TMI Blog2016 (6) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) has properly adjudicated the issue and we do not find any mistake therein. We accordingly confirm the order of the CIT(Appeals). - Decided in favour of assessee. - ITA Nos. 1169 to 1172/Bang/2015, CO Nos. 220 to 223/Bang/2015 - - - Dated:- 27-5-2016 - Shri Sunil Kumar Yadav, Judicial Member And Shri A. K. Garodia, Accountant Member For the Revenue : Shri Sanjay Kumar, CIT-III(DR) For the Assessees : Shri V. Chandrashekar, Advocate ORDER Per Bench These appeals are preferred by the Revenue against the respective order of CIT(Appeals)-2, Bengaluru inter alia on the following common grounds:- 1. The order of the CIT(Appeals) is opposed to law and the facts and circumstances of the case. 2. On the facts and in circumstances of the case, whether the CIT(A) was right in deleting the additions made placing reliance upon the judgment of the Co-ordinate Bench of the ITAT which has not been accepted by the Department and the issue is open in appeal filed by the Department before the Hon'ble High Court of Karnataka? 3. For these and such other ground that may be urged at the time of hearing, it is humbly prayed that the order of the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions. The relevant observations of the CIT(A) in ITA No.1169/Bang/2015 are extracted for the sake of reference:- 4.6 I have carefully considered the appellant's submissions and perused the assessment order. In the course of the hearing, the AR for the appellant filed written submissions from which the following portions are extracted and reproduced below: The appellant submits that the lands which are the subject matter of the Joint Development Agreement (JDA) are held to be Agricultural Lands not Capital Assets u/s 2(14) of the Act in the appellant s own case by the Hon ble Income Tax Appellate Tribunal [ITAT] in ITA No.1652/Bang/2012, dated 21/11/2014 for the A.Y. 2008-09. The Hon ble ITAT has, apart relying upon several other decisions of different co-ordinate benches on the same issue, followed the decision of the Jurisdictional Karnataka High Court in the case of Leelavathi in 21 Taxmann.com.148 (Kar) in coming to the conclusion that the lands owned by the appellant are agricultural lands, despite the fact that they stand converted, in view of the fact that the conversion was resorted to only for the purpose of either selling the lands or for developing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at paras 7.3.8 to 7.3.10 of its order has also found merit in the arguments put forth by the learned Authorised Representative therein that owing to the peculiar features of law prevailing in the state, an agriculturist in the state of Karnataka has to necessarily get his agricultural land converted if he has to sell the same to a non-agriculturist and hence is placed at a disadvantage as compared to an agriculturist in Tamil Nadu, Andhra Pradesh, etc. who can directly sell their agricultural lands to non-agriculturists without getting the same converted. In this regard the co-ordinate bench of the Tribunal at paras 7.3.8 to 7.3.10 of its order has observed and held: 7.3.8 Finally, the most important aspect which requires to be considered is that agriculture is a State subject and different States have different reforms (laws) as to who can purchase/own agricultural lands in the respective States. To illustrate further, in Karnataka, non-agriculturists and industrial companies are prohibited from purchasing of lands which are classified as 'agricultural' in the revenue record . If an agriculturist intends to sell his agricultural lands to a company/nonagriculturist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agricultural land and, thus, exempt from capital gains in view of s. 2(14) of the Act. It is ordered accordingly.' The extracted portion at paras 7.3.8 to 7.3.10 of the order in the case of M.R.Seetharam (HUF) (supra) indicates that the coordinate bench of the Tribunal came to the conclusion that mere conversion of land from agriculture to non-agriculture could not be taken as the sole criteria to hold it as a capital asset under section 2(14) of the Act and that if that land is used for agricultural purposes till the date of sale, despite the fact that it is converted to non-agricultural use are agricultural lands and not capital assets under section 2(14) of the Act. 4.8 On going through the submissions and also the evidence produced in support of the submissions, I find that they are factually correct. Further the appellant has also placed on record the fact that these very lands were assessed to wealth tax as capital assets belonging to the appellant by a wealth tax assessment order passed u/s 16(3) r.w.s. 17 dated 9/01/2013 just two months prior to the passing of this impugned assessment order. In fact the proceedings under the Wealth Tax Act and the Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Shri M.R. Ramaiah. These documents confer and explain the title of the appellant to the impugned lands and further demonstrate that these impugned lands are contiguous to the agricultural lands, which are the subject matter of the decision of the Hon'ble ITAT referred to above and enjoy the same physical characteristics and also located in Akkalenahalli and Mallenahalli villages, Kasaba Hobli, Devanahalli Taluk. In view of this fact, it is clear that the impugned lands are identical in physical properties and under cultivation as the lands, which are the subject matter of the decision of the Hon'ble ITAT. In fact, it is also noticed in the said Tribunal order that the Hon'ble Members of the Tribunal have personally inspected the physical characteristics of these lands in the year 2014, which is a good seven years after the date of JDA, and found that these lands are under cultivation with fruit-bearing and coconut trees in abundance. 4.11 In fact, as submitted by the appellant, the Hon'ble ITAT has held in ITA NO.1654/Bang/2012 that no capital gains will arise from the sale/transfer of land, which is an agricultural land and not a capital asset u/s 2(14) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the taxes levied and collected . It would be relevant to mention here that in the above said case the CIT had ordered reopening u/s 263 relying upon the decisions of T.K.Oayalu Chaturbhuj Kapadia. The Fact that the Tribunal has held that the agreement between the parties would decide as to when Possession is intended to be given is of great importance to determine the year of taxability of Capital gain. In the present instance the parties have clearly agreed that the developer will get possession only upon completion of the construction of the Owners share of the Constructed area handing over of the same to the Appellant not any time before. In view of this clear legal contract between the two interested parties it would be grossly wrong to suggest that possession stands transferred immediately upon the signing of the JDA. 4.13 Considering the facts and the JDA placed on record, I find merit in the additional submissions as made above by the appellant. 4.14 Hence, respectfully following the decision of the jurisdictional Bangalore Bench of the Hon'ble ITAT in the appellant's own case, where these lands have been treated as agricultur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osit and in addition to the same, he was also entitled for structures to be constructed by the developer at free of cost on the basis of such agreement. Thus, in that case, the assessee has received the amount on 26.1.1996 and possession was handed over on 30.5.1996 and the project was completed in the year 2003-04. The controversy in that case was with regard to the year of taxability of the capital gain. In that case, it was held by Their Lordships of the Hon'ble High Court of Karnataka that since the possession was finally transferred in the A.Y. 1997-98, the capital gain is to be taxed in the year in which the non-refundable money was received or the project was completed. 9. But in the instant case, the issue in dispute is with regard to chargeability of the capital gain on the impugned transaction. Our attention was drawn to the order of the Tribunal in the connected cases i.e., Shri M.R. Seetharam v. ACIT in ITA No.1654/Bang/2012 dated 13.6.2014, in which the Tribunal has held that the agricultural land was transferred to buyer and the issue was raised, whether capital gain has accrued on such transactions. The Tribunal has held that though the subject land was conver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ysing the arguments of the assessee on the issue, we shall now proceed to deal with the sequence of events which apparently took place, chronologically, as under: 7.2.3. The assessee had in its possession certain acres of agricultural lands, out of which, lands to the extent of 6 acres and 1 gunta situated at Akkalenally and Mallenahally converted as nonagricultural vide Conversion order No.ALN(D) SR 30/2004-05 dated 19.7.2004 [source: Page 88 to 92 of PB AR] were sold to M/ s. ETL Corporate Services Private Limited for a sum of ₹ 45.58 crores. The subject property was a part of around 600 acres of lands known as 'Gokula Farm' which was originally purchased by Late Sri M.S.Ramaiah, the father of Sri M.R. Seetharam - HUF - way back in 1951 [Source: Page 6 of Sale Deed dt.12.4.2007]. The same has been jointly cultivated by the family, comprising of 10 children of Late M.S.Ramaiah. These lands were, subsequently, partioned in 1970 and after the death of Sri M.S. Ramaiah, the lands were further portioned [Refer: Para 3.2. of the Asst. order]. Even though, the subject property, among others, was converted as non-agricultural lands way back in 2004, agricultural activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Director of Horticulture (Zilla Panchayat) Devanahalli, Government of Karnataka, dated 23.4.2014 wherein it has been certified as under: This is to certify that M.R.Seetharam, s/o (of) Late M. S. Ramaiah residing at Gokula House, Dr M. S. Ramaiah Road, Gokula, Bangalore, have, in their land situated in Akkelenahalli - Mallenahalli Village, Kasaba Hobli, Devanahalli Taluk bearing Sy Nos. 29, 30/1, 30/2, 37/1p, 37/4p, 37/6p, 37/7p, 37/10p, 37/13p, 37/ 16p, fruit yielding mango, sapota, coconut, cashew, coco, jack-fruit, rose apple, guava trees aged 25 - 30 years. 7.2.6. Ostensibly, neither the AO nor the CIT (A) had disputed the fact in clear terms that even after the conversion of the land for nonagricultural purposes, the assessee has been carrying on agricultural operations and also admitting incomes from such lands in its returns of income. The AO's stand that once the agricultural lands were converted into non-agricultural, even though agricultural activities continued; the lands cannot be termed as agricultural land is, in our view, not the correct proposition of law. This is apparent from the fact that one of the mandatory conditions contained in the conver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and use of the lands in the adjoining area were such as would indicate that the land was agricultural? (ix) Whether the land itself was developed by plotting and providing roads and other facilities; (x) Whether there were any previous sales of portions of the land for non-agricultural use? (xi) Whether permission under Tenancy and Agricultural Lands Act was obtained because the sale or intended sale was in favour of non-agriculturist, if so, whether the sale or intended sale to such non-agriculturist was for non-agricultural or agricultural user? (xii) Whether the land was sold on yardage or on acreage basis? (xiii) Whether an agriculturist would purchase the land for agricultural purposes at the price at which the land was sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield? 7.2.7. In view of the norms prescribed by the Hon'ble Supreme Court in its judgment (supra), we are of the view that the facts making in the present case, the issue requires to be decided as to whether the subject land was an agriculture land. The land in question was inherited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tural operations on the said lands declared by the assessee in its returns of income which were accepted by the Revenue for the AYs 2004-05 to 2009-10. 7.3.3. At this juncture, we would like to refer to the findings of the earlier Bench of this Tribunal in the case of H.S.Vijaya Kumar v, ACIT, Hassan in ITA No.108/Bang/05 dated 28.11.2006. After taking into account the rival submissions of an almost identical issue to that of the present issue under dispute, the Tribunal has held as under: 6.4. In this case also various conditions imposed by the Deputy Commissioner, Hassan were not fulfilled by the assessee prior to the sale of the said land. It is observed that permission has been accorded for residential purposes and whereas the sale has been made to Indian Oil Corporation for putting up a service station. This contradiction itself goes to show that the permission accorded does not militate against the land becoming nonagricultural land. The first appellate authority also went by the fact that the land was sold on yardage basis to Indian Oil Corporation. This single circumstance in our considered opinion does not change the character of the land for the reason that n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cter of the land. For example, the Government has notified many areas for setting up of special economic zones or industrial parks or for infrastructural developments such as road ways and railways. After identifying particular areas, the Government notifies that a particular area would be used for non-agricultural purposes. It is thereafter only that the acquisition start and accordingly the land of farmers are acquired. It would be travesty of justice, if a view has to be taken that when once a Notification is given by the Government, the agricultural land becomes nonagricultural land i.e., even prior to the issue of acquisition notices. As long as there is no change in the physical characteristics of the land in question, we cannot be held that there is a conversion. 7.3.4. The jurisdictional High Court in the case of CITG v. Smt K. Leelavathy reported in (2012) 21 taxmann.com 148 (Kar) dated 2.1.2012 had an occasion to analyse the provisions of s. 2 (14) read with sections 45 and 48 of the Act. Briefly, the substantial questions of law raised by the Revenue before the Hon'ble Court was that - 1. Whether the appellate authorities were correct in holding that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sale of capital asset as this sale was after the date of permission for non-agricultural use granted by the Asst. Commissioner, viz., after May 10,2004, whereas the earlier sale transaction dated April 7, 2004, is held to be in respect of an agricultural land. We do not find the reasoning and the principle enunciated by the Tribunal for making a distinction as to whether the land was agricultural land or otherwise in the case of T. Suresh (supra) apply to the present case to be obnoxious or violating any statutory provisions and, therefore, we do not find any illegality in the finding recorded by the Appellate Commissioner and the Tribunal. . 7.3.6. In the case of M. ThimmeGowda [(i) Sri M. ThimmeGowda, (ii) Sri M.N. Manjunath, (iii) Sri Dasappa, (iv) Sri T. Suresh Gowda, (v) Sri T. PrasannaGowda v. Department of Income-tax, the earlier Bench of this Tribunal, in its findings in ITA 1464, 1465/B/08; 177,178,262 305/B/09 dated 30.12.2009, had dealt with an identical issue to that of the present issue under consideration. The main issue before the earlier Bench was: Whether the land sold by the assessee was agricultural in nature or not? .After duly analysing the rival sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion in spite of the fact that this land was situated in an industrially developed area where the potential use of the land as non-agricultural land was very high but the Hon'ble High Court held that the use of the land as non-agricultural is totally immaterial. Entries in the record of rights are good prima facie evidence regarding land being agricultural and if the presumption raised either from actual user of the land or from entries in revenue records is to be rebutted, there must be material on the record to rebut the presumption. The approach of the fact-finding authorities, namely, the income-tax authorities and the Tribunal, should to consider the question from the point of view of presumption arising from entries in the record of rights or actual user of the land and then consider whether that presumption is dislodged by other facts in the case. While coming to the above conclusion, the Hon'ble High Court considered the following facts. The presumption for non-agricultural used was obtained by the assessee before the sale of the land. Coming to the facts in the instant case, the previous owner made an application for conversion, obtained the permission, but w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 464,1465/ B/ 08, 177,178,262 305/ B/ 09 Page 55 agricultural land. The assessing officer observed that the land was converted for residential purpose before the sale and, therefore, it is immaterial whether the land was situated outside the city limits or beyond 8 KMs. He further held that the cultivation of land till disposal is also irrelevant. He further held that no documentary evidence was produced to the effect that the land converted was treated as agricultural land within the meaning of s. 2 (14)(iii)(b). ......................................................................................................... 54. On similar issues in the connected case, we had held that the evidence produced by the assessee before the assessing officer and Commissioner of Income-tax (A) to the effect that assessee was doing cultivation of ragi etc., was sufficient to treat the land as agricultural land in the hands of the assessee, particularly because in the document, the nature of the land has been recorded as non-agricultural under the Karnataka Land Reforms Rules, 1966. While coming to the above conclusion we also held that this is a document maintained by the Government o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.3.9. Thus, it is evident from the fact that the agriculturists in other States can sell their agricultural lands without getting the same converted whereas the agriculturists in Karnataka cannot do so due to the Land Reforms Act prevailing in the State. As such, an agriculturist in Karnataka is on a different footing from his counterparts in other States. If one were to conclude that since the present assessee had obtained a conversion order to enable it to sell its lands to a nonagriculturist (a Corporate), the subject land ceased to be a nonagricultural and, thus, become a Capital asset, though the subject land remains an agricultural land, the assessee then stands discriminated in the eyes of law vis-a-vis its counter-parts in other States. Had the State Reforms Act permitted the assessee to sell its agricultural lands without conversion to a Corporate as in the case of other States (supra), the assessee would not then be required to get the land converted merely to facilitate its sale to a corporate and the gains arising from such sale would not have been exigible to Capital Gains tax which is the subject of a Central Act (Income-tax Act).In the instant case as mentioned earl ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
