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Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAHUL CHAUDHARY
PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 21/07/2017 passed by the Ld. Commissioner of Income Tax (Appeals)-3, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2013-14, raising the solitary ground as under:
Greenboom Developers & Resorts Ltd. 2 ITA No. 3363/M/2019 “1. Whether on the facts and circumstances of the case and in law, The Ld. CIT(A) erred in confirming the long term capital gain of Rs.1,30,91,195/- for sale of agriculture land which was purchased on 24.06.1987.” 2. The assessee revised the form No. 36 i.e. the form prescribed for filing the appeal on the ground that assessee company merged with M/s Greenboom developers and resorts Ltd by way of the order of the Hon’ble High Court dated 21/05/2016.
3. Briefly stated facts of the case are that the assessee e-filed its return of income for the year under consideration on 29/09/2013 declaring loss of ₹24,154/-. In the return of income the assessee computed long-term capital gain on sale of land, but same was claimed as exempt on the ground that land sold was agricultural land. In the scrutiny assessment order passed under section 143(3) of the income tax Act, 1961 (in short ‘the Act’) dated 29 to 2016, the Assessing Officer rejected the claim of the assessee of exempted long-term capital gain and assessed the long-term capital gain at ₹1,30,91,195/-. On further appeal, the Ld. CIT(A) observed that that Greenboom Developers & Resorts Ltd. 3 ITA No. 3363/M/2019 the assessee failed to substantiate the land in question was agricultural land. The Ld. CIT(A) pointed out that land was situated in Borivali suburban district, covered under the municipality of Mumbai. As no evidence in support of the claim that land in question was agricultural land, the Ld. CIT(A) upheld the addition of observing as under:
“6. Grounds No. 1 to 3 relate to taxing of long term capital gain of Rs. 1,30,91,195/-. During the course of assessment proceedings, the A0 observed that the appellant company has sold agricultural land of Rs. 1,85,00,000/-, part of the plot for Rs. 25,00,000/- to Mr. Mohan Cherian and another part at Rs.1,60,00,000/- to Mr. Irfan Khan on 08.11.2012. The appellant has purchased the plot in 1989 from Dorit Maria for Rs. 9,65,608/- and earned profit of Rs.1,75,34,392/-. The AO asked the appellant to file details of agreement and working of capital gains. Perusal of details filed showed that the said immovable property is situated at village Erangal, Taluka Borivali, Mumbai. In the computation, the appellant claimed that it is agricultural land and was purchased on 24.06.1987 for Rs. 9,65,608/- and sold on 07.11.2012 for Rs. 1,85,00,000/-. The appellant filed valuation report of the plot No: CTS No. 35 done by The Sub-registrar Borivali No. 5, Mumbai Suburban district (Bandra). Relying on the said government rates as per the Mumbai suburban district, the AO concluded that the property have been sold at Rs. 1,60,00,000/-. A show cause notice was issued to the appellant asking to tax the difference in consideration
Greenboom Developers & Resorts Ltd. 4 ITA No. 3363/M/2019 as capital gains, which was responded by the appellant. Since the land in question is situated in area which comprised within the jurisdiction of Bombay Municipal Corporation, the AO has taxed the long term capital gains of Rs.1,30,91,195/-.”
6.1 On the other hand, the appellant submitted that the appellant purchased agricultural land at Erangal Village, Madh Island, Taluka Borivali, Mumbai on 24.06.1987, but due to distance of 12.4km from Mumbai the appellant was unable to carry on agricultura! operations on the said land. The cost of acquisition of the said land was Rs. 9,65,608/-. The appellants' Director, due to old age decided to sale said land. The land was covered no development area therefore the directors were not carried on any agricultural operations.
6.2 Further, the appellant submitted that the appellant has sold the said land along with structure on the sold to two parties. The building and some portion of land was sold to Mr. Mohan Cherian at Rs. 25,00,000/- and balance part of land to Mr. Irfan Khan at Rs. 1,60,00,000/-. The appellant has received total consideration of Rs. 1,85,00,000/-. The net capital gain was 1,30,01,105/- after constderingttre indexed cost of acquisition. The appellant has treated the said capital gain as exempt income and not eligible to tax as the appellant was of bonafide belief that the said land and building is agricultural land and building. The appellant has filed purchase and sale showing agreement with department in support of their claim.
6.3 The appellant further submitted that the appellant has purchased said land along with structure as an agriculture land and building and sold as agricultural land and building. The said land was situated Erangal Village. The location of land itself suggests it is in village. The appellant states that the character of the land does not Greenboom Developers & Resorts Ltd. 5 ITA No. 3363/M/2019 get changed from agricultural land to non agricultural land automatically. The appellant has never made any application for converting the said land as non-agriculture land than the appellant fails to understard of the stand of A.O. to treat as non agricultural land and taxing capital gain on the said land. We also rely on Gujarat high court decision in CIT V Rajsibhai Mermanbhai Odedara 22 taxman 72.
6.4 I have carefully considered the rival submissions and facts of the case. The main dispute arising is to tax the difference as LTCG. The appellant daimed that this is an agricultural land and does not attract any income tax, whereas the AO treated the said land and dwelling house as non agricultural property because the land is situated in the vicinity of Municipality of Mumbai. The undisputed fact is that the said land is situated at Borivali in Mumbai which is covered under Municipality of Mumbai and the status of the said land have changed as city expanded and no land remained as agricultural land and the entire space has been converted into residential colony. The Mumbai Municipality has provided basic amenities to the residential properties. The claim of the appellant that it remains agricultural land is neither tenable nor acceptable. Further, except presenting academic discussion, the appellant has not produced any evidence in support of its claim that the land in question is still maintaining the status quo of an agricultural land, either during the assessment proceeding or during the appellate proceedings. In view of the same, I did not find any reason to interfere in the findings of the AO, who has correctly assessed the difference as LTCG in the hands of the appellant; hence Grounds No. 1, 2 and 3 are dismissed.”
Greenboom Developers & Resorts Ltd. 6 ITA No. 3363/M/2019
4. Aggrieved, the assessee is an appeal before the Tribunal raising the grounds as reproduced above.
5. Before us the Ld. counsel of the assessee filed two paperbooks containing pages 1to 132 and 1 to 34. Before us Ld. counsel of the assessee referred to page No. 121 of the paperbook, which is copy of Google Map showing distance of the Erangal Village from Malad (a sub urban area of Mumbai) as 12.4 kms. Further, the Ld. counsel submitted that land was purchased as agricultural land and was never converted to non-agricultural land and therefore assessee satisfies the definition of the agricultural land as per section 2(14)(iii) of the Act and excluded from the definition of the capital asset.
We have heard rival submission of the parties on the issue in dispute and perused the material on record. The issue in dispute before us is whether the land sold by the assessee was in the nature of the agricultural land exempted from the definition of the capital
Greenboom Developers & Resorts Ltd. 7 ITA No. 3363/M/2019 asset liable for long-term capital gain. One of the conditions for excluding the land from the definition of the capital asset is that said land should be agriculture land in India not being land situated within prescribed limit from the municipal Corporation as per section 2(14)(iii) of the Act. During relevant time said distance was prescribed at 8kms from the outer limit of the municipal Corporation . The term “ agriculture” has not been defined in the Act and various courts from time to time has explained as what constitutes “agriculture”. The Hon’ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim (204 ITR 631) has approved the decision of a division Bench of the Hon’ble Gujrat High Court in the case of CIT Vs Siddharth J Desai (1983) 139 ITR 628 (Guj) and has led down 13 test or factors which are required to be considered and upon consideration of which, the question whether the land is agricultural or not, has got to be decided or answered. The said 13 test are reproduced as under:
Greenboom Developers & Resorts Ltd. 8 ITA No. 3363/M/2019 “1. Whether the land was classified in the Revenue records as agricultural and whether it was subject to the payment of land revenue?
Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time?
Whether such user of the land was for a long period or whether it was of a temporary character or by any of a stopgap arrangement?
Whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land?
Whether, the permission under s. 65 of the Bombay Land Revenue Code was obtained for the non-agricultural use of the land? If so, when and by whom (the vendor or the vendee)? Whether such permission was in respect of the whole or a portion of the land? If the permission was in respect of a portion of the land and if it was obtained in the past, what was the nature of the user of the said portion of the land on the material date?
6. Whether the land, on the relevant date, had ceased to be put to agricultural use? If so, whether it was put to an alternative use? Whether such cesser and/or alternative user was of a permanent or temporary nature?
7. Whether the land, though entered in Revenue records, had never been actually used for agriculture, that is, it had never been ploughed or tilled? Whether the owner meant or intended to use it for agricultural purposes?
Greenboom Developers & Resorts Ltd. 9 ITA No. 3363/M/2019
8. Whether the land was situated in a developed area? Whether its physical characteristics, surrounding situation and use of the lands in the adjoining area were such as would indicate that the land was agricultural? 9. Whether the land itself was developed by plotting and providing roads and other facilities? 10. Whether there were any previous sales of portions of the land for nonagricultural use? 11. Whether permission under s. 63 of the Bombay Tenancy and Agricultural Lands Act, 1948, was obtained because the sale or intended sale was in favour of a non-agriculturist? If so, whether the sale or intended sale to such nonagriculturists was for non- agricultural or agricultural user? 12. Whether the land was sold on yardage or on acreage basis? 13. Whether an agriculturist would purchase the land for agricultural purposes at the price at which the land was sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield?" 6.1 We find that before the lower authorities, the assessee has not filed any evidence in support for justifying whether the land was situated beyond the 8 km from the outer limits of the municipal Corporation or satisfies the test laid down in the case of Sarifabibi (supra).
Greenboom Developers & Resorts Ltd. 10 ITA No. 3363/M/2019
Before us the Ld. counsel of the assessee submitted that in identical case of ACIT Vs Shri Vishal R Suchak in the Tribunal has restored the issue back to the Assessing Officer for verifying that whether the land was situated beyond 8 km from the municipal limit. As the question of distance of the land sold from the outer limit of the Municipal Corporation and other 13 test laid down in the case of the Sarifabibi (supra), which goes to the root of the question whether the land of the assessee is agricultural land, beyond the outer limit of the multiple Corporation, were not raised specifically by the lower authorities, therefore in the fact and circumstances of the case and in the interest of substantial justice, we feel it appropriate to restore this issue to the file of the Assessing Officer for deciding afresh in the light of the discussion made above. The ground of the appeal of the assessee is allowed for statistical purposes.
Greenboom Developers & Resorts Ltd. 11 ITA No. 3363/M/2019
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 29/04/2022.