Income Tax Appellate Tribunal - Hyderabad
P Venkat Reddy, Hyderabad vs Assessee on 19 August, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "A", HYDERABAD
BEFORE SHRI D. MANMOHAN, VICE PRESIDENT
AND
SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
I.T.A. No. 12/HYD/2014
Assessment Year: 2008-09
P. Venkat Reddy, Addl. Commissioner of
HYDERABAD Vs Income Tax,
[PAN: AGEPP3161D] Range-9,
HYDERABAD
(Appellant) (Respondent)
For Assessee : Shri V. Raghavendra Rao, AR
For Revenue : Shri A. Seetharama Rao, DR
Date of Hearing : 04-07-2016
Date of Pronouncement : 19-08-2016
ORDER
PER B. RAMAKOTAIAH, A.M. :
This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-VI, Hyderabad, dated 29-08-2013 on the issue of capital gains brought to tax during the year on sale of certain lands claimed to be agricultural lands.
2. The appeal memo was filed with a delay of twenty six days including intervening holidays. Both assessee and his Counsel gave affidavits explaining the cause of delay. Considering I.T.A. No. 12/Hyd/2014 :- 2 -: P. Venkat Reddy the same, we are of the opinion that there is sufficient cause in filing appeal belatedly. We hereby condone the delay and admit the appeal.
3. Briefly stated facts are that assessee, an individual, had filed the return of income admitting the total income at Rs. 12,41,930/-, with a note in return of income indicating that he received a sale consideration of Rs. 61,00,000/- towards sale of agricultural land, and his share has been utilized in house construction/repairs. However, the profits on sale of such lands were not included in total income holding that the lands under sale are agricultural lands and as such do not constitute capital assets. During the course of the assessment proceedings, the Assessing Officer (AO) found that assessee purchased lands at Mansanipally Village, Maheswaram Mandal, R.R.Dist., in the month of November, 2005 to the extent of Ac 4.02 Guntas, for a consideration of Rs. 12,22,500/- and an acre of land in January, 2006, for a consideration of Rs. 3,00,000/- vide the Agreement for Sale cum GPA and sold total area of Ac.3.02 Guntas @ Rs. 20,00,000/- per acre in the month of September, 2007. Then the AO proposed to treat the profits arising of such transactions as Short Term Capital Gains, for which assessee objected on two counts, viz.,
(i) the said lands are agricultural lands;
(ii) only a minor part of the sale consideration was received by him, with major portion of such consideration going to the consenting party with whom he entered into an oral agreement earlier;
I.T.A. No. 12/Hyd/2014
:- 3 -: P. Venkat Reddy
The AO brushed aside such contentions on the ground that the lands under reference fall in HMDA jurisdiction as per G.O. No. 274, as such said lands are no more agricultural lands, and there is no agreement in writing with the consenting party, to show that the said party holds any interest in such land. Accordingly, the resultant profits/gains on sale of land, to the extent of Rs. 44,18,960/- being the difference between the total sale consideration of Ac. 3.02 guntas (Rs. 61,00,000/-) and the cost of acquisition (Rs. 16,81,040/-) was brought to tax by the AO.
4. Before the Ld. CIT(A) it was contended that (a) the notification issued for HMDA does not apply and (b) the consideration received of Rs. 9,15,000/- as per the sale deeds can only be brought to tax under the head 'capital gains'.
5. On considering the detailed submissions and remanding the matter to the AO, Ld. CIT(A) confirmed the action of AO with certain directions to modify the cost of acquisition. His order is as under:
"5.2 The appellant's objections are on two counts. One is regarding the treatment of agricultural land as capital asset, within the definition of Sec. 2(14)(iii) of I.T.Act, holding that the lands under reference are located in area, which are outside scope and ambit of Sec. 2(14)(iii) and the notification mentioned by the A.O. However, there is no further elaboration on this issue. Regarding the issue of receipt of sale consideration by the consenting party, which is to the extent of Rs. 51,85,000/-, it was submitted that, the land under reference were sold earlier to M/s. Sai Chaithanya Housing Pvt. Ltd. much before the sale deeds dated 30.09.2007 and a portion of sale consideration was received by the consenting parties as indicated in sale deed with a reference to the oral agreement and such consideration was: also confirmed by the consenting parties, which was shown to have been taken for their tax purpose. It was I.T.A. No. 12/Hyd/2014 :- 4 -: P. Venkat Reddy further submitted that both the right holders viz. the assessee and consenting party have registered sale deeds for consideration of Rs. 41,00,000/- and Rs. 20,00,000/-, out of which the share of the appellant is to the extent of Rs. 6,15,000/- and Rs. 3,00,000/respectively, as against the share of consenting party to the extent of Rs. 51,85,000/- and the share of consideration for each party is indicated in the sale deed. It was further contended that the consenting parties have categorically admitted the receipt of Rs. 34.85 lakhs out of Rs. 41.00 lakhs and Rs. 17.00 lakhs out of Rs. 20.00 Iakhs, which were the sale considerations received for sale of Ac. 2.02 Guntas and Ac. 1.00 Guntas land respectively, and A.O failed to appreciate these facts .
5.3 Perused the submissions of the appellant and the observations of the A.O along with the other facts that have been brought on record. As could be seen from the facts, the appellant's main contention was the lands under reference were agricultural lands and cannot be considered as the capital asset within the purview of provisions of Sec. 2(14)(iii) of I.T. Act. Rest of the arguments are only alternative in nature. As regard to the treatment of land as capital asset, it was never argued by the appellant that it was fetching him the agricultural income and carrying on the agricultural operations. Further, the said land property is located at Mansanipally village of Maheswaram Mandalam falling within the limits of HMDA notified Authority, as per G.O.No. 274 dated 20.04.2007, which is not disputed by the assessee, seriously. It is also relevant to mention here that the appellant himself was claiming the said property as right of the assessee which was acquired as per the agreement for sale cum GPA and was disposed as same right in the said property, along with the consenting party, for a consideration which has been shared by them on the basis of ratios, which is only known to them. This fact of sale of rights in the land under reference, was referred to in the submissions of the appellant reflecting the true nature of asset under reference. Under the circumstances, I have no hesitation in holding that the property under reference is a capital asset and the profits associated with such sale gives taxable incomes to the owners. Accordingly, the gains on sale of the property are liable to be assessed as short term capital gains and the action of the A.O is upheld, in this regard.
5.4 As regard to the quantum of sale consideration received, it was the argument of the appellant that he has received only a part of the sale consideration being a AGPA holder and considered himself as joint right holder, along with the consenting party who has received the major portion of the sale proceeds, finding a mention in the sale deeds on sharing and confirmed by consenting party, is only liable for taxes on the sale consideration of Rs. 9,15,000/-. Indeed, this fact has a mention in the sale deeds and confirmed by the consenting party. But, the missing I.T.A. No. 12/Hyd/2014 :- 5 -: P. Venkat Reddy link in these transactions is how the consenting party has acquired the rights in the said property from the appellant, without any written deed/agreement and without payment of any consideration. It is difficult to believe that the appellant having purchased the property at Rs. 3,00,000/- lakh per acre in year 2005 has sold at the same rate in the year 2007, if it is to be believed that he has only received Rs. 9,15,000/towards his share of sale consideration, which was the peak period in real estate at Hyderabad. Further, it is also difficult to believe that major share of the rights in the property would be handed over to a third party without any consideration and without any agreement in writing. It is also relevant to mention here that the appellant voluntarily mentioned in the return of income, indicating the sale consideration received by him for sale of lands, was Rs. 61,00,000/- and the same was shown to have been invested in the specified asset, i.e., the existing property of the appellant located at H.No. 16-11-739, Gaddiannaram, Dilsukhnagar, Hyderabad. It is also a fact that the appellant neither denied such investment nor explained the alternate sources for such investments, in case the entire consideration of Rs. 61,00,000/- was not received by him, as claimed during the assessment proceedings.
Based on the circumstances and facts of the case, it can only be presumed that the appellant has received the entire consideration of Rs. 61,00,000 as mentioned in return of income, with Rs. 9,15,000 received from the vendee towards the sale transactions dated 30.09.2007 and the balance amounts (Rs. 61,00,000-Rs.9,15,000) from the consenting party who has acquired the rights in the said property prior to the sale deeds dated 30.09.2007. It was not the case of the appellant to prove that the rights, that too major rights in the property under reference were transferred to the consenting party without any consideration and also invested the amounts in the properties as specified. Under the circumstances, it proves that the appellant received the entire consideration of Rs. 61,00,000/- towards the sale/transfer of his rights over the property in absence of any other information as regard to the sources for Rs. 61,00,000 indicated in return of income and earned the short term capital gains on such transfer. However, it is relevant to mention here that the appellant has sold only A 2.02 Guntas of land at Sy.No.96 out of Ac 4.02 Guntas purchased in November, 2005 and it is not known whether similar sharing of rights has taken place, and whether the sale of the remaining land has contributed to the total sale consideration under reference. Further, the A.a has taken the cost 'of acquisition of Ac5.02 Guntas, as the cost of Ac 3.02 Guntas, in computing the capital gains which appears not factually correct. Accordingly, the addition of Rs. 44,18,960/- stand sustained/confirmed, subject to verification of proportionate cost of acquisition of property under reference and the status of remaining two acres of land purchased by appellant in the year 2005. Accordingly, this ground of appeal is treated as Partly Allowed".
I.T.A. No. 12/Hyd/2014 :- 6 -: P. Venkat Reddy
6. Assessee is aggrieved and raised as many as six grounds with sub-grounds which are mainly submissions.
7. Ld. Counsel for assessee referred to the sale deeds and submitted that assessee's share in the sale of property was only Rs. 9,15,000/- which he has disclosed in return and being sale of agricultural lands, the same is not exigible to tax. He also filed additional evidence in the form of various certificates to affirm that the impugned lands are agricultural in nature. With reference to the contention that the municipal limits of Hyderabad does not extend to the HMDA limits, he relied on the following Co-ordinate Bench decisions:
i. Smt. C. Vijay Kumari Vs. ITO, in ITA No. 1797/Hyd/14, dt.
05-06-2015;
ii. Smt. R. Uma Devi Vs. DCIT, in ITA No. 350/Hyd/14, dt. 11-03-2015;
iii. Smt. N. Sarojini Vs. DCIT in ITA No. 226/Hyd/14, dt. 11-03-2015;
iv. Harniks Park (P) Ltd. Vs. ITO [41 taxmann.com 109] (Hyderabad) dt. 27-09-2013;
v. M/s. Goutham Constructions Vs. ITO in ITA No. 307/Hyd/2011, dt. 27-09-2013;
vi. Smt. T. Urmila Vs. ITO in ITA No. 398/Hyd/2012 [28 taxmann.com 222] (Hyderabad) dt. 12-12-2012;
8. Ld. DR relied on the orders of the authorities.
I.T.A. No. 12/Hyd/2014
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9. During the course of hearing, the Ld. Counsel was asked to explain the nature of ownership on lands, as assessee has only signed as AGPA holder of a third party but not as owner. He expressed his helplessness as the purchase deeds were not placed on record.
10. We have considered the rival contentions and perused the documents placed on record and various case law. Application of various case law will arise only when the facts are clear. In the instant case, AO and CIT(A) has gone on presumption that assessee is owner of agricultural lands which are within the HMDA limits. Ld. CIT(A) tried to modify the above stating that he was only holding rights in property but ultimately confirmed the stand of AO. As seen from the two sale deeds, the following are stated in the recitals:
1. "The deed of sale is made and executed on this 30th day of SEPTEMBER 2007 at Maheshwaram, R.R. District.
Sri Badavath Krishna, S/o. Balya aged about 33 Yrs, Occ:
Agriculture, R/o. Uppugadda Thanda, Mansanpally Village, Maheshwaram Mandal, R.R. Dist., A.P. Represented by AGPA holder: Sri P. Venkat Reddy, S/o. P. Kanakal Reddy, aged about 56 Yrs, R/o. H.No. 739/a/1/1, Gaddi Annaram, Dilsukh Nagar, Hyderabad District.
(Herein after called the VENDOR which expression of the VENDOR shall mean and include all his legal heir's successor's executors, administrators, legal representatives, nominees, and assignees etc., AND M/S SAI CHAITANYA HOUSING (P) Ltd (registered and incorporated under company's act 1956) Flat No: 311, Annapurna Block, Aditya Enclave, Ameerpet, Hyderabad I.T.A. No. 12/Hyd/2014 :- 8 -: P. Venkat Reddy represented by its Chairman Sri Dhulipalla Samba Siva Rao, S/o. Satyanarayana, Age: 48 Years, R/o. Ameerpet, Hyderabad. Herein after called the 'CONSENTING PARTY' / AGREEMENT HOLDERS which expression of the vendor shall mean and include all their heirs, executors, administrators, legal representatives nominees and assignees etc., of SECOND PART".
And
2. The deed of sale is made and executed on this 30th day of SEPTEMBER 2007 at Maheshwaram, R.R. District.
Sri NENAVATH LAXMAN, S/o. Sri N. DESYA, aged about 51 Years, Occupation: Agriculture, Sri NENAVATH SEVYA, S/o. Sri N. DESYA, aged about 46 Years, Occupation: Agriculture, Sri NENAVATH CHAKRI, S/o. Sri N. DESYA, aged about 72 Years, Occupation: Agriculture, Sri NENAVATH RAMESH, S/o. Sri N. DESYA, aged about 20 Years, Occupation: Agriculture, All are residents of Uppugadda Thanda, Mansunpally Village, Maheshwaram Mandal, Ranga Reddy District, Represented by AGPA holder: Sri P. Venkat Reddy, S/o. P. Kanakal Reddy, aged about: 56 Years, Occupation: Business, R/o. H.No. 739/A/1/1, Gaddi Annaram Dilsukh Nagar, Hyderabad District. Through vide AGPA Document No. 6729/2005, dated 11th day of November, 2005 of SRO, Maheshwaram.
AND M/S SAI CHAITANYA HOUSING (P) Ltd (registered and incorporated under company's act 1956) Flat No: 311, Annapurna Block, Aditya Enclave, Ameerpet, Hyderabad represented by its Chairman Sri Dhulipalla Samba Siva Rao, S/o. Satyanarayana, Age: 48 Years, R/o. Ameerpet, Hyderabad.
(Herein after called the "CONSENTING PARTY" / AGREEMENT HOLDERS which expression of the vendor shall mean and include all their heirs, executors, administrators, legal representatives, nominees and assignees etc., of SECOMND PART".
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The above recitals clearly indicate that assessee has acted in representative capacity as a General Power of Attorney holder and not as owner of the land. The exact relationship and appropriation of funds require verification. The so called AGPA by which assessee came into possession of land/right, if any, was not placed on record, so as to examine this aspect.
10.1. The sale deeds clearly indicate that Sai Chaitanya Housing (P) Ltd., also has certain rights by virtue of agreements. Whether the agreement is with assessee as GPA holder or with the actual owners separately is not clear. The facts as per the deeds are that both the parties received the consideration separately which is not in dispute.
10.2. Even though assessee and said company has sold 2.02 acres of land out of the extent purchased/agreed to purchase as per page 2 of the deed indicate separate extents of Ac. 1.27 Guntas, Ac. 1.28 Guntas and Ac. 0.27 Guntas being the Patta Nos. 398, 301 & 401 respectively of different title deeds. Which part of the above Ac. 4.02 Guntas was parted with is not clear. Ld. CIT(A) has already directed AO to examine this aspect and rework the cost of acquisition to 3.02 Acres only. But the impugned land is not clearly demarcated and whether assessee holds the balance or not require examination.
10.3. Unless assessee owns the land, the issue whether the sale of agricultural land will give rise to capital gain or not cannot be examined. Moreover, the applicability of HMDA Act also I.T.A. No. 12/Hyd/2014 :- 10 -: P. Venkat Reddy depends on owning the land. If assessee has only certain rights on land, then the nature of ownership is different. Unless the AGPA is examined, this aspect cannot be adjudicated.
10.4. With reference to the consideration received also assessee has clearly stated in return of income as under:
"Note: During the year 2007-08 the Assessee has sold Agricultural property for Rs. 61,00,000/- of which Rs. 9,15,000 (my share) utilised for the purpose of Renovation and Expansion of Existing Property at H.No. 16- 11-739, Gaddiannaram, Dilsukhnagar, Hyderabad.
Agricultural Property sold during the year
1. Sy. No. 100/u/5, and Sy. No. 96, at Manasanipally Village, Ranga Reddy Dist. To the extent of 3.02 Acres".
Therefore, the contention of AO that he has received full amount cannot be accepted. Even the sale deed indicate separate payments. Therefore, considering the entire amount may not be correct. However, these aspects can again be examined since the nature of ownership itself requires examination. In case assessee has not purchased lands but acquired certain rights by way of AGPA, then whether the transaction result in 'adventure in nature of trade' also require further examinations. The issue whether the gain if any is to be assessed as Short Term Capital Gains or Business can be considered on examination of facts.
10.5. In order to examine the above aspects, we hereby set aside the orders of AO and CIT(A) and restore the entire issue to the file of AO, who should examine all aspects and re-do the I.T.A. No. 12/Hyd/2014 :- 11 -: P. Venkat Reddy assessment based on facts and law. Needless to state that assessee should be given due opportunity in the proceedings.
11. In the result, assessee's appeal is allowed for statistical purposes.
Order pronounced in the court on 19th August, 2016 Sd/- Sd/-
(D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER Hyderabad, Dated 19th August, 2016 TNMM Copy to : 1. P. Venkat Reddy, 16-11-739, Gaddiannaram, Dilsukhnagar, Hyderabad. 2. Addl. Commissioner of Income Tax, Range-9, Hyderabad. 3. CIT (Appeals)-VI, Hyderabad. 4. CIT-VI, Hyderabad. 5. D.R. ITAT, Hyderabad. 6. Guard File.