Income Tax Appellate Tribunal - Mumbai
Ratanshi Mulji Patel, Navi Mumbai vs Department Of Income Tax on 27 May, 2000
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI ' D ' BENCH
MUMBAI BENCHES, MUMBAI
BEFORE SHRI G E VEERABHADRAPPA, PRESIDENT & SHRI VIJAY PAL RAO, JM
ITA No. 5499/Mum/2011
(Asst Year 2008-09)
The Income Tax Officer Vs Ratanshi Mulji Patel
Ward 22(2)(4), Mumbai 11 Gopal Krishna Bhavan, 3rd Floor
A-Wing S R Marg
Off Tilak Road
Ghatkopar East- Mumbai 77
(Applicant) (Respondent)
PAN No. AAAPP5976E
Assessee by Sh M VB subramanian
Revenue by Sh C G K Nair
Dt.of hearing 13th June 2012
Dt of pronouncement 18th July 2012
PER VIJAY PAL RAO, JM
This appeal by the revenue is directed against the order dated 27/05/2000 and CIT(A) for the assessment year 2008-09.
2 The revenue has raised various grounds in this appeal; however, the only issue arises for our consideration and adjudication is as under:
"Whether in the facts and circumstances of the case, the CIT(A) is justified in holding that the gain on sale of agricultural land at Nagpur is exempted from tax as the same falls under section 2 (14) (iii) of the I T Act.
3 The assessee is an individual and derived income from house property, capital gains and income from other sources. During the year under consideration, the assessee has shown exempt income of ` 58,11,000/- as capital gain arising from sale of agricultural land. The Assessing Officer asked the assessee to furnish the details and nature of exempt income along with supporting evidence. In response, 2 ITA No.5499/M/11 Ratanshi Mulji Patel the assessee furnished the relevant details and submitted that the same is on account of sale of agricultural land, being 50% share of the assessee at Mouje Bothali, PH No.74, Tahsil, Nagpur (Rural) Dist Nagpur. The total sale consideration was stated to be at ` 1.20 crores and assessee's share being 50% i.e. ` 60 lakhs in the said property, which was claimed as exempt income at `. 58,11,000/- after reducing the cost of acquisition. The Assessing Officer observed that the assessee has decided to sell the land in question within 11 months from the date of purchase. The Assessing Officer noted that the date of purchase was 17/11/2005 and the assessee received the part sale consideration on 1/10/2010, which is within 11 months from the date of purchase. Further, the Assessing Officer found that the assessee has sold the land to the Shri Vishal Nanaji Kodavar and Shri Pramod Satyanarayan Agarwal of Kondavar Group of Builders. Accordingly, after considering the various facts and circumstances, the Assessing Officer held that the transaction of purchase and sale of land in question are in the nature of adventure and therefore, are in the nature of trade and assessed the income as business income.
3.1 On appeal, the CIT(A) held that the land in question was recorded in the revenue records as agricultural land and remained so in the immediate next year therefore, the gain on the said land is not taxable being covered under section 2 (14)(iii).
4 Before us, the ld DR has narrated the facts as recorded by the Assessing Officer and pointed out that the assessee never declared any agricultural income. He has further submitted that the assessee received the sale consideration within the 11 month of purchase of the said land which shows the intention of the assessee was not to use the said land for agricultural purposes; but to earn the profit from purchase and sale of the land. Further, the learned DR has submitted that the land 3 ITA No.5499/M/11 Ratanshi Mulji Patel was sold to the builder for non-agricultural purpose. The land is situated at the main road and surrounded by SEZ and all the adjoining areas are developed. He has relied upon the decision of honourable Supreme Court in case of Commissioner of Income-tax v. Gemini Pictures Circuit Private Ltd. reported in 220 ITR 43(SC)/85 Taxman 594 as well as decision of honourable jurisdictional High Court in case of Gopal C. Sharma v. Commissioner of Income-tax reported in 209 ITR 946(Bom) and submitted that from the facts and circumstances of the case, it cannot be said that the assessee purchased the land for agricultural purposes. Rather, the transaction is clearly in the nature of trade and therefore, the decision of honourable High Court in case of Commissioner of Income-tax v. Smt. Debbie Alemao reported in 331 ITR 59 (Bom) as relied upon by the CIT(A) is not applicable in the facts of the case. The learned DR has also relied upon the order of the Assessing Officer. 4.1 On the other hand, the ld AR of the assessee has submitted that;
(i) As per Revenue records the land is bearing 'gat kramank ' 41/2 in patwari halka no. 74 at Tehsil Nagpur Gramin. It was purchased by the appellant along with his daughter from Sri Vasantrao Devtale and Sau. Nandatai Sudhir Supare of Nagpur in 2005 by purchase deed dated 17 Nov. 2005. At that time the piece of land having an area of 7.63 hectare was purchased for Rs. 4,50,000.
(ii) The appellant is a farmer also as he is having agricultural land in Gujarat also. It is evident from the copy of 'Khedut Pothi' submitted which is a record of details of land of farmer, as well as the balance sheets filed with returns for A.Y. 2003-04,2004-05, 2005-06 ,2006-07 and 2007-08 also. The 50% share in the land purchased at Nagpur by purchase deed of 2005 is also reflected in the balance sheet as on 31-3-2006 filed along with return filed for A.Y. 2006-07.
(iii) The agricultural land purchased by the appellant jointly with his daughter in the year 2005 by deed dated 17.11.2005 is claimed some 12 Km way from Nagpur Municipal limits. The appellant has claimed that this fact was not acknowledged by A.O. even though this was brought in his notice by the Tehsildar's certificate date 26-7-2006 which was filed during assessment proceedings itself. The appellant has taken a plea that in the order the Assessing Officer has wrongly mentioned that the Tehaildar certificate stating that the land is 22Kms away from Nagpur Municipal Limit was never furnished before him." 4 ITA No.5499/M/11
Ratanshi Mulji Patel The ld AR of the assessee has supported the order of the ld Commissioner of Income Tax (Appeals).
5 We have considered the rival submissions as well as relevant material on record. The assessee purchased the land in question on 17/11/2005 for a consideration of `. 2,25,000/- as 50% share of the assessee. The land was sold for a consideration of Rs. 1.20 crores and 50% share of the assessee comes to Rs. 60 lakhs. The Assessing Officer has given the details of sale consideration received by the assessee at page number 3 of the assessment order as under:
Received by Assessee Received by assessee's daughter as co-
owner
01.10.2006 ` 23,82,667 01.10.2006 ` 23,82,667
11.05.2007 ` 6,17,333 11.05.2007 ` 6,17,333
11.05.2007 ` 30,00,000 11.05.2007 ` 30,00,000
Total ` 60,00,000 Total ` 60,00,000
5.1 The details of consideration show that the assessee received the
consideration in 3 instalments and about 40% of the consideration was received on 01/10/2006, which means that the sale deal was finalised prior to the receipt of part consideration on 01/10/2006 and the final payment was received on 11/05/2007. In other words, the assessee decided to sell the said land prior to 01/10/2006, which is within 11 months from the date of purchase. The Assessing Officer held that the transaction of purchase and sale are in the nature of adventure and therefore, it is in the nature of trade and not acquisition of capital asset for agricultural purposes. 5.2 In order to determine the real nature of transaction of purchase and sale various factors are to be taken into consideration viz the intention of the assessee at the time of purchase, treatment of the land in question, holding period, actual use of land, location of land, surrounding circumstances, near future use of land etc. 5 ITA No.5499/M/11 Ratanshi Mulji Patel Thus, the question that a particular land is acquired and retained as an agricultural land has to be decided on the basis of totality of the relevant facts and circumstances and not by applying any single factor or test. 5.3 In the case in hand, no agriculture operation was carried out by the assessee on the land in question. Immediately after purchase, the assessee decided to sell it which demonstrates the intention of the assessee not to hold the land for cultivation or agriculture operation but to resale the same at the earliest possible occasion.
Undoubtedly, the land is situated at the main road near the city of Nagpur and in the vicinity of SEZ which means, the entire surrounding area is commercially developed. Further, the land was sold within a short period of 11 month to the builder for non-agricultural use and purpose. All these facts clearly reflects the commercial and profit element in the purchase and sale transactions of land in question.
5.4 The honourable Supreme Court in case of Gemini Pictures Circuit Private Ltd. (supra) has observed and held in paragraph 5 and 6 as under:
"5 A recent decision of this court in Sarifabibi Mohmed Ibrahim v. CIT [1993] 204 ITR 631, rendered by a Bench comprising one of us (B. P. Jeevan Reddy J.) is relied upon by learned counsel for the Revenue. The Bench observed :
"Whether a land is an agricultural land or not is essentially a question of fact. Several tests have been evolved in the decisions of this court and the High Courts, 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 a cumulative consideration of all the relevant facts."
Several judgments of this court and the High Courts were referred to including a judgment of the Bombay High Court in CIT v. V. A. Trivedi [1988] 172 ITR 95. On a consideration of the factors for and against, the Bombay High Court observed in V. A. Trivedi's case [1988] 172 ITR 95 that for ascertaining the true character and the nature of the land, it must be seen 6 ITA No.5499/M/11 Ratanshi Mulji Patel whether it has been put to use for agricultural purposes for a reasonable span of time prior to the date of sale and further whether on the date of sale the land was intended to be put to use for agricultural purposes for a reasonable span of time in future. Examining the case from the said point of view, the High Court held that the fact that the agreement of sale was entered into by the assessee with a housing society is of crucial relevance since it showed that the assessee had agreed to sell the land for admittedly non-agricultural purposes. The ratio of the said decision was approved in Sarifabibi's case [1993] 204 ITR 631 (SC).
6 We do not think it necessary to multiply the cases, since, in our respectful opinion, no other conclusion is reasonably possible in the facts of the case before us than the one arrived at by us. All the three authorities under the Act too arrived at the same conclusion. With great respect to the learned judges of the High Court, we find their conclusion wholly unsustainable and unacceptable."
5.5 The real use of land is very relevant and material for deciding the true intention of the assessee in acquiring the land and selling the same. To apply the exception of capital asset as per section 2 (14) (iii), the character of land being agriculture has to be decided with reference to the intention and purpose of acquiring the land. Once it is borne out from the facts and circumstances of the case that the intention of the assessee was not to put to the land for agricultural use and accordingly, it was not used for agriculture purpose by the assessee as well as even by the purchaser, who is a builder, then the provisions of section 2 (14) (iii) would not apply in the case of the assessee.
5.6 In the case of Smt. Debbie Alemao(supra), the Assessing Officer assessed the capital gain arising from sale of agricultural land; therefore, the said decision would not apply in the case in hand where the Assessing Officer has assessed the gain from sale of the land as business income.
6 In view of the above discussion and in the facts and circumstances of the case, we hold that the nature of transaction of purchase and sale was rightly held 7 ITA No.5499/M/11 Ratanshi Mulji Patel by the Assessing Officer as trading. Accordingly, we set aside the impugned order of CIT(A) and restore that of Assessing Officer .
7 In the result, the appeal of the revenue is allowed Order pronounced in the open court on the 18th, day of July 2012.
Sd/- Sd/-
( G E VEERABHADRAPPA ) ( VIJAY PAL RAO )
President Judicial Member
Place: Mumbai : Dated: 18th, July 2012
Raj*
Copy forwarded to:
1 Appellant
2 Respondent
3 CIT
4 CIT(A)
5 DR
/TRUE COPY/
BY ORDER
Dy /AR, ITAT, Mumbai