the assessee without appreciating the fact that the status of the land under consideration has always been padd since beginning which means no agricultural activities have been carried out on the said land 5. The order of the CIT(A) may be vacated and that of the Assessing Officer ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Act, 1961 (for short 'the Act'). 5. Assessee carried the matter before the Ld. CIT(A) by way of filing the appeal who has deleted the addition by allowing the appeal. Feeling aggrieved from the impugned order, Revenue has come up before the Tribunal by way of filing the present appeal. 6. We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto. 7. Undisputedly, the assessee being the owner of the land in question having been purchased at different times from 1988 to 2007 sold the same to Mayank Land Pvt. Ltd. and Laxman Vaidya on 22.04.2010 and 25.10.2010 (during the year under assessment) for Rs.5,39,67,045/- and Rs.14,00,000/- respectively. 8. It is also not in dispute that the assessee has claimed the land in question to be an agricultural land being not situated within the specified area as per section 2(40) of the Act, hence not a capital asset. It is also not in dispute that in A.Y. 2010-11 only assessee has shown agricultural income of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Y. 2010-11 to the tune of Rs.60,000/-. 12. Before proceeding further to decide the issue in question we would like to extract the provisions contained under section 2(14)(iii) of the Act which are as under: (14) capital asset means .. (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, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand; or (b) in any area within the distance, measured aerially,- (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand hut not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (Ill) not being more than eight kilometres, from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of Shri Sadashiv Govind Bagade and Shri Baliram Mundhe, which fact has not been controverted by the assessee if they are having any clash of interest with the assessee, the same is a vital piece of evidence to decide the issue in controversy. 17. When the facts contained in the physical verification report of the inspector are examined in the light of the nokamama relied upon by the assessee allegedly entered into between assessee and one Shri Lax.man Dattaram Bhoir, available at page 546 to 555, it is proved on record that the same is vague and ambiguous document whereas the physical verification report is factual one. Even the nokamama is a document without consideration and does not contain any recital if Shri Laxman Dattaram Bhoir, has ever cultivated the land, nor it mentioned in the nokamama as to from which crop season he has started cultivating the land and what would be the terms and conditions of making such cultivation 18. It is also one of the contentions of the Assessee that he has received Rs.60,000/- from Shri Laxman Dattaram Bhoir for three years @ Rs.20,000/- per year as rent for cultivating the land. But it is very surprising as to how the receipt reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19/15.4 7 -2/4 0.11 1.29 1.4 Ra. Pad 5-6/15.4 8 -1/5 0.09 0.19 0.28 Ra. Pad 3-4/15.4 9 -16/3 0.01 0.09 0.10 Bhat 20-21/15.4 10 -1/4 084 0.56 1.4 Ra. Pad 1-2/15.4 11 -16/4/B 0.06 0.42 0.48 Bhat 24-25/15.4 12 -18/1 0.08 0.23 0.31 Bhat 22-23/15.4 2.62 908 117 21. Aforesaid table duly showing the nature of the land in question being cultivable or non cultivable goes to prove that from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut to cultivation it is difficult to treat it as agricultural land. From the nokarnama, acknowledgment/receipt for receiving Rs.60,000/- by the assessee from Shri Laxman Dattaram Bhoir it can be safely inferred that these are self serving documents prepared to discredit the physical verification report given by the inspector of Income Tax Department and revenue record prepared per semester on physical verification basis 25. Even perusal of the copies of the sale deed qua the land in question executed by the assessee viz. sale deeds dated 02.04.2010 25.10.2010 available at page 334 to 345 do not contain the fact if the land in question is an agricultural land and cultivable nor any source of irrigation has been mentioned therein. In these circumstances, it is difficult to believe as to how the assessee was cultivating paddy crop in the land m question which is a water intensive crop. 26. Assessee's contention that to purchase an agricultural land the purchaser also needs to be an agriculturist is also not sustainable because nature of the land as per copies of the sale deed made available on the file has never been recorded as agricultural land, rather word land is me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural purpose to non-agricultural purpose. 28. We have perused the judgment rendered by the Hon'ble Bombay High Court which is not applicable to the facts and circumstances of the case because when it is proved fact on record that the major chunk of land was never put to agricultural use, except small fraction of the same, during the last about 10 years, from the year under assessment, the proposition mooted out by the assessee that agriculture land even if not put to agricultural use in particular year will retain its nature as agricultural land is not sustainable. 29. The Ld. CIT(A) proceeded on the premise that the Land Revenue Department has held land measuring 0.98 acre out of total land of 11.7 acres as fit for cultivation, but we are of the considered view that when this land was never put to use it cannot be said that it was cultivable nor any irrigation facilities was there nor it was case of the assessee that the land was cultivable but he could not cultivate the same who has rather come up with the nokaranama and receipt for taking rent from his tenant for cultivating the entire land in question which issue has already been discussed in the preceding para. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as earned Rs. 5,47,52,045/- as non-taxable income being profit on sale of agricultural land. The Assessing Officer noted that he has seen from the record that the land was classified in the revenue record as agricultural land , there is no proof of regular payment of land revenue applicable to such land. That no mention of crop on land is mentioned in 7/12 extracts. That there is no evidence of agricultural activities, income, expenses in the past. That the sale deed executed by the assessee for sale of such property has mentioned that there are no trees on the land at the time of purchase. Hence, the Assessing Officer held that the subject matter of capital gain cannot be construed as agricultural land as there was no operation in the said land. The Assessing Officer also disputed the assessee s contention that in his case land is situated within the sub-section (b) of section 2(14)(iii) and hence the distance should be measured from Karjat Municipal Council and which was never notified as per Gazette published by Central Government. The Assessing Officer was of the opinion the whole contention of the assessee is based on the assumption that the land is agricultural and situated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the DCIT, Circle-3 in that case has finalized her case on 30.3.2014 on the basis of the report of DDIT dated 22.2.2013. However, he noted that in the case of the assessee i.e. Ashok Wesavkar the Assessing Officer has not discussed this report. Thereafter learned CIT(A) reproduced report of DDIT mentioned by him. He noted that findings of the DDIT based on which DCIT, Circle-3, Thane has arrived at a conclusion that the said land was not an agricultural land. He summarised the same in his order. 6. Thereafter learned CIT(A) reproduced the submission of assessee in great detail. Learned CIT(A) referred the provisions of Act in this regard. Thereafter he examined the issue whether location of the land falls within the definition of capital asset as defined in section 2(14)(iii) of the Act. After discussion he finally came to the conclusion that the Assessing Officer has rightly held that in the case of Ashok Wesavkar has accepted the contention of the assessee that as far as conditions laid down in section 2(14)(iii) are concerned the land in question is not a capital asset. 7. Thereafter learned CIT(A) referred to various case laws including that from Hon'ble Apex Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... di Ayogya) (Lagvadi Yogya Shetra) Total Area Comments From 2003-04 to 201011 Document No. 1 -2/5 0 0.1 0.1 Ra. Pad 8-9/15.4 2 -2/9 0.05 0.65 0.7 Ra. Pad 10-11/15.4 3 -2/10 0.13 1.00 1.13 Ra. Pad 13-14/15.4 4 -5/3 1.10 3.22 4.32 Ra. Pad 16-17/15.4 5 -2/11 0.12 1.27 1.39 Ra. Pad 12-13/15.4 6 -16/1 0.03 0.06 0.09 Bhat 18-19/15.4 7 -2/4 0.11 1.29 1.4 Ra, Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) held that the land fulfils the criteria that it is classified in the revenue records as agricultural land and land revenue was also duly paid are satisfied. Thereafter learned CIT(A) addressed the proposition that whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time. In this regard he referred to the following case laws :- i. Hon'ble Supreme Court in CWT Vs Officer's-in-charge (court of Wards)(1976)105 ITR 133 order dated 06.08.1976 held that 12. What is really required to be shown is the connection with an agricultural purpose and user and not the mere possibility of user of land, by some possible future owner or possessor, for an agricultural purpose. It is not the mere potentiality, which will only affect its valuation as part of 'asset', but its actual condition and intended user which has to be seen for purposes of exemption from wealth-tax... If there is neither anything in its condition, nor anything in evidence to indicate the intention of its owners or possessors to connect it with an agricultural purpose, the land could not be agricultural land for the purposes of earning an exemption un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral income learned CIT(A) referred to the return of income which was also reflected in the bank account wherein agricultural income was offered and accepted by Department. Learned CIT(A) further observed that before the Naukarnama when the assessee was doing agricultural activity himself with the labourers. That there were more expenses than the income and the agricultural produce was used for self consumption by assessee and the labour. He observed that the Assessing Officer s finding that in the Naukarnama there was no name of the farmer is factually wrong. He noted that Naukarnama dated 21.4.2007 clearly mentioned the name of Dattarya Laxman Bhoir a farm labourer who also had agricultural land in the neighboring village and the assessee had given the land to him for tilling and crop sharing. He also noted that as the land size was big and there are other Naukarnam s namely with Shir Chandrashekhar Joshi and with Balu Hiru Taule, who are the agriculturists and holding land in the neighboring areas. He noted that even the DDIT has mentioned in his report that an agreement was entered with Shri Joshi by one of the family member. He noted that it was submitted that mainly the rice w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for agricultural purposes. The ratio of law laid down in Court of Wards by Supreme Court that what is really is required to be shown is the connection with the agricultural purpose and user and not the mere possibility of the user of the land for an agricultural purpose has been explained by various courts on the facts of the case. The crux of the findings is that the land should be used for the purpose of agriculture and 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. x. Applying the above principles on the facts of the case, regarding the test whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time, it is seen that the assessee has submitted documentary evidence in the form of land revenue records, the copy of Naukarnama, the return of income and the bank statement to show that the land was used for agricultural purposes. In his statement also he explained that on the land, rice was grown in rainy season and minor millets and vegetables were grown after rainy season depending upon the moisture available in soil and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the company was required to give a certificate that it was owning agricultural land which is part of the agreement on page 207-209 of the paper book dated 9.5.2015. in this regard learned CIT(A) referred as under :- On Page No. 209 the Tehsildar in letter dated 15.03.2010 has certified as under: LAND HOLDING CERTIFICATE FOR AGRICULTURAL LAND This is to certify that M/s. Mayank Land Private Limited situated at Navi Mumbai is owning and enjoying 00-40-00 Ha of agricultural land in (Survey No) Khasara No. 20/18 in Village; Devalamphi, Tehsil (Taluka): Khandwa, Dist: East Nimad, State : Madhya Pradesh. This certificate is issued for the purpose of land registration. Place: Khandwa Date: 15.03.2010 Patwari Tehsildar 14. Learned CIT(A) also observed main objective of the purchasing company was also inclusive of engagement into agricultural activity. He observed that in this case neither the assessee nor the buyer has converted the land into non-agricultural use before or after the sale. That the land was sold in acres and not in square yards. He repeated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Shankar Dalai, it is held that if the land is used for agriculture and the produce is sufficient for self consumption, it should be treated as agricultural land. 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. These decisions have to be respectfully followed while deciding a complex issue like this. Probably while giving these decisions, Courts have the background of the farmers committing suicide and the crisis faced by the agrarian community on one hand and the rampant misuse of showing bogus agricultural income on the other hand. It cannot be denied that due to nontaxability of agricultural income there are large number of cases who without doing real agriculture inflate the agricultural income. It was in this background, the Courts have held that to decide whether the land is agricultural or not is a complex matter and laid down various criteria. The Courts have been tough with cases where there are no agricultural operations at all or the land was converted to non-agricultural use or the intention was to deal in agricultural lands. Sh. Wesavkar could satisfy th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Rs. 5,47,52,045/- as Non-Taxable Income being Profit on sale of Agricultural Land. Computation of Income, Audited Balance Sheet and Tax Audit Report. [Pg 1- 21] Assessee had purchased agricultural property at Vengaon on various dates from: Sr. No. Date Seller Survey No. 1. 17.11.1994 Lax man Wadekar Old Survey No. 57, Hissa No. 4 New Survey No. 1/4 2. 5.1.1989 Parsharam Vaidya Old Survey No. 57. HissaNo. 5 New Survey No. 1/5 3. 15.11.1994 Laxman Wadekar Old Survey No. 44, Hissa No. 4 New Survey No. 2/4 4. 30.11.1988 SudhirV Vaid Old Survey No. 44, Hissa No. 5 New Survey No. 2/5 5. 2.7.1991 Bhagwan Vaidya Old Survey No. 44, Hissa No. 9 New Survey No. 2/9 Old Survey No. 44, Hissa No. 11 New Survey No. 2/11 6. 30. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opulation of less than 10,000 (as per last census) It must be situated in an area which is beyond 8 Km from the local limits of such municipality as specified in this behalf by the Central Government in the Official Gazette 2. The said property was purchased by Assessee from a set of farmers who regularly undertook the agricultural activities on the said land. 3. Naukarnama' dated 21.04.2007 between Assessee and Mr. Dattamay L. Bhoir, (Pg. No. 249, 253 546-556) 4. As per this arrangement, the owners of agricultural land hire local resident farmers, who in turn carry out the farming activities of growing crops and other ancillary activities on the said land. After selling the resultant agricultural produce in the open market and meeting all the incidental expenditure, the residual income accrued to the farmers is then shared between the owners of the land and the farmers. 5. In the Revenue Records, as per 'Extract 7/12' (Refer Paper Book Pg. No. 314-322), the said land is recorded as Agricultural Land. 6. The Assessee has never applied for converting the land to Non-Agricultural Land. 7. Agricultural Cess (Shet Sara) paid is attached herewith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.AO erred in inferring the fact that the land was barren as per 7/12 Extract without appreciating the fact that the land has to be kept barren mandatorily for a certain period or else it looses its fertility. In the instant case rice was grown on the said land for 3 months every year during monsoon and post harvesting the land was kept barren. The stamp duty levied by the Collector of Stamps for the said land was as per the rates applicable to Non-Agricultural land The Ld.AO without applying his mind and relying purely on a presumption, inferred that the stamp duty paid on such transfer of land was as per rates levied on transfer of non-agricultural land. There was no corroborative evidence for such assumption. The Ld. AO failed to acknowledge the fact that the stamp duty was paid on rates leviable to agricultural land. Sale of land to non-agriculturist company. The Ld.AO wrongly inferred the fact that the purchaser of land was to a non-agriculturist without appreciating the fact that an agricultural land can never be sold to a non-agriculturist. The purchaser is an agriculturist and was holding agricultur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and legal submissions and documentary evidence, it is amply clear that said Land is agricultural land for the purpose of Section 2(14)(iii) of the Act. 19. CIT Vs. H. V. Mungale (1984) 145 ITR 208(Bom.) (HC) (Refer Paper Book Pg. No. 429-433), wherein it was observed as under: It is well established Hint in a given case agricultural land may or may not yield agricultural income. If there is land which was once cultivated or rut t to agricultural use hit t is now fallow or barren, it would not merely by reason of such fact cease to be agricultural land. Conversely what is potently non-agricultural land may in extraordinary circumstances he used for a purpose to which agricultural land is usually put and may, therefore, yield agricultural income. However, merely by reason of the yield, it cannot he designated as agricultural land. Again, when' the land is being assessed as agricultural land, then, normally, although it is not being put to actual agricultural use, it may be presumed that it continues to be agricultural land, unless it can be shown that it has been in fact put to some non-agricultural use, or there is some relevant circumstances to indicate that it cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shall be used for any other non-agricultural purpose except with the permission of the Collector. Permission for non-agricultural use was first time obtained by the purchaser after it purchased the land. iii. Thus, the findings recorded by the authorities below that the land was used for the purpose of agriculture are based on appreciation of evidence and application of correct principles of law. Facts of the case at hand i. The land is shown as agricultural land in revenue records; ii. There is a positive agricultural income shown in the Income-tax return; iii. There is a valid naukarnama executed which proves that agricultural activities were carried on the subject land, iv. The purchaser is an agriculturist company and was holding agricultural land prior to purchase of subject land. v. As per the latest 7/12 extract, the subject land is still an agricultural land that means even after a span of more than 4 years, the character of the land has not changed. Comparison and conclusion On comparing the facts of the case law and our case, it is evident that our case is more stronger as there is a positive agricultural income as well as a valid documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning on the determination of the question arc as follows : a. whether, the land was classified in the revenue record as agricultural and whether it was subject to the payment of land revenue, but this factor alone will not be conclusive] b. whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time; c. whether such user of the land was for a long period or whether it was of a temporary character or by way of stop-gap arrangement; d. 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; e. whether the permission under section 65 of the Bombay Land Revenue Code, was obtained for the non-agricultural use of the lands: if so, when and by whom; whether such permission was in respect of the whole or a portion of the land; if the permission was in respect of a portion of the land and if it was obtained in past, what was the nature of the user of the said portion of the land on the material date; f. whether the land, on the relevant date, had ceased to be put to the agricultural use: if so, whether, it was put to an altern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd was located on the outskirts of the village but it was not situate in the municipal limit. The land must, therefore, he taken as having been situate in a rural area and it continued to have an agricultural bias right up to the date of its sale. Further, there was no evidence or material on record to indicate that the price offered for the land by the society, even proceeding on the basis that the intended user of his part was non-agricultural, would not have been offered fry an agriculture who wanted to purchase the land for purely agricultural user. There being no evidence on record as regard the nature of the soil, its fertility, its suitability and adaptability for raising cash crops, the irrigation facility and such or similar factors which had a great bearing on the valuation of an agricultural land, it would be hazardous to come to the conclusion that the price offered was such that no agriculturist would have paid the same if he wanted to purchase the land for purely agricultural purposes. 3. Accordingly, the land was an agricultural land and the surplus realised on a sale thereof was not liable to be assessed to capital gains tax. Facts of the case at hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon. Gujarat High Court, the subject land cannot be considered as a capital asset for capital gains tax liability. 23. Shankar Dalai vs. CIT (2017) 80 taxmann.com 41/247 Taxman 170 (Bom.)(HC) (Pg. No. 491-501) Facts are similar. Decision is squarely applicable. II The agricultural land is not a capital asset as it does not fall either in 2(14)(iiia) or (iiib) 1. It is submitted that the impugned land falls under the jurisdiction of Gram Panchayat of Vengaon. The Sarpanch of Group Gram Panchayat, Vengaon has issued a certificate dated 30.07.2010 (Refer Paper Book Pg. No. 323 557-558), whereby it has been categorically noted that land is under jurisdiction of Gram Panchayat and population per census 2011 is 2700. As per the Ministry of Home Affairs, Government of India, the census of the year 2011 is provisional in nature, yet to be finalized and published. Therefore, according to the applicable last preceding census , being the year 2001, the population of Vengaon was 2,590. (Pg.No. 324) Also, the Road Development Map 2001-2021 of Karjat Taluka - the village of Vengaon is depicted as an area having a population of less than 10,000 according to census of 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad Municipality. Since Rajendra Nagar Municipality is not admittedly notified by the Central Government, the agricultural land in question cannot he treated as capital asset by taking the distance from the limits of Hyderabad Municipality. By respectfully following decisions of the Co-ordinate Bench cited supra, we hold that the land in question cannot be treated as capital asset within the meaning of section 2(14)( iii)(b) of the Income-tax Act. Accordingly, Orders of the lower authorities are set aside. III. Order passed by CIT(A) is based on the facts and considering the statements on oath of the assessee. (CIT(A) Pg. 34-36 Para 10) Department has not contradicted the facts recorded by the CIT(A). In view of the above submissions, it is prayed that appeal of the department may be dismissed. 18. Upon careful consideration I note that the case of the Assessing Officer in this case is that though the land has been classified as agricultural land as per the revenue record but there is no proof of payment of land revenue. Further the Assessing Officer observed that there is no mention of crop on land as mentioned in 7/12 extracts. Further the Assessing Officer observed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1011 Document No. 1 -2/5 0 0.1 0.1 Ra. Pad 8-9/15.4 2 -2/9 0.05 0.65 0.7 Ra. Pad 10-11/15.4 3 -2/10 0.13 1.00 1.13 Ra. Pad 13-14/15.4 4 -5/3 1.10 3.22 4.32 Ra. Pad 16-17/15.4 5 -2/11 0.12 1.27 1.39 Ra. Pad 12-13/15.4 6 -16/1 0.03 0.06 0.09 Bhat 18-19/15.4 7 -2/4 0.11 1.29 1.4 Ra, Pad 5-6/15.4 8 -1/5 0.09 0.19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one with the help of labour and subsequently by leasing the land. Moreover, the record itself mentioned Bhat (Rice) as acknowledgment of agricultural activity done. As regards the Assessing Officer s observation that the assessee has never shown any agricultural income it is noted that the learned CIT(A) referred to the return of income which was also reflected in the bank account wherein agricultural income was offered and the said income has been accepted by the Department. Moreover, when the land record itself mentioned about the agriculture produce, adverse inference in this regard is not justified. 23. As regards the adverse inference in Naukarnama that the names were not given learned CIT(A) has given finding that the said aspect noted was factually wrong. That the names are duly mentioned and the said persons have accepted that they were doing labour and agricultural activities. As regards expenses learned CIT(A) noted that as per Clause-11 of the Agreement, expenses were to be incurred by the labourer. Hence there is no question of assessee accounting for the expenses. 24. Further learned CIT(A) has referred to the portion of sale deed from which he has rebutted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivity was done also stands rebutted from the land revenue records itself which shows that the crops were produced. Once it is amply clear that the land is agricultural land, land revenue is being paid, crops are being cultivated, no permission for non-agriculture use is there, adverse inference cannot be drawn if the produce is not commensurate with the area of land. This is duly approved by Hon'ble Bombay High Court decisions referred herein below. As reiterated by Hon'ble Bombay High Court in these decisions that lack of commensurate generation of surplus cannot be used as yardstick for the land to be non-agricultural when the land was not used for nonagricultural purposes. 28. The case laws from Hon'ble Jurisdictional High Court in the case of CIT Vs. H. V. Mungale (1984) 145 ITR 208(Bom.)(HC) is duly applicable on the facts of the present case supports the case of the assessee. The exposition from Hon'ble High Court read as under : It is well established Hint in a given case agricultural land may or may not yield agricultural income. If there is land which was once cultivated or rut t to agricultural use hit t is now fallow or barren, it would not merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cultural income was just enough to maintain the land and there was no actual surplus. Hence, no agricultural income was shown by the assessee. Held The Hon. Court held that: i. If the agricultural operation does result into generation of surplus that cannot be a ground to say that the land was not used for the agricultural purpose. ii. It is not disputed that the land shown in revenue records to be used for agricultural purposes and no permission was ever obtained for nonagricultural use. Relevant section of Land Revenue Code prescribes that no land used for agriculture shall be used for any non agricultural purpose and no land assessed for one non-agricultural purpose shall be used for any other non-agricultural purpose except with the permission of the Collector. Permission for non-agricultural use was first time obtained by the purchaser after it purchased the land. iii. Thus, the findings recorded by the authorities below that the land was used for the purpose of agriculture are based on appreciation of evidence and application of correct principles of law. 30. In my considered opinion ratio from aforementioned Hon'ble Bombay High Court decisions are squ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said receipt as non-taxable claiming that the land sold by him was an agricultural land and did not fall within the ambit of capital Asset as defined u/s 2(14)(iii) of the Act and therefore, not liable to capital gain tax. However, the Assessing Officer did not agree with the above contention of the assessee and held that the land sold by the assessee did not quality to be categorized as agricultural land . He, therefore, after giving benefit of cost of acquisition of Rs.20,50,875/-, subjected to amount of Rs.5,33,16,625/- to long-term capital gain tax. 5. Being aggrieved by the said order of the Assessing Officer, the assessee preferred appeal before the CIT(A). The ld. CIT(A), vide order dated 15.05.2007, after considering the submissions of the assessee, accepted the contention of the assessee that the land sold by the assessee was an agricultural land and therefore, was not liable to be treated as a capital asset and could not be subjected to capital gains tax. 6. Being aggrieved by the above order of the CIT(A), the Revenue preferred appeal before the Tribunal which was listed before the Mumbai A Bench of the Tribunal. Pin Before the Tribunal, the ld. AR of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. He further held that only a small portion of land, where as per the Revenue records, paddy was grown was to be treated as agricultural land and accordingly, directed the Revenue to give the assessee the benefit of agricultural land not falling in the definition of capital asset to the extent of 0.9 acres only out of total land sold of 11.07 acres. The main points, upon which the ld. Judicial Member based its findings, can be summarized as under: x x x some text is missing here [sic] x x x did not support the contention of the assessee rather, corroborates physical verification report made by inspector of income tax, wherein, the land, in question, has been shown as barren land having no irrigation facilities. (g) That the contention of the ld. AR of the assessee that just because land is shown as barren, it cannot be said that agricultural land had become non-agricultural in nature was misconceived. (h) That even perusal of the copies of the sale deed qua the land, in question, executed by the assessee i.e. sale deed dated 02.04.2010 and 25.10.2010 do not contain the fact if the land, in question, was an agricultural land and cultivable, nor any source of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as grown. (d) That the ld. CIT(A) has noted that vegetables and other minor millets grown on the land were not mentioned in the revenue record in Raigad District. That the DDIT/Inspector had mis-understood the word Ra pad as barren land, whereas, the land records have used the word Lagvadi Yogya Shetra for the land which is cultivable and Porkhrab - Lagvadi Ayogya for non-cultivable land. As per 7/12 extract, the land measuring 9.08 hectares was cultivable land. That the Id. CIT(A) noted that Ra pad does not mean that the land was barren but it means cultivable upon which cultivation was not done. (e) That the ld. CIT(A) has referred to be statement of Shri Ashok Wesavkar in which he explained that the agricultural activities were done with the help of labour and subsequently the land was leased out. That the agricultural record itself mentioned Bhat (Rice) as acknowledgement of agricultural activity done. (f) That the agricultural income offered by the assessee has been accepted by the department. (g) That the CIT(A) has noted that as per the Naukarnama the names of the persons were mentioned and the said persons have accepted that they were doing labour an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s agricultural land, land revenue is being paid, crops are being cultivated, no permission for non-agriculture use is there, adverse inference cannot be drawn if the produce is not commensurate with the area of land. This is duly approved by Hon'ble Bombay High Court decisions referred herein below. As reiterated by Hon'ble Bombay High Court in these decisions that lack of commensurate generation of surplus cannot be used as yardstick for the land to be non-agricultural when the land was not used for non-agricultural purposes. 10. In the written submissions, the ld. DR has mainly relied upon the decision of the Hon ble Supreme Court in the case of Smt. Sarifabibi Mohammed Ibrahim vs. CIT reported in (1993) 204 ITR 631, wherein, the Hon ble Supreme Court has laid down the following 13 tests which are required to be considered to determine as to whether the land in question is agricultural land or not : 1) Whether the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue? 2) Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time? 3) Whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble Supreme Court to qualify as agricultural land . Therefore, the same is required to be treated as capital asset liable to be subjected to capital gains tax. 11. The Id. AR, on the other hand, has replied to each of the contentions of the ld. DR by way of a chart, wherein, not only the contentions of the ld. DR but the counter-comments of the ld. AR/assessee have been mentioned. Therefore, it will be appropriate to reproduced comments and counter-comments as under: Allegation of Ld DR Reply of Assessee i) The assessee purchased the land ranging from 1988 to 2007, but no agricultural income was reflected in the return of income except for AY| 2010-11. It was explained by the Assessee in| his statement on oath before CIT(A) | that the assessee belongs to the family of agriculturalists. The assessee has purchased a land for cultivation only. However, the agricultural produce was utilized for self- consumption and not for sale. Thereafter, the assessee had given his land for tilling to various contract farmers by executing a nokarnama. As per the condition of nokarnama, the contract farmers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depended on monsoon for purpose of agriculture activity. Hence, absence of irrigation doesn t mean that Agricultural activity was not carried out. iv) The nokarnama submitted by the assessee is vague and ambiguous. Further, the same does not even bear a date. It does not contain any recital of Shri Laxman Bhoir that he ever cultivated the land, nor does it mention as from which crop season he has started cultivating the land and what were the terms and conditions of making such cultivation. The absence of these significant Aspects is inexplicable. All the alleged Proceeds from the activity Aggregating Rs. 60,000/- for the three years was given by Shri Bhoir purportedly in one go, that is on 03.2010, just days before the agreement with the purchaser. This is highly unusual, unlikely, far-fetched and against the principles of probability. Further, there is no witness to the document. Hence, it is manifest beyond an iota of doubt that the nokarnama is __ self-serving afterthought created post facto. The Ld. DR. had stated that the nokarnama were vague ambiguous and undated documents which does not prove that the land was cultivated i) Nokarna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. I have heard the rival contentions and gone through the record. Before proceeding further, it will be relevant to reproduce herein the relevant provisions of section 2(14)(iii) of the Act, which read as under: (14) capital asset means - (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, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand ; or (b) in any area within the distance, measured aerially,- (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 1.39 Ra. Pad 12-13/15.4 6 -16/1 0.03 0.06 0.09 Bhat 18-19/15.4 7 -2/4 0.11 1.29 1.4 Ra. Pad 5-6/15.4 8 -1/5 0.09 0.19 0.28 Ra. Pad 3-4/15.4 9 -16/3 0.01 0.09 0.10 Bhat 20-21/15.4 10 -1/4 0.84 0.56 1.4 Ra. Pad 1-2/15.4 11 -16/4/B 0.06 0.42 0.48 Bhat 24-25/15.4 12 -18/1 0.08 0.23 0.31 Bhat 22-23/15.4 2.62 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason, whatever it may be, if an assessee cannot cultivate the land or incapacitated to do so, that will not change the nature of the land from agricultural to non-agricultural especially when there is no change of user of the land. 8) The land is not situated in a developed area. The physical characteristics surrender situations and use of the land in adjoining area as held by the CIT(A), indicate that the land was an agricultural land. 9) The land has not been developed by plotting an providing roads and other facilities. 10) There was no previous sale of land for non-agricultural use. 11) There was no permission obtained u/s 63 of Bombay Tenancy and Agricultural Land Act for intended sale in favour of a non-agriculturist. The land has not been sold on yardage or on acreage basis. 12) The price of the land sold does not show that it was shown at a high price or that price was not proportionate to the price of the agricultural land in the area. 13) The land has been specifically mentioned in the revenue record as cultivable land and there is no mention that the land is a barren land. The vacant or fallow land does not mean that it is a barren lan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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