Case Law Details
Phool Singh Vs ITO (ITAT Delhi)
ITAT do not find any merit into the objection of the assessee that the land in question being agricultural land cannot be treated as capital asset. The sale-deed itself goes to demonstrate that what was being transferred was an industrial land. Therefore, there is no ambiguity on these facts. The objection of the assessee that land was an agricultural land is devoid of merit, hence, rejected.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal, by the assessee, is directed against the order of learned CIT(Appeals), Ghaziabad 29.03.2018 pertaining to the assessment year 2010-11. The assessee has raised following grounds of appeal:
“1. The Ld. CIT (Appeal) did not consider the fact of the case and set aside order without any basis.
2. The Ld CIT (Appeal) could not justifying the fair market value Rs. 60/-per sq. mtr adopting by the Ld. A.O. on 01.04.1981 of the land sold to compute the long term capital gain is objectionable.
3. The tax assessed Rs. 10165760/- is highly objectionable. The grounds to make the tax assessed is objectionable.
3. At the time of sale consideration the agriculture activity done on the land. Land sold by nature agriculture but the buyer purchased for commercial purpose.
4. Interest u/s 234-A and 234-B is highly objectionable.
5. The provisions of section 271(1) ( C) may be knocked off.”
2. Facts giving rise to the present appeal are that the Assessing Officer was in possession of information that assessee had sold an immovable property for a sum of Rs. 3,20,34,000/-. Therefore, the assessment of the assessee was reopened u/s 147 of the income-tax Act, 1961 (in short “the Act”) and a notice u/s 148 of the Act was issued. Thereafter, assessment u/s 143(3) read with section 147 of the Act was framed. Thereby the Assessing Officer made addition of Rs. 2,56,40,688/- on account of long term capital gains. Further, the Assessing Officer assessed the income at Rs. 2,45,89,870/- after giving deduction u/s 54F of Rs. 12,02,500/-. Aggrieved against this the assessee preferred appeal before the learned CIT(Appeals), who after considering the submissions dismissed the appeal. Aggrieved against it, now the assessee is in appeal before this Tribunal.
3. No one appeared on behalf of the assessee at the hearing. However, a letter from the assessee’s counsel is on record stating that written submissions dated 21.09.2021 have already been filed. Therefore, we proceed to decide the appeal after hearing the learned DR and considering the written submissions filed on behalf of the assessee. For the sake of clarity the written submissions of the assessee are reproduced as under:
“FACTS OF THE CASE
The assessee is an agriculturist. The assessee had sold his ancestral agricultural land for a sale consideration of Rs. 3,20,04,000/- vide a registered agreement to sell on 09.01.2009, though the sale-deed was executed on 03.08.2009. The I.T.O.,Ward- 30), Bulandshahr [ hereinafter shortly referred to as ‘AO’ ] issued a notice u/s 148 on 29.03.2017. Subsequently, he assessed the total income at Rs. 2,45,89,870/- along with agricultural income at Rs. 16,000/- vide an assessment order u/s 143(3) / 147 dated 05.12.2017. In appeal, the Ld. C.I.T.(Appeals), Ghaziabad [ hereinafter shortly referred to as ‘CIT(A)’ ] has dismissed the appeal vide an order u/s 250 dated 29.03.2018.
Here, it is not in dispute that the land sold was an ancestral agricultural land and the agricultural operations were carried on till the sale. The assessee has agricultural income of Rs. 16,000/- for the year under consideration. It is also not in dispute that the land sold does not fall within the definition of capital asset u/s 2(14) of the I. T. Act, 1961, at the time of the registered agreement to sell on 09.01.2009. The use of land sold was changed on 28.01.2009 and treated as industrial land for the purpose of sale-deed executed on 03.08.2009 only on the intention of the purchaser, since the purchaser had purchased the agricultural land for the use of nonagricultural, i.e. industrial purposes.
GROUNDS AND ARGUMENTS
REGARDING GROUNDS NO. 1 and 3:
It is submitted that the assessee had sold his agricultural land for a sale consideration of Rs. 3,20,04,000/- vide a registered agreement to sell on 09.01.2009 and received Rs. 2,80,04,000/- as a part of the said sale consideration on the same date i.e. 09.01.2009. The sale-deed was executed on 03.08.2009. The land sold was an ancestral agricultural land and had been truly used for agricultural purposes till the sale as per agricultural land records, i.e., Khatauni and Khasra. The use of land sold was changed on 28.01.2009 and treated as industrial land for the purpose of the said sale-deed only on the intention of the purchaser, since the purchaser had purchased the agricultural land for the use of nonagricultural i.e. industrial purposes.
Here, it is not in dispute that the assessee truly carried out agricultural activities on the said land till its sale and through these activities he was earning agricultural income. For the year under consideration, the assessee had agricultural income of Rs. 16,000/- which has been duly accepted by both the Ld. AO and CIT(A).
The agricultural land sold does not fall within the definition of capital assets u/s 2(14)(iii)(a)/(b) as the same is situated at Village – Ibrahimpur Junaidpur urf Maujpur which has population of 4,132 as per Population Census 2011. The agricultural land sold is also truly and firmly situated at a distance of about 5 to 6 Kms. from the municipal limit of Khurja out of the notified area up to a distance of 4 Kms. notified in respect of Khurja vide Notification No. SO 9447 dated 06.01.1994 issued in pursuance of sec. 2(14)(iii)(b).
Both the Ld. AO and CIT(A) have considered the said agricultural land as a non- agricultural land as only the same was industrial land at time of the execution of sale- deed on 03.08.2009. Here, it is pertinent to mention that Khurja Master Plan 2021 is a plan-map only which merely represents comprehensive long-term strategy i.e. plan or program for achieving an objective of planned development of the area of Khurja upto2021. The agricultural area declared as industrial in Khuria Master Plan 2021 has only a meaning that the installation of industries would be preferred in the said area, in other words, the industrialist can establish their industries after acquisition of the land in the said area.
The agricultural area declared as industrial in Khurja Master Plan 2021 has never been notified as industrial area by any Govt. Authority. In other words, the agricultural land situated in the area declared as industrial in Khurja Master Plan 2021 cannot loose its agricultural status until its Industrial use / specific notification. Khurja Master Plan 2021 is only a plan or vision document for future and the same cannot be used to decide the character of the land whether agricultural or industrial in present.
It is also pertinent to mention that the “agricultural land” expression is not specifically defined under the Income-Tax Act, 1961. But in the definition of “agricultural income” given under section 2(1 A) of the Income-tax Act, 1961, there is a mention of what types of land will be treated as agricultural land and emphasis has been given on the use of land. Here the law specifies that identification of agricultural land depends on its use, if any land situated in India is being used for agricultural purposes, it shall be treated as agricultural land and any income derived from such land shall be exempt and it shall not be treated as capital asset by fulfilling certain conditions mentioned in sec. 2(14) of the Income-tax Act, 1961.
Here, the assessee was using the land sold for agricultural purposes only and truly carried out activities related to agriculture and through these activities he was earning agricultural income, which has already been accepted by both the Ld. AO and CIT(A). As both the Ld. AO and CIT(A) have themselves accepted agricultural income of Rs. 16,000/-from the land sold and exempted it for the year under consideration, then how could they raise an objection towards the agricultural nature of the land sold.
Both the Ld. AO and CIT(A) alleged that since the assessee has sold his ancestral agricultural land as industrial plot measuring in square meters, he is not entitled to any exemption, hence, Long Term Capital Gain arises on the sale proceeds of the said land. Here, it is submitted that in their said allegations, both the Ld. AO and CIT(A) have given emphasis on name i.e. Industrial Plot of the agricultural land sold and its measurement in square meters.
Both the Ld. AO and CIT(A) have completely ignored the contention of the law as above discussed, in which emphasis has been given on the use of land. Here the law clearly specifies that identification of agricultural land depends on its use, if any land situated in India is being used for agricultural purposes. Hence, it may be concluded that whatever the name by which the land is called and measured is immaterial to ascertain that the particular land is agricultural land or not as identification of agricultural land depends on its use. No any provision of the Income-Tax Act, 1961 specifies that the nature of the land sold is to be ascertained by the sale-deed executed.
It is further submitted that for a land to be an agricultural land does not depend on its sale execution deed in which it was sold as an industrial land, rather it depends upon the use of land by the assessee. If the use of land is for agricultural purposes, it is sufficient to prove that the land is an agricultural land. Here, the assessee was using that land for agricultural purposes and was earning agricultural income. It is further submitted that the land sold was an ancestral agricultural land and the same was used for carrying out agricultural activities since a very long period of time. Potential for non-agricultural use of land after sale, the high price paid thereof by the purchaser for its industrial use so far as the land in question is concerned, does not mean that the land had lost its character as agricultural land in the hands of the seller. The fact that the purchaser has purchased it as an industrial plot for the purpose of constructing an industrial unit 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.
In case of CIT vs. Smt. Sanjeeda Begum J2006J 154 TAXMAN 346, Hon’ble High Court of Allahabad ( Enclosed hereto Page No. 8 to 10 J has observed that, “the agricultural land was sold after dividing the same into plots having named Shiv Vihar Colony. As the agricultural operations were carried on till the date of transfer of the said agricultural land situated outside the municipal limits as well as outside the notified area u/s 2(14)(iii)(b), therefore, the same was not included in the definition of capital assets as given in sec. 2(14)(iii) and no capital gain tax was eligible. Here, the Hon’ble High Court did not accept the plea as the said land was under regulated area for which the Addl. District Magistrate had fixed a circle rate and it was situated in the proximity of buildings and building side as well as had been converted into non-agricultural land before the date of the agreements to sell”.
It is also pertinent to mention here, the judgment dated 10.04.2019 on similar facts and circumstances, in case of, Sh. Jitender Kumar namely ITO, Ward-2, Bulandshahr Vs. Sh. Jitender Kumar [ ITA No. 3909 / Del / 2015 ] [ Enclosed hereto Page No. 11 to 17 j, in which the Hon’ble ITAT Delhi, Bench ‘G’ has lengthily discussed and held that, “the agricultural land sold in the shape of industrial plot is at all an agricultural land and the same is not liable for capital gains to tax”.
It is further submitted that the Ld. CIT(A) has considered the said agricultural land as a non-agricultural land as only the same was nonagricultural land at time of the execution of sale-deed on 03.08.2009. The Ld. CIT(A) has completely ignored that the land sold was an agricultural land at the time of execution of the agreement to sell duly signed and registered on 09.01.2009. The use of land sold was changed on and treated as industrial land for the purpose of sale-deed executed on only on the intention of the purchaser, since the purchaser had purchased the agricultural land for the use of non-agricultural, i.e., industrial purposes. Thus, the Ld. CIT(A) ought to have considered the date 09.01.2009 on which the agreement to sell had been executed by the assessee for transfer of the agricultural land. Here, there is an extinguishment of some rights in the land sold by the appellant in favour of the purchaser vide the agreement to sell dated 09.01.2009. The extinguishment of any rights also amounts to the transfer as per the definition of ‘Transfer’ vide section 2(47)(ii) of the I. T. Act, 1961.
As the definition of ‘transfer’ vide section 2(47)(ii) of the I. T. Act, 1961, also includes ‘the extinguishment of any rights in relation to a capital asset’, and there is no doubt that here, there is an extinguishment of some rights in the land sold by the assessee in favour of the purchaser vide the said agreement to sell dated 09.01.2009. As on the said date, i.e., 09.01.2009, the land sold was an agricultural land and does not fall within the definition of capital asset u/s 2(14) of the I. T. Act, 1961. The reasons for subsequently changing the use of land sold have also been duly explained before both the Ld. AO and CIT(A).
The reliance has been placed on the decision of Hon’ble Supreme Court in case of Sh. Sanjeev Lai Etc. vs. CIT [ (2014) 365 ITR 389 f Enclosed hereto Page No. 18 to 27 ] in which it has been held that, “In normal circumstances by executing an agreement to sell in respect of an immovable property, a right in personam is created in favour of the transferee/vendee. When such a right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed. Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee. Though the entire property cannot be said to have been sold at that time when an agreement to sell is entered into. However, looking at the provisions of section 2(47) of the Act, which defines the word ‘transfer’ in relation to a capital asset, one can say that if a right in the property is extinguished by execution of an agreement to sell, the capital assets can be deemed to have been transferred. In the light of definition of ‘transfer as defined under section 2(47), it is clear that when any right in respect of any capital asset is extinguished and that right is transferred to someone, it would amount to transfer of a capital asset”.
Finally, it may be said that the agricultural land sold in the shape of industrial plot is at all an agricultural land and the same is not liable for capital gains to tax, therefore, the addition towards long term capital gain may kindly be deleted.
REGARDING GROUND NO. 2 :
It is submitted that before the Ld. CIT(A), the assessee raised a ground that, “the Ld. AO is not justified in adopting the fair market value Rs. 60/- per Sq. Mtr. as on 01.04.1981 of the land sold to determine the indexed cost of acquisition to compute the long term capital gain”. But the Ld. CIT(A) has not mentioned, even a single word, in his order regarding the fair value on 1.4.1981 @60/- per Sq. M. of the land sold taken to determine indexed cost of acquisition to compute thelong term capital gain. The Ld. AO has taken the same arbitrarily on an unknown case basis. In 1981, the circle rate of land situated at City Station nearby Village – [brahimpur Junedpur urf Maujpur was of Rs. 100/- to 125/- per Sq. M. as per the Schedule certified by the Sub-Registrar, Khurja [ Enclosed hereto Page No. 28 & 29 ]. Considering the said circle rate, ttie fair value on 1.4.1981 @ Rs. 125/- per Sq. M. of the land sold should reasonably be taken to determine indexed cost of acquisition to compute the long term capital gain, if calculated.
REGARDING GROUNDS NO. 4 and 5 :
It is submitted that these grounds of appeal are consequential in nature, please direct accordingly”.
4. Learned Sr. DR opposed these submissions and supported the orders of authorities below. Learned Sr. DR submitted that there is no dispute regarding the fact and the assessee himself has admitted that the land use of the property in question was changed. The assessee has laid much stress on the usage of land but such contention is contrary to the records. The sale deed in unequivocal terms states transfer of industrial land. Therefore, no doubt remains regarding character of the land. The case laws as relied by the assessee are distinguishable on facts. Here, the assessee has declared it as an industrial land and paid stamp duty accordingly. Learned Sr. DR qua the objection regarding adoption of indexed cost of acquisition stated that the issue needs to be verified by the Assessing Officer.
5. We have heard the learned Sr. DR, perused the written submissions of the assessee and other material available on record. We do not find any merit into the objection of the assessee that the land in question being agricultural land cannot be treated as capital asset. The sale-deed itself goes to demonstrate that what was being transferred was an industrial land. Therefore, there is no ambiguity on these facts. The objection of the assessee that land was an agricultural land is devoid of merit, hence, rejected. The case laws as relied by the assessee are distinguishable on the facts of the present case. Thus, ground nos. 1 & 3 of appeal are dismissed.
6. Another objection is regarding adoption of indexed cost of acquisition. The assessee has filed circle notified rates of the area. It would be in the interest of justice to set aside this issue for verification. Therefore, the impugned order is hereby set aside on the issue of computation of indexed cost of acquisition as on 01.04.1981. The Assessing Officer would verify the cost of acquisition as on 01.04.1981 from State land revenue authorities and re-compute the indexed cost of acquisition as per the circle rates. Needless to say that Assessing officer would provide adequate opportunity of hearing to the assessee in this regard. Ground no. 2 of assessee’s appeal is allowed for statistical purpose.
7. The charging of interest u/s 234A and 234B of the Act, raised in ground no. 4, is consequential.
8. The contention raised in ground no. 5 is premature and needs no adjudication at this stage.
In the result, assessee’s appeal is partly allowed for statistical purpose.
Order pronounced in open court on 15th July, 2022.
