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Income Tax Appellate Tribunal, BENCH ‘A’ KOLKATA
Before: Hon’ble Shri J.Sudhakar Reddy, AM & Shri S.S.Viswanethra Ravi, JM ]
ORDER PER J.SUDHAKAR REDDY, AM:
The instant appeal has been filed by the Revenue against the order dated 28.10.2016 passed by the Commissioner of Income Tax-(A)-12, Kolkata in favour of the assessee wherein the order dated 30.03.2013 passed by ITO-Ward-8(1) Kolkata u/s 143(3) of the Income Tax Act, 1961 (Act) (hereinafter referred to as the ‘ Act’ ) computing the total income at Rs.65,13,730/-, against the total income of Rs.1,100/- declared by the assessee in his return was partly reversed.
The brief fact of the case is that the assessee purchased agricultural land in different sizes from different parties totalling measuring 329 .00 decimal on various dates in the year 2006, the details whereof are given in the assessment order. The consideration amount for such purchase was Rs.13,87,365/- for the financial year 2006-07. On 25.06.2009 the said land was sold to one Utkarsh Metal Industries Pvt. Ltd for a consideration of Rs.74,00,000/- relating to A.Y.2010-11. This resulted in a gain of Rs.60,12,635/-.
According to the AO no agricultural activity was ever conducted by the assessee or his representative on this land and that the area was a growing industrial M/s Metropolitan Electro Communication Pvt. Ltd. A.Y.2010-11 2 area for the last couple of years and thus the income earned on sale of land, is not agricultural income and is taxable as short term capital gain as applicable under the provision of the income tax Act. The entire amount on sale of land to the tune of Rs.60,12,635/- has been assessed as short term capital gain by the AO.
The CIT(A) while dealing with the said appeal preferred by the assessee relied upon some documents placed before him by it, asked for a remand report from the AO and upon perusal of the entire set of documents concluded that the impugned land is agricultural land and is outside the ambit of the definition of capital asset and income arising from the sale of such land cannot be termed as Short term capital gain or long term capital gain and decided the issue in favour of the assessee. Aggrieved the revenue filed this appeal on the following grounds :- “1. That “Whether the Ld. CIT(A) erred in law & fact in coming to a conclusion, merely on the basis of submission of the assessee as fresh evidence, that the assessee was very much engaged in activities on the plots of land and that the land in quesiton was agriculture land”.
2. That the petitioner craves leave to amend or alter any/all of the above grounds or introduce any additinal grounds of appeal, if necessary at the time of hearing of the appeal.”
The ld. DR while arguing the matter, supported the contention made by the AO in his order dated 30.03.2013. According to him there was no agricultural activity during 2006 to 2009 on that particular land. He further pointed out that the assessee failed to produce supporting evidence to prove the land to be a agricultural land before the AO and that no documents were submitted, which will prove that agricultural operation are made on the particular land. He further contended that this is an area with industrial growth for the last couple of years and that the assessee purchased the land for industrial use. He sought to substantiate his argument with the fact of change of price, where the value of land rose to Rs.74,00,000/- from Rs.13,87,365/- within a period of less than three years. The ld. DR has also relied upon the comments made by the AO in the remand report. According to him the assessee company had purchased the immovable property in question for investment purpose and not for agricultural M/s Metropolitan Electro Communication Pvt. Ltd. A.Y.2010-11 3 purpose for gaining profit by way of its sale. During the assessment stage, the assessee failed to provide any document or evidence which reveals that there was any agricultural activities during the period in which the said land was in its possession. He further added that Khuddus Ali Molla, who was the caretaker of the land as claimed by the assessee as doing agricultural activities, was not produced by the assessee before the AO and that Shri Molla failed to furnish any accounts of agricultural activities on that particular land.
The ld. AR relied upon the order of CIT(A). He has taken us to the relevant documents placed before AO and CIT(A) to substantiate his arguments that the land in question is agricultural in nature.
We have heard the rival submissions made by the parties and perused the records placed before us The main point in this matter is whether the land in question is a agricultural land or not.
Section 2(14)(iii) of the Act defines the agricultural land as follows :-
“ agricultural land in India, not being land situate –
(a) In any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand or (b) In any area within the distance, measured aerially –
I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to item (a) and which has a population of more than one lakh but not exceeding ten lakh; or M/s Metropolitan Electro Communication Pvt. Ltd. A.Y.2010-11 4
III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh.”
In the instant case the land in question is situated at Mouza-Gurap, J.L.No.126 with territorial limits of Gurap Police Station, Gram: Gurap under the office of the Additional District Sub Registrar, Dhaniyakhali about 36 km from the nearest municipality situated at Chinsura, Hooghly i.e. far beyond 8 km from the local limits of any municipality, a fact which is admitted by the AO in his remand report. The assessee has filed a certificate from Gurap Panchayat dated 07.11.2014 certifying the distance and the purpose for which the lands were put into use as agriculture. The AR further pointed out that one caretaker namely Md. Kuddus Molla carried out agricultural activities on that particular land and this fact was brought to the notice of the AO by a letter dated 08.03.2013. The purchase agreement as well as the sale deed, being a part of the record, shows the land as ‘Sali’ which is nothing but an agricultural land as evident from Khatia. A website hosted by the Government itself shows the land in question was an agricultural land and therefore not a capital asset as per the definition of the capital asset u/s 2(14) of the Act. The receipts on accounts of their sale are not to be treated as capital gains.
The ld. CIT(A) at page 13 and 14 has held as follows :-
“If the totality of facts available on record is kept in juxtaposition with the judicial pronouncements discussed hereinabove and the intention of the legislature along with relevant sections, I am of the opinion that a particular land is agricultural land or not depends upon so many factors. Any agricultural income derived from agricultural operations will qualify for agricultural income. So far as capital gains on the sale of such land is concerned, it also depends upon factors like location of the land, use of the land, distance from municipal limit, whether land use was changed, etc. If all these factors are cumulatively kept in mind, one fact emerges that the impugned land is situated beyond the prescribed limit from the municipality, recorded as agricultural land in the revenue record, agricultural operation was done by one caretaker, hence there is no question of capital gains tax on sale of such land. The correct test that has to be applied is whether on the date of sale, the land was agricultural land or not, whether land use was changed or not. Just because after the sale, the purchaser was going to put the land to non-agricultural use, it does not mean that on the M/s Metropolitan Electro Communication Pvt. Ltd. A.Y.2010-11 5 date of sale the land has ceased to be agricultural land. If in the revenue record, the particular land is recorded as agricultural land and till the date of sale, it is exploited as agricultural land and the owner of the land has not taken any step to indicate his intention to exploit the land for non-agricultural purposes then such land to be regarded as agricultural land. The purpose for which such land is sold is not of much importance and weight. A close reading of section 2(l4)(iii)(a) seems to suggest that it is the population of the municipality that has to be taken into account and not the population of any area within the municipality. It may be that a municipality may comprise of many villages, wards and street and each assessee may claim that the limit of population is provided with reference to a place, ward or street. In such an event, the section will have no uniform application and will lead to many anomalies. Panchayat is different from municipality. Municipality is always understood differently from Panchayat, therefore, the land situated beyond prescribed municipal limit and is recorded as agricultural land in the revenue record is to be considered as agricultural land until proved otherwise. Admittedly, the term "capital asset" has an all embracing connotation and includes every kind of property as generally understood except those are expressly excluded from the definition. It is exactly the case here because section 2(l4)(iii) expressly defines agricultural land with regard to its location and distance from the municipal limit. It seems that the learned Assessing Officer has not examined the documents produced by the assessee establishing the distance of land beyond prescribed municipal limit and more specifically when Khasra number, etc. has been duly mentioned in the report of Tehsildar. So far as the argument of the AO that the land was sold at a substantial amount is not the relevant factor to prove that it was non-agricultural land because it depends upon so many factors In the instant case, the land which was sold is situated at Mouza - Gurap, J.L. No. 126 with the territorial limits of Gurap Police Station, Gram: Gurap under Additional District Sub Registrar, Dhaniyakhali, about 36K.M. from the nearest municipality situated at Chinsura, Hooghly i.e. far beyond 8 K.M from the local limits of any municipality and the fact was also confirmed by the Ld. Assessing Officer from Gram Pancha at Gurap.The assessee has filed a certificate from Gurap Panchayat dated 07.11.2014 certifying the distance and the agricultural purpose for which the lands were put into use, copy of which along with a translated version are annexed hereto and marked as Annexure: 'I' Thus as per the above definition, the land sold being situated far beyond 8 K.M. from local limits of any municipality situated at Chinsura, Hooghly is an agricultural land and outside the ambit of the definition of capital asset and income arising from the sale of such land cannot be treated as short term or long term capital gain as the same is exempted under the I.T. Act, 1961.) The totality of facts clearly leads to the conclusion, under the facts narrated hereinabove, that the impugned land is agricultural land. Hence the issue is decided in favour of the appellant. “
M/s Metropolitan Electro Communication Pvt. Ltd. A.Y.2010-11 6 We find no infirmity in the same.
Taking into consideration the entire gamut of the matter the order passed by the AO as well as the CIT(A), remand report, the submissions made by the AR and DR and considering the entire reports placed before us, we hold that the land in question is an agricultural land and thus we uphold the order passed by the CIT(A) on the basis of the observation made herein above.
In the result the appeal by the revenue is dismissed.
Order pronounced in the Court 04.05.2018.