Income Tax Appellate Tribunal - Ahmedabad
Jagdishbhai Gadhiya, Surat vs Assessee on 13 February, 2015
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ 'बी', अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" B " BENCH, AHMEDABAD
सम ी अ नल चतुव द , लेखा सद य एवं ी कुल भारत, या यक सद य ।
BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER And
SHRI KUL BHARAT, JUDICIAL MEMBER
आयकर अपील सं./I.T.A. No.1503/Ahd/2013
( नधा रण वष / Assessment Year : 2009-10)
Jagdishbhai Gadhiya बनाम/ The Income Tax Officer
C/o.SNK & Co., Vs. Ward-3(2)
31A, Adarsh Society Surat
Opp. Seventh Day
Advenish School
Athwalines, Surat
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : ABCPG 0746 J
(अपीलाथ% /Appellant) .. (&'यथ% / Respondent)
अपीलाथ% ओर से /Appellant by : Shri Samir Shah, AR
&'यथ% क) ओर से/Respondent by : Shri Roop Chand, Sr. DR
ु वाई क) तार ख /
सन Date of Hearing 04/02/2015
घोषणा क) तार ख /Date of Pronounce ment 13/02/2015
आदे श / O R D E R
PER SHRI KUL BHARAT, JUDICIAL MEMBER :
This appeal by the Assessee is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-IV, Surat ('CIT(A)' in short) dated 28/03/2013 pertaining to Assessment Year (AY) 2009-10. The Assessee has raised the following grounds of appeal:-
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1. That on facts and circumstances of the case and in law the learned CIT(A) has erred in sustaining addition towards short term capital gain as made by the learned AO on account of alleged compulsory acquisition of agricultural land during the year under consideration, which was not even capital asset as per section 2(14) of the Act; when it was proposed to be acquired by the State Government.
2. That on facts and circumstances of the case and in law the learned CIT(A) has erred in sustaining the stand of the learned AO that notification issued by Government of Gujarat to acquire the said agricultural land for GIDC purpose, should be considered as land notified by the Central Government as per requirement of section 2(14)(iii)(b) of the Act.
3. That on facts and circumstances of the case and in law the learned CIT(A) has erred in sustaining the impugned addition, ignoring that the agricultural land was not transferred in the subject year but was transferred in FY 2010-11.
4. Without prejudice to ground of appeal no.1 and without admitting, that on facts and circumstances of the case and in law the learned CIT(A) has erred in totally disregarding that even otherwise the land being agricultural land, capital gain if any arising on the same during AY 2011-12 was exempt u/s.10(37) of the Act.
5. The appellant craves leave to add, amend, alter, substitute, modify any or all of the above grounds of appeal, if necessary, on the basis of submissions to be made at the time of personal hearing.
2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 29/12/2011, thereby the Assessing Officer (AO in short) made addition/disallowance of Rs.57,10,250/- in respect of short-term capital gain on account of compulsory acquisition of land. Against this, the assessee filed an appeal before the ld.CIT(A), who after considering the ITA No.1503/Ahd/2013 Jagdishbhai Gadhiya vs. ITO Asst.Year - 2009-10 -3- submissions dismissed the assessee's appeal. Now, the assessee is further in appeal before us.
3. All the grounds are interconnected and, therefore, the same are decided together. The ld.counsel for the assessee submitted that during the year under consideration, the assessee had received a sum of Rs.64,10,250/- on 23/03/2009 from Government of Gujarat as advance payment for acquisition of an agricultural plot of land situated at Village- Raihiyad, Tal.Vaghra, Dist.Bharuch. The plot of land was located outside the municipal limit of Bharuch Municipality, eventhough falling in Bharuch District. The payment was made on initiation of process of compulsory acquisition of the agricultural land for notifying the area under GIDC. The assessee had purchased the land on 11/03/2008. The assessee had been carrying out agricultural activity on the said land beginning from the date of purchase till the date of actual acquisition by the GIDC. The ld.counsel for the assessee reiterated the submissions made vide written submissions dated 30/05/2014, which are reproduced hereunder:-
"Sir, Sub: Notice of personal hearing in appeal no. 1TA/1503/A/2011 In the case of Jagdish L. Gadhiya Assessment Year 2009-2010 Filing of written submissions Our above said client is in receipt of the subject notice granting personal hearing in the subject appellate matter, and in this regard we have to submit as follows for the ITA No.1503/Ahd/2013 Jagdishbhai Gadhiya vs. ITO Asst.Year - 2009-10 -4- kind consideration and immediate reference of your honours as per the information and explanation provided by the appellant.
The appellant is an individual assessee. During the subject year it had earned commission income, agricultural income, interest income and income from capital gain.
1. The facts of the case together with relevant documentary evidences are submitted herein below for the immediate reference of your honours.
2. During the year under consideration, the appellant had received a sum of Rs. 64,10,250/- on 23/03/2009 from Government of Gujarat as advance payment for acquisition of an agricultural plot of land situated at Village-Rahiyad, Tal.-Vaghra, Dist.-Bharuch. The plot of land was located outside the municipal limit of Bharuch Municipality, even though, falling in Bharuch district. The payment was made on initiation of process of compulsory acquisition of the agricultural land for notifying the area under GIDC. The plot of land was acquired by the appellant on 11/03/2008.
3. The appellant was continuously undertaking agricultural activity on the said plot of land beginning from its acquisition date till date of actual acquisition on 27/11/2010. Copy of certificate of Deputy Collector and Land acquisition officer, GIDC, Ankleshwar certifying the actual acquisition of land during FY 2010-11, is already enclosed with appeal memorandum, The English translation of this certificate is enclosed herewith as Annexure-1.
4. Your honour may appreciate that the land is situated at a distance of around 32 kms. from the municipal boundry limit of. Bharuch municipality arid around 30 kms. from the boundry limit of Vaghra Taluka. A certificate issued by Vadadla Gram Panchayat certifying the aforesaid distance in Gujarati language is already enclosed with appeal memorandum. The certificate also certified that the appellant had jointly with the co-owner of the agricultural land, conducted agricultural activity on the said plot of land, since its acquisition in March, 2008 uptil the date of compulsory acquisition by Gujarat Government on 27/11/2010. The certificate also certifies that the appellant had obtained two crops from the said land viz. Cotton and lentil seeds (Tuvar). The English translation of this certificate is enclosed herewith as Annexure-
2.
5. Further, your honours may appreciate that an agricultural land situated in rural area is not a capital assets if -
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(a)The land is not situated in any area within the territorial jurisdiction of a Municipality or a cantonment board having a population of 10,000 or more and
(b)ln any area (within 8 Kms. from the Municipality stated above) as specified by the Government vide notification No. 9447 dtd. 6-1-1994, In the case of the appellant, the said land acquired by the GIDC was situated at a distance of 32 kms. i.e. more than 8 Kms. from the boundry of Bharuch Municipality and further, the village in which the land is situated does not have population of more than 3,000, hence, the subject land is not a capital asset as per the definition of capital assets u/s. 2(14) of the Act.
6. Thus, it can be summarised that -
(a)The appellant jointly held an agricultural plot of land in a remote rural area.
(b)The appellant had himself carried on agricultural activity on the said land for a period of at least two years prior to the actual date of acquisition of the said land by GIDC in F.Y. 2010-11.
(c)The distance of the said land held by the appellant from the boundry of Bharuch Municipality or Vaghra Taluka is 32 Kms. and 30 kms. respectively. Thus, the said land does not fall within the definition of capital assets u/s. 2(14) of the I.T. Act, 1961.
7. Hence, it has been justifiably established during the course of assessment proceedings that the transfer of said land which is not a capital asset, will not result into any charge of income tax on the appellant.
8. Inspite of having submitted the aforesaid facts before the learned AO, he has disregarded the same and made an addition of Rs. 57,10,2507- towards long term capital gain that too for the year under consideration ignoring the fact that there was no transfer of capital asset and there was no transfer at all of the said land in the subject year, but it was transferred in the F.Y. 2010-1 1 pertaining to A.Y. 201 1-12.
Even the learned Commissioner (Appeals) has dismissed the appeal of the appellant on the ground that the land being acquired by Government of Gujarat as per the Notification No. GIDC/Jame(J-AA)/Sec.6/Dahej-2/l412, GIDC, Gandhinagar to be designated as notified area for GIDC, the land was considered to be situated in the notified area and hence, it cannot be said to be considered as rural agricultural land ITA No.1503/Ahd/2013 Jagdishbhai Gadhiya vs. ITO Asst.Year - 2009-10 -6- and hence, argument of the appellant the subject land is not a capital asset, is not correct.
In this regard, we have most humbly submit that section 2(14)(iii)(b) clearly states that the notification should be issued by the Central Government to specify as to which area being not more than eight kilometres, from the local limits of municipality or cantonment board should be treated as capital asset and the notification issued by Gujarat Government cannot decide whether the said land is a capital asset or not and hence, the findings of the learned CIT(A) is absolutely unlawful, illegal, irrelevant and contrary to the provisions and intention of legislation.
The relevant extract of section 2(14)(iii)(b) is reproduced herein below for the immediate reference of your honours.
"(b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette."
9. Without prejudice to the true and correct facts of the case and the aforesaid contention of the appellant that there is no charge of income tax on transfer of the said agricultural land, located in the rural area and without admitting on the allegations of the learned AO, we have to further submit before your honours as follows.
(a) Even otherwise if the said land is treated to be a capital asset and profit arising therefrom as chargeable income, the land being transferred by way of compulsory acquisition vide award No. KhJA/AKL/Case No. 1/2008(2)/10 dtd. 27-11-2010 as is certified by the Deputy Collector, GIDC, Ankleshwar, the gain arising on transfer of the said land cannot be taxed in the year under consideration but can be treated to be pertaining to F.Y. 2010-11 i.e. A.Y. 2011-12.
Hence, since no transfer took place in the year under consideration the question of addition to total income does not arise and therefore, even on this ground the addition made by the learned AO needs to be deleted by your honours.
(b) Considering the fact that the appellant has been undertaking agricultural activity on the said plot of land since acquisition and upto the date of actual physical acquisition by the Government and the provisions of section 10(37) ITA No.1503/Ahd/2013 Jagdishbhai Gadhiya vs. ITO Asst.Year - 2009-10 -7- of the Act, the gain arising on compulsory acquisition of this agricultural land would even otherwise be exempt from tax.
Hence, even on this ground the addition made by the learned AO and sustained by the learned CIT(A) disregarding the facts and merits of the case and clear and unambiguous provisions of the Act, needs to be deleted in the interest of justice.
10. We place reliance on the following relevant judicial pronouncements which are squarely applicable to the facts of the case.
a) CIT v. Smt. Lilavati Thakorelal Patel (1985) 152 ITR 565 (Guj) "It has been found as a matter of fact by the Tribunal that the land in question was classified as agricultural land in the revenue records maintained under the Bombay Land Revenue Code. It has also been found by the Tribunal that the sale deed supported by the panipatrak established that agricultural operations were being carried on upto the accounting year relevant to the asst. yr. 1966-67. The Tribunal has found, firstly, that the lands have been acquired by the family in the thirties. There is some evidence to hold that it was being put to agricultural use; and there is nothing to indicate that it was not so used in any of the intermediate years. Thirdly, the land has also been accepted to be an agricultural land right upto the asst. yr. 1966-67 (Re. wealth-tax assessment) and nothing has happened in this year except sale of land which would indicate that the character of the land was changed. The only adverse circumstance which the Tribunal has noted was that there was some construction activity around the land in question; and that the town planning scheme was applied to this land some years back. It is also found that the assessee had not applied for permission to convert this land into non- agricultural land.
The Tribunal also recorded the factum of payment of Rs. 3,000 to the tenant in consideration of his handing over possession to the purchasers, which definitely supported the contention that the land was being put to agricultural use; and there was nothing on record to indicate to the contrary. The Tribunal noted that there was no sub-plotting of land and it was sold as one unit and its value was also determined on the basis that it was a single unit of land and not on the basis of square yardage or per square metre basis. The land was accepted as an agricultural land in wealth- tax reference. In view of these findings of fact, it cannot be successfully contended, as was sought to be done on behalf of the Revenue, that the land is not an agricultural land. Inclusion of the land in question in the town planning scheme of the surrounding area being fully developed or the land had been valued for the purposes of wealth-
ITA No.1503/Ahd/2013Jagdishbhai Gadhiya vs. ITO Asst.Year - 2009-10 -8- tax return on square yardage basis, would not rebut the presumption arising from the actual user of the land as an agricultural land and from its classification as agricultural land in the revenue records of the State Government.--CWT vs. Officer-in-charge (Court of Wards) 1976 CTR (SC) 404 : (1976) 105 ITR 133 (SC) applied; CIT vs. Siddarth J. Desai (1982) 28 CTR (Guj) 148 : (1982) 138 ITR 628 (Guj) : TC20R.670, CWT vs. Narandas Motilal (1971) 80 ITR 39 (Guj), CIT vs. Manilal Somnath (1977) 106 ITR 917 (Guj) ; TC20R.682#1 , CIT vs. Prakash Industries 1978 CTR (Guj) 194 :
(1978) 114 ITR 316 (Guj) : TC20R.695, Manibhai Motibhai Patel vs. CIT (1981) 22 CTR (Guj) 168 : (1981) 131 ITR 120 (Guj) : TC20R.714 and Ramprasad C. Dalal vs. CIT (1982) 136 ITR 633 (Guj) : TC20R.722 followed."
b) D.L.F. Universal Ltd. v. CIT (2001) 119 Taxman 373 (Del) "Capital gains--Agricultural lands--Compulsory acquisition by Government--Assessee purchased agricultural land for its colonisation business--Same acquired by Government before conversion into plots--Compensation received from Government for compulsory acquisition of agricultural lands not assessable as capital gains--D.L.F. United Ltd. vs. CIT (1986) 161 ITR 714 (Del) : TC 20R.742 followed Conclusion:
Compensation received by assessee, from Government for compulsory acquisition of agricultural lands which were purchased by assessee for its colonisation business was not assessable as capital gains."
c) ITO v. Gahlot Farms Pvt. Ltd. (2011) 138 TTJ (Del) (UO) 13 "Notified area for the purpose of s. 2(14)(iii)(b) in the case of Tehsil Samalkha, District Kama/ is area upto a distance of 5 kms. from municipal limit in all directions and, therefore, agricultural land sold by the assessee which is admittedly situated 7 to 8 kms. from the municipal limit of Samalkha cannot be treated as capital asset and hence no capital gain is chargeable to tax."
d) CIT v. Smt. Jijibai Shinde (1996) 135 CTR (MP) 271 "The land used for agricultural purposes does not come within the definition of capital asset under s. 2(14)(iii) and therefore, no capital gain tax was chargeable on the compensation amount paid to the assessee, on acquisition of such land."ITA No.1503/Ahd/2013
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e) CIT v. Smt. Sanjeeda Begum (2006) 154 Taxman 346 (All) "Land sold by the assessee being agricultural land which was located beyond 8 kms. of the municipal limits, it is not included in the definition of 'capital assets' as given in s. 2(14)(iii) and, therefore, no capital gain was exigible to tax."
f) DCIT v. Udhava Das Forma & Ors. (2009) 124 TTJ (Chennai) 817 "The State Government by exercising its powers under s. 3(1) of the 1948 Act can requisition any land for the purpose specified in the said section. As per s. 6(1), if the land requisitioned under s. 3 is not acquired, the same may be released by the State Government from requisition and the possession is also returned to the owner who is entitled for the possession. As per s. 4(2) of the said Act, the period of requisition comes to an end when a notification for acquisition of the land is published and the land vests absolutely in the State Government with effect from the date on which the notice is so published. From the abovesaid provision of the 1948 Act, it is clear that the requisition of the land is not a transfer because the ownership remains with the assessee/owner. The requisition of the land is only taking of possession of the land by the State Government for the purpose specified in s. 3(1) of the 1948 Act, thereby the owners of the land are deprived from the use and enjoyment of the land. In the case in hand, the requisition took place on 23rd April, 1976 and it came to an end on 7th April, 1990 when the land in question was acquired by issuing a notification under s. 4 of the said Act. The compensation payable against the requisition is only to compensate the owners of the property for depriving them from use and enjoyment of the land and building. Therefore, the said compensation received by the owners for requisition of the land is not capital in nature because it is not against the transfer of the land or transfer of any right by the assessees to the State, because it is not a voluntary transfer by the assessees to the Government but only as per the provision of statute. Moreover, the said compensation is also not an income of the owner/assessees because it is neither a rent nor receipt in lieu of loss of income or transfer of any right by the assessees. Therefore, the compensation received for requisition cannot be taxed as an income of the assessees under the IT Act. Even otherwise, when the compensation which is not against the transfer of the property (compulsory acquisition), then the same cannot be included as consideration for computation of capital gain and the same cannot be taxed as income of the assessee under any other head.-- Senairam Doongarmall vs. CIT (1961) 42 ITR 392 (SC) and CIT vs. D.P. ITA No.1503/Ahd/2013 Jagdishbhai Gadhiya vs. ITO Asst.Year - 2009-10
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Sandu Bros. Chembur (P) Ltd. (2005) 193 CTR (SC) 578: (2005) 273 ITR 1 (SC) applied."
g) Addl. CIT v. Tarachand (1980) 123 ITR 567 (Pat) "Since the land has been recorded in the official records as agricultural land, if the Department wanted to show that the entry was wrong, it should have given some concrete facts in that direction. For example, it could have shown that the land lay within the municipal limits of the town of Ranch/ or that the assessee had made his entire plot of land into parcels and was selling each one of them for the purpose of constructing a house thereon. The fact that the purchaser has purchased it for the purpose of constructing his house has no relevance, because so far as the seller is concerned, he will be deemed to have parted with the agricultural land in the form of agricultural land, unless it is proved otherwise. The Department has not brought up any such material on the record by which it could be said that the criteria adopted by the Tribunal for determining the character of the agricultural land was wrong."
11. Prayer:
We most humbly pray before your honours to delete the impugned addition made by the learned AO which is absolutely unlawful, bad-in-law based on conjuncture, surmises and without appreciating the true and correct facts of the case in a proper manner.
Should your honours feel that there are certain judicial pronouncements which are contrary to what we have submitted herein above, we most humbly request to provide us an opportunity to distinguish the facts of the appellant with the facts of those cases and thereby grant one more opportunity of personal hearing. Your honours would be kind enough in accepting the submission of the appellant together with all the relevant documentary evidences and the judicial pronouncements relied upon by the appellant and for that we shall ever remain grateful.
Thanking You Very Truly Yours Sd/-
Chartered Accountants"ITA No.1503/Ahd/2013
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3.1. On the other hand, ld.Sr.DR Shri Roop Chand vehemently opposed the submissions made by the ld.counsel for the assessee and he supported the orders of the authorities below.
4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) decided the issue, by observing as under:-
"10. Decision: I have gone through the assessment order and submissions of the appellant. In this case three issues have been agitated. They are:-
A) Financial Year in which the land was compulsorily acquired. B) Whether the land was capital asset or not.
C) Whether the appellant qualified for exemption u/s.10(37) of the IT Act.
A) From the assessment record, it is seen that in respect of land acquired by GIDC resulting in capital gains, the following facts emerge:
Sr.No. Particulars/Details Date
1 Date of Notification 15.03.2008
2. Date of Purchase 11.03.2008
3. Date of acquisition and 15.02.2009
handing over of the land
The above are based on the certificate dated 21.12.2011 issued by Divisional Manager, GIDC and relied upon by the AO.ITA No.1503/Ahd/2013
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The appellant has now produced a certificate from Deputy Collector and Special Land Acquisition Officer. GIDC dated 16- 3-2011 in support of his contention that the plot of land was actually acquired by GIDC, Ankleshwar on 27-10-2010. The appellant had not raised this issue during the course of assessment proceedings. However, it is seen that out of the total sale consideration received by the appellant, ₹64,10,250/- was received on 23.03.2009 and ₹8,03,996/- was received on 31.03.2011. Therefore, the possession of the property in question has been given on 15.02.2009 and compensation has been received on 23.03.2009 which implies that part performance as per Sec.53A of the Transfer of Property Act has been done and therefore in view of Sec.2(47) it amounts to transfer. Therefore, gains arising from the compulsory acquisition of the land have to be taxed in the year under consideration, i.e. in Y 2009-10. Furthermore, Section 45(4) of the IT Act clearly states that where the capital gain arises from the transfer of a capital asst, being a transfer by way of compulsory acquisition under any law, the capital gain computed with reference to the compensation awarded in the first instance shall be chargeable as income under the head "Capital Gains" of the previous year in which such compensation or part thereof was first received. The consideration was received for the first time on 23.03.2009 and possession was given on 15.02.2009 which is evident from the letter dated 21.12.2011 received from the Divisional manager, GIDC, Ankleshwar stating that "It is to inform that the section-4 Notification under Land Acquisition Act of 6 villages of Taluka, Vaghara Dist. Bharuch was issued on 25.03.2008 in which lands of village Vadadala specifically survey no.62 were included. Further you may please note that survey no.62 admeasuring 08-14-00 H-A-Sq.mtrs. was handed over to GIDC by consent agreement on 15-2-2009. The khatadar who has signed the consent agreement is Shri Jagdishbhai Labhubhai Gadhia."
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Therefore for this reason also, the capital gains for acquisition of land would arise in AY 2009-10.
(B) The next issue to be decided is whether the asset is a capital asset or not. The AO in the assessment order has discussed at length why the land belonging to the appellant is a capital asset and why he is not eligible for exemption u/s.10(37) of the IT Act. At the cost of repetition it may be stated here that the Gujarat Govt. had declared vide notification dt 25-03-2008 declared its intention to acquire the said land for development of GIDC. The said notification was recorded by the Gram Panchayat in their record vide entry No.1877 dated 1/8/2008 in form No.6. Hence it is an undisputed fact that the land situated at Survey No.62 Village
- Vadadla, Taluka - Vaghara, District Bharuch belonging to the appellant came under the notified area as per notification No.GIDC/Jame (J-AA)/Sec.6/Dahej-2/1412, GIDC Gandhinagar. The inclusion of the agriculture land being survey No.62 village Vadadala Taluka, Vaghara Dist.Bharuch was situated in notified area and this has been confirmed in the letter dated 21.12.2011 of Special Land Acquisition Officer. Ankleshwar, Bharuch.
The appellant has taken the plea that the population of the village in which the land was situated was below 3,000 as per the last census and therefore the land will not fall within the definition of capital asset u/s.2(14) of the IT Act. In the first instance, the appellant has not provided any evidence to this effect although in his submission, it is stated that the same is being enclosed. Even otherwise, the argument of the appellant is misplaced - it is the population of the notified area which is relevant and not of the village in which the land is situated- and the notified area comprises of six villages. It has not been established by the appellant that the total population of the six villages in the notified ITA No.1503/Ahd/2013 Jagdishbhai Gadhiya vs. ITO Asst.Year - 2009-10
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area was below 10,000 in the last census. The argument, therefore, does not help the appellant.
In view of these facts, I am of the considered opinion that the land belonging to the appellant was situated in the area notified by GIDC and hence it was a capital asset as per provisions of sec.2(14) of the IT Act.
(C) The last issue to be adjudicated is whether the provisions of section 10(37) of the IT Act was applicable to the appellant's case and whether the appellant had fulfilled conditions stipulated in clause-2 of section 10(37) of the IT Act that land must have been used for agricultural purpose during the period of two years immediately preceding the date of transfer. The appellant had purchased the land on 11.03.2008 and had handed over the possession of the land to GIDC on 15.03.2009 as is evident from the Divisional Manager, GIDC Ankleshwar's letter dated 21.12.2011. This proves that the land was in the possession of the appellant for only one year and hence the income chargeable to tax under the head "Capital Gains" arising from the transfer of agricultural land situated in the notified area cannot be held to be exempt from taxation u/s.10(37)(ii). Section 10(37) stipulates that the appellant or his parents should have carried on or used the land for agricultural purposes during the period of two years immediately preceding the date of transfer which is certainly not possible in the appellant's case as the land was in possession of the appellant for less than a year before the date of transfer and hence could not have been used for agricultural purposes by the appellant for two year immediately preceding the date of transfer. Even, copy of 7/12 on record clearly establishes that the impugned land was not used for agricultural purposes since 2008-2009.
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Since the conditions mentioned in Section 10(37) is not satisfied, the appellant's income from acquisition of land is not exempt u/s.10(37) of the IT Act.
11. The appellant has also relied on certain case laws whose facts are clearly distinguishable from the facts of the appellant's case and hence are not relevant.
12. In view of the above discussion, the A.O's action in bringing to tax the amount of ₹57,10,250/- (₹64,10,250 - ₹7,00,000) to tax as short term capital gain in AY 2009-10 is upheld."
4.1. As per section 45(1) of the Act, any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income-tax under the head "Capital Gains", and shall be deemed to be the income of the previous year in which the transfer took place.
4.2. From the plain reading of the section it is clear that there should be a capital asset and transfer of such capital asset should be effected in the previous year. In the case in hand, GIDC acquired the land of the assessee under Land Acquisition Act. The contention of the assessee is that the land being an agricultural land cannot be treated as capital asset in view of the exclusion prescribed u/s.2(14)(iii) of the Act. It is not in dispute that prior to acquisition, notification issued u/s.2(4) of the Land Acquisition Act proposing to acquire the land, the land in question was agricultural land in Revenue records. However, objection of the AO is ITA No.1503/Ahd/2013 Jagdishbhai Gadhiya vs. ITO Asst.Year - 2009-10
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that no agricultural activity was carried out by the assessee in respect of Asstt.Years 2008-09 to 2010-11. However, in the AY 2007-08, there is a noting of cultivation of 'kapas'. It is recorded by the AO that an amount of Rs.1,28,20,500/- was received jointly with Shri Bharatbhai Vanmalibhai Patel on 23/03/2009 from Gujarat Government. The AO treating the land as capital asset and computed the 'short-term capital gain' amounting to Rs.57,10,250/-. In our considered view, both the authorities below have misdirected themselves in reaching to the conclusion that the land acquired by the GIDC is a capital asset in view of the fact that the area in which the land situated is notified by the appropriate authority as a development area. Both the authorities below have failed to consider the nature of the land prior to acquisition and notification by the appropriate authority. The Hon'ble Gujarat High Court rendered in the case of Gordhanbhai Kahandas Dalwadi vs. CIT reported at 127 ITR 664(Guj.) has held as under:-
"6. It has been observed by the Supreme Court in CWT vs. Officer- in-Charge (Court of Wards), Paigah 1976 CTR (SC) 404 : (1976) 105 ITR 133 (SC) that if the law has not been correctly appreciated by the Tribunal, its appreciation of facts is bound to be affected by the wrong approach to the evidence. Now, in the instant case, the Tribunal has held against the assessee because permission to sell the land for non- agricultural use was obtained. This Court has pointed out in CIT vs. Manilal Somnath (1977) 106 ITR 917 (Guj) that the permission granted by the Revenue authorities under s. 63 of the Bombay Tenancy and Agricultural Lands Act clearly goes to show that in case the land did not cease to be agricultural land, the permission would be treated as cancelled and, therefore, the sale in favour of the particular purchaser would be infructuous and the land would revert to the assessee as agricultural land. In such an eventuality, the land would still continue to be agricultural land because the permission to sell to a non-agriculturist would be ITA No.1503/Ahd/2013 Jagdishbhai Gadhiya vs. ITO Asst.Year - 2009-10
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treated as cancelled. It has to be borne in mind that the correct test that has to be applied is whether on the date of the sale the land was agricultural land or not. Because after the sale the purchaser was going to put the land to non-agricultural use, it does not mean that the land had ceased to be agricultural land at the date of sale. The crucial date for the purpose of finding out the character of the land is the date of sale and the question that has to be asked is whether on the date of sale the land was agricultural land or not. However, we find that what has weighed with the Tribunal, inter alia, is the fact that after the sale the purchaser was going to use the land for non- agricultural purposes and it is in the light of what was going to happen in future that the Tribunal held that the land was non- agricultural in character at the relevant time. It must be borne in mind, as was held by this Court in Chhotalal Prabhudas vs. CIT (1979) 10 CTR (Guj) 69 : (1979) 116 ITR 631 (Guj), that if the land is actually used for agricultural purposes as indicated in Manilal Somnath's case (supra) or by the Supreme Court in Begumpet Palace's case (1976) 105 ITR 133 (SC), at least, prima facie it can be said to be land which is either actually used or ordinarily used or meant to be used for agricultural purposes. If it is actually used at the relevant date for agricultural purposes and there are no special features, as for example, a building site being actually used as a stop-gap arrangement for agricultural purpose, it would be agricultural land. Potential use of the land as non-
agricultural land is totally immaterial. Entries in the record of rights are good prima facie evidence regarding land being agricultural and if the presumption raised either from actual user of the land or from entries in revenue records is to be rebutted, there must be material on the record to rebut the presumption. The approach of the fact- finding authorities, namely, the IT authorities and the Tribunal, should be to consider the question from the point of view of the presumption arising from entries in the record of rights or actual user of the land and then consider whether that presumption is dislodged by the presence of other factors in the case.
7. In Chhotalal Prabhudas' case (supra), in 1952 non- agricultural use of the land was discontinued and permission was obtained for use of land for purely agricultural purposes and thereafter for some years after 1952 the land was allowed to lie fallow and thereafter agricultural operations were resumed on the land, and in the light of those facts, this Court held that the land was agricultural land. In that case, the land was used for brick-making for nearly two decades before it was returned to agricultural operations in 1952. In the instant case, we have non-agricultural use for brick-making for a period of two years and thereafter the land was allowed to lie fallow and agricultural operations were started and bajri was grown in this land in the Revenue year 1964-65. We may point out that under the Bombay Tenancy and Agricultural Lands Act, 1948, "land" has been defined in s. 2, sub-s. (8), to mean, inter alia, land which is used for agricultural purposes or which is sometimes used as ITA No.1503/Ahd/2013 Jagdishbhai Gadhiya vs. ITO Asst.Year - 2009-10
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agricultural land, but is allowed to lie fallow, is agricultural land for the purposes of the Tenancy Act, and it is that agricultural land for the sale of which to a non- agriculturist permission under s. 63 is necessary and it, is in the light of this definition which has obviously to be borne in mind when permission under s. 63 is obtained, that the question has to be approached. It must be pointed out that in CIT v.Manilal Somnath (supra), this Court has observed that merely because land is surrounded by development or that development has caught up with the land in question it should not be held that the land had ceased to be agricultural land. It is nobody's case that permission for non-agricultural use under s. 63 of the Bombay Land Revenue Code had been obtained by the vendor, the assessee, before he sold the land on January 30, 1969, to the purchaser. The importance of the potential non- agricultural use of the land may be reflected in the price which the purchaser is prepared to pay for the agricultural land, but potential non- agricultural use does not alter the character of the land from agricultural land to non-agricultural land. In the instant case, it has been found that the assessment which was being paid was for agricultural use of the land and the special rates which are fixed for non-agricultural use were not being paid by the assessee prior to the date of the sale. Under these circumstances, since the correct tests which are required by law to be applied for determining as to of what date the character of the land is to be found and, secondly, in the light of what tests the question has to be decided, have not been applied by the Tribunal, we are applying the correct tests to the facts found and, in our opinion, applying the principles laid down by this Court in CWT vs. Narandas Motilal (1971) 80 ITR 39 (Guj), Manilal Somnath's case (supra), Smt. Chandravati Atmaram Patel vs. CIT 1978 CTR (Guj) 211 : (1978) 114 ITR 302 (Guj) and Chhotalal Prabhudas vs. CIT (supra), read in the light of the observations of the Supreme Court in Begumpet Palace's case (supra), it is clear that the Tribunal was in error when it held on the facts found that in law the land was not agricultural land. The conclusion that it was not agricultural land was a mixed question of law and fact and the approach of the Tribunal adopted in coming to this conclusion was not in strict accordance with law. Since the Revenue records showed that this was agricultural land, the approach should have been whether the presumption that this was agricultural land was being rebutted by any evidence about user of the land or about the character of the land having been changed prior to the date of the sale. No such evidence has been pointed out from the records of this case or from the facts found by the Tribunal and considerations of other development in the locality or other locality in the vicinity of the land are not proper considerations to be applied, as was pointed out in Manilal Somnath's case (supra)."
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4.3. Further, the Hon'ble Gujarat High Court rendered in the case of CIT vs. Siddharth J.Desai reported at 139 ITR 628 (Guj.) has laid down certain factors to consider whether the land is agricultural or not. In the said case, the factors as enumerated by the Hon'ble Jurisdictional High Court are as under:-
"11. On a conspectus of these cases, several factors are discernible which were considered as relevant and which were weighed against each other while determining the true nature and character of the land. It may be useful to extract from those decisions some of the major factors which were considered as having a bearing on the determination of the question. Those factors are:
(1) Whether the land was classified in the Revenue records as agricultural and whether it was subject to the payment of land revenue ?
(2) Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time ?
(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 ?
(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 ?
(5) Whether, the permission under s. 65 of the Bombay Land Revenue Code was obtained for the non-agricultural use of the land ? If so, when and, by whom (the vendor or the vendee)? Whether such permission was in respect of the whole or a portion of the land ? If the permission was in respect of a portion of the land and if it was obtained in the past, what was the nature of the user of the said portion of the land on the material date ?
(6) 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 cesser and/or alternative user was of a permanent, or temporary nature ?
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(7) Whether the land, though entered in revenue records, had never been actually used for agriculture, that is, it had never been ploughed or tilled ? Whether the owner meant or intended to use it for agricultural purposes ?
(8) Whether the land was situate in a developed area ? Whether its physical characteristics, surrounding situation and use of the lands in the adjoining area were such as would indicate that the land was agricultural ?
(9) Whether the land itself was developed by plotting and providing roads and other facilities?
(10) Whether there were any previous sales of portions of the land for non- agricultural use ?
(11) Whether permission under s. 63 of the Bombay Tenancy and Agricultural Lands Act, 1948, was obtained because the sale or intended sale was in favour of a non- agriculturist ? If so, whether the sale or intended sale to such non-agriculturist was for non-agricultural or agricultural user ?
(12) Whether the land was sold on yardage or on acreage basis ?
(13) 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 ?
At the risk of repetition, we may mention that not all of these factors would be present or absent in any case and that in each case one or more of those factors may make appearance and that the ultimate decision will have to be reached on a balanced consideration of the totality of circumstances.
12. One more thing before we turn to the facts and circumstances of the present case. While applying the test as to whether an agriculturist would have purchased the land for agricultural purposes at the price realised by the sale and whether the owner would have ever sold the same by valuing it as property yielding agricultural produce on the basis of its yield, it must be remembered that the valuation of an agricultural land is a complex matter. Several factors enter into account in determining the value of an agricultural land such as the nature of the soil and its fertility, the type of crop for which the land is suited or is adaptable, the size of the land and the practicability of the use of mechanised implements in order to procure better yield, the proximity to village and availability of transport facilities, the availability of irrigation facility and ITA No.1503/Ahd/2013 Jagdishbhai Gadhiya vs. ITO Asst.Year - 2009-10
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power and, above all, the scarcity of the land in the area. Personal, social and economic considerations also influence, perceptibly or otherwise, the valuation of an agricultural land in our country. All these factors will have to be investigated into and a finding of fact will have to be recorded on each of the relevant aspects by the fact-finding authorities. In the absence of such findings, no presumption can ordinarily be raised, merely because high price is realised, that the land could never have been sold as an agricultural land for genuine agricultural user or purposes."
4.4. We find that both the authorities below have failed to take note of these factors and have decided this issue mechanically, therefore the orders of the authorities below are set aside and the matter is restored back to the file of AO for de novo assessment. The AO is hereby directed to verify the documents as furnished by the assessee in support of its claim that the land was agricultural before acquisition and decide this issue in the light of the ratio laid down by the Hon'ble Jurisdictional High Court in the cases of CIT vs. Siddharth J.Desai(supra) and Gordhanbhai Kahandas Dalwadi vs. CIT(supra).
5. In the result, the appeal of the Assessee is allowed for statistical purposes.
Order pronounced in the Court on Friday, the 13th day of February, 2015 at Ahmedabad.
Sd/- Sd/-
(अ नल चतव
ु द ) (कुल भारत)
लेखा सद य या यक सद य
( ANIL CHATURVEDI ) ( KUL BHARAT )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 13/ 02 /2015
ट .सी.नायर, व. न.स./T.C. NAIR, Sr. PS
ITA No.1503/Ahd/2013
Jagdishbhai Gadhiya vs. ITO
Asst.Year - 2009-10
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आदे श क! " त$ल%प अ&े%षत/Copy of the Order forwarded to :
1. अपीलाथ% / The Appellant
2. &'यथ% / The Respondent.
3. संबं4धत आयकर आयु6त / Concerned CIT
4. आयकर आय6 ु त(अपील) / The CIT(A)-IV, Surat
5. 7वभागीय & त न4ध, आयकर अपील य अ4धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड; फाईल / Guard file.
आदे शानुसार/ BY ORDER, स'या7पत & त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation .. 11.2.15 (dictation-pad 10 -pages attached at the end of this File)
2. Date on which the typed draft is placed before the Dictating Member ...12.2.15
3. Other Member...
4. Date on which the approved draft comes to the Sr.P.S./P.S.................
5. Date on which the fair order is placed before the Dictating Member for pronouncement......
6. Date on which the fair order comes back to the Sr.P.S./P.S.......13.2.15
7. Date on which the file goes to the Bench Clerk.....................13.2.15
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................