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Income Tax Appellate Tribunal, MUMBAI BENCH “E” MUMBAI
Before: SHRI RAVISH SOOD & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the Revenue. The relevant assessment year is 2009-10. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-I, Thane [ in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’).
The grounds of appeal
filed by the Revenue read as under:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting an amount of Rs.51,12,750/- being disallowance of claim of exemption of Long Term Capital Gain being sale of agricultural land.
Samsuddin Ahmed Saiyed
2. On the facts and in the circumstance of the case and in law, the Hon'ble CIT(A) erred in holding that the said land is agricultural land despite the fact that no agricultural activity is carried out in the said land and only wild grass is grown which is a natural process on any barren land. This fact was verified by deputing an Inspector to verify physically as regards to agricultural activity. Even the State Revenue authority has termed the land to be hills and the produce to be grass. As per the provisions of sec 10(37)(ii) of the IT Act. 1961, "such land during the period of 2 years immediately preceding the date of transfer, was being used for agricultural purposes by such HUF, Individual or a parent of his”. However, in this case, this land was barren and no agricultural was carried out.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in treating sale of wild grass as agricultural activity. 3. Briefly stated, the facts of the case are that the assessee filed his return of income for the assessment year (AY) 2009-10 on 02.04.2009 disclosing total income of Rs.2,00,000/-. The Assessing Officer (AO) received Annual Information Return (AIR) information that the assessee had sold immovable property amounting to Rs.55,52,750/- during the period under consideration. In response to a query raised by the AO, the assessee submitted that he had sold the property vide sale deed dated 25.07.2008 at village Mangao-Varedi, Taluka Karjat, Dist. Raigad, for a total consideration of Rs.55,52,750/- and the same was not liable for capital gains as the land in question was an agricultural land. As per the assessee, after considering the indexed cost of acquisition and also indexed cost of improvement, there was a loss of Rs.41,25,904/-. During the course of assessment proceedings, the assessee claimed before the AO that the said plots were table agricultural plots Samsuddin Ahmed Saiyed and used for agricultural purpose. To verify it, the AO made a reference to the State Land Revenue Department. The said department vide their letter dated 15.12.2011 informed the AO that the said plots of land were not “agricultural land” but comprised only hills. The AO on verification of the annual production chart (7/12 extract) submitted by the assessee observed that the assessee had not carried out any agricultural activities on the said plots of land. The product shown therein is only ‘grass” which comes automatically on any barren land. Thus the AO held that these plots of lands were not agricultural land, even though they are falling in ‘Green Zone’ as claimed by the assessee. Also during the course of assessment proceedings, the assessee had furnished photocopy of stamped receipt for payment of Rs.8,44,000/- to his brothers who claimed to be the partners in purchase of the aforesaid landed property. As per this stamped receipt, the assessee and his brothers claimed the said property as “abandoned uncultivated land”. In view of the above facts the AO held that the aforesaid land was not an agricultural land and it was a capital asset as defined u/s 2(14) of the Act and therefore, liable to capital gains tax. In the computation of capital gains submitted by the assessee during the course of assessment proceedings, claim was made that the capital gains on sale of the said land was exempt u/s 54B of the Act. The AO observed that the assessee had not brought anything on record to show that the investment in new agricultural land had been made within the stipulated time. The assessee also failed to prove that he had deposited the capital gain in Capital Gains Deposit Account Scheme and Samsuddin Ahmed Saiyed utilized the said deposit for purchase of the agricultural land. In so far as the assessee’s claim for investment in residential house is concerned, he had not furnished any details like date of purchase, copy of purchase agreement, details of payment made etc. Thus the AO held that the assessee failed to prove that he had fulfilled the conditions laid down in section 54F. While working out the capital gain/loss, the assessee had claimed various expenses, like cost of improvement of the original land (asset), transfer expenses (brokerage), payment to family members towards purchase of the original asset, cost of improvement of the new agricultural land purchased in Karnataka, cost of construction of firm house in the new agricultural land at Karnataka etc. However, the assessee failed to file before the AO any documentary evidence to prove the genuineness of these expenses except (i) family shares purchased from brothers of Rs.8,44,000/- and (ii) cost of reacquisition of Rs.4,40,000/-. Therefore, the AO held that in so far as family shares purchased from brothers, the assessee had not brought anything on record to show that the assessee’s brothers had any lawful claim in the said land. The assessee also failed to prove that he had taken money from his brothers for purchase of the said land. Therefore, the AO disallowed various expenses except cost of reacquisition of Rs.4,40,000/- given by the assessee while working out the capital gains on sale of the said land. The AO further noted that while computing the capital gains on sale of the aforesaid land, the assessee had claimed purchase cost of Rs.1,51,745/-, Rs.2,50,000/- and Rs.49,060/-. During the course of Samsuddin Ahmed Saiyed 19.12.2011, the AO asked the assessee to explain the source of investment with necessary documentary evidence on the above claim. In this regard, the assessee submitted that the funds for purchasing the plot were arranged by him, his brothers and brother-in-laws who were working abroad. However, the assessee failed to furnish any documentary evidence to prove that the funds were provided by the above relatives for purchase of the plots. Therefore, the AO treated the investment in these plots as out of undisclosed sources of income and held the cost of acquisition of these plots at Rs. Nil. Considering the above facts, the AO calculated the Long Term Capital Gain (LTCG) on sale of the aforesaid plots of land as under:
Sale consideration received on sale of plots Rs.55,52,750 Less: (i) Cost of acquisition NIL (ii) Indexed cost of acquisition NIL (iii) Cost of re-acquisition Rs.4,40,000 Taxable Long- term capital gain Rs.51,12,750/-
Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) decided the issue as to whether the land in question is agricultural land or not. The Ld. CIT(A) has held that (i) perusal of the purchase agreement dated 30.11.2007 between the assessee and the seller Shri Arun Balkrishna Basare shows that the land Samsuddin Ahmed Saiyed 4 of this agreement, it is clearly mentioned that the seller has paid the agricultural cess (Dhara) till today and henceforth the cess (Dhara) will be paid by the purchaser; the agricultural cess is paid on the agricultural land to the State Government, (ii) perusal of the registered sale agreement dated 25.07.2008 between the assessee and the purchase of the land Shri Neil Dhiren Thacker also proves that the land in question sold by the assessee is an agricultural land; while giving the description of the property, it is mentioned at page 2 of the sale deed that “all that piece and parcel of agricultural land situated at village Mangao Varedi, Taluka Karjat, Dist. Raigad, within the limits of Gram Panchayat Mangao Varedi”; the same thing is repeated at page 8 of the agreement while giving the schedule of the property, (iii) even if the revenue department has stated it to be ‘Hills’, it will not automatically be termed as non- agricultural land; Hilly tract can also be an agricultural area, (iv) though Hilly area, but the same is situated in the village Mangao Varedi, about 20 km away from the Taluka Karjat, is definitely an agricultural land, (iv) the land in question is assessed to the land revenue as agricultural land and the assessee has paid the annual agricultural cess (Dhara) on this land which is mentioned in the 7/12 extract submitted by the assessee, (v) it is not the case of the AO that the land in question is not shown as the agricultural land in the 7/12 extract, (vi) in 7/12 extract, the produce shown on the land of the assessee is grass, which is also an agricultural produce, (vii) it is also not proved that the assessee had ever applied for the change of land used for non-agricultural use and Samsuddin Ahmed Saiyed (viii) the assessee has sold the land as agricultural land to the buyer as mentioned in the sale deed. Then the Ld. CIT(A) deleted the addition of Rs.51,12,750/- made by the AO.
Before us, the Ld. DR relies on the decision in Fazalbhoy Investment Co. Pvt. Ltd. v. CIT (1989) 176 ITR 523 (Bom), Kalpettta Estates Ltd. v. CIT (1990) 185 ITR 318 (Kar), Chemmancherry Estates Co. v. ITO (2008) 118 TTJ 691 (Chen-Trib), Smt. Sarifabibi Mohmed Ibrahim & Ors v. CIT (1993) 204 ITR 631 (SC). The Ld. DR also filed a copy of letter dated 15.12.2011 from the Tehsildar Officer to the AO stating the following: “With reference to the above subject, it is stated that the land details No. 21/1A and 137/3 region having sl. No. 5.45.0 area 3.88 and sl. No. 1.23.0 area 0.69 is around 20 kms from Karjat and this land is not cultivable, it has mountains.”
On the other hand, the Ld. counsel of the assessee files a Paper Book (P/B) containing inter alia (i) copy of order passed by the S.D.O, Land Revenue, Panvel, Dt. 20.09.2001 & Dt. 26.11.2007 for purchase of agricultural land by respondent, (ii) copy of agreement in respect of purchase of agricultural land by respondent Dt. 20.11.2007, (iii) copy of agreement in respect of sale of agricultural land by respondent Dt. 25.07.2008, (iv) copy of record of rights i.e. 7/12 extract, prescribed in the Maharashtra Land Revenue Code, depicting the land as “agricultural land & agricultural produce thereof on the said agricultural land” in the name of respondent and (v) copy of order/report by the district town Samsuddin Ahmed Saiyed Raigad Division, stating the agricultural land falling under the “Green Zone”. The Ld. counsel clarifies that the above documents were filed before the AO and CIT(A) Reliance is also placed by him on the order dated 22.12.2016 of the ITAT in ACIT v. Shri Haresh Chunilal Rajani (ITA No. 911/Mum/2015). Finally, the Ld. counsel supports the order passed by the Ld. CIT(A).
We have heard the rival submission and perused the relevant materials on record. The reasons for our decisions are given below. We begin with the decisions relied on by the Ld. DR. In Fazalbhoy Investment Co. Pvt. Ltd. (supra), the assessee purchased land in question, at Chembur, in July 1951. It was acquired by the Government during the course of three previous years. The AO assessed LTCG in the sums of Rs.2,18,933/-, Rs.4,218/- and Rs.34,428/- respectively for the three years. He rejected the contention of the assessee that the said land was agricultural land and that any gain made thereon would not, therefore, attract the provisions relating to capital gains in the Act. The Hon’ble High Court held that “in the absence of evidence to show that the land was put to any agricultural use, the same cannot be treated to the agricultural land, the sale of which could be excluded from the levy of capital gains tax”.
Samsuddin Ahmed Saiyed In Kalpettta Estates Ltd. (supra), the assessee pleaded that the assets transferred are agricultural lands and so exempt from the levy of capital gains tax. The Hon’ble Kerala High Court held that burden is on the assessee to show that the land was agricultural land on the date of sale and it is not enough to allege or show that it was agricultural land once or on the date of acquisition. It upheld the finding of the Tribunal that the assessee only extracted Timber from the land and no agricultural operations were carried on and the land continued to Lremain a forest land. Land was no subject to land revenue. Thus the Hon’ble High Court held that the land was not agricultural and therefore, not exempt from capital gains tax. In Chemmancherry Estates Co. (supra), the ITAT ‘A’ Bench, Chennai held that “land sold by the assessee being barren land having no irrigation facilities and not fit for agricultural operation and the same being situated in a developed area and sold to a Co-operative Housing Society for construction of houses, it was non-agricultural land and therefore, capital gains arising on transfer thereon are taxable.” In Smt. Sarifabibi Mohmed Ibrahim & Ors (supra), the Hon’ble Supreme Court held : “Whether a land is an agricultural land or not is essentially a question of fact. Several tests have been evolved in the decisions of the Supreme Court and the High Court, but all of them are more in the nature of guidelines. The question has to be answered in each case having regard to the facts and circumstances of that case. There may be factors both for and against a particular point of view. The Court has to answer the question on a consideration of all of them a Samsuddin Ahmed Saiyed process of evaluation. The inference has to be drawn on cumulative consideration of all the relevant facts. “ 7.1 We now discuss the decision in Shri Haresh Chunilal Rajani (supra) relied on by the Ld. counsel of the assessee. During the year under consideration, the assessee sold certain lands for a sale consideration of Rs.5,22,02,500/- to M/s Lavasa Corporation. These lands were adjacent to each other and located in the village Admal, Taluka Mulasni in Pune District. The assessee claimed the lands as agricultural lands falling outside the definition of capital asset given in section 2(14) of the Act. The Tribunal vide order dated 22.12.2016 held that “We notice that the Ld. CIT(A) has considered the revenue record and noticed that the impugned land has been shown as agricultural land. He has also noticed that there was a no material to show that the land was put to non- agricultural purpose. He has noticed that the growing of grass was also an agricultural activity and the revenue records have also shown that the grass has been grown in the impugned land. The Ld. CIT(A) has also noticed that the land under consideration has not been found to be barren land, incapable for agricultural operations.” The Tribunal all took into account the finding the Ld. CIT(A) that the impugned land is located 45 km away from the town and dismissed the appeal filed by the revenue. 7.2 The major contention of the Ld. DR is the letter dated 15.12.2011 from the Tehsildar Officer to the AO stating that “the land details No. 21/1A and 137/3 region having sl. No. 5.45.0 area 3.88 and sl. No. 1.23.0 Samsuddin Ahmed Saiyed 0.69 is around 20 kms from Karjat and this land is not cultivable, it has mountains.” 7.3 We have referred hereinbefore the decision in Smt. Sarifabibi Mohmed Ibrahim & Ors. (supra) wherein it is held that “whether a land is an agricultural land or not is essentially a question of fact. Several tests have been evolved in the decisions of Supreme Court and High Court, but all of them are more in the nature of guidelines. The question has to be answered in each case having regard to the facts and circumstances of that case.” 7.4 We find that there is merit in the findings of the Ld. CIT(A) that as per the purchase agreement dated 30.11.2007 between the assessee and the seller Shri Arun Balkrishna Basare, the land purchased by the assessee is an agricultural land and at page 4 of the said agreement, there is a clear mention that the seller has paid agricultural cess (Dhara) till date and henceforth the cess (Dhara) will be paid by the purchaser. Further, a perusal of the registered sale agreement dated 25.07.2008 between the assessee and the purchaser of the said land Shri Neil Dhiren Thacker also proves that the land in question sold by the assessee is an agricultural land. While giving the description of the property, it is mentioned at page 2 of the sale deed that “all that piece and parcel of agricultural land situated at village Mangao Varedi, Taluka Kajat, Dist. Raigad, within the limits of Gram Panchayat Mangao Varedi”; the same thing is repeated at page 8 of the agreement while giving the schedule of the property.
Samsuddin Ahmed Saiyed There is also merit in the finding of the Ld. CIT(A) that though hilly area but the same is situated in the village Mangao Varedi, about 20 km away from the Taluka Karjat, is definitely an agricultural land. It is well to remember that the question whether a particular land is agricultural land has to be decided on a totality of the relevant facts and circumstances. There may be circumstances for and against. They have to be weighed together and a reasonable decision arrived at. Where the assessee has produced cogent evidence to support his contention that the land concerned was agricultural land and the revenue wants to controvert such contention, the revenue has to lead convincing evidence on its point as held in CWT v. Officer-in-charge (Court of Wards), (1976) 105 ITR 133, 143 (SC); CIT v. Fagoomal Lakshmichand, (1978)112 ITR 9,11 (Ker.). In the instant case, the revenue has failed to lead convincing evidence on its points. In view of the above facts, we uphold the order of the Ld. CIT(A).