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TMI Blog2018 (5) TMI 2180X X X X Extracts X X X X X X X X Extracts X X X X ..... lier 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. Further in the case of Hindustan Industrial Resources Ltd. [ 2009 (1) TMI 1 - HIGH COURT DELHI] 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 [ 1984 (11) TMI 28 - DELHI HIGH COURT] 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 infirmity in the order of the ld. CIT (A) tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 capital gain has arisen on account of sale of agricultural land, which is not an asset within the meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onse 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 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 lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 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 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 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Learned Assessing Officer, however held that; Firstly, land was purchased along with old constructed houses, and therefore, it was a sale of land along with sale of house property appurtenant to it; Secondly, land has never been used for agricultural purpose which is evident from the fact that in the P L account no agricultural income was declared by the assessee in the current year or in the preceding Assessment Years; Thirdly, the intended purchase of land as per the MOU of the assessee company was also not used for the agricultural purposes; and Lastly, he strongly relied upon the decision of Hon'ble Supreme Court in the case of CWT vs. Officer-In-Charge (Court of Wards), Paigah, (1976) 105 ITR 133 (SC) and decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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:- The first doubt expressed by Ld. A.O. was that the Ld. A.O. was not sure that whether it was land or house property. Our respectful submission in this regard is that we fail to understand that on what basis, Ld. A.O. confused misdirected himself in this regard. From the perusal of the documents discussed herein above it would be clear that the impugned land consisted only a negligible portion of an old structure which could not be used in any manner and which constituted not more than 0.03% area of the total area and therefore branding the entire land as house property (consisting of 99.97% area) was highly unjustified on the part of Ld. A.O. and may please be held so. We had also requested Ld. A.O. to make a requisite suitable verification for its satisfaction but unfor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 favour, on facts as well as on law and therefore the addition made on Ld. A.O. is contrary to law and facts and the same may kindly be deleted. 7. Apart from above, a letter from Chartered Accountant was also filed to certify that land sold out at village Mandrem, Panrem Taluka Goa had a population of less than 10,000 and was beyond 8 kms from the local limits of Mapusa Municipal area. In fact, the property was situated around 25 kms far from the Municipal area. A copy of map of Goa showing municipal boundaries of the village Mandrem and distance of Municipal village of Mapusa; and secondly, copy of report of Zila Panchayat Election 2005 in Goa State which shows Mapusa has village constituency was filed. Apart from that, it was again reiterated with the help of documents that as per the Coas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how 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. The land was not situated within 8 kilometers of the municipal limits of a city. 9. Thereafter, Ld. CIT (A) referred and relied upon the following judgments: (i) CIT vs. Minguel Chandra Pais, (2006) 282 ITR 0618 (Bom.) (ii) CIT vs. Smt. Debbi Alemao, (2011) 331 ITR 0059 (Bom.) (iii) Hindustan Resources Ltd. vs. Asst. CIT, (2011) 335 ITR 0077 (Del.) After drawing similarity of facts from the aforesaid cases, he held that case of the assessee is similar and finally held that sale proceeds of the land are treated as income from the sale of agricultural land and therefore exempt from capital gain after holding as under:- The case of the appellant is similar. The land is shown as agricultural land in the balance sheet of the appellant company. The purchase deed and the sale deed show the land as agricultural land. The Form No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. 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 for permission under section 63 of the Bombay Tenancy and Agricultural Lands Act, 1948. The permission was granted on 22-4-1969. Thereafter a number of sale deeds were executed in respect of the said land between 9-5-1969 and 30-5-1969. The income-tax authorities sought to levy capital gains tax on the consideration received by the assessees treating the said land as non-agricultural land. The assessees' contested the same contending that the land sold was an agricultural land. The ITO rejected the assessees' claim. On appeal, the AAC upheld the order of the ITO. On second appeal, Tribunal held that the said extent of land was agricultural land and, therefore, no capital gains tax was leviable thereon. On reference, the High Court held that the said land was non-agricultural land. Held that: Whether a land is an agricultural land or not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder 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 assessees had no intention to bring it under cultivation at any time after 1965-66-certainly not after they entered into the agreement to sell the same to a housing co-operative society. Though a formal permission under section 65 of the land revenue code was not obtained by the assessee, yet their intention was clear from the fact of their application for permission to sell it for a non-agricultural purpose under section 63. Therefore, the High Court was right in holding that the said land was not an agricultural land at the time of its sale and that the income arising from its sale was not exempt from the capital gains tax. 11. Thus, he held that now in the light of the aforesaid judgment of the Hon'ble Apex Court, the observations and the findings of the learned Assessing Officer should be upheld. 12. On the other hand, learned counsel for the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 agricultural purposes was granted and thereafter, the sale deeds were executed. He further submitted that in subsequent decisions, this judgment has been well taken note of various High Courts and now there are decisions of Hon'ble Jurisdictional High Court as well as decision of Hon'ble Bombay High Court at Goa, wherein exactly on similar facts the case has been decided in favour of the assessee. The list of the judgments relied upon by the learned counsel in this regard were as under:- (i) Hindustan Industrial Resources Ltd. vs. ACIT, 335 ITR 0077, (Del.) (ii) DLF United Ltd. vs. CIT, 158 ITR 0342 (Del.) (iii) CIT vs. Smt. Debbie Alema, 331 ITR 0059 (Bom.) (iv) DLF United Ltd. vs. CIT, 161 ITR 0709 (Del.) (v) Sercon Pvt. Ltd. vs. CIT, 136 ITR 0881 (Guj.) (vi) DLF United Ltd. vs. CIT, 161 ITR 0714 (Del.) (vii) Haresh v. Milani vs. JCIT, 114 ITD 0428 (ITAT Pune) (viii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 purchased with the said intention only. This is further strengthened by the fact that it was sold to a prospective hotelier, therefore, clearly the intention was to use it for non commercial purposes. In support he has strongly relied upon the decision as discussed above. 16. However, the aforesaid observations of the learned Assessing Officer stands repudiated on the basis of facts and material on record that; firstly, land revenue shows that it was an agricultural land and some agricultural operation were carried out and simply because assessee had not shown agricultural income that does not mean no agricultural activity was ever carried out; secondly, even at the time of sale the agricultural land, the land continued to be agricultural land and no change of land used was ever sought at the time of sale and now it has also been brought on record that even after the sale also the land remained a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be used for any other non-agricultural purpose except with the permission of the Collector. Sec. 32 of the Goa, Daman and Diu Land Revenue Code prescribes the procedure for conversion of use of land from one purpose to another including conversion from agricultural purpose to non-agricultural purpose. The permission for non-agricultural use was obtained for the first time by the Varca Holiday Beach Resort (P) Ltd., the purchaser after it purchased the land. Thus, the finding recorded by the two authorities below that the land was used for the purpose of agricultural is based on appreciation of evidence and by application of correct principles of law. The Tribunal has relied upon two unreported decisions of this Court in CIT vs. Minguel Chandra Pais (Tax Appeal No. 1 of 2002) and CIT vs. Smt. Maria Leila Tovar Furtadoe Pais (Tax Appeal No. 2 of 2002) [reported at (2006) 200 CTR (Bom) 152--Ed.] which in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement 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 withdrawal of cash. The said amount of Rs. 20 lac have sought to be treated as exempt from capital gains on the grounds that pertained to agricultural land only. However, the ld. CIT (A) has rejected the assessee's contention after observing and holding as under:- However the sale consideration received by the appellant company includes a sum of Rs. 10,00,000/- received as compromise agreement which consists of Rs. 7,61,000/- as compensation received upon termination of the agreement for sale dated 02.08.1990 and Rs. 2,39,000/- towards agreed interest and litigation cost. This Rs. 10,00,000/- received by the appellant company vide cheque No. 252853 dated 12.11.2005 from M/s. Maha Seer Hotels Resorts Pvt. Ltd. vide agreement dated 14.11.2005 for compromise settlement for withdrawal of case and another Rs. 10,00,000/- vide cheque No. 252854 dated 12.11.2005 for assignment deals cannot be considered to be re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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