MOHMOODA BEGUM,RANGA REDDY vs. INCOME TAX OFFICER, WARD-8(1), HYDERABAD

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH ‘B', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER

Sl.No. ITA No. AY Appellant Respondent 1&2 448 & 2008-09 Mohammed Income-tax 449/H/18 & Ghani Qureshi, Officer, Ward – 2009-10 Ranga Reddy. 8(1), Hyderabad. PAN – AAEPQ 8284C 3&4 450 & 2008-09 Mohammed -do- 451/H/18 & Jamal Quershi, 2009-10 Ranga Reddy. PAN – AAEPQ 8285D 5&6 452 & 2008-09 Mohammed -do- 453/H/18 & Sayeed 2009-10 Quershi, Ranga Reddy. PAN – APTPM 6238E 7&8 454 & 2008-09 Mohammed -do- 455/H/18 & Abbas, 2009-10 Ranga Reddy. PAN – AHAPA 9780C 9&10 456 & 2008-09 Mahmooda -do 457/H/18 & Begum, 2009-10 Ranga Reddy PAN – BDNPB 5107J

Assessee by: Smt. Momina Alam Revenue by: Shri Nilanjan Dey Date of hearing: 08/01/2019 Date of pronouncement: 15/03/2019 O R D E R PER S. RIFAUR RAHMAN, AM:

All these appeals filed by the assessees (pertain to the family members) are directed against a common order of CIT(A) – 2, Hyderabad, dated, 19th December, 2017 for AYs 2008-09 & 2009-10. As identical issues are involved in these

2 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others appeals, the same were clubbed and heard together and therefore, a common order is passed for the sake of convenience.

2.1. Smt. Mahmooda Begum is the owner of agricultural property of Ac. 0.24 guntas and Ac. 0.09 Guntas in Survey No.238, Narsingi Village, Rajendra Nagar Mandal, Ranga Reddy District purchased for a consideration of Rs.68,000/- including stamp duty vide document dated 12.11.1998. She is also owner of agricultural property of Ac.0.08 Guntas in Survey No.242, Narsingi Village, Rajendra Nagar Mandal, Ranga Reddy District purchased for a consideration of Rs.130,500/- including stamp duty as per deed dated 26.05.1999. Due to old age, Smt. Mahmooda Begum and her husband Sri Mohammed Abbas Qureshi wanted to pass on the said properties to younger generation of 3 children and a HIBA (as per Islamic customs and Traditions) was executed wherein the share for each was determined as Smt. Mahamooda Begum 39%, Sri Mohammed Abbas Qureshi 39% and each of the three sons (the assessee and two others) 13.35%. All the family members entered into an agreement .of sale dated 29.10.2007 with Smt. M. Jayasree in respect of Ac 0.09 Guntas in S.No.238 and Ac 0.08 Guntas in S.No.242 for a consideration of Rs.3.40 crores and it was stipulated that the transaction would be completed within 6 months. Smt. Jayasree paid Rs. 2.79 crores over the period of time upto February 2008. Similar agreement dated 29.10.2007 was entered by the family members in respect of land admeasuring

3 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others Ac.0.24 Guntas in S.No. 238 for a consideration of Rs. 4.80 crores to Sri M. Vishnu Vardhan with the same stipulation that the transaction would be completed within six months. Sri Vishnu Vardhan paid Rs. 4.21 crores over the period of time up to February, 2008. The assesee received his share accordingly.

2.2 The assessee filed return of income for the AY 2008-09 on 23.09.2008 declaring total income of Rs.1.25 lakhs. The Assessing Officer (AO) noted that the assessee did not offer capital gains on the sale of family property for the total consideration of Rs.8.20crores (agreement for sale with Smt. Jayasree for Rs.3.40 crores and agreement for sale with Sri Vishnu Vardhan for Rs 4.80 crores). The AO accordingly issued notice u/s.148 for the AY 2008-09 dated 09.02.2015, in response to which the assessee filed revised return of income for the AY 2009-10 on 15.12.16 declaring NIL capital gains after claiming deduction u/s.54B and 54F along with business income of Rs.1.70 lakhs. No revised return was filed for the AY 2008-09 and the assessee filed a letter dated 20.02.2016 stating that the original return of income filed may be considered in response to notice u/s.148. As stated above, no capital gains was declared in the return for the AY 2008-09.

2.3 The declaration of capital gains by family members in the AY 2009-10 and the deductions claimed are given hereunder in a tabulated form for ready reference:

Name of the Capital Indexed cost Deduction Deduction Net capital case gains of u/s 54B u/s 54F gains declared in improvement arrived after revised claiming return deductions before claiming deductions Sri 87,95,159 4,60,069 44,10,229 39,24,861 Nil Mohammed Ghani

4 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others Qureshi Sri 1,10,42,810 5,77,642 63,14,007 11,91,294 29,59,867 Mohammed Jamal Qureshi Sri 3,32,26,155 17,38,037 2,01,69,151 60,06,557 53,12,410 Mohammed Abbas Qureshi Smt. 1,75,90,317 9,20,137 50,75,991 1,15,94,189 NIL Mahmooda & Begum 83,04,150

2.4 It was noted that subsequent to the entering agreement. for sale with Smt. Jayasree and Sri Vishnu Vardhan dated 29.10.2007, the assessee and the family members registered an Agreement of Sale-Cum-Irrecoverable Power of Attorney (ASClPOA) with M/s. Nell Project Developers Private Limited (NPDPL) on 20.05.2008 for a consideration of Rs.9.20 crores wherein, Smt. Jayasree and Sri Vishnu Vardhai were included as confirming parties. As per the said registered ASCIPOA, it is noticed that the confirming parties have confirmed that w.e.f. receipt of sale consideration of Rs. 8 crores by them as per Clause 1.1 (Rs. 7cr. paid by them to the family members of the assessee + Rs. 1cr. extra), the agreement for sale dated 29.10.2007 has come to an end and became un- enforceable and they have completely given up all the respective rights/privileges including the right of pre-emption to purchase the above said land of Ac 1.01 Guntas. Accordingly, NPDPL made payment of sale consideration of Rs.9.20 crores in the following manner:- 1. Payment in favour of vendor No. 1i.e. Mahmooda Begum Cheque No. Date Amount in Drawn on (Rs.) 620755 20/05/2008 30,00,000/- HDFC Bank, Banjara Hills, Hyd. 620756 20/05/2008 30,00,000/- -do- Total 60,00,000/-

5 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others 620757 20/05/2008 30,00,000/- HDFC Bank, Banjara Hills, Hyd. 620758 20/05/2008 30,00,000/- -do- Total 60,00,000/-

2.5 From the above it can be seen that out of sale consideration of Rs.9.20 crores, the assessee and family members have received Rs.8.20 crores and Smt. Jayasree and Sri Vishnu Vardhan together received Rs. 1 crore. In response to notice u/s.133(6) of the Act, Smt. Jayasree and Sri Vishnu Vardhan confirmed that from the above sale transaction, they gained Rs. 1 crore and filed return of income for the AY 2009-10 declaring Short Term Capital Gain (STCG) on the above sale "transaction with NPDPL.

2.6 In view of the above factual background, the AO issued show cause letter to the assessee's wife Smt. Mahmooda Begum, as she is the absolute owner of properties sold, as to

6 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others why capital gains on the agreement for sale dated 29.10,2007 should not be brought to tax in the hands of family members. The gist "of the response' by Smt. Mahmooda Begum (letter signed by all the family members) is as under:- “They purchased agricultural land in the year 1998 admeasuring Ac 1.01 Guntas and duly got land mutation done and holder of pattadar pass book and title book. This land has been put to cultivation and further some- lands would taken on lease from nearby landlords and cultivate. This agricultural land was originally proposed to be sold to Smt. Jayasree and Sri Vishnu Vardhan who agreed to purchase for a sale consideration of Rs.8.20 crores vide document dated 29.10.2007 and paid Rs.50 lakhs each as advance. Though the agreement of sale shows the transaction "as an agreement of sale with possession’’ real possession was not handed over to the purchaser since they could not pay the agreed amount and another party by name M/s. NPDL to whom ASCIPOA has been executed on 20.05.2008. In fact till date; the land is in our possession and we have been carrying out agricultural operations thereon.

The sale proceeds of agricultural do not attract any tax including capital gain as we have been carrying agricultural operations since the date of purchase of land in the year 1998 till the date of transfer 20.05.2008 and accordingly the said proceeds would be thought to be exempt from income tax and therefore not declared in the Income Tax return for the A Y 2009-10. Upon receipt of the notice, it was understood that the lands sold was categorized into urban agricultural lands on which tax incidence arises on sale of such agricultural land and therefore we have revised return for the AY 2009-10 and it is requested to accept the same (all the 5 members). While computing the capital gains, the proposed cost of acquisition and improvements for each member was taken. Since, it is an agricultural land, we are entitled for deduction u/s.54B in respect of investment made in agricultural lands. Accordingly, the proposed sale proceedings received by each member have re-invested in the purchase of agricultural land and claimed exemption u/s.54B. Further, some amounts have been invested in construction of property on therefore deduction u/s.54F has also been claimed. Asper the HIBA, the consideration received by the family members is as under:

7 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others Name of the Share of land as Receipt of sale person per HIBANAMA consideration as per HIBANAMA declared by Smt. Mahmooda Begum. Mahmooda Begum 9 Gts 1,80,00,000 MD Abbas Qureshi 17 Gts 3,40,00,000 MD Jamal Qureshi 5.65 Gts 1,13,00,000 MD Ghani Qureshi 4.50 Gts 90,00,000 MD Sayeed 4.58 Gts 97,00,000 Qureshi 2.7 The AO observed that as per the Agreement For Sale (AFS) entered with Smt. Jayasree and Sri Vishnu Vardhan on 20.10.2007, substantial amount of consideration was paid by transferor and possession of the property was also given by the family members of the assessee, clearly falling in the purview of part performance of the agreement u/s. 53A of the Transfer of Property Act. All the ingredients of transfer of asset are available in the AFS dated 29.10.2007. Possession of the property was given by the family members of the assessee to Smt. Jayasree and Sri Vishnu Vardhan as per Para 3 of AFS dated 29.10.2017. Further, he observed that in response to summons u/s.131, the purchasers (Smt. Jayasri and Sh. Vishnu Vardhan) have submitted that they had paid Rs.7 crores to Smt. Mahmooda Begum and family members on different dates as per the above mentioned AFS and further that they received an amount of sale consideration of Rs. 8 Cr. from NPDPL and profit of Rs. 1 crores was declared as STCG in the returns for the AY 2009-10. Further, the purchasers have claimed certain development expenses on the said land against the sale consideration received from NPDPL, as evident from their computations of income for the AY 2009-10.

2.8 The AO observed that as per the relevant clauses in AFS and as per the purchasers admission that they have taken possession of the land and developed the plots during the FY 2007-08 relevant to AY 2008-09, it clearly establishes

8 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others that the assessee and family members have given possession of the land to Smt. Jayasree and Sri Vishnu Vardhan in the AY 2008-09. The AO after quoting extensively from the AFS dated 29.10.2007 and ASCIPOW dated 20.05.2008 (page 17-19 of assessment order) gave conclusive finding that transfer of property had taken place in the AY 2008-09 and therefore capital gains arising thereon has to be brought to tax in the AY 2008-09.

2.9 The AO observed that whether the land sold is a capital asset u/s.2(14) of the Act is the next question. The assessee and family members filed revised returns for the AY 2009-10 claiming the land as agricultural land situated within the urban limits and claimed deduction u/s.54B and u/s.54F. lt was submitted that agricultural operations were carried out on the said land right from 1988 till 2008 but no documentary evidence for claiming it as agricultural land was produced. The AO made enquiries with MRO Rajendra Nagar Mandal with regard to the situation of the land in the urban limits, in response to which the Dy. Collector and Tahsildar, Rajendra Nagar Mandal replied that as per the verification of revenue records for FY 2008-09 and 2009-10, it was found that the name Smt. Mahmooda Begum W/o. Md. Abbas is recorded as pattadar and possessor in respect of land in S.No.237 (Ac. 0.11 Gts), S.No.238 (Ac. 0.24 Gts)_ and S.No.242 (Ac. 0.07 Gts) and "no entry found in the columns of crops". He further informed that the distance between the said land situated at Narsingi Village and GHMC Rajendra Nagar Circle is approximately 7 kms. Thus, the AO opined that as per the report of Dy. Collector and Tahsildar, Rajendra Nagar Mandal, the property is situated within the municipal limits of notified municipal area as specified in the Act and also no crops were grown.

9 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others

2.10. The AO noted that the assessee did not produce any evidence with regard to the primary/secondary agricultural operations carried out on the said land. No evidence was produced with regard to the earning of agricultural income (Returns of Income show no agricultural income). Further, the lands sold by the assessee and family members are located in well developed and fast developing area with several housing as well as infrastructure projects being set up.

2.11 In view of the above observations, the AO concluded comprehensively that the land sold by the assessee and family members is a capital asset as defined in Section 2(14) of the Act. The AO further concluded that the said lands are within the limits of GHMC as per the Government of Andhra Pradesh G.O.Ms.No.261 dated 16.04.2007 and thus it is immaterial whether the lands are situated within 8 kms from Rajendra Nagar Municipality or not. Therefore, the AO concluded that the assessee and family members are liable for capital gains on the transfer of said property in the AY 2008-09. The AO accordingly completed the assessment for the AY 2008-09 on "substantive basis" by taking the indexed cost of acquisition at Rs.2,12,838/- and arrived capital gains of Rs.87,87,162/- adopting the consideration received by the assessee at Rs.90,00,000/- .

10 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others

3.1 The assessee and family members claimed improvement of the property amounting to Rs. 28,78,000/- (share to the assessee of Rs.4,06,099) and it was claimed that the said expenditure was incurred during the FY 1998-99 to 2001-02. The assessee was asked to submit necessary documents/evidences in this regard such as bills/vouchers etc. for the said claim and as assessee could not produce any such evidences, the claim of improvement to the land was disallowed.

3.2 As regards deduction u/s.54B, the assessee claimed that he had invested part of the sale proceeds in the agricultural land as per AFS dated 02.11.2007 for Rs.31.90 lakhs and incurred expenditure for levelling of land and rock cutting of Rs.10,52,700/- and proportionate expenditure incurred for fixing compound wall for Ac 1.68 Guntas out of total Ac 12 is Rs.1,67,529/- totaling to Rs.44,10,229/-. The AO noted that the said property was purchased. by Smt. Mahmooda Begum and not by the assessee for Rs. 2.09 lakhs and paid, stamp duty accordingly. The AO noted that the AFS doesn't contain the details and mode of payment and the appellant had also not furnished the payment details with documentary evidence. The AO further held that to claim exemption u/s.54B, the investment should have been made after the date of transfer i.e. 25.05.2008. Taking the above into consideration, the AO held that exemption u/s. 54B is not allowable, since the property does not belong to the assessee (the original owner of the property Smt. Mahmooda Begum) and further, the land sold is not an agricultural land and it is an urban as defined u/s.2( 14) of the Act, which was confirmed by the assessee by filing revised return and the assessee failed to produce any evidence about the cultivation of lands.

11 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others Further, the letter of Dy. Collector and Tahsildar, Rajendra Nagar Mandal clearly brings out the fact that the properly is situated within the municipal limit of notified municipal area and also no crops were raised. Accordingly, the claim u/s 54B of Rs.44,10,229/- (land cost of Rs.31.90 lakhs and plot improvement charges of Rs.12,20,229/-) was disallowed.

3.3 As regards Deduction u/s .54F, the assessee claimed investment in Plot No. 464, admeasuring 250 sq.yds situated, at Narsingi Village registered vide sale deed dated 30.04.2008 for Rs.6 lakhs. He claimed that he invested an amount of Rs.37.05 lakhs as per AFS dated 14.2.2008 as against actual sale deed amount of Rs.6 lakhs. Further the assessee claimed Rs.12.75 lakhs for the construction of house. The AO asked evidences regarding construction of house like municipal plan approval, sanction letter, construction expenditure details along with bills/vouchers etc. in respect of deduction claimed u/s.54F to the extent of Rs.50.25 lakhs (37.50 lakhs land and Rs.12.75 lakhs for construction of house). However, the assessee could not produce any evidence in this regard. In the absence of production of such evidence, the AO opined that the assessee only purchased a plot of land and did not undertake any construction of house on the plot. No municipal plan approval, municipal tax bills, water bills, electricity bills etc. in the: name of the assessee were furnished. It was further noted by the AO that the AFS for the said land on which he was supposed to have constructed house, stands in the name of Sri Mohd. Abbas Qureshi and not the assessee. In view of the facts as brought out above, the AO disallowed deduction u/s.54F and computed Long Term Capital Gains of Rs.87,87162/-.

12 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others 4. Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A) contesting the following grounds, which are common in all the appeals:

i) Properties being sold are not capital assets 2(14) of the Act. ii) Properties being sold are agricultural lands. (iii) The capital gains if any, arises in the AY 2009-10 and not in 2008-09. (iv) The transfer of property has taken place onIy in the A Y 2009-10 and not in AY 2008-09 as per Section 53A of Transfer of Property Act. v) Documents/claims/deductions/expenses submitted but not allowed.

:The AR Submitted that the said lands are agricultural lands located in Narsingi Gram Panchayat. Narsingi Gram Panchayat was never merged with Rajendra Nagar Municipality at any point of time. Government of Andhra Pradesh merged Rajendra Nagar Municipality with Hyderabad Municipal Corporation on 16.04.2007 to form Greater Hyderabad Municipal Corporation (GHMC). The GHMC proposed to merge Narsingi Gram Panchayat and some other gram panchayats with GHMC vide GO dated 26.03.2013. Thereafter GO dated 31.08.2013 was issued stating that Narsingi Gram Panchayat shal be merged with GHMC. The GO dated 31.08.2013 was contested by the residents of these gram panchayats and the Hon'ble AP High Court vide order dated 26.09.2013 passed interim suspension orders and stayed operation of GO dated 31.08.2013. Thereafter, Government of AP issued GO dated 08.01.2014 cancelling the earlier GO dated 31.08.2013. In effect, Narsingi Village fall under jurisdiction of Narsingi Gram Panchayat and was never merged with Rajendra Nagar Municipality or GHMC. In the CBDT Notification dated 06.01.1994, it was stated that urbanization of areas means areas up to a distance

13 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others of 8 kms from the municipal limits in all directions. The said notification does 'not include Rajendra Nagar Mandal and hence the areas outside of Rajendra Nagar Municipality do not come under the classification of urban 'and. The AO erroneously relied upon the letter issued by Dy. Collector and Tahsildar, stating that the distance between the said land and GHMC Rajendra Nagar Circle is approximately 7 kms. This letter mentions the approximate distance and does not clearly mention whether the distance is based on road or aerial distance. As per the software tool ww.freemaptools.com the aerial distance between the said land and Rajendra Nagar Municipality is 9.059 kms. As per the census data of Ranga Reddy District published in 2011, the population of Narsingi Village is 9,449. As per the reliance placed by the AO in the case of Srujan Singh [125 Taxman 1075], for the agricultural land to be taken as capital asset, it should be in an area within the municipality limits and the area should more than 10,000 population. On both the accounts, the said agricultural land does not come under purview of Capital Asset as the Income Tax Act. 5.1 As regards Properties sold are Agricultural Lands, the AR submitted that the said land are abutting Musi reservoir on one side and on the other side there is a well. Smt. Mahmooda Begum, her husband and three children were undertaking agricultural and farming operations and they were cultivating rice and other agriculture produce in the said land from the time they have acquired the land in the year 1998/1999 till the year 2008. In addition to undertaking farming on the said land, all of them also used to undertake agricultural operations in the neighbouring lands taken on Iease. The Adangal/Pahani records for the property demonstrate that it was agricultural lands in S.No.237, 238 and 242 and it was yielding two mahanipanta recorded in the said adangal / pahani, submitted to the AO.

14 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others 7.3 . I have carefully considered the material on record, the arguments of the AR and the evidences produced in support of the contentions. It was contended that the assessee and family members were cultivating and growing rice during the year 1998 to till 2008 and further, they have taken the neighbouring lands on lease for agricultural operations. But the fact is that no evidence regarding carrying of agricultural operations were produced either before the AO or before me. In respect of undertaking agricultural operations evidence was produced. It is relevant and material to note that no agricultural income has been declared in the IT returns filed by the appellant and family members. If they have carried out agricultural operations of their lands and lease lands, certainly it would result in considerable agricultural income. Furthermore, the AR submitted photographs of the said agricultural land which is part of the documentation of sale deed executed by the appellant and family members (the photograph of the property under transfer has to be enclosed to the deed as per prevailing laws of AP Government). The photos and images are enclosed to this order as Annexure which clearly demonstrates that no agricultural operations were carried out on the said land. The AR enclosed pahani/adangal of the said lands as Page No. 6 & 7 of the paper book containing 44 pages in support of the contention that the appellant and family members carried out agricultural operation. On verification of the said documents, it is seen that it only mentioned that it is a wet land and no other details regarding carrying of agricultural operations were available. Therefore, the contentions of the appellant that the said lands were agricultural lands is a mere statement without any evidence and in fact the' above mentioned facts clearly demonstrate that no agricultural operations were being carried out in the said lands and therefore it is a capital asset liable for capital gains. 7.4 Coming to the issue as to whether the said land is within 8 kms from the municipal limits or not, the AR relied upon a software tool www.freemaptools.com wherein the aerial distance between the said land and Rajendra Nagar Municipality was marked as 9.059 kms. It is however to be noted that it is not an accepted tool/ method for determining the distance. On the other hand, the Dy. Collector and Tahsildar stated that the distance between the said land and GHMC Rajendra Nagar Circle is approximately 7 kms. It has been held by me in Para No. 7.3 above that the said lands under transfer are not agricultural lands and therefore the issue of measuring

15 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others the distance from the land to the Municipal limit and thereupon arriving at a decision as to whether the land transferred is a capital asset or not doesn't arise. 7.5 In view of the above, Grounds No.(i) and (ii) of appeal are dismissed.”

16 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others “8.1 I have carefully considered the contentions made by the AR. From the AFS dated 29.10.2007 with Smt. N. Jayasree and Sri N. Vishnu Vardhan separately, it is seen in the last Para of Page no.3 of the said AFS, it was clearly mentioned as "That the vendors hereby deliver the vacant and peaceful possession of the schedule property on today". It is evident from the above that the appellant and family members have handed over the possession of the property to Smt. Jayasree and Sri Vishnu Vardhan on 29.10.2007 itself and therefore Section 53A of Transfer of Property Act comes into operation and it will be considered as transfer of property in the FY 2007-08 itself. The arguments of the AR that the possession of the property was not given to Smt. N. Jayasree and Sri N. Vishnu Vardhan is erroneous and misreading.

8.2 In Page No.4 of ASCIPOA, it was stated that out of total sale consideration of Rs. 9.20 crores, M/s. NPDPL shall pay Rs.3.40 cores to Smt. N. Jayasree and Rs.4.60 crores to Sri N. Vishnu Vardhan the confirmation Parties 1 & 2 for relinquishing the property rights and the balance sum of Rs.1.20 crores shall be paid to the vendors i.e. appellant and family members. It is evident from the above that the vendee is making payment directly to Smt. N. Javasree and Sri N. Vishnu Vardhan only because they have taken over the possession of the property and the said payment was towards relinquishing their rights in the said property. It is further evident that Smt. N. Jayasree and Sri N. Vishnu Vardhan were paid a sum of Rs.8 crores by M/s. NPDPL whereas they have given only Rs.7 crores to the appellant and family members as per the terms of AFS. Smt. Jayasree and Sh. Vishnu Vardhan got Rs. 1 crore profit upon transfer of the said property by them to M/s NPDPL. They were mentioned as confirming parties in the ASCIPOA because the AFS entered by the assessee and family members with Smt. Jayasree and Vishnu Vardhan was not a sale deed. It a material and important fact that Smt. N. Jayasree and Sri N. Vishnu Vardhan have declared Ra.1 crore as STCG on the said transaction in the returns filed for the AY 2009-10. If the transfer of the land had not taken place to Smt. N. Jayasree and Sri N. Vi.shnu Vardhan in the FY 2007-08, the issue of arising of capital gains in their hands in the FY 2008-09 would not arise. The argument of the AR that the vendors i.e. appellant and the family members have delivered the physical possession of the property to M/s NPDPL vide Para 3.1 of the ASCIPOA indicates

17 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others that the transfer has occurred only in the AY 2008-09 is devoid of any merit since this is in reference to the clause of cancellation of AFS dated 29.10.2007 contained in Para-Il of the ASCIPOA. From the above, it is evident and clear that the impugned transfer of property had taken Place in the FY 2007-08 and therefore, the capital gains is liable to be brouqht to tax in the AY 2-008-09. 8.3 In view of the above, Grounds No:(iii) and (iv) of appeal are dismissed.”

“It was submitted by the AR that the appellant and family members are farm labourers and not educated and could not retain many of the expenses vouchers/bills etc. incurred in proper format inspite of having genuinely incurred expenses for the upkeep of the agricultural property. They have undertaken demolition of their home way back in the year 2008 and constructed the existing structure and in the process lost some of the bills/vouchers that would have positioned them to claim benefits under indexation, Section 54B and Section 54F of the Act. The scrutiny u/s.148 had taken place after much passage of time resulting in destruction of many bills/vouchers. Inspite of adverse situations, the appellant and family members were able to obtain primary evidence/circumstantial proofs/affidavits of vendors whoever traceable for the period AY 2008-09 and 2009-10. and hence their claims of indexation and benefits u/s.54B and 54F should be given.

18 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others 2009-10. Therefore, the issue of allowing the deductions u/s 54B and 54F in the AY 2008-09 doesn't arise. In any case, even on merits, the claims are not allowable as under:- (i) The AO has given detailed reasons for disallowance of claim u/s.54B as the appellant has not produced any evidence in - support of the claim u/s.54B. I am in agreement with the AO in regard to his findings. In any case, once the property transferred is not held to be agricultural land, the issue of allowing deduction u/s.54B does not arise. (ii) As regards the claim u/s.54F, as elaborated in detail by the AO, it is seen that the appellant had not furnished primary evidences such as municipal approval, municipal tax bills, water or electricity bills etc. in support of the contention of construction of a house. Even with regard to the alleged buying of land, the appellant claimed it at Rs.37.50 lakhs as per the AFS dated 30.04.2008 where as it is only for Rs.6 lakhs as per the Sale Deed. The appellant did not produce the said AFS dated 14.02.2008, though he claimed Rs. 37.50 lakhs as the purchase consideration. It Is not hard to visualize the reason for nonproduction of the said AFS as only the guideline value given by way of cheque would have been mentioned in the sale deed, whereas the real consideration including may be cash payment would have been mentioned in the AFS. 9.2 In view of the above, the deduction u/s,54F is also not available to the appellant even on merits. Thus deductions u/s 54B and 54F are not allowable for the claim made in the AY 2009-10. In the result, the grounds of appeal for the AY 2008-09 are dismissed and the action of the AO in bringing the said transaction to capital gains tax in the AY 2008-09 is upheld.

19 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others return of income. It can be seen that on one hand the appellants themselves declared capital gains in the AY 2009- 10 and on the other hand the arising of capital gains is being challenged in the grounds of appeal for the AY 2009-10 (in fact the same set of grounds and arguments were made in the appeals for both the years i.e. AY 2008-09 & 2009-10). Since it has been held by me that the said lands are not agricultural lands and are capital assets and the capital gains arises in the AY 2008-09 as discussed in the preceding paras, the Grounds of appeal No. (i) & (ii) of the AY 2009-10 are dismissed. As regards the year of taxability, since the appellant himself offered capital gains in the AY 2009-10, the Grounds No. (iii) & (iv) of appeal are dismissed as infructuous. As regards the claim of deduction u/s 54B and 54F in the AY 2009-10, contested in Ground No. (v)- of appeal, it is dismissed as per the discussion in Para No.9.1 above. In the result, appeal for the AY 2009-10 is dismissed.”

20 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others Rajendra Nagar MandaI, Ranga Reddy District vide registered document no 3641/98 dated 12 November 1998 and vide registered document 2130/99 dated 26 May 1999. The Adangal and Pahani are Mutated on her name. 3. That, the Learned CIT (A) failed to note that there was no transfer during the Financial Year 2007-2008 relevant to the Assessment year 2008-2009 as the Agreement of Sale of 29-10-2007 was not registered and no possession of the land was given as could be seen from the subsequent agreement - cum GP A of 20-05- 2008. 4. That, without prejudice to the aforesaid ground the learned CIT(A) failed to note that the land in question were agricultural lands and therefore not a capital asset within the meaning of Section 2(14) of the IT Act, 1961 on the basis of evidence tendered by the Appellant. 5. That, any other ground(s) that may arise at the time of hearing.”

13.1 The appeals raised in AY 2009-10, which are common in all the appeals, as under: “1. That, the impugn assessment order is contrary to the principals of natural justice. 2. That, Smt. Mahmooda Begum is the absolute owner of the agricultural property for Sy. No. 237, 238 and 242 total admeasuring to an extent of Ac 1-01 Guntas, situated in Narsingi Village, Narsingi Gram Panchayat, Rajendra Nagar MandaI, Ranga Reddy District vide registered document no 3641/98 dated 12 November 1998 and vide registered document 2130/99 dated 26 May 1999. The Adangal and Pahani are Mutated on her name. 3. That, the Learned CIT (A) having come to a conclusion that there was no transfer in the assessment year 2009-2010 ought to have cancelled the protective assessed for the Ay 2009-2010. 4. That, the Learned CIT (A) erred in upholding that no evidence was filled by the appellant that the land in question were Agricultural Lands.

21 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others 5. That, the Learned CIT (A) fails to note that the Lands in question were not Capital Assets but Agricultural Lands and therefore not liable for Capital Gains. 6. That, the Learned CIT (A) erred in, disallowing the exemption under section 54B of Income Tax Act, 1961. 7. That, the Learned CIT (A) erred in disallowing the exemption under section 54F of Income Tax Act, 1961. 8. That, any other ground(s) that may arise at the time of hearing.”

14.1 Further, she submitted that assessee along with family members and consenting parties i.e. M. Jayashree and M. Vishnu Vardhan sold the property in the AY 2009-10, as the consenting parties paid considerable amount but could not pay the balance amount. The consenting parties arranged this sale by bringing the new purchaser. Since the property was with the assessee and they paid the considerable amount, the sale

22 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others was completed as per the terms and conditions mentioned in the sale agreement dated 20/05/2008. Therefore, the year of chargeability of capital gain falls in AY 2009-10 only.

14.2 With regard to agricultural land, she brought to our notice the Pahani which is placed in pages 52-76 of the paper book, which shows that assessee was doing agriculture in the above said land.

14.3 With regard to situation of land, she brought to our notice the Gram Panchayat Certificate, which is placed at page 78 of paper book. She submitted that the land situated in Rajendra Nagar Mandal and not in Rajendra Nagar municipality. She further submitted that as per GO No. 261, dated 16/04/2007, 12 municipalities were brought under GHMC, which include Rajendra Nagar Municipality (placed at pages 95-98 of paper book.) She brought to our notice the GO No. 407, dated 31/08/2013, the Rajendra Nagar Mandal, in which, the Narsingi Village is part of above Mandal and this Rajendra Nagar Mandal was brought within GHMC. She also brought to our notice, the GO Nos. 410, & 416, as per which, other villages of Rajendra Nagar Mandal were brought under GHMC. Subsequently, in GO No. 12, dated 07/01/2014, the govt. has cancelled the GO Nos. 407, 410 & 416, which is placed in page 79 of paper book, which includes the Narsingi Village. Even as per Notification No. SO 9447), dated 06/01/1994, the Rajendra Nagar is not notified. Therefore, she submitted that the Narsingi Village is part of Rajendra Nagar Mandal and not part of Rajendra Nagar Municipality, which was not notified by CBDT, this village is outside the purview of GHMC limits. She relied on the case law, CIT Vs. Madhukumar N. (HUF), [2012] 208 Taxman 394 (Kar.) to submit that the Narsingi Village does not come under notified area, the land

23 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others situated in this village is not capital asset within the meaning of section 2(14)(iii)(b) of the Act. Similar view was held in the case of Srinivas Pandit (HUF) Vs. ITO, ITA No. 56/Hyd/2007, order dated 23/04/2010, which was confirmed by Hon’ble Jurisdictional High Court in ITTA No. 195 of 2013.

14.4 With reference to AY 2008-09, she submitted that AO has treated the sale in AY 2008-09 and again the same transaction was brought to tax in AY 2009-10 on protective basis. The same transaction was brought to tax twice. She submitted that the agreement of sale was cancelled subsequently and the same was part of the sale deed dated 20/05/2008 and the assessee has confirmed the delivery of possession in the above agreement, it clearly shows that the assessee has actually sold the land only in the AY 2009-10.

14.5 Further, ld. AR of the assessee relied on the decision in the case of Smt. Raja Ravi Ramana, Patna HC, 201 ITR 1032 for exemption u/s 54B & 54F of the Act.

24 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others

25 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others purpose of section 53A. The cumulative effect of these amendments are that where a person contracts to transfer for consideration any immovable property in writing and the transferee has in part performance of the contract, taken possession of the said property, the benefit of section 53A would not be available to him unless the document is registered. In short, the seller cannot enforce the agreement. Therefore, seller interest is not protected.

16.1 In the given case, no doubt, the assessee has received considerable consideration by the end of AY, still, the other portion of the sale consideration is not protected since the assessee has not registered agreement of sale. It clearly shows that no prudent seller will let go his ownership without proper protection. Merely because in the clause of agreement of sale, it is mentioned that the possession will be handed over today, when the assessee received only initial advance, it does not mean that assessee has handed over the possession of the property. The registered sale deed clearly indicates that the possession was handed over by the assessee to new purchaser subsequent to receipt of whole consideration agreed by the assessee in the unregistered agreement of sale. Therefore, considering the practical and regular customs in the real estate business, in our view, assessee has not handed over the possession till the receipt of whole consideration as per agreement with the consented parties. Hence, in our view, the transfer within the meaning of section 2(14)(v) of the Act was not taken place in AY 2008-09. Therefore, the addition made by the AO in AY 2008-09 on capital gains is deleted.

26 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others already AO has made protective assessment in this AY. In our view also, the actual transfer taken place only in AY 2009-10.

17.1 With regard to other ground, whether the land is agricultural land and whether this land is capital asset or not, in our view, let us deal first issue of capital asset . Ld. AR brought before us the various GOs of AP Government, on bringing the various municipalities within GHMC. We notice that Rajendra Nagar Mandal which is part of Ranga Reddy District. In GO No. 407 dated 31/08/2013, the Narsingi village, which is part of Rajendra Nagar Mandal was brought under GHMC. But, subsequently, the above GO 407 was withdrawn in GO No. 12 datged 07/01/2014. It clearly indicates that the Rajendra Nagar Mandal in which Narsingi Village is part of above Mandal was attached to GHMC briefly. But at the time of sale i.e. AY 2009-10, it was never part of GHMC.

17.2 Further, the particular land can be considered as capital asset only when it is part of notification of the CBDT. The last CBDT notification brought before us i.e. SO 9447, is dated 06/01/1994. As submitted by ld. AR the land situated outside the notified area as per notification is not capital asset. We notice that in the case of CIT Vs. Madhukumar N. (HUF), (supra), the High Court of Karnataka has held as under: “S. 2(14)(iii)(b) of the Act covers the situation where the subject land is not only located within the distance of 8 kms. from the local limits, which is covered by Clause (a) to S 2[14][iii] of the Act, but also requires the fulfilment of the condition that the Central Government has issued a notification under this Clause for the purpose of including the area upto 8 kms., from the municipal limits, to render the land as a 'Capital Asset’'. It is contended that land in question is located, within 8 kms. i.e. within the municipal limits of Municipal Council in the absence of any notification issued under Clause (b) to section 2[14][iii] of the Act, it cannot be looked in as a capital asset within the meaning of Section 2(l4)(iii)(h) of the Act also and therefore though the

27 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others Tribunal may not have spelt out the reason as to why the subject land cannot be considered as a 'capital asset' by giving this very reason, the conclusion arrived at by the tribunal is nevertheless correct.”

17.3 In the case of Srinivas Pandit (HUF) Vs. ITO (supra), the coordinate bench of this Tribunal held as under: “In this case also admittedly the entire transactions was made through Rajendra Nagar Revenue Authorities and not through Hyderabad Revenue Authorities. Therefore, as found by the Coordinate Bench of the Tribunal in the case of Capital Local Area Bank ltd. (supra), the jurisdictional Municipality is Rajendra Nagar Municipality and not the Hyderabad Municipality. Since Rajendra Nagar Municipality is not admittedly notified by the Central Government, the agricultural land in question cannot be treated as capital asset by taking the distance from the limits of Hyderabad Municipality. By respectfully following decisions of the Coordinate Bench cited supra. we hold that the land in question cannot be treated as capital asset within the meaning of Sec. 2(14)(iii)(b) of the IT Act. Accordingly, Orders of the lower authorities are set aside.” When the revenue has appealed against the said order of the Tribunal before the AP High Court, the Hon’ble High Court upheld the order of Tribunal and dismissed the appeal of the revenue.

28 I.T.A. No. 454Hyd/18 and others Md. Abbas Qureshi and others

Sd/- Sd/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 15th March, 2019. kv