BALASAHEB VITTHALRAO KADAM,,PUNE vs. INCOME-TAX OFFICER,, PUNE

This appeal by the assessee against the order dated 19-01-2017 passed by the Commissioner of Income Tax (Appeals)-9, Pune [„CIT(A)‟] for assessment year 2012-13.

The only issue to be decided is as to whether the CIT(A) justified in confirming the addition made by the AO on account of Short Term Capital Gain against the claim of assessee being not liable to tax on account of agricultural land in the facts and circumstances of the case.

The brief facts of the case as emanating from the record are that the assessee is an individual and engaged in the business of Manpower Supplier Services. The assessee conducts his business under the name and style of M/s. Sai Associates. On examination of individual transaction statement details, the AO observed that the assessee along with other four persons/entities had sold immovable property on 16-12-2011 for a consideration of Rs.5,90,00,000/-. The assessee furnished the copy of sale deed dated 13-12-2011. The assessee purchased said property vide purchase deed dated 15-04-2010. Accordingly, computed Short Term Capital Gain of Rs.87,81,842/- (Rs.99,36,842/- - Rs.11,55,000/-) vide its order dated 30-03-2015. The AO was of the opinion that the assessee along with M/s. Balsai Facilities Services India Pvt. Ltd. along with three other individuals sold the property in Gat No. 830, Sanswadi which is industrial zone admeasuring 1 H 90 Aar.

Being aggrieved before the AO, the assessee contended before the CIT(A) in First Appellate Proceedings that income arising from the transfer of agricultural land is not liable to tax and u/s. 45 of the Act. The agricultural land is not a capital asset. Further, if the land is more than 8 KM away from Municipal Corporation the agricultural land cannot be termed as capital asset. The provision u/s. 45 or section 2(14) of the Act does not recognize the location of industrial zone and the 7/12 extract filed by the assessee clearly shows the subjected property as agricultural land prior to purchase and after the sale. Considering the submissions of assessee, the CIT(A) held that prior to 1070 agricultural income is exempted and after the amendment the capital asset was substituted in clause (iii) of section 2(14) of the Act and the property arising from transfer of agricultural land is capital gain. The entries in revenue records is prima-facie evidence but not conclusive prove to hold that the character of land is agricultural land. The assessee did not purchase the said land for the purpose of agricultural but for making profits motive. Further, he held on examination of record, the assessee‟s name is not entry in the revenue records and there were still the names of earlier owners were there. Therefore, it is a business asset confirmed the view of AO.

The ld. AR submits that the land was situated beyond 8KM from Dehuroad Cantonment Board and population of said locality (Sanaswadi) was less than the prescribed limit of 10,000 as per last Census. The land being an agricultural land both at the time of purchase and sale and argued that it is not at all capital asset taxable u/s. 2(14) of the Act and the findings of both the lower authorities are incorrect.

The CIT(A) erred in finding that the land admeasuring 1 Hector 90R was small piece of land and the assessee‟s share in the same was 32R and such a small piece of land was purchased and sold within a period of 2 years could not be said as purchased with an intention for agricultural purpose is a subjective imaginary. He submits that as even a small piece of land if acquired/purchased, cannot change or alter the very nature of the land as agricultural land as mentioned in the revenue records which was cultivated by the previous owner for the reason that the land was situated in the industrial zone. The assessee could not yield any agricultural produces from the said land after it was purchased due to scarcity of water though the assessee had the intention to use the land for agricultural purpose. It is also not denied that for the purpose of investment also the land in question was purchased by the assessee and other four co-owners, merely because the land was purchased for the intention of the investment, the nature and character of the land as on date of purchase from the previous owner till the date of sale by the assessee and other four co-owners of the same being an agricultural land cannot change.

The ld. AR submits that necessary evidences regarding the land being situated beyond 8 Km at Sanaswadi from Dehu Road Cantonment Board were furnished before the CIT(A) along with 7/12 extracts of the concerned land showing the nature and character of the land purchased and sold as agricultural land. The decisions in the cases of DCIT Vs. Kalpana J. Jaikar (Supra) & CIT Vs. Debbi Alernao (supra) were also cited before the CIT(A) and the CIT(A) did not give any observation and findings as to how the said decisions were not applicable in the case of the assessee. The CIT(A) referred to many decisions which are not applicable on the facts of the case of the assessee.

The CIT(A) had discussed the position of the provisions of section 2(14) of the Act before the amendment by the Finance Act, 1970 and so also after the amendment from the said year inter-alia stating that up to and including the AY 1969-70, "agricultural land in India" was wholly excluded from the definition of capital asset. For and from AY 1970-71, a new sub-clause (iii) of section 2(14) was inserted bringing within the term "capital Asset" agricultural land situated within the limits of any municipality etc.

The ld. DR submitted that the CIT(A) discussed the provisions u/s. 2(24) of the Act and held the nature of land is to be decided in terms of clause (iii) to section 2(14) of the Act. The clause (iii) was came into effect from 01-04-1970 and there was no evidence brought on record by the assessee that the said subjected land is beyond 8KM from local limits of any municipality or cantonment board and supported the order of CIT(A) prayed to dismiss the grounds of appeal raised by the assessee.

In the result, the appeal of assessee is allowed for statistical purpose.