Income Tax Appellate Tribunal - Delhi
Lavleen Singhal vs Deputy Commissioner Of Income Tax on 27 July, 2007
Equivalent citations: (2007)111TTJ(DELHI)326
ORDER
D.R. Singh, J.M.
1. The assessee has filed this appeal against the order of CIT(A) passed in appeal No. 444/00-01, dt. 18th Sept., 2002, on as many as four grounds. The ground Nos. 3 and 4 are general in nature and need no adjudication from our side. The ground Nos. 1 and 2 involve the issue whether the assessee is liable to pay the tax on the capital gains arising from the sale of land situated in village Roz-ka-Gurjar during the year under reference.
2. Briefly stated, the facts relating to the issue involved in these grounds of appeal are that on 3rd Sept., 1984, the assessee purchased a plot of land situated at Qila No. 244, Rakba No. 9190-9, village Roz-ka-Gurjar in Tehsil Sohna, District Gurgaon, Haryana, which has been sold in the year relevant to asst. yr. 1998-99 under consideration for a sum of Rs. 8,19,220. According to assessee no capital gain was leviable on the sale of this land because this was an agricultural land situated beyond 8 kms. from municipal limits and hence the same was not a capital asset and was hence exempt from capital gain tax of Rs. 7,86,451 arising from the sale of that agricultural land.
3. In support thereof the assessee furnished a certificate from the Land Revenue authorities wherein the assessee has been shown as Kashtkar indicating that the assessee purchased this agricultural land and sold the same as agricultural land as is evident from the sale deed. Further, according to the assessee the land sold by the assessee was an agricultural land because it was covered under Chakbandi indicating that the land under Chakbandi could not be used for any other purposes than agricultural purposes. Lastly, according to the assessee, as per CBDT Notification No. 9447, dt. 6th Jan., 1994, the land falling more than 5 kms. from Sohna District Committee Area was out of the purview of Section 2(14) of the IT Act, 1961. A letter issued by the Tehsildar confirmed that village Roz-ka-Gurjar in Tehsil Sohna, District Gurgaon, was situated beyond 8 kms. from Committee Area, Sohna, and so the land in question fell outside the purview of capital asset and gains arising therefrom were not taxable.
4. He has also placed reliance on the decisions in CIT v. Madhabhai H. Patel ; Gemini Pictures Circuit (P) Ltd. v. CFT ; CWT vs. H.V. Mungale (1983) 32 CTR (Bom) 301 : (1984) 145 TTR 208 (Bom).
5. However, the tax authorities below by placing reliance on the decision of the Gujarat High Court in the case of Rasiklal Chimanlal Nagri v. CWT (1965) 56 TTR 608 (Guj) and the apex Court in the case of CWT v. Officer-in-Charge (Court of Wards) Paigah 1976 CTR (SC) 404 : (1976) 105 TTR 133 (SC), wherein their Lordships observed that "the determination of the character of land according to the purpose for which it is meant or set apart and can be used, is a matter which ought to be determined on the facts of each particular case. What is really required to be shown is the connection with an agricultural purpose and user and not the mere possibility of user of land by some possible future owner or possessor for an agricultural purpose. It is not the mere potentiality, which will only affect the valuation as part of 'assets', but its actual condition and intended user which has to be seen for the purposes of exemption from wealth-tax. One of the objects of its exemption is to encourage cultivation or actual utilization of land for agricultural purpose. If there is neither anything in its condition nor anything in the evidence to indicate the intention of its owners or possessor so as to connect it with an agricultural purpose, the land could not be agricultural land for the purpose of earning an exemption under the Act", held that the land sold by the assessee was non-agricultural land hence was liable to tax on account of capital gains earned thereon by the assessee mainly on the reasoning that in the instant case the appellant is engaged in the partnership business in past several years. He has purchased the piece of land in question in 1984. The appellant has not furnished any evidence which would suggest that the said land was purchased with the intention of using it for the purpose of agriculture or furnished any evidence to show that the land was actually used for agriculture during 14 years of its possession so as to term it as an agricultural land hence in these circumstances the tax authorities below treated the land sold by the assessee as non-agricultural land and accordingly computed the capital gains thereon.
6. Before us the learned Authorised Representative for the assessee reiterating the submissions made before the tax authorities below submitted that since the agricultural land sold by the assessee does not fall within the definition of Section 2(14) of the IT Act, 1961, hence the tax authorities below were not justified in coming to the conclusion that the land sold by the assessee was not an agricultural land and was liable to pay tax on the capital gains on the sale of the same.
7. On the other hand, the learned Departmental Representative for the Revenue placing strong reliance on the reasoning given in the order of the tax authorities below submitted that they have rightly made/sustained the impugned addition on account of capital gains earned by the assessee on the sale of non-agricultural land.
8. We have considered the rival submissions of both the parties, perused the record and carefully gone through the impugned order of the tax authorities below.
9. In the case of CWT v. H.V. Mungale (supra) at pp. 214-215, their Lordships after properly analyzing ratio of decision of apex Court in the case of CWT v. Officer-in-Charge (Court of Wards), Paigah (supra), observing that in the Court of Ward's case (supra), the Hon'ble Supreme Court has taken the view that the determination of the character of land, according to the purpose for which it is meant or set apart and can be used, is a matter which ought to be determined on the facts of each particular case and what is really required to be shown is the connection with an agricultural purpose and user and not the mere possibility of user of land, by some possible future owner or possessor, -for an agricultural purpose. It was pointed out (at pp. 143, 144 of 105 ITR) that:
It is not the mere potentiality which will only affect its valuation as part of 'assets', but its actual condition and intended user which has to be seen for purposes of exemption from wealth-tax. If there is neither anything in its condition, nor anything in evidence to indicate the intention of its owners or possessors, so as to connect it with an agricultural purpose, the land could not be 'agricultural land' for the purpose of earning an exemption under the Act. Entries in Revenue records are, however, good prima facie evidence.
On the facts of that case the Supreme Court found that the relevant considerations were not kept in view by the taxing authorities in deciding the question of fact and, therefore, according to the Supreme Court the High Court should have sent the case back to the assessing authority for deciding the question of fact after stating the law correctly. The decision of the Full Bench was set aside and the matter was remanded to the Tribunal for a proper decision of the case in accordance with law. The only ratio which can be carved out from this decision of the Supreme Court is that it is not the mere potentiality for being used for agricultural purposes that is relevant for the purpose of deciding whether the land is an agricultural land or not but that what is to be determined is the character of the land according to the purpose for which it was meant or set apart and can be used. Even according to the Supreme Court, entries in Revenue records are good prima facie evidence with regard to the character of the land and the purpose for which it is intended to be used and the burden is on the Revenue to rebut this presumption.
Having analysed the decision of the Supreme Court, it is difficult for us to see how this decision can be of assistance to the Revenue. The Tribunal has not in the instant case treated the land in question as agricultural land on the ground that at some future date it can be used as agricultural land. The decision of the Supreme Court has to be read in the light of the fact that the Supreme Court had to deal with an exclusive piece of land which was a part of the palace estate which had never been used as agricultural land or for the purpose of agriculture and the mere possibility that it can be used for agriculture was treated as insufficient to qualify it as agricultural land.
Held as under:
In the instant case the facts show that the land was used for agriculture till 1963. It has been so recorded in the Revenue records and the land is assessed as agricultural land. No evidence has been led on behalf of the Revenue to rebut this presumption. Merely because it remained fallow after 1963, the land did not cease to be agricultural land.
10. Their Lordships of Madras High Court in the case of Gemini Pictures Circuit (P) Ltd. v. CIT (supra) have held as under:
Once it is established that the land is agricultural land in the hands of the assessee until some act on the part of the assessee has been established which has converted the property into non-agricultural property or the user of the land was actually changed or other definite indications to the contrary are available, the land will be presumed to remain as agricultural land. Once the assessee proves that the land is agricultural land, the burden of proving that it is not agricultural land is on the Revenue.
11. In the case of CFT v. Madhabhai H. Patel (supra), the assessee claimed that the lands were agricultural. The ITO was of the view that the character of the land had changed when the assessee sold the same and he assessed the capital gains. The Tribunal found that the land, till it was sold, was classified as agricultural land in the Revenue records. In the village Forms Nos. VII and XII, popularly know as "records of rights" it was mentioned that the whole of the land was cultivated till the year 1967-68. The land was cultivated personally by the assessee. The said land belonged to the family and he got it by way of inheritance and not by way of purchase from some other party. He had not, at any point of time, applied for permission to use the land for non-agricultural purposes. The Tribunal held that no capital gains arose.
12. On reference their Lordships after applying the decision (supra) of the apex Court confirming the above order of the Tribunal held as under:
That all the relevant factors had been taken into consideration by the Tribunal along with the other relevant factors, viz., that the land was sold to a cooperative housing society; that it was sold at Rs. 20 per sq. yard, and that it was situated within the corporation limits of Ahmedabad city. It was, therefore, not possible to say that the view taken by the Tribunal was unreasonable or erroneous in law. There was no material to show that the assessee had taken any part either in getting the plots subdivided into sub-plots, or in getting the plans prepared and passed for non-agricultural use. All those steps were taken by the purchaser of the land and not by the assessee. The Tribunal was right in law in holding that the land in question was agricultural in character and the assessee was not liable to be taxed in respect of the surplus arising on sale of the land in question as capital gains.
13. From the ratio of the decisions (supra) it can be deduced that for determining the nature and character of a land not just one factor is to be considered but all relevant factors are to be considered. For example, to determine whether the land is agricultural land or not, the relevant factors to be considered are whether the land from the date when it was purchased till the date when it was sold was classified as agricultural land in the Revenue records, because such entries in Revenue records raises a presumption in favour of the assessee unless successfully rebutted by the Revenue Department. Second, whether the land, from the date of its purchase till the date of its sale, was ever being used for non-agricultural purposes or has been converted to non-agricultural land. Third, whether the land from the date of its purchase was never intended to be used for agriculture and was not ploughed or tilled from the date of its purchase till the date of sale and whether for the non-cultivation the assessee has got any justifiable explanation. Lastly, whether the character of the land from the date of its purchase has been changed by the assessee which makes it unfit for immediate cultivation when the same was sold. Hence, we can say that a mere temporary non-user of the land for agricultural purposes will not effect the character of the land as agricultural land. The actual conversion of the land for non-agricultural purposes will effect the character of the land as agricultural land. Whether such a conversion has taken place will depend on the facts of each case.
14. Now, reverting to the facts of the instant case of the assessee, we find that the piece of land purchased in the year 1984 by the assessee was an agricultural land in the Revenue records. From the sale deed it is evident that this land when sold by the assessee was an agricultural land. The assessee never converted this land to a non-agricultural land at any point of time during his possession. It means that the assessee never purchased the land with an intention of converting it into a non-agricultural land because throughout the period of possession he did not change the agricultural character of the land by carrying out any such activity on it which could bring the land into the fold of non-agricultural land. Though admittedly the assessee had not cultivated the land from the date of purchase till the date of its sale i.e., for a period of fourteen years but explained before us that since he was an athlete of international stature i.e., taking part in Olympics, most of the time remained out of the country and could not devote time for cultivation of the land. The Department has not been able to place on record any evidence to controvert the submissions of the assessee which were supported with evidence. Hence, in our opinion in the facts and circumstances of the case of the assessee, the tax authorities below were not justified in treating the land in question as non-agricultural land merely because the assessee has not cultivated the land for a period of fourteen years i.e., from the date of purchase till the date of its sale, however, ignoring the explanation given by the assessee why he could not cultivate the land for a period of fourteen years and also ignoring the other evidence placed on record by the assessee clearly indicating that from the date of purchase till the date of its sale the land remained an agricultural land in the Revenue records and the assessee did not convert the user of the land as non-agricultural either temporarily or permanently. Further, the assessee filed a certificate from the Tehsildar of the area confirming that the village Roz-Ka-Gurjar in Tehsil Sohna, District Gurgaon, was situated beyond 8 kms. from Committee Area, Sohna and, therefore, according to the assessee, the land in question fell outside the purview of capital asset as per CBDT Circular No. 9447, dt. 6th Jan., 1994, wherein it is mentioned that the land falling beyond 5 kms. from Committee Area was out of the purview of capital asset.
15. We are of the opinion that the CIT (A) was not justified in rejecting the contention of the assessee merely because the land of the assessee was not mentioned in the certificate issued by the Tehsildar because, undisputedly, the land in question was situated in village Roz-Ka-Gurjar, which has been certified by the Tehsildar to be situated beyond a distance of 8 kms. from the Town Committee Area. Hence, on the basis of the certificate issued by the Tehsildar, we hold that in view of the CBDT circular the land of the assessee fell outside the purview of capital asset. For the reasons stated above, we conclude that in the existing facts and circumstances the tax authorities below were not justified in treating the land in question as non-agricultural land and computing the capital gains on the sale thereof. Accordingly, the orders of tax authorities below in this regard are set aside and the issue involved in the grounds of appeal is decided in favour of the assessee. The grounds of appeal taken by the assessee are allowed.
16. In the result the appeal filed by the assessee is allowed.