ITO, WARD-9(4), HYD, HYDERABAD vs. KRISHNA CHIGULLAPALLY, HYD, HYDERABAD

It transpires at the outset that the Revenue’s identical substantive grounds in all the five instant appeals read as under: “1. (i)CTT(A) erred in not appreciating the following facts which indicate that the impugned land was not an Agricultural Land: a) The Land is sold to a Non-Agriculturist for Non-Agricultural purposes. b) The Land is said at a price comparable to the price fetched by building sites. It may be noted that the proposed investment by the Real Estate Company is approximately Rs.900 Crores for 86 Acres which works out to investment of around Rs.10 crores per Acre. c) The price is such that no bonafide Agriculturist would purchase the same for genuine Agricultural Operations. d) The land is situated in an Area which is in proximity to the Hyderabad International Airport. (ii) CIT(A) erred by ignoring the fact that the aforesaid factors outweigh other circumstances such as recording in land records as agricultural land, payment of land revenue, disclosing agricultural income in returns etc., as decided by Hon'ble Chennai ITAT in the case of ITO (Intl.Tax), Chennai vs. Aboobucker (67 Taxmann.com 114- 2016)”.

Relevant facts pertaining to the foregoing sole issue of assessment of long term capital gains in all these five cases does not appear to involve a complicated backdrop. Suffice to say, all these assessees had been co-owning/co-possessing their land(s) situated in Thummalur Village, Maheswaram Mandal, R.R.District and adjoining Kothur Village. They had entered into the Joint Development Agreement(s) ‘JDAs’ in issue dt.27-09-2007 followed by the respective sale deed(s) as well. The Assessing Officer inter alia took note of the foregoing JDA and sought to treat the same as transfer(s) u/s.2(47)(v) of the Act. We note from the lead assessment year appeal for AY.2008-09 that he inter alia considered

The CIT(A) has reversed the Assessing Officer’s action as under:

Learned departmental representative vehemently contended during the course of hearing that the CIT(A) has erred in law and on facts and in deleting the impugned long term capital gain’s identical addition in these five assessees’ hands. He sought to buttress the relevant factual backdrop inter alia that these assessees’ lands are not agricultural in nature; they fall within the municipal limits of the Hyderabad Development Authority area, all taxpayers had executed a ‘JDA’ and sale deed(s) with the developer, they had not been carrying out any agricultural activity and the impugned long term capital gains addition deserves to be restored. Dr.Rajendra Kumar, further stated that it is the assessees only who had applied for all the necessary municipal permission qua land’s development as well as the ancillary formalities even well after the ‘JDA’ and sale deed(s) and the Assessing Officer has rightly assessed them for having derived long term capital gains.

Learned authorised representative on the other hand invited our attention to the assessee’s stand adopted through out, right from scrutiny till the CIT(A)’s order inter alia highlighting the fact that their lands concerned are agricultural and not capital assets giving rise to the impugned long term capital gains. They are purely agricultural lands. And that the vendee(s) concerned had undertaken all the risk and responsibility to develop the same dt.

We have given our thoughtful consideration to Revenue’s foregoing contentions. We find no reason to sustain either parties submissions in entirety. We make it clear first of all that there is no clarity on the basic clinching issue as to whether the lands concerned forming subject matter of the impugned transfer herein formed a capital asset u/s.2(14)(iii)(a) and (b) of the Act or not. Although both the learned representatives have argued sufficiently on all the foregoing issues, we find that the Assessing Officer as well as the CIT(A) nowhere express any opinion on the application of the foregoing statutory provision defining a capital asset which could be held as giving rise to the impugned capital gains. Dr.Rajendra Kumar, at this stage sought to invite our attention to the fact that these assessees had in fact applied for permission from the Hyderabad Municipal Authority ‘HMDA’ very well after the impugned transfer by way of the JDA as well as the sale deed (supra). Mr.Rao nowhere disputed application of Section 2(47)(v) on the other hand. Faced with this situation, we deem it appropriate to restore the instant clinching issue back to the Assessing Officer to decide the applicability of Section 2(14) of the Act :- 32 -: to 909/Hyd/2016 qua the assessees’ lands sold during the relevant previous year. It is made clear that the Assessing Officer shall go by the corresponding municipal limits prescribed by the official gazette notification as applicable on the date of transfer only and not thereafter. Needful shall be done within three effective opportunities of hearing. It is further made abundantly clear that all these assessees shall be at liberty to raise as all factual/legal submissions as are admissible to them under the law.

All these Revenue’s five appeals are treated as allowed for statistical purposes in foregoing terms. A copy of this common order be placed in the respective case files.