Income Tax Appellate Tribunal - Hyderabad
Desham Satyanarayana, Hyderabad vs Department Of Income Tax on 20 January, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "A" : HYDERABAD
BEFORE SHRI D. MANMOHAN, VICE PRESIDENT
AND
SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
ITA.No.1825/Hyd/2014
Assessment Year 2009-2010
The Income Tax Officer, Mr. Desham
Ward 13(5) (I/c), vs. Satyanarayana,
Hyderabad. Hyderabad.
PAN AOKPD2900A
(Appellant) (Respondent)
For Revenue : Mr. M. Sitaram
For Assessee : Mr. P. Vinod
Date of Hearing : 28.10.2015
Date of Pronouncement : 20.01.2016
ORDER
PER BENCH :
This appeal by the Revenue is directed against the order passed by the Ld. CIT(A)-II, Hyderabad dated 11.09.2014 for the A.Y. 2009-2010.
2. Though several grounds were urged before us, the main grievance of the Revenue is that the land in question was not used for agricultural purpose after its sale and it was not cultivated prior to the same, apart from the fact that surrounding areas were subjected to developmental activities like Engineering Colleges etc., in which event, the land at the time of sale ought to have been brought to tax under the Head "Long Term Capital 2 ITA.No.1825/Hyd/2014 Mr. Desham Satyanarayana, Hyderabad.
Gains". Assessee herein is an employee of National Geo Physics Research Institute. In response to the notice issued under section 148 of the Act, assessee declared total income at Rs.1,97,210. During the course of assessment proceedings, the Assessing Officer noticed that he along with his two brothers sold ancestral agricultural land of 6.7 acres of land at Sy.No.707 and 708 situated at Korremulla (v), Ghatkesar (M), Ranga Reddy District on 04.03.2008 and received total sale consideration of Rs.1,97,60,000 on which no capital gains tax was paid. When confronted, assessee submitted that the land is situated beyond 8 KM from municipal limits and it is agricultural land. When called-upon to furnish evidence of cultivation of agricultural lands the assessee, vide letter dated 22.03.2013 submitted as under:
1. "The agricultural land sold is an ancestral property and it falls under HUF status. The HUF return was not filed because there was no taxable income under HUF Status. Hence there was no requirement to file HUF Return so the question of disclosing the agricultural Income does not arise.
2. We have submitted pahanies of agricultural land where the crops grown by us was. mentioned. It being the government record, there cannot be better evidence than government record to evidence the agricultural activity.
Agricultural activity was being carried in the said land for several years before sale. Agricultural was carried on for more than 2 years and the fact is recorded in.
Records as well.
3 ITA.No.1825/Hyd/2014Mr. Desham Satyanarayana, Hyderabad.
3. The relevant issue is at the point of sale whether it was agricultural land or not. After sale the buyer put to a different use does not alter the nature of land at the time of sale. At the point of sale our land was agricultural land."
2.1. The Assessing Officer was not convinced with the explanation of the assessee. He observed that the assessee had not admitted any agricultural income either in his individual capacity or HUF capacity and had not produced bills, sale of agricultural produce. He also observed that the land was in his individual capacity and there was no evidence that the land under cultivation in the preceding two years of its sale. He also observed that after sale the land was put to commercial activity. In fact, the land was sold to a non-agriculturist for a non-agricultural purpose i.e., for building an Engineering College. He drew support from the observations of the Hon'ble Supreme Court in the case of Smt. Sarifabibi Md. Ibrahim vs. CIT 204 ITR 631 to conclude that the land sold was not an agricultural land. It should be treated as capital asset and consequently the sale proceeds thereof are liable to long term capital gains. 1/3rd share of the assessee was brought to tax under the Head "Long Term Capital Gains".
3. On an appeal filed by the assessee, Ld. CIT(A) observed that as per the revenue records and the sale deed, land was described as agricultural land from the pahanies, crops grown were shown as "Paddy".
4 ITA.No.1825/Hyd/2014Mr. Desham Satyanarayana, Hyderabad.
Admittedly, the land falls beyond 8 K.M. from urban agglomeration and therefore, did not fall within the definition of capital asset, unless it is shown that it was used for non-agricultural purpose. He has taken into consideration several judicial precedents in this regard and observed that even if agricultural operations are not carried on and the land is kept un-cultivated/fallow for few years, it does not alter the character of the land unless it is specifically put to non-agricultural use. Since, in the instant case, there is nothing on record to suggest that the assessee had made any attempt to convert the land into non-agricultural purpose, the same cannot be considered as capital asset and consequently, the question of capital gains does not arise.
4. Aggrieved by the order of Ld. CIT(A), Revenue is in appeal before us. Ld. D.R. relied upon the decision of Hon'ble Supreme Court in the case of Smt. Sarifabibi Md. Ibrahim vs. CIT (supra) that in each case the facts have to be gathered to draw an inference, as to whether it was put to agricultural operations or not.
4.1. In the aforecited case, the facts in favour of the assessee were - (a) land registered as agricultural land in revenue records (b) payment of land revenue till the year 1968-69 (c) absence of any evidence that it was put to non-agricultural use.
5 ITA.No.1825/Hyd/2014Mr. Desham Satyanarayana, Hyderabad.
4.2. The facts against the assessee were:- (a) that the land was situated within the municipal limits i.e., within 1 K.M. from the Surat Railway Station (b) land was not cultivated from 1965-66 until it was sold in 1969 (c) the party entered into an agreement of sale with a Housing Cooperative Society to sell the land for non- agricultural purpose (d) the party applied in June, 1968 and March, 1969 for permission to sell the land for non- agricultural purpose and sale took place thereafter (e) the land was sold @ Rs.23 per sq. yard and purchaser society commenced construction operations within three days of purchase.
4.3. Under these circumstances, the Hon'ble Supreme Court held that the circumstances in favour of the Revenue outweigh the circumstances in favour of the assessee and concluded that the land at the time of sale was not an agricultural land.
5. Ld. D.R. adverted our attention to the land records wherein the land was shown as dry land which cannot give good yield and more particularly of Paddy. Since the assessee mentioned that he has grown paddy in the preceding years Ld. D.R. submitted that in a dry land it will be difficult to cultivate paddy and thus in the absence of any other evidence it cannot be treated as an agricultural land. He also relied upon the decision of ITAT, Cochin Bench in the case of MK Abdul Rahman 49 SOT 267 to submit that mere capability of using the land 6 ITA.No.1825/Hyd/2014 Mr. Desham Satyanarayana, Hyderabad.
for agricultural purpose is not enough to treat the same as agricultural land.
6. On the contrary, Learned Counsel appearing on behalf of the assessee relied upon a certificate issued by the revenue department to highlight that the land is situated beyond 8 K.M. from the Hyderabad municipal limits. Even as per the remand report, the A.O. agrees that the land is situated beyond 8 KM from Municipal limits and this was not disputed by the A.O. in the assessment order itself. It was also submitted that there was a dispute regarding the actual cultivation carried on this land as per govt. records. It was submitted by the Ld. Counsel that the land was purchased as agricultural land and sold and referred to as agricultural land in the sale deed placed on record in the paper book.
7. We have perused the rival contentions and examined the facts on record. There is no dispute with reference to the fact that the impugned land is situated beyond 8 KM from the Municipal limits, to be precise 9.5 KM from the end of the Municipal limits. Even though, no income was declared by the assessee - who is Director of NGRI, Hyderabad in his individual capacity - the land appears to have been purchased in HUF capacity. As seen from the recitals of the sale deed, it is true that Mr. D. Satyanarayana along with his two other brothers Mr. D. Laxminarayana and Mr. D. Mahender purchased agricultural land vide registered document 7 ITA.No.1825/Hyd/2014 Mr. Desham Satyanarayana, Hyderabad.
No.526 of 1985. It is also seen that along with the assessee, assessee's mother, wife and son were also included as vendors by the vendee to avoid further complications which indicate that the property may belong to the HUF. Be that as it may, the status of the property and non-declaration of agricultural income does not come in the way of identifying the land as agricultural land as the property was purchased in 1985 and sold in March, 2008 i.e., after 23 years as agricultural land. There is no evidence of conversion of land from agricultural to non-agricultural usage. Revenue has not brought anything on record to counter the findings or evidence on record that the land in question is shown as 'dry' agricultural land in the revenue records. There is also no evidence that assessee has intended to convert the land into non-agricultural land, as in the case of Smt. Sarifabibi Md. Ibrahim vs. CIT (supra). Since the facts in the above said case relied on by the Revenue are entirely different from the facts in the impugned case, we see no reason to interfere with the findings given by the Ld. CIT(A). Moreover, whether agricultural operations are being conducted or not, so as to consider it as non-agricultural land, will arise only when the land is situated within 8 KM of the city limits. Where the land is recognised as agricultural land in the revenue records and assessee is holding the same for a period of more than 20 years as agricultural land and in the absence of any evidence that assessee sold the land 8 ITA.No.1825/Hyd/2014 Mr. Desham Satyanarayana, Hyderabad.
as non-agricultural land or at least converted into non- agricultural land, the nature of the land cannot be changed.
7.1. In the case of DCIT, Circle 1(3), Hyderabad vs. M. Kalyan Chakravarthy ITA.No.729/Hyd/2013 dated 24.10.2014 assessee entered into an agreement for development of land and the purchaser used the land for commercial purposes. The Bench observed that the land sold was agricultural land and put to use for agricultural purposes also and therefore the fact that the predecessor utilised the land for commercial purpose cannot be considered as evidence of change of land. Under the circumstances, the purpose for which the purchaser utilised the land cannot be considered as evidence of change of land.
7.2. The Hon'ble Delhi High Court in the case of Hindustan Industrial Resources Ltd., vs. ACIT (141 ITR 806) on similar facts held as under :
"The Tribunal's finding of fact is contrary to its own record and, therefore, is in the realm of perversity. This is so because the Tribunal clearly held that at the point of time when the assessee purchased the said land, it was agricultural land. There is no dispute with regard to this. The Tribunal also noted that the award passed by the District Collector (Land Acquisition), was a document which established beyond doubt that the land in question was agricultural land. Thus, on the date of purchase, the land in question was agricultural land and on the date of acquisition, the character of the land continued to be agricultural. When these two clear findings have 9 ITA.No.1825/Hyd/2014 Mr. Desham Satyanarayana, Hyderabad.
been returned, it is apparent that in the transitional period, that is, between purchase and acquisition, the nature and character of the land did not change. The fact that the assessee intended to use the land for industrial purposes did not in any way alter the nature and character of the land. The further fact that the assessee did not carry out any agricultural operations did not also result in any conversion of the agricultural land into an industrial land. It is nobody's case that the assessee carried out any operations for setting up any plant or machinery or of the like nature so as to lead to an inference that the nature and character of the land had been changed from agricultural to industrial. The mere fact that the assessee did not carry out any agricultural operations did not alter the nature and character of the land. In any event, this discussion is not relevant in the backdrop of the clear finding given by the Tribunal that on the date of the purchase and as also on the date of acquisition, the land in question was agricultural land. Having come to such a conclusion, the Tribunal ought not to have gone into question of intention of the assessee and definitely not into the question of intention of the land acquiring authority, the latter being a wholly irrelevant consideration. In these circumstances, the land acquired from the ownership of the assessee was agricultural land".
7.3. Since the facts in the present case indicate that assessee has sold away the agricultural land and there is no intention or evidence that land was converted to non-agricultural land or put to use for non- agricultural purposes, the contention that purchaser used the land for the purpose of Engineering College cannot be held against the assessee so as to treat the land as non-agricultural land.
10 ITA.No.1825/Hyd/2014Mr. Desham Satyanarayana, Hyderabad.
7.4. It is also deserves to be noticed that Revenue did not place on record about the status of the 2/3rd stakeholder's assessments.
8. It is also further noticed that the land in question was sold on 4th March, 2008, the fact of which was also stated in the assessment order. However, for the best reasons known to the A.O. he treats the previous year as 2008-09 whereas the previous year should have been 2007-08. Consequently, the issue could have been considered in A.Y. 2008-09 and not in A.Y. 2009-10 in which year there is no such transaction of sale of land. The A.O. in our view, has considered the assessment year wrongly and initiated proceedings in a later year, when the property was sold on 04.03.2008 relevant to A.Y. 2008-09. In view of that the contentions of the Revenue does not require any consideration. There is no merit in the Revenue grounds. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open Court on 20.01.2016.
Sd/- Sd/- (B.RAMAKOTIAH) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT Hyderabad, Dated 20th January, 2016 VBP/- 11 ITA.No.1825/Hyd/2014
Mr. Desham Satyanarayana, Hyderabad.
Copy to
1. The Income Tax Officer, Ward 13(5) (I/c), Hyderabad.
2. Mr. Desham Satyanarayana, Flat No.G-2, 1-3-82 & 83, High Light Heavens Apartments, Street No.6, Habsiguda, Hyderabad.
3. CIT(A)-II, Hyderabad
4. CIT-I, Hyderabad
5. D.R. ITAT "A" Bench, Hyderabad
6. Guard File