ITO WD 1(1), KALYAN vs. ARUN BABU SHELAR, BHIWANDI

आदेश / O R D E R PER R.C.SHARMA (A.M):

6.2 I have carefully gone through the facts of the case, findings of the AO in the assessment order as well as remand report, submissions of the Ld AR and material placed on record. From the above facts, it is noticed that during the year, the appellant, along with three other co- owners, had sold immovable property on 06.07.2010, for total consideration of Rs 1,00,55,000/-. On verification of capital account, the AO noticed that the appellant had credited an amount of Rs35,70,000/-, being his share in sale consideration, to the capital account. Since the income arising on sale of land was not offered for tax, the AO, therefore, added the entire amount of Rs 35,70,000/- as STCG, to the income. On the other hand the appellant did not offer any income against sale of land, with the plea that the same was agricultural land and not capital asset, as per provisions of Sec 2( 14) of the Act.

Shri Arun Baba Shelar 6.3 During the course of appellate proceedings, the appellant claimed that - 1) Land in question is an agricultural land, hence the sale proceeds / gains, arising on sale, are not taxable and 2) The land in question is situated beyond distance of 8 kms from local limits of municipal corporation and having population of less than 10000. It was further claimed that family of assessee is basically farmer and carrying on agricultural activities since generations. The crops such as Bhat and Gavat arc cultivated on the said land, which is clearly evident from 7/12 extracts. 6.4 During remand proceedings, the above facts were examined by the AO by deploying inspector of the department. In the remand report, the AO has accepted the fact that the land under question is situated beyond 8km, from the limit of the Municipality. As regard claim of agricultural land, not liable for capital gain, the AO has not accepted the claim of the appellant, on account of following facts:- i) The AO in the remand report observed that in the return of income, filed for A.Y.I 1-12, the appellant had not declared any agricultural income. In the rejoinder, the Ld. AR stated that the appellant, basically being an agriculturist, has harvested small quantum of agricultural produce, which was consumed by the family members, hence not sold in the market. It is further contended that after considering the cost and labour deployed by the family members, there was hardly any surplus, to be offered for tax. ii) In the second objection, the AO stated that the appellant had obtained permission from the competent authority, vide letter dated 22.8.2008. for establishing industrial estate, for service of industry, i.c.20years before the sale deed executed, clearly establish the intention of the appellant to make the profit on sale of land. Further, stated that the land was sold to M/s Renaissance Infra., not an agriculturist, for construction of warehouse and not for agricultural activities and registration therefore, was done at higher rale. In the rejoinder, the Ld. AR slated that i) The Assessee has not obtained any permission/ application for commercial use of Land. The Developer has made application for purchase of land for industrial use hut till date the developer has not made a GATT and the Collector has not issued N.A Order The agreement entered is for agricultural land and can he evidence through 7/12 extracts or the revenue records clearly. Till date the developer has not constructed or even started any construction on our land. / have already enclosed latest 7/12 copy for your reference that the land is agriculture even us on today date. The assessee has sold his agricultural land to M/s Renaissance Infra. He has also acted as a broker and facilitated land dealings of other farmers. This activity is ancillary and there is no brokerage income in another year. The assessee has offered brokerage income in respective Income Tax Returns Shri Arun Baba Shelar ii) The assessee has been sold land to partnership firm, but the land which is transferred is a rural agricultural land which is not a capital asset. Hi) The Purchaser has purchased the land with intention of development of industrial complex, so the purchaser advocate lias taken higher rates for the land. The agricultural land sold was sold for consideration higher than the stamp duty value. Thus, It is clearly evident that agricultural activities were being carried out by she assessee and his brothers and they are farmers since birth and have been indulged in agricultural activities. They have also taken a loan from Agriculture Credit Society which is-reflected in 7/12 records. The land is agricultural land and ft HAT and GA VAT has been cultivated, the entry for cultivation of'BHA T and GA VA T i.s clearly evident in 7/12 records The assessee have not obtained any permission from the respective authority, the developer hail applied. But till date the land is a rural agricultural land and the Collector has not issued N.A order 6.5 From the above facts, it is clear that the agricultural produce was just sufficient for self consumption and hence not sold in open market. It is further seen that the appellant had never applied, before any competent authority, for converting the agricultural land into N.A. (non-agricultural) nor obtained any permission for commercial use of land, till date. It is M/s Renaissance Infra., who had made an application, before the Development Commissioner (Industries), for purchasing of agricultural land of 72.96 hectare, from various farmers, which was granted to M/s Renaissance Infra., on 22.8.2008. During the course of appellate proceedings, the appellant himself appeared and clarified the above aspects. It is seen that the appellant and his family members, are engaged in the agricultural activities, since generations. The relevant documents have been verified and the claim of the appellant's appears to be in order therefore, liable to be accepted. The above facts, prove beyond doubt that the appellant had sold the agricultural land, as such, without changing of its land use, hence not liable for capital gain tax, as has been reported by the AO, in the remand report. Accordingly, the AO is hereby directed to delete the addition of Ks.35,70,000/-, on account of Short Term Capital gain, against the sale of agricultural land. These grounds of appeal arc allowed. "