No Exemption U/s. 10(37) if no agricultural activity during last two years prior to date of acquisition of agricultural land

Ajesh Kumar Agrawal Vs. CIT (Rajasthan High Court)

What is to be considered is that for being granted benefit under sub-section (37) of section 10 of the Act, the land in question should have been put to agricultural use by the assessee for the preceding two years. Even if we accept the contention of the appellant that he was in possession of the land for two years from 27-7-2006 to 7-10-2008, then too, from the records it is not at all clear that for both the years the appellant was carrying out agricultural activity in the land in question. The Tribunal has further examined the issue and held that if at all there was any agricultural activity being carried on by the appellant in the previous two years, some accounts with regard to expenditure made by the appellant for sowing the crops and also revenue generated by selling the agricultural produce would have been submitted by the assessee, which has not been done by him. The same is also a strong ground for not accepting that the appellant was carrying on agricultural activity on the plot in question.

Clear findings of fact have been recorded by all the three authorities, which in our view, do not require to be interfered with by this Court in appeal. As such, we are of the view that since the finding of fact has been given by all the authorities that the appellant was not carrying on any agricultural activity in the plot in question in preceding two years prior to 7-10-2008, the appellant would not be entitled to the benefit of section 10(37) of the Act.

FULL TEXT OF HIGH COURT JUDGMENT / ORDER IS AS FOLLOWS:

By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal of the department and assessee’s C.O. has been dismissed.

2. This court while admitting the appeal on 31-1-2017 framed the following questions of law :–

“(i) Whether the learned ITAT was justified under law while reversing the findings of learned Commissioner (Appeals) in respect of granting of relief of Rs. 56,94,231 exemption under section 10 (37) of the Act of 1961 by considering the Khasra Girdavari Report dated 5-12-2011 integral part of the order of Assessment as Annexure- A not furnishing information in respect of growing of Crop on the agricultural land during the year 2007-08?

(ii) Whether the learned assessing officer was justified under law to denying exemption under sections 10(37) of the Income Tax Act on the compensation received by the assessee in respect of its land acquired by RIICO and making Addition of Rs. 1,30,33,036 as Capital Gain by considering a Khasra Girdavari which does not disclose the information for growing of crop during two years immediately preceding the date of transfer?”

3. Counsel for the appellant contended in view of provision section 10(37)(ii) of the Income Tax Act which reads as under :–

“In the case of an assessee, being an individual or a Hindu individual family, any income chargeable under the head” Capital gain” arising from the transfer of agricultural land, shall be exempted, where :–

Such land is situate in any area referred to in, item (a) or item (b) of sub-clause (iii) of clause (14) of section 2 Such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual, or a parent of his.

Such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India

Such income has arisen from the compensation or consideration for such transfer received by such assesses on or after the 1-4-2004.

It may be noted in this connection that exemption is available only if compulsory acquisition has taken place on or after 1-4-2004. Exemption is also available if acquisition has taken place before 1-4-2004 but compensation has been received on or after 1-4-2004.

For the purposes of this clause, the expression, compensation or consideration” includes the compensation or consideration enhanced or further enhanced by any court, tribunal or other authority.”

4. He contended that this is the only condition which was not fulfilled by the appellant therefore, the same is required to be viewed closely. He contended that the land was acquired on 4-7-2008 therefore, the agricultural use is to be considered as under :–

5. He further contended that Tribunal has seriously committed an error in not considering the earlier year namely, financial year 2005-06 Samvat 2062-63 and has considered the agricultural income. He contended that the Tribunal has committed an error in reversing the view taken by the Commissioner (Appeals) and has relied upon observation made by Commissioner (Appeals) and contended that Commissioner (Appeals) while considering the matter has rightly partly allowed the appeal of the assessee.

6. Counsel for the respondent has relied upon the decision of the Tribunal wherein it has been observed as under :–

“7. We have heard the rival contentions of both the parties and perused the material available on the record. As per section 10(37)(ii) of the Act, such land, during the period of two years immediately preceding the date of transfer, is being used for agricultural purposes by such Hindu undivided family or individual or of a parent of his;thus the assessee has to put this land in immediately preceding two years in agricultural operation for claiming the benefit of section 10(37) of the Act. The assessee produced Kastagar namely Shri Hemraj Sharma alongwith his affidavit which has been examined by the assessing officer but has not has able to demonstrate that he really cultivated the land. There was no evidence with him or with assessee that there was an irrigation facility available on that land and incurred expenditure for cultivating the agricultural activities on it. The assessee also has not able to produce any authentic evidence of sale proceeds from the mandi before the lower authorities. The learned Commissioner (Appeals) also wrongly appreciated the fact that in Samvat 2064-65 (financial year 2007-08), the assessee cultivated khasra No. 198, 461/195 and 460/195. On verification of the copy of Khasra Girdawari available in paper book, which does not show any agricultural activity in Samvat 2064-65 relevant to financial year 2007-08. Further the admissible evidence to prove the agricultural activity carried by the assessee, is Khasra Girdawari, no any certificate from the Sarpanch of the village, which is also contradictory and he openly accepted that this certificate was given by him at the behest of the assessee. He did not know the exact land of the assessee where situated. Therefore, we have considered view that the assessee’s claim proportionately allowed by the learned Commissioner (Appeals) is not justified. Accordingly, we reverse the order of the learned Commissioner (Appeals) and the revenue’s appeal is allowed on this ground.

11. At the outset the learned Authorised Representative of the assessee has submitted that the learned assessing officer estimated the household without any basis and brought on record contrary evidence. He relied on the decision of Hon’ble ITAT Jodhpur Bench in the case of ITO v. Dr. Anand Chabra 37 Tax World 72 wherein it has been held that the assessing officer has not given any basis for estimating household expenses, addition made cannot be sustained. He further relied on the decision of ITAT, Jaipur Bench in the case of Mahaveer Singh Sankhla v. DCIT 177 TTJ (JP)(UO) 1 wherein it has been held that onus is on the revenue to prove that the assessee had incurred expenditure much more than debited by the assessee, therefore, he prayed to uphold the order of the learned Commissioner (Appeals).”

7. He relied upon the decision of Karnataka High Court in B.M. Muniraju v. Commissioner (Appeals)-V, Bangalore (2016) 282 CTR 108 (Karnataka) wherein it has been held as under :–

7. Even otherwise, we notice from the records that subsequently certain certificates came to be issued by the revenue authorities in the year 2012 to indicate that there was agricultural crop of Jowar on the plot in the year 2005-06 as well as 2006-07 and in the year 2007-08. The revenue records produced by the assessee before the authorities also indicated that there was plantation of Eucalyptus saplings. Thus, even on facts, records are inconsistent or contrary to each other that there was plantation of Eucalyptus saplings. What is to be considered is that for being granted benefit under sub-section (37) of section 10 of the Act, the land in question should have been put to agricultural use by the assessee for the preceding two years. Even if we accept the contention of the appellant that he was in possession of the land for two years from 27-7-2006 to 7-10-2008, then too, from the records it is not at all clear that for both the years the appellant was carrying out agricultural activity in the land in question. The Tribunal has further examined the issue and held that if at all there was any agricultural activity being carried on by the appellant in the previous two years, some accounts with regard to expenditure made by the appellant for sowing the crops and also revenue generated by selling the agricultural produce would have been submitted by the assessee, which has not been done by him. The same is also a strong ground for not accepting that the appellant was carrying on agricultural activity on the plot in question.

8. Clear findings of fact have been recorded by all the three authorities, which in our view, do not require to be interfered with by this Court in appeal. As such, we are of the view that since the finding of fact has been given by all the authorities that the appellant was not carrying on any agricultural activity in the plot in question in preceding two years prior to 7-10-2008, the appellant would not be entitled to the benefit of section 10(37) of the Act.

8. We have heard learned counsel for the parties.

9. Taking into account the observations made by the Tribunal in Para 7 and 11 as reproduced above, we are in complete agreement with the view taken by the Tribunal.

10. The issues are decided against the assessee and in favor of the department.

11. The appeal stands dismissed.