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Income Tax Appellate Tribunal, MUMBAI “H” BENCH
Before: S/Sh.B.R. Baskaran & Amit Shukla
O R D E R लेखा सद�य लेखा सद�य बी लेखा सद�य लेखा सद�य बी बी.आर बी आर आर. . . . बा�करन आर बा�करन बा�करन के अनुसार बा�करन के अनुसार के अनुसार/ Per B.R. BASKARAN, AM: के अनुसार The appeal filed by the revenue is directed against the order dated 21.11.2014 passed by Ld CIT(A)-33, Mumbai for assessment year 2011-12. Though the revenue has raised many grounds, all of them are directed against a single issue, viz., whether the Ld CIT(A) was justified in accepting the contention of the assessee that the land sold by him was a agricultural land.
The facts relating to the issue are discussed in brief. The assessee is an individual. During the year under consideration, the assessee sold certain land described as Plot No.53/1, 64/7, 64/3,67/5 and 67/6 (I group), Plot No.62/5,85/1 and 76/4 (II group) for a sale consideration of Rs.5,22,02,500/- to M/s Lavasa Corporation. These lands are adjacent to each other and are located in the village Admal, Taluk Mulasni in Pune District. The assessee claimed the lands as agricultural lands falling outside the definition of capital asset given in sec. 2(14) of the Act.
911/M/15-Haresh Chunnilal Rajani
The AO did not accept the claim of the assessee for the following reasons:- (a) The land was not used by the assessee for agricultural purposes. (b) The assessee has not shown any agricultural income on loss from the plots. (c) The certificate of the Talati clearly states that there was no agricultural operation on these lands and it was a barrent land on which only grass (Gawath) grows. (d) The Government of Maharashtra, Urban development Department, vide notification No.TPS 1800/1004/CR-106/2000/UD-13 dated 1.6.2001 has decided to develop the area of Admal Village, Mulshi Taluka as Hill Station. (e) The Maharashtra Tourism Development Corporation Ltd has issued an exemption certificate to the Lavasa Corporation from the Stamp Duty Act 1958 in respect of the sale by transfer or MOU till the tourism policy 2006 is in force. (f) The intention of the assessee was not to carry on agricultural activities on the land, but to sell it appropriate time of spurt in the real estate market. Accordingly, by placing reliance on the decision rendered by Hon’ble Supreme Court in the case of Gemini Pictures Circuit P Ltd (220 ITR 43), the AO treated the land as non- agricultural land and accordingly assessed the capital gains arising on sale thereof.
The Ld CIT(A), however, agreed with the contentions of the assessee and accordingly held that the impugned land is an agricultural land and accordingly reversed the view taken by the AO. Aggrieved, the revenue has filed this appeal before us.
The Ld D.R invited our attention to the assessment order and submitted that the AO has analysed the characteristics of the land and found that the assessee has not carried out agricultural operations and further the impugned land has been proposed to be developed as Hill station. He submitted that the Ld CIT(A) has erroneously granted relief to the assessee.
On the contrary, the Ld A.R submitted that the AO has misdirected himself in assuming that the grass grown in the field was a wild grass. He submitted that the assessee has filed an affidavit dated 21.3.2014, wherein he has stated that his father used to grow Vegetables and Nachni on a portion of land. He has further stated that his father used to carry out farming activity. He submitted that the impugned lands were used to carry out agricultural activities including growing of grass. He submitted that the assessee has kept the character of land as agricultural land only till the date of sale. The intention of the purchaser of land to convert the same for non-agricultural purpose, if any, would not alter the character of land in the 2
911/M/15-Haresh Chunnilal Rajani hands of the assessee. He submitted that the impugned land is located about 50 Kms away from Lavasa town. He submitted that the surrounding area has not been developed as Hill Station so far, though the Government’s proposal came long time back. He submitted that the Ld CIT(A) has rightly appreciated all these factors and accordingly rendered his decision. Accordingly he submitted that the order passed by Ld CIT(A) should be upheld.
We have heard rival contentions and perused the record. We notice that the Ld CIT(A) has passed a detailed order and hence we fell it convenient to extract the operative portion of his order below:-
“18.1 I have perused the assessment order passed by the AO and the written submissions of the appellant on the issue carefully.
From the facts stated above, it can be observed that the AO has not accepted the claim of the appellant regarding the sale of the land as agricultural land and treated the same as capital asset as per section 2(14) and thus concluded that sale proceeds of the land are liable for capital gains tax.
The Assessing Officer has considered the said land as non-agriculture and liable for capital gains tax mainly on the following grounds:-
1. The certificate of the Talati clearly states that there is no agricultural operation on these lands and it is a barren land on which only wild grass( Gawath ) grows.
2. The assessee has also not been showing any agricultural income or loss from these plots of land.
3. The government of Maharashtra, Urban Development Department, vide notification no., TPS 1800/1004/CR-106/2000/UD-13 dated 01/06/2001, has declared the entire area of Admal village, Mulshi Taluka as for the development of Hill Station.
21. The first ground on which the AO has treated the land sold by the appellant as non-agricultural land is that as per certificate of Talati there is no agricultural operation on these lands and it is a barren land on which only wild grass (Gawath) grows.
22. The above contention of the AO cannot be accepted that if the grass is grown on the lands without any other agricultural operations, the same cannot be categorized as agricultural land. Growing of grass is also an agricultural activity and an agricultural produce only. Merely because the grass is grown on the said land would not make it a non-agricultural land. The 7/12 extract filed by the appellant itself mentions the land in question as agricultural land though only grass is grown on this land. The land is reflected in the revenue records as agricultural land, which is a vital parameter to decide the nature of the land sold.
23. While deciding a similar issue, in the case of Smt. Manyam Meenakshama Vs CWT : (1967) 63 ITR 534 (AP), it was held by the Hon'ble High Court Andhra Pradesh that " the land, which is left barren but which is capable of being cultivated can also be 'agricultural land' unless the said land is actually put to some other non-agricultural purpose, like construction of buildings or an aerodrome runway etc., thereon, which alters the physical character of the land rendering it unfit for immediate cultivation ..... land is assessed to land revenue as agricultural land under the state revenue law, it is strong piece of evidence of its character as agricultural land."
24. Therefore even if the land is barren but capable of being cultivated, the same would be categorized as agricultural land as decided in the judicial pronouncement cited above. Revenue records of the 911/M/15-Haresh Chunnilal Rajani village Admal also shows the land as agricultural land. Therefore, the contention of the Assessing Officer that land is not agricultural because grass is grown over the land has no relevance and it cannot be accepted as the criteria or treating the land as non-agricultural. 25. Second ground on which the AO has treated the land sold by the appellant as non-agricultural land is that the assessee has also not been showing any agricultural income or loss from these plots of land.
26. The appellant has filed an affidavit that his father Sh. Haresh Chunnilal Rajani, who owned these lands since 1994 till he died on 02/03/2013, carried out agricultural operations on these lands at subsistence level and whatever agricultural produce was grown, was consumed by the labourers and the family members.
27. The AR of the appellant has further contended that the agricultural operations were not for commercial purposes and therefore no income was shown. Since no produce was sold, therefore, there was no agricultural income and consequently no question of showing the same in the return of income.
28. The above arguments of the appellant has merit. Carrying of agricultural operations is not the essential criteria for determining the nature of land. The land in question is assessed to the land revenue as agricultural land and the appellant has paid the annual agricultural cess (Dhara) as clearly mentioned in the 7/12 Extract. It is not the case of the AO that the land in question is not shown as the agricultural land in the 7/12 Extract. Further in 7/12 Extract, the produce shown on the land of the appellant, is the grass, which is also an agricultural produce. There is nothing on record to indicate that the appellant had ever applied for the change of land use for non-agricultural purposes. These facts are not disputed even by the AO.
29. While deciding a similar issue in the case of CIT Vs. Smt. Debbie Alemao, ITA no: 1 and 2 of 2006; the Hon'ble High Court of Bombay at Goa, vide its order dated: 09/09/2010 has held in the matter as under :- “The Assessing Officer has noted that the said land was entered in the revenue record as an agricultural land i.e. garden or orchard. The ITAT also held that the land was recorded in the revenue records as an agricultural land. This is not disputed by the revenue. It is however contended that the land was not actually used for agriculture in as much as no agricultural income was derived from this land and was not shown by the respondents in their income-tax return. This was explained by the respondents by saying that there were coconut trees in the land but the agricultural income derived by sale of the coconuts was just enough to maintain the land and there was no actual surplus. Hence, no agricultural income was shown from this land. In our opinion, if an agricultural operation does not result in generation of surplus that cannot be a ground to say that the land was not used for the agricultural purpose. It is not disputed that the land was shown in the revenue record to be used for agricultural purpose and no permission was ever obtained for non-agricultural use by the respondents. Section 30 of the Goa, Daman and Diu Land Revenue Code, 1968 provides that no land used for agriculture shall be used for any non-agricultural purpose and no land assessed for one non- agricultural purpose shall be used for any other non-agricultural purpose except with the permission of the Collector. Section 32 of the Goa, Daman and Diu Land Revenue Code prescribes the procedure for conversion of use of land from one purpose to another including conversion from agricultural purpose to non-agricultural purpose. The permission, for non-agricultural use was obtained for the first time by the Varca Holiday Beach, Resort Private Limited the purchaser after it purchased the land. Thus, the finding recorded by the two authorities below that the land was used for the purpose of agricultural is based on appreciation of evidence and by application of correct principles of law. The Tribunal has relied upon two unreported decisions of this Court in CIT Vs. Minguel Chandra Pais (Tax Appeal No. 1/2002) end CIT Vs. Smt.Maria Leila Tovar Furtadoe Pais (Tax Appeal No. 2/2002) which involved identical issue, In those appeals this Court has upheld the order of the Tribunal holding that the land was agricultural land and its sale did not invite the payment of capital gain. It is not disputed before us that the facts of the said cases were similar to the facts of the present cases. We are bound by the decision in those cases.”
911/M/15-Haresh Chunnilal Rajani
30.The term "Capital Asset" has been defined in Section 2(14), whereby agricultural land is kept out of the preview of capital asset, provided such land is not located within the jurisdiction of a municipality or cantonment board having population of not less than ten thousand, or, such land is not located within eight kilometers from the municipality or cantonment board having population of more than ten lakh.
30.1. In the instant case, the village Talati vide certificate dated 20/12/2013 has certified that the nearest Municipal Council is Paud ( which is Tehsil office) approx. 45 km away from the land in question and the population of the village Admal is approx. 300. This fact also clearly proves that the land of the appellant situated in a village having population of 300 and 45 km away from municipality, is agricultural land and not a capital asset as defined in Section 2(14).
Further, perusal of the registered sale agreement between the appellant and the purchaser of the land Lavasa Corporation, shows that the land in question sold by the appellant is an agricultural land. The father of the appellant purchased the major portion of these lands in the year 1994 as agricultural lands and later when the lands are sold through the registered deed, these have been sold as agricultural lands only. When the property-has been purchased and sold as agricultural land, how the same-can be treated as capital asset as defined in section 2(14) liable for capital gains.
Even otherwise, an agricultural land registered in land records as such does not become non- agricultural land merely by not carrying out agricultural operations on said land, and also not merely by the intention of the purchaser of said land. The above principle was laid down by the Hon'ble High Court of Bombay in the case of CWT vs. H.V. Mungale [1983] 145 ITR 208 (Bom.) wherein the Hon'ble High Court has elaborately explained the treatment of a land as agriculture land in following words "It is well established that in a given case agricultural land may or may not yield agricultural income. If there is land which was once cultivated or put to agricultural use but is now fallow or barren, it would not merely by reason of such fact cease to be agricultural land: Conversely what is patently non-agricultural land may in extraordinary circumstances be used for a purpose to which agricultural land is usually put and may therefore yield agricultural income. However, merely by reason of the yield, it cannot be designated as agricultural land. Again, where the land is being assessed as agricultural land, then, normally, although it is not being put to actual agricultural use, it may be presumed that it continues to be agricultural land; unless it can be shown that it has been in fact put to some non-agricultural use, or there is some relevant circumstances to indicate that it cannot be properly regarded as agricultural land. It is also well settled that entries in revenue records are good prima facie evidence with regard to the character of the land and the purpose for which it is intended to be used and the burden is on the revenue to rebut this presumption. That apart, while determining the character or the nature of the land, it must necessarily be taken into account that the land which is recorded as agricultural land in the revenue papers cannot be used for non-agricultural purposes by the owner, unless the land is allowed to be converted to non-agricultural purposes by appropriate authorities."
The land in question is registered in the revenue records in the name of the appellant as on the date of sale. The 7/12 extracts taken from the "Talathi “ of the lands of the appellant clearly states the nature of the land is agricultural land. The 7/12 extracts also contains the description of the crops being grown on this land which is stated to be "Gawath" which is also 'an agricultural produce. All these facts clearly prove that the nature of the land in question is agricultural land which cannot be disputed in view of the revenue records of the area. The Assessing Officer has not placed any evidence on record disputing the above revenue records. Till the above revenue records are not in dispute, the lands sold by the appellant cannot be treated as non-agricultural land.
The next ground on which the AO has disputed the nature of land being non- agricultural is that the Government of Maharashtra, Urban Development Department, vide notification no. TPS 1800/1 004/CR-106/2000/UD-13 dated 01/06/2001 , has declared the entire area of Admal village, Mulshi Taluka as for-the development of Hill Station.
The above argument cannot be used for treating the sale of land as non-agricultural. If the Government of Maharashtra is planning to develop the area around this land as Hill station in the future, it will not change the nature of the land as on the date of sale of the said land. Any declaration
911/M/15-Haresh Chunnilal Rajani by the government for the future development of the area in any form does not change the character of land in appellant's hands at the time of the sale. Undoubtedly, the land has not been converted to non-agriculture before the sale. It has been informed by the AR of the appellant that this land, even though sold long ago, is the agricultural land in the-revenue records till date. This is also evident from the certificate of Talathi Village Admal dated 25.02.2014 which categorically states all the areas of land sold by the appellant are agricultural land till recent past. The buyer has not got changed the land use from agricultural to non agricultural in respect of this land. The land was purchased and sold as an agricultural land, which is clearly mentioned in the purchase and sale deeds in respect of this land, which are placed on record and entered in the revenue records as agricultural land. 35.1 In the case of HINDUSTAN INDUSTRIAL RESOURCES LTD. vs. ASSISTANT COMMISSIONER OF INCOME TAX, :(2011) 335 ITR 77, it was held by the Hon'ble High Court of Delhi that "In view of the findings of the Tribunal that the land in question was agricultural land at the time of purchase by assesseees also at the time of acquisition, the land was clearly agricultural land irrespective of the fact that the assessee intended to use the land for industrial purposes and did not carry out any agricultural operations and therefore, no capital gains could be charged on acquisition thereof under Land Acquisition Act, 1894." 35.2 The facts of the case law of Gemini Pictures Circuit P.Ltd 220 ITR 43(SC) relied upon by the Assessing Officer, cannot be applied to the instant case because in that case the land was situated on the Mount Road in Madras, which was the busiest road of the area; Further the land was surrounded by commercial and residential areas. The land of the appellant on the contrary is situated in village and surrounded by all farms and agricultural lands.
In circumstances explained above, it is held that the said land in question sold by the appellant to Lavasa Corporation situated at village Admal Taluka Mulashi in Pune district, is an agricultural land and since it does not fall within Municipal limits having population of more than ten thousand ,or within 8 kilometers of the municipal limits having population of more than ten lakh, the said land does not fall within the preview of capital asset as defined in section 2(14) and not liable for capital gains. The action of the AO treating the same as non-agricultural and a capital asset and liable for capital gains cannot be accepted in view of the facts narrated above. The addition made by AO consequently is deleted.”
On a careful perusal of the order passed by Ld CIT(A) along with the arguments advanced before us by both the parties, we notice that the first appellate authority has considered all the grounds raised by the AO for rejecting the claim of the assessee. We notice that the Ld CIT(A) has considered the revenue record and noticed that the impugned land has been shown as agricultural land. He has also noticed that there was no material to show that the land was put to non-agricultural purpose. He has noticed that the growing of grass was also an agricultural activity and the revenue records have also shown that the grass has been grown in the impugned land. The Ld CIT(A) has also noticed that the land under consideration has not been found to be barren land, incapable for agricultural operations. Accordingly, the AO has examined the character of land by applying the principles laid down by Hon’ble Bombay High Court in the cases of Smt. Debbie Alemaro (supra) and H.V.Mungale (supra). We have earlier noticed that the AO had placed reliance on the decision rendered in the case of Gemini Pictures Circuit P Ltd (supra). We notice that the Ld
911/M/15-Haresh Chunnilal Rajani CIT(A) has given a categorical finding that the same is not applicable to the facts of the present case.
We notice that the Ld CIT(A) has also addressed the concern raised by the AO that the assessee did not declare any agricultural income in the earlier year. The Ld CIT(A) has placed reliance on certain case law to accept the contentions of the assessee that the agricultural activities did not result in any surplus. We also notice that the Ld CIT(A) has noted that the hill development activity would not alter the character of land. In any case, it is the submission of the assessee that the hill development plan has not been executed by the Government so far. The ld CIT(A) has also noticed that the impugned land is located 45 Kms away from the town.
Thus, we notice that the AO has drawn adverse inferences on the basis of his own reading of records and we notice that the Ld CIT(A) has addressed all of them by drawing support from various case law as well as the documents produced by the assessee. Hence we do not find any reason to interfere with the order passed by Ld CIT(A) on this issue.