ITO, CHENNAI vs. ANANTHI RABINDRAN, CHENNAI

This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) -4, Chennai, dated 30.03.2015 and pertains to assessment year 2008-09.

The only issue arises for consideration is computation of capital gains.

Shri R. Durai Pandian, the Ld. Departmental Representative, submitted that the assessee sold a property at Tiruporur for `2.18 Crores to M/s Skylines. The assessee claimed before the Assessing Officer that the land in question was agricultural land situated beyond 8 KM radius from the nearest municipal limits, therefore, the same is exempt from taxation. The Assessing Officer found that the land was classified as “Residential” land by Tamil Nadu Registration Department, therefore, it cannot be construed as agricultural land at all. Since the land was classified as residential land, the Assessing Officer rejected the claim of the assessee and held that the assessee is liable for capital gains tax. However, on appeal by the assessee, the CIT(Appeals) found that the land in question was classified as agricultural land and the assessee was growing agricultural crops all along the period of holding. Therefore, the capital gains arising on sale of that land is not liable for taxation.

Referring to the copy of Adangal extract, which is available at page 18 of the paper-book, the Ld. D.R. submitted that it was classified as Punjai land (dry land). It appears the standing crops are coconut and mango trees. The source of irrigation for cultivating the coconut and mango trees is not available on record.

On the contrary, Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the land in question was classified as Punjai land in the State revenue records. The Punjai land, according to the Ld. counsel, is also an agricultural land. The assessee has cultivated coconut, mango trees, which is evident from Adangal extract filed by the assessee. On a query from the Bench, how the assessee was able to cultivate coconut, mango trees without any source of irrigation?, the Ld.counsel submitted that the source of irrigation is not known to him. He has further clarified that it is not known whether the assessee has obtained any electricity service connection for agriculture purpose. Since the land in question was classified as Punjai land by the State Government, according to the Ld. counsel, the CIT(Appeals) has rightly found that the land in question is agricultural land.

Referring to pages 21, 22 & 23 of the paper-book, the Ld.counsel for the assessee submitted that the land is also subject matter of acquisition by the State Highway and Minor Ports Department. In the notification issued under Land Acquisition Act, the land was shown as Punjai land, therefore, it is obvious that the subject matter was agricultural land. Since it is admittedly situated beyond 8 KM of radius of nearest municipal limit, the CIT(Appeals) has rightly found that the assessee is not liable to pay capital gains tax.

We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the assessee has sold land at Tiruporur for `2.18 Crores to M/s Skylines. The assessee claimed before the Assessing Officer that the land in question is agricultural land and situated beyond 8 KM radius of nearest municipality, therefore, exempt from capital gains.

Now the assessee claims that coconut and mango trees are cultivated in the subject land. Coconut and mango trees need irrigation atleast in the beginning of the plantation. Without the source of irrigation, mango and coconut trees cannot be grown on Punjai land. It is not the case of the assessee that river irrigation is available for the subject land. Admittedly, no river irrigation is available for the subject land. Therefore, the assessee has to necessarily make arrangements for irrigation of the land by lifting the ground water through motor pump. The details of the electrical service connection obtained by the assessee are not available on record. It is also not known whether the assessee has constructed any building on the subject land. In the absence of any such details, this Tribunal is of the considered opinion that the nature of land cannot be decided by this Tribunal. Therefore, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the issue of capital gains is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter and bring on record the source of irrigation for cultivating coconut and mango trees and also bring on record whether the assessee has obtained any electricity service connection from State Electricity Board. The Assessing Officer shall also examine the purpose for which the electricity service connection was obtained as tariff. Thereafter the Assessing Officer shall decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

In the result, the appeal filed by the Revenue is allowed for statistical purposes.