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Assessee by Shri Suresh K. Kabra – CA Revenue by Ms. Anupama Singla – Sr.DR Date of hearing 02.09.2021 Date of pronouncement 07.09.2021 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: to 306/SRT/2018 For A.Y. 2014-15 1. These three appeals by three assessee’s are directed against the common order of ld. Commissioner of Income tax (Appeals)-3, Surat dated 06.03.2018 for the assessment year (AY) 2014-15. In all appeals the facts are common, the assessee’s in all cases has raised identical grounds of appeal
, therefore, all appeals are clubbed, heard and decided by the consolidated in the common order. For appreciation of facts is treated as lead case.
2. The assessee has raised grounds of appeal as under: “01. The Ld CIT-A was not just and proper on the facts of the case and in law in confirming the action of the Ld Assessing officer in considering the agriculture land as not being covered by clause (d)(i) of section 56(2) and in turn considering the difference in the stamp duty valuation and transaction value as taxable u/s 56(vii) (b) of the Act. 02.1 The appellant prays that 02.1 The Ld Assessing Officer may be kindly directed to consider the agriculture land as covered under the clause (d)(i) of the explanation to clause (vii) u/s 56(2) and accordingly delete the addition made of Rs 18,84,845/-. 02.2 Personal hearing may be granted. 02.3 Any other relief that your honours may deem it fit may be granted.
03. The appellant craves leave to amend, alter or delete any or all of the above grounds of appeals and to add any new or additional ground of Appeal at the time of hearing.”
3. Brief facts of the case are that the assessee filed his Return of Income for the A.Y. 2014-15 by declaring income of Rs.5,79,520/-. The case was selected for scrutiny. During the assessment, on verification of certain details, the ld.Assessing Officer (AO) noted that assessee along with two other co-owners have purchased immovable properties out of RS No.59, Tal Palsana, Dist. Surat dated 28.10.2013 for Rs.1.20 crore. The assessee to 306/SRT/2018 For A.Y. 2014-15 is the owner of 1/3rd share, thus, the assessee’s share comes to Rs.39.99 lakhs. The assessee was asked to furnish the copy of sale deed. The assessee filed copy of sale deed along with his submission. On perusal of sale deed, the ld.AO noted that stamp valuation authority (SVA) valued the market value of said land at Rs.1.76 crore and charged stamp duty of Rs.8.65 lakhs. On the basis of valuation by SVA, the share of contribution of assessee comes to Rs.58.84 lakhs, however, the assessee claimed to have made payment of share of Rs.39.99 lakhs. On the basis of aforesaid difference, the ld.AO issued show cause notice as to why difference of Rs.18.84 lakhs [Rs.58,84 lakhs – Rs.39.99 lakhs] should not be added to the income the assessee under section 56(2)(vii)(b)(ii) of the Act. The ld.AO reproduced the contents of show cause notice in para 4.2 of the assessment order. In response to show cause notice, the assessee filed his reply dated 27.10.2016. In the reply, the assessee stated that during the relevant period the assessee purchased rural agricultural land at block no.59, village Chaltan, District Surat. The assessee contended that addition under section 56(2)(vii)(b)(ii) of the Act cannot be made against the assessee as the assessee has purchased agricultural land, which is situated beyond 8 km from local municipal limit and that, the agricultural land, is not a capital asset. It was further explained that in section 596(2)(vii)(b), reference is made to immovable property and as per Explanation (d), to 306/SRT/2018 For A.Y. 2014-15 property “ means capital asset” specified in item no [i to ix] of the said Explanation. The definition of capital asset is prescribed under section 2(14) of the Act and as per said definition, rural agricultural land situated beyond 8 km from local municipality unit is not regarded as capital asset. Consequently, the provision of section 56(2)(vii)(b) are not applicable to the property which is not a ‘capital asset’. The assessee also furnished the certificate of Deputy Executive Engineer (R & B) Panchayat Sub-Division, Palsana, certifying that agricultural land purchased by assessee is situated beyond 8 km of local limit of Surat Municipal Corporation (SMC). On the basis of aforesaid submission, the assessee claimed that Jantri rate cannot be treated as basis for making addition to the income of the assessee. The assessee also contended some other facts that agreement to purchase the land was entered in 2010-11 and part consideration was paid by co-owner on 25.10.2010 which is reflected in the registered sale deed. The contention of assessee/explanation furnished by the assessee was not accepted by the ld.AO. The ld.AO held that a plain reading of section 56(2)(vii)(b)(ii) made it clear that Sub-section and clause are applicable in respect of transfer of “any immovable property” and not for capital asset only. It was further held that intention of legislature behind insertion of sub-clause d(ii) of clause 7 of 56(2) is to curb the practise of ‘on money’ in relation to transaction of immovable property in the hand of purchaser. to 306/SRT/2018 For A.Y. 2014-15 Thus, from amended provision of clause (vii) of sub-section( 2) of section 56, where any immovable property is received for a consideration which less than the stamp value of property by an amount exceeding Rs.50,000/- , the stamp duty value of said property has exceeded such consideration is chargeable to tax in the hands of individual or HUF as income from other sources. The other contention of the assessee that the assessee entered into agreement in the year 2010-11 in part consideration was paid, the ld.AO held that registered sale deed was executed on 25.02.2010 and all other payments are made during the relevant period under consideration. The ld.AO on the basis of aforesaid submission, all the difference of the Rs.18.84 lakhs under the head income from other sources.
4. Aggrieved by the addition in the assessment order, the assessee filed appeal before the ld.CIT(A). Before the ld.CIT(A), the assessee filed detailed written submissions as filed before the ld.AO. The ld.CIT(A) recorded the submission of assessee in para 6 of his order. The ld.CIT(A) after considering the submission of assessee held that there is no dispute regarding the status of land being an agricultural land situated beyond 8km from municipal limits. However, the other contention of assessee that land purchased by the assessee is agricultural land falls within the exemption of capital asset under section 2(14) and section 56(2)(vii)(b) is not applicable, was not accepted by holding that he has already taken a contrary view in to 306/SRT/2018 For A.Y. 2014-15 appeal No.CAS/3/334/16-17 dated 17.12.2017. The ld.CIT(A) further held that the submission of assessee is misplaced. The explanation appears in clause C of section 56(2)(vii)(b)(ii) and it starts for the purpose of this clause, which makes it clear that the explanation is for clause-(c) and not for clause-(b). the relevant part of the order passed by Ld. CIT(A) is extracted below: “7.6 The reliance of the AR on explanation reproduced above is misplaced. The explanation appears after clause(c) of the section and it starts ‘For the purposes of this clause.' Which makes it clear that the explanation is for clause (c) and not for clause (b).This is further clear from the reading of the explanation itself. The explanation doesn't pertain to phrase " immovable property " as used in 56(2)(vii)(b) but to the word 'property' used in clause (c) of sec.56(2)(vii) in the phrase " any property, other than immovable property ". The AR has tried to apply this explanation to the word property which is part of immovable property in clause (b)which is incorrect. It can be seen that S.56(2)(vii)(b) pertains to immovable property which on transfer incurs stamp duty, hence, the word property mentioned here cannot possibly include shares & securities, jewellery etc. as mentioned in the explanation. The fact that these are included within the meaning of 'property' clearly indicates that the said explanation is in connection with clause (c) of sec.56(2)(vii). Moreover, if the meaning given in explanation is imported to the word property in clause (b), then we will have absurd meaning like immovable shares n securities or immovable jewelery. An interpretation that gives absurd meanings should be discarded. Hence, the interpretation of phrase 'immovable property ' canvassed by the AR is rejected. This ground of appeal is rejected.”
5. On the basis of aforesaid observations, the Ld. CIT(A) upheld the order of A.O. Further aggrieved, the assessee has filed present appeal before this Tribunal. to 306/SRT/2018 For A.Y. 2014-15
6. We have heard the submission of learned authorised representative (ld.AR ) for the assessee and the learned Senior departmental representative (Sr- DR) for the Revenue and have gone through orders of authorities below. The ld.AR of the assessee submits that the immovable property/land purchased by the assessee is agricultural land and is not ‘capital asset ‘as specified item no. (i) to (ix) of Explanation-(d) to section 56(2)(vii)(b). The definition of ‘capital asset’ is prescribed under section 2(14) of the Income Tax Act. As per the said section, the rural agricultural land situated beyond 8 km from local municipality limits is not regarded as ‘capital asset’ and consequently the provision of section 56(2)(vii)(b) are not applicable to the property which is not a ‘capital asset’. The ld.AR for the assessee submits that to substantiate the fact that the properties beyond the 8 km from the local limit, the assessee furnished the certificate of Deputy Executive Engineer (R & B) Panchayat to Sub- Division Palsana. Lower Authority has not disputed this fact. The ld.AR for the assessee further submits that the ld.CIT(A) accepted the fact that the land purchased by the assessee an agricultural land. However, the ld.CIT(A) given his own conclusion that the meaning of property mentioned in the explanation attached with section 56(2)(vii)(b) is with regard to clause-(c) and not for clause-(b). to 306/SRT/2018 For A.Y. 2014-15
7. To support his submission, the ld.AR of the assessee relied upon the decision Jaipur Tribunal in Y.M. Vs. DCIT [2021] 125 taxmann.com 273 (Jaipur Trib), wherein the coordinate Bench held that agricultural land purchased by the assessee would not be governed by the provision of section 56(2)(vii)(b). The ld.AR for the assessee submits that similar view was taken by Pune Tribunal in Mubarak Gafur Korabu Vs ITO [2020] 117 taxmann.com 828 (Pune Trib). Further, the Jaipur Tribunal in CIT vs. Ashok Agarwal (HUF) & ANR [2020] 59 CCH 0258 (Jaipur), while considering the scope of clause-(vii) of section 56(2) held that clause- (vii)would not be applicable on transaction of plot of land being a part of stock in trade. The ld AR for the assessee prayed for allowing the appeal in favour of the assessee.
8. On our directions, the ld.AR of the assessee submits that he undertakes to furnish / file the copy of conveyance deed / sale deed executed in favour of assessee.
9. On the other hand, the ld. Sr -DR for the Revenue supported the order of ld.AO. The ld. Sr-DR for the Revenue submits that ld.CIT(A) while considering the similar submission of assessee has elaborately discussed the contention of assessee and held that land is not exempted from the applicability of section 56(2)(vii)(b)(b). to 306/SRT/2018 For A.Y. 2014-15
10. We have considered the rival submission of both the parties and have gone through the orders of authorities below. We find that the ld.AO made addition under section 56(2)(vii)(b) by taking view that a plain reading of section 56(2)(vii)(b)(ii) made it clear that Sub-section and clause are applicable in respect of transfer of “any immovable property” and not for capital asset only. It was further held that intention of legislature behind insertion of sub-clause d(ii) of clause (vii) of 56(2) is to curb the practise of ‘on money’ in relation to transaction of immovable property in the hand of purchaser. Thus, from amended provision of clause 7 of sub-section(ii) of section 56 where any immovable property is received for a consideration which less than the stamp value of property by an amount exceeding Rs.50,000/-, the stamp duty value of said property has exceeded such consideration is chargeable to tax in the hands of individual or HUF as income from other sources. The ld.AO on the basis of aforesaid submission, all the difference of the Rs.18.84 lakhs under the head income from other sources.
11. The ld.CIT(A) upheld the order of ld.AO by holding that there is no dispute regarding the status of land being an agricultural land situated beyond 8km from municipality limits. However, the other contention of assessee that land purchased by the assessee is agricultural land falls within the exemption of capital asset under section 2(14) and section 56(2)(vii)(b) is to 306/SRT/2018 For A.Y. 2014-15 not applicable, was not accepted by holding that he has already taken a contrary view in appeal no.CAS/3/334/16-17 dated 17.12.2017. The ld.CIT(A) further held that the submission of assessee is misplaced. The explanation appears in clause -c of section 56(2)(vii)(b)(ii) and it starts for the purpose of this clause, which makes it clear that the explanation is for clause (c) and not for clause-(b). It is further held that from reading of explanation difference, the explanation does not pertains to phrase “immovable property” as used in 56(2)(vii)(b), but to the word property used in clause (c) of section 56(2)(vii) in the phrase, any property, other than immovable property. If the meaning given in the explanation is imported to the word property in clause – (b), then it will have absurd meaning like immovable shares and securities of immovable jewellery.
We find that Co-ordinate Bench of Jaipur and Pune Tribunal while considering the similar grounds of appeal
has taken a view that agricultural land purchased by assessee is not covered by the provisions of section 56(2)(b)(vii)(b). The relevant part of decision of Pune Bench in Mubarak Gafur Korabu vs. ITO (supra) is extracted below: “8. We have heard the rival contentions and perused the record. Section 56(2)(vii) of the Act talks about where an individual or HUF received in any previous year from any person or persons on or after first day of October, 2009 but before first day of April, 2017, under clause (a) any sum of money without consideration exceeding Rs. 50,000/-, then the whole of such sum is chargeable to tax under 'Income from other sources'. Under clause (b), any immovable to 306/SRT/2018 For A.Y. 2014-15 property i.e. (i) without consideration, the stamp duty value of which exceeds Rs. 50,000/-, then stamp duty value of such property is to be added; and (ii) for consideration which is less than stamp duty value of the property by an amount exceeding Rs. 50,000/-, then stamp duty value of such property as exceeds such consideration is to be added in the hands of person as 'Income from other sources'. Clause (c) talks of any property other than immovable property and sub-clause (i) talks of without consideration the aggregate fair market value which exceeds Rs. 50,000/-; and sub-clause (ii) talks of consideration which is less than aggregate market value of the property by an amount exceeding Rs. 50,000/-. Explanation under the said section defines certain terms and clause (d) talks of property to mean capital assets of the assessee and then refers to the list of assets.
9. The case of assessee before us is that it has purchased agricultural asset which was held as 'Current Asset' by the assessee and when the same was sold in 2016, business income was declared on the said transaction. The assessee also stressed that agricultural land purchased by assessee was not capital asset, for which reliance was placed on the definition of 'capital asset' under section 2(14) of the Act. As per terms used under the Act, an immovable property is defined to be the land or building or both as per clause (d) of Explanation under the said section. Hence, clauses (a) and (b) of section 56(2)(vii) of the Act are not attracted. Clause (c) talks of any property other than immovable property. Section 2(14) of the Act defines 'capital asset' to mean property of any kind held by assessee whether or not connected with his business or profession and any securities held by foreign institutional investor but it does not include any (i) stock in trade, consumable stores or raw materials held for the purpose of business; (ii) personal effects i.e. movable property held for personal use and (iii) agricultural land in India. In the first instance, where the assessee had purchased agricultural land which was its stock in trade and on its sale the receipts were recognized and accepted as business income, then there is no question of attracting the provisions of section 56(2)(vii)(b) of the Act against assessee. Even otherwise, the land held by assessee was agricultural land which is not capital asset as clearly defined under section 2(14) of the Act, which excludes agricultural land out of definition of 'capital asset'. The asset owned ITA No.304 to 306/SRT/2018 For A.Y. 2014-15 by assessee is not capital asset, hence clause (b) is not attracted and provisions of clause (c) i.e. property other than immovable property is also not attracted, in view of definition of property as per clause (d) under Explanation i.e. property means the following capital assets of the assessee:— (i) immovable property being land or building or both; (ii) shares and securities; (iii) jewellery; (iv) archaeological collections; (v) drawings; (vi) paintings; (vii) sculptures; (viii) any work of art; [or] (ix) bullion.
10. In the totality of above definitions, we hold that agricultural land purchased by assessee is not governed by the provisions of section 56(2)(vii)(b) of the Act being not capital asset and also because of the fact that the assessee was holding it as stock in trade. Hence, it is outside the purview of said section and no addition has to be made in the hands of assessee.
Now, coming to the decision of Jaipur Bench of Tribunal in Trilok Chand Sain (supra), wherein provisions of clause (b) of section 56(2)(vii) of the Act were considered. However, they have failed to take into cognizance the provisions of clause (c) of said section, which talks of property other than immovable property. The Tribunal in para 6 refers only to the definition of 'immovable property' and hold that it is not circumscribed or limited to any particular nature of property. However, clause (c) very clearly talks of property other than immovable property and the word 'property' has further been defined under clause (d) of Explanation thereunder. In the totality of the above said facts and circumstances, there is no merit in reliance placed upon by the to 306/SRT/2018 For A.Y. 2014-15 learned Departmental Representative for the Revenue on the ratio laid down by Jaipur Bench of Tribunal in ITO v. Trilok Chand Sain (supra). In view of clear- cut provisions of the Act, we find no merit in the orders of authorities below in making the aforesaid addition in the hands of assessee. The ground of appeal
No. 1 raised by assessee is thus, allowed.
12. In the result, the appeal of assessee is allowed.”
13. We further find that by following the decision of Pune Tribunal, the Jaipur Bench also took a similar view in Yogesh Maheshwari vs. DCIT (supra). We have independently examined the facts of the case. We find that the lower authorities has not disputed the fact that the land purchased by the assessee are beyond the 8 km from the mentioned unit of SMC. We further filed that ld.CIT(A) further admitted that the assessee purchased the agricultural land. We have seen the sale /purchase deed dated 25.102013, which is placed on record on the direction of the bench, wherein the nature of land is described as “agricultural land”.
In view of the aforesaid factual and legal discussion, we find that grounds of appeal
raised by the assessee is covered by the decision of Pune Bench of Tribunal in Mubharak Gafur Korabu vs. ITO (supra) and Jaipur Bench of Tribunal in Yogesh Maheshwari vs. DCIT (supra). Therefore, we find merit in the submission of the ld.AR of the assessee that provision of section 56(2)(vii)(b) of the Act are of the Act not applicable in the present case.
15. Thus, the grounds of appeal filed by the assessee are allowed.