Income Tax Appellate Tribunal - Delhi
Ito, New Delhi vs M/S. Gomantak Eximis Ltd., New Delhi on 15 May, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "C" New Delhi
BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER
&
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
I.T.A. No.2708/DEL/2012
Assessment Year: 2006-07
ITO-Ward-12(2), vs. Gomantak Eximis Ltd.,
New Delhi. S-375, Rear Ground Floor,
Greater Kailash, Part-II,
New Delhi.
TAN/PAN: AABCI 0397N
(Appellant) (Respondent)
CO No.435/DEL/2012
Assessment Year: 2006-07
Gomantak Eximis Ltd., v. ITO-Ward-12(2),
S-375, Rear Ground Floor, New Delhi.
Greater Kailash, Part-II, New
Delhi.
TAN/PAN: AABCI 0397N
(Appellant) (Respondent)
Appellant by: Shri Amit Jain, Sr.D.R.
Respondent by: S/Shri Ashwani Taneja & Shaantanu
Jain, Adv.
Date of hearing: 27 02 2018
Date of pronouncement: 15 05 2018
ORDER
PER AMIT SHUKLA, J.M.:
The aforesaid appeal has been filed by the Revenue and the Cross Objection by the assessee against impugned order dated 29.03.2012, passed by Ld. CIT (Appeals)-XVIII, New Delhi for the quantum of assessment passed u/s.143(3) for I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 2 the Assessment Year 2006-07. In the revised grounds of appeal, the Revenue has taken following grounds:
"1. Ld. Commissioner of Income Tax (Appeal) erred in law and on the facts and circumstances of the case, in deleting the addition of Rs. 9,69,61,307/- determined under the head 'Capital Gain' by the AO.
2. Ld. Commissioner of Income Tax (Appeal) erred, in law and on the facts and circumstances of the case, in deleting the addition of Rs. 9,69,61,307/- ignoring the facts and findings of the AO that the land sold by the assessee was not Agricultural Land.
3. The Ld. CIT (Appeal) erred, in law and on the facts and circumstances of the case, in not appreciating and directing the AO to determine the tax payable on the book profit (including the profit on sale of land) as per the provision of section 115JB.
4. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing."
2. The facts in brief are that the assessee company had purchased an agricultural land admeasuring 76145 sq. mtr at village Mandrem, Pernem Taluka, sub-District Pernem of North Goa at a cost of Rs.18,12,130/-, by way of two purchase deeds; one dated 16.04.1992; and other dated 23.04.1992, falling in the Assessment Year 1993-94. The said land was surrounded by agricultural land and the Arabian Sea. Since the time of purchase the assessee company was holding the said land and stated to have been carried out some agricultural operation on it. This land was sold during the previous year relevant to the Assessment Year 2006-07 for a total sale consideration of Rs.10.30 crore to 'M/s. Maha I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 3 Seer Hotels & Resorts Pvt. Ltd.' The gain from the sale of land was claimed as exempt u/s.10 on the ground that capital gain has arisen on account of sale of agricultural land, which is not an asset within the meaning of Section 2(14)(iii). In response to the show cause notice by the Assessing Officer, the assessee had filed various particulars and details from time to time and explained that the said land was an agricultural land. The details furnished before the Assessing Officer, has been highlighted in the impugned appellate order, which for the sake of ready reference is reproduced hereunder:-
The copy of computation sheet showing claim of the assessee. The relevant page of balance sheet of the assessee company showing the impugned land was shown as agriculture land in its own balance sheet right from the beginning.
Certificate of incorporation consequent upon change of name of assessee Company from M/s Indana International Ltd. to M/s Gomantak Exims Ltd. issues by the Registrar of Companies. Copies of purchase deeds of the impugned land showing that the impugned land was agricultural land. Similarly, backside of PB 33 & 34 would show that the impugned land was surrounded by agriculture lands and the Arabian Sea.
The another purchase deed showing that the impugned land was agricultural land.
The copy of certificate issues by M/s Rajan Ramani & Co. (CA) certifying that the impugned land was purchased as agriculture land and that the said land was classified as garden/cultivable area under land revenue records of the Government of Goa. It has further been certified in these documents that the above said land was sold as agriculture land and it fell outside the definition of I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 4 capital assets in terms of section 2(14)(iii) of the Income Tax Act. The copies of agreement to sell for sale of land executed with the buyer namely M/s Maha Seer Hotels & Resorts Pvt. Ltd. The reference to certain documents issued by the concerned authority of the village i.e. Form No. I & XIV dated 5-10-2005.These documents issued in Form I & XIV dated 05-10-2005 issued by the concerned govt, authorities showing that the impugned land has been classified as garden area and the entire area was cultivable. The letter submitted to Ld. A.O. dated 16-12-2008 submitting copy of certificate from the office of mamlatdar of the concerned government authority certifying that Mendrem village was situated at more than 8 km distance away from the jurisdiction of municipal limits and the same comes under the rural area. Letter dated 23-12-08 sent by the concerned govt, authority that is mamlatdar to Ld. AO, in response to his letter u/s 133(6) confirming that the said authority has issued certificate about the said land being agriculture land.
3. Apart from above documents, the detailed explanation was also submitted before the Assessing Officer which again for the sake of ready reference is reproduced hereunder:-
"This is to bring to your kind notice that as per Coastal Zone Regulation/India, defined by Ministry of Environment & Forests, No Construction/ Development of Building either residential / commercial is permitted within the 200 meters of the sea beach. In the Present case, the construction is very old, since 1920 and now can be named as Heritage Property comes within 200 meters of the sea beach. (Kindly view attached map of Land). It means that old structure has no legal sanctity and has no commercial/Residential value in terms of rupees. Further it is submitted that this structure has been constructed only I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 5 on 231.78 square meters, out of 76145 square meters area of Agricultural land. In other word only 0.03% area is constructed which is also too much old that does not have any commercial/residual value.
Mere a small structure, i.e., 231.78 Sq. meters. Which is very old and have no legal sanctity on a very big land i.e. 76145 Sq. Meters"
does not change the characteristic of whole land. [Gowardhan Das & Sons vs. CIT (2007) 158 Taxman 465/288 ITR 481 (Punj. Har.) Further it is submitted that in order to qualify for "agricultural land in India". It must be agricultural land at the time of sale [T. S. M. O. Mohammad Orthuman vs. CIT (1957) 31 ITR 480 (Madras)].
If the land is used for agricultural purpose or even if the agricultural use has ceased but it is apparent that the land is meant to be used for agricultural purpose, it would be agricultural ) land. Ramchand bhai Bhaijibhai Patel vs. (1971) 81 ITR 446 (Guj).
The character of land at the time when the sale took place is material factor. Even the potential non-agricultural value of the land for which a purchase may be prepared to pay a larger price would not detract from its character of agriculture land on the date of sale CIT vs. Manilal Somwat (1977) 10C ITR 917 (Guj).
If a land is used for cultivation, etc. it would merit to be considered "Agriculture land" irrespective of the fact whether any agriculture income is yielded or not. [CIT vs. Sutton & Sons Ltd. (1981) 127 ITR 57, 60 (Cal).
From the above it would be noted that there was no house property in the said land alleged by Id. A.O. There was only one old heritage structure which was build prior to 1920 and is not in a useable condition at the moment. In any case, it was a very small structure admeasuring 231.78 sq. mtrs. out of total land area of 76145 sq mtrs.
I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 6
--------------------------------------------- Note on Agricultural Income "It is respectfully submitted that the assessee company has been using this land for Agricultural operation only. The land has been cultivated for agricultural purposes and no other use of this land has been taken at any time. Your good self also may get this fact verified through your independent sources. The agricultural yield was meagre which somehow enough to just cover up the remuneration of the caretaker and other persons working over there. Since no surplus was left, so that no income in this regard could be shown in the accounts. Caretaker and his team, obtained the crop of coconut. They sold part of it for their livelihood and they consumed Part of it. Remaining part was given to Assessee Company in the form of coconuts. This fact can be verified from the revenue record also as well as Office of Mamlatdar of Pernemn Taluka, Pernerm Goa."
Applicability of Bombay Tenancy and Agricultural Land Act, 1948.
"This is respectfully submitted that the said Act is not applicable to the state of Goa. As per section 1(2) of the said Act, is extended to the Bombay area of the state of Maharashtra. Extracts of section 1(2) of the said Act is enclosed herewith as per Annexure 4.
Further, without prejudice, it is submitted that we have sold our agricultural land as such. No Charge of land Use i.e. CLU has been obtained by us or by the other party before sale of land. We have learnt that even till date the land is used for agricultural purposes only. We have further learnt that as per Regional Master Plan of Goa, No. CLU i.e. Change of Land Use is permitted. Your good self may kindly get all these facts verified by the Government and other sources. This land was Agricultural land and it is still agricultural land. "
Xxxxxxxxxxxxxxxxxx I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 7 Note on structural house on Survey no. 212 "it is respectfully submitted that the said structural house which is very old since 1920, constructed on 231.78 square meter of land meter of land only. Further that structure comes within 200 meters of sea beach/coastal zone area, Where no construction / development of building either residential/commercial is permitted as per bye laws of Coastal Zone Regulation Act 1986, defined by Ministry of Environment & forest, (copy of coastal zone Regulation/India is enclosed herewith for your reference).
Further it is submitted that since the said structure comes within 200 meters of CRZ 1986 i.e. Coastal regulation zone. That structure cannot be destroyed or Renovated without prior approval of Ministry of Environment & forest. It means this structure has on Residential/commercial value on its own. Further in view of the above facts and circumstances that old structure has no legal sanctity and has no Commercial/Residential value in term of Rupees.
Further it is respectfully submitted that mere a small structure i.e. 231.78Sq. meters. Which is very old and have no legal sanctity on a very large agriculture land i.e. 76145 Sq. Meters does not change the characteristic of whole land. The same view has been expressed in the case of [Gowardhan Das & Sons vs. CIT (2007) 158 Taxman 465/288 ITR 481 by Hon'ble High Court of (Punj. & Har.)]".
It is respectfully submitted that the Ld. AO has made detailed inquiry with the purchaser namely M/s. Maha Seer Hotels & Resorts Pvt. Ltd., the said party confirmed to Ld. AO that the impugned land was Agriculture land and even as on date the same status of the land is maintained.
The copy of reply dated 17 Nov, 2008 confirming the above stated I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 8 facts, the relevant portion of their letter is reproduced below. The copy of the site plan of the land in dispute.
"This has reference to your above notice. As desired we wish to submit the necessary information:-
I) Details of all transactions made with M/s Gomantak Eximis Pvt.
Ltd. during the period 01.04.2005 to 31.03.2006:-
Date Cheque No./pay order no. Amount(Rs.)
12.11.2005 Ch. No. 252851/P.O. No. 296396 9,80,00,000
50,00,000
12.11.2005 Ch. No. 252852/P.O. No. 296386
Total cost of Agricultural land purchased as per sale 10,30,00,000 Deed Dated 01.12.2005 12.11.2005 Ch. No. 252854/P.O. No. 296389 for Assignment deeds 10,00,000 12.11.2005 Ch. No. 252853/P.O. No. 296388 for Compromise 10,00,000 settlement for withdrawal of case Total amount paid 10,50,00,000
2. Copy of bank statement for the period 01.04.2005 to 31.03.2006 where above transactions have been routed through.
3. We are assessed to Income Tax with Permanent Account No. AADCM9908M, Income Tax Officer- Ward 6(1), New Delhi (Copy of acknowledgement for A. Y. 2006-07 is enclosed herewith).
4. The present status of the land is the same as during the A.Y. 2006-07 at the time of purchase of the land at Goa by us on plot 'B' of the property, there was structure standing thereon being House No. 365 bearing Survey No. 212 at Manderm Village, Goa."
From the perusal of the facts stated herein above and the evidence brought before Ld. A.O. following 3 things are established:-
1. The impugned land was purchased as agriculture land by the assessee company,
2. The impugned land was retained and used as agriculture I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 9 land by the assessee company and
3. The impugned land was sold as agriculture land by the assessee company.
Thus, in view of the above submissions the resultant gain arising on the sale of impugned land would be exempt under the Income Tax. Act, 1961."
4. Learned Assessing Officer, however held that;
Firstly, land was purchased along with old constructed houses, and therefore, it was a sale of land along with sale of house property appurtenant to it;
Secondly, land has never been used for agricultural purpose which is evident from the fact that in the P&L account no agricultural income was declared by the assessee in the current year or in the preceding Assessment Years;
Thirdly, the intended purchase of land as per the MOU of the assessee company was also not used for the agricultural purposes; and Lastly, he strongly relied upon the decision of Hon'ble Supreme Court in the case of CWT vs. Officer-In-Charge (Court of Wards), Paigah, (1976) 105 ITR 133 (SC) and decision of Hon'ble Gujarat High Court in the case of CIT vs. Sarifabibi Mohmed Ibrahim (1982) 136 ITR 321, held that in view of the parameters laid down to determine the true nature and the character of the land and in such parameters as applied in the case of the assessee then it fails an almost every count to claim that it was I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 10 an agricultural land.
The said parameters analyzed by the Assessing Officer in the impugned order reads as under:
"Q1. Whether the land was classified in the revenue records as agricultural land and whether it was subject to the payment of land revenue?
Ans. No. As per assessee letter dated 26.12.2008 in which it is stated that the land revenue is not applicable since it was the free hold land.
Q.2. Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time of sell? Ans. No. The land had never been put to agricultural use by the assessee as already mentioned above.
Q.3. Whether such user of the land was for a long period or whether it was of a temporary character or by way of a stop-gap arrangement?
Ans. No. The land had never been put to use for agricultural purposes as per the record available.
Q.4. Whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land?
Ans. Not applicable. Since the assessee did not use the land for agricultural purposes as such there was no agricultural income. Q.5. Whether the land, on the relevant date, had ceased to be put to agricultural use? If so, whether it was put to an alternative use? Whether such user and/or alternative user was of a permanent or temporary nature?
Ans. Cannot be determined in the absence1 of any evidence filed by the assessee.
Q.6. Whether the land was sold on yardage or on acreage basis? Ans. The land was purchased and sold on the yardage basis.
I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 11 Q.7. Whether an agriculturist would purchase the land for agricultural purposes at the price at which the land was sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield? Ans. Probably not keeping in view the sales consideration of the land sold and no agricultural income being derived by the assessee company ever since its purchase as per the record available. Further, the land has been sold to a prospective hotelier as such the future intended use is also of non agricultural nature."
5. Accordingly, he held that it was not a sale of agricultural land and worked out the Long Term Capital after giving index cost of acquisition at Rs.9,89,61,307/-.
6. Before the ld. CIT(A) after reiterating the details furnished before the Assessing Officer, assessee rebutted the objections raised by the Assessing Officer in the following manner:-
"The first doubt expressed by Ld. A.O. was that the Ld. A.O. was not sure that whether it was land or house property. Our respectful submission in this regard is that we fail to understand that on what basis, Ld. A.O. confused misdirected himself in this regard. From the perusal of the documents discussed herein above it would be clear that the impugned land consisted only a negligible portion of an old structure which could not be used in any manner and which constituted not more than 0.03% area of the total area and therefore branding the entire land as house property (consisting of 99.97% area) was highly unjustified on the part of Ld. A.O. and may please be held so. We had also requested Ld. A.O. to make a requisite suitable verification for its satisfaction but unfortunately Id. A.O. chose to work on the basis of surmises and conjectures instead of I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 12 going by real facts and figures and thus the whole premise of Id.
A.O. was unjustified and illegal.
The other doubt of Id. A.O. was that whether land was classified in the revenue records as agriculture land and whether the said land was used as agriculture land by them assessee company. Ld. A.O. has unfortunately presumed the answer of these questions as 'no' on the basis of his whims and fancies.
Our respectful submissions are that the copies of records obtained from the concerned government authority i.e. Mamlatdar etc. were brought to the notice of Ld. A.O. in which the land has been marked as garden area and cultivable land and it has been submitted to Id. A.O. that the assessee has been taking the crop of coconut from this land which has been consumed by the assessee and therefore under these circumstances there were no basis with Id. A.O. to hold otherwise that too on the basis of surmises and conjectures and without bringing any contrary material on record. Apart from the government records, certificate from a reputed firm of CA's was also submitted by Ld. A.O. The said land was open for verification by Id. A. O. but unfortunately Ld. A. O. has displaced the claim of the assessee without there being any contrary material on record.
The next doubt of Ld. A. O. was that the said land was sold to a prospective hotelier and therefore as such the future intended use was of non agriculture nature. Our respectful submission is that we fail to understand from where Ld. A.O. has picked up this intention. It is no where coming out from the sale deed that the said land was sold for commercial purposes. Even till date no permission for change in the land use has been obtained by the purchase. The land has been retained as it is and no commerciall activity has been done. All these facts were before Ld. A.O. and he could not bring on record any contrary material from the concerned government authorities or the said purchaser and chose to make I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 13 addition on the basis of his whims and fancies that too based upon his surmises and conjectures.
Further, without prejudice to the above submissions it is respectfully submitted that as per law it was not assessee's concern as to the intention of the purchaser of the land with respect to the future user of the land. The assessee had purchased the agriculture land and kept it as agriculture land and used it as agriculture land and sold it as agriculture land and that is end the matter.
Reliance is placed on the recent judgment of the jurisdictional High Court in the case of Hindustan Industrial Resources Ltd. vs. Assistant Commissioner of Income Tax (221 CTR, 710 Del).
Thus, the assessee's case is very strongly in its favour, on facts as well as on law and therefore the addition made on Ld. A.O. is contrary to law and facts and the same may kindly be deleted."
7. Apart from above, a letter from Chartered Accountant was also filed to certify that land sold out at village Mandrem, Panrem Taluka Goa had a population of less than 10,000 and was beyond 8 kms from the local limits of Mapusa Municipal area. In fact, the property was situated around 25 kms far from the Municipal area. A copy of map of Goa showing municipal boundaries of the village Mandrem and distance of Municipal village of Mapusa; and secondly, copy of report of Zila Panchayat Election 2005 in Goa State which shows Mapusa has village constituency was filed. Apart from that, it was again reiterated with the help of documents that as per the Coastal Zone Regulation of India defined by Ministry of Environment & Forest no construction/ development of I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 14 building either residential or commercial is permitted within 200 mtr. of the sea beach and the said land falls within that range. It was further explained that the construction of small house in the land was very old and was constructed in the year 1920 and has been declared as heritage property which comes within the range of 200 mtr of sea beach. Not only that the house constructed was only 231.78 sq. mtr out of 76145 sq. mtr. area of agricultural land, i.e., it was only 0.03% of the area and does not have any commercial /residential value. The character of the land at the time of sale is a material factor which has to be seen as per the sale deed was purely an agricultural land and potential non agricultural value after the purchase would detract from its character of agricultural land on the date of sale. Apart from that, various other submissions were made from time to time as required by the ld. CIT (A) to clarify the entire facts which have been incorporated in the appellate order in detail.
8. Ld. CIT (A) after taking note of the arguments and contention raised by the Assessing Officer as well as by the assessee who has summarized the case of the Assessing Officer and assessee in the following manner:-
"The AO held that the appellant company could not claim the land sold by it as exempt on the following basis:
1. The land has never been used for agricultural purposes as no agriculture income had been declared by the assessee in the preceding years.
2. As per the memorandum of association of the company, the main objects of the company was business of hotel, restaurant etc. and the land was I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 15 purchased with the intention of pursuing the main object.
3. No land revenue was applicable on this land as per the assessee's letter dated 26.12.2008.
4. The land was sold on yardage basis and not on acreage basis.
5. The land had been sold to a prospective hotelier.
6. The land had been sold along with certain structures built on it and as such the sale of the land was treated as sale of house property with land appurtenant thereto.
The appellant on the other hand relied on the following point for claiming it as an agricultural land
1. The land is shown as agricultural land in the balance sheet of the appellant company.
2. The purchase deed and the sale deed show the land as agricultural land.
3. The certificate issued by M/s Rajan Ramani & Co. certified that the land was purchased as agricultural land and was classified as garden/cultivable area under land revenue records of the government of Goa.
4. The Form No. I and XIV issued by the officer in charge land records clearly show the entire area as a cultivable area.
5. The land was not situated within 8 kilometers of the municipal limits of a city."
9. Thereafter, Ld. CIT (A) referred and relied upon the following judgments:
(i) CIT vs. Minguel Chandra Pais, (2006) 282 ITR 0618 (Bom.)
(ii) CIT vs. Smt. Debbi Alemao, (2011) 331 ITR 0059 (Bom.)
(iii) Hindustan Resources Ltd. vs. Asst.CIT, (2011) 335 ITR 0077 (Del.) After drawing similarity of facts from the aforesaid cases, he held that case of the assessee is similar and finally held that sale proceeds of the land are treated as income from the sale I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 16 of agricultural land and therefore exempt from capital gain after holding as under:-
The case of the appellant is similar. The land is shown as agricultural land in the balance sheet of the appellant company. The purchase deed and the sale deed show the land as agricultural land. The Form No. I and XIV issued by the officer in charge of land records clearly show the entire area as a cultivable area. The certificate issued by M/s Rajan Ramani & Co. certifies that the land was purchased as agricultural land and was classified as garden/cultivable area under land revenue records of the government of Goa. The land is not situated within 8 kilometers of the municipal limits of a city. The population of the area where the land is situated is less than 10,000/- as per Zila Panchayat Election records. The land has not been put to any non agricultural use over the period of holding of 12 years by the appellant company. The structure situated on the land covers an area of 231.78 square metres as against total land area of 76145 square metre of the total land. A large portion of the land comes within 200 metres of the coastal zone area where no construction is permitted.
The registry does not reflect the sale of land on yardage basis but shows a consolidated amount as sale proceeds. The AOs observation that the land was not actually used for agricultural purposes in as much as no agricultural income was derived from this land and was not shown by the assessees in their income-tax returns has been explained on the basis that there were coconut trees in the land but the agricultural income derived by sale of the coconuts was just enough to maintain the land and there was no actual surplus. If an agricultural operation does not result in generation of surplus that cannot be a ground to say that the land was not used for agricultural purposes. Further, the decision of the jurisdictional high court is that not even carrying out agricultural I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 17 operation does not alter the nature and character of the land. The judicial pronouncements thus squarely cover the case of the appellant company. The sale proceeds of the land are therefore treated as income from sale of agricultural land and therefore exempt from capital."
10. Before us the learned Department Representative after referring to the various observations made by the Assessing Officer, strongly relied upon the judgment of Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim & Ors. vs. CIT, 204 ITR 0631 (SC) wherein the Hon'ble Supreme Court on following facts:
"The assessees were co-owners of a plot of land situated within municipal limits and at a distance of 1 km. / from the Surat railway station. A portion of the said plot was converted to non- agricultural purposes while the remaining extent continued to be registered as agricultural land. On 15-3-1967 the assessees agreed to sell remaining part of land to a housing co-operative society. To enable them to complete the transaction, the assessees applied on 12-6-1968 and 19-3-1969 for permission under section 63 of the Bombay Tenancy and Agricultural Lands Act, 1948. The permission was granted on 22-4-1969. Thereafter a number of sale deeds were executed in respect of the said land between 9-5-1969 and 30-5- 1969. The income-tax authorities sought to levy capital gains tax on the consideration received by the assessees treating the said land as non-agricultural land. The assessees' contested the same contending that the land sold was an agricultural land. The ITO rejected the assessees' claim. On appeal, the AAC upheld the order of the ITO. On second appeal, Tribunal held that the said extent of land was agricultural land and, therefore, no capital gains tax was leviable thereon. On reference, the High Court held that the said I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 18 land was non-agricultural land."
Held that:
Whether a land is an agricultural land or not is essentially a question of fact. Several tests have been evolved in the decisions of the Supreme Court and the High Court, but all of them are more in the nature of guidelines. The question has to be answered in each case having regard to the facts and circumstances of that case. There may be factors both for and against a particular point of view. The Court has to answer the question on a consideration of all of them a process of evaluation. The inference has to be drawn on cumulative consideration of all the relevant facts.
In the instant case, the land was undoubtedly under cultivation up to and inclusive of the year 1964-65. For the years 1965-66 to 1967-68 the land was admittedly not cultivated. On account of floods in Tapti river, the land could not be cultivated even for year 1968-69.
Further, in the instant case, the facts in assessees favour were land being registered as agricultural land in the revenue records; payment of land revenue in respect thereof till the year 1968-69; absence of any evidence that it was put to non-agricultural use by the assessees; that the land was actually cultivated till and including the agricultural year 1964-65; that there were agricultural lands abutting the said land and that the assessees had no other source of income except the income from the said land. The facts appearing against their case were: The land was situated within the municipal lands - it was situated at a distance of one kilometer from the Surat railway station; the land was not being cultivated from the year 1965-66 until it was sold in 1969; the appellants had entered into an agreement of sale with a housing cooperative society to sell the said land for an avowed non-agricultural purpose, namely, construction of houses; they had applied in June 1968 and I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 19 March 1969 for permission to sell the said land for non- agricultural purposes under section 63 of the Bombay Tenancy and Agricultural Lands Act and obtained the same on 22-4-1969; soon after obtaining the said permission they executed sale deeds and the purchaser society commenced construction operations within three days of purchase.
In view of the criteria evolved in CWT v. Officer-in-Charge (Court of wards) [1976] 105 ITR 133 (SC). the entering into the agreement to sell the land for housing purposes, the applying and obtaining of the permission to sell the land for non-agricultural purposes under section 63 and its sale soon thereafter and the fact that the land was not cultivated for a period of four years prior to its sale coupled with its location, the price at which it was sold, did outweigh the circumstances in favour of the assessee's case. The land was not an agricultural land when it was sold and the assessees had no intention to bring it under cultivation at any time after 1965-66 -
certainly not after they entered into the agreement to sell the same to a housing co-operative society. Though a formal permission under section 65 of the land revenue code was not obtained by the assessee, yet their intention was clear from the fact of their application for permission to sell it for a non-agricultural purpose under section 63.
Therefore, the High Court was right in holding that the said land was not an agricultural land at the time of its sale and that the income arising from its sale was not exempt from the capital gains tax.
12. Thus, he held that now in the light of the aforesaid judgment of the Hon'ble Apex Court, the observations and the findings of the learned Assessing Officer should be upheld.
I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 20
12. On the other hand, learned counsel for the assessee, Shri Ashwani Taneja after explaining the entire facts and background of the case and also referring to the various materials as discussed in the appellate order, submitted that neither at the time of purchase nor at the time of sale, the character of the land had changed and it remained an agricultural land all throughout. This has not only been certified by the local authorities but also it was duly explained and proven from the material placed on record that;
Firstly, the first objection of the Assessing Officer that there was a house in the said land and therefore, it is a sale of house property stands negated by the fact that it very old house built in the year 1920; and the land falls within coastal region which as per law of Coastal Zone Regulation of India, no residential or commercial building was permitted within 200 mtr. of sea beach. Hence there cou;d not be sale of house property. Besides this the area in which old house was standing was around 0.02% which is very miniscule.
Secondly, the assessee company has been using this land of agricultural operation only and no other use of this land has been taken at any time;
Thirdly, the land was situated much beyond the prescribed municipal limit of 8 km and in fact it was around 25 km from the municipal area.
Fourthly, at no point of time there was any change of I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 21 use of land permitted by the authorities even when the assessee was holding the land and also after the sale of the land. In fact the land remained the agricultural land till today. The Assessing Officer in fact has made inquiry from the purchaser, namely M/s. Maha Seer Hotels & Resorts Pvt. Ltd., who has confirmed to the Assessing Officer that the impugned land was an agricultural land even as on date and the same status of the land is maintained. The relevant portion of the reply filed by the purchaser has already been incorporated in the foregoing paragraphs; and Lastly, nowhere it is borne out from the record or from the inquiry that the said land was sold for any commercial purpose or there was any permission granted for change of the land used by the purchaser.
Thus on these facts, ld. CIT (A) has rightly upheld the contention of the assessee.
13. In so far as the judgment of Hon'ble Supreme Court as relied upon by the Assessing Officer as well as by the learned DR, he submitted that the said judgment, first of all, is not applicable at all because the land in question in the said case was beyond the municipal land; and secondly; the said land was not cultivated for years and assessee had entered into agreement to sale to a Housing Co-operative Society for use of non agricultural purposes, construction of houses and the said land use for non agricultural purposes was granted and I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 22 thereafter, the sale deeds were executed. He further submitted that in subsequent decisions, this judgment has been well taken note of various High Courts and now there are decisions of Hon'ble Jurisdictional High Court as well as decision of Hon'ble Bombay High Court at Goa, wherein exactly on similar facts the case has been decided in favour of the assessee. The list of the judgments relied upon by the learned counsel in this regard were as under:-
(i) Hindustan Industrial Resources Ltd. vs. ACIT, 335 ITR 0077, (Del.)
(ii) DLF United Ltd. vs. CIT, 158 ITR 0342 (Del.)
(iii) CIT vs. Smt. Debbie Alema, 331 ITR 0059 (Bom.)
(iv) DLF United Ltd. vs. CIT, 161 ITR 0709 (Del.)
(v) Sercon Pvt. Ltd. vs. CIT, 136 ITR 0881 (Guj.)
(vi) DLF United Ltd. vs. CIT, 161 ITR 0714 (Del.)
(vii) Haresh v. Milani vs. JCIT, 114 ITD 0428 (ITAT Pune)
(viii) DLF United Ltd. vs. CIT, 217 ITR 0333, (Del.)
14. We have heard the rival submissions and perused the relevant findings given in the impugned orders as well as the material referred to before us. Already the facts of the case, submissions of the assessee as well as the case of the Assessing Officer have been elaborately discussed in the foregoing paragraphs. To put in a succinct manner, the relevant facts and material are discussed hereunder:-
i. The assessee company purchased a piece of land admeasuring 76145 sq. mtr at Village Mandram, Pernem Taluka, sub-District Pernem of North Goa, by way of two purchase deeds dated 16.04.1992 and 23.04.1992 for I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 23 sums aggregating to Rs.18,12,130/-. This land was sold during the relevant year for a sale consideration of Rs.10.30 crores to M/s. Maha Seer Hotels & Resorts Pvt. Ltd. and the gain from such sale of land has been claimed as exempt by the assessee, that is, it is an agricultural land not covered under the definition of assets u/s.2(14)(iii).
ii. The said land as per the Land Revenue records and also certified by the local authorities was used as agricultural land and such character of land remained the same at the time of purchase and also during the time of sale. The certificate of land revenue records clearly shows that entire land was cultivable area on which certain agricultural operations were carried out.
iii. Admittedly, the land was beyond the municipal limit of 8 kms of Mapusa Municipal Limit (in fact was 25 Kms away from municipal centre). The Assessing Officer had carried out inquiry from the concerned local authorities and in response, Mamalatdar confirmed that he issued the certificate about the said land being the agricultural land.
iv. Inquiry was made from the purchaser by the Assessing Officer, who duly confirmed that the present status of the land continues to be agricultural and it is retained and used as agricultural land only and no conversion of used land has taken place and no commercial activity has been done till present date.
I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 24 v. In so far as the small structure standing therein, it has been explained that it was old structure built in the year 1920 with an area of 231.78 sq. mtre and such a structure comes within 200 mtr. of Coastal Regulation Zone which prohibits any kind of residential and commercial building, and therefore, the said structure being prior to such Regulation, 1986 had no commercial/residential value.
16. On the other hand, the case of the Assessing Officer was that, no agricultural income has been declared by the assessee in the earlier years; and one of the main objects of the assessee-company was business of hotel and restaurant and the said land was purchased with the said intention only.
This is further strengthened by the fact that it was sold to a prospective hotelier, therefore, clearly the intention was to use it for non commercial purposes. In support he has strongly relied upon the decision as discussed above.
17. However, the aforesaid observations of the learned Assessing Officer stands repudiated on the basis of facts and material on record that; firstly, land revenue shows that it was an agricultural land and some agricultural operation were carried out and simply because assessee had not shown agricultural income that does not mean no agricultural activity was ever carried out; secondly, even at the time of sale the agricultural land, the land continued to be agricultural land and no change of land used was ever sought at the time I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 25 of sale and now it has also been brought on record that even after the sale also the land remained agricultural land in the hands of the seller and till date land used has not been changed and; lastly, even if land has been sold to a hotelier but if it is not used for commercial purpose even after the sale, then does not make any difference whether a prospective hotelier had purchased a land. All the facts and materials which has been discussed above clearly pointed out that it was clear cut sale of agricultural land, and therefore, any Long Term Capital Gain arisen from sale of such land is to be treated as exempt u/s.10.
18. Coming to the decision of Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim & Ors. vs. CIT (supra), we find that in that case part of the plot was converted into non agricultural purposes before the sale; secondly, the land was sold to a Co-operative Housing Society solely for non agricultural purpose, i.e., construction of house; and lastly, the said land was within 1 km of railway station of Surat and was within the municipal limit. Apart from that, permission to sale the land for non agricultural purpose was obtained and immediately thereafter sale deeds were executed. Thus, this decision is not applicable on the facts of the present case. On the contrary, we find that Hon'ble Bombay High Court in the case of CIT vs. Smt. Debbie Alemao, 331 ITR 0059 (surpa), on almost similar set of facts had observed and held as under:-
I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 26 The AO has noted that the said land was entered in the revenue record as an agricultural land i.e. garden or orchard. The Tribunal also held that the land was recorded in the revenue records as an agriculture land. This is not disputed by the Revenue. It is however contended that the land was not actually used for agriculture in as much as no agricultural income was derived from this land and was not shown by the respondents in their IT return. This was explained by the respondents by saying that there were coconut Trees in the land but the agricultural income derived by sale of the coconuts was just enough to maintain the land and there was no actual surplus. Hence, no agricultural income was shown from this land. In our opinion, if an agricultural operation does not result in generation of surplus that cannot be a ground to say that the land"
was not used for the agricultural purpose. It is not disputed that the land was shown in the revenue record to be used for agricultural purpose and no permission was ever obtained for non-agricultural use by the respondents. Sec. 30 of the Goa, Daman and Diu Land Revenue Code, 1968, provides that no land used for agriculture shall be used for any non-agricultural purpose and no land assessed for one non-agricultural purpose shall be used for any other non-agricultural purpose except with the permission of the Collector. Sec. 32 of the Goa, Daman and Diu Land Revenue Code prescribes the procedure for conversion of use of land from one purpose to another including conversion from agricultural purpose to non-agricultural purpose. The permission for non-agricultural use was obtained for the first time by the Varca Holiday Beach Resort (P) Ltd., the purchaser after it purchased the land. Thus, the finding recorded by the two authorities below that the land was used for the purpose of agricultural is based on appreciation of evidence and by application of correct principles of law. The Tribunal has relied upon two unreported decisions of this Court in CIT vs. Minguel Chandra Pais (Tax Appeal No. 1 of 2002) and CIT vs. Smt. Maria I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 27 Leila Tovar Furtadoe Pais (Tax Appeal No. 2 of 2002) [reported at (2006) 200 CTR (Bom) 152--Ed.] which involved identical issue. In those appeals, this Court has upheld the order of the Tribunal holding that the land was agricultural land and its sale did not invite the payment of capital gain. It is not disputed before us that the facts of the said cases were similar to the facts of the present cases. We are bound by the decisions in those cases.
19. Further in the case of Hindustan Industrial Resources Ltd. vs. ACIT (supra), the Hon'ble Jurisdictional High Court held that if the land in question was agricultural land at the time of purchase by the assessee and also at the time of acquisition, then the said land would clearly be held as agricultural land irrespective of the fact that assessee intended to use the land for industrial purposes and did not carried out any agricultural operations. Even then also no capital gain could be charged on sale of such agricultural land. Similar view has been taken in the case of DLF United Ltd. vs. CIT (supra). Thus, in view of our independent appraisal of facts on record and the ratio as culled out from the decision cited by the parties, we do not find any infirmity in the order of the ld. CIT (A) that the gain on sale of such land cannot be taxed as capital gain.
20. Coming to the issue of 115JB as raised in ground no.3, we find that, firstly, neither the issue of computation or taxation of book profit u/s.115JB has been raised by the Assessing Officer; nor such grounds were raised in the original grounds of appeal by the Department. Apart from I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 28 that, once Assessing Officer has not treated the said gain for the purposes of book profit then by way of such ground the issue cannot be raised by the Department. Otherwise also when the income of agricultural land is exempt from tax, then the said exempt income cannot be added to the books profit while calculating the MAT u/s.115JB. Thus, the said ground raised by the Revenue cannot be entertained and same is dismissed.
21. In the result, the appeal of the Revenue is dismissed.
22. In the Cross Objection, the assessee has raised following grounds:-
"1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not treating the full amount of Rs.9,89,61,307 as exempt from tax and has further erred in sustaining the action of Ld. AO in treating the amount of Rs.20,00,000/- received on account of compromise agreement and settlement as taxable under capital gain tax and that too by recording incorrect facts and findings."
23. The amount of Rs.20 lacs have been received by the assessee on account compromise agreement as compensation received upon termination on agreement for sale dated 02.08.1990 and withdrawal of cash. The said amount of Rs.20 lac have sought to be treated as exempt from capital gains on the grounds that pertained to agricultural land only. However, the ld. CIT (A) has rejected the assessee's contention after observing and holding as under:-
"However the sale consideration received by the appellant company I.T.A. No.2708/DEL/2012 & CO No.435/Del/2012 29 includes a sum of Rs. 10,00,000/- received as compromise agreement which consists of Rs. 7,61,000/- as compensation received upon termination of the agreement for sale dated 02.08.1990 and Rs. 2,39,000/- towards agreed interest and litigation cost. This Rs. 10,00,000/- received by the appellant company vide cheque no. 252853 dated 12.11.2005 from M/s Maha Seer Hotels & Resorts Pvt. Ltd. vide agreement dated 14.11.2005 for compromise settlement for withdrawal of case and another Rs. 10,00,000/- vide cheque no. 252854 dated 12.11.2005for assignment deals cannot be considered to be receipt on account of sale of agricultural land and hence would not be exempted from capital gain tax."
24. Looking to the nature of payment which is on account of compromise agreement and also settlement of withdrawal of cases, it cannot be held that the said amount received by the assessee is on account of sale of agricultural land, and therefore, ld. CIT (A) has rightly held that the said amount cannot be treated as exempt from capital gain tax and accordingly the order of the ld. CIT (A) is confirmed and the grounds raised in the Cross Objection is dismissed.
25. In the result, the appeal of the Revenue as well as the Cross Objection of the assessee is dismissed.
Order pronounced in the open Court on 15th May, 2018.
Sd/- Sd/- [PRASHANT MAHARISHI] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: April, 2018 PKK: