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2016 (1) TMI 894 - ITAT PUNE

2016 (1) TMI 894 - ITAT PUNE - TMI - Income arising from sale of agricultural land - whether exempt or is taxable as capital gains in the facts of the case? - Held that:- In the present case there is no allegation that the assessee had ever applied for change of land use. The 7/12 extracts show the land as agricultural land and there is cultivation of crop. The land is beyond 8 km from the Municipal limits and the village is having population of less than 10,000. There is no evidence on record t .....

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ASTHY, JM : The appeal has been filed by the assessee assailing the order of Commissioner of Income Tax (Appeals)-V, Pune dated 02-07-2012 for the assessment year 2007-08. The only issue raised in the appeal by the assessee is; Whether the income arising from sale of agricultural land is exempt or is taxable as capital gains in the facts of the case? 2. The facts of the case as emanating from the records are : The assessee is a cloth merchant. The assessee filed his return of income for the impu .....

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, is not a capital asset within the meaning of section 2(14) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). The Assessing Officer rejected the contentions of the assessee and applied the test as laid down by the Hon'ble Gujarat High Court in the case of CIT Vs. Siddharth J Desai, 139 ITR 628 to determine the nature of land. The Assessing Officer held that the plots of land sold by the assessee are situated in predominant developed area, the land is not under cultivation a .....

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e. Now, the assessee is in second appeal before the Tribunal assailing the findings of the Commissioner of Income Tax (Appeals). 3. Shri Nikhil Pathak appearing on behalf of the assessee submitted that the assessee is owner of agricultural land comprising in S. No. 106, 161 at Village Khadkale and Gat No. 244, Village Kusgaon, Tal.-Maval, Distt.-Pune having 1/3rd share. The aforesaid land is beyond 8 km from the Municipal limits of Lonawala and is having population less than 10,000. The extracts .....

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sing Officer has not rejected the extracts of 7/12 before holding that the land is a capital asset. It is also not disputed that the land is more 8 km away from Municipal limits and is situated in a village having population of less than 10,000. The Assessing Officer has not been able to show from the records that the land was not utilized for the agriculture purpose. The first reason given by the Assessing Officer to treat the plots of land as capital asset is that the plots are situated in pre .....

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purpose. The assessee has placed on record extracts of 7/12 after sale of plots. The Revenue records still show that the land is under cultivation. The third reason pointed out by the Assessing Officer is that plot of land situated at Kusegaon Gat No. 244 is shown as barren land in the Revenue record. Therefore, no cultivation is possible on the said land and the assessee has not disclosed agriculture income in his return of income. The ld. AR further submitted that the Commissioner of Income Ta .....

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n the land. However, from the perusal of the 7/12 extracts it is evident that the land was cultivable and was under cultivation. As far as plots comprising in S No. 106 and 161 at Khadkale, Tal.-Maval, Distt.-Pune is concerned there is no dispute that the land/plots were under cultivation. The dispute is only with regard to the land comprising in Gat No. 244 (Old 135), Kusegaon. In the 7/12 extracts it has been mentioned that part of land is pad (barren). However, in 7/12 extracts for the subseq .....

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representing the Department submitted that the assessee has failed to prove that any agriculture activity was carried out on the land in question. The assessee has not disclosed any income from agriculture activity in his return of income. The ld. DR further pointed out that there are contradictions in 7/12 extracts filed by the assessee for the same assessment year. Thus, no reliance can be placed on such documents. Moreover, the land comprising in Gat No. 244, Kusegaon has been classified as .....

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g population less than 10,000. The assessee on the basis of Revenue records has claimed the plots of land as agricultural land and accordingly claimed the income from sale of plots of land as exempt. On the contrary, stand of the Revenue is that even though the land is stated to be agricultural land in the Revenue records, it does not qualify the tests laid down by the Hon'ble Gujarat High Court in the case of CIT Vs. Siddharth J Desai (supra). A perusal of Revenue records show that the land .....

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000 population, development of surrounding area and nearness of the highway cannot be a ground to characterize the land as nonagriculture. 6. The Commissioner of Income Tax (Appeals) has rejected the 7/12 extracts merely on the ground that there are contradictions in two 7/12 extracts for the same year. In one of the 7/12 extracts for the year 2002-03 the crops mentioned are Bhat , Gehu and Vipath , whereas in the second 7/12 extracts for the same year the crops mentioned are Bhat and Gehu . We .....

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jecting 7/12 extracts by the Commissioner of Income Tax (Appeals) are not sustainable. 7. Another reason for holding the land as capital asset by the Revenue is that the assessee has not disclosed agricultural income from the land in his return of income. We are of the considered view that, non-disclosure of agricultural income by the assessee in the return of income cannot be a ground for changing the classification of land from agricultural land to a capital asset . The Hon ble Bombay High Cou .....

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t CIT (supra) the Coordinate Bench held the land to be agricultural land on the basis of Revenue records even after inclusion of land in the industrial zone. The relevant extract of the findings of Tribunal are as under: 23. It is further pertinent to note that mere inclusion of land in the industrial zone without any infrastructure development thereupon or without establishing and proving that the land was put into use for nonagricultural purposes does not and cannot convert the agricultural la .....

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into non-agricultural purposes and no such permissions were obtained from the concerned authority. In the Revenue records, the land is classified as agricultural land and has not been changed from agricultural land to non-agricultural land at the time when the land was sold by the assessee. It is also not in dispute that there was no activity undertaken by the assessee of developing the land by plotting and providing roads and other facilities and there was no intention also on the part of the a .....

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en it is classified as agricultural land in 7/12 extracts where the nature of the crop and the person who cultivated the land are duly mentioned at the relevant point of time when the lands were sold by the assessee and where nothing is brought on record to show that the land was put in use for non-agricultural purposes by the assessee. In view of the decision of the Hon'ble jurisdictional High Court in the case of Gopal C. Sharma vs. CIT (supra), it is also clear that the profit motive of t .....

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