Income Tax Appellate Tribunal - Chandigarh
Tejwant Singh Negi, Kinnaur vs Assessee on 19 January, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI H.L.KARWA, VICE PRESIDENT
AND MS. RANO JAIN, ACCOUNTANT MEMBER
ITA No.947/Chd/2014
(Assessment Year : 2007-08)
Jai Chand, Vs. The Income Tax Officer(Khaneri),
Vill. Kanai, P.O. Baltrang, Rampur Bushahr.
Tehsill Sangla, Distt. Kinnaur. (H.P.)
(H.P.)
PAN: AHFPC0969G
ITA No.948/Chd/2014
(Assessment Year : 2007-08)
Tejwant Singh Negi, Vs. The Income Tax Officer(Khaneri),
Vill. Kanai, P.O. Baltrang, Rampur Bushaher.
Tehsill Sangla, Distt. Kinnaur. (H.P.)
(H.P.)
PAN: BUGPS3635C
ITA No.949/Chd/2014
(Assessment Year : 2007-08)
Krishan Chand, Vs. The Income Tax Officer(Khaneri),
Vill. Kanai, P.O. Baltrang, Rampur Bushaher.
Tehsill Sangla, Distt. Kinnaur. (H.P.)
(H.P.)
PAN: AHFPC0968H
ITA No.950/Chd/2014
(Assessment Year : 2007-08)
Suresh ChandNegi, Vs. The Income Tax Officer(Khaneri),
Vill. Kanai, P.O. Baltrang, Rampur Bushaher.
Tehsill Sangla, Distt. Kinnaur. (H.P.)
(H.P.)
PAN: AFAPN3605B
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ITA No.951/Chd/2014
(Assessment Year : 2007-08)
Shyamal Singh Vs. The Income Tax Officer(Khaneri),
Vill. Kanai, P.O. Baltrang, Rampur Bushaher.
Tehsill Sangla, Distt. Kinnaur. (H.P.)
(H.P.)
PAN: BIAPS3967H
ITA No.952/Chd/2014
(Assessment Year : 2007-08)
Devi Singh, Vs. The Income Tax Officer(Khaneri),
Vill. Kanai, P.O. Baltrang, Rampur Bushaher.
Tehsill Sangla, Distt. Kinnaur. (H.P.)
(H.P.)
PAN: BUVPS2753N
ITA No.953/Chd/2014
(Assessment Year : 2007-08)
Lalish Chander Negi, Vs. The Income Tax Officer(Khaneri),
Vill. Kanai, P.O. Baltrang, Rampur Bushaher.
Tehsill Sangla, Distt. Kinnaur. (H.P.)
(H.P.)
PAN: AEZPN9722R
ITA No.954/Chd/2014
(Assessment Year : 2007-08)
Ram Gopal Negi, Vs. The Income Tax Officer(Khaneri),
Vill. Kanai, P.O. Baltrang, Rampur Bushaher.
Tehsill Sangla, Distt. Kinnaur. (H.P.)
(H.P.)
PAN: ACMPN6939E
And
ITA No.955/Chd/2014
(Assessment Year : 2007-08)
Mangat Singh, Vs. The Income Tax Officer(Khaneri),
Vill. Kanai, P.O. Baltrang, Rampur Bushaher.
Tehsill Sangla, Distt. Kinnaur. (H.P.)
(H.P.)
PAN: BUVPS2856N
(Appellant) (Respondent)
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Appellant by : Shri Parveen Kapoor
Respondent by : Shri Manoj Mishra, DR
Date of hearing : 10.12.2015
Date of Pronouncement : 19.01.2016
O R D E R
PER RANO JAIN, A.M. :
These nine appeals filed by the different assesses are directed against the separate orders of learned Commissioner of Income Tax (Appeals), Shimla dated 14.8.2014, 14.8.2014, 14.8.2014, 14.8.2014, 25.8.2014, 25.8.2014, 14.8.2014, 14.8.2014 and 25.8.2014 respectively for assessment year 2007-08. The appeals before the CIT (Appeals) were against the order of the Assessing Officer made under section 143(3) r.w.s. 254 of the Income Tax Act, 1961 (in short 'the Act').
2. Since the facts and circumstances are identical in all the appeals, the same were heard together and are being disposed off by this consolidated order for the sake of convenience. The decision given in the case of Jai Chand in ITA No.947/Chd/2014 shall apply mutatis mutandis to all the appeals.
ITA No.947/Chd/2014 :
2. Briefly, the facts of the case are that the 4 assessee had filed return of income declaring income of Rs.1,07,470/- and agricultural income of Rs.67,46,129/-. During the year under consideration, the assessee had given his land to J.P. Karcham Hydro Corporation Ltd. on rent. The assessee got compensation for carrying out changes in the topography and for removing fruit bearing trees. However, the assessment was completed under section 143(3) of the Income Tax Act, 1961 (in short 'the Act', considering the entire income from compensation i.e. Rs.67,46,129/- as income from 'other sources' as against the claim of the assessee as 'agriculture income'. The learned CIT (Appeals) decided the issue in assessee's favour, however, on an appeal filed by the Department before the I.T.A.T., Chandigarh Bench in ITA No.1161/Chd/2010 dated 24.11.2011, the matter was restored back to the file of the Assessing Officer with the direction to compute the income in the hands of the assessee under the head 'capital gains'.
3. Before the Assessing Officer, in second round, the assessee again raised a contention that the amount of compensation received by him may not be assessed as capital gains. Besides, that a computation was provided to the Assessing Officer and it was contended that an amount of Rs.85,600/- per tree be treated as Fair Market Value as on 1.4.1981 as the assessee was having full grown orchards on his ancestral land at that time and 5 further it was pleaded that the assessee was having 142 number of trees on his land. In this view, prayer was made to compute the cost of acquisition/improvement in this manner. Rejecting the contention of the assessee the Assessing Officer considered the number of trees in his land to be 99, on the basis of compensation of land described in Jamabandi filed by the assessee. Further, the assessee considered the cost of acquisition to be Rs.2500/- per tree, being the basic value of tree and expenses incurred to bring the tree to the fruit bearing stage. In this manner, the Long Term Capital Gain was computed at Rs.54,62,604/-.
4. Aggrieved by this, the assessee went in appeal before the learned CIT (Appeals) and reiterated the contention raised before the Assessing Officer. The learned CIT (Appeals) dismissed the appeal of the assessee holding that the method of NPV(Net Present Value) suggested by the assessee is not a proper method for computing cost of acquisition/improvement. Further, the assessee has failed to furnish any evidence in support of suggested calculation of cost of acquisition. Further he held that the Assessing Officer has estimated the cost of acquisition and number of plants as based on copies of Jamabandi and based his calculation of number of plants as per unit land in consultation with Revenue or Horticulture Department.
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5. Aggrieved by this, the assessee has come in appeal before us, raising the following revised grounds of appeal :
"1. The learned CIT(A) has wrongly confirmed the order of the learned A.O. despite the fact that no capital gains arises on the destruction of fruit growing trees.
2. The learned CIT(A) has wrongly ignored the Tehsildar's Revenue Certificate submitted during the asstt. proceedings that all the land was having fruit bearing trees.
3. The learned CIT(A) has wrongly confirmed the learned A.O.'s rejection of claim of cost of improvement of trees despite the fact the fruit growing trees were grown, up kept for a period of 25 year at a cost.
4. The learned CIT(A) has wrongly confirmed the learned A.O.'s rejection of claim of Net Present Value of the fruit growing trees because the compensation of loss in case of natural calamities is always calculated on this method.
5. That Ld. C1T(A) has wrongly confirmed the entire compensation as full value of consideration.
6. That the assessee/appellant reserves the right to amend/alter/add any ground in support of his claim."
6. The learned counsel for the assessee reiterated the submissions made before the lower authorities. Further, an evidence in the form of affidavit of one Shri G.S. Rathore, retired IAS, Department of Himachal 7 Pradesh was also filed giving the number of trees on the land of the assessee at the time of the transfer. A note on justification for more compensation to such farmers, by one Dr. D.R. Gautam, Ex. Director-Extensive Education, UHF, Former Director Horticulture, Uttrakhand was also filed. Vehement arguments were made justifying the number of trees and cost of acquisition/improvement of trees given by the assessee, to be correct.
7. The learned D.R. relied on order of the Assessing Officer as well as that of learned CIT (Appeals) and further argued that the Assessing Officer has been generous enough to give the benefit to the assessee in term of cost of acquisition/improvement being the cost of tree till the age it becomes fruit bearing. In this way, it was prayed to confirm the order of the learned CIT (Appeals).
8. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The assessee has challenged the action of the Assessing Officer in treating the said receipt as 'capital gain'. We cannot adjudicate this issue as the same was decided by the I.T.A.T. in the first round. The directions given to the Assessing Officer, while setting aside the case was to compute the income under the head 'capital gain'. 8
9. While computing capital gains under the said circumstances, two disputes, have arisen. First is with regard to number of trees. In the present case, the claim of the assessee is that there were 142 trees, while the Assessing Officer has considered there being only 99 trees. The second dispute is with regard to cost of acquisition and cost of improvement per tree to be taken for computing the income under the head 'capital gain'. In the present case, the assessee claimed the cost of acquisition and improvement to be Rs.85,600/- per tree while the Assessing Officer has estimated the same at Rs.2500/- per tree.
10. As regards the number of trees, we observe that the Assessing Officer has arrived at the number of trees on the basis of Jamabandi produced by the assessee himself during the course of assessment. The claim of the assessee as to the existence of fruit trees is based on a certificate from Tehsildar, Tehsil Sangla, dated 29.4.2011, whereby it is certified that the assessee was having land which was wholly occupied by fruit bearing trees of apples, grapes, chulli, etc. However, the Tehsildar has not given the number of trees. The assessee claimed that he was having land measuring 5 bighas and 6 biswas, therefore, it was estimated that 142 apple trees were standing at the time of lease. We observe that there is no documentary evidence with regard to the number of trees. Even in the lease agreement entered between the assessee 9 and M/s Jaypee Karchan Hydro Corporation, there is no mention of number of trees. However, we see from the perusal of copies of Jamabandi that the cultivation done in the different khasra numbers have been stated in the same. Jamabandi is such a register in which the detail of village land owners and cultivators and land revenue is given. This book is prepared after five years. Jamabandi is a part of Revenue record and presumption of truth is normally attached to record. Of course, presumption is, however, rebuttable. No material is brought on record to rebut the entries shown in the relevant Jamabandi. The assessee had not produced any copy of Khasra, Girdawari relevant to the period under consideration for the reason best known to him. The Assessing Officer has made a detailed analysis of cultivation as shown in Jamabandi of different khasra numbers, during the assessment proceedings. The land is either certified to be having bagichas, i.e. orchards, or being banjar kadim, i.e. barren. We have examined the copies of Jamabandi and tallied the same with the analysis made by the Assessing Officer in his order and found that the Assessing Officer has rightly set aside the land being documented as banjar, having no fruit trees. The argument of the learned counsel for the assessee that the land is said to be banjar or under agricultural crop, is of no help to the assessee as even if some crops were being cultivated in the said land, the same cannot be classified as apple trees and no cost of acquisition can be attributed to the same. After 10 considering the Jamabandi, the Assessing Officer come to a conclusion that the land containing bagichas were 0-63- 98 hectares, on conversion which comes to 8.7 bighas and the assessee's 1/3rd share at 2.9 bighas. As per agreement made by the assessee and his 2 brothers with M/s Jaypee Karchamm Hydro Corporation Ltd. (JKHCL) New Shimla, the khasra Nos.494, 496, 499, 500 & 573/1 were taken on rent by the second party. On going through copies of jamabandi the Assessing Officer has noticed that khasra No.494 & khasra No.573/1 measuring 0-10-98 & 0- 53-00 are reflected as bagicha i.e. apple orchard and remaining khasra Nos.496, 499 & 500 are either banjar kadim or under agriculture crops. We are in agreement with this finding of the Assessing Officer, which he has arrived after a totally scientific method applied on the basis of revenue records. As regards number of apple trees to be grown per bighas, the Assessing Officer has applied 25 number of apple trees per bigha on the basis of consultation from revenue/horticultural authority, which even the assessee has not objected to. On this basis, the Assessing Officer has arrived at 99 number of trees. We do not find any fault in this. The evidence filed by the assessee in terms of certificate of Tehsildar or that of a retired IAS officer is of no evidentiary value, specially in the presence of Jamabandi, which is an actual proof of land holding and cultivation thereon. In this view, we confirm the order of the learned CIT (Appeals) to the extent of number of trees to be 99 as against 142 claimed 11 by the assessee.
11. The second question before us is the cost of acquisition and cost of improvement per tree to be taken for computing capital gain. In the present case, the assessee has claimed the same to be Rs.85,600/- per tree while the Assessing Officer has allowed the same to be Rs.2500 per tree. Before adverting to the facts of the case, we must mention that the issue is only that of computation of capital gain. The mode of computation of capital gain is provided in section 48 of the Act, which to the extent necessary for adjudicating the present case, reads as under :
"48. The income chargeable under the head "Capital gains"
shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :--
(i) expenditure incurred wholly and exclusively in connection with such transfer;
(ii) the cost of acquisition of the asset and the cost of any improvement thereto:"
12. The four most important terms in this section are 'full value of consideration', 'expenditure incurred wholly and exclusively in connection with transfer', cost of acquisition and 'cost of any improvement thereto'. There is no dispute in the present case, as regards the full value of consideration and expenditure incurred wholly and exclusively in connection with transfer. The only dispute is with regard to the cost of acquisition and cost of improvement thereto. The basis adopted by the 12 assessee at arriving at a figure of Rs.85,600/- per tree as cost of acquisition and improvement is that he has taken Rs.100/- as the initial cost of planting a single tree and further Rs.300/- per tree is taken as the recurring cost of maintenance in the term of irrigation, treatment for improvement, etc. This amount of Rs.300/- is said to be incurred per tree per annum and is in the nature of recurring expenditure. Further, the assessee has assumed average life of a tree to be 45 years and further assuming that the trees were 15 years of age at the time of leasing the land, the value of trees at the time of evaluation is arrived at Rs.4600/- per tree. Once arriving at this cost per tree, the assessee deducted the net present value or likely earning for remaining bearing life of trees, i.e. 30 years and adding the basic value of tree to this figure, an amount of Rs.85,600/- per tree is arrived at.
13. After going through the method adopted by the assessee at arriving at the cost of acquisition and the cost of improvement, we do not find ourselves in agreement with the same. What the assessee has done is to arrive at the Net Preseent Value of likely earning for the remaining life of trees. This method may be in consonance with arriving at an amount to be estimated for getting compensation for loss of revenue earning apparatus of a person. But this is not a right approach to estimate the cost of acquisition and improvement for the purposes of computation under the head 'capital gains'. For Income 13 Tax purposes, one has to confine oneself to the provisions and methodology provided under the Income Tax only and no other method can be imported from anywhere else for said purpose. The initial cost of acquiring the trees in the form of cost of labour for preparation of pit, digging, filling of pit, cost of material like fertilizer, insecticide, pesticides @ Rs.100/- per tree as asked for by the assessee has been accepted by the Assessing Officer. Further, the maintenance cost of tree or recurring cost till the tree becomes fruit bearing, i.e. for 8 years have also been accepted by the Assessing Officer @ Rs.300/- per tree per annum. These expenses are in the form of irrigation, treatment for improvement of yield and fruit quality, watch and ward, weeding, manuring, fertilizing, mulching, pruning, basin making, plant protection and expenses required to maintain the orchard in good shape and quality. To this extent, there is no dispute between the assessee and the Assessing Officer. We also find it appropriate to consider this much expenditure as cost of acquisition and cost of improvement, as these expenses are incurred to bring the tree to a bearable stage, where it can be able to bear fruit. Further expenses the assessee is asking for are the maintenance expenses for the remaining life of the tree. Once the tree becomes able to bear fruit, whatever expenses are incurred, to our mind, these are revenue and recurring expenses, which are to be incurred for the maintenance of the trees only and are not in the nature of cost of improvement. To our mind, the 14 cost of improvement, in case of a tree can only be those expenses which are incurred either to enhance the life span of the trees or to enhance the fruit bearing capacity of such trees. These further expenses are not of such nature and are incurred only for the upkeep of the orchard or for the maintenance of the trees only. Therefore, we uphold the action of the Assessing Officer in not treating these expenses as part of cost of acquisition or cost of improvement. We further uphold the action of the Assessing Officer in not allowing the Net Present Value as computed by the assessee for the loss of likely earning. As we have earlier mentioned that this approach may be appropriate for estimating the amount of compensation, but for the purpose of computing the capital gains, this is not the right approach. In view of the above, we uphold the order of the Assessing Officer.
14. In the result, appeals of all the assessees are dismissed.
Order pronounced in the open court on this 19th day of January, 2016.
Sd/- Sd/- (H.L. KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER Dated : 19 t h January, 2016 *Rati*
Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.
Assistant Registrar, ITAT, Chandigarh 15