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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI D.S. SUNDER SINGH
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – 4, Chennai, dated 19.10.2016 and pertains to assessment year 2012-13.
The only issue arises for consideration is assessment of capital gain on sale of agricultural land.
Shri M. Karunakaran, the Ld.counsel for the assessee, submitted that the assessee has sold immovable property to the extent of 1 acre 23 cents comprised in Survey No.95/1A8, 95/1A4E, 95/1A7B2 as per Patta Survey No.95/1A3B9 at No.36, Muthukadu Village, Kancheepuram District, for a sale consideration of `6,60,00,000/-. The assessee claimed profit on sale of land as exempted since the same was classified as agricultural land in the State revenue records. The Ld.counsel further submitted that the assessee’s share was `2,64,00,000/-. The assessee has filed a certificate from Village Administrative Officer and also from Tahsildar to establish that the land in question is an agricultural land. The population of Muthukadu Village was also less than 10,000 as on 04.10.2010. In fact, the assessee cultivated casuarina trees in the subject land which is evidenced by the certificate issued by Village Administrative Officer and also the extract of adangal register. In fact, according to the Ld. counsel, the land was purchased by the assessee in the year 1985 and the classification of land was not changed at any point of time.
Referring to the assessment order, the Ld.counsel for the assessee submitted that the Assessing Officer, by placing reliance on the website of State Registration Department, found that the subject land was classified as Residential Area – Class I. According to the Ld. counsel, the classification of land is done by the State Revenue Department and not by Registration Department, therefore, the so called classification as found in the website of Registration Department cannot be a reason for disallowing the claim of the assessee.
Referring to the decision of this Bench of the Tribunal in ITO v. Smt. G. Rajalakshmi in dated 28.08.2015, the Ld.counsel for the assessee submitted that when the Revenue authorities of the State Government maintain the adangal register in the course of official duty, which discloses that the assessee cultivates casuarina, the Assessing Officer is not justified in saying that the land was classified as Residential Area – Class I. In view of the classification made by the Revenue authorities, according to the Ld. counsel, the subject land has to be treated as agricultural land.
Referring to the paper-book, more particularly pages 18 and 19, the Ld.counsel for the assessee submitted that this is an adangal extract which shows the cultivation of casuarina trees in the subject land. Moreover, the land in question is situated beyond 8 KMs radius of the nearest municipality. Referring to the copy of sale deed, which is available at page 1 of the paper-book, the Ld.counsel submitted that the land in question was in fact purchased by the assessee as agricultural land and also sold the same in the same status as agricultural land. The Ld.counsel has also placed his reliance on the judgment of Madras High Court in Mrs. Sakunthala Vedachalam v. ACIT in Tax Case (Appeal)
Nos.566 and 567 of 2013 dated 06.08.2014, a copy of which is available at page 1 of the paper-book. Similarly, the Ld.counsel has also placed his reliance on the judgment of Madras High Court in the Principal CIT v. M/s Mansi Finance Chennai Ltd. in T.C.A.No.483 of 2016 dated 01.09.2016, a copy of which is available at page 17 of paper-book. The Ld.counsel has also placed his reliance on the judgment of Bombay High Court in CIT v.
Smt. Debbie Alemao (331 ITR 590. Reliance has also been placed on the decision of Pune Bench of this Tribunal in Haresh V. Milani v.
JCIT (2008) 114 ITD 428.
On the contrary, Shri Supriyo Pal, the Ld. Departmental Representative, submitted that the land in question was classified as Residential Area – Class I by the State Registration Department, therefore, the Assessing Officer rejected the claim of the assessee considering that this is not an agricultural land. The assessee has disclosed agricultural income only in the assessment year 2012-13, the year in which the land in question was sold. Referring to the claim of the assessee that the assessee cultivates casuarina trees, the Ld. D.R. submitted that the land in question came into possession of the assessee by virtue of settlement deed dated 29.03.2009 and other co-owners were in possession by the year 1985. Therefore, according to the Ld. D.R., the Assessing Officer has rightly rejected the claim of the assessee holding that the land in question is not an agricultural land at all.
We have considered the rival submissions on either side and perused the relevant material available on record. The only issue arises for consideration is whether the land in question is agricultural land or capital asset taxable under the Income-tax Act.
In case the land in question is an agricultural land, the profit on sale of such land may not be taxable under the provisions of Income-tax Act.
We have carefully gone through the material available on record. The adangal extract, copy of which is available at pages 18 and 19 of the paper-book, shows that the land in question is classified as dry land and the assessee cultivates casuarina trees.
For cultivating casuarina trees, the assessee has to necessarily undertake some basic agricultural operations. It is not in dispute that the adangal extract, which is otherwise known as Village Account No.2, is maintained by the Village Administrative Officer subject to supervision of the Tahsildar of respective taluk.
Therefore, the village adangal register is an official document maintained by the State Revenue Department for the purpose of estimating food production of State. Hence, this Tribunal is of the considered opinion that the adangal register cannot be brushed aside. The Village Administrative Officer as well as the Tahsildar have also certified that the land in question was cultivated by the assessee.
In the State of Tamil Nadu, lands are classified as dry land and wet land. Wherever there is a dry land, it can also be cultivated by the assessee. In such case, the dry land is also to be treated as agricultural land. In respect of wet land, there will be a source of irrigation from a tank or a natural river. In such case, the land in question would form part of Ayakut for irrigation from the water source which belongs to Government. In this case, admittedly, the land in question is classified as dry land and the assessee is cultivating casuarina trees which is evidenced from the adangal extract.
The classification of land admittedly vested with the Revenue Department of State Government. The State Registration Department was taking care of registration of transfer of land and collection of stamp duty thereon. The State Registration Department is expected to take the classification of land from the classification made by the Revenue Department. This Tribunal is of the considered opinion that the Registration Department of the State Government cannot classify the land on its own. Other than registration of the documents presented for registration by the respective parties and collection of stamp duty, the State Registration Department has no role in classification of lands.
Now the question arises for consideration is when the Revenue Department of the State Government has classified the land in question as dry agricultural land and the State Registration Department has classified the land as Residential Area – Class I, whether the classification has to be taken as agricultural land or residential land? This Tribunal is of the considered opinion that the classification made by the Revenue Department will prevail over the information found in the State Registration Department. This is for simple reason that State Registration Department has no jurisdiction to classify the land. Therefore, the classification made by the Revenue Department shall definitely bind on the State Registration Department.
Now the document, namely, the adangal extract clearly demonstrates that the assessee has cultivated casuarina in the subject land. The land in question was purchased in 1985 as agricultural land and the sale deed executed by the assessee also discloses the land in question was transferred as agricultural Punjai land. Therefore, the said land has to be taken as agricultural land.
We have also carefully gone through the decision of this Bench of the Tribunal in Smt. G. Rajalakshmi (supra). In fact, this Tribunal has observed in para 6 of the said order dated 28.08.2015 as follows:-
“6. The next issue arises for consideration is whether the land was cultivated or not. The State Revenue Department is taking the Cultivation Account in every six months. The Village Administrative Officer has to take the Cultivation Account and record in Village Account No.2. This Village Account No.2 is otherwise known as Adangal/Cultivation Account. Subsequently, a gazette officer from the Taluk Office will re-verify the accounts taken by the Village Administrative Officer and this account would be used for estimating the food production of the District. Therefore, it obvious that the Cultivation Account (Adangal) prepared by the Village Administrative Officer is the basic document which was maintained by the State Revenue Department in the regular course of official functioning. In this document, the subject land was shown as if it was cultivated with paddy. Once the Village Administrative Officer, in exercise of his official functioning, found that the land was subjected to cultivation with paddy, this Tribunal is of the considered opinion that the same cannot be doubted by the Income Tax Authorities. Even during examination, the Village Administrative Officer clarified that the subject land was under cultivation. In those circumstances, this Tribunal is of the considered opinion that the land in question is agricultural land and it was subjected to cultivation. The only contention of the Revenue now before this Tribunal is that the Adangal Register was not examined by the Assessing Officer. When the assessee filed the documents before the Assessing Officer including the Adangal Register, it is for the Assessing Officer to examine the same. Instead of examining the Adangal Register, the Assessing Officer proceeded as if the land was classified as dry land and the Village Administrative Officer admitted that the land was not cultivated after Tsunami. This Tribunal is of the considered opinion that the statement of the Village Administrative Officer cannot go beyond the official document maintained while performing the official duty. Since the Adangal Register is one of the document maintained by the State Government shows that the said land was cultivated with paddy, this Tribunal is of the considered opinion that the said land is an agricultural land, therefore, it cannot be treated as a capital asset u/s 2(14) of the Income-tax Act. The CIT(A) has also found that the subject land was situated beyond 8 KMs radius of the municipal limit and the population was less than 10,000. In those circumstances, this Tribunal do not find any infirmity in the order of the CIT(A). Moreover, it is not the case of the Revenue that the CIT(A) has admitted any fresh material during the course of appellate proceedings. In such circumstances, this Tribunal is unable to accept the contention of the Revenue that the matter needs to be remitted back to the file of the Assessing Officer for re- examination. In view of the above discussion, we do not find any infirmity in the order of the lower authority. Accordingly, the same is confirmed.”
We have carefully gone through the Pune Bench of this Tribunal in Haresh V. Milani (supra) wherein it was held as follows:-
“23. It is further pertinent to note that mere inclusion of land in the industrial zone without any infrastructure development thereupon or without establishing and proving that the land was put into use for non-agricultural purposes does not and cannot convert the agricultural land into non-agricultural land. In the instant case, at the relevant point of sale of the land in question, the surrounding area was totally undeveloped and except mere future possibility to put the land into use for non- agricultural purposes would not change the character of the agricultural land into non-agricultural land at the relevant point of time when the land was sold by the assessee. It is also an admitted position that the assessee had not applied for conversion of the land in question into non-agricultural purposes and no such permissions were obtained from the concerned authority. In the revenue records, the land is classified as agricultural land and has not been changed from agricultural land to non-agricultural land at the time when the land was sold by the assessee. It is also not in dispute that there was no activity undertaken by the assessee of developing the land by plotting and providing roads and other facilities and there was no intention also on the part of the assessee to put the same for non-agricultural purposes. No such finding has been given by the department. No material or evidence in support of the fact that the assessee has put the land in use for non- agricultural purposes has been brought on record. Merely because the assessee has not given any direct evidence of sale of agricultural produces, which were stated to have been consumed by the assessee for own purposes, is not sufficient to say that the land in question was not agricultural land when it is classified as agricultural land in 7/12 extracts where the nature of the crop and the person who cultivated the land are duly mentioned at the relevant point of time when the lands were sold by the assessee and where nothing is brought on record to show that the land was put in use for non-agricultural purposes by the assessee. In view of the decision of the Hon''ble jurisdictional High Court in the case of Gopal C. Sharma (supra), it is also clear that the profit motive of the assessee in selling the land without anything more by itself can never be decisive to say that the assessee used the land for non-agricultural purposes. We may also refer to a decision of the Hon''ble Supreme Court in the case of N. Srinivasa Rao v. Special Court [2006] 4 SCC 214 where it was observed that the fact that agricultural land in question is included in urban area without more, held not enough to conclude that the user of the same had been altered with passage of time. Thus, the fact that the land in question in the instant case is brought in industrial zone cannot be a determining factor by itself to say that the land was converted into use for non- agricultural purposes.”
In view of the above, this Tribunal is unable to uphold the order of the lower authority. Accordingly, the orders of the authorities below are set aside and the addition made by the Assessing Officer is deleted.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on 23rd March, 2017 at Chennai.