TMI Blog2015 (4) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... ally put to use for agricultural purpose. In these circumstances, we are of the opinion that the issue of land being agricultural land has not been proved beyond doubt and hence the issue is set aside to the file of the AO who shall verify all the necessary documents as well as the bills and vouchers for the sale of agricultural produce before concluding whether the land is agricultural land. Further for the exclusion of land from the definition of capital asset, the definition of capital asset is to be as per section 2(14)(iii). Hence, the AO shall verify whether the land is a capital asset as per section 2(14)(iii) - Decided in favour of Revenue for statistical purposes. - ITA No.1385/Hyd/2014 - - - Dated:- 27-3-2015 - Shri P.M. Jagtap And Smt.Asha Vijayaraghavan JJ. For the Appellant : Shri Rajat Mitra, DR For the Respondent : Shri V. Sridhar ORDER Per Smt. Asha Vijayaraghavan, J.M. This is an appeal filed by the Revenue against the order of the CIT (A) II Hyderabad dated 11.06.2014 passed for A.Y 2007- 08. 2. Briefly stated, assessee is an individual. Originally he filed his return of income for A.Y 2007-08 on 25.07.2007 admitting salary in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the 8 km from the limit of GHMC The land was not put to agricultural purpose, before or after sale, either by the assessee or by the purchaser. The assessee had no intention to put the land for agricultural purposes, as seen from the photographs. Purchaser used the land for construction of apartments. The land was sold at a whooping price of ₹ 1.00 crore per acre which is very high from agricultural land. 6. AO relied on the statements recorded by the DDIT from VRO, Quthbullapur Mandal, MD of Bhavya Constructions and others and on photographs taken during search operations on buyer of land in coming to the conclusion that the landis not agricultural land and the assessee has not carried out agriculture, and tehrefore, the same should be taxed under the head Short Term Capital Gains . These evidences were submitted by the assessee before the AO. In framing the assessment order the AO also relied on judicial pronouncements such as Raja Mustafa Ali Khan vs. CIT (1948) 16 ITR 330 (PC) and Smt. Sharifa Bibi Mohmed Ibrahim vs.CIT (1993) 204 ITR 631 (S.C) and the principles discussed therein. AO, thus brought to tax thesum of ₹ 95,95,000/- as short t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtificate from Dy.Collector and Tahsildar, Quthubullapur Mandal. The 1 acre sold by the assessee to Varun Constructions is located in Sy.No.667. The ld Counsel for the assessee submitted as follows: that apart from the intimation letter referred to by the AO in para 7 on page 3 of the assessment order, the assessee had brought on record sufficient evidence to indicate that the land in question is beyond 8 kms from the municipal limits and the AO himself had information on record that the land is beyond 8 kms. It can be seen that for exclusion of land from the definition of capital asset, two conditions are prescribed, one it should not be within the jurisdiction of whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name or a cantonment board and which has a populationof not less than ten thousand or two it should not be located in any area within such distance not being more than 8 kms from the limits of any municipality as may be notified. The section in connection with the facts and circumstances of the assessee s case would apply as under: a) The land in Sy.No.667 Dundigal Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptions underlying the assessment are evident from the remark of the AO the assessee had no intention to put the land for agricultural purposes, as seen from the photographs . That the photographs nowhere speak the intentions of an assessee. They are mere pictures taken at a particular point of time and depict things as they stand at that time. That the land was sold by the assessee in the year 2006-07 (12-03- 2007) relevant to A.Y 2007-08 and search and seizure operations u/s 132 of the I.T. Act,1961 were conducted in the case of Sri Vengilla Ananda Prasad, MD of M/s Bhavya Constructions (P) Ltd and M/s Bhavya Cements Ltd in the year 2009 (on 7.10.2009) i.e. 2 years from 7 months after the assessee sold theland to M/s. Varun Constructions. The photographs (evidence relied upon by the AO vide Annexure D) were taken during post search enquires on 26.12.2009 (almost 3 years after the sale). Further in the course of assessment proceedings, assessee was asked evidence with respect of sale of produce etc. As stated earlier, assessee carried out agril. Activity in 2005-06 2006-07 and the AO has called for the evidence as above in the year 2013 i.e. almost 7 years after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the first issue the CIT (A) observed that the assessee has produced copy of purchase deed and sale deed and as per these deeds, the land was recorded as agricultural land. As per the pahani - adangal the land was recorded as dry land and the land is put to agricultural operations by growing jowar. The CIT (A) held that even in income-tax return filed on 25.07.2007, i.e., before the date of search on 07.10.2009 in case of M/s. Bhavya Constructions, agricultural income of ₹ 14,000/-was shown in his individual return, whereas there was income from ancestral lands taxable in HUF Capacity. , since HUF does not have any other taxable income, no return was filed. The land was purchased in March, 2005, therefore, agricultural income was offered in F.Y.2006-07 for A.Y.2007-08 In his individual return as the land was purchased in individual capacity and carrying out agricultural operations was question of fact. It was pointed out by the ld CIT (A) that enquiries conducted by the Department were only subsequent to the date of search i.e. 07.10.2009, whereas the land was sold on 12.03.2007 itself. It was further pointed out that in the statement recorded, the VRO Bowrampet, Qutubull ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch does not jall under the provisions of section 2(14)(iii) of the IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as non-agricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, in such circumstances, in our opinion, such transfer like the case before us cannot be considered as a transfer of capital asset or the transaction relating to sale of land was not an adventure in the nature of trade so as to tax the income arising out of this transaction as business income. Accordingly, the ground raised by the Revenue is dismissed. 16. The ld CIT (A) concluded as follows: The fundamental factors in this case were, that the land was recorded as agricultural land in revenue records namely Adangal/pahani, growing crops like jowar. The land was recorded as agricultural land in purchase and sale' deeds also. Further, the competent Municipal limits and 9.3 kms. outside erstwhile Kukatpally municipality authority has certified that the land is located at 15 kms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia, not being land situate- (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand [according to the last preceding census of which the relevant figures have been published before the first day of the previous year] ; or (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of and scope for urbanisation of that area and other relevant considerations, specify in this behalf by notification in the official gazette. The following item (b) shall be substituted for the existing item (b) of sub-clause (iii) of clause (14) of section2 by the Finance Act, 2013 w.e.f. 1.4.2014: (c) in any area within the distance, measured aerially,- (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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