IN THE ITAT INDORE BENCH
Income-tax Officer-5(1), Indore
IT Appeal No. 207(Ind.) of 2012
[Assessment year 2008-09]
August 31, 2012
Joginder Singh , Judicial Member
The Revenue is aggrieved by the impugned order dated 31.1.2012 broadly on the ground that on the facts and in the circumstances of the case, the learned first appellate authority erred in treating the land sold as agricultural land when the assessee failed to substantiate that any agricultural activity was carried out on the said land and further erred in holding that the land sold was beyond 8 kms from the municipal limit.
2. During hearing, we have heard Shri Keshave Saxena, ld. CIT/DR and Shri S.S. Sheetal, learned Counsel for the assessee. The crux of arguments on behalf of the Revenue is identical to the ground raised by further submitting that firstly the assessee has to prove that any agricultural operation was done by the assessee as the assessee himself is not doing any agricultural operation being advocate. It was also pleaded that the Tehsildar is not a competent authority to issue a certificate regarding distance of land from the municipal limit. A plea was also raised that the land was sold to developer. Our attention as invited to various pages of the paper book. Reliance was placed on the decision in Arundhati Balkrishna v. CIT  138 ITR 245 (Guj), CIT v. Smt. Sarifabibi Mohmed Ibrahim  136 ITR 621, Kalpetta Estates Ltd. v. CIT  185 ITR 318, CIT v. Gemini Pictures Circuit (P.) Ltd.  220 ITR 43 and Fazalbhoy Investment Co. (P.) Ltd. v. CIT  176 ITR 523. On the other hand, the learned Counsel for the assessee defended the impugned order by submitting that the impugned land was inherited by all the brothers and was also sold as a composite sale being composite land. It was explained that one of the brothers was carrying out agricultural operation and it is not necessary that every brother will tilt the land himself. A plea was also raised that the Assessing Officer as well as the Inspector of the Income Tax Department visited the land, the map was prepared by the Inspector himself. The learned counsel took us to various pages of the paper book through which he tried to explain that the land in question is situated beyond 9 kms from the municipal limit. Reliance was also placed upon the decision of the Tribunal in ITA No. 506/Ind/2010 along with the decision in CIT v. Smt. Debbie Alemao  331 ITR 59.
3. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is an advocate practising in High Court of Madhya Pradesh at Indore. The assessee earned income from house property, pension being Ex-MLA in State Legislative Assembly, declared income of Rs. 4,04,690/- on 5.9.2008. The assessee claimed exemption from capital gains on sale of land by claiming the same to be agricultural land situated in the revenue record of village Lasudia Parmar (Teh. Sanver) bearing Khasra No. 184, etc. The stamp duty and registration fees were borne by the purchaser and the sale consideration amounting to Rs. 1,29,21,582/- was received through cheque. The Assessing Officer concluded that the impugned land is situated within 8 kms from the municipal limit and then mentioned the provisions of section 10(37) of the IT Act which are applicable in the case of compulsory acquisition, therefore, is not applicable to the facts of the case as the land was sold by private deal and no exemption u/s 54B of the Act was claimed. So far as the argument of the learned CIT DR and observation of the Assessing Officer that since the land was not cultivated by the assessee himself and was carried on by the brother, therefore, it cannot be treated as agricultural land. We are not absolutely convinced by this argument/observation because there is no requirement in any Act more especially the Income Tax Act that only the self cultivated land will be treated as agricultural land. The Tehsildar is the concerned revenue Officer who on the basis information/report of revenue Patwari issues a certificate. Since the brother of the assessee was doing agricultural operation, therefore, any income derived out of it will be treated as agricultural income. Even if less income has been shown, the assessee cannot be denied the character of agricultural income.
4. So far as the question of distance from Municipal limit is concerned, we have perused the record and find that even as per the report of the Income Tax Inspector (pages 9 and 10 of the paper book) it has been mentioned that the land is situated 9.7 kms by road from the municipal limit by a straight distance method. The map of the land (page 10) was prepared by the Income Tax Inspector himself, therefore, disregard to such document is not justified. A certificate has been issued by the Executive Engineer, Public Works Department (page 11 of the paper book) wherein it has been specifically mentioned that the impugned land is 9.6 kms from the municipal limit. The Land Revenue Officer (Tehsildar) had also mentioned the Survey No. 95 Area 4.22 acre, Survey No. 96/1 area 1.20 acre and has mentioned that the land in question is about 10 kms from the municipal limit and the population of the village is about 2000 persons. The assessee has also produced a certificate from the land Surveyor (page 14) wherein it has been mentioned that the impugned land is situated at 9.09 kms from the Municipal limit. The assessee has also placed on record the google map (page 13). All these certificates clearly say that the impugned land is situated beyond 9 kms from the municipal limit, therefore, as per section 2(14)(iii) of the Act, the impugned agricultural land is situated in the revenue record of village Lasudia Parmar whose population is about 2000 people which is less than the condition mentioned in section 2(14)(iii)(a) of the Act. So far as the condition mentioned in sub-clause (b) of the aforesaid section is concerned, from record it is clear that the impugned land is beyond the prescribed limit of 8 kms from the municipal limit. From this angle also, there is no mistake in the conclusion drawn in the impugned order. We further find that some cases like Laukik Developers v. Dy. CIT  105 ITD 657 (Mum.) have been relied upon in the impugned order/assessment order wherein the issue was examined with respect to section 80IB of the Act whereas the issue before us pertains to section 2(14) with respect to agricultural income, therefore, not applicable to the facts of the present case.
The learned CIT DR placed reliance on the decision of the Hon’ble Gujarat High Court in Arundhati Balkrishna (supra). We find that in that case, the land was situated within municipal limits of Ahmedabad and the surrounding land was developed and since the land was not agricultural land, the gains from sale of such land was held to be exigible to capital gains tax. However, the land in question is clearly agricultural land situated beyond 9 kms from the municipal limit, therefore, this case may not help the revenue, moreso one fact pertinent to mention here that part of the same land, owned by one of the brothers, was treated as agricultural land, therefore, it is quite unjustified to treat part of the same land/chunk to be non-agricultural. Another case relied upon is from Hon’ble Bombay High Court in Fazalbhoy Investment Co. (P.). Ltd. (supra) wherein there was no evidence showing that no agricultural operations were carried out on the land. The Hon’ble Court held that land was not agricultural. However, in the impugned land, agricultural operation was done by one of the brothers, therefore, with utmost regard, this judicial pronouncement may not help the revenue. Another decision relied on is Gemini Pictures Circuit (P.) Ltd. (supra). The land was situated in most important business centre of a city and was entered in the municipal record as urban land and tax was paid thereon. Part of the land was used for construction of non-residential building. In that situation, profit on sale of such land was held to be exigible to capital gains. However, in the impugned case, the facts are altogether different, therefore, may not help the revenue. A decision from Hon’ble Kerala High Court in Kalpetta Estates Ltd. (supra) was relied upon. In that case, it was held that burden of proof is on the assessee to prove that the land was agricultural land at the time of transfer and forest lands were acquired with the intention of extending plantation. Since no agricultural operation was carried out, it was held that it gives rise to capital gain on the sale of such land. In the case of Smt. Sarifabibi Mohmed Ibrahim (supra) the land was situated near railway station and was sold on square yard basis to housing society. The profit from the sale of such land was held to be assessable to capital gains tax. Keeping in view the location and other attendant circumstances, it was held to be assessable to capital gains tax.
5. The learned counsel for the assessee relied on the decision of the Hon’ble Bombay High Court in Smt. Debbie Alemao (supra) wherein the land, in question, was shown in the revenue record as agricultural land and no permission was taken for conversion of land use. It was held that since no agricultural income was shown in the return is not the material for the purposes of gains from sale of such land. It is pertinent to mention here that this case also pertains to section 45, 54, 54B, etc. of the Act.
6. If the totality of facts available on record is kept in juxtaposition with the judicial pronouncements discussed hereinabove and the intention of the legislature along with relevant sections, we are of the considered opinion that a particular land is agricultural land or not depends upon so many factors. Any agricultural income derived from agricultural operations will qualify for agricultural income. So far as capital gains on the sale of such land is concerned, it also depends upon factors like location of the land, use of the land, distance from municipal limit, whether land use was changed, etc. If all these factors are cumulatively kept in mind, one clear fact is oozing out that the impugned land is situated beyond the prescribed limit from the municipality, recorded as agricultural land in the revenue record, agricultural operation was done by one of the brothers, we are of the considered opinion that the no capital gains tax is exigible on sale of such land. So far as the objection of the learned CIT DR that the Tehsildar is not a competent authority for measuring the distance, we are not satisfied with such submission especially when the Inspector of the department of Income tax and Tehsildar both have certified that the land is situated beyond 8 kms from the municipal limit. We are of the considered opinion that Tehsildar is the most competent revenue Officer to certify the proof of agricultural operation, distance of land from a particular place, rate of land, etc. Our view is further fortified by the decision from Hon’ble Punjab & Haryana High Court in CIT v. Lal Singh  195 Taxman 420. So far as the issue of measuring the land through straight method/aerial method is concerned, we are of the view that for measuring the land we are supposed to go by the road, therefore, road distance is the most appropriate method and not the crow’s flies i.e. straight line distance. This view is further supported by the decision in Laukik Developers (supra) and the decision from Hon’ble Punjab & Haryana High Court in CIT v. Satinder Pal Singh  188 Taxman 54. The Hon’ble Court held as under :-
“The maximum distance prescribed by sc. 2(14)(iii)(b) which may be incorporated in the notification could not be more than 8 kms from the local limits of municipal committee or cantonment board, etc. The notification has to take into account the extent of and scope for urbanisation of that area and other relevant considerations. The reckoning of urbanisation as a factor for prescribing the distance is of significance which would yield to the principle of measuring distance in terms of approach road rather than by straight line on horizontal plane. If principle of measurement of distance is considered straight line distance on horizontal plane or as per crow’s flight then it would have no relationship with the statutory requirement of keeping in view the extent of urbanisation. Such a course would be illusory. It is in pursuance of the aforesaid provision that Notification No. 9447 dt. 6th Jan., 1994 has been issued by the Central Government. In respect of the State of Punjab, at item No. 18 the sub-division Khanna has been listed at serial No. 19. It has inter alia been specified that area upto 2 kms from the municipal limits in all directions has to be regarded other than agricultural land. Once the statutory guidance of taking into account the extent and scope of urbanisation of the area has to be reckoned while issuing any such notification then it would be incongruous to the argument of the Revenue that the distance of land should be measured by the method of straight line on horizontal planes or as per crow’s flight because any measurement by crow’s flight is bound to ignore the urbanisation which has taken place. Tribunal was therefore justified in holding that distance of 2 kms from the municipal limits of city of Khanna has to be reckoned for the purposes of s. 2(14)(iii) by measuring the same as per the road distance and not as per straight line distance on a horizontal plane or as per crow’s flight – Laukik Developers v. Dy. CIT  108 TTJ (Mumbai) 364 :  105 ITD 657 (Mumbai) approved.”
The above conclusion by the Hon’ble High Court clearly supports the case of the assessee. In the case of Lal Singh (supra) the Hon’ble High Court concluded that “the report of the Tehsildar having certified that the assessee’s land was 8 kms away from the municipal limit, the land constituted agricultural land entitling the assessee to exemption u/s 54B of the Act.
7. If the assessment order is analysed, we are of the view that the learned Assessing Officer is more guided by section 45 of the Act which speaks about capital gains arising from the transfer of capital asset. Section 54B of the Act speaks about non-charging of gains of the cases where there is a transfer of land used for agricultural purposes. An amendment was effected with effect from 1.4.1970 so as to include lands situated in certain specified areas within the ambit of non-agricultural land. However, burden is on the assessee to prove that the land is agricultural land and at the same time, onus is on the department to prove that the land is non-agricultural or it forms part of business asset. For the purposes of land being agricultural land, actual agricultural operation or cultivation or tilting of land is always not necessary. What is to be seen is whether such land is capable of agricultural operation being carried on. Our view is fortified by Hon’ble Calcutta High Court CIT v. Borhat Tea Co. Ltd.  138 ITR 783. The correct test that has to be applied is whether on the date of sale, the land was agricultural land or not, whether land use was changed or not. Just because after the sale, the purchaser was going to put the land to non-agricultural use, it does not mean that on the date of sale the land has ceased to be agricultural land. If in the revenue record, the particular land is recorded as agricultural land and till the date of sale, it is exploited as agricultural land and the owner of the land has not taken any step to indicate his intention to exploit the land for non-agricultural purposes then such land to be regarded as agricultural land. The purpose for which such land is sold is not of much importance and weight. If the department is in a position to prove that it was used as agricultural land as a stop gap arrangement and its land use was changed before the sale then the situation may be different. Whether the land is an agricultural land or not is essentially a question of fact. A close reading of section 2(14)(iii)(a) seems to suggest that it is the population of the municipality that has to be taken into account and not the population of any area within the municipality. It may be that a municipality may comprise of many villages, wards and street and each assessee may claim that the limit of population is provided with reference to a place, ward or street. In such an event, the section will have no uniform application and will lead to many anomalies. Panchayat is different from municipality. Municipality is always understood differently from Panchayat, therefore, the land situated beyond prescribed municipal limit and is recorded as agricultural land in the revenue record is to be considered as agricultural land until proved otherwise. Admittedly, the term “capital asset” has an all embracing connotation and includes every kind of property as generally understood except those are expressly excluded from the definition. It is exactly the case here because section 2(14)(iii) expressly defines agricultural land with regard to its location and distance from the municipal limit. It seems that the learned Assessing Officer has not examined the documents produced by the assessee establishing the distance of land beyond prescribed municipal limit and more specifically when Khasra number, etc. has been duly mentioned in the report of Tehsildar. So far as the argument of the learned CIT DR that the land was sold at a substantial amount is not the relevant factor to prove that it was non-agricultural land because it depends upon so many factors. Even in the grounds of appeal, the revenue has raised a ground that the documentary evidences produced by the assessee belong to the land of Shri Rakesh Shukla, brother of the assessee. We are not convinced with this argument also because the total land is adjoining to each other and is from one chunk. This claim of the revenue rather supports the case of the assessee. As mentioned earlier, in the case of one of the brothers, it has been allowed as agricultural land, therefore, no different yard stick can be adopted in the case of another brother, being the land is part of the same chunk. The totality of facts clearly leads to the conclusion, under the facts narrated hereinabove, that the impugned land is agricultural land, therefore, the stand of the learned CIT(A) is affirmed.
Finally, the appeal of the revenue is having not merit, therefore, dismissed.