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2017 (5) TMI 361 - ITAT VISAKHAPATNAM

2017 (5) TMI 361 - ITAT VISAKHAPATNAM - TMI - Revision u/s 263 - capital gain on sale of land - nature of land - agriculture land situated within municipal limit or not - Held that:- In the present case, the land sold by the assessee not situated in any of the places as mentioned above. In fact the land situated in a hamlet village is not even situated in a village. Therefore, section 2(14)(iii)(a) has no application. - So far as application of section 2(14)(iii)(b) of the Act is concerned t .....

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as not carried agricultural operations, capital gain tax cannot be attracted. Exclusion provided u/s 2(14)(iii) does not apply to agricultural land situated within the Panchayat limits. - The impugned land sold by the assessee not attract the capital gains tax and no capital gain can be taxed. We also observed that the assessing officer has not at all examined before passing the order u/s 143(3) of the Act whether the capital gain attracts or not. After survey proceedings, assessee filed the .....

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by the assessee is dismissed. Thus, we reverse the order passed by the CIT(A) and the ground raised by the assessee is allowed. - I.T.A.No.187/Vizag/2014, I.T.A.No.26/Vizag/2012, I.T.A.No.135/Vizag/2015, I.T.A.No.27/Vizag/2012. & S.P. No.18/Vizag/2014 - Dated:- 5-5-2017 - SHRI V. DURGA RAO, JUDICIAL MEMBER. AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri Samuel Nagadesi, AR For The Respondent : Shri R. Govinda Rajan, DR ORDER PER V. DURGA RAO, Judicial Member: These three app .....

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s common order for the sake of convenience. 2. ITA No.27/Vizag/2012 filed by the assessees s husband against order passed by the CIT-1, Visakhapatnam dated 2.1.2012 and the same is disposed by passing a separate order. 3. The brief facts of the case extracted from ITA No.187/Vizag/2014 are that the assessee is an individual, running a milk diary. The assessee has sold 1.02 acres of land to M/s. Hemadri Enterprises Pvt. Ltd. on 25th May 07 for a consideration of ₹ 3,57,96,000/-. Subsequentl .....

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00/- and an amount of ₹ 14,79,066/- out of commission expenditure claimed of ₹ 80,34,579/-. Subsequently, the Ld. Commissioner has initiated proceedings u/s 263 of the Act and directed the A.O. to re-do the assessment after enquiries. The A.O. by order dated 29.5.2012 consequent to the order u/s 263 of the Act, noted that the genuineness of payment of ₹ 1,28,35,000/- to vacate the occupants was not established and the entire amount was disallowed. The A.O. also found that the n .....

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al grounds before the Ld. CIT(A), Visakhapatnam. For the sake of convenience, the same are extracted as under: 1. On the facts and in the circumstances of the case the learned Commissioner erred in law and facts of the case in treating the impugned agricultural land as capital asset within the meaning of Section 2(14)(iii) of the Income-tax Act, 1961. On the facts and in the circumstances of the case the learned Commissioner ought to have held the same is not a capital asset in view of the provi .....

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s, who conducted survey misguided and also ignored the relevant provisions of Notification issued by the Central Government. As the same is foundation to fix the incidence of tax the appellant makes this humble prayer to permit the raising of the above additional ground. The land is agricultural land situated in the village Hamlet of Thummapala village and not a capital asset within the meaning of section 2(14)(iii) of the Income-tax Act, 1961 accordingly the transfer does not attract capital ga .....

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ew of the provisions of section 2(14)(iii)(b) of the Act. But it is pertinent to bring it in your kind notice that the said land is situated within the ambit of 8 kms. of Anakapalle Municipality, which was established in the year 1877. This Thummapala hamlet where the land is situated is about 3 kms. from Anakapalle. 7. Further, there are two conditions enumerated in section 2(14)(iii)(b) of the Act to ascertain whether the land should be treated as a capital asset or not. In this aspect, it is .....

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s filed a detailed submission vide letter dated 19.3.2014 submitted on 25.3.2014. It was submitted before the Ld. CIT(A) that the land is not situated within the Anakapalle Municipality. Though, the land is situated within the 8 kms. of Anakapalle Municipality, it would not fall within the purview of capital asset as Anakapalle municipality as it is not notified municipality for the purpose of section 2(14)(iii)(b) of the Act. The Counsel for the assessee has referred notification no.SO77(E) dat .....

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the order is extracted as under: I have considered the submissions made. The subject land is admittedly situate in Thummappala village which is 3 kms. from Anakapalle. The AO has not filed any credible evidence to show that the land is not situate in the Anakapalle municipality. Further, there was no indication in the records to show that agricultural activity was carried on in the impugned land so as to constitute agricultural land for the purpose of section 2(14). Hence, the pleas raised by th .....

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3) read with Section 263 of the Income-tax Act, 1961 is erroneous in law and facts of the case. 2. The learned Commissioner of Income Tax (Appeals) erred in law and facts of the case, in holding that the order under Section 143(3) read with Section 263 stating that the assessee's appeal before the ITAT against the order made under Section 263 was dismissed. On the facts and in the circumstances of the case the learned Commissioner (Appeals) ought to have appreciated the fact that the appeal .....

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fact that the attempt to reopen the assessment by approving the reopening of the original assessment under Section 147, made futile by dropping of the proceedings commenced pursuant to the notice under Section 147, therefore, ought not to have initiated proceedings under Section 263 of the Income-tax Act, 1961 that to Assessing Officer passing impugned order without affording fresh opportunity as directed by the Commissioner. 4. On the facts and in the circumstances of the case the learned Comm .....

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the facts and in the circumstances of the case the learned Commissioner of Income Tax (Appeals) erred in law and facts of the case in stating that the AR has not raised any plea in regard to the other grounds of appeals which are connected with the mistaken basis of framing the assessment, issue as to affording an opportunity of being heard while passing the impugned order; the question as to natural opportunity of being heard and fair hearing; the grounds being self explanatory, the Commissione .....

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The Ld. Counsel for the assessee further submitted that the land is situated in survey no.663 of Thummapala, hamlet of Kottavaru Village, therefore, section 2(14)(iii)(a) of the Act has also no application. For the above proposition, he relied upon the judgement of Hon ble Madras High Court in the case of CIT Vs. P.J. Thomas (1995) 211 ITR 897. 13. The Ld. Counsel for the assessee further submitted that the land situated in a small village and the assessee carried agricultural operations earlier .....

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once a land is agricultural land as per the revenue records, assessee need not carry agricultural operations for the year under consideration and submitted that the land situated in Thummapala hamlet of Kottavaru village is an agricultural land as per the revenue records. For that he referred page 41 of the paper book (Adangal/pahani). 15. The Ld. Counsel for the assessee also submitted that the land is not converted from agricultural to non-agricultural, for that he has filed a certificate issu .....

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ailed to prove that he has carried out the agricultural operations, therefore, the land is not an agricultural land, capital gain tax can be collected. He strongly supported the order passed by the Ld. CIT(A). 17. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The assessee has sold the landed property to the extent of 1 acre 2 cents in survey nos.613/1, 663/1 & 670/1 for a consideration of ₹ 3,57,96,000/-. .....

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t to the directions issued by the Ld. Commissioner u/s 263 of the Act, the A.O. has passed an assessment order u/s 143(3) r.w.s. 263 of the Act by order dated 29.5.2012. Before the Ld. CIT(A), the assessee has raised a legal issue that the land sold by the assessee is an agricultural land and no capital gains can be taxed . The Ld. CIT(A) has admitted the additional ground raised by the assessee and also called the report from the A.O. in respect of the distance and nature of the land. The Ld. C .....

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illage, Anakapalle Mandalam, Visakhapatnam district. During the course of hearing of the appeal, the Ld. D.R. filed a letter dated 10.8.2016, filed by ITO Ward-1, Anakapalle addressing to the Commissioner of Income Tax (DR), ITAT, Visakhapatnam, wherein it is clearly mentioned that survey no.663/1 of Thummapala hamlet of Kottavaru village, which is a major Panchayat of Anakapalle Mandalam does not fall within the jurisdiction of Visakhapatnam. The land is situated 3 kms. away from Anakapalle mun .....

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essee is situated in Thummapala hamlet of Kottavaru village. It is also clear that the Anakapalle municipality is not notified as per the Gazette notification as mentioned above. However, the Anakapalle municipality included the limits of Greater Visakhapatnam Municipal Corporation by GOMS 375 dated 30.7.2013. So far as GVMC limits of Anakapalle municipality is concerned, assessee has filed a letter issued by RTI No.1311/G2/2016 dated nil, wherein, it is clear that the Thummapala hamlet of Kotta .....

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are classified as Jirayiti dry as per settlement of fair adangal. As per adangal/pahani (paper book pg.41), survey no.663/1, 670/1, 613/1, the land is classified as a dry land and cultivatable land. We find from the above, as per the revenue records, the impugned land is a dry cultivatable jirayiti land. The impugned land is not converted from agricultural to non-agricultural land. It is also clear from the certificate issued by the office of Zonal Commissioner, Anakapalle zone that the land sit .....

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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; or …………………………………………………………&h .....

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in the Official Gazette . 20. From the above, it is very clear that as per section 2(14)(iii)(a) of the Act, to attract the capital gains, the land has to situate in a municipality, municipal corporation, notified area, committee or town area committee or town committee or any other name or a cantonment board, which has a population of more than 10,000. In the present case, the land sold by the assessee not situated in any of the places as mentioned above. In fact the land situated in a hamlet v .....

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8.12.1999, therefore, section 2(14)(iii)(b) of the Act has also no application. 22. The only point for consideration is whether the assessee is to carry agricultural operations in the land. In this context, the Ld. Counsel for the assessee has submitted that the land is an agricultural dry land. To that effect, he filed a revenue record and it clearly shows that it is a dry and cultivatable land. So far as carrying agricultural operations in the year under consideration is concerned, it is submi .....

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vasagam (supra), wherein the Hon ble Madras High Court has held as follows: 15. To get exemption, the assessee has to satisfy the conditions laid down in Section 2(14) of the Income Tax Act, which reads as follows: 2(14) capital asset means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include- (i) any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession (ii) personal effects, tha .....

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any wearing apparel (b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel (iii) agricultural land in India, 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 les .....

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e Official Gazette (iv) 6® per cent. Gold Bonds, 1977, or 7 per cent. Gold Bonds, 1980, or National Defence Gold Bonds, 1980, issued by the Central Government (v) Special Bearer Bonds, 1991, issued by the Central Government (vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by the Central Government " 16. Once the Tribunal has accepted that the classification of lands as per the revenue records are agricultural lands, which are evidenced by the adangal and the l .....

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conclusion that the assessees' lands are not agricultural in nature. The reason given by the Tribunal that the adjacent lands have been divided into plots for sale would not mean that the lands sold by the assessees were for the purpose of development of plots. Also the reasoning given by the Tribunal "No agriculturists would have purchased the land sold by the assessee for pursuing any agricultural activity" is based on mere conjectures and surmises. 18. The plea of the learned st .....

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herein, it is held as follows: There was authority for the proposition that the expression agricultural land' mentioned in Entry 21 of List II of the Seventh Schedule to the Government of India Act, 1935, should be interpreted in its wider significance as including lands which are used or are capable of being used for raising any valuable plants or trees or for any other purpose of husbandry (See Sarojinidevi v. Shri Krishna Anjanneya Subrahmanyam and other(1) and Megh Raj v. Allah Rakhia (2 .....

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uch clear that once land is classified in the revenue record as an agricultural land even assessee has not carried agricultural operations, capital gain tax cannot be attracted. 24. In the case of Smt. Chalasani Naga Ratna Kumari (supra), wherein the coordinate bench of the Tribunal, wherein both the Judicial Member & Accountant Member are parties to the order dated 23.12.2016 has considered the similar issue and held that once lands are classified as agricultural lands in the revenue record .....

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lands are situated within 8 kms. from the limits of GVMC and hence, previous limits of Visakhapatnam Municipal Corporation is irrelevant to determine the distance. Since, as on the date of transfer of lands, the extended limits of GVMC has been notified by the Govt. of Andhra Pradesh, the distance from the extended limits of GVMC has to be considered to determine whether the particular land is situated within 8 kms. from such distance or not. The assessee claims that the lands are agricultural l .....

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lso suitable for agricultural operations. Therefore, impugned lands cannot be held as non-agricultural lands, just because the assessee has not carried out any agricultural operations. Once, the lands are classified as agricultural lands in the revenue records and suitable for agricultural operations, whether or not agricultural operations carried out by the assessee, the characteristics of land does not change from agricultural land to non-agricultural lands. Therefore, we are of the view that .....

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antonment, which has a population of not less than 10,000 according to the last preceding census. In order that the benefit of exclusion of agricultural land as capital asset may not be available, the land should be situated within the jurisdiction of a municipality or a cantonment board as stated earlier and is also related to the population. Though the expression, "municipality, municipal corporation, notified area committee town area committee, town committee", etc., have been used .....

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agricultural lands by the assessee. From the above, it is very clear that the exclusion provided u/s 2(14)(iii) does not apply to agricultural land situated within the Panchayat limits. 26. Keeping in view of the above and also by considering the facts and circumstances of the case, the impugned land sold by the assessee not attract the capital gains tax and no capital gain can be taxed. We also observed that the assessing officer has not at all examined before passing the order u/s 143(3) of th .....

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