TMI Blog2019 (12) TMI 960X X X X Extracts X X X X X X X X Extracts X X X X ..... ater years, is proper and is confirmed in principle; but for the additional evidences. However, the Assessing Officer is required to examine the additional evidences furnished by the ld. AR for the assessee as per the set principles of natural justice. Deduction claim u/s 54B - In the present case, there is no dispute about the time-line provided for purchase of eligible lands and the agricultural nature of the same. The dispute is only on the condition of 2 years of land use for agricultural purposes for immediately preceding two years from the transfer date of the lands sold. Thus, while the revenue is in favour of the two calendar years, the assessee argues that the agricultural use of lands for two crop seasons in two years fulfils the specified conditions mentioned in section 54B(1) of the Act. it is evident that the condition of two years of agricultural use of lands stands met if the said lands are used for an year preceding to the date of transfer of land and also same days of the year preceding to the said preceding year. In other words, two crop seasons in the two years preceding to the date of transfer, meets the legal requirement of law in section 54B of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B. During the assessment year 2012-13, assessee filed the return of income declaring the total income of ₹ 11,84,296/-. In the Return of Income, assessee reported sale of various lands and claimed that the entire income of ₹ 3,35,33,192/- as exempt u/s 10 of the Act. Further, it is also the claim of the assessee that the assessee reinvested the said gains as per the law and hence, he is eligible for deduction u/s 54B of the Act in respect of the amount so invested. Rejecting all the claims of the assessee, the Assessing Officer made the assessment u/s 143(3) of the Act determining the total income at ₹ 3,29,54,915/- (para 6 of the assessment order). Assessee claimed agricultural income of ₹ 3,61,295/- too in the return and the same was so rejected by the Assessing Officer. The said para 6 of the assessment order is extracted hereunder :- 6. Subject to the above remarks, total income is computed as under : I. Income from House Property as disclosed ₹ 21,000/- II. Income from Business Profession as disclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il submission by assessee as per law. 5.1] The Learned CIT-APPEAL erred in law and on the facts in circumstances of case by denying exemption claim, u/s 54B for purchasing of other agriculture land by investing entire sale consideration of agriculture land within period of 2 years of sale and also ignoring decision of jurisdictional ITAT PUNE in this respect. 5.2] The Learned CIT-APPEAL erred in law and on the facts in circumstances of case by not accepting agriculture income shown/returned by assessee in his RETURN, by applying rule of consistency, as same being consistency accepted by department for all the preceding assessment years and subsequent scrutiny assessment A.Y. 1314, except A.Y. 12-13 in appeal. 7] The Learned CIT-APPEAL erred in law and on the facts, as he failed to appreciate that agriculture land possessed by assessee was capital assets as per provision of section 2(14) and assessee always treated land as fixed assets in his balance sheet and not as stock in trade; Land was sold as a whole and not into plot and no expenses incurred for development etc at any time and no N.A. permission. 8] The learned CIT-APPEAL erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is issue include that the assessee tabulated 13 items of purchase and sale transactions of various land held by the assessee. Assessee provided the details of survey number of the land along with the dates, purchase value, sale value etc. The details are given in para 2.4 at page 8 of the assessment order. As per the table given therein, the cumulative total sale consideration received by the assessee on sale of the said lands is ₹ 3,89,52,000/- and the cost of acquisition of these lands is ₹ 75,43,307/- [(sic) ₹ 76,83,988/-]. The different of ₹ 3,14,08,693/- was eventually reported by the assessee as capital gains and relied on the entries made in the books of account of the assessee. In the books, the properties were shown consistently as fixed assets i.e. investments in land for capital gains over the years. These properties are factually located within the 8 kilometres from the municipal limits and the holding period is less than 2 years. 10. Considering the number of transactions (distance) location of the assets, holding period before sale of the same etc, the Assessing Officer show caused to the assessee to treat the gains as the profit/busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee u/s 54B of the Act was also denied by the Assessing Officer. 13. Further, the Assessing Officer noted that the assessee claimed the agricultural income of ₹ 3,61,925/- over and above ₹ 3,14,08,693/- i.e. on account of sale of agricultural land. This claim of agricultural income of ₹ 3,61,925/- was examined by the Assessing Officer and the visit of the Inspector of Income Tax was ordered. During the visit of ITI, the lands were with only wild grass and there is no activity relating to the agricultural activity in the said land. Further, on commenting on the invoices of paddy sales amounting to ₹ 1,18,875/-, the Assessing Officer held this claim of the assessee is also not to be allowed. Accordingly, the Assessing Officer proceeded to add the said sum of ₹ 3,61,925/- too as non-agricultural income of the assessee. 14. Before the CIT(A): During the First Appellate Proceedings, the assessee made various written submissions mentioning that the gains on sale of land is exempt u/s 2(14) of the Act. He also reiterated the claims about sanctity of the 7/12 extracts and the bonafide on the claim of growing agricultural produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the relevant facts of the same, we find appropriate to admit the same and use it for adjudication of the issue relating to the proper head of income for taxing the gains. The issues for adjudication in short are: A. Relevant Head of Income for taxing the profits/gains earned on sale of lands i.e. i. Agricultural income as conceded by the assessee. ii. Capital gains as Business Income i.e. Adventure in the nature of trade. B. Capital Gains The claim of deduction u/s 54B of the Act as conceded partly to the extent of ₹ 1,84,81,978/- out of ₹ 3,14,08,693/-. 18. In this regard, ld. Counsel for the assessee filed the written submission and the same is extracted hereunder :- 1. As per the computation of income attached with Return of Income filed on 31-03-2014 the assessee has sold urban agriculture lands situated within the Municipal limits of Panvel Town consisting of 16 Survey Nos. by way of 13 sale deeds and has earned Short Term Capital Gains of ₹ 3,13,44,837/-. The assessee has invested a part of the sale consideration of the said urban agriculture lands in purchase of agricultural lands at abou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has made further 6 investments in agricultural lands amounting to ₹ 16,71,220/- and in A. Y. 2016-17 the assessee has made 4 more investments in agricultural lands amounting to ₹ 17,85,000/. As against this after the A. Y. under consideration the assessee during the A.Y. 2013-14 has sold only 2 lands for a small amount of ₹ 5,40,000/- and in the A.Y. 2014-15 another 2 lands for ₹ 16,43,200/-. No lands has been sold in A. Y. 2015-16 and A. Y. 2016-17. (Paper Book Page Nos. 88, 89, 93 and 98). It can be seen that assessee has made 32 investments in agricultural lands during 4 years from A. Y. 2013-14 to A. Y. 2016-17. In this period the assessee has sold only 4 lands for a small amount of ₹ 21,00,000/-. During A. Ys. 2015-16 and 2016-17. Prior to the A. Y. under consideration also there are not many sales of land. In A. Y. 2010-11 assessee has sold only two lands. These lands were acquired by assessee in the year 1996, i.e. about 24 years before the sale. (Paper Book Page No. 93). In A. Y. 2011-12 the assessee has not sold any land. (Paper Book Page No. 96). From the frequency of and quantu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r some suits were filed in respect of other lands wherein the assessee was also implicated. In support of these circumstances developing in an around the town of Panvel the assessee has filed before the Hon'ble Tribunal, additional evidence in the shape of the copies of the said litigation suits along with the copy of the Notification No. TPS-1712/475/CR-98/12/UD-12 dated 10- 01-2013, issued by CIDCO. The assessee have also submitted the application for admission of the additional evidence. It is trite law that the assessee is free to have two portfolios i.e. the assessee can be in the business of trading in lands, and at the same time the assessee can also purchase lands for investments purposes. - Viksit Engineering Ltd. 100 taxmann.com 436 (Bombay). - Sri Hemant B. Motadu ITA No. 283/PUN/2014 (Page 7 Para 10 and Page 8 Para 11). After the A. Y. 2012-13 because of the recession, there has not been any appreciation in the value of the lands, therefore the assessee has not sold any lands for next 4-5 years. This also establishes that the assessee is not in the business of trading in lands. In the A. Y. 2010-11 the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 54B would be satisfied if the assets has been used for whole of the immediately preceding year and some days of the year earlier to the preceding year, and not necessarily for whole period of two years (Para 9). This judgment has been followed by the Hon'ble Pune Bench, of the Tribunal in the case of, Majid Khan Nisar Khan ITA No. - 901/PUN/2016. D. From the Capital Gains to the extent of ₹ 1,84,81,978/- that have arisen from the sale of the lands which have been cultivated for two crop seasons, the assessee is eligible for deduction u/s 54B, in respect of reinvestment in the agricultural land. - During the hearing of the appeal, the Authorised Representative has submitted that the assessee is eligible for deduction u/s 54B of the Act only in respect of the Capital Gains arising from sale of the lands which were cultivated for two crop seasons. Such Capital Gains works out to ₹ 1,84,81,978/- as per the chart placed at Page No. 1 of the Paper Book. Accordingly, the Authorised Representative has conceded that the remaining Capital Gains of ₹ 1,28,62,859/- (3,13,44,837/- - 1,84,81,978) is not eligible for deduction u/s. 54B of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he land is less than 2 years. Therefore, the transaction is in the nature of adventure in the nature of trade. Assessee s claim of agricultural activities in the said land together with the supporting reports of the ITI contributed to the Assessing Officer s decision treating the sale transactions as adventure in the nature of trade. On these report of ITI, the assessee argues that the same does not pertain to the assessment year under consideration. Assessee relies on the Thalati s report on one hand and the contents of 7/12 extract of the Revenue on the other. These 7/12 extracts support the assessee s claim that Rice was cultivated in the relevant assessment years. 23. Capital Gains Proper Head of Income: On hearing the arguments of the parties on this issue of proper head of income for taxing the earnings, we find that it is an undisputed fact that the assessee consistently recorded the sale and purchase transaction as that of the investment activity relating to fixed assets. It is also born on records that the lands as business assets (stock-in-trade) are earmarked for his partnership firm. The firm has self, daughter and son as the partners. Revenue did not dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,52,000/-. The gains earned on sale of the agricultural lands held as fixed assets were reinvested in the eligible lands to the extent of ₹ 1,84,81,978/- only. The tables showing the above figures are extracted as under :- Table No.I. Showing details of lands sold, purchase/sale dates, purchase and salve values Sr. No. Description of land Purchase date Purchase consideration in Rs. Sale Date Sale Consideration in Rs. 1 89/2 Vihighar 21/04/2010 2,91,524 03/12/2011 16,33,500 2 102/2/3 Vihighar 29/04/2010 3,37,428 03/12/2011 18,90,000 3 15/3 16/14, Vihighar 01/09/2010 5,43,343 03/12/2011 30,37,500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Purchase Crop as per 7/12 Extract on purchase Date of Sale Crop as per 7/12 Extract on Sale Period Holding Capital Gains (RS) Lands with Rice held for 2 crop seasons 1 15/5 08-06-2010 Rice 03-12-2011 Rice 18 months. 08-06-2010 to 03-12-2011 18,50,503 2 91/1 13-11-2009 Rice 03-12-2011 Rice 24 months. 13-11-2009 to 03-12-2011 15,50,349 3 91/2 13-11-2009 Rice 03-12-2011 Rice 24 months. 13-11-2009 to 03-12-2011 16,60,824 4 100/3 11-03-2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer/CIT(A), namely (i) the lands sold were not agricultural lands as only grass was seen growing in those lands at the time of ITI s visit; and (ii) the use of the lands for agriculture for 2 years immediately preceding to the date of sale, as specified in the provisions of section 54B(1) of the Act. We shall now proceed to adjudicate each of the issue i.e. (i) agricultural lands or not and (ii) land use for agriculture for two years immediately preceding to date of sale. 29. A. Agricultural lands or not: In this regard, the case of the Revenue is that with no direct evidence in support of growing the rice, sale of agricultural produce, other related direct evidences, the claim of agricultural status cannot be granted to the said lands sold that gave rise to capital gains of ₹ 3,13,44,837/-. Per contra, the case of the assessee is that with the details and the documentary evidences like 7/12 extracts and the contents therein, the Talati certificates and the revenues documents, the lands in question constitutes an agricultural lands as mentioned in the provisions of section 54B of the Act. Referring to the Report of the ITI of Assessing Officer, ld. AR su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ediately preceding the date on which the transfer took place, was being used by the assessee being an individual or his parent, or a Hindu undivided family for agricultural purposes (hereinafter referred to as the original asset), and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,- . 33. From the above, it is evident that the land transferred (lands sold) should have been used by the assessee/parent/HUF for agricultural purposes. Two years immediately preceding the transfer date is specified condition in the law. As per the same, to avoid paying capital gains tax, these provisions specify the conditions for reinvestment of the gains in the agricultural lands only in the specified time period. 34. In the present case, there is no dispute about the time-line provided for purchase of eligible lands and the agricultural nature of the same. The dispute is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to obtain earnest money or advance or instalments before a property is conveyed by registering sale deed, the investment made out of such amount would amount to investment out of sale consideration. Circular No. 359, dt. 10th May, 1983 issued in connection with section 54E would apply with equal force to relief under section 54B also. Applying the spirit of the Circular of the Board, it could be said that the investment made prior to the date of transfer would also be eligible and should be considered as investment made out of sale proceeds. The limit of two year period after transfer is an outer limit, while the investments made earlier to the date of transfer out of the earnest money or advances should be considered to fall within two years time-limit period. Thus, the assessee was entitled to the benefit of section 54B in respect of the total amounts invested in the new agricultural lands up to 16-2-1988. 37. From the above discussion, it is evident that the condition of two years of agricultural use of lands stands met if the said lands are used for an year preceding to the date of transfer of land and also same days of the year preceding to the said prece ..... X X X X Extracts X X X X X X X X Extracts X X X X
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