MIDNAPORE AGRO UNITED HATCHERY PVT. LTD.,HOOGHLY vs. ACIT, CIR-2, MIDNAPUR, PASCHIM MEDINIPUR

3 Midnapore Agro United Hatchery Pvt. Ltd. A.Yr. 2011-12 26,73,535/- in respect of building as against Rs. 15lacs and Rs. 20lacs adopted by the assessee as per the sale deed respectively. The ld. AO accordingly computed the long term capital gains on transfer of this land and building as under:

4 Midnapore Agro United Hatchery Pvt. Ltd. A.Yr. 2011-12 6. The Ld. CIT(A) called for a remand report from the ld. AO in respect of this submission made by the assessee. The ld. AO reiterated the stand taken in the assessment in his remand report. The assessee in its rejoinder to its remand report stated that the assessee specifically stated that the ld. AO vide written submission dated 07.10.2013 that the land in question being agricultural land and hence no tax was paid on sale of the same. The assessee had also placed on record the entry in the revenue records of Government of West Bengal with regard to classification of land as agricultural land. With regard to objection made by the ld. AO that in page 2 of the sale deed dated 08.04.2010 submitted by the assessee wherein the description of land was mentioned as ‘homestead’ , the assessee explained that in the sale deed it was inadvertently mentioned as ‘homestead’ and further explained that a landed property can be described as homestead only when the said property is converted in the Government records from agricultural land to homestead. In this regard it was submitted that a fresh record dated 20.10.2014 has been taken from the land revenue department of Government of West Bengal wherefrom it was clear that the said landed property continued to be agricultural in nature. The Ld. CIT(A) observed in his order as under:

“In the appellant proceedings the AR admitted that the two storied building was used for hatchery and poultry business. The landed property admeasured 6532.50 sq.ft. (15 decimals) and the poultry building occupies 982 sq.ft. (as per the assessee). As per the assessee the land is agricultural land and in the Deed of the Sale it is declared as JAL/Jaljamin and is assessed to land revenue as land & building separately. The assessee filed certain receipts to show this fact. However, the claim of the assessee that the receipts of the office of Land and Land Reforms prove that the land revenue is paid for the entire 15 decimal of land is not accepted as the noting of tax paid on 15 decimals of land is in a different handwriting and in English whereas the rest of the matter in the receipts are printed as well as are written totally in Bengali language. Further the page 2 of the Deed of Sale declares the property sold as “Bastujamin” i.e. non-agricultural homestead. Though the AR has contested this entry in the sale deed by seeking to rely on the Revenue receipts, it is held that a mere entry in the revenue record by itself is not determinative of the question as to whether the land is agricultural or not.” ……………………………… In the instant case, the property sold is a Poultry business where there is a two storied constructed building also. The sale has been made of the 4

5 Midnapore Agro United Hatchery Pvt. Ltd. A.Yr. 2011-12 property as such declaring it to be a Homestead land. The land has been valued for stamp duty at a very high price ostensibly due to its commercial nature. Even the assessee has attributed more sale value to the building then to the land part of the property. There is no record of any agricultural activities been performed by the assessee on this property. Further the assessee is a company and its very name indicates that it is doing business of poultry. The claim of the assessee that it had used the vacant portion for agricultural activities is not supported by any evidence. On the contrary the open space is required for the movement of vehicles and equipment for poultry business. Even when the AO reiterated in the remand report that the assessee has not adduced any evidence of it ever having carried out any agricultural activities, the response of the assessee was one of mere denial only and no supporting documents were filed. {It is also seen that the Mouza Santipur is located in close proximity to Kolaghat Town which has a population of 22,707 as per the census 2001 also.} In view of the above facts, the claim of the assessee that it had sold an agricultural property is held baseless and is rejected. The addition on account of capital gains is approved but it is seen that while the AO has allowed the deduction of the indexed cost of acquisition of the land, the AO has not allowed as a deduction the written down value of the building constructed on the land. The cost of the building (less depreciation) also requires to be allowed as a deduction from the deemed sale consideration. The AO is directed to allow the deduction of the same after verification from the record. As a result, the appeal of the assessee is partly allowed.”

6 Midnapore Agro United Hatchery Pvt. Ltd. A.Yr. 2011-12 executed by the assessee normally contained the sale consideration attributable to the land at 15 lacs and towards building for Rs. 20 lacs. The ld. AO directly applied the provision of Section 50C of the Act and adopted the sale consideration as per Stamp Valuation Authority. At the outset the primary fact which is to be decided is whether the subject mentioned land which was transferred is agricultural land or not. The ld. AR stated the land is classified as ‘ Jal’ and placed reliance on the record of Block Land & Land Reform Officer- Kharagpur-1,, Paschim Medinipur dated 28.11.2008 wherein it has been categorically stated in the case of another person Mr. Pradip Kumar that the landed property classified as ‘ Kala’ , ‘ Jal’ & ‘ Dhani Soem’ are all agricultural in nature. He also argued that the land in question is wet land as could be evident from the sale deed. It was also argued that the assessee had paid the land revenue on such land and building as tax on agricultural land. Even though no agricultural activities were carried on this land by the assessee, the land are cultivable lands entitled and fit for carrying on agricultural portion only. We find that this Tribunal had an occasion to adjudicate similar issue as to whether the land registered as wet land could be construed as agricultural land consequentially sale of such land was not to be excisable to capital gain taxed in the case of DCIT vs. Smt. Laxmi Singh in I.T.A. No. 815/Kol/2011 for assessment year 2008-09 dated 12.08.2011 wherein it was held as under:

“4. We have heard rival contentions and gone through facts and circumstances of the case. The facts relating to this case are that assessee sold a land situated at K. Badaga village Madiberi Talik, District Kodagu in Karnatak on 13/07/2007 for a consideration of Rs. 60 lakh which was acquired on 24/03/2003 for a consideration of Rs. 5,87,400. Assessee submitted evidences of purchase deed, sale agreement, certificate of Revenue Inspector specifying land in question situated in rural area. However, Assessing Officer found that assessee could not establish or furnish any evidence to show that agricultural activities were carried out in this land for it to qualify as agricultural land and unable to show any agricultural income from this land in any preceding year and therefore found that in absence of any agricultural activity it cannot be called an agricultural land. Assessing Officer rejected the claim of appellant that profit of Rs. 49,59,767/- on sale of this land could be claimed as exempt from taxation as it was not an agricultural land. We find from records that no doubt there is absence of any agricultural activity on the land but the same is characterized as 'wet land' or abandoned coffee land. We find from sale deed that this land is classified as plantation 6

7 Midnapore Agro United Hatchery Pvt. Ltd. A.Yr. 2011-12 land as defined under Karnataka Land Reforms Act, 1961 and which clearly revealed from sale deed. The description of land in sale deed is as 10.62 acres of 'coffee sagu land' with another 5.31 acres of 'wet land' in both the purchase deed as well as agreement for sale. Once it is not rebutted that this is not 'wet land' or 'coffee land' the initial onus by assessee is discharged and this is to be treated as agricultural land. Accordingly, we confirm the order of CIT(A) and this issue of revenue's appeal is dismissed.”

In the instant case the distinction of the land being situated beyond 8 kilometers from the concerned municipality cantonment board has not been disputed by the revenue. The assessee had already placed on record that in the land revenue records of Government of West Bengal the subject mentioned land has been classified as agricultural land and that the said land are cultivable lands. The assessee has also placed on record the report of the office of Block Land & Land Reform Officer , Kharagpur dated 28.11.2008 I the case of another person wherein the landed property classified as ‘ Jal’ are considered to be agricultural in nature. In view of the aforesaid facts and respectfully following judicial precedent relied upon hereinabove we hold that the subject mentioned land is agricultural land and hence agricultural land situated beyond the requisite kilometers from any municipality cantonment board and hence does not fall within the ambit of definition of capital asset as per section 2(14) of the Act. Hence the gains derived thereon on sale of such land cannot be brought to tax under the head capital gains with regard to value of building adopted by the ld. AO based on Stamp Valuation Authority at Rs. 26,73,535/- as against the value of Rs. 20 lacs disclosed by the assessee, the assessee has subjected to the value adopted by the ld AO and hence in that scenario the legislature had already provided the way to resolve the dispute in terms of section 50C(2) of the Act by making rental income to departmental value officer for determining the value of building. It is not in dispute that the complete sale deed by the assessee is liable for capital gains though the assessee had not admitted the same in the return of income. We direct the ld. AO to determine the value building in terms of section 50C(2) of the act and grant deduction towards indexed cost of building as per 7