ITO, Kota v. CHANDRA PRAKASH & SONS HUF, Kota

ITA 876/JPR/2010 | 2007-2008
Pronouncement Date: 28-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 87623114 RSA 2010
Assessee PAN AABHC0176N
Bench Jaipur
Appeal Number ITA 876/JPR/2010
Duration Of Justice 1 year(s) 27 day(s)
Appellant ITO, Kota
Respondent CHANDRA PRAKASH & SONS HUF, Kota
Appeal Type Income Tax Appeal
Pronouncement Date 28-07-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 28-07-2011
Assessment Year 2007-2008
Appeal Filed On 01-07-2010
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.876 / JP/2010 ASSESSMENT YEAR 2007-08 PAN: AABHC 0176 N THE ITO VS. M/S. CHANDRA PRAKASH & SONS (HUF) WARD- 1 (1) MITTAL DHATU RASAYAN UDYOG KOTA E-81 INDRAPRASTHA INDL. AREAK KOTA (APPELLANT ) (RESPONDENT) ITA NO.877 / JP/2010 ASSESSMENT YEAR 2007-08 PAN: AAFHS 5995 B THE ITO VS. M/S. SUNIL KUMAR & SONS (HUF) WARD- 1 (1) F-474 MITTAL UDYOG KOTA INDRAPRASTHA INDL. AREAK KOTA (APPELLANT ) (RESPONDENT) DEPARTMENT BY : SHRI VINOD JOHRI ASSESSEE BY : SHRI SIDDHARTH RANKA ORDER PER N.L. KALRA AM:- THE REVENUE HAS FILED APPEALS AGAINST TWO DIFFEREN T ORDERS OF THE LD. CIT(A) KOTA DATED 31-03-2010 FOR THE ASSESSMENT YE AR 2007-08. 2.0 THE ISSUE RAISED IN BOTH THE APPEALS IS THE SAM E EXCEPT FOR DIFFERENCE IN QUANTUM OF RELIEF ALLOWED IN RESPECT OF LONG TER M CAPITAL GAIN AND SHORT TERM CAPITAL GAIN. 2 2.1 NOW WE WILL BE DISCUSSING THE FACTS IN THE CASE OF CHANDRA PRAKASH & SONS (HUF) AND THE CONCLUSION ARISES IN THE CASE OF CHANDRA PRAKASH & SONS (HUF) WILL BE APPLICABLE TO OTHER APPEAL I.E. SUNIL KUMAR & SONS (HUF). 2.2 THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN THE CASE OF CHANDRA PRAKASH & SONS (HUF) IS AS UNDER:- ON THE FACTS AND IN THE CASE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 31 29 891/- ON ACCOUNT OF LONG TERM CAPITAL GAIN AN D RS. 8 74 790/- ON ACCOUNT OF SHORT TERM CAPITAL GAIN MA DE BY THE AO TREATING THE SALE OF AGRICULTURAL LAND AS INDUST RIAL LAND IGNORING THE FACT THAT THE ASSESSEE RECEIVED 50% RE BATE ON STAMP DUTY FROM THE SUB-REGISTRAR WHEN THE LAND WAS SOLD HOLDING THE SAME AS INDUSTRIAL LAND. 2.3 THE ASSESSEE HAS SHOWN INTEREST INCOME AND APPE NDED A NOTE IN WHICH IT WAS STATED THAT THE PROFIT FROM SALE OF AGRICUL TURAL LAND TO THE EXTENT OF RS. 29 35 837/- IS AGRICULTURAL INCOME. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS THE ASSESSEE FILED A LETTER DATED 5-11 -2009 THAT PROFIT ON SALE OF LAND IS TO BE CONSIDERED AS CAPITAL RECEIPT AND NOT AGRICULTURAL INCOME AND THEREFORE SUCH PROFIT SHOULD NOT BE CONSIDERED FOR RATE PURPOSES. THE ASSESSEE ALONGWITH OTHER TWO ASSESSES SOLD THE LAND MEASURING 2.20 HECTARES SITUATED AT VILLAGE MANDANA ON 2006 TO M/S. EARTH S TONE GROUP NEW DELHI FOR A CONSIDERATION OF RS. 1.01 CRORES. THE NATURE OF LAND SOLD HAS BEEN 3 MENTIONED AS BANJAD/ GAIR MUMKIN KHATTA. BEFORE THE AO THE ASSESSEE CLAIMED THE LAND IS NOT CAPITAL ASSET AS PER PROVIS IONS OF SECTION 2(14)(III) OF THE ACT THE AO NOTICED FROM THE SALE DEED THAT PMT REGISTRATION WAS GRANTED TO THE ASSESSEE BY THE DISTRICT INDUSTRIES CENTRE KOTA FOR USING THE LAND AS INDUSTRIAL LAND FOR DOING MANUFACTURING ACT IVITIES. THE AO COLLECTED THE INFORMATION FROM DISTRICT INDUSTRIES CENTRE KO TA AND DISTRICT INDUSTRIES CENTRE KOTA SENT INFORMATION VIDE LETTER DATED 07- 12-2009. THE INFORMATION SO RECEIVED FROM THE DISTRICT INDUSTRIES CENTRE KO TA HAS BEEN MENTIONED AT PAGES 3 AND 5 OF THE ASSESSMENT ORDER. THE IMPORTAN T INFORMATIONS IS AVAILABLE IN THE LETTER ARE AS UNDER:- 1. THE ASSESSEE APPLIED TO THE DISTRICT INDUSTRIES CENTRE KOTA ON 16-06-04 FOR GRANTING PMT CERTIFICATE FOR USING THE SAID LAND FOR MANUFACTURING OF WORMI COMPOST FERTILIZERS. 2. THE TOTAL INVESTMENT IN FIXED ASSET IS TO THE EX TENT OF 1.85 LACS INCLUDING THE INVESTMENT IN LAND TO THE EXTENT OF R S. 1.50 LACS. 3. THE RAW MATERIAL REQUIRED IS ANIMAL DUG AND BLAC K SOIL TO THE EXTENT OF 0.5 LACS AND12.00 LACS. PHOSPATE KHAD TO THE EXTENT OF 0.5 LACS IS ALSO REQUIRED AS RAW MATERIAL. 4. THE SOURCE OF POWER HAS BEEN SHOWN AS FIREWOOD. 5. ANNUAL PRODUCTION CAPACITY IS 300 MT 4 6. CERTAIN BILLS AND VOUCHERS IN RESPECT OF PURCHAS E OR BUILDING MATERIAL AND TRANSPORTATION OF BUILDING MATERIAL AN D SALE OF WORMI COMPOST WERE ENCLOSED WITH THE APPLICATION ON THE BASIS OF THE INFORMATION RECEIVED FROM DISTR ICT INDUSTRIES CENTRE KOTA THE AO ISSUED THE SHOW CAUSE NOTICE TO THE AS SESSEE AS TO WHY CAPITAL GAIN BE NOT CHARGED ON THE SALE OF LAND BY TREATING THE LAND AS INDUSTRIAL LAND. THE ASSESSEE FILED THE REPLY AND THE GIST OF THE RE PLY IS AVAILABLE AT PAGES 5 AND 6 OF THE ASSESSMENT ORDER. IT WAS STATED THAT L AND WAS BAJAD LAND AND LOT OF EFFORTS WERE MADE TO MAKE IT FERTILE. THE ASSESS EE EMPLOYED SHRI RAM SINGH TO WORK ON THE LAND SO AS TO MAKE THE LAND FE RTILE ENOUGH FOR CULTIVATION. IT WAS AGREED BETWEEN THE ASSESSEE AND SHRI RAM SINGH THAT CROP OBTAINED FROM THE LAND WILL BELONG TO SHRI RAM SING H AND VEGETABLE GROWN ON THE LAND WILL BE SHARED BETWEEN SHRI RAM SINGH A ND THE ASSESSEE. THE ASSESSEE GOT DUG A BOREWELL AND TO GET THE WATER FR OM THE BOREWELL A SUBMERSIBLE PUMP WAS FITTED. TO GET ELECTRIC CONNEC TION THE ASSESSEE FILED AN APPLICATION BEFORE DISTRICT INDUSTRIES CENTRE K OTA TO GET THE PMT REGISTRATION SO AS TO ENABLE HIM TO GET THE ELECTRI C CONNECTION. THERE WAS A LONG WAITING PERIOD FOR GRANT OF ELECTRIC CONNECTIO N ON AGRICULTURAL LAND. HENCE VIA MEDIA WAS ADOPTED TO GET THE ELECTRIC CO NNECTION AND REGISTRATION APPLICATION WAS FILED FOR GETTING THE ELECTRIC CONN ECTION. THE REGISTRATION WAS 5 OBTAINED FOR 100 FT AREA 200 FT AREA BUT THE ACTUA L AREA USED BY THE ASSESSEE WAS ONLY 50 TO 60 SQ. FT. FOR WORMI COMPOST CULTIVA TION. THE COMPOST AND WORMS WERE THEN SOLD BY THE ASSESSEE FOR RS. 5 000/ - AND RS. 3 000/- ON 01- 06-04 AND 1-11-04. THE ASSESSEE JOINTLY WITH HIS BR OTHER AND FATHER GOT CONSTRUCTED TWO ROOMS FIVE LABOUR QUARTERS AND ON E WATER STORAGE TANK. THE AO ALSO OBTAINED INFORMATION FROM SUB-REGISTRAR MA NDANA AND THE SUB- REGISTRAR INTIMATED THAT REBATE OF 50% ON STAMP DUT Y WAS GIVEN ON THE BASIS OF A LETTER FROM DISTRICT INDUSTRIES CENTRE KOTA. THE AO DEPUTED THE INSPECTOR TO MAKE ON THE SPOT VERIFICATION. THE INS PECTOR RECORDED THE STATEMENT OF SHRI RAM SINGH. SHRI RAM SINGH ADMITTE D THAT HE HAS NOT CULTIVATED ANY CROP ON THE LAND DURING HIS TENURE O F EMPLOYMENT. HE FURTHER STATED THAT HE HAS BEEN EMPLOYED ON MONTHLY SALARY BASIS. THE INSPECTOR REPORTED THAT THE LAND UNDER REFERENCE COMES UNDER RIICO INDUSTRIAL AREA. THE AO PROVIDED THE CERTIFIED COPY OF THE INSPECTOR S REPORT TO THE ASSESSEE AND THE ASSESSEE FILED THE REPLY VIDE LETTER DATED 29 TH DEC. 09. THIS REPLY IS AVAILABLE AT PAGE 8 OF THE ASSESSMENT ORDER. THE AS SESSEE RELIED UPON THE COPY OF GIRDAWARI SUBMITTED BY HIM. IT WAS STATED T HAT THE LAND IN QUESTION IS NOT A PART OF RIICO INDUSTRIAL AREA. THE LAND TO TH E EXTENT OF 100 SQ. FT.HAS BEEN USED FOR WORMI COMPOST ACTIVITIES AND THIS FA CT HAS NOT BEEN DISPROVED BY THE INSPECTOR DURING HIS INSPECTION. T HE PROPER AUTHORITY TO 6 ASCERTAIN THE NATURE OF LAND IS SUB-REGISTRAR MAND ANA. THE AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD AS UNDER:- 1 IT IS ESTABLISHED FROM THE AFFIDAVIT AND PMT CERT IFICATE THAT LAND WAS USED FOR INDUSTRIAL AND MANUFACTURING ACTIVITIES. 2. ONCE THE DISTRICT INDUSTRIES CENTRE KOTA HAD IS SUED THE PMT CERTIFICATE THEN IT IS IMMATERIAL WHETHER THE L AND IS PARTLY OR FULLY USED FOR WORMI COMPOST. 3. THE SUB-REGISTRAR GAVE REBATE OF 50% ON STAMP DU TY ON THE BASIS OF THE LETTER ISSUED BY DISTRICT INDUSTRI ES CENTRE KOTA 4. THE CONTENTION OF ASSESSEE CANNOT BE ACCEPTED TH AT PMT REGISTRATION WAS DONE FOR TAKING ELECTRIC CONNECTIO N. THE AO REFERRED TO THE DECISION OF THE HON'BLE BOMBAY HIG H COURT IN THE CASE OF SMT. NAYAN TARA G AGARWAL VS CIT 207 ITR 639 IN WHICH HON'BLE HIGH COURT HELD THAT THE COLOURABL E DEVICE CANNOT BE A PART OF TAX PLANNING 5 THE AGRICULTURAL LAND WAS NOT GIVEN TO SHRI RAM S INGH FOR CULTIVATION. THE ASSESSEE HAS NOT SHOWN ANY AGR ICULTURAL INCOME IN THE RETURN OF INCOME. 2.4 IF ONE CONSIDERS THE FACTUAL MATRIX THEN IT IS CLEAR THAT THE ASSESSEE HAS TRIED TO EVADE THE TAX BY SHOWING THE LAND WHICH HA S BEEN SOLD WAS AN AGRICULTURAL LAND. THE AO REFERRED TO THE DECISION OF HON'BLE APEX COURT IN 7 THE CASE OF CIT VS GEMINI PICTURES CIRCUIT (P) LTD. 220 ITR 43 IN WHICH THE LAND WAS THE LAND SITUATED ON ALL SIDES BY INDUSTRI AL AND COMMERCIAL BUILDING CANNOT BE CONSIDERED AS AN AGRICULTURAL LAND ON THE GROUND THAT BANANA AND VEGETABLES WERE RAISED ON PART OF THE LAND. THE AO ACCORDINGLY TREATED THE LAND AS AN INDUSTRIAL LAND. THE CONSIDERATION FOR T HE LAND WAS ADOPTED AT RS. 52 25 000/- ON THE BASIS OF THE LETTER RECEIVED FRO M SUB-REGISTRAR MANDANA. IN RESPECT OF OTHER ASSETS LIKE CONSTRUCTION BORIN G TREE ETC. THE CONSIDERATION WAS ADOPTED AT RS. 31 12 200/- THAT IS ALSO ON THE BASIS OF THE LETTER RECEIVED FROM SUB-REGISTRAR MANDANA. ON LAND THE AO COMPUT ED THE LONG TERM CAPITAL GAIN AND ON BUILDING CONSTRUCTION ETC. SHO RT TERM CAPITAL GAIN WAS COMPUTED. 2.5 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSMENT ORDER SUMMARIZED THE OBSERVATION OF THE AO AT PAGES 4 TO 6 OF THE APPELLATE ORDER. DURING THE COURSE OF APPELLATE PROCEEDINGS THE AO FILED A LETTER DATED 10-03-2010. IN THIS LETTER THE AO STATED THAT THE LAND SOLD WAS NOT AGRICULTURAL LAND AS THE INSPECTOR AFTER MAKING SPO T ENQUIRY REPORTED THAT NO AGRICULTURAL ACTIVITIES WERE PERFORMED ON THIS LAND FOR THE LAST SO MANY YEARS AND THE ASSESSEE HAS ALSO NOT SHOWN ANY AGRICULTURA L INCOME. THE AO FURTHER POINTED OUT THAT SHRI RAM SINGH HAS ADMITTED THAT H E WAS AN EMPLOYEE ON MONTHLY SALARY BASIS AND HE HAS NOT CULTIVATED ANY CROP. THE PURCHASER HAS 8 PAID 50% ON THE STAMP DUTY ON THE REGISTERED DOCUME NT. IT MEANS THAT THE LAND WAS BEING USED FOR INDUSTRIAL PURPOSES. THE AS SESSEE HAS INTERPRETED A LETTER DATED 04-02-2010 ISSUED BY SDO KOTA TO SHRI GOVIND RAM MITTAL PRESIDENT SMALL SCALE INDUSTRIES KOTA ACCORDING T O HIS OWN CONVENIENCE BY STATING THAT THE LAND IN QUESTION IS NOT AGRICULTUR AL LAND. ONCE THE DISTRICT INDUSTRIES CENTRE KOTA HAS GRANTED THE PERMANENT R EGISTRATION CERTIFICATE TO THE ASSESSEE THEN THE LAND IN QUESTION SHOULD BE DE EMED TO BE CONVERTED LAND FOR INDUSTRIAL PURPOSES. THE LD. CIT(A) HAS REFERRE D TO THE PROVISIONS OF RAJASTHAN LANDS REVENUE ACT 1956. AS PER THIS ACT THE PERSON HAS TO MAKE AN APPLICATION IN PRESCRIBED FORM ALONGWITH PAYMENT OF PRESCRIBED CONVERSION CHARGES TO THE PRESCRIBED AUTHORITY AND THE AUTHORITY AFTER BEING SATISFIED WITH THE REQUIREMENT OF CONVERSION HAS TO ISSUE A LETTER IN THE PRESCRIBED FORM AND THE TESHSILDAR HAS TO REDUCE TH E AREA OF THE KHATEDARI LAND BY MAKING NECESSARY ENTRY IN THE REVENUE RECOR D. THE ORDER IS REQUIRED TO BE NOTIFIED IN RAJASTHAN GAZETTE EXTRAORDINARY. RULE 5A IS AN EXCEPTION TO PROCEDURE PRESCRIBED FOR CONVERSION OF AGRICULTURAL LAND FOR NON-AGRICULTURAL PURPOSES AND AS PER THIS RULE A PERSON CAN USE AGR ICULTURAL LAND UPTO 2500 SQ. MTR FOR ESTABLISHING A SMALL SCALE INDUSTRY WIT HOUT HAVING TO SEEK PERMISSION FOLLOWING THE ELABORATE PROCEDURE. THE R ULE UNAMBIGUOUSLY STATES THAT THE AREA SO USED SHALL CONTINUE TO BE I N HIS KHATEDARI. 9 2.6 THE LD. CIT(A) AFTER CONSIDERING THE FACTS REPO RTED BY THE AO IN HIS ASSESSMENT ORDER AND IN HIS LETTER TO THE LD. CIT(A ) AND CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DIRECTED THE AO TO TREA T THE LAND AS INDUSTRIAL LAND. 2.7 DURING THE COURSE OF PROCEEDINGS BEFORE US THE LD. DR HAS FILED THE WRITTEN SUBMISSIONS IN FOUR PAGES. THE LD. DR HAS P LACED RELIANCE ON THE ORDER OF THE AO. THE LD. DR SUBMITTED THAT LETTER D ATED 4-02-2010 FILED BEFORE THE LD. CIT(A) NEITHER CONTAINS THE NAME OF THE OFFICE ISSUING THE LETTER NOR OFFICE ADDRESS. IT DOES NOT CONTAIN COMP LETE SIGNATURE AND THE LETTER IS NOT ISSUED TO THE HUF. NO AGRICULTURAL OPERATION S WERE CARRIED OUT ON THE LAND. THE LAND IS COVERED IN RIICO INDUSTRIAL AREA AS IT IS ALSO CORROBORATED FROM RECORDS OF DISTRICT INDUSTRIES CENTRE KOTA. I T WAS SUBMITTED THAT THE ORDER OF THE LD. CIT(A) IS REQUIRED TO BE VACATED A ND THE ORDER OF THE AO SHOULD BE CONFIRMED. 2.8 THE LD. AR HAS FILE THE WRITTEN SUBMISSIONS CON TAINING 24 PAGES AND ALSO FILED THE PAPER BOOK CONTAINING 75 PAGES . THE LD. AR ALSO FILED AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE. T HE ADDITIONAL EVIDENCE IS A LETTER DATED 23-12-2010 ISSUED BY DISTRICT INDUST RIES CENTRE KOTA TO M/S. EARTH STONE GROUP NEW DELHI I.E. PURCHASER OF THE LAND. IN THIS LETTER IT HAS BEEN MENTIONED THAT LAND ON WHICH STAMP DUTY OF 50% WAS GIVEN HAS NOT 10 GOT CONVERTED INTO NON-AGRICULTURAL LAND. THE APPLI CATION UNDER RULE 29 HAS BEEN SIGNED BY THE LD. AR AND NOT BY THE RESPONDENT . MOREOVER IT IS NOT THE CASE OF THE ASSESSEE THAT INCOME TAX AUTHORITIES HA VE NOT PROVIDED SUFFICIENT OPPORTUNITY. IT IS ONLY MENTIONED THAT THE PAPER WA S RECEIVED AFTER THE ORDER WAS PASSED BY THE LD. CIT(A). ACCORDING TO US RULE 29 IS NOT APPLICABLE AND ADDITIONAL EVIDENCE IS NOT ADMITTED. 2.9 BEFORE US THE LD. AR STATED THAT THE LAND WAS BEING SHOWN AS AGRICULTURAL LAND IN THE REVENUE RECORDS. OUR ATTEN TION WAS DRAWN TO COPIES OF KHASRA GIRDAWARI AVAILABLE AT PAGES 53 AND 54 O F THE PAPER BOOK. THE LETTER RECEIVED FROM RIICO DATED 18-01-2010 STATES THAT THERE IS NO INDUSTRIAL AREA IN MANDANA BUT ACQUISITION OF LAND FOR SEZ AND GENERAL INDUSTRIAL IN VILLAGE MANDANA IS UNDER CONSIDERATION OF STATE GOV T. LEVEL. THIS LETTER IS OF THE YEAR 2010 WHILE THE LAND WAS SOLD IN 2006 AS TH AT RELEVANT TIME THERE WAS NO MOVE FOR SEZ. THE LD. AR DREW OUR ATTENTION TO LETTER RECEIVED FROM SDO KOTA DATED 4-2-2010 IN WHICH IT HAS BEEN STATE D THAT LAND HAS NOT BEEN CONVERTED FOR INDUSTRIAL USE. THE LETTER FROM DISTR ICT INDUSTRIES CENTRE KOTA DATED 4-01-2011 ALSO MENTIONS THAT THE PURCHASER HA S NOT CONVERTED THE AGRICULTURAL LAND FOR NON-AGRICULTURAL PURPOSES. TH E SALE DEED DOES NOT REFER TO THE FACT THAT THE LAND WAS NOT FOR AGRICULTURAL USE. IT IS THE CONTENTION OF THE ASSESSEE THAT ACTUAL AGRICULTURAL OPERATIONS WE RE CARRIED OUT AT THE 11 IMPUGNED LAND BUT THE PRODUCE WAS FOR SHARING BASIS BETWEEN THE ASSESSEE AND THE CULTIVATOR WHO WAS LIVING AT THE SITE. THE LD. AR DREW OUR ATTENTION TO THE CERTIFICATE FROM JVVNL IN WHICH IT HAS BEEN STATED THAT ELECTRIC CONNECTION APPLIED IN 2003-04 WAS ALLOTTED IN 2009. THE ASSESSEE IN ORDER TO GET THE ELECTRIC CONNECTION OPTED FOR A DEVICE THRO UGH WHICH ASSESSEE COULD GET THE ELECTRIC CONNECTION. THE ASSESSEE FILED THE PMT APPLICATION AND GOT ELECTRIC CONNECTION ON PRIORITY. THE REBATE FOR STA MP DUTY IS GIVEN IN CASE THE UNIT IS PROPOSED TO BE PUT UP ON THE LAND. THE CONVERSION OF NON- AGRICULTURAL USE CAN BE DONE BY THE BUYER LATER ON. THE BUYER WAS GRANTED REBATE FOR SETTING UP OF MOZIC TILES TUMBLED TILES ETC. THIS IS EVIDENT FROM THE COPY OF THE CERTIFICATE FROM DISTRICT INDUSTRIE S CENTRE KOTA DATED 15-06- 06. THE LD. AR SUBMITTED THAT THE STATEMENT OF SHRI RAM SINGH WAS RECORDED AT THE BACK OF THE ASSESSEE AND THE COPY HAS NOT BE EN PROVIDED TO THE ASSESSEE. THE ASSESSEE HAS RELIED UPON THE COPY OF THE KHASRA GIRDAWARI REPORT. THE CERTIFICATE FROM RIICO SHOWS THAT THERE IS NO INDUSTRIAL AREA IN VILLAGE MANDANA. HENCE THE REPORT OF THE INSPECTOR IN RESPECT OF LAND BEING PART OF THE INDUSTRIAL AREA CANNOT BE ACCEPTED. TH E SDO HAS CLEARLY STATED THAT THE LAND IS AGRICULTURAL AND NO APPLICATION FO R CONVERSION OF LAND WAS RECEIVED. THE LD. AR HAS RELIED UPON THE FOLLOWING CASES. 1. LAVELLEN SINGHAL VS DCIT 111 TTJ 326 (DEL. TRIBUNAL) 12 2. HARESH V MILANI VS JCIT 114 ITD 428 (PUNE TRI BUNAL) 2.10 THE LD. AR HAS SUBMITTED THAT THE AO HAS RELIE D UPON CERTAIN DECISIONS WHICH ARE DISTINGUISHABLE. THE FACTS OF T HE CASE ON WHICH THE AO HAS PLACED RELIANCE ARE DIFFERENT FROM THE FACTS OF THE INSTANT CASE WHICH HAVE BEEN RELIED UPON BY THE AO ARE AS UNDER:- 1. SMT. NAYAN TARA G AGARWAL VS CIT 207 ITR 639 (BOM) 2. WORKMAN ASSOCIATED RUBBER INDUSTRY LTD. VS ASSOCIAT ED RUBBER INDUSTRY LTD. 157 ITR 77. 3. CIT VS GEMINI PICTURES CIRCUIT (P) LTD. 220 ITR 43 (SC) 4. CIT VS RAM KISHAN DEV 35 ITR 312 5. CIT VS VENKETSWAMI NAIDU 29ITR 529 (SC) 6. UNION OF INDIA VS PLAYWOOD ELECTRONIC (P) LTD. 184 ITR 308 (SC) 2.11 WE HAVE HEARD BOTH THE PARTIES. IT IS NOT DISP UTED THAT THE LAND WAS PURCHASED ON 26 TH DEC. 2000 AND THE LAND HAS BEEN SOLD TO M/S. EARTH STONE GROUP NEW DELHI ON 26-06-2006. THE ASSESSEE HAS NO T SHOWN AGRICULTURAL INCOME DURING THE ASSESSMENT YEAR 2000-01 TO 2006-0 7. THE COPY OF THE REGISTERED SALE DEED IS AVAILABLE AT PAGES 56 TO 63 OF THE PAPER BOOK. THE SALE DEED IS IN RESPECT OF LAND MEASURING 2.08 HECTARE O F LAND OWNED BY THE 13 ASSESSEE ALONGWITH TWO OTHER HUFS NAMELY M/S. GOVIN D RAM & SONS (HUF) AND M/S. SUNIL KUMAR & SONS (HUF). IT IS MENT IONED IN THE SALE DEED THAT THE ASSESSEE IS HAVING AGRICULTURAL LAND IN KHASRA NO. 1617 AND THE NATURE OF LAND IS BANJAD. THE DESCRIPTION IN RESPEC T OF THE ASSETS AVAILABLE ON LAND IS MENTIONED AT PAGE 5 OF THE SALE DEED. THESE ARE AS UNDER:- 1. THERE IS BOUNDARY WALL HAVING HEIGHT OF 7 FT AND TOTAL LENGTH AND WIDTH OF THE BOUNDARY WALL IS 540 SQ. FT. AND 4 80 SQ. FT. 2. FOUR BORING ALONGWITH MOTORS 3. TWO HALLS MEASURING 25 X 20FT 4. FIVE LABOUR QUARTERS 5. ELECTRIC MOTORS 6. TWO GUARD ROOMS 7. SWIMMING POOL 50 X 70 FT 8. 364 TREE OF AMLA 9. 190 TREE OF ANAR 10. 44 TREE OF SAGWAN 11. 29 TREE OF ASHOK 12. 10 TREE OF MANGOE 13. 18 TREE OF ORANGE 14 26 TREE OF LEMON 15 49 TREE OF ROSE 16 25 TREE OF VIDHYA 14 AT PAGE OF THE SALE DEED IT IS MENTIONED THAT LAND BEING SOLD IS GAIRMUMKIN KHADDA AND BANJAD. THE LAND IS SITUATED BEYOND TWO K.M. FROM THE MAIN ROAD. KHASRA AND GIRDAWARI AVAILABLE AT PAGE 53 OF THE PAPER BOOK SHOWED THAT NO AGRICULTURAL OPERATION HAD BEEN DONE IN RES PECT OF KHASRA NO. 1616. THE AREA OF LAND IN KHASRA NO 1617 SHOWED THAT THER E HAS BEEN NO AGRICULTURAL OPERATION IN SAMVAT YEAR 2063 AN 2064. SAMVAT YEAR 2061 THE LAND TO THE EXTENT OF 0.40 HECTARE HAS BEEN UTILIZE D FOR AGRICULTURAL OPERATION OUT OF TOTAL LAND OF 0.73 HECTARE. 0.26 HECTARE LAN D HAS BEEN USED CULTIVATED DURING KHARIF AS WELL AS IN RAVI IN SAMVAT YEAR 206 1. IN KHASRA NO 1617/2 THE AREA OF LAND IS 0.73 AND CULTIVATION HAS BEEN D ONE IN THE AREA OF 0.50 IN SAMVAT YEAR 2061. THERE HAS BEEN NO CULTIVATION FR OM SAMVAT YEAR 2063 AND 2064. PART OF LAND IS IN CULTIVATION FOR THE FI NANCIAL YEARS 2004-05 AND 2005-06 AND THERE HAS BEEN NO CULTIVATION IN FINANC IAL YEAR 2006-07 AND 2007-08. THE BALANCE LAND OUT OF FINANCIAL YEAR 200 4-05 AND 2005-06 WHICH HAS NOT BEEN CULTIVATED HAS BEEN MENTIONED AS PADAT . AS PER CERTIFICATE GIVEN BY RIICO IT IS MENTIONED THAT THERE IS NO INDUSTRI AL AREA AT MANDANA. THE ACQUISITION OF LAND FOR ESTABLISHMENT OF SEZ IS UND ER CONSIDERATION OF THE STATE GOVT. THE CERTIFICATE IS DATED 18-01-2010. IT MEANS THAT LAND UNDER REFERENCE WAS NOT PART OF INDUSTRIAL LAND. THE PURC HASER WAS GIVEN A CERTIFICATE THAT IT WILL BE ENTITLED TO 50% OF STAM P DUTY AND 50% OF THE 15 GOVT. PORTION OF CONVERSION CHARGES BECAUSE THE APP LICATION FOR THE PROJECT OF MOZIC TILES ETC. HAS BEEN REGISTERED AND THE GRO UP HAS ALSO FILED THE DECLARATION. THIS REBATE OF STAMP DUTY IS FOR THE P URPOSE OF ESTABLISHING A UNIT AND IT IS NOT NECESSARY THAT AT THE TIME OF PU RCHASING THE LAND FOR THE PURPOSE OF UNIT SUCH LAND SHOULD BE INDUSTRIAL LAN D . IT IS ALSO NOT DISPUTED THAT THE ASSESSEE MADE AN APPLICATION FOR PMT REGIS TRATION. ALONGWITH APPLICATION THE ASSESSEE ATTACHED THE PHOTOSTAT CO PY OF CERTAIN BILLS WHICH SUGGEST THAT THE ASSESSEE HAS MADE CERTAIN CONSTRUC TIONS AND ALSO PURCHASED WORMI COMPOST KHAD AND ALSO COMPOST AND WORMI WERE SOLD ON 01-06-04 AND 1-11-09. THE APPLICATION FOR PMT REGISTRATION W AS MADE ON 16-06-04 I.E. TWO YEARS BEFORE THE DATE ON WHICH THE ASSESSE E HAS SOLD THE LAND. THE INVESTMENT IN LAND IN THE APPLICATION WAS SHOWN AT RS. 1.50 LACS. THE ASSESSEE IN REPLY BEFORE THE AO HAS STATED THAT REG ISTRATION WAS OBTAINED FOR 100X 200 FT AREA BUT ACTUAL AREA USED BY THE ASSESS EE WAS ONLY 50 TO 60 SQ. FT. 2.12 AFTER CONSIDERING THE FACTS ON RECORD WE WILL NOW CONSIDER AS TO WHETHER THE LAND CAN BE CONSIDERED AS AGRICULTURAL LAND AND AS TO WHETHER OTHER ASSETS ATTACHED TO THE LAND SHOULD BE SEPARAT ELY TAXED BY NOT CONSIDERING SUCH ASSETS ATTACHED TO THE LAND AS AGR ICULTURAL LAND . THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS BORHAT TEA CO. LTD. 138 ITR 783 HELD THAT ACTUAL CULTIVATION IS NOT NECESSA RY TO HOLD THAT LAND IS 16 AGRICULTURAL LAND. IF THE LAND COULD BE PUT TO CULT IVATION IMMEDIATELY THEN IT CAN BE CONSIDERED AS AGRICULTURAL LAND. BY EMPLOYIN G HUMAN LABOUR AND SKILL THE LAND WAS MADE FIT FOR MATERIAL CULTIVATI ON AND HENCE LAND WAS HELD AS AGRICULTURAL LAND. THE HON'BLE APEX COURT IN THE CASE OF CIT VS GEMINI PICTURES CIRCUIT (P) LTD. 220 ITR 43 HELD IT MUST BE SEEN WHETHER IT HAS BEEN PUT TO USE FOR AGRICULTURAL PURPOSES FOR A REA SONABLE SPAN OF TIME PRIOR TO THE DATE OF SALE AND FURTHER WHETHER ON THE DATE OF SALE THE LAND WAS INTENDED TO BE PUT TO USE FOR AGRICULTURAL PURPOSES FOR A REASONABLE SPAN OF TIME IN FUTURE. THE HON'BLE APEX COURT HELD THAT T HE FACT THAT THE AGREEMENT OF SALE WAS ENTERED INTO BY THE ASSESSEE WITH A HOU SING SOCIETY IS OF CRUCIAL RELEVANCE SINCE IT SHOWED THAT THE ASSESSEE HAD AGR EED TO SELL THE LAND FOR ADMITTEDLY NON AGRICULTURAL PURPOSES. THE MERE FACT IS THAT VEGETABLES WERE GROWN IN THE LAND AS STOP GAP ACTIVITY IS NOT CONCL USIVE THAT THE LAND WAS AGRICULTURAL. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GORDHAN BHAI KAHANDAS DALWADI VS CIT 127 ITR 664 TREATED THE LA ND AS AGRICULTURAL BECAUSE THE NATURE IN THE REVENUE RECORD SHOWS THAT THE LAND WAS AGRICULTURAL AND LAND REVENUE WAS PAID FOR AGRICULT URAL USE. NO PERMISSION FOR NON-AGRICULTURAL USE OBTAINED BEFORE THE DATE O F SALE. PRESUMPTION THAT LAND IS AGRICULTURAL MUST BE DISLODGED BY EVIDENCE BY THE REVENUE. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GOPAL C SHARMA VS CIT 209 17 ITR 946 HELD THAT ACTUAL USER OF THE LAND FOR AGRIC ULTURAL PURPOSES IS ONE OF THE CRUCIAL TEST TO DETERMINE AS TO WHETHER THE LAN D IS FOR AGRICULTURAL OR NOT. THE FACT IS THAT THE LAND IS SOLD OR TRANSFERRED TO NON-AGRICULTURISTS FOR NON- AGRICULTURAL PURPOSES OR THAT IT IS LIKELY TO BE US ED FOR NON-AGRICULTURAL PURPOSES SOON AFTER IT IS TRANSFERRED IS ALSO THE R ELEVANT FACTOR GERMEN OF THE ISSUE . THE HON'BLE BOMBAY HIGH COURT HELD THAT LAND WHI CH IS NOT INTENDED FOR AGRICULTURAL PURPOSES IN FUTURE CANNOT BE CONSIDERED FOR NOT CHARGING CAPITAL GAIN ON TRANSFER OF LAND. THE HON 'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS MADHABHAI H PATEL 208 ITR 638 HE LD THAT THE ORDER OF THE TRIBUNAL IS NEITHER UNREASONABLE NOR ERRONEOUS IN L AW WHEN THE LAND WHICH WAS AGRICULTURAL BEFORE THE DATE OF SALE AND SOLD T O COOPERATIVE HOUSING SOCIETY IS TO BE TREATED AS AGRICULTURAL LAND BECAU SE THE ASSESSEE HAS NOT TAKEN ANY PART IN GETTING THE PLOT SUB-DIVIDED INTO SUB-PLOTS OR IN GETTING THE PLANS PREPARED AND PASSED FOR NON-AGRICULTURAL USE. THE HON'BLE APEX COURT IN THE CASE OF SARIFABIBI MOHD. IBRAHIM & OTHERS VS CIT 204 ITR 631 HELD THAT INFERENCE HAS TO BE DRAWN ON A CUMULATIVE CONS IDERATION OF THE RELEVANT FACTS. THE HON'BLE APEX COURT HAS REFERRED TO THE D ECISION OF THE FULL BENCH ANDHRA PRADESH HIGH COURT REPORTED IN 72 ITR 552 IN WHICH EIGHT TESTS WERE LAID TO DETERMINED AS TO WHETHER THE LAND IS A AGRICULT URAL LAND. THE TESTS FROM SERIAL NO. 1 TO 4 REFERRED AT PAGE 139 OF 105 ITR WERE NOT APPROVED BY 18 HON'BLE APEX COURT. THE FIFTH INDICATOR WHICH REFER S TO THE FACT THAT LAND ASSESSED TO LAND REVENUE IS RELEVANT BUT NOT CONCLU SIVE. THE TESTS AT SERIAL NO.6 TO 8 WERE HELD AS MERELY NEGATIVE IN CHARACTER . THE HON'BLE APEX COURT IN THAT CASE HELD THAT LAND CANNOT BE CONSIDERED AS AGRICULTURAL BECAUSE THE ASSESSEE APPLIED AND OBTAINED PERMISSION TO SELL TH E LAND FOR NON-AGRICULTURAL PURPOSES AND THEREAFTER THE LAND WAS SOLD TO THE HO USING SOCIETY. ON THESE FACTS THE HON'BLE APEX COURT HELD THAT THE ASSESSE E IS LIABLE TO CAPITAL GAIN. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS SMT. DEBBIE ALEMAO 331 ITR 59 HELD THAT THE SALE OF LAND IS EX EMPT FROM CAPITAL GAIN BECAUSE THE LAND WAS SHOWN IN REVENUE RECORDS AS AG RICULTURAL LAND AND NO PERMISSION WAS TAKEN BY THE ASSESSEE FOR CONVERSION OF LAND USE. NO AGRICULTURAL INCOME SHOWN IN THE RETURN IS MATERIAL . THE HON'BLE DELHI HIGH COURT IN THE CASE HINDUSTAN INDUSTRIAL RESOURCES LT D. VS ACIT 221 CTR 710 HELD THAT THE TRIBUNAL OUGHT NOT TO HAVE GONE I NTO THE QUESTION OF INTENTION OF THE ASSESSEE OR THE INTENTION OF THE L AND ACQUIRING AUTHORITY. THE LAND WAS ACQUIRED AND THE AWARD WAS MADE BY THE DIS TRICT COLLECTOR(LAND ACQUISITION) TO ESTABLISH THAT THE LAND WAS AGRICUL TURAL LAND. THE FACT THAT THE ASSESSEE INTENDED TO USE THE LAND FOR INDUSTRIA L PURPOSES DID NOT IN ANY WAY ALTER THE NATURE AND CHARACTER OF THE LAND. IT WAS THEREFORE HELD THAT THE LAND IN QUESTION WAS AGRICULTURAL LAND AND CAPITAL GAIN SHOULD BE CHARGED ON 19 ACQUISITION THEREOF. HON'BLE KERALA HIGH COURT IN T HE CASE OF CIT VS KALPETTA ESTATES LTD. 185 ITR 318 HELD THAT BURD EN IS ON THE ASSESSEE TO SHOW THAT LAND WAS AGRICULTURAL LAND ON THE DATE OF SALE. THE DOCUMENTARY EVIDENCE FILED BEFORE THE AO SHOWS THAT PART OF THE LAND WAS CULTIVATED IN THE FINANCIAL YEAR 2004-05 AND 2005-06. THE BALANCE LAND WAS NOT CULTIVATED BUT THE NATURE OF THE LAND WAS AGRICULTURAL. HENCE BEFORE SALE THE LAND WAS AGRICULTURAL EXCEPT THE PART OF THE LAND WHICH WAS BEING USED FOR INDUSTRIAL PURPOSES I.E. FOR THE PROJECT OF WORMI COMPOST. THE ASSESSEE HAS ADMITTED THAT AREA OF SUCH LAND IS TO THE EXTENT OF 60 SQ. F T. THOUGH THE PERMISSION WAS TAKEN FOR 100 TO 200 SQ. FT.. WE THEREFORE HOLD TH AT THE 100 SQ. FT. LAND IS NOT BE CONSIDERED AS AGRICULTURAL. AFTER THE TRANSFER O F LAND THE LAND HAS NOT BEEN USED FOR AGRICULTURAL PURPOSES AS PER COPY OF GIRDA WARI AVAILABLE. THE USE OF LAND HAS NOT BEEN CONVERTED FROM AGRICULTURAL TO IN DUSTRIAL. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS VIM AL CHAND GOLECHA 201 ITR 442 HELD THAT CAPITAL GAIN ON LAND AND BUILDING SHOULD BE SEPARATELY DETERMINED. THE CAPITAL GAIN IS NOT EXEMPT ON BUILD ING. THE CAPITAL GAIN IS ALSO NOT EXEMPT ON TREES PLANTED ON THE LAND. IN RE SPECT OF SHORT TERM CAPITAL GAIN THE LD. CIT(A) HAS NOT RECORDED ANY FINDINGS THOUGH THE AO HAS COMPUTED THE LONG TERM CAPITAL GAIN ON LAND AND THE SHORT TERM CAPITAL GAIN ON OTHER ASSETS. THEREFORE THE ISSUE OF DECIDING T HE SHORT TERM CAPITAL GAIN 20 ON BUILDING AVAILABLE ON THE LAND INCLUDING SWIMMIN G POOL AS WELL AS ON TREES THE MATTER IS RESTORED BACK ON THE FILE OF T HE LD. CIT(A). THERE WILL BE NO CAPITAL GAIN ON THE LAND BY HOLDING THAT LAND IS AGRICULTURAL. HOWEVER LONG TERM CAPITAL GAIN WILL BE COMPUTED BY THE AO O N LAND TO THE EXTENT OF 100 SQ. FT.. WITH THESE DIRECTIONS THE APPEAL IS D ISPOSED OFF. 3.1 NOW WE TAKE THE APPEAL IN THE CASE OF SUNIL KUM AR & SONS (HUF) (ITA NO. 877/JP/2010 ). 3.2 THE FACTS IN THE CASE OF SUNIL KUMAR & SONS (HU F) ARE THE SAME TO THE FACTS IN THE CASE OF M/S. CHANDRA PRAKASH & SON S (HUF). HENCE OUR FINDINGS WILL BE THE SAME AS IN THE CASE OF M/S. CH ANDRA PRAKASH & SONS (HUF). THERE WILL BE NO CAPITAL GAIN ON SALE OF LAN D EXCEPT LAND MEASURING 100 SQ. FT. THE SHORT TERM CAPITAL GAIN IS UPHELD O N SALE OF BUILDING AND TREES. HOWEVER THE COMPUTATION IS RESTORED BACK ON THE FI LE OF THE LD. CIT(A) BECAUSE THE LD. CIT(A) HAS NOT CONSIDERED THE QUANT UM OF SHORT TERM CAPITAL GAIN WHICH IS TO BE INCLUDED IN THE INCOME BECAUSE THE LD. CIT(A) HAS HELD THAT LAND IS AGRICULTURAL. THE AO IN HIS ORDER HAS REFERRED TO APPLICATION FILED FOR PMT REGISTRATION. WITH THIS APPLICATION THE AS SESSEE FILED CERTAIN DOCUMENTS. THE COPY OF SUCH APPLICATION HAS NOT BEE N FILED BY THE ASSESSEE WITH THE PAPER BOOK. IT IS MENTIONED THAT INVESTMEN T IN LAND WILL BE RS. 1.50 LACS. BEFORE THE AO THE ASSESSEE CONTENDED THAT RE GISTRATION WAS OBTAINED 21 FOR 100 TO 200 SQ. FT. AREA. IT HAS BEEN STATED THA T ACTUAL USE OF AREA WAS 60 SQ. FT. SINCE IN THE CASE OF NATURE OF LAND WE HAV E REFERRED TO GIRDAWARI I.E. A DOCUMENT AND THE AGRICULTURAL LAND WHICH HAS BEEN C ONVERTED AS INDUSTRIAL LAND TO PMT REGISTRATION AND THEREFORE THE LAND WH ICH HAS BEEN MENTIONED IN THE APPLICATION WILL HAVE TO BE CONSIDERED AS IN DUSTRIAL LAND. IN THE ABSENCE OF RELEVANT INFORMATION WE ARE UNABLE TO A SCERTAIN THE AREA OF SUCH LAND. THE AO WILL ASCERTAIN THE AREA MENTIONED IN T HE APPLICATION AND SUCH LAND AREA WILL NOT BE CONSIDERED AS AGRICULTURAL LA ND AND SALE TO THAT EXTENT WILL BE LIABLE TO LONG TERM CAPITAL GAIN. THE DOCUM ENTARY EVIDENCE IS TO BE PREFERRED OVER ORAL EVIDENCE AS PER FOLLOWING DECIS IONS. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SHRI OM PRAKASH K JAIN 2009-TIOL -52-HC- MUM HELD THAT DOCUMENTARY EVIDENCE MUST PREVAIL OVE R ORAL EVIDENCE. STATEMENT DURING SURVEY IS EVEN NOT AN ORAL EVIDENCE BUT AN INFORMATION 3.3 ACCORDINGLY WE HAVE DIRECTED TO ACCEPT THAT THE RE WAS AGRICULTURAL OPERATIONS BEFORE SALE OF LAND AND PART OF THE LAND WAS CONVERTED INTO INDUSTRIAL USE AS PER DOCUMENTS FILED FOR THE REGIS TRATION OF PMT. 22 4. IN THE RESULT THE APPEALS OF THE REVENUE ARE PA RTLY ALLOWED.. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28-07 -2011 SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 28 /07/2011 *MISHRA COPY FORWARDED TO :- 1. THE ITO WARD -1 (1) KOTA 2. M/S. CHANDRA PRAKASH & SONS (HUF ) KOTA 3. M/S. SUNIL KUMAR & SONS (HUF) KOTA 4. THE LD. CIT BY ORDER 5. THE LD. CIT(A) 6. THE LD.DR 7. THE GUARD FILE (ITA NO.876/JP /10) A.R ITAT JAIPUR 23 24 25