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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI ABRAHAM P.GEORGE & SHRI GEORGE MATHAN
आदेश / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER:
the Order of the Commissioner of Income Tax (Appeals)-15, Chennai, in dated 18.03.2016 for the AY 2007-08.
Shri S.Mohd. Mustafa, JCIT, represented on behalf of the Revenue and Shri Philip George, Adv. & Shri D.Palanivel, Adv., represented on behalf of the assessee.
ITA No.1878/Mds/2016 :- 2 -:
It was submitted by the Ld.AR that there was a survey operation on the assessee on 05.06.2012. In the course of survey, it was noticed that the assessee along with his brother Shri M.A.Antony and another person Shri A.K.Thilakan had entered into an agreement for the sale of certain lands at Kelambakkam with M/s.Vijayshanti Builders Ltd., on 21.08.2006 and had received sale consideration of Rs.8,72,90,000/- resulting a capital gains of Rs.8,61,41,416/-. Since the assessee had not admitted any capital gains for the AY 2007-08, the assessment was re-opened. It was submitted by the Ld.AR that the assessee had purchased agricultural land situated at No.46, Thaiyur ‘B’ Village, Chinglepet Taluk, Kancheepuram District, covering under Patta No.305, comprised in Sy.No.1273, measuring an extent of 115 cents on 04.05.1998. The assessee’s brother Shri M.A.Antony had similar on 04.05.1998 purchased an extent of 50 cents agricultural land situated at No.46, Thaiyur ‘B’ Village, Chinglepet Taluk, Kancheepuram District, covering under Patta No.305, comprised in Sy.No.1395/C5 on 04.05.1998. Similarly on 04.05.1998, Shri A.K.Thilakan had purchased an extent of 116 cents of agricultural land situated at No.46, Thaiyur ‘B’ Village, Chinglepet Taluk, Kancheepuram District, covering under Patta No.305, comprised in Sy.No.1273. All the three assessees together had entered into agreement for sale on 21.08.2006 with M/s.Vijayshanti Builders Ltd., for the sale of their agricultural lands. The Ld.AR drew our attention to Page No.77 of Paper Book which was Annexure-1 to the Sale Deed, wherein the names of various persons, the area of the land under survey numbers and sale
ITA No.1878/Mds/2016 :- 3 -: consideration has been specifically mentioned. The details of the payments made by M/s.Vijayshanti Builders Ltd., were shown at Page Nos.78-81 of the Paper Book in respect of the assessee as also Shri M.A.Antony. The Ld.AR drew our attention to Page Nos.50-63 of the Paper Book to submit that the land sold was purely agricultural land, Page Nos.50 & 51 was the Certificate issued by the Village Administrative Officer in respect of the assessee Shri A. Lalichan intimating the crop.
Page No.51 is the Adangal in which Kist rate 329 towards single crop has been levied. Page Nos.52 & 53 similarly is in respect of the agricultural land held by Shri A.K.Thilakan showing a Kist tax of 333 and 39 towards single crop and double crop. Page Nos.54 & 55 in respect of Shri A.
Lalichan balance area 0.46.5, at Page No.58 is the receipt issued to Shri A. Lalichan. Page No.62-63 is a distance from the land to Chinglepet shown at 25.3 kms and to Kancheepuram District 64.1 kms. Page No.64 is the census in respect of Chinglepet Taluk Kancheepuram District showing the total population at 7609. It was a submission that Chitta & Adangal representing the Revenue Records in respect of the land sold by the assessee clearly showed that the land sold by the assessee is agricultural land. The distance from the nearest Municipality was more than 8 kms and the population of the nearest Taluk was also less than 10000. It was a submission that as the lands sold were agricultural lands, the assessee had not disclosed the long term capital gains in respect of the said land. In the returns in response to Sec.148, the details of the land sold was included but claimed as exempt. It was a submission that ITA No.1878/Mds/2016 :- 4 -: the AO had on the ground that in Cluase-13 of the Sale Agreement had specified that the assessee would if necessary in order to facilitate the process of obtaining the necessary sanctions and approvals from the authorities to extend all necessary co-operation to the purchasers as may be required by signing relevant papers/applications which are to be submitted, as also in Cluase-14, the assessee had agreed to permit the purchasers upon execution of the Sale Agreement to undertake the marketing operations in respect of the proposed development of the scheduled property, as also on account of the Clause-19 of the Sale Agreement which specifies that the assessee would necessary to extend co-operation to the purchasers to enable the purchasers to transfer the properties proposed to be developed in favour of buyers identified by the purchasers had treated the sale of the agricultural land as liable for long term capital gains. It was a submission that on appeal Ld.CIT(A) had confirmed the assessment. It was a submission that the assessee having sold agricultural land, the same was not liable for capital gains and the agricultural land which had been sold could not be treated as a capital asset u/s.2(14) of the Act.
In reply, the Ld.DR vehemently supported the order of the AO & the Ld.CIT(A). He reiterated the stand of the AO as mentioned in the Assessment Order. It was submitted by the Ld.DR that the Sale Agreement was not a Joint Development Agreement. The Ld.DR drew our attention to Page No.87 of the Paper Book to submit that even in the ITA No.1878/Mds/2016 :- 5 -:
computation in the Receipts & Payments Account, no expenditure has been claimed by the assessee towards agricultural operations for the relevant assessment years. The Ld.DR drew our attention to Page No.66- 76 of the Paper Book which is a copy of the Sale Agreement to submit that in Clause-11, the assessee had permitted the purchasers to create mortgages, lien, etc., with financial institutions or banks, in Clause-13, the assessee had agreed to execute Power of Attorney in the name of the nominee of the purchaser to facilitate the process of obtaining the necessary sanction, in Clause-14, the assessee had permitted the purchaser to undertake marketing operations in respect of the said land, in Cluase-16, the assessee had specifically agreed that the sale shall be in favour of the purchasers or their nominees. It was a submission that clearly the sale of the land was not for agricultural purpose but for construction of flats. It was a submission that the AO was right in law in holding the sale of the said lands has liable for long term capital gains.
We have considered the rival submissions. A perusal of the provisions of Sec.2(14) defines capital asset. Sec.2(14)(iii) defines agricultural land as follows -
(iii) 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 ITA No.1878/Mds/2016 :- 6 -:
(II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (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. Explanation— For the purposes of this sub-clause, “population” means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year;
Thus, whether a particular land sold is agricultural land or not is to be determined as per the definition provided in Sec.2(14)(iii). What for, the purchaser of the land, uses the said land, will not determine, the character of the land sold in the hands of the assessee. When the facts in the assessee’s case are examined in line with the provisions of Sec.2(14)(iii), it shows that the nearest Taluk being Chinglepet Taluk Kancheepuram District and the village Taiyur shows that a population of only 7609 and the distance from the Chinglepet is 23.5 kms and the distance from Kancheepuram is 64.1 kms. A perusal of the Chitta & Adangal shows the names of the assessees and the Kist having been paid as agricultural land and the Village Administrative Officer certified as specifying both single crop and double crop. The assessee has placed such substantial evidences and this is not rebutted by the AO in respect of the nature of the land, as to whether it is agricultural or not? The AO has read into only the Sale Agreements and no other documents. Admittedly, the assessee is entitled to sell his land for the best possible price that can be generated, but if the nature of the land is agriculture, the same cannot be brought under the definition of capital asset for the purpose of levying long term capital gains. Further, what has been sold by the assessee is ITA No.1878/Mds/2016 :- 7 -:
not converted lands. This being so, in the present case, as it is noticed that the land sold by the assessee is agricultural land, we are of the view that the same is not giving rise to any long term capital gains in the hands of the assessee. In these circumstances, the findings of the Ld.CIT(A) and the AO on this issue stands reversed.
In the result, the appeal filed by the assessee is allowed.