Chand Prabha Jain v. Cit, Income Tax Appellate Tribunal, Judgment, Law, casemine.com

Precedent	Rule or Principle Cited For	Application by the Court
CIT of Wealth Tax v. Officer Incharge (Court of Wards), 105 ITR 133 (SC)	Broad propositions: (i) capability alone to be used for agriculture is insufficient to make land agricultural; (ii) actual agricultural purpose/use is required rather than mere possibility; (iii) determination is fact-specific.	The decision was cited by the parties. The Court recognized these broad propositions as part of the jurisprudential background; the opinion discusses them in the context of evaluating factual signs of actual agricultural use.
Smt. Sarifabibi Mohmed Ibrahim v. CIT, 204 ITR 631 (SC)	Supreme Court laid down 13 factors/tests to decide whether land is agricultural in character; provides a methodology to evaluate cumulative facts.	The Court applied the Sarifabibi framework: it considered the 13 tests and concluded that the cumulative effect of those tests favoured the assessee (i.e., the land retained agricultural character on the date of sale).
CIT v. Satinder Pal Singh (CIT II, Ludhiana) — Punjab & Haryana High Court (citation as relied in text)	Principle that distance for s.2(14)(iii) must be measured by approach by road (motorable distance) and not merely straight-line/crow-flight distance.	The Court accepted and applied this principle: it held that distance must be measured by approach by road and used this principle in assessing evidence about whether the land was beyond 8 km on the date of sale.
Hindustan Industrial Resources Ltd. v. ACIT, 355 ITR 77 (Jurisdictional High Court)	Holds purchaser's intention (and intention to use land for non-agricultural purposes) is irrelevant to change the character of land; non-cultivation alone does not alter character where record shows agricultural nature on relevant dates.	The Court relied on these observations to emphasize that purchaser's intention is irrelevant and non-cultivation for a period does not per se change character; used to support assessee's contention that character remained agricultural.
CIT v. Gemini Pictures Circuit (P.) Ltd., 220 ITR 43 (SC)	Authority addressing character of land in the context of an urban (Madras city) setting (cited by revenue).	The Court noted the precedent but found it distinguishable on facts (Gemini involved land in the heart of Madras city; not comparable to the present facts).
Kalpatta Estates Ltd. v. CIT, 185 ITR 318	Establishes onus on assessee to prove entitlement to exemption; considers agricultural purpose at the time of sale important; historical use not decisive if no agricultural operations carried out.	Court noted the principle but distinguished the case on facts: in Kalpatta the land had no agricultural operations and was forest land; here Khasra/Girdawari and other evidence indicated historical agricultural use by the assessee.
Gopal C. Sharma v. Commissioner of Income-Tax, 209 ITR 946 (Bom)	Holds that prolonged non-use for agricultural purposes and context of surrounding use are important; non-use for long period is a crucial factor.	The Court acknowledged the precedent but held it distinguishable on the facts presented (assessee had been using the land for agriculture for a substantial prior period and the facts did not mirror those in Gopal Sharma).
Mahaveer Enterprises v. UOI, 244 ITR 789 (Rajasthan)	Observation that land measured in yards and treated as plotted/yardage suggests trading/stock-in-trade character; loss of agricultural character where converted into plots.	The Court recorded that the revenue relied on this judgment, but the assessee and the Court treated it as distinguishable: that case concerned land treated as trading stock/plots; here sale deed and records described land as agricultural.
M.K. Abdul Rehman v. K.M. Anees-ul-Haq, 49 SOT 206 (Cochin)	ITAT decision on related issues of land characterization (relied upon by revenue).	Cited by the revenue. The Court treated the precedent as distinguishable in the factual matrix of the present case (revenue's comparison not accepted on facts).
Suresh Kumar D. Shah v. DCIT, 49 SOT 341 (Hyd)	ITAT decision on characterization of land (relied by revenue).	Cited by the revenue. The Court treated the ITAT decision as not applicable on these facts (distinguished by reference to factual differences recorded in the rejoinder).
Deoki Nand & Sons (2001) 115 Taxman 513 (Delhi HC)	Held that Faridabad Administration Complex (under relevant statute) was akin to a municipality for purposes of section 2(14)(iii)(a) (cited in debate whether HUDA/LDA amounts to a municipal body).	The Court recorded the decision; it also recorded contestation between parties on whether HUDA/LDA should be treated as municipal body. Ultimately the Court held that the decision was distinguishable on facts and that the land-character question must be decided by applying the Income-tax Act criteria.
CIT v. Shashiben, 288 ITR 319 (Guj)	Authority cited by assessee for principle that entries in revenue record showing agricultural use give rise to a presumption of agricultural character.	The Court accepted the relevance of revenue records (sale deed, Khasra-Girdawari) as supportive evidence that the land was agricultural and treated this as a factor favouring the assessee.
CIT v. Manilal Somnath, 106 ITR 917 (Guj)	Another authority cited by the assessee supporting the proposition that revenue records indicating agricultural use carry evidentiary weight.	The Court accepted that revenue entries indicating agricultural character are prima facie evidence and considered this in the cumulative evaluation under the Sarifabibi tests.
Dr. Motibhai D. Patel v. CIT, 127 ITR 671	Authority cited by the assessee to support presumption in favour of agricultural character where revenue records indicate such status.	The Court noted the authority as supporting the assessee’s position that revenue records create a rebuttable presumption; used this as part of the fact analysis.
M.S. Srinivasa Naicker v. ITO, 211 CTR 222 (Mad)	Authority that purchaser's intended use is an irrelevant consideration in deciding the character of land.	The Court relied on the principle (cited in rejoinder) that purchaser's intended use is irrelevant; this supported the Court's conclusion that purchaser intention did not alter character on the sale date.
Goodyear India Ltd. v. State of Haryana, 188 ITR 402 (SC)	General principle on the effect/authority of a decision (cited by assessee for narrow application of precedent as authority only for what it decides).	The Court accepted the submission that a precedent should be applied for what it actually decides; used in its analysis of distinguishing the cases cited by revenue.
Padmasundara Rao v. State of Tamil Nadu, 255 ITR 153	General authority cited about limits of what a decision stands for (cited by assessee).	The Court noted the submission and relied on this approach to treat earlier decisions in a fact-specific manner when distinguishing authorities relied upon by the revenue.
CIT v. Sun Engineering Works P. Ltd., 198 ITR 297 (SC)	General authority on the scope of precedents (cited by assessee).	The Court used the general proposition regarding application of precedent narrowly when considering the positions advanced by the parties and distinguishing case law.
ITO v. Smt. Gurinder Kaur, 102 ITD 189 (Del)	Tribunal decision relied upon by assessee for principles on application of precedents and evidentiary issues.	Cited in submissions; the Court used the broader point about narrow application of precedents when distinguishing the revenue's authorities on facts.
Kalpatta Estates Ltd. (also cited as (1992) 61 Taxmann 54 (Ker); 185 ITR 318)	Principle that burden is on the assessee to prove exemption and that agricultural purpose at the time of sale is decisive.	The Court noted the authority and distinguished it on facts, recording that the factual matrix in Kalpatta (forest/non-cultivated land) differs from the evidence before the Court (Khasra/Girdawari and sale-deed entries).

B.C Meena, A.M:— Both these appeals filed by the assessees emanate from the order of the CIT (Appeals)-XXV, New Delhi, both dated 31.10.2011 Since the issue involved in both the appeals is common, therefore, for the sake of convenience, both the appeals are disposed off by this common order.

2. The grounds of appeal which are common in both the appeals read as under:—

“1. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in confirming the assessment framed by the learned Assistant Commissioner of Income Tax, Circle - 29(1), New Delhi.

2. That the learned Commissioner of Income Tax (Appeals) has erred while confirming the order of assessment and in failing to hold that the Assessing Officer was not justified either on facts or in law to have made addition of Rs. 8.36 crores as a long term ‘capital gain’ in respect of gain arising on the transfer of an ‘agricultural land’, within the meaning of section 2(14)(iii)(b) of the Income Tax Act, 1961.

3. That the learned Assistant Commissioner of Income Tax has failed to appreciate that, the assessee had transferred the land which fell to his share on the death of his father who had acquired the said land in the year 1995-1996 as an agricultural land and continued to remain as such with him too and such a land being not a capital asset, as defined in section 2(14)(iii)(b) of the Income Tax Act, 1961 could not be held to be a capital asset more particularly when no attempt had been made for the change of user.

4. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that, the land held by the assessee was situated in a village Tigra measured 25 kanals and 3 marlas i.e about 15000 sqr. yds. and could not be treated to be non-agricultural land or an urban land.

5. That the finding of the learned Commissioner of Income Tax (Appeals) in the appellate order that the assessee had failed to establish the land held by the assessee was an agricultural land is misconceived and such a finding has been reached in an arbitrary manner and in disregard of the evidence brought on record by the assessee in the shape of Khasra, Girdwari etc.

6. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the assessee had lead sufficient evidence including of the fact that, had it not been an ‘agricultural land’, such value of land would have been held as an ‘asset’ within the meaning of section 2(ea) of the Wealth Tax Act and would have been brought to tax under Wealth Tax Act. The learned Commissioner of Income Tax (Appeals) thus fell in error, in holding that the assessee had failed to discharge his onus. On the contrary he failed to comprehend that, the burden lay upon the learned Assessing Officer to establish that the land held by the assessee was not an ‘agricultural land’, within the meaning of section 2(ea) of the Wealth Tax Act.

7. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that, the assessee had demonstrated that the such land was actually used for the agricultural purpose and various crops were produced on the said land and was reflected in the various records maintained by the Patwari namely Girdwari etc. which is primary records and could not have been brushed aside.

8. That the learned Commissioner of Income Tax (Appeals) fell into an error both on facts and in law, in placing a reliance of the judgment of Rajasthan High Court, reported in 244 ITR 789, in the case of Mahaveer Enterprises v. UOI, wherein the petitioner has challenged the constitutional validity of tax as an agricultural income. In the instant case, the assessee is contending the land held by him was not a capital asset within the meaning of section 45 of the Act as define in section 2(14)(iii)(b) of the Income Tax Act, 1961.

9. That the authorities below have failed to appreciate that the assessee had lead an un-rebutted evidence that the measurement of distance of land situated from Badshahpur Ghata Road was beyond 8 K. Ms. and the certificate obtained by the Assessing Officer showing the distance of 7.7 K. Ms., was on the basis of Badshahpur Ghata road which did not exist on the date of transfer (when the sale took place) as, such a road was only completed in September 2008 and was not in existence on 6 September 2007.

10. That the learned Commissioner of Income Tax (Appeals) has further erred in sustaining levy of interest u/s. 234B of the Income Tax Act, 1961.

It is thus prayed that the addition sustained by the learned Commissioner of Income Tax (Appeals) of Rs. 8.36 crores be deleted and it be held that no interest u/s. 234B of the Income Tax Act, 1961 was leviable.”

3. In both the appeals, the issue involved is whether the land sold was a capital asset or not within the meaning of section 2(14)(iii)(b) of the Income-tax Act, 1961 (Act). The main dispute is that whether or not the impugned land situated in Village Tigra adjoining to Village Samspur in the Tehsil of Gurgaon at the time of sale was beyond 8 kms. from municipal limits of Gurgaon. The assessee put forth the contention that such land was not a capital asset within the meaning of Section 2(14)(iii)(b) of the Act as it was located beyond 8 kms. from the municipal limits of Gurgaon and in support of such contention the assessee has relied on the certificate dated 13.10.2010 issued by the Patwari and Tehsildar which is placed at page 106 of the paper book. The assessee also relied on the computer generated printout of road direction maps, which are placed at pages 127 & 128 of the paper book. As per these direction maps, the distance of Sector 15, Part 2, Gurgaon and Kanhai Village is 4.7 Kms. (Evident page 127) and distance from village Kanhai to village Tigra is 4.4 Kms (evident from Page 128). All these documents were filed before A.O as well as CIT(A). Ld. AR also submitted that the assessee has submitted a certificate. Revenue did not believe the same and obtained another certificate from the Tehsildar. As per this the distance of the land from municipal limit of Gurgaon shown at 7.7 Kms. The CIT(A) has upheld the order of Assessing Officer. The learned AR also submitted that to determine the distance of the land sold, the same has to be measured with regard to the motorable travel of the situation of the land from the municipal limits. The road distance of the village to the municipal limits is to be measured on the basis of the records maintained under the Punjab Revenue Act. This fact has also been observed by the ITAT in order dated 16.12.2011 while granting the stay of demand to the assessee. The Ld. AR submitted that the assessee is able to demonstrate that the road distance on the date of sale was more than 8 kms., which is calculated on the basis of records on the straight line method and the motorable distance comes to 9.5 kms. A.O's findings have been recorded on the basis of another certificate obtained from Patwari and countersigned by the Tehsildar. This certificate is based on the road (Ghata to Badshahpur) which was not in existence at the time of sale of the land. Ld. AR further submitted that the Assessing Officer's claim is unsubstantiated while the assessee has established by the actual measurement of the distance which is worked out on the basis of existing road at the time of sale and the village revenue record. The Assessing Officer has obtained such confirmation by recording the statements of Shri Jagdish Chander, Patwari dated 22.11.2010, Shri Pankaj Setia, Tehsildar dated 02.12.2010 and Shri Vijay Kumar Naib, Tehsildar dated 03.12.2010, placed at pages 107 - 109, 110 -112 and 113 - 115 respectively. Even in these statements, Shri Jagdish, Patwari in answer to question nos. 4 & 5 has given an estimated distance by stating that the land in question was 7 - 8 kms. from the municipal corporation limit. Shri Jagdish Chander, Patwari has also not stated the population of the Village Tigra. Similarly, the Tehsildar, Shri Pankaj Setia has also shown his ignorance that whether the land is situated in the municipal limit or not. Shri Setia has also stated that on the basis of photostat copy of the certificate, he cannot comprehend whether it is issued by our office or not. The statement that certificate was not issued by him has no adverse inference as it was counter signed by Shri Vijay Kumar Naib, Tehsildar and not by Shri Setia. Only for reason that Shri Setia was confronted on the basis of a photocopy, he could not comprehend whether it was issued by his office or not. In the statement, Shri Vijay Kumar, Naib Tehsildar has also not stated about the distance of the village from municipal corporation, Gurgaon. Ld. AR also submitted that subsequent statements recorded by the Assessing Officer are vague and unspecific and are also not based on any valid material. These statements are contrary to the certificate dated 13.10.2010 where the distance stated to be approximately 8.5 kms. On the basis of these statements, the Assessing Officer has abruptly obtained a certificate without any basis and without any material despite the fact that the distance as per the record maintained under the Punjab Revenue Act is 9.3 kms. on the basis of motorable road at the time of sale of the land. Ld. AR relied on the decision of Hon'ble Punjab & Haryana High Court in the case of CIT II, Ludhiana v. Satinder Pal Singh for the proposition that the distance of the agriculture land had to be measured in terms of the approach by road and not by a straight line distance on a horizontal plane or as per crow flight distance. The certificate obtained by the Assessing Officer is based on the fact that Mustil No. 35, Kila No. 6 which is in Mauza Tigra is near the road between Ghata to Badshahpur despite the fact that there was no such road on the date of sale. The road Ghata to Badshahpur was constructed much beyond the date of sale of land. The distance on the date of sale by approach road was much more than 8 Kms. Ld. AR submitted that the original certificate issued regarding the distance is correct. There was no valid material to arrive at the distance lesser than that. Further the distance mentioned in the subsequent letter by the Patwari was based on the road Ghata to Badshahpur while this road was not in existence at the time of sale of the land. This certificate was issued on 07.12.2010 Ld. AR further pleaded that the ACIT failed to comprehend that the said road, on which the second certificate is based, was not in existence on the date of the sale of the land and this road was completed only in September, 2008 which is evident from page 254 of the paper book which is a letter issued by the Executive Engineer, HUDA Division No. I, Gurgaon addressed to Smt. Geetika Singhvi dated 02.11.2011 As per this letter the road work from Badshahpur to Ghatta village completed in September, 2008. The sale of the assessee's agriculture land took place on 06.09.2007 Thus, the road came into existence after about one year. The Ld. AR pleaded that reliance of the ACIT on the said report is improper and incorrect in law. In fact, the assessee has placed on record before the Assessing Officer computer printouts of the situation of the Village Tigra. As per these printouts, the distance from the municipal limits to Village Kanhai by road as existed was 4.7 kms. and distance by the then road existed at the time of sale of the land, from Village Kanhai to Village Tigra was of 4.4 kms. Thus, the distance of Village Tigra from the municipal limits as per the then existed road was 9.1 kms. and not 7.7 kms. Ld. AR also pleaded that further distance of the land in question was one more kilometer from Village Tigra on the date of sale. The distance shown in the Shizra's maintained as per the Punjab Revenue Act is to be reduced by 0.7 Kms. on account of the shortening of the road, thus the actual distance of the land at the time of the sale as per revenue shizra was 9.260 kms. Ld. AR also pleaded that in view of the decision of Punjab & Haryana High Court in the case of CIT v. Satinder Pal Singh cited supra, the distance has to be measured on the basis of approach by road. On the basis of approach by road, the distance comes to 8.40 kms. Ld. AR also pleaded that the road situated between Badshahpur to Ghata Village was completed only in September, 2008. This fact was also brought to the notice of Assessing Officer. The second certificate obtained by the Assessing Officer was based on the basis of Badshahpur to Ghatta road. The authorities below have committed a fundamental error by holding that there is a distance of less than 8 kms. Such conclusions are based only on assumption and on the wrong basis that there was a motorable road in existence between Ghata to Badshahpur at the time of sale of land, whereas there was no such road existed at that time, as is evident form the letter dated 02.11.2011 issued by the Executive Engineer, HUDA, Division No. 1, Gurgaon.

4. On the other hand, the Ld. DR submitted as under:—

“Solitary issue in these cases is whether land is to be considered as capital asset or not and as a consequence there of whether land sale should be subjected to capital gains tax or not. Capital Asset is defined by section 2(14) of the LT. Act. This section defines capital assets to be property of any kind subject to three exceptions provided there in. As far as the present case is concerned, the issue to be decided is whether subject land can be classified as capital asset or it falls in the exception and, therefore, cannot be classified as capital asset.

Provision of section 2(14) makes it clear that for any person to claim capital asset exemption, following three conditions are required to be satisfied.

1. The land has to be “agricultural land”.

2. Land should not fall in the jurisdiction of a municipality etc known by municipality or known by any other name and the area in which land falls should not have a population of more than 10,000.

3. Third condition which is required to be satisfied is that this land should be outside 8 Kilometers or more of such municipality etc in accordance with notification issued by the Central Govt. It is undisputed that in the present case required distance notified is 8 Kilometers as per Notification issued by Central Govt.

It is re-emphasized here that satisfaction of all the three conditions is essential to claim the benefit of exemption from Capital Gains Tax. The person has to, therefore, satisfy all the three conditions. It is, therefore, essential to examine all the three conditions independently in the case of the assessee.

4.1 On the issue of whether land under consideration was an “Agricultural land or not ld. DR submitted as under:—

“It is undisputed fact that “land” is a State subject and the usage to which a particular land can be put is exclusively in the domain of the State Govt. In the present case, land falls in the State of Haryana. In the State of Haryana there are three important legislations which deal with the manner in which land is used.

(i) Punjab Scheduled Roads and Controlled Areas Restriction of Un-regulated Development Act 1963. (Here-in-after called Land Control Act 1963)

(ii) Haryana Development and Regulations of Urban Area Act 1975.

(iii) Haryana Urban Development Authority Act 1977 - (Here-in-after called HUDA Act 1977)

The first Act i.e Land Control Act 1963 empowers the State Govt. through the Director Town & Country Planning to declare areas around the scheduled roads enumerated in the Act or in other area which has potential for urbanization to be declared as “controlled area”. Once any area is declared as “controlled area” land use in that particular area is controlled and has to be in accordance with the plans made by Director of Town Country Planning or any other person so authorized. As far as the present case is concerned land in question fell in the “controlled area” is not disputed.

Controlled Area is defined as below as per this Act:

Declaration of controlled Area (section -4)

The Government may, by notification in the Official Gazette, declare any area outside the limits of municipal town or any other area, which in its opinion has the potential for building activities, industrial, commercial, institution, recreational estates/activities and uses subservient to the above to be controlled area for the purposes of this Act.

The Government shall also cause the contents of the declaration made under sub-section (1) to be published in at least two newspapers printed in a language other than English.

Subsequent to the declaration of “Controlled Area” Director Town Country Planning is required to make “Zoning Plans” for the “confirming use” of land. The” Zoning Plan” specifies w.r.t the” controlled area” which land will be put to what permitted use. The detailed procedure which is to be adopted has been laid down in the Act itself from section 3 to section 9. The land usages prescribed are residential, commercial and institutional and so on and so forth.

In the appellants' case, the area in which assessee's land fell ‘Final Development Plan’ Notification was issued on 5.2.2007 a date much prior to the date of sale of land. Copy of this Notification is enclosed with this synopsis as Annexure-‘A’. The Zoning and layout drawing mentioned in this notification has been enclosed by the assessee in its paper book. The drawings very clearly lays down the following usages permitted by the Authorities in Gurgaon Manesar Urban Complex-20-21 AD notified by the aforesaid Notification. The usages permitted by the aforesaid drawing are as below:—

100 Residential (Ground Housing/Plotted).

200 Commercial

300 Transport & Communication

500 Public Utilities

600 Public & Semi Public Use

700 Open Spaces

800 Agricultural Zone

900 Special Area.

A look at the “Final Development Plan” drawing would reveal that appellants' land which is subject matter for consideration fell in sector 65 of Gurgaon and that too in the Commercial Area, which is the most valuable approved use of land. In Sector 65 Gurgaon as a whole, only usages which are permitted are commercial and residential and no other usage is permitted. Agricultural use is Not Permitted in this entire sector leave along appellants' land.

The appellants' land, therefore, as per the Notification issued by Haryana Govt. under Punjab Land Controlled Act, 1963 on the date of sale was undisputedly commercial land. This is the reason that it was sold at the rate of more than 8 crores per acre. Non Confirming use of Land and consequences thereof are also defined in this Notification (supra) as below:

(m) ‘Non-conforming use’ in respect of any land or building in a controlled area means the existing use of such land or building which is contrary to the major land use specified for that part of the area in the development plan;

X. Discontinuance of non conforming uses:—

(1) If a non-conforming use of land has remained discontinued continuously for a period of two years or more, it shall be deemed to have been terminated and the land shall be allowed to be re-used or redeveloped only according to the conforming use.

The Appellants have admitted and also as evidenced by Khasra Girdawari in the Paper Book filed by assessee that no agricultural activity/production took place at least two years prior to the date of sale. Beyond these two years also there is no evidence in terms operations/incomes to indicate agricultural activities. Otherwise also the appellants are non agriculturist by profession. On account of non confirming use of non agricultural purposes for two years the appellants could only subject the land to confirming use as per the notification under consideration which is non agricultural.

As per the further scheme of law once land is declared as controlled land and zoning restriction/plans are notified, the land IS subjected to further development by Haryana Urban Development Authority constituted under 1977 HUDA Act here-in after called HUDA. As per the Act, HUDA is required to make detailed sector plans in accordance with the zoning restriction and develop roads, sewage, electricity and other urban civic facilities. HUDA is also expected to control building construction activities and usage of land as per the notified Zoning plans.

In the paper book documents with respect to Khasra Girdawari has been placed. Khasra Girdawari gives details of the crops grown as observed by the Patwari of the area. The statement submitted by the assessee himself givers Khasra Gindwari details as per Jamabandi carried out in the year 2001-2002. As per this document submitted by the assessee in Paper Book the appellants are shown to be cultivating the land himself and there was no cultivation of the crop during at least two years prior to the date of sale land. This document establishes that the land was not subjected to agricultural operations by the assessee. Further the appellants have not produced any evidence that he himself being non-agriculturalist how he could ever himself carry out agricultural operations. No evidence whatsoever with respect to purchase of seeds/purchase of agricultural equipment or irrigation/source of irrigation etc were produced. No agricultural income has been shown by the assessee in his/her return of income. This go on to prove without any doubt that the land was not put to agriculture use.

Land in question as per the sale deed submitted by the appellants in the paper book was roughly measuring 42 kanals (1 acre approx. = 8 kanals) as originally purchased. In the sale deed itself it has been mentioned that part of the land was acquired by HUDA as far back as year 2000. This is yet another conclusive proof of development of area and the fact of its being controlled area. Out of the remaining land, land of around 1 acre was sold as far as back year 2004 to another builder called ATS Property Pvt. Ltd. This is also an indicator of the actual usage of land in the year 2004. The appellants were left with land measuring just about 3 acres.

In the aforesaid factual and circumstantial background judicial precedents on the aforesaid subject are required to be looked into to cull out principles/propositions/guidelines on the issue and then to determine whether the land was agricultural land or not?”

Ld. DR also relied on the order of the Hon'ble Supreme Court in the case of CIT of Wealth Tax v. Officer Incharge (Court of Wards) reported in 105 ITR 133 (SC) and pleaded that in that case, Hon'ble Supreme Court analysed the subject matter in totality and has held the broad propositions that (i) If land which is capable of being subjected to agriculture process can be held to be agricultural land then in that case practically every type of land including that covered by building would be eligible to be called agricultural land and this would obviously defeat the purposes of exemption given; (2) What is really required to be shown while deciding the matter is as to what is the actual agricultural purpose and usage and not the mere possibility of usage of land; and (3) The determination of the character of a land is a matter which ought to be determined on the facts of which particular. The Ld. DR also relied on the decision of Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim v. CIT reported in 204 ITR 631 (Hon'ble Supreme Court) and the Ld. DR pleaded that the Hon'ble Supreme Court revisited the issue in depth and after analyzing several cases including Sidharth J. Desai case reported in 139 ITR 628 (Guj.), evolved 13 factors which should be applied before the question, whether the land is agricultural land or not is answered. The Hon'ble Supreme Court has not only laid down 13 parameters/guidelines and also applied the methodology on the facts in the case of Safidabibi under consideration and held the land to be non-agricultural land. Ld. DR also relied on the decision of Hon'ble Supreme Court in the case of CIT v. Gemini Pictures Circuit (P.) Ld. - 220 ITR 43. Ld. DR also relied on the decision of Kalpatta Estates Ltd. - 185 ITR 318 for the following proposition:—

“1. Onus is on the assessee to prove that he is eligible for exemption from being taxed for capital gains. The assessee has grossly failed in discharging his onus. On the contrary, evidences relied by the assessee has been established to be incorrect by AO. The AO carried out enquiries with the competent authorities and they have evidenced the contrary.

2. Agricultural purpose at the time of sale is to be taken into consideration. Historical/Prior agricultural use is not important. As evidenced by Khasra Girdawari the assessee was not undertaking any agricultural activity at least two years prior to the date of sate.”

Ld. DR also relied on the decision of Hon'ble Bombay High Court in the case of Gopal C. Sharma v. Commissioner Of Income-Tax. - 209 ITR 946 for the proposition that factum of non-using of land for reasonable span of time and date of transfer is a crucial factor for determining of issue as to whether the same is agricultural land. Ld. DR also relied on the decision of Hon'ble Rajasthan High Court in the case of Mahaveer Enterprises v. UOI - 244 ITR 789 for the following proposition:—

“……..That agricultural land is not measured in yards and the very nature of measurement suggests that the intention of the petitioner was trading activity in land. That being the position, the stock-in-trade in terms of land measured in yards suggests that the land was never intended to be used for agricultural purpose when it was brought into the partnership assets, it was converted into the plots and it had been given measurement in yards. That being the position, the land ceased to have the character of the agricultural land used for agricultural purpose. Since the land has lost the character of agricultural land used for agricultural purpose, the reading down applied by the Bombay High Court of the Explanation inserted in the 1970 offers no guideline as the land has lost its character of being an agricultural land.”

Ld. DR also relied on the recent decision of ITAT Cochin Bench dated 21.10.2011 in the case of M.K Abdul Rehman reported in 49 SOT 206. Ld. DR also relied on the decision of ITAT, Hyderabad Bench ‘B’ in the case of Suresh Kumar D. Shah reported in 49 SOT 341. Ld. DR finally pleaded that to decide the type land, parameters laid down in the case of Hon'ble Supreme Court in Sarifabibi, cited supra have to be considered by a process of evaluation and inference has to be drawn on a cumulative consideration of all relevant facts.

Ld. DR submitted that HUDA should be considered as Municipal or local body for the purpose of Section 2(14)(iii) of IT Act. For this Ld. DR submitted as under:—

“Second issue is whether HUDA (Haryana Urban Development Authority) can be considered to be a Municipal Corporation or similar other body. HUDA is a very powerful body which is headed by Haryana Chief Minister. It is State Government, PSU and Urban Municipal Body all rolled into one. HUDA Act, 1977, is needed to be perused to resolve this issue. This act was brought in to provide for the establishment of an Urban Development Authority for undertaking urban development and the Local Development Authority for the development of local area in the State of Haryana and for the matters ancillary there to. Object clause reads as below:

Act to provide for the establishment of an Urban Development Authority for undertaking urban development and the Local Development Authority for the development of local area in the State of Haryana and for matters ancillary thereto.

Section 2(y) of this Act defines “Urban Area”.

(y) “urban area” means—

(1) the area comprised within the jurisdiction of any local authority and also any such area in the vicinity as the state Government may, having regard to the extent of and the scope for, the urbanization of that area or other relevant considerations, specify in this behalf by notification; and

(2) such other area as the states Government may, by notification declare to be an urban area, which in the opinion of the state Government is likely to be urbanised and includes any area declared as controlled area under the provisions of the Punjab Scheduled Roads and controlled Areas Restriction of Unregulated Development Act, 1963, or the Faridabad Complex (Regulation and Development) Act, 1971”

The definition unambiguously lay down that the area notified under the 1963 Act to be Urban Area. The land in question, is therefore, ‘Urban Area land as per HUDA Act 1977 also.

Local authorities is defined as per section 2(n) of the Act: It may be noted that HUDA is added to the definition of local authority.

(n) “local authority” means a municipal committee, a notified area committee a Town Improvement Trust, the Faridabad Complex Administration the Haryana Urban Development Authority or other authority legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund;

Section 13 of the Act defines object and functions of the HUDA Authority. The object and function are as below:

Section 13

The objects of the Authority shall be to promote and secure the development of all or any of the areas comprised in the urban area and for that purpose, the Authority shall have the power to acquire by way of purchase, transfer, exchange or gift, hold, manage, plan, develop and mortgage or otherwise dispose of land and other property, to carry out of itself or through any agency on its behalf, building, engineering, mining and other operations, to execute works in connection with supply of water, treatment and disposal of sewage, sullage and storm water, control of pollution and any other services and amenities and generally to do anything, with the prior approval, or on direction, of the State Government, for the purpose of this Act.

From the object and purposes of the act, it is clear that HUDA was doing all the functions which a municipal body is required to do.

Section 29 of the Act declares that the HUDA Authority may transfer his responsibility to local bodies in certain cases.

Section 29

Where any area has been developed by the Authority, the Authority may entrust the local authority discharging municipal function, within whose local limits the area so developed is situated, with the responsibility for the maintenance of the amenities which have been provided in the area by the Authority and for the provisions of the amenities which have not been provided by the Authority but which in its opinion should be provided on terms and conditions agreed upon between the Authority and the local authority and where such terms and conditions cannot be agreed upon, on terms and conditions settled by the State Government in consultation with the local authority on a reference of the matter to the State Government by the Authority,

This clearly indicates that the authority was doing everything which is required from the municipal body otherwise also it is impossible for Modern city of more than 25 lacs people to be managed without a Municipal Committee.

Section 62 of the Act provides for declaration of Local Development Area. (LDA) It is undisputed that the land in question fell in Local Development Area of Gurgaon.

Section 63 of the Act provides for a constitution of Local Development Authority, Chief Executive Authority of the Municipal Committee is a member of Local Development Authority. This indicates that the HUDA authority was a super municipal body.

Section 72 of the Act defines objects of Local Development Authority. This also indicates that the objects in the nature of municipal services were also to be provided by the Authority/LDA.

Section 74 leaves the onus of sector development on the Local Development Authority in HUDA. This section reads as below:

Section 74

(1) Simultaneously, with the preparation of the master plan or as soon as ma be thereafter, the Local Development Authority shall proceed with the preparation of a sector Development plan for each of the sectors into which the local Development area may be divided.

(2) A sector Development plan may—

(a) contain a site plan and use plan for the Development of the sector and show the approximate locations and extents of land use proposed in the sector for such things as public building and other public works and utilities, roads, housing, recreation, industry, business, markets, schools, hospitals and public and private open spaces and other categories of public and private uses;

(b) specify the standards of population density and building density,

(c) show every area in the sector which may, in the opinion of the Local Development Authority, be required to be declared for development or re-development; and

(d) in particular, contain provisions regarding all or any of the following matters, namely:—

(i) the division of any site into plots for the erection of buildings;

(ii) the allotment or reservation of land for roads, open spaces, gardens, recreation-grounds, schools, markets and other public purpose;

(iii) the Development of any area and the restrictions and conditions subject to which development may be undertaken or carried our;

(iv) the erection of building on any site and the restrictions and conditions in regard to the open spaces to be maintained in or around buildings and height and character of building;

(v) the alignment of buildings of any site;

(vi) the architectural features of the elevation of frontage of any building to be re-erected on any site;

(vii) the number of residential buildings which may be erected on plot or site;

(viii) the amenities to be provided in relation to any site or buildings and the person or authority by whom or at whose expense such amenities are to be provided.

(ix) The prohibitions or restrictions regarding erection of shops, workshops, warehouses or factories or buildings of a specified architectural feature or building designed for particular purposes in the locality;

(x) The maintenance of walls, fences, hedges or any other structural or architectural construction and the height at which they shall be maintained;

(xi) The restrictions regarding the use of any site for purposes other then erection of buildings;

(xii) Any other matter which is necessary for the proper Development of the sector or any area thereof according to plan and for preventing building being erected haphazardly in such sector or area.

The sector Development plan as per definition includes plan for all the amenities which are normally provided by the Municipal bodies. Amenities are defined in the Section 2 of the Act.

(a) “amenity” includes roads, water-supply, street-supply, street-lighting, drainage, sewerage, treatment and disposal of sewage, sullage and storm water] public works, tourist spots, open spaces, parks, landscaping and play fields and such other conveniences as the State Government may, by notification, specify to be an amenity for the purposes of this Act;

[ai] “basis amenities” include metalled roads, wholesome water, sewerage, electrifications;]

Quite undisputedly it can be said that all the amenities which are normally provided by municipal bodies are provided by HUDA.

Analysis of all these provisions in the HUDA Act clearly establishes that the local development authority in HUDA and HUDA itself can be treated as municipal body.

It is therefore submitted that as land under consideration fall in the HUDA/LDA area, it should be considered to be falling within the municipal area for the purpose of section 2(14)(iii)(a) of the LT. Act.

Similar question came before the consideration of Delhi High Court for in the case of Deoki Nand & Sons (2001) 115 Taxman 513. In this judgement, Hon'ble Delhi Court has categorically held that Faridabad Administration Complex created under Faridabad Complex (Regulation & Development) Act, 1971 was held to be akin to a municipality for the purpose of section 2(14)(iii)(a) of the I.T Act.”

On the issue whether the land situated within or outside 8 kms., the Ld. DR submitted as under:—

“Third parameter whether location of land is within or outside 8 kms from the local limit of municipal corporation existing municipal corporation boundary existing on the date of sale. The assessee has claimed that the land was outside 8 kms of the municipal limit of the municipal body existing on the date of sale. The Tehsildar certificate produced by the assessee during the course of assessment proceedings has been proven to be incorrect by the A.O The A.O has carried out substantial inquiries with the concerned authorities as well as their superior authorities who were competent to certify the distance and the relevant evidence is part of the assessment order as well as assessment records the same leave no scope for dispute. This leaves no doubt that the land in question was within the distance of 8 kms from the limit of municipal body existing at that point of time. Facts in the assessment order are not reproduced here for the sake of brevity but strong reliance is placed on the same.

During the course of proceedings before the Hon'ble Tribunal, the appellants have tried to produce certain maps and its calculations of distance in order to claim that the distance was more than 9 kms. These self certified and self serving maps and the calculations were not submitted before the lower authorities and even before the Tribunal these were not submitted as ‘additional evidences’. The same are, therefore, liable to be rejected without any consideration. It is further submitted that should the Tribunal consider them to be fit to be admitted, the evidence should be subjected to proper independent inquiry from the competent authority by the A.O/Tribunal itself. It was reemphasized that even at this stage the assessee has not been able to get his claim of distance certified by the competent authority of the State. Even maps submitted are as old as 1952/1953.

Even now no authority has certified what were the roads existing on the date of sale of the land. All the claims made by the assessee with respect to existence of roads even now are self serving and self certified. Onus is on the assessee to establishes his case to be fit for exemption as held in the case of Kalpatta Estates Limited (1992) 61 Taxmann 54 (Ker) : 185 ITR 318 and the assessee has hopelessly failed to discharge the onus.

Considering the aforesaid facts and numerous evidences brought on record by the A.O, it is submitted even on the third parameter the assessee has no case to claim that it is exempt from Capital Gains Tax as the land is outside 8 kms from the municipal limits.

To conclude it is submitted that failure on one parameter is enough to deny the benefit of exemption. The appellants have failed on all the three.”

5. In the rejoinder by the AR of the assessee, it was submitted that the issue has to be decided with reference to Section 2(14)(iii) of the Act which exclude agricultural land described therein from the definition of capital asset. For exclusion of agricultural land from the definition of capital asset, the foremost condition to be fulfilled is that land should be agricultural land and the other condition is either of two conditions, namely, (i) agricultural land, if situated in a municipal area comprising a population of less than 10000, (ii) it should be at a distance of more than 8 kms from any municipal limit. Ld. AR submitted that land in question is agricultural land and it has so been described in the title deed registered for transfer of this land and it also stands as agricultural land in the revenue record as on the date of the sale. It was submitted by him that the mere fact that no agricultural activity was carried out for the last two years cannot be a basis to suggest that the land was not an agricultural land since the character of the land remained the same. Ld. AR referred to the decision of Bombay High Court in the case of CIT v. Smt. Debbie Alemao 331 ITR 59, according to which if the land is shown in the revenue record to be used for agricultural purposes and no permission was ever obtained for non-agricultural use by the assessee, then, the same should be considered to be agricultural land. It was submitted that permission for change of land use was granted only on 15 May, 2008 and, therefore, the character of the land did not change on the date of the sale. It was submitted that though it is a matter of fact that impugned land is situated in the State of Haryana and is also situated in the controlled area as defined in Punjab Scheduled Roads and Controlled Areas Restricted of Un-regulated Development Act 1963, but, aforementioned statutory provisions have nothing to do to determine the character of the land as the preamble of the said Act shows that purpose of the said Act is for development of roads and not that because of introduction of the said Act, all land falling in the controlled area would not be agricultural land. Ld. AR also submitted that the other two Acts referred to by the learned DR, namely, Haryana Development and Regulations of Urban Area Act, 1975 and Haryana Urban Development Authority Act 1977 (HUDA Act) also have no application as the aforementioned Act empowers the State Government through Director, Town and Country Planning Department to declare the area around the scheduled roads enumerated in the Act or in the order area which has potential for urbanization to be declared as ‘controlled area.’ Even if some area is declared as controlled area, it will not be sufficient to conclude that land within the controlled area ceases to be an agricultural land as the issue raised in the present appeal has to be decided according to the provisions of Section 2(14)(iii). Ld. DAR also submitted that it has already been shown that the land is described as agricultural in the revenue record. The assessee has been cultivating the said land as per copy of the Khasra and Girdhavari filed by the assessee for a long period. Ld. AR further submitted that inflation in price of land cannot alter the basic character of the land. In this regard, reliance is placed upon the following decisions:

i) 288 ITR 319 (Guj) CIT v. Shashiben

ii) 106 ITR 917 (Guj) CIT v. Manilal Somnath

iii) 209 ITR 946 (Bom) Gopal C. Sharma v. Commissioner Of Income-Tax.

6. Ld. AR also referred to the following decisions to contend that if the entries in the revenue record show that the land in question is agricultural land, then, a presumption arises that the land is agricultural in character and unless that presumption is rebutted by evidence led by the revenue it must be held that the land was agricultural in character at the time when it was sold:—

i) Dr. Motibhai D. Patel v. CIT 127 ITR 671

ii) CWT v. Officer-in-Charge (Court of Wards) 105 ITR 133 (SC)

7. Ld. AR further submitted that as per the decision of Hon'ble Madras High Court in the case of M.S Srinivasa Naicker v. ITO reported in 211 CTR 222 (Mad), the fact that the purchaser intended to put a different use to the land is an irrelevant consideration.

8. So far as it relates to case law relied upon by the learned DR, the same have been distinguished by the learned AR as under:—

Sr. No. Name of Judgments Rebuttal of the Assessee a) 105 ITR 133 (SC) CIT v. Officer in Charge (Court of Wards) It is submitted that in this case it was held that entries in revenue record are however good prima facie evidence that land is an agricultural land. It was held that, if there is a connection with agricultural purpose then the land is an agricultural land. In the instant case, the khasra girdawari establishes that there was actual cultivation of crops, jawar, gehun, bajra on the said land and as such the land was an agricultural land even in terms of judgement of Apex Court in the case of CIT v. Officer in charge (Court of Wards) reported in 105 ITR 138. b) 204 ITR 631 (SC) Smt. Sarifabibi Mohmed Ibrahim v. CIT It is submitted if the test as stated therein are applied it would be seen the land is an agricultural land for the following reasons: i) That land was classified in the revenue records as agricultural; ii) That land was actually or ordinarily used for agricultural purposes; iii) That no alternative use put to land; iv) That land was not developed by plotting and providing roads and other facilities; and, v) That land was not sold as yardage basis Thus the above judgment too cannot be applied to regard the land as non-agricultural land. In any case, detailed submission have been made in para 3.12 of synopsis. c) 220 ITR 43 (SC) CIT v. Gemini Pictures Circuit (P) Ltd. The above judgment has also no application since that was a case where land was situated in the heart of city of Madras wherein in the instant case land was not situated beyond the municipal limits. d) 185 ITR 318 (Ker) Kalpatta Estates Ltd. v. CIT It is submitted that, in the said case, it has been held that, burden to prove land is an agricultural land is on assessee. It is submitted that, land transferred in the aforesaid case was forest land and since no agricultural operations had been carried out, it was held that, land is not an agricultural land. It is thus evident that reliance placed on the said judgment is misplaced. In the case of the assessee, Khasra-Girdawari have been placed on record which clearly evidences that land sold was an agricultural land as the same was used for agricultural purposes. e) 209 ITR 946 (Born) Gopal C. Sharma v. Commissioner Of Income-Tax. This judgment too has no application as here to the land sold was located in a heavy industrial zone and the land was not used for long period of time for agricultural purposes i.e several long years. In fact, substantial portion of the land for use of industrial purposes. In the case of appellant, land is an agricultural land not situated in any industrial zone or utilized for industrial purposes. f) 244 ITR 789 (Jodh) Mahaveen Enterprises v. UOI It is submitted this judgment also has no application since in this case, the petition had challenged the constitutional validity of tax as an agricultural Income. In the instant case, the assessee 1S contending the land held by him was not a capital asset within the meaning of section 45 of the Act as defined in section 2(14)(iii)(b) of the Act. g) 49 SOT 206 (Coch) M.K Abdul Rehman v. K.M Anees-ul-Haq This judgement has also no application since here the land was located in a well developed and fast developing area. It is submitted in the instant case, it will be seen that page 249 of the Paper Book that, motorable work had even not been completed upto the date of sale much less the land being located in developed area. h) 49 SOT 341 (Hyd) Suresh Kumar D. Shah v. DCIT This judgment is also not applicable as land in question was a barren land surrounded by rocky mountains and not fit for agricultural operations. In fact, no agricultural operations were carried on for the last 10 years. In the instant case, agricultural operations were carried for more than 10 years.

9. It was further submitted that the decision of the court should be considered to be an authority for what it actually decides and, not what can be logically or remotely deduced therefrom and reliance was placed on the following decisions:—

a) Goodyear India Ltd. v. State of Haryana 188 ITR 402 (SC)

b) Padmasundara Rao v. State of Tamil Nadu 255 ITR 153 (S)

c) CIT v. Sun Engineering Works P. Ltd. 198 ITR 297 (SC)

d) ITO v. Smt. Gurinder Kaur 102 ITD 189 (Del)

10. So far as it relates to 13 tests described in the decision of Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim v. CIT (supra), the submissions of the learned AR are as under:—

Sr. No. Test as per Apex Court As per Revenue Rebuttal of the Assessee 1) Whether the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue? No evidence for payment of land revenue as per Revenue. As per control Act 1963 declared as “Controlled Area”. Land undisputedly part of HUDA notified area. Fell in the commercial area of sector 65 as per the notification issued in Feb 2007, which is prior to date of sale. The land of the appellant is located in the state of Haryana where there is no requirement for payment of land revenue. This factor is thus inapplicable. However, as stated above as per revenue records the land was agricultural land. Further, fact that, as per Control Act' 1963 land was declared as controlled area for commercial purposes (six months prior to sale and, after 12 years of holding the land) does not alter the actual usage of the land. The land was acquired for agricultural purposes held for agricultural purposes till the date of sale. The commercial usage was obtained only by the purchaser of land and, not by the appellant and that too, after the date of sale. 2) Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time? Admitted no agricultural use at least till two years prior to the date of sale. Otherwise also circumstantial evidences suggest no agricultural activities carried out even prior to that. Undisputedly land was ordinarily and actually used till two years prior to the date of date. Mere fact that, no agricultural activity was carried out does not alter the nature of land. In fact, as stated above assessee has not taken any steps to alter the nature of land till the date of sale, as would be evident from sale deed wherein too has been stated that, land was an agricultural land (see page 98-99 of Paper Book) 3) Whether such user of the land was for a long period or whether it was of a temporary character or by way of a stop-gap arrangement? Assessee is a non agriculturist and land was primarily purchased for investment in the fast developing area It is submitted that the aforesaid land had been acquired by the husband of the assessee in the year 1995-1996 for agricultural purposes. It is submitted after his death on 24.07.2002 the land devolved upon the assessee. It is evident from the revenue records that Sllice year 1995-1996 upto 2005 i.e for approximately 10 years agricultural activities were carried out either by the assessee or her husband. Therefore, user of the land was for agricultural purposes and was for long period and not by way of temporarily character or stop-gap arrangement. It must be appreciated that the notification referred is dated 5.02.2007 whereas the land was sold by the appellant in September' 2007 i.e six months after development plan was notified by the state government. Thus the suggestion land was primarily purchased for investment in the fast developing area is factually incorrect. In fact, change of land use was obtained by the purchaser only on 15.05.2008 and, such land fell within the jurisdiction of municipal limits of Gurgaon on 10.08.2008 (see page 126-129 of the Paper Book) 4) Whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land? No relation with market pnce. Land was sold @ more than 8 crore per acre. Even purchase cost was wholly disproportionate to potential agricultural income. The submission of the revenue is misconceived. It is submitted that investment in the land was merely about Rs. 2 lacs per acre which itself shows that, the land was acquired for agricultural purposes and that too in 1995-1996. It may be appreciated that, it is highly incredulous to suggest that, since a notification was issued 12 years later from the date of purchase of land therefore the land was not acquired for agricultural purposes and that too prior to six months of sale of land. 5) Whether, the permission under section 65 of the Bombay Land Revenue Code was obtained for the non-agricultural use of the land? If so, when and by whom (the vendor or the vendee)? Whether such permission was respect of the whole or a portion of the land? If the permission was in respect of a portion of the land and if it was obtained in the past, what was the nature of the user of the said portion of the land on the material date? No permission needed. On the contrary by operation of law it became “commercial land” which IS most lucrative use. No permission obtained. Such permission for change of land use was obtained by the purchasers 6) Whether the land, on the relevant date, had ceased to be put to agricultural use? If so, whether it was put to an alternative use? Whether such cesser and/or alternative user was of a permanent of temporary nature? Ceased to be put to agricultural use. Land was made eligible for commercial use hence no prudent justification for agricultural use? As stated above the land was used for agricultural purposes for 10 years and mere fact that, the land was not used for 2 years did not alter the nature of the land. 7) Whether the land, though entered in revenue records, had never been actually used for agriculture, that is, it had never been ploughed or tilled? Whether the owner meant or intended to use it for agricultural purposes? No evident whatsoever for ploughing or tilling has been produced. Undisputedly land was ordinarily and actually used till two years prior to the date of date. Mere fact that no agricultural activity was carried out does not alter the nature of land. In fact, as stated above assessee has not taken any steps to alter the nature of land till the date of sale as would be evident from sale deed wherein too has been stated that the land was an agricultural land (see page 98-99 of Paper Book). It is submitted from the year 1995-1996 upto 2005 i.e for approximately 10 years agricultural activities were carried out either by the assessee or her husband therefore land was used for agricultural purposes. It must be appreciated that the notification referred is dated 5.02.2007 whereas the land was sold by the appellant in September' 2007 i.e six months after development plan was notified by the state government. In fact, change of land use was I obtained by the purchaser only on 15.05.2008 and fell within the jurisdiction of municipal limits of Gurgaon on 10.08.2008 (see page 126-129 of the Paper Book) 8) Whether the land was situate in a developed area? Whether its physical characteristics, surrounding situation and use of the lands in the adjoining area were such as would indicate that the land was agricultural? Yes, it was in the notified area and notified as commercial land. The area is amongst the fastest growing are in India. The land was located in a village Tigra and it was notified for commercial purposes only 6 months prior to sale. 9) Whether the land itself was developed by plotting and providing roads and other facilities? HUDA, the government agency was carrying out massive development Factually incorrect. The land was not developed by plotting and providing roads and other facilities. 10 Whether there were any previous sales of portions of the land for non-agricultural use? Yes, sold in the past to a builder/developer. It is although true that portion of the land in the year 2000 had been acquired and also sold yet the fact above does not alter the nature of the land as agricultural activities had been carried out even after the sale of land. 11 Whether permission under section 63 of the Bombay Tenancy and Agricultural Lands Act, 1948 was obtained because the sale or intended sale was in favour of a non-agriculturist? If so, whether the sale or intended sale to such non-agriculturist was for non-agricultural or agricultural user? Became commercial land by operation of law. The change of land use was obtained by the purchaser of the land not by the appellant. 12 Whether the land was sold on yardage or on acreage basis? Sold on the basis of intermediate units of kanals and marlas. Marla is as small as roughly 25 sq. yards. Mere fact that area of the land was stated in kanal and marlas does not make it that the land was sold in yardage basis. The entire land measuring 25 kanal, 3 marla i.e, aggregating to 3.1 acres approximately has been sold as it is to one purchaser and not in yards to various purchasers i.e after plotting of land. 13 Whether an agriculturist would purchase the land for agricultural purposes at the price at which the land was sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield? NO QUESTION. No agricultural operations can be sustained on the land costing over Rs. 8 crore per acre. It is not disputed that the purchased acquired the land for non-agricultural purpose. However, the same is irrelevant consideration as held in the case of M.S Srinavasa Naicker v. ITO reported in 211 CTR 222 (P&H).

11. Ld. AR also submitted that the decision of the Hon'ble Delhi High Court in the case of Deoki Nandan & Sons (supra) relied upon by the learned DR has no application to the facts of the case as it related to Assessment Year 1972-1973 i.e, after the substitution of the provisions of Section 2(14)(iii)(a) of the Act, Faridabad Administration Complex is not a municipality, but is akin to municipality and the land in question was hence a capital asset on the date of transfer. In this manner, the learned AR has concluded his rejoinder.

12. We have carefully considered the rival submissions. We have also carefully gone through the assessment order, order passed by the Ld. CIT(A) and the documents and case law referred by both the parties. Careful perusal of assessment order will reveal that the main case of the Assessing Officer is that the land sold by the assessees is capital asset as it is situated within the distance of 8 Kms from the limit of Gurgaon Municipality. For arriving at such conclusion, ld. Assessing Officer has disbelieved the certificate dated 13 October, 2010 issued by Tehsildar, Gurgaon which has been reproduced in the Assessment order at page 3. According to this certificate the impugned land is agricultural land and it is situated in Village Tigara which has a population of less than ten thousand and its distance from Municipal limit of Gurgaon is approximately 8.5 Kms. To verify the veracity of the certificate, the Assessing Officer has conducted enquiry by summoning and recording the statements of land revenue authorities and the final outcome of the same is certificate dated 7/8.12.2010, the contents of which have also been reproduced in the assessment order at page 6. According to this certificate, the distance of the impugned land from municipal limit of Gurgaon via road from Ghata to Badshahpur is stated to be 7.7 Km. This certificate also clarify the fact that sale of land by the assessee was prior to the event of Gurgaon being made Municipal Corporation. This certificate was confronted by the Assessing Officer to the assessee and the assessee was asked to explain as to why the impugned land should not be considered to be as capital asset and thus chargeable to Capital gain. In response the assessee submitted a reply dated 20.12.2010 The contents of this reply have also been reproduced in the assessment order at page 7 & 8. In this reply it was submitted by the assessee that the distance as stated by the assessee of 8.5 Kms is based on the certificate issued by Land Revenue authorities dated 13.10.2010 It was also specifically stated that the distance as stated in the certificate is computed with reference to Ghata-Badshahpur road which is not relevant as the said road did not exist on the date of sale being under construction. The assessee also sought cross examination of the Patwari and Tehsildar. It was also requested by the assessee to again measure the distance from the road in use at the time of sale of land.

13. Again, vide letter dated 24.12.2010 (the contents of which are also reproduced in the assessment order at pages 8 to 12), it was claimed by the assessee that actual distance is more than 8 Kms and it will be relevant to reproduce the relevant portion of the said letter as under:—

“4. Since ‘the land had been transferred within accounting year and the excess of sale proceeds over the cost of acquisition had been claimed as exempt, the assessee obtained a certificate dated 13.10.2010 from Tehsildar Gurgaon who duly confirmed that, the aforesaid agriculture land is situated approximately 8.5 Km beyond from the municipal limits. A copy of the said certificate though is on your record, yet the same is being refurnished as Annexure-B. In fact the assessee's son, Sh. Rohit S. Kumar who was also 1/3rd co-owner of the aforesaid land also took precaution to verify the same by physically measuring the distance of the land, from the municipal limits and found it to be more than 8.5 Km away from the municipal limits from all sides. This is also supported by the site plans of the situation of land situated at Village Tigra which was beyond 8 Kilometers from the Municipal limits of Gurgaon. The details of measurement is explained as per aforesaid site plan in para 6 herebelow:

5. Sir, now in the course of proceedings, it appears to the assessee, in order to deny the legitimate claim of the assessee, you have proceeded to record the statements of Patwari & of Tehsildar, behind the back of the assessee, copies of the such statements have however not been provided by you to the assessee, instead a copy of confirmation dt. 7.12.2010 as obtained by you from Patwari &. Tehsildar (on the same sheet) has however been furnished to the assessee for information and rebuttal. The said confirmation dt. 7.12.2010 reads as under.

6. It is most humbly and respectfully submitted the aforesaid confirmation as obtained is based on no material other them a mere assertion made and is contrary to the earlier confirmation dated 13.10.2010 placed on record and was given by the same Tehsildar. It is also not known it is submitted with respect on what basis, has now the Patwari has stated that before the Municipal Corporation came into existence, the said area of situation was 7.7 Km away from the Municipal limits of Nagar Palika. In fact no site map or any basis has been placed on record and is contrary to the earlier confirmation. It is evident that there is no basis to exactly state that it was 7.7 Km only beyond the Municipal limits. In fact the assessee is placing on record as Annexure-C to support that it was 8.4 Km at the time, when the assessee had sold the land. The following details would establish that the land was situated beyond 8 Km. from the Municipal limits from all sides:—

Distance from the Municipal limit of Gurgaon to Citizen Park, to village Kanhai'. 4.00 kms Add: Distance from. Village Kanhai to Village Tigra where 4.4 kms Our land is situated thus distance is over 8.0 kms. (This is based on actual measurement) 8.4 kms.

7. It is submitted that the assessee apprehends that the distance of 7.7 Km as has been stated in the said confirmation dated 7.12.2010 is based on an alleged actual distance as on date of the aforesaid confirmation, as against the distance of 8.4 Kms when there was no motorable road and this distance of 7.7 Km as has been stated is apparently appears to be based on the basis of speedometer of the vehicle on the basis of road now existing. Thus, in order to have it clarified, it is requested that the Patwari & Tehsildar, Shri Jagdish& the Tehsildar whose statements have been recorded, may kindly be produced for assessee's cross examination, so that the assessee can rebut the allegation (that in the absence of any motorable road) distance of the agricultural land is 7.7 Km). It is reiterated the agricultural land situated was beyond 8 Km from Municipal Limit from Gurgaon, from all directions not 7.7 Km as has now been alleged. It is most humbly submitted that since you are seeking to rely upon the said certificate as obtained by you on 7.12.2010, the burden is upon you to establish the correctness of such a certificate, in place of certificate already granted to the assessee and had been placed on record. It is submitted that it is not known as to whether the earlier certificate made available to the assessee by the Tehsildar was ever confronted to either of them and what had been the response made in respect thereof by them. Thus, it is prayed that in order to do substantial justice, you may please summon them at the cost of the assessee u/s. 131 of the Act and assessee is willing to bear the cost in respect thereof.

8. It may further be added here in the said certificate dt. 7.12.2010 it has been stated that, the assessee's land is adjacent to Badshapur Ghata Road, which is factually incorrect, since between Badshapur Ghata Road and the assessee's land situated at Village Tigra there is a green belt declared by HUDA which land, on the date of sale, did not belong to the assessee and was owned by the Government i.e HUDA and thus it is not on adjacent land as stated in the said certificate. This singular fact shows there has not been correct appreciation by Patwari and the Tehsildar, who has merely endorsed the certificate of Patwari.

14. In the present case as the assessee is claiming exemption from capital gain on the basis that the impugned land is not a ‘capital asset.’ Therefore, initial burden is on the assessee to prove that the land in fact is not capital asset. To fall outside the scope of “capital asset” the land has to fulfill the condition as discussed in Section 2(14)(iii). The first condition is that it should be agricultural land and the second condition is that it should be situated either within the jurisdiction of any municipality, etc. which has a population of less than ten thousand according to the last preceding census of which figures have been published before the first day of the previous year or in any area which is at a distance of more than eight kilometers from the local limits of any municipality, etc. as the Central Government may having regard to the extent of and scope for, urbanization of that area and other relevant consideration, specify in this behalf by notification in official gazette. There is no dispute that the distance as specified by Central Government by notification in the official gazette at the time of sale of impugned land by the assessee was a distance of 8 kms from the end of municipal limits of Gurgaon.

15. From the analysis of provisions of Section 2(14)(iii) which defines the ‘Capital asset’ and exclude ‘agricultural land’ from the definition of ‘capital assets’ will reveal that if at the time of sale the impugned land is ‘agricultural land’, then, it shall not be deemed to be capital assets if either it does not fall within the limits of any municipality etc., of which population exceeds ten thousand or it should be situated at a distance more than the distance specified by Central Government in this behalf by way of notification in official gazette. Now it is the case of the assessee that his land, at the time of sale does not fall within the 8 kms. from the end of municipal limit of Gurgaon. Firstly, it is the case of Assessing Officer that the said distance is lesser than 8 Kms, therefore, the assessee does not qualify for exemption of capital gain and, secondly, it is the case of Assessing Officer that the impugned land is not agricultural land.

16. First, coming to the contention of Assessing Officer that the distance of the assessee's land is less than 8 Kms, the evidence which exists on the record is the certificate dated 13 October, 2010 submitted by the assessee according to which the distance is 8.5 Kms. The second evidence is colleted by the Assessing Officer according to which the distance is 7.7 Kms. By furnishing the certificate dated 13 October, 2010 the assessee had discharged the initial onus laid upon him/her. In order to verify, the Assessing Officer had obtained another certificate. The said certificate was confronted to the assessee and the assessee in turn had pleaded that the distance which has been specified in the said certificate was measured from the road which did not exist at the time of sale. This submission of the assessee, as pointed out earlier, has even been recorded in the assessment order. The Assessing Officer does not give any credence to the said submission. The assessee also described how the distance at the time of sale was more than 8 Kms. No material whatsoever has been brought on record by the Assessing Officer to disprove the claim of the assessee that at the time of sale the distance as computed by the assessee was not correct. The Assessing Officer has relied upon an evidence which was objected to by the assessee on a specific ground and that ground of the assessee has not been shown to be incorrect. There is a force in the contention of the assessee that the position as on the date of sale has to be seen and later development, if any, will become of no consequence as the question to be determined is that whether or not on the date of sale the land falls within the parameters of agricultural land as specified in Section 2(14)(iii). Later, the assessee has also obtained, under the Right To Information Act, a certificate from the Executive Engineer of HUDA, according to which the road from which the distance was measured at 7.7 Kms was completed only in September, 2008 which is beyond the date of sale made by the assessee. The said certificate cannot be deemed as additional evidence as right from the beginning it has been the contention of the assessee that on the date of sale the road on the basis of which the distance has been measured at 7.7 Kms. did not exist at the time of sale. The certificate is only supporting the contention raised by the assessee before the Assessing Officer and which is also recorded in the assessment order itself. The contents of the said letter are as under:—

Smt. Geedka Singhvi,

73, Sukhdev Vihar,

Mathura Road,

New Delhi.

Memo No. 8528Dated 2.11.11

Subject: Information of road leading from village Badshahpur to Ghatta village (Golf Course Extension Road) under RTI Act, 2005.

With reference to your letter dated 02.11.2011, it is intimated that the road work from Badshahpur to Ghatta village stretch stand completed in September, 2008. This is for your kind information.

Executive Engineer,

HUDA, Division No. 1,

Gurgaon.

17. The road on the basis of which the distance in the second certificate stated came into existence after the date of sale of land. The distance has to be measured in terms of the approach by road and not by a straight line distance on a horizontal plane or as per crow flight distance as held by Hon'ble Punjab & Haryana High Court in the case of CIT v. Satinder Pal Singh cited supra. In this view of the situation, the Assessing Officer having not brought any material on record to prove that the contention of the assessee is incorrect, the distance of the impugned land as on the date of sale has to be held to be more than 8 Kms, therefore, the assessee has proved one of the essential conditions to show that the land owned by him or her was situated at a distance of more than 8 Kms from the end of the municipal limits of Gurgaon.

18. Now, coming to the question whether or not the assessee's land can be specified to be agricultural land within the meaning of Section 2(14)(iii). For holding that the impugned land was not rural agricultural land, ld. Assessing Officer has relied upon the letter issued by District Town Planner, Gurgaon dated 28 December, 2010 which is reproduced in the assessment order at page 14 in which it is stated that Sector 65 was included in Final Development Plan, Gurgaon-Manesar Urban Complex 2021 AD which was published on 5 February, 2007 which is much prior to the date of sale which is 6 July, 2007. He also referred to the fact that the land was sold to Splendeur Land Base Ltd. and the internet search has revealed that such land has been used for development of trade tower by the name of Splender Trade Tower and the location of the said land was 3 kms from the Main Golf Course Road and, therefore, the land was located in prime residential/commercial area of Gurgaon. Reliance has been placed on the home page of the website of Splender Group and he asked the assessee to show cause as to why the land should not be treated as non-agricultural land. The assessee objected to such move of the Assessing Officer by letter dated 29 December, 2010 in which it was submitted that land should be considered to be agricultural land as per Notification No. SO10(E) dated 6 January, 1994 as amended by Notification No. SO1302 dated 28 December, 1999 and the land is agricultural land within the meaning of Section 2(14)(iii) of the Act. The Assessing Officer turned down both these objections. He held that the land sold by the assessee was not a rural as it was situated within the statutory limit of 8 kms from the municipal limits and after the notification dated 5 February, 2007, the character of land remained no more rural as from the plan it was abundantly clear that the land was residential in nature. He also turned down the plea of the assessee regarding application of the Notification issued by Central Government according to which the agricultural land should be considered to be agricultural land if it is situated beyond 8 kms of Gurgaon Municipality and, for this purpose, he placed reliance on the decision in the case of Deoki Nandan & Sons (supra). He also held that the land can be agricultural land only if it is being used for agricultural purposes by the assessee and, in this manner, the Assessing Officer has concluded that the land was not in the nature of agricultural land. Learned CIT(A) has upheld such findings of the Assessing Officer.

19. We have carefully considered the submissions of both the parties in this regard. Copy of sale deed has been furnished before us according to which the land sold has been described as agricultural land in Column No. 5 requiring to describe ‘type of property.’ Copy of Khasra, Girdawari has been placed in the paper book at page 106-107 of the paper book which also describe the property as agricultural land. In this Khasra-Girdawari, particulars regarding 2001-2002 to March, 2007 have been given and it is observed therefrom that from 2001-2002 to February, 2005 the land (except small portion) was being used as self cultivated in which the assessee has grown crop upto 26 February, 2005. Thereafter, from October, 2005 to 2006, some part of the and has been cultivated. From October, 2006 to March, 2007, only one portion of the land has been cultivated. Therefore, practically it can be said that except some part of the land the cultivation was not done by the assessee from October, 2005 to March, 2007. Thus, it is not a case where the assessee did not carry out agricultural operation for a long period and it was self-cultivated land of the assessee. Rather, it has been the contention of the assessee that it was used by the assessee for a long period for cultivation and the assessee has never sought conversion of the said land for any purpose other than agricultural.

20. Now, coming to the 13 tests laid down by Hon'ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim v. CIT (supra). While discussing the rejoinder a table has been reproduced in the above part of this order, in which the assessee has controverted the contention of the revenue that even applying the aforementioned tests, the land does not lose the character of agricultural land. These tests are not discussed in detail for the sake of brevity, but, it can be mentioned that the land has been described in the revenue record as agricultural and the land was actually and ordinarily being used by the assessee for agricultural purposes at or about the relevant time and such user was for a longer period since 1995-1996. The purchase price of the said land in the hands of the assessee was quite rational, proportional to the investment made as it has been mentioned in the rejoinder that the land was purchased for a sum of Rs. 2 lac per acre in 1995-1996. The permission for conversion of the land from agricultural character was not obtained by the assessee, but it was obtained by the purchaser much after the purchase of land. The said land was never put to alternative use by the assessee either permanently or temporarily. The land entered in the revenue record was actually used by the assessee for agriculture and it is not a case where the land has never been actually cultivated. The land has been shown to be existed in village Tigra though according to the development plan it may have been specified to be residential. The assessee did not develop this land by plotting and providing rights, etc. and other facilities. Only one portion of the land was sold in 2000. The land was also not sold on yards basis, but on kanal and marla basis and the purchaser of the land has acquired the said land with an intention to develop the same. If the cumulative effect of these tests are to be seen, then also it has to be held that the character of the land sold by the assessee was agricultural as on the date of the sale. It may be mentioned here that what is important to be seen is the factual position on the date of sale of the land and this position of law has been established by the decision of Hon'ble jurisdictional High Court in the case of Hindustan Industrial Resources Ltd. v. ACIT 355 ITR 77 and the relevant observations of their lordships from the said decision are reproduced below:—

“9. Having considered the arguments advanced by the counsel for the parties, we are of the view that the assessee's contentions deserve to be upheld and the findings returned by the Income-tax Appellate Tribunal ought to be reversed. We are conscious that we are not merely reversing a finding of fact, what we are intending to do is to point out that the Tribunal's finding of fact is contrary to its own record and, therefore, is in the realm of perversity. This is so because the Tribunal clearly held that at the point of time when the assessee purchased the said land, it was agricultural land. There is no dispute with regard to this. The Tribunal also noted that the Award passed on 1-4-1992 by the District Collector (Land Acquisition), Greater Noida, Bulandshar, was a document which established beyond doubt that the land in question was agricultural land. Thus, on the date of purchase, the land in question was agricultural land and on the date of acquisition, the character of the land continued to be agricultural. When these two clear findings have been returned, it is apparent that in the transitional period, that is, between purchase and acquisition, the nature and character of the land did not change. The fact that the appellant/assessee intended to use the land for industrial purposes did not in any way alter the nature and character of the land. The further fact that the appellant/assessee did not carry out any agricultural operations did not also result in any conversion of the agricultural land into an industrial land. It is nobody's case that the appellant/assessee carried out any operations for setting up any plant or machinery or of the like nature so as to lead to an inference that the nature and character of the land had been changed from agricultural to industrial. The mere fact that the appellant/assessee did not carry out any agricultural operation did not alter the nature and character of the land. In any event, this discussion is not relevant in the backdrop of the clear finding given by the Tribunal that on the date of the purchase and as also on the date of acquisition, the land in question was agricultural land. Having come to such a conclusion, the Tribunal ought not to have gone into question of intention of the appellant/assessee and definitely not into the question of intention of the land acquiring authority, the latter being a wholly irrelevant consideration.

10. In these circumstances, we decide the question in favour of the appellant/assessee and against the revenue. The appeal is allowed with costs. The impugned order passed by the Income-tax Appellate Tribunal is set aside.”

21. From the above observations of their lordships of jurisdictional High Court, it will be clear that the intention of the purchaser of the land is wholly irrelevant consideration. Even if we weigh the aforementioned 13 tests laid down by Hon'ble Supreme Court, the balance of convenience lies in favour of the assessee as most of the important tests are in favour of the contention that land in question was agricultural land.

22. It may further be mentioned that the character of the land has to be decided as per the provisions of Income-tax Act and it has already been mentioned that agricultural land has been defined in the Act itself and one has to go by the criteria laid down in the Income Tax Act and Rules. If the character of the land is agricultural, then, the issue has to be decided in the light of the Notification issued by Central Government and reference to other Acts i.e, HUDA Act and Punjab Scheduled Roads and Controlled Areas Restriction of Un-regulated Development Act, 1963, etc. will be wholly irrelevant to consider the issue raised in the present appeals. The case law relied upon by the learned DR are distinguishable on facts and it has been demonstrated in the rejoinder by the learned AR that how they are distinguishable on facts. Therefore, for the sake of brevity the same is not repeated.

23. In view of the above discussion, it is held that the land in question at the time of sale by the assessees was “agricultural land” within the meaning of Section 2(14)(iii), therefore, it was not “capital asset” u/s. 2(14). No capital gain is chargeable on sale of such land by the assessees.

24. In the result, the appeals filed by the assessees are allowed.

ITA No. 5028.Del./2011, (Assessment Year: 2008-09) and ITA No. 5029.Del./2011, (Assessment Year: 2008-09)

Chand Prabha Jain v. Cit

Structured Summary of the Provided Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Assessee's (Appellant's) Arguments (Ld. AR)

Revenue's Arguments (Ld. DR)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Chand Prabha Jain v. Cit

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