THE PR. COMMISSIONER OF INCOME TAX vs. SHRI M THIMMEGOWDA

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ITA/364/2022HC KarnatakaKAHC01033779202227 September 2024Bench: S.G.PANDIT,C.M. POONACHA6 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the appeal based on submissions regarding the tax effect and CBDT Circulars. The learned counsel for the assessee submitted that the tax effect was less than Rs. 2 Crores, making the appeal not maintainable at the instance of the Revenue in view of CBDT Circular No. 09/2024 dated 17.09.2024. The Revenue sought liberty to revive the appeal if the matter fell within the exceptions of Circular No. 09/2024 and Circular No. 5/2024 dated 15.03.2024. The Court granted this liberty. The substantial questions of law were kept open to be adjudicated in an appropriate proceeding. Therefore, no decision was made on the merits of the substantial questions of law, and no specific findings were recorded by the High Court on the ITAT's order or the classification of the income.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income Tax and the Deputy Commissioner of Income Tax, filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated April 20, 2022, passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru. The appeal pertains to Assessment Year 2007-2008 and challenges the ITAT's decision in ITA No. 1035/Bang/2019. The ITAT had set aside the order of the Appellate Commissioner, which had confirmed the order of the Deputy Commissioner. The core dispute revolves around the classification of income derived from the sale of land, specifically whether it constitutes business income or is exempt as agricultural income or capital gains. The High Court admitted the appeal to consider substantial questions of law.

What were the issues?

The High Court was asked to decide the following substantial questions of law: 1. Whether the ITAT's order was perverse in holding the assessee's income as not business income, despite the land sold being converted land sold for non-agricultural purposes. 2. Whether the ITAT correctly held that land, though converted, should be treated as agricultural land and exempt from capital gains under Section 2(14) of the Act, ignoring that the converted land was sold for commercial purposes to a housing society, thus constituting business income. 3. Whether the ITAT was justified in not considering that the lands were transferred from the assessee and family members along with a person alleged to be the assessee's benami, and that the assessment was rightly completed by adding the income as business income. 4. Whether the ITAT's order was perverse in ignoring that land cultivation after conversion does not make it agricultural land, and that under Section 80 of the Karnataka Land Reforms Act, 1964, agricultural land cannot be transferred to a non-agriculturist, rendering the assessee's claim of transferring agricultural land untenable. The Revenue argued that the land was converted and sold for commercial purposes, thus the income should be treated as business income. The assessee contended that the land was agricultural land and exempt from capital gains. The Revenue also relied on the Karnataka Land Reforms Act, 1964. The judgment does not explicitly record arguments from the assessee on all points, but their position is implied by the questions framed.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 2(14),Section 80

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BENGALURU IN ITA

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NC: 2024:KHC:40423-DB ITA No. 364 of 2022

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 27TH DAY OF SEPTEMBER, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA INCOME TAX APPEAL NO.364 OF 2022

BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE, C.R. BUILDING, QUEENS ROAD, BENGALURU-560 001.

2.

THE DEPUTY COMMISIONER OF INCOME TAX CENTRAL CIRCLE-1(3) C.R BUILDING, QUEENS ROAD, BENGALURU-560 001. …APPELLANTS

(BY SRI. DILIP.M., ADV. A/W SRI. RAVIRAJ.Y.V., ADVOCATE)

AND:

SHRI M. THIMMEGOWDA #F-113, CENTRAL CHAMBERS, 2-C AND D, 2nd FLOOR, 2nd MAIN, GANDHINAGAR,

Digitally signed by B LAVANYA Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:40423-DB ITA No. 364 of 2022

BENGALURU-560 009. PAN: ACYPT 2499N.

…RESPONDENT

THE ITA/INCOME TAX APPEAL IS FILED UNDER SEC.260- A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 20/04/2022 PASSED IN ITA NO.1035/BANG/2019, FOR THE ASSESSMENT YEAR 2007-2008 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN ITA NO.1035/BANG/2019 DATED 20/04/2022 FOR ASSESSMENT YEAR 2007-2008 ANNEXURE-C AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(3), BENGALURU AND ETC.

THIS APPEAL, COMING ON FOR FINAL HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE S.G.PANDIT and HON'BLE MR JUSTICE C.M. POONACHA

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NC: 2024:KHC:40423-DB ITA No. 364 of 2022

ORAL JUDGMENT (PER: HON'BLE MR JUSTICE S.G.PANDIT)

Heard the learned counsel Sri. Dilip.M., along with Sri. Raviraj.Y.V., learned counsel for the appellants/Revenue.

2.

The Revenue is in appeal under Section 260-A of the Income Tax Act, 1961 (for short, ‘the Act’) questioning the correctness and legality of order dated 20.04.2022 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in ITA.No.1035/Bang/2019 for the assessment year 2007-08.

3.

This Court, admitted the appeal on 29.07.2022 to consider the following substantial questions of law: 1. "Whether on the facts and in the circumstances of the case, the Tribunal order can be said as perverse in nature in holding that assessee's income is not bussienss income as assessee has sold agricultural land ignoring that as on date of sale the land sold was converted land and same was sold for non agricultural purpose"?

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NC: 2024:KHC:40423-DB ITA No. 364 of 2022

2.

"Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that though the land is converted into non agriculture in view of cultivation of land till date of sale, the land should be treated as agricultural land and same is exempt from capital gains in view of section 2(14) of the Act ignoring that converted land M/s.SPR Developers (P)Ltd had entered into sale agreement with M/s.Vijaya Bank Employees Housing Co-opeertative Society and registered the lands to the extent of 118 Acres by way of Sale deed signed with housing Society which is purely for commercial purpose and as such income earned from that can be considered as business income and not agricultural income nor capital gains"?

3.

"Whether the Tribunal is justified in not considering that the lands were transferred from assessee and family members along with Shri.C.H.Krishnappa who is benami of assessee and the assessment was rightly completed with addition as business income on transfer of land"?

4.

"Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in nature as Tribunal ignored that even if lands were being cultivated after conversion the same cannot be held as agricultural land and As per Section 80 of the Karnataka Land Reforms Act, 1964,

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NC: 2024:KHC:40423-DB ITA No. 364 of 2022

an agricultural land cannot be transferred to an non agriculturist. Therefore, if the assessee claims that he had transferred agricultural land the it is not tenable in the eyes of law"?

4.

Learned counsel for the assessee submits that the tax effect in this appeal is less than Rs.2 Crores and therefore, the appeal should not be entertained at the instance of the revenue in view of the Circular No.09/2024 dated 17.09.2024 issued by the Central Board of Direct Taxes. It is also submitted that the aforesaid Circular binds the revenue.

5.

On the other hand, learned counsel for the revenue submits that he be granted liberty to revive the appeal in case the matter falls within the exceptions under the aforesaid Circular dated 17.09.2024 and Circular No.5/2024 dated 15.03.2024.

6.

In view of the aforesaid submissions, the appeal is disposed of with liberty as prayed for by the learned

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NC: 2024:KHC:40423-DB ITA No. 364 of 2022

counsel for the revenue. However, the question of law is kept open to be adjudicated in an appropriate proceeding.

Sd/- (S.G.PANDIT) JUDGE

Sd/- (C.M. POONACHA) JUDGE

SMJ List No.: 4 Sl No.: 37

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