Capital Gain on Sale of Agriculture land where motive of holding was not Agriculture
IN THE INCOME TAX APPELLATE TRIBUNAL
The Relevant Text of the Order are as follows :
18. Learned Counsel for the Assessee submitted that the land is out of 8 KM from DMC area, therefore, notification of 1994 would apply. He has submitted that the learned D.R. cited old decisions when notification of 1994 was not in force. Since the assessee sold the agricultural land as it is, so, no business activity has been conducted by assessee and no business income has been earned. PB-164 is the remand report filed by A.O. supported by letter Dated 28.06.2014 of Sub-Divisional Magistrate, North Delhi in which information to A.O. under section 133(6) have been supplied in respect of the subject matter in which it is clearly certified that the land in question is situated at a distance of 9 KM from local municipal limits which is supported by copy of the certificate. Learned Counsel for the Assessee submitted that notification dated 06.01.1994 was issued as per the Act. The learned DR filed copy of MCD. However, CBDT circular is relevant to prove the land holding, therefore, MCD record is not relevant. The assessee shows that it has made investment in agricultural land. No business activity in land has been done. Sale of agricultural land is not taxable. So period of holding is not relevant. Nature and Character of land shall have to be seen. Learned Counsel for the Assessee, therefore, submitted that Ld. CIT(A) correctly deleted the addition.
19. We have considered the rival submissions. It is not in dispute that Tehsildar, Revenue Department and Patwari, Revenue Department have certified that the lands in question falls more than 8 KM from the Municipal limits. Since it is also not disputed that the lands in question at the time of purchase by assessee was agricultural land, therefore, it is governed by Delhi Land Reforms Act. The assessee did nothing in the agricultural land. The assessee did not make any request for conversion of the land use and did not made plotting in the said land. The assessee with great efforts purchased the lands in question from several Farmers and after making these efforts during the long period purchased the land and since some other party approached the assessee for purchase of the lands in question at a higher rate, the assessee has sold the lands to other party. Therefore, there is no question of assessee doing any business activity in the agricultural land. The Revenue Authorities have also certified that at the time of purchase by assessee, the land was cultivated as agricultural land by the Farmers. Therefore, land use was agricultural land only. No land use was changed at any point of time. The CBDT has issued notification dated 06.01.1994 under section 2(14)(iii)(b) of the I.T. Act regarding urbanisation of area. This notification has clarified the area which have fall outside the local limits of Municipality and as regards Delhi, it is explained that the area up to the distance of 8 KM from the limits of Municipal Corporation in all directions shall have to be excluded. No other notification has been issued by CBDT thereafter. Therefore, issue shall have to be considered in the light of aforesaid circular. Section 2(14) deals with the capital asset and exception is provided in sub-clause (iii) of Section 2(14) of the I.T. Act. It has two parts of agricultural land in India not being lands situated:
“2(14)(iii) (b) in any area within such distance, not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette.”
20. The learned D.R. contended that the case of the assessee would fall in Section 2(14)(iii)(a) of the I.T. Act. However, while applying the aforesaid provision it has to be proved that population of that area was more than 10000 as per the last preceding Census. Further, no such case has been made-up by the A.O. The AO has not brought any material on record to satisfy if the said provision is applicable to the case of the assessee and what is the population of that area where the land in question is situated. Therefore, contention of Learned D.R is rejected that provisions of Section 2(14)(iii)(b) of the I.T. Act are not applicable. It is specified in section 2(14)(iii)(b) that the agricultural land which is situated beyond 8 KM from the local limits of the Municipality were referred to in item (a) (supra) as the Central Government may having regard to extend of and scope of urbanising of that area and other relevant factors specified in this behalf by the Notification in the Official Gazette. Therefore, sub-clause (a) to Section 2(14)(iii) is excluded by sub-clause (b) of the aforesaid Section by issuing notification by the CBDT. It is well settled Law that the CBDT instructions are binding on Income Tax Authorities. According to the Notification Dated 06.01.1994 if the land in question is situated outside 8 KM from the Municipal limits, it would be agricultural land and would not fall within the definition of “capital asset”. No other notification has been issued by the CBDT. Therefore, the case of the assessee is supported by Certificate of Patwari as well as Tehsildar and Sub-Divisional Magistrate of Delhi in which it is clarified that the land in question is situated more than 9 KM from the municipal limit and the population of the area is about 7000 only. Therefore, contention of the Learned D.R. is rejected. It may also be noted here that Amendment in the Act is made in the year 2014 which is not relevant to the matter in issue. The North Municipal Corporation Delhi is created in the year 2011 and they have issued certificate in the year 2013. Since it was not in existence in assessment year under appeal, therefore, such notification issued by North Municipal Corporation Delhi is not relevant. The assessee has admittedly sold the agricultural land as it is so there were no intention to do any business activity, therefore, period of holding would not be relevant. The intention of the assessee is therefore clear that assessee purchased the agricultural land and sold the agricultural land as it is. The assessee never treated the said agricultural land as stock in trade and never converted into non agricultural land. The assessee did not create any plot in the said land and no developmental activities have been done and no facilities have been provided. The assessee did not make any advertisement for sale of the land. The character of the land in the hands of assessee as agricultural land has not changed. The agricultural land in question is classified in revenue record as agricultural land and actual cultivation was done as per the record. The AO has not produced any evidence on record to show agricultural land was used for non- agricultural purposes. The AO has also not brought information/evidence on record. The assessee had been carried on activities of buying and selling of the land in a systematic and regular manner. It is well settled Law that Certificate of the Tehsildar and Patwari who are the designated Officers and is Competent Authority and are authorised to issue Certificate measuring distance from Municipal Limits which relevant. The ITAT, Jaipur Bench in the case of Satya Dev Sharma Vs. Income Tax Officer, Ward 5(2), Jaipur 46 taxmann.com 149 (supra) held as under:
“IT : For purpose of application of item (b) of sub-clause (iii) of section 2(14) and to measure KMs from radius of Municipal Corporation, relevant date would be date of notification and not date of sale of land in question”
21. The ITAT, Jaipur Bench in the case of Smt. (Dr.) Subha Tripathi Vs. Deputy Commissioner of Income-tax, Cirle-6, Jaipur 34 taxmann.com 286 held as under:
“IT : If agricultural land fell beyond 8 kms of municipal limits on date of publication of relevant CBDT notification but fell within 8 kms on date of sale of land, it would still fall outside term ‘capital asset’.”
22. The ITAT, Jaipur Bench in the case of Dinesh Kumar Jain Vs. Income-tax Officer, Ward 6(1), Jaipur 78 taxmann.com 53 held as under:
“IT : Amendment to section 2(14) by Finance Act, 2013 cannot apply for assessment year 2011-12; for this year distance of agricultural land from nearest municipality was to be measured by approach road.”
23. Since the land in question is dealt by Delhi Land Reforms Act and nothing is brought on record of violation of the aforesaid provisions and the Competent Authority under the Delhi Land Reforms Act, Certified that the lands in question falls beyond 8 KM from the Municipal Limits, therefore, there is nothing wrong in the findings of the Ld CIT(A) in holding that land in question is agricultural land and amount earned on sale of the land to be capital receipt. The decisions relied upon by the Learned D.R. would not support the case of the Revenue. Considering the totality of the facts and circumstances, we do not find any infirmity in the order of the Learned CIT(A) in allowing the claim of assessee. We, therefore, do not find any merit in the departmental appeal on this ground and the same is dismissed accordingly. In the result, Ground No.3 of the appeal of the Revenue for the A.Y. 2010- 2011 is dismissed.
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