Ita/251/2015 Of Shri Sreedhar Asok Kumar v. The Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN &THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY, THE 11TH DAY OF DECEMBER 2017/20TH AGRAHAYANA, 1939 ITA.No. 251 of 2015 -------------------- AGAINST THE ORDER/JUDGMENT IN ITA 18/COCH/2012 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 07-05-2015 APPELLANT(S)/RESPONDENT/ASSESSEE: -------------------------------- SREEDHAR ASOK KUMAR PROPRIETOR, INDIAN INSTITUTE OF MANAGEMENT, AISWARYA BUILDINGS, VALANJAMBALAM,KOCHI 682 016 BY ADVS.SRI.T.M.SREEDHARAN (SR.) SRI.V.P.NARAYANAN SMT.DIVYA RAVINDRAN RESPONDENT(S)/APPELLANT/REVENUE: -------------------------------- THE COMMISSIONER OF INCOME TAX C.R BUILDING,I.S PRESS ROAD,COCHIN 682 018 R BY SRI.K.M.V.PANDALAI, SC, INCOME TAX DEPARTMENTSRI.CHRISTOPHER ABRAHAM, SC, INCOME TAX DEPARTMENT THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON11-12-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA.No. 251 of 2015 -------------------- APPENDIX--------- APPELLANT(S) ANNEXURES: ---------------------- ANNEXURE A: COPY OF ASSESSMENT DATED 30-12-2010 PASSED U/S.143(3) OFTHE INCOME TAX ACT BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(1) KOCHI ALONG WITH COMPUTATION OF INCOME AND DEMAND NOTICE. ANNEXURE B: COPY OF THE ORDER OF THE CIT(A)-II, KOCHI DATED 15-11-2011 IN ITA NO.125/R-2/E/CIT(A)-II/2010-11. ANNEXURE C: COPY OF THE ORDER OF THE JUDICIAL MEMBER OF THE ITAT,COCHIN BENCH IN ITA NO.18/COCH/2012 DATED 08/2014 ANNEXURE D: COPY OF THE ORDER OF THE ACCOUNTANT MEMBER OF THE ITAT,COCHIN BENCH IN ITA NO.18/COCH/2012 DATED 17-10-2014. ANNEXURE E: COPY OF ORDER U/S.255(4) OF THE INCOME TAX ACTD 1961DATED 29-10-2014, OF THE ITAT, COCHIN BENCH IN ITA NO.18/COCH/2012. ANNEXURE F: COPY OF THE ORDER PASSED BY THE THIRD MEMBER OF THE ITAT,COCHIN BENCH DATED NIL IN ITA NO.18/COCH/2012. ANNEXURE G: COPY OF THE FINAL ORDER DATED 07-05-2015 IN ITA NO.18/COCH/2012 OF THE ITAT, COCHIN BENCH. RESPONDENT(S) ANNEXURES: ----------------------- NIL. dkr. //TRUE COPY//PA TO JUDGE K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------- I.T.Appeal No. 251 of 2015 ------------------------------------------- Dated this the 11[th] day of December, 2017 J U D G M E N T Ashok Menon, J. The assessee has preferred this appeal challenging thefindings of the Income Tax Appellate Tribunal in I.T.A.No.18/Coch/2012 for the assessment year 2008-09 allowing the departmentalappeal by vacating Annexure B order of the first appellate authority.The appellant was assessed to income tax by the DeputyCommissioner of Income Tax, Circle (2)1, Kochi, for the assessmentyear 2008-09 determining a total income at Rs.10,86,71,781/-consisting of business income at Rs.38,78,390/-, long term capitalgain amounting to Rs.10,34,89,809/- and the short term capitalgain at Rs.13,03,582/-. A demand was raised for Rs.3,18,35,210/-as per assessment order dated 30-12-2010 at Annexure A. Theappellant had executed an agreement on 10-10-2007 in favour ofM/s Desai Homes for sale of land for Rs.11 crores. In the return of ITA.251/2015 income, the appellant had declared his income at Rs.12,71,577/-,after claiming exemption/deduction admissible under the relevantprovisions of the Act regarding capital gain under Section 2(1A)stating that the appellant's agricultural land is situated in KakkanadVillage of Thrikkakara Panchayat, which is a rural area. Notificationsissued by the CBDT under Section 2(14) of the Income Tax Act (the'Act' for brevity) does not include the area; which is the basis of theclaim of exemption as an agricultural land. ITA.251/2015 income, the appellant had declared his income at Rs.12,71,577/-,after claiming exemption/deduction admissible under the relevantprovisions of the Act regarding capital gain under Section 2(1A)stating that the appellant's agricultural land is situated in KakkanadVillage of Thrikkakara Panchayat, which is a rural area. Notificationsissued by the CBDT under Section 2(14) of the Income Tax Act (the'Act' for brevity) does not include the area; which is the basis of theclaim of exemption as an agricultural land. 2.Aggrieved by the assessment made, the appellant filedan appeal before the Commissioner of Income Tax (Appeals)-II,Kochi. The assessee's appeal was allowed and the claim forexemption was accepted relying on the decision of this Court in ITANo.1295/2009, wherein it was held that the agricultural land isexempted from capital gains unless it is located in a municipal areaor notified area. 3.The Revenue went on appeal before the Income TaxAppellate Tribunal, which was heard by a Bench of two Members,consisting one Judicial Member and one Accountant Member. Therewas difference of opinion between the Members. While Judicial Member dismissed the appeal of the Revenue, the AccountantMember allowed the appeal and vacated the order of theCommissioner of Income Tax (Appeals). As a consequence of thedifference of opinion, an order under Section 255(4) of the Act waspassed directing the Registry to place the file before the Presidentfor nominating a third Member and as per Annexure E order dated29-10-2014 the matter was referred to the third Member whoagreed with the Accountant Member vide order at Annexure F. Copyof the final order dated 07-05-2015 of the Income Tax AppellateTribunal, Cochin Bench is at Annexure G. This order is challengedbefore us. 4.We heard the learned Senior Counsel appearing for theappellant and the learned Counsel appearing for the respondent-Revenue. We heard the learned Senior Counsel appearing for the 5.The only question that arises for consideration in thisappeal is whether the ITAT vide majority decision was justified inholding that the property in question was not an agricultural land,thus upholding the disallowance of the claim of the assessee forexemption from 'capital assets'. ITA.251/2015 6.The learned Senior Counsel submits that the subjectproperty is an agricultural land and therefore, not a capital assetwithin the meaning of Section 2(14) of the Act. Consequentialtransfer of the said land would not raise capital gain chargeable totax under Section 45 of the Act. The land is admittedly situated inThrikkakara Panchayat, which is not a notified area and is more than8 kms. away from Kochi Corporation. The earlier decision of theDivision Bench of this Court in ITA No.1295/09 dated 21-11-2010is binding on the Appellate Tribunal as it is in an identical case onfacts and therefore the findings of the Tribunal needs to be upset. 7.Thrikkakara Panchayat of Ernakulam District was earlier anotified area for the purpose of Section 2(14) of the Act. But in1993 when a revised notification was issued, the Panchayat was notincluded. The learned Senior Counsel for the appellant submits thatthe very purpose of de-notifying the area was to extent the benefitof agricultural land to the property situated therein. 8.In Commissioner of Income Tax v. Gemini PicturesCircuit Pvt.Ltd., [(1996) 220 ITR 43 (SC)] it was held that whether aparticular land is agricultural land or not, is to be decided on the ITA.251/2015 7.Thrikkakara Panchayat of Ernakulam District was earlier anotified area for the purpose of Section 2(14) of the Act. But in1993 when a revised notification was issued, the Panchayat was notincluded. The learned Senior Counsel for the appellant submits thatthe very purpose of de-notifying the area was to extent the benefitof agricultural land to the property situated therein. 8.In Commissioner of Income Tax v. Gemini PicturesCircuit Pvt.Ltd., [(1996) 220 ITR 43 (SC)] it was held that whether aparticular land is agricultural land or not, is to be decided on the ITA.251/2015 totality of the relevant facts and circumstances. In Gopal C.Sharmav. Commissioner of Income Tax, [(1994) 209 ITR 946 (Bom)], it washeld that when the land is used for agricultural purposes situated inan industrial area and not intended for agricultural purposes infuture, that would give rise to capital gains. In Commissioner ofIncome Tax v. V.A.Trivedi, [(1988) 172 ITR 95 (Bom)] it was held thatthe character and the nature of land are relevant in determiningwhether the land is agricultural land or whether the land is put touse for agricultural purposes on the relevant date. The mere factthat the area in which the land is situated is not notified underSection 2(14) would not enable exclusion of the land from thedefinition of 'capital gains'. Only agricultural lands are excludedand such exclusion will not be applicable if the area is notifiedunder Section 2(14)(iii)(b). 9.It is observed by the Tribunal that the assessee is not anagriculturist and is the Proprietor of a Management Institute, andthere is no evidence to indicate that the land has been put to anyagricultural use. In the decision reported in Sarifabibi MohmedIbrahim and others v. Commissioner of Income Tax, [(1993) 204 ITR ITA.251/2015 631 (SC)], it is held that the question whether a particular piece ofland is agricultural or not is essentially a question of fact, to bedecided after a consideration of circumstances appearing for andagainst the assessee. In the decision reported in Asha George v.Income Tax Officer, [(2013) 351 ITR 123 (Ker)], this Court held thus: “The crucial question is whether the land was actuallybeing used for agricultural purpose during the twoyears prior to the date of transfer. We do not thinkthat we can overturn a finding on fact, at any rate,based on our reappreciating the material which wasconsidered by the Tribunal which is the final factfinding authority.” It is also held in the above decision that a Certificate of the VillageOfficer showing the land as “Nilam” (paddy land) alone may not besufficient for the crucial question is whether the land was actuallyused for agricultural purposes during the two years prior to the dateof transfer. The mere categorisation of the land as 'Nilam' in therevenue records would not hence, suffice to raise a valid claim ofexemption. In the instant case, the Tribunal has concluded that thesubject land has to be treated as capital asset within the meaning of ITA.251/2015 Section 2(14) of the Act. Ordinarily, the question whether a land isan agricultural land or not is a question of fact and the finding onthe question of fact recorded by the Tribunal is final. We are notinclined to upset the decision of the Tribunal, and therefore, there isno merit in the argument advanced by the learned Senior Counselfor the assessee. The appeal will stand dismissed finding noquestion of law arising from the impugned order. No costs. Sd/- K.V INOD CHANDRAN Judge Sd/- ASHOK MENONJudge dkr True copy PA to Judge