Virendra Singh v. Income Tax Officer, Ward 2(1), Alwar

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 98/2018 Virendra Singh, S/o Late Shri Prahlad Singh, Aged About 43Years, R/o Chajju Singh Ki Gali, Outside Malakheda Gate, Alwar. ----Appellant Versus Income Tax Officer, Ward 2(1), Alwar. ----Respondent Connected With D.B. Income Tax Appeal No. 99/2018Surendra Singh, S/o Late Shri Prahlad Singh, Aged About 48Years, R/o Chajju Singh Ki Gali, Outside Malakheda Gate, Alwar. ----Appellant Versus Income Tax Officer, Ward 2(1), Alwar. ----Respondent For Appellant(s) : Mr. Ashish SharmaFor Respondent(s): HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH 17/04/2018 Judgment In both appeals common questions of law and facts areinvolved, hence, they are decided by this common judgment. By way of these appeals, the appellants have challenged thejudgment and order of the Tribunal whereby the Tribunal hasdismissed the appeal of the assessee and appeal of SurendraSingh has partly allowed confirming the order of AO as well asCIT(A). law:- Counsel for the appellant has framed following questions of In DBITA No. 98/2018 “i) Whether in the facts and circumstances of thecase the learned ITAT was justified in rejecting theclaim of the assessee under Section 54B claimed onaccount of capital gain on transfer of land used foragricultural purposes amounting to Rs. 9,01,332/-? ii) Whether in the facts and circumstances of thecase, the ITAT was justified in holding the order ofthe Coordinate Bench of ITAT Hyderabad completelyat variance without discussing and considering thefacts of the case of the assessee as also the facts ofthe case of ACIT vs. N. Raghuverma (2013) 42 ITS421 Hyd.? iii) Whether in the facts and circumstances of thecase, ITAT was justified in holding that the landsunder consideration (khasra Nos. 886 & 890) werenot used for agricultural purposes?” In DBITA No. 99/2018 “i) Whether in the facts and circumstances of thecase the learned ITAT was justified in rejecting theclaim of the assessee under Section 54B claimed onaccount of capital gain on transfer of land used foragricultural purposes amounting to Rs. 8,05,540/-? ii) Whether in the facts and circumstances of thecase, the ITAT was justified in holding the order ofthe Coordinate Bench of ITAT Hyderabad completelyat variance without discussing and considering thefacts of the case of the assessee as also the facts ofthe case of ACIT vs. N. Raghuverma (2013) 42 ITS421 Hyd.? iii) Whether in the facts and circumstances of thecase, ITAT was justified in holding that the landsunder consideration (khasra Nos. 886 & 890) werenot used for agricultural purposes?” Though counsel for the appellant has relied upon the decision in the case of Commissioner of Wealth Tax vs.Officer-in-Charge reported in [1976] 105 ITR 133 (SC)wherein it has been held as under:- “For the reasons already given, we do not think thatthe term "agricultural land" had such a wide scope asthe Full Bench appears to have given it for thepurposes of the Act we have before us.We agree that the determination of the character ofland, according to the purpose for which it is meantor set apart and can be used, is a matter which oughtto be determined on the facts of each particular case.the term "agricultural land" had such a wide scope asthe Full Bench appears to have given it for thepurposes of the Act we have before us.We agree that the determination of the character ofland, according to the purpose for which it is meantor set apart and can be used, is a matter which oughtto be determined on the facts of each particular case. “For the reasons already given, we do not think thatthe term "agricultural land" had such a wide scope asthe Full Bench appears to have given it for thepurposes of the Act we have before us.We agree that the determination of the character ofland, according to the purpose for which it is meantor set apart and can be used, is a matter which oughtto be determined on the facts of each particular case.the term "agricultural land" had such a wide scope asthe Full Bench appears to have given it for thepurposes of the Act we have before us.We agree that the determination of the character ofland, according to the purpose for which it is meantor set apart and can be used, is a matter which oughtto be determined on the facts of each particular case. What is really required to be shown is the connectionwith an agricultural purpose and user and not themere possibility of user of land, by some possiblefuture owner or possessor, for an agriculturalpurpose. It is not the mere potentiality, which willonly affect its valuation as part of "assets", but itsactual condition and intended user which has to beseen for purposes of exemption from wealth-tax. Oneof the objects of the exemption seemed to be toencourage cultivation or actual utilisation of land foragricultural purposes. If there is neither anything inits condition, nor anything in evidence to indicate theintention of its owners or possessors, so as toconnect it with an agricultural purpose, the land couldnot be "agricultural land" for the purposes of earningan exemption under the Act. Entries in revenuerecords are, however, good prima facie evidence.We do not think that all these considerations werekept in view by the taxing authorities in deciding thequestion of fact which was really for the assessingauthorities to determine having regard to all therelevant evidence and the law laid down by thisCourt. The High Court should have sent back the caseto the assessing authorities for deciding the questionof fact after stating the law) correctly.” He has further relied upon the decision of Gujarat High Courtin case of Gordhanbhai Kahandas Dalwadi vs. Commissioner ofIncome Tax reported in [1981] 127 ITR 664 (Gujarat) wherein ithas been held as under:- “In Chhotalal Prabhudas' case MANU/GJ/0006/1978 :[1979]116ITR631(Guj) , in 1952 non-agricultural useof the land was discontinued and permission wasobtained for use of land for purely agriculturalpurposes and thereafter for some years after 1952the land was allowed to lie fallow and thereafteragricultural operations were resumed on the land,and in the light of those facts, this court held that theland was agricultural land. In that case, the land wasused for brick-making for nearly two decades beforeit was returned to agricultural operations in 1952. Inthe instant case, we have non-agricultural use forbrick-making for a period of two years and thereafterthe land was allowed to lie fallow and agriculturaloperations were started and bajri was grown in thisland in the revenue year 1964-65. We may point outthat under the Bombay Tenancy and AgriculturalLands Act, 1948, "land" has been defined in s. 2,sub-s. (8), to mean, inter alia, land which is used foragricultural purposes or which is sometimes used asagricultural land, but is allowed to lie fallow, isagricultural land for the purposes of the Tenancy Act,and it is that agricultural land for the sale of which to non-agriculturist permission under s. 63 is necessaryand it is in the light of this definition which hasobviously to be borne in mind when permission unders. 63 is obtained, that the question has to beapproached. It must be pointed out that in CIT v.ManilalSOMNATHMANU/GJ/0009/1976:[1977]106ITR917(Guj) , this court has observed thatmerely because land is surrounded by developmentor that development has caught up with the land inquestion it should not be held that the land hadceased to agricultural land. It is nobody's case thatpermission for non-agricultural use under s. 63 of theBombay Land Revenue Code had been obtained bythe vendor, the assessee, before he sold the land onJanuary 30, 1969, to the purchaser. The importanceof the potential non- agricultural use of the land maybe reflected in the price which the purchaser isprepared to pay for the agricultural land, butpotential non-agricultural use does not alter thecharacter of the land from agricultural land to non-agricultural land. In the instant case, it has beenfound that the assessment which was being paid wasfor agricultural use of the land and special rateswhich are fixed for non-agricultural use were notbeing paid by the assessee prior to the date of thesale. Under these circumstances, since the correcttests which are required by law to be applied fordetermining as to of what date the character of theland is to be found and, secondly, in the right of whattests the question has to be decided, have not beenapplied by the Tribunal, we are applying the correcttests to the facts found and, in our opinion, applyingthe principles laid down by this court in CWT v.NarandasMotilalMANU/GJ/0021/1970:[1971]80ITR39(Guj) , Manilal Somnath's caseMANU/GJ/0009/1976 : [1977]106ITR917(Guj) , Smt.ChandravatiAtmaramPatelv.CITMANU/GJ/0021/1977 : [1978]114ITR302(Guj) andChhotalal Prabhudas v. CIT MANU/GJ/0006/1978 :[1979]116ITR631(Guj) , read in the light of theobservations of the Supreme Court in BegumpetPalace'scaseMANU/SC/0232/1976:[1976]10ITR133(SC) , it is clear that the Tribunalwas in error when it held on the facts found that inlaw the land was not agricultural land. The conclusionthat it was not agricultural land was a mixed questionof law and fact and the approach of the Tribunaladopted in coming to this conclusion was not in strictaccordance with law. Since the revenue recordsshowed that this was agricultural land, the approachshould have been whether the presumption that thiswas agricultural land was being rebutted by anyevidence about user of the land or about thecharacter of the land having been changed prior tothe date of the sale. No such evidence has beenpointed out from the records of this case or from thefacts found by the Tribunal and considerations ofother development in the locality or other locality inthe vicinity of the land are not proper considerations to be applied, as was pointed out in ManilalSomnath'scaseMANU/GJ/0009/1976:[1977]106ITR917(Guj).” However, the AO has recorded the following findings:- “Claim of deduction u/s 54B:- i) Uses of land for agricultural purposes: In the computation of the return of income theassessee has shown chargeable long term capitalgain at NIL after claiming deduction u/s 54B of Rs.25,14,850/- against the investment made inpurchase of land of Rs. 28,92,480/-. As per provisions of section 54B(1), the deduction isallowable only where the capital gain arises fromtransfer of a capital asset being land which, in thetwo years immediately preceding the date on whichthe transfer took place, was being used by theassessee or a parent of his for agricultural purposes.With reference to query made in this regard, videnote sheet dated 10/01/2014, the A.R. vide hiswritten replies filed on 28/01/2014 has submittedthat:- “Claim of deduction u/s 54B:- i) Uses of land for agricultural purposes: In the computation of the return of income theassessee has shown chargeable long term capitalgain at NIL after claiming deduction u/s 54B of Rs.25,14,850/- against the investment made inpurchase of land of Rs. 28,92,480/-. As per provisions of section 54B(1), the deduction isallowable only where the capital gain arises fromtransfer of a capital asset being land which, in thetwo years immediately preceding the date on whichthe transfer took place, was being used by theassessee or a parent of his for agricultural purposes.With reference to query made in this regard, videnote sheet dated 10/01/2014, the A.R. vide hiswritten replies filed on 28/01/2014 has submittedthat:- 1. A photo copy of Girdawari of just preceding year ofsale of land is enclosed which indicating what type ofcrops were sawed and produce. This aspect wereexamined by the A.O in the A.Y. 2010-11 andconsidered the same as well as found in ourder. 2. The agricultural land sold out during the yearunder consideration were given on contract Batai toagriculturist and taken one time payment for year asper practice here Girdawari indicating nature of cropssowed by the Kastkar cultivator was known as MullaJi of Kesarpur village adjoining to the Bhugore as perpast practice. The agricultural land was given onbatai orally year to year. In the just preceding yearthe ld. AO completed the assessment of sale of landthe same was provided to him accordingly this aspectwas examined by the ld. A.O., while passing theassessment order and no adverse inference wasdrawn. Since assessee taken one time payment noother details can be given of buyer of produce etc.On considering the above submission of the A.R.,there is no option to examine the lands sold werebeing used by the assessee within two yearsimmediately preceding the transfer took place exceptthe Khasra Girdawari (four year) from samvat 2065to samvat 2068 furnished in the case of his brotherfor the same A.Y. who also solds their share of landsin similar Khasra’s. As per sale deeds, the lands/plotssold pertain to Khasra No. 890, 886 & 887. TheVikram Samvat of the year in which plots sold isSamvat 2067 (i.e. F.Y. 2010-11/ previous year of theassessment year under consideration. In this regard,the position of crops grown in these kharsa within theperiod of two years (Samvat 2065 & 2066) reveals asunder:- From the above details, it is observed that the landpertaining to Khasra No. 887 (involving area ofmeasuring 1.10 Hectare) was being used foragricultural activates/purposes within two year fromthe date of transfer. The land measuring 0.01 Hec.Pertaining to Khasra No. 886 pertainsn to the landcovered for the any means of irrigation. Theremaining land of Khasra No. 890 measuring 0.62Hec. Has remained vacant (i.e. being not used foragricultural purposes) within the period of two yearsfrom the date of transfer of plots out of it.Accordingly, out of the total land involved in threeKhasra’s of measuring (0.62+0.01+1.10) =1.73 hec,the land measuring 0.62 haec which comes to0.62/1.73 hec=35.84% of total lands involved inthree khasra’s., is not eligible for deduction u/s 54B(1) of the IT Act, 1961. thus out of the claim of totaldeduction u/s 54B of Rs. 28,92,480/- the deductionto the extent of Rs. (2514850x35.84%) =9,01,.322/- is hereby withdrawn/disallowed onaccount of land sold was not being used foragricultural purposes within last 2 years from thedate of sale for the purpose of computing incomechargeable of “Capital Gains” in this case.” The above finding was confirmed by the CIT(A) as well as theTribunal. The Tribunal while considering the matter has observedas under:- The above finding was confirmed by the CIT(A) as well as theTribunal. The Tribunal while considering the matter has observedas under:- “7. I have heard the rival contentions of both theparties and perused the material available on therecord. I have also perused the order of theCoordinate Bench of ITAT, Hyderabad Bench, but thefacts of these assessees cases are completely atvariance. There is no evidence in support of thecontentions raised in the submissions by the ld AR. Itis admitted fact that there was no agriculture activityon these lands in the two preceding years from thesale of the land. Therefore, I have no alternate but toconfirm the findings recorded by the ld. CIT(A) onthis issue. Ground No. 1 of both these appeals standdismissed.”parties and perused the material available on therecord. I have also perused the order of theCoordinate Bench of ITAT, Hyderabad Bench, but thefacts of these assessees cases are completely atvariance. There is no evidence in support of thecontentions raised in the submissions by the ld AR. Itis admitted fact that there was no agriculture activityon these lands in the two preceding years from thesale of the land. Therefore, I have no alternate but toconfirm the findings recorded by the ld. CIT(A) onthis issue. Ground No. 1 of both these appeals standdismissed.” We are in complete agreement with the view taken by the Tribunal. In our considered view, in view of the concurrent finding, no substantial question of law arises. Hence, the appeals stand dismissed. (INDERJEET SINGH),J (K.S.JHAVERI),J A.Sharma/4-5