KULWANT SINGH,MOHALI vs. ITO, W-6(5), MOHALI

That the Ld. CIT(A)-2 has erred in giving his findings that the agricultural land sold by the Assessee is not capital asset as per provisions of Section 2(14) of the Act and as such long term capital gain arising out of sale of the same was liable to be taxed.

That the Ld. CIT(A)-2 has also erred in giving his findings that certificate filed from the competent authorities does not in any case certify that it conform the definition of agriculture land as per provisions of the Income Tax Act, 1961 and further, the certificate from the Revenue Authorities should have been accepted by the authorities below.

That the Agricultural Land was not a capital asset as the population of the village in which agriculture land is located is less than one thousand as per, latest census for which evidence was led before the CIT(A).

That the learned CIT(A) has erred in confirming the action of the Assessing Officer in denying the benefit U/s 54B of the Act in respect of land purchased in the name of the wife of the Assessee and the same is, thus, not in the name of the third person.

That the benefit U/s 54B ought to have been given as per Judgment of Punjab and Harvana Hiah Court in the case of CIT Vs. Gurnam Sinqh 327 ITR 278 and the land had been purchased in the Joint name of wife and self, since the assessee had not been keeping good health.

That the submissions filed during the course of hearing has not been considered properly.

That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.

Briefly the facts of the case are that the assessee has sold agricultural land situated at Village- Raipur Khurd, HB No. 2, Mohali alongwith other co-owners on 14.05.2014 for Rs. 5,92,88,000/- in which assessee's share being 7/18th was Rs. 2,30,56,445/-. The AO held that the agricultural land sold by the assessee was within municipal limits of Mohali and as such was Capital Asset u/s 2(14) of the Act and liable to be taxed. Subsequent to the sale of land, the assessee purchased 4 pieces of agricultural land in his name & his wife's name, as per details given below:

During the appellate proceedings before the ld CIT(A), the ld AR on behalf of the assessee submitted that the agricultural land sold by the assessee was outside the Municipal Limit of Mohali during F.Y. 2014-15. In support of his contentions, the assessee furnished certificates of Patwari- Vill. Raipur Khurd, attested by Tehsildar, Sarpach & Namberdar of Village- Raipur Khurd. The assessee also placed on record certificate of Town Planner, Municipal Corporation, SAS Nagar in support of his claim.

1 The submissions of the assessee alongwith documentary evidences furnished during the appellate proceedings were considered by the ld CIT(A). As per his findings in the impugned order, during F.Y. 2014-15, the assessee sold his agricultural land situated at Village- Raipur khurd alongwith two co-owners for Rs. 5,92,88,000/- out of which the assessee's share was Rs. 2,30,56,445/-. Subsequently, the assessee invested the sale consideration of above said land, in purchase of 4 pieces of land in his name & his wife's name (2 pieces in F.Y. 2014-15 8s one each in 2015-16 8s 2016-17), on which he claimed deduction u/s 54B of the Act. The AO allowed the benefit of deduction u/s 54B to the extent of the consideration for land purchased by the assessee' in his name(that in wife's name excluded) within two years of sale amounting to Rs. 83,05,800/- and added the remaining amount of Rs. 1,47,50,645/- to the returned income of the assessee. There is no evidence that the sold land existed in the wife's name so exclusion is justified. Further, the issue as to whether the assessee would be entitled to avail benefit u/s 54B in case of property purchased in name of any third party including the taxpayer's wife was before Punjab & Haryana High

2 The ld CIT(A) further held that having made claims u/s 54B during the course of assessment proceedings(that was duly adjudicated by the AO and credit given for land purchased in his own name), the assessee, during the appellate proceedings clearly has adopted another tack. He is attempting to canvass, alternately, that the land sold was agricultural land and therefore income on its sale was not taxable. He furnished certificate from Patwari, Village -Raipur Khurd, in which it is certified that the agricultural land sold by the assessee was used for agricultural purposes & the said land is outside the juri iction of municipal committee. The said report does not certify that the land in question was being used for agricultural purposes in the two years immediately preceding the date of transfer, which is a prerequisite condition for claiming deduction u/s 54B of the Act. In any case this aspect ought to have been examined by the AO at the time of according deduction u/s 54B of the Act. The assessee also submitted a certificate from Town Planner, Municipal Corporation, SAS Nagar, which clarifies that the land does not fall within the limits of Municipal Corporation, SAS Nagar. Not only is the said clarification inconsequential for purposes of section 54B but for the claims that it was a capital asset also. It is also the case that the I.T Act excludes agricultural

3 The ld CIT(A) held that the present certificate from the authorities (claimed to be competent to issue such certificates), doesnot in any case certify that it conforms to the definition of agricultural land as per the provisions of the I.T Act. The finding of the AO, who on the basis of maps, had come to the conclusion that the said land was a capital asset u/s 2(14) of the Act and LTCG arising out of sale of the same was liable to be taxed subject to other provisions of the Act, remains intact. In light of the above discussion, there are no grounds to interfere with the AO's finding that the land sold by the assessee was capital asset, and the relief on capital gains has been rightly restricted to the land bought by the assessee in his own name.

Against the aforesaid findings and directions of the ld CIT(A), the assessee is in appeal before us.

During the course of hearing, the Ld. AR submitted that the assessee has sold rural agricultural Land at Vill Raipur Khurd alongwjth other co-owners for Rs. 5,92,88,000/- on 14.05.2014. The share of the Assessee was 7/18 i.e Rs.

1 It was submitted that the Land sold by the Assessee was not a capital Asset and was purely in the nature of Rural Agriculture Land as per Section 2(14)(iii) of the Income Tax Act 1961. It was submitted that as per the definition of agriculture land, it is clear that any Land which is outside the Municipal Limits and has population of less than 10000, the said land would be agricultural land and not covered by the provisions of sec 2(14)(iii)(a) of the Act.

It was submitted that the Assessee has filed the following documents before the department in order to prove the same: a) Verification report by Patwari (land Record Officer) and Sarpanch b) Certificate of limitation as issued by Municipal Corporation SAS nagar, Mohali. c) Relevant page of District Census Handbook as issued by Directorate of Census Operations Punjab, wherein it is clear that the total population of Vill Raipur Khurd was only 907 persons.

3 It was submitted that the Patwari (Land Record Officer) has given the certificate as under: " The said land has been sold by Mr Kulwant Singh S/o Sh. Jagir Singh. Mr. Kulwant Singh was used to cultivate produce from this agriculture land. This, Rakba was used to cultivate crops. This Rakba is outside the Municipal Committee at Village Raipur Khurd, Mohali. Report is produced."

4 It was further submitted that the Municipal Corporation SAS Nagar has issued the limitation certificate as under:

5 Reliance was placed upon the following case laws wherein it has been held that the area which is outside the municipality and having population less than 10000, the land would not be a capital asset as per the provisions of sec 2(14)(iii)(a) of the Act: It was further submitted that it has even been held by various Hon'ble Courts that the certificate by the officials of the Land revenue department is more reliable than that of any Income Tax Department. Reliance in this regard is being placed in the following cases: wherein it has been held as under: "Report of Inspector of Survey and Land Records more reliable than that of Income Tax Department Valuer" b) CIT vs Lal Singh & Ors as reported in 325 ITR 588 (P&H HC)

On the facts and circumstances of this case, we also wish to state that in the matter giving weightage to the evidence, report of the departmental inspection vis-a-vis certificates of the Village Administrative Officer, Deputy Surveyor, Ambattur Taluk and General Manager, Metropolitan Transport Corporation (Chennai) Ltd's, for the purpose of Section 2(14)(iii)(b) of the Income Tax Act, certificates of the Revenue Authorities and Public Transport Corporation Ltd., on the measurement of distance, by the approach road, should be given weightage and accepted, unless the contrary is proved."

7 It was submitted that the Ld. CIT(A) has stated that, the certificates as filed by the Assessee does not conforms to the definition of agricultural land as per the provisions of I T Act. Further he has stated that the AO on the basis of the maps has come to the conclusion that the Land is capital asset. In this regard it is submitted that the certificates as issued by the Land record Officers, duly proves that the fact that the land is outside the purview of definition of capital asset. Rather, the AO has merely reproduced a screen shot of google map and has not stated anywhere as to how it proves anything adverse in the case of the Assessee. So, it cannot be denied that the impugned land in question is a rural agricultural land which is outside the purview of definition of sec 2(14) of the Act and is not subject to capital gain tax.

8 Without prejudice to the above, even if for the sake of arguments it is accepted that the impugned land in question is a capital asset and is subject to capital gain tax, even then the Assessee has duly invested the sale proceeds further in agricultural land and he is duly eligible to avail the exemption as per the provisions of sec 54B of the Act.

9 The Assessing Officer has not accepted the partial Investment made by the Assessee in the purchase of Agricultural land in the name of his wife. In this regard we rely upon the following Judgments of the Hon'ble Courts wherein it has been held that even the Investment in the name of family members of the Assessee is eligible for claiming exemption as per the provisions of sec 54B of the Act:

10 It was submitted that the Ld. CIT(A) has stated that the certificates as filed by the Assessee do not certify that the Land in question was used for agricultural purposes and thus the Assessee is not entitled to exemption u/sec 54B of the Act- In this regard it is submitted that the AO has already given the part benefit of provisions of sec 54B of the Act, so the CIT(A) has erred in holding that it is not proved as to whether the land in question was used for agricultural purpose or not.

The Ld. DR has vehemently argued the matter and relied on the order of the authorities below.

We have heard the rival contentions and purused the material available on record. Firstly, we find that there is no restriction in assessee pleading before the ld CIT(A) by way of an alternate ground that the land sold being an agriculture land falls outside the definition of a capital asset u/s 2(14)(iii) of the Act and the sale proceeds arising from the sale thereof cannot be brought to tax. The same being a legal ground and infact emerging from the findings of the AO where the AO has held that even though the land is an agricultural land, the same falls within the municipal limits of Mohali and thus exigible to tax.

It is the submission of the assessee that the agricultural land sold by the assessee was outside the Municipal Limit of Mohali during F.Y. 2014-15 and secondly, the population of the village was only 907 persons and thus, the agriculture land so sold doesn’t qualify as capital asset and cannot be brought

If we look at the definition of agricultural land - Section 2(14)(iii) of the Income Tax Act 1961 defines the agricultural land as under: