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Income Tax Appellate Tribunal, DELHI BENCH “E”: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the revenue against the order of the ld CIT(A)- 1, Dehradun dated 14.10.2014 for the Assessment Year 2010-11. 2. The revenue has raised the following grounds of appeal:- “1. That the ld CIT(A)-I, Dehradun has erred in law and on facts in holding that the land sold by the assessee was not a capital asset even though it had been declared as a part of industrial area by the Govt. and had in fact been sold as non agricultural land.
2. The order of the ld CIT(A) be set aside and that of the Assessing Officer be restored.”
ITO Vs Meera Thapa Prop CO No. 233/Del/2015 (Assessment Year: 2010-11) 3. The assessee has also filed cross objection in this appeal, however same is supporting the order of the ld CIT(A).
Despite notice none appeared on behalf of the revenue as well as the assessee and therefore, the issue is decided on merits of the case as per information available on record.
The brief fact of the case is that the assessee is a proprietor of M/s. Saheed Filling Station, Mussoorie Road, Dehradun, which is authorised retail outlet of M/.s Hindustan Petroleum Corporation. The assessee is a war widow of Kargil War. She was allotted a plot of agricultural land at Dehradun, bearing Khasra No. 122Mi, Selaqui, Mauza Central Hope town, Dehradun. The land is mentioned in the revenue record as agricultural land. The above land was transferred to the assessee on 31.12.2009 and till then the assessee was continuously performing agricultural activities as on date. However, the agricultural income earned by the assessee was very small and sometime in loss. On 28.06.2004 the land was declared to be eligible for tax holiday u/s 80IC(2)(a) of the Act by Central Govt vide notification No. 177/2004. Therefore, on 31.12.2009, the assessee sold this land for Rs. 78.50 lacs through three separate sale deed. The assessee filed her return of income on 10.09.2010 declared income of Rs. 449029/-. In the return of income the assessee declared profit from petrol pump filling station of Rs. 511852/- and income from other sources. The ld AO noted that the assessee has not declared the capital gain on sale of property. The ld AO noted that the assessee has sold the land which is a „capital asset‟ and is not an „agricultural land‟ as the Govt has issued a notification wherein, the above land was notified as industrial land. He rejected the explanation of the assessee that it is an agricultural land. He further supported the same stating that the assessee has not shown agricultural income in her return of income for earlier years. Accordingly, he made an addition of Rs. 98.59 lacs to the sale consideration of Rs. 78.50 lacs applying provision of section 50C of the Act as long term capital gain where the cost of acquisition is Zero.
ITO Vs Meera Thapa Prop CO No. 233/Del/2015 (Assessment Year: 2010-11) 6. Consequent to the order passed u/s 143(3) of the Act dated 31.12.2012, assessee preferred an appeal before the ld CIT(A) who held that the assessee has sold agricultural land as it has been proved by the certificate of Tehsildar and other land records. He further held that merely because the land is declared as „industrial land‟ same cannot be held to be a „capital asset‟ and „capital gain‟ cannot be charged on sale of „agricultural land‟. He further held that as the assessee‟s land was very small and the income was also very negligible as it was not conducive to sell agricultural produce from the land in market after the consumption. Therefore, he deleted the addition made by the ld AO.
We have carefully considered the orders of the lower authorities. The facts stated are in a narrow compass that an agricultural land which was cultivated by the assessee for agricultural purposes, on being notified by the Govt, the land was sold for industrial purposes, whether such land can be considered to be sale of agricultural land or not in absence of any agricultural income shown by the assessee because of the smallness of the income, is chargeable to tax or not? The ld CIT(A) has dealt with the whole issue vide para No. 6 of his order which is as under:- “6. I have duly considered the facts and circumstances of the case and the submission of the assessee. It is a fact that the assessee was granted a piece of land by the Government of Uttarakhand after the martyrdom of her husband in the Kargil conflict on 10.08.1999. The size of the land was approximately 1 acre. The Central Government vide Notification No. 177/2004 dated 26.08.2004 declared the land of the assessee as industrial land fit for deduction u/s 80-IC. However, there is no evidence that the assessee put the land to any other use except agricultural purposes till the sale of land on 31.12.2009. The land was entered in the revenue record as agricultural land. In fact it continues to remain in the agricultural record as agricultural land even today and stand in the revenue record. There is merit in the assessee’s submission that the size of the land being small it was not conducive to sell agricultural produce from land in market after consumption. However, the fact that she was continuously carrying out agricultural activities on the same is proved by the certificate of the Tehsildar, report of the Halka patwari and the land records. On 31.12.2009 the land was sold to the parties mentioned in the order of the Assessing Officer. At least two of these parties were Page | 3 ITO Vs Meera Thapa Prop CO No. 233/Del/2015 (Assessment Year: 2010-11) industries. However, The assessee did not apply at any stage for converting the land to non-agricultural u/s 143 of the U.P. Zamidari Abolition and Regulation Act. The case of the assessee is distinguishable from that of Sarafabibi Mohd. Ibrahim and Gopal C. Sharma because in the aforementioned cases the land had not been used for cultivation while the assessee’s land were under cultivation as per the land record. It is also seen that the land continued to be used for agricultural operation right from its purchase till its sale. The assessee had not developed the land by plotting or providing roads or other facilities as such none of the test laid down in the judgment of Sarifabibi are seen to be applying to the assessee except for the fact that the land was sold on yardage and not acreage basis and whether agriculturist would purchase the land for agricultural purposes at which the price at which the price the land was sold. On these two tests the peculiar circumstances of the notification of the area into an industrial area would explain why the assessee sold the land n sq.mts. and why the cost of the land appreciated considerably on account of its possible use for industrial purposes. However, as has been pointed out in the case of Gordhanbhai Kahandasdatwadi v. CIT [1981) 127 ITR 664 (Guj.) potential non-agricultural use of the land does not alter the character of land from agricultural to non-agricultural land and the correct tests whether on the date of sale the land was agricultural or not. Furthermore, as pointed out by the assessee, the mere fact that her land were included into a industrial area would not change the character of the land in itself. In the case of N.Srinivas Rao vs. Special Court under the A.P. Land Act the Hon’ble Supreme Court held that “except for the fact that the said land were now included within the urban area, there is nothing to show that the user of the same had been altered with the passage of time. The decision in Sarifabibi’s case (supra) cited by Mr. Parasaran does not therefore, help his client case.” Accordingly, the Hon'ble Supreme Court held that the tenant in the instant case remained an agriculturist and therefore, transfer from an agriculturist to a non-agriculturist which was expressly prohibited under that Act was invalid. Relying on this decision the Pune Bench of ITAT in the case of Haresh V Milani vs. JCIT 111 TTJ 310 Pune held that mere fact that the land under reference was brought under an industrial zone cannot be a determining factor to say that the character of the land had changed. Furthermore, in the case of M/s Srinivasa Naicker vs. ITO 292 ITR 491 (Mad) it was held that till date of sale the agricultural operation were carried on by the assessee and the fact that the purchaser had put to use for a totally different purpose from that of the assessee ought not to have weighted with the tax authority. Capital gains could not be levied. Furthermore, in the case of Raghottama Reddy vs. ITO 169 ITR 174, the A.P. High Court held, “Accordingly we hold that the profit or gain resulting from sale of Page | 4 ITO Vs Meera Thapa Prop CO No. 233/Del/2015 (Assessment Year: 2010-11) agricultural land is revenue derived from land i.e. it is agricultural income within the meaning of clause (1) under section 2 of the Act.” The ITAT Hyderabad bench in the case of T. Urmilla vs. ITO W-6(2) in of 2012 dated 12.12.2012 while dealing with the case of an assessee whose land incorporated into Hyderabad Airport Development authority held that the Hyderabad Airport Development authority was not a municipal authority and was outside the outer municipal limit of Hyderabad. The land transferred could not be considered a capital asset under the provision of section 2(14)(iii) of the I.T.Act. Following the ratio of these judgments I hold that the mere notification of the area in which the assessee’s land was situated as an industrial zone would not alter the character of the land and render into a capital asset. The land continued to remain an agricultural land until sale. Accordingly, the assessee is not liable to pay capital gains on the sale of the said land and the addition made on this account is deleted.”