ITO, Davangere v. Sri. H.V. Rudrappa, Davangere

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE DR. O.K. NARAYANAN VICE PRESIDENT AND SMT. P. MADHAVI DEVI JUDICIAL MEMBER ITA NO.990(BANG)/2010 (ASSESSMENT YEAR: 2005-06) INCOME-TAX OFFICER WARD-1 DAVANGERE. APPELLANT VS. SHRI H.V.RUDRAPPA # 3563 TULASI BUILDING 5 TH MAIN 6 TH CROSS MCC B BLOCK DAVANGERE. RESPONDENT APPELLANT BY: SMT. AMRITA RANJAN. RESPONDENT BY : SMT.SHEETHAL BORKAR. O R D E R PER SMT. P. MADHAVI DEVI JM : THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER OF THE CIT(A) HUBLI DATED 11-6-2010 FOR THE ASSESSMENT YEAR 2005-06. 2. THOUGH THE REVENUE HAS RAISED AS MANY AS EIGHT GROUNDS OF APPEALS THE GRIEVANCE THEREIN IS THAT T HE CIT(A) HAS ERRED IN DECIDING THAT THE PRESCRIBED DISTANCE OF M UNICIPAL LIMITS IN RESPECT OF DAVANGERE IS 5 KMS AND NOT 8 KMS AND THAT IT WAS ITA NO.990(BANG)/2010 PAGE 2 OF 7 A CASE OF COMPULSORY ACQUISITION BY THE GOVERNMENT OF KARNATAKA FOR USE BY THE KARNATAKA HOUSING BOARD (K HB) AND THAT THE ASSESSEE HAS BEEN USING THE LAND IN QUESTI ON FOR AGRICULTURAL PURPOSES THUS SATISFYING THE CONDITION S LAID DOWN U/S 10(37)(III) OF THE OF THE INCOME-TAX ACT 1961 [HEREINAFTER REFERRED TO AS 'THE ACT'] EXEMPTING THE INCOME FROM SALE OF SUCH LAND FROM TAXATION UNDER THE HEAD CAPITAL GAI NS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL WHO FILED HIS RETURN OF INCOME FOR THE R ELEVANT ASSESSMENT YEAR AND CLAIMED EXEMPTION FROM PAYMENT OF CAPITAL GAINS ON THE SALE OF AGRICULTURAL LAND ON T HE GROUND THAT THE SAID LAND IS SITUATED OUTSIDE THE SPECIFIED ARE A AND THEREFORE IT IS NOT A CAPITAL ASSET. THE AO HOWEVER DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S.147 FOUND T HAT AS PER THE NOTIFICATION ISSUED BY THE GOVERNMENT OF KARNAT AKA DATED 12-6-1984 IN RESPECT OF DAVANGERE THE MUNICIPAL LI MITS AND THE LANDS WITHIN A DISTANCE OF 8 KMS FROM THE MUNICIPAL LIMITS ARE CAPITAL ASSETS FOR THE PURPOSES OF COMPUTATION OF L AND REVENUE. HE OBSERVED THAT THE AGRICULTURAL LAND OF THE ASSES SEE WAS WITHIN 5.4 KMS FROM THE MUNICIPAL LIMITS AND THEREF ORE HELD THAT IT IS A CAPITAL ASSET AND ON THE SALE OF THE SAME THE ASSESSEE IS LIABLE TO PAY CAPITAL GAINS TAX AND THE ASSESSEE IS NOT ENTITLED TO EXEMPTION U/S 10(37) OF THE ACT. HE ALSO OBSERVED THAT THE ASSESSEE HAS NOT FULFILLED THE OTHER CONDITIONS MEN TIONED IN SECTION 10(37)(II) OF THE ACT I.E. THAT THE ASSESSE E HAS NEVER ITA NO.990(BANG)/2010 PAGE 3 OF 7 HAD ANY AGRICULTURAL INCOME IN THE IMMEDIATELY PREC EDING TWO ASSESSMENT YEARS AND THE SALE IN QUESTION WAS NOT A CASE OF COMPULSORY ACQUISITION. HE OBSERVED THAT THE TRANS ACTION OF PURCHASE BY KHB WAS REGISTERED AFTER PAYMENT OF STA MP DUTY AND THE REGISTRATION FEES AFTER PROLONGED NEGOTIATI ONS AND THEREFORE IT IS NOT A CASE OF COMPULSORY ACQUISITIO N. HE ACCORDINGLY DENIED THE EXEMPTION U/S 10(37) OF THE ACT. 4. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A) STATING THAT THE CENTRAL GOVERNMENT HAS ISSUED A NOTIFICATION DATED 6-1-1994 WHEREIN DAVANGERE CITY LIMITS IS 5 KMS. IN SUPPORT OF HIS CONTENTION THAT THE ASSESSE E WAS CARRYING ON AGRICULTURAL OPERATIONS THE ASSESSEE F ILED COPIES OF PAHANIS AND SUBMITTED THAT THERE WAS NO SURPLUS INC OME FROM AGRICULTURAL ACTIVITY FROM THE SAID LAND DUE TO WHI CH THE ASSESSEE DID NOT DECLARE AGRICULTURAL INCOME. HE F URTHER SUBMITTED THAT THE SALE DEED WITH KHB WAS EXECUTED AS PER THE REQUIREMENT OF THE ACQUISITION PROCEDURE AND ALSO T O AVOID UNNECESSARY LEGAL LITIGATION BUT IN FACT IT IS DUE TO COMPULSORY ACQUISITION OF LAND BY THE GOVERNMENT. THUS THE LE ARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CONDITI ONS U/S 10(37) OF THE ACT ARE SATISFIED. AFTER TAKING ALL THE ABOVE SUBMISSIONS OF THE ASSESSEE AND THE EVIDENCE FILED BY THE ASSESSEE INTO CONSIDERATION THE CIT(A) ALLOWED THE APPEAL. AGGRIEVED BY THE RELIEF GIVEN BY THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. ITA NO.990(BANG)/2010 PAGE 4 OF 7 5. ONE OF THE GRIEVANCES OF THE REVENUE IS THAT THE CIT(A) HAS ADMITTED ADDITIONAL EVIDENCE WITHOUT GIV ING ANY OPPORTUNITY TO THE AO TO REBUT THE CLAIM OF THE ASS ESSEE AND THUS HE HAS VIOLATED THE PROCEDURES PRESCRIBED UNDE R RULE 46A OF THE IT RULES. SMT.AMRITA RANJAN THE LEARNED DE PARTMENTAL REPRESENTATIVE REITERATED THE OBJECTIONS RAISED BY THE AO IN SUPPORT OF THE SAME. SHE SUBMITTED THAT THE NOTIFI CATION OF THE STATE GOVERNMENT AND ALSO THE ACT CLEARLY LAYS DOWN THAT THE AGRICULTURAL LAND WHICH IS WITHIN THE LIMITS OF 8 K MS. OF THE CITY IS A CAPITAL ASSET AND IS LIABLE TO TAX IF THE SAME IS TRANSFERRED. SHE SUBMITTED THAT THE LAND OF THE ASSESSEE WAS 5.4 KMS. FROM THE CITY LIMITS AND THEREFORE THE ASSESSEE IS NOT E NTITLED TO THE EXEMPTION U/S 10(37) OF THE ACT. SHE ALSO SUBMITTE D THAT THE CIT(A) HAS CONSIDERED THE ADDITIONAL EVIDENCE SUCH AS XEROX COPIES OF PAHANIES TO COME TO THE CONCLUSION THAT T HE ASSESSEE WAS CARRYING ON AGRICULTURAL OPERATIONS WITHOUT GIV ING ANY OPPORTUNITY TO THE AO TO VERIFY THE GENUINENESS OF THE SAME. SMT.SHEETHAL BORKAR THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER HAND SUPPORTED THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE NOTIFICATION ISSUED BY THE K ARNATAKA GOVERNMENT IS FOR THE COLLECTION OF LAND REVENUE WH ILE THE CENTRAL GOVERNMENT HAS ISSUED THE NOTIFICATION FOR THE PURPOSE OF THE ACT AND THEREFORE THE CIT(A) HAS RIGHTLY CON SIDERED THE CENTRAL GOVERNMENT NOTIFICATION FOR COMING TO THE C ONCLUSION THAT IT IS OUTSIDE THE LIMITS OF 5 KMS OF THE CITY LIMITS AND THE ITA NO.990(BANG)/2010 PAGE 5 OF 7 ASSESSEE IS ENTITLED TO THE DEDUCTION U/S 10(37) OF THE ACT. AS REGARDS THE OTHER CONDITIONS THE LEARNED COUNSEL F OR THE ASSESSEE DREW OUR ATTENTION TO THE FINDINGS OF THE CIT(A) THAT IT WAS A CASE OF COMPULSORY ACQUISITION BY THE GOVERNM ENT OF KARNATAKA FOR THE USE BY THE KHB AS IS OBVIOUS FROM THE PUBLIC NOTIFICATION ISSUED BY THE KARNATAKA GOVERNMENT AS REGARDS COMPULSORY ACQUISITIONS OF LANDS BELONGING TO THE F ARMERS WHEREIN THE NAME OF THE ASSESSEE IS APPEARING IN SL .NOS.184 AND 185. THUS ACCORDING TO HER THE ORDER OF THE CIT(A) NEEDS NO INTERFERENCE. 6. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THE RIVAL CONTENTIONS WE FIND THAT THE ONLY ISSUE IS WHETHER THE ASSESSEE FULFILS THE CONDITIONS U/S 10(37) OF THE A CT. THE CONDITIONS TO BE SATISFIED ARE THAT: I. THE AGRICULTURAL LAND SHOULD BE OUTSIDE THE MUNICIPAL LIMITS AS SPECIFIED BY THE CENTRAL GOVERNMENT; II. THE ASSESSEE SHOULD HAVE BEEN CARRYING ON THE AGRICULTURAL OPERATIONS WITHIN TWO YEARS IMMEDIATELY PRECEDING THE DATE OF TRANSFER; III. SUCH TRANSFER IS BY WAY OF COMPULSORY ACQUISITION UNDER ANY LAW; AND ITA NO.990(BANG)/2010 PAGE 6 OF 7 IV. ANY SUCH INCOME HAS ARISEN FROM THE COMPENSATION CONSIDERATION FOR SUCH TRANSFER RECEIVED BY SUCH ASSESSEE ON OR AFTER 1-4-2004. WE FIND THAT THE CIT(A) HAS EXTENSIVELY CONSIDERED THE EVIDENCE FILED BY THE ASSESSEE TO COME TO CONCLUSION THAT TH E ASSESSEE HAS FULFILLED ALL THE ABOVE FOUR CONDITIONS. THE E VIDENCE FILED BY THE ASSESSEE BEFORE THE CIT(A) ARE ALL NOTHING BUT THE NOTIFICATION OF THE CENTRAL GOVERNMENT PRESCRIBING THE CITY LIMITS AND THE STATE GOVERNMENT NOTIFICATION ACQUIRING THE LAND OF THE ASSESSEE. THE POWERS OF THE CIT(A) ARE CO-TERMINUS WITH THAT OF THE AO AND THEREFORE HE HAS THE POWER TO LOOK IN TO THE EVIDENCE FILED BY THE ASSESSEE AND CONSIDER THE SAM E FOR GRANTING RELIEF TO THE ASSESSEE. AS REGARDS THE CO NDITION THAT THE ASSESSEE SHOULD HAVE CARRIED ON THE AGRICULTURA L OPERATIONS DURING THE PERIOD OF TWO YEARS IMMEDIATELY PRECEDIN G THE DATE OF TRANSFER THE ASSESSEE HAS FILED XEROX COPIES OF THE PAHANIS BEFORE THE CIT(A) WHICH ARE ALSO PART OF LAND REVEN UE RECORDS WHICH ARE THE EVIDENCE FOR THE AGRICULTURAL OPERATI ONS CARRIED ON BY THE ASSESSEE. MERELY BECAUSE THE ASSESSEE HAS NOT DECLARED AGRICULTURAL INCOME IT CANNOT BE SAID THA T THERE WERE NO AGRICULTURAL OPERATIONS AT ALL. IN VIEW OF THE SAME WE ARE SATISFIED THAT THE ASSESSEE HAS FULFILLED THE CONDI TIONS LAID DOWN U/S 10(37) OF THE ACT AND THE CIT(A) HAS PROPERLY A PPRECIATED ITA NO.990(BANG)/2010 PAGE 7 OF 7 THE SAME. IN VIEW OF THE SAME WE CONFIRM THE ORDE R OF THE CIT(A) AND THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY 2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE PRESIDENT (SMT. P.MADHAVI DEVI) JUDICIAL MEMBER EKS COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) CONCERNED 4. CIT 5. DR ITAT BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE