Sh. Satya Dev Sharma , Jaipur vs Assessee on 23 January, 2014

Income Tax Appellate Tribunal - JaipurSh. Satya Dev Sharma , Jaipur vs Assessee on 23 January, 2014 1

IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR

(BEFORE SHRI HARI OM MARATHA AND SHRI N.K. SAINI)

ITA No. 25/JP/2010 Assessment year : 2008-09 PAN: ABNPS 2913 E

Shri Satya Dev Sharma vs. The ITO29, JLN Marg, Uniyara Garden Ward- 5(2)Jaipur Jaipur(Appellant) (Respondent)

ITA No. 123/JP/2012 Assessment year : 2008-09 PAN: ABNPS 2913 E

The ITO vs. Shri Satya Dev SharmaWard- 5(2) 20, JLN Marg, Uniyara GardenJaipur Jaipur(Appellant) (Respondent)

Assessee by : Shri Sandeep Jhanwar Department by: Shri D.C. Sharma

Date of Hearing: 23-01-2014 Date of Pronouncement: 30-01-2014

ORDER

PER HARI OM MARATHA, JM:-

These two cross appeals are filed by the assessee and department respectively against the order of ldCIT(A), Jaipur dated 01-11-2011 for the assessment year 2008-09. The major issue in the twoappeals is in respect of taxation of capital gain on part of agricultural land sold by the assessee.

1.0 The brief facts of the issue are that the Assessee possessed 16 bigha of agricultural land at VillageMachwa. The Government record in form of Girdawari shows that there were agricultural activitieson the said land and various crops like wheat, bajra etc. were grown on the said land as per thisrecord (P.B. Page 17). Samwat 2064 is related with the assessment year under consideration i.e. A Y2008-09. During the year, the Assessee sold 4 bigha of agricultural land out of total 16 bigha for aconsideration of Rs. 1.04 crores i.e. @ 26 lacs per bigha. This land was allotted to him by Govt. in1972 on his retirement from defence services. Assessee claimed this land to be agricultural land

Sh. Satya Dev Sharma , Jaipur vs Assessee on 23 January, 2014

Indian Kanoon - http://indiankanoon.org/doc/85348539/ 1

which is out of scope of definition of capital asset u/s 2(14). He claimed that land is covered byexclusions in clause (iii) of section 2(14) and not covered by sub clauses (a) and (b) of this clause asit is situated in village Machwa where population is less than 10,000/-. This village Machwa is alsoout of Jaipur Municipal Corporation and it was more than 8 kms beyond the limits of JaipurMunicipal Corporation as on 6.01.1994 when the notification (P. B. Page 1) was issued undersub-clause (b), though now the distance is 2-3 kms. only due to extension of limits of JaipurMunicipal Corporation. The sale deed (P.B. page 5-10) was not registered till the end of 31.3.2008.He also purchased bonds eligible u/s 54 EC in Feb. 2008 for a sum of Rs. 50 lacs. The AssessingOfficer however, mentioned in her order that the Property is situated within limits of JaipurMunicipal Corporation as per certificate of Tehsildar. Further, property is used for residential/commercial purpose and not for agricultural purpose. She further added that Inspector's reportsuggest that multi story project of leading builder is coming up adjacent to this land and the landhas not been entered in the name of the purchasers. She has taken Market price of the property ason 1.4.1981 was Rs. 2700 per bigha on the basis of similar property sold. She also observed that theProvisions of section 50C are applicable in this case. After giving the aforesaid findings, theassessing officer computed the capital gain as under :

- She applied provisions of section 50C and took circle rate. Accordingly, he appliedRs. 35 lacs per bigha and computed total sale consideration at Rs. 1,40,00,000/-.

- Purchase price : FMV as on 1.4.1981 on the basis of document dtd.27.12.1980 @ Rs. 2,700/- per bigha and computed total cost of Rs.10,800/- & indexed cost Rs.59,508/- (10,800 x 551/100).

- She accordingly computed Long Term Capital gain at Rs.1,39,40,492/-. After allowing the deduction u/s 54EC ofRs.50,00,000/-, taxable capital gain has been taken atRs.89,40,492/-.

2.0 Before ld CIT(A) the assessee raised the following plea :

The captioned land is not a Capital Asset within the meaning ofsection 2(14) as it is an agricultural land under clause (iii) of thissection and not covered by exclusions of agricultural land given in subclauses (a) & (b) of this clause (iii) of section 2(14). Ld CIT(A) has notaccepted this plea and assessee has taken ground no. 1 in this respect.

Alternatively The provisions of section 50C do not apply inassessee's case as the transaction was not registered. The word'assessable' has been included in section 50C w.e.f. 1.10.2009 only andas per the decision of Hon'ble Jaipur Bench of ITAT itself, theprovisions of section 50C would not apply where the transaction oftransfer of land is not registered. Ld CIT(A) accepted this plea anddirected to alter the sale consideration as received by the assessee. The



department has come in appeal before us against the relief so allowed. Regarding Cost of acquisition, the assessee contended that thecases quoted by the AO are not comparable for the following reasons :

o The said land was already in the possession of the buyers.

o The said transfer was not in respect of one piece of land but it was inrespect of 5 pieces of land scattered in area of 2 kms. o The said landwas very deep (3 to 4 kms.) from the main road and the assessee's landwas only 250 mtrs. Further there is a lane approaching the assessee'sland.

o In the immediate vicinity of the assessee's land, multistoriedbuildings are being constructed. It is not the position of the other land.

In view of the said reasons, the assessee contended that FMV of the land as on1.4.1981 should have been taken by computing the same as per principle laid down in133 TTJ 278 (TM) (Agra). Accordingly, the value comes to Rs.18,87,477/- as per thefollowing calculation below :

1,04,00,000 x 100 = 18,87,477 Ld.CIT(A) however considered Rs. 10,000 per bighai.e. Rs. 40,000/- as against the assessing officer's valuation of Rs.10,800/- per bigha@ Rs.2,700 per bigha. The assessee has taken ground no. 2 in this respect.Department has also taken ground no. 2 for increasing the price per bigha as on1.4.1981 to Rs.10,000/-.

3.0 Let us now come to the grounds of the assessee's appeal. As regards ground no.1, ld. A/R of theassessee Shri Sandeep Jhanwar pointed out a typographical error in drafting of ground andrequested to read the same by adding word 'not' in the forth line after the words 'assesse is' andbefore the words 'covered in' and also to add words '(a) and' after the words 'sub clause' and beforethe words '(b) of' and accordingly the corrected ground would read as under :-

Under the facts and circumstances of the case ld. Commissioner of Income Tax(Appeals), Jaipur has erred in confirming the findings of the assessing officer that theagricultural land transferred by the assessee is capital assets within the meaning ofsection 2(14)(iii) of the Income tax Act, 1961, which according to assessee is notcovered in the exclusion under sub-sub clause (a) and (b) of section 2(14)(iii). He hasaccordingly erred in upholding the chargeability of long term capital gain on thetransfer of agricultural land by the assessee.] As far as the findings of the AssessingOfficer that the land is covered in JMC, the ld.

A/R submitted that the same is wrong. The letter of Tehsildar appended by the AO in her order (AOpage 10) itself says that the land is within 8 KMs of the boundaries of the JMC. Further, thenotification appended by AO in her order at Page 11 contains the name of the village Machera and



not Machwa. Machera has been misunderstood by AO as Manchwa. He submitted that the ld.CIT(A) has, however, given finding that the land is situated at 2 to 3 KMs. from the JMC boundaryand it is within 8 kms from the JMC boundaries (Page 13 of the order). He accordingly requested toignore these findings of AO as the same are absurd. He further submitted that the findings of AOthat the land in question is used for residential/ commercial purpose is also wrong for the reasonsthat the land was used by the assessee for agricultural and as per the Government record,agricultural activities were being carried on the said land during the year under consideration (PBPage 17). He also submitted that this finding of AO is contradictory as far as, the AO herself has saidthat the buyers of the land have done plotting on the land. The assessee referred certain electricitybills also in support of agricultural activities on the land. The ld. A/R submitted that the land is anagricultural land. The assessee sold it as such charging rate per bigha. He submitted that neither theassessee nor the department should have any concern as to how the land could be used by thebuyers. It was not a relevant factor for this section to see that how the buyer intended to use the landas held in the various decisions including CIT Vs Manilal Somnath 106 ITR 917 (Guj.), M.S.Srinivasa Naicker Vs ITO (292 ITR 481) and Manibhai Motibhai patel Vs CIT (131 ITR 120) (Guj.).In such circumstances, the observation that the nearby locations are getting developed as multistoryproject has no relevance in the present case. He further submitted that the land was situated beyondthe boundaries of 8 Kms. of the limits of JMC as on 6.1.1994 (i.e. the date of issuing relevantnotification No. 9447/F. No. 164/3/87-ITA-I dated 06/01/1994) as per the certificate on page 11 andtrace of the site plan being produced during the course of hearing. The land has now come nearer tothe boundaries covered in the jurisdictional limit of JMC due to extensions after 1994. He submittedthat th question which is to be decided in this case is whether the said land would be covered by subclause (b) of clause (iii) of section 2(14). He submitted that Under clause (b) power is given toGovernment to notify the area from the limit of Municipalities etc. having population of not lessthan 10,000/. Accordingly, the Government, on 6.1.1994 has notified certain area. He referred therelevant extracts of notification No. 9447/F. No. 164/3/87-ITA-I dated 06/01/1994 at PB Page 1. Hesubmitted that as per this notification, for Jaipur, the area notified was the area of 8 Kms. from theboundaries of Jaipur Municipal Corporation at Entry No. 19.7. The Explanation (2) of thenotification clearly indicates that the Municipal Limits as existing on the date of issue of notificationare to be referred [PB Page 4]. He submitted that there is no ambiguity in the language ofnotification. The notification is issued within the powers given to the Government. He submittedthat as per the powers given to the government under this clause, it is to notify the extended areaunder sub-clause (b). The area which is notified as on a particular date has to be frozen or static. Itcannot be dynamic. The law also had given the power to include the area within the meaning ofcapital asset, where, there is a scope of extension of limits in the near future. Had the limits beenextended to the land, it would have been covered within clause (a) itself. He stated that otherwisealso, the government has specifically given the date of reckoning the limit of 8 Kms. in theexplanation (2) to the notification as stated above. He referred his following specific submissionsmade in the written submissions against each and every observation of the ld. CIT(A) :

CIT(A)'s findings Submission

Argument of the assessee that the There is no ambiguity in the limits prescribed by notification dtd. language of the notification and 06.01.1994 have been frozen. If this therefore, rules of interpretation



argument is accepted, it would render does not apply. The explanation of

several decisions of High Courts and notification dtd. 06.01.1994 clearlyTribunals to nullity. states that the referred limits in the schedule to this notification are those limits which are existing on the date of on which the notificationIt was not the intention of the was published in the Officiallegislature to freeze the limits as these Gazette i.e. 06.01.1994.would change with increasingurbanization. CIT(A) has not quoted any such judgement. The judgements quoted by him are on different line of law which have no application in theThe assessee has failed to interpret the facts of the assessee's case.section 2(14)(iii) in its right Applicability of all the judgementsperspective. quoted by the CIT(A) is separately analysed and annexed to these synopsis. As far as the intention of legislature is concerned, we may submit that the Central Government notified the distance of 8 kms in said notification keeping in mind the potential of growth of the city in the near future. In fact the boundaries of JMC have still not covered the land of the assessee.

From the above discussion, it is quite clear that CIT(A) has erred in applying the provisions of section 2(14)(iii) and decisions of Hon'ble High Courts and Tribunals.

The legislature has used the word "any We may submit that the legislaturemunicipality". When the Legislature has used word "any municipality" toused "any municipality", it would be cover those municipalities under thesafe to infer that limits of municipality clause (a) of section 2(14)(iii). Aswould not remain static and may such there is no relevance of the saidchange with the increasing findings/observations.urbanization.

The Central Government has the The provisions of section 2(14)(iii)authority u/s 507(a) of the Municipal are independent of the saidCorporation Act to declare any portion provisions quoted by the CIT(A).of a rural area as an urban area. The Only those Municipal Limits aremoment the power is exercised u/s covered in section 2(14)((iii) where507(a), the need for notification u/s the population is not less than2(14)(iii)(b) would not arise. Similarly 10,000/-. As such there is no



the moment the Central Government relevance of the said findings.feels that a particular area within 8 kms "Capital asset" has been defined u/sof the limits of municipality has to be 2(14) of Income Tax Act, 1961.treated as an urban area, the need forexercise of power u/s 507(a) would Imposition of capital gain onalso cease. Thus two provisions are in transfer of capital asset is a matter ofa way complimentary to each other and Income tax as required by section

at times overlap. 45. Income Tax Law is a whole law in itself.

No other law or provisions should be applied unless an express or implied reference is made inincome tax law.

Hence, the findings of CIT(A) that the section 507(a) of Munciapl Corporation Act and section2(14)(iii) of Income Tax Act are not valid.

Notifications issued by the Central The notification is not overruling the Government are instancesof provisions of law as the Government is subordinate legislation and that in the authorized tospecify the area under the absence of an express or implied said clause (b) of section 2(14)(iii). Theprovision subordinate legislation could area has been specified by the not have overruled thestatutory government on the basis of boundaries provisions. of municipal corporation existing as onthe date of notification.

The onus is on the assessee to show The assessee has produced the that the character of thelands changed extracts of Girdawari report for land after the acquisition of the capital asset inquestion showing that the land by the assessee and that the lands were was actually being cultivatedat the agricultural lands at the time of transfer time of transfer (PB Page 17). of the asset.

The balance land is still being used for agriculture.

The rate charged by assessee is Rs.26 lacs per bigha (PB Page 6).

Bigha is used for measurement of agricultural land only. As such there is no intention of assessee tochange the land use and assessee was not concerned of the use of the land by the buyer. This isclearly indicated from the sale deed.

The land is still lying as such and no plotting has been done on the same.

On this basis, he submitted that, the interpretation taken by the ld CIT(A) makes the wholenotification as invalid and the decisions of Courts given on that basis becomes nullity. Thenotification does take few municipal areas of the country and distances in all cases are separatelydetermined. Distance of 8 kms. is only an outer limit and not a benchmark. He accordinglyconcluded that the claim of the assessee is as per law and this ground of appeal deserves to beallowed. The ld. A/R also drawn our attention towards the decision of Jaipur Bench of ITAT in the



case of Smt. Subha Tripathi Vs. DCIT (58 SOT 139) wherein the same question arose for the sameassessment year in respect of land situated in the same village Machwa. The Hon'ble Bench hasdecided the case in favour of the assessee on the similar basis as argued by ld. A/R. He also drew ourattention towards the returns of income filed by the assessee in the subsequent years whereinagricultural income shown by the assessee in respect of the remaining part of land has beenaccepted by the department.

4.0 Ld. D/R on the other hand has supported the order of A.O. and ld CIT(A). He submitted that theland in question was capital asset u/s 2(14). He referred the findings given by the ld CIT(A) that 8kms from the local limits was to be seen on the date of transfer and not on the date on whichnotification was published in official Gazette. He submitted that issue stands covered in the favourof Revenue by the decision of Hon,ble Cochin Tribunal in the case of Arun Sunny Vs DCIT (002 ITR380) wherein it was held that the central government had issued the notification for the purpose ofchanging the character of the asset. The nature of the property had to be examined as on the date oftransfer. Further, the transfer deed of the asset was executed during the year under considerationand therefore, the nature of the property whether it was a capital asset or not, had to be examinedfor the year under consideration. He submitted that ld CIT(A) has correctly held that once theproperty was found to be a capital asset on the date of transfer, the transaction became liable forcapital gains taxation and the date of notification could not be used for any other purpose. Hefurther mentioned that the date of notification was relevant only in deciding the nature of theproperty. He placed reliance on the decision of Hon'ble Madras High court in the case of M.Venkatesan Vs CIT (144 ITR 886) where referring to the scope of section 45, it was held that"taxation or exemption from taxation depends upon the subject of transfer answering or notanswering the definition of capital asset at the time of transfer and at no other point of time." Hefurther submitted that normally when the area of the municipality is extended looking to theurbanization on account of pressure of population, then slowly there agricultural lands areconverted into urban areas and they form part of such urban areas. It is true that even after formingof municipal areas, there might exist some lands which may be under cultivation, but that becomesan urban area with the passage of time. He submitted that section 2(14)(iii)(b) clearly stipulates thatany area within such distance not being more than 8 kms from the local limits of any municipality,has to be treated as capital asset for the purpose of I.T. Act. The legislature has used the word "anymunicipality". When the legislature used "any municipality", it would be safe to infer that limits ofmunicipality would not remain static and may change with the increasing urbanization. Though theassessee claimed that the agricultural land was beyond 8 kms radius of JMC as on 06.01.94, the AOhad found that the land in question was within 2 to 3 kms radius of JMC. For this he placed relianceon the decision of Hon'ble Andhra Pradesh High Court in the case of CIT Vs Bolla Ramaiah (174 ITR154) wherein it was held that when the land was situated within 8 kms of local limits of municipalcorporation, it was liable for capital gain. It was held that it was unnecessary to go into the questionwhether the land were agricultural lands or not on the date of acquisition, because even if it wereagricultural lands, they were not exempt from capital gains tax. It would imply that what isnecessary is the position as on date of sale and not the position as on the date of acquisition. Furtherreliance was made on decision of Hon'ble Apex court in CIT Vs Gemini Pictures Circuit (P.) Ltd (220ITR 43) where it was held that mere fact that the land in question was agricultural land could not bea ground to claim exemption u/s 2(14) of IT Act when it was situated within 8 kms of the local limits



of Municipal Corporation. Since the land sold by the assessee was a capital asset, therefore, thesurplus realized by the assessee on ale of land was assessable as capital gain. He also referred thefindings of the ld. CIT(A) that the central government has the authority under section 507(a) of theMunicipal Corporation act to declare any portion of a rural area as an urban area. The moment thepower is exercised under section 507(a), the need for notification u/s 2(14)(iii)(b) would not arise.Similarly the moment the Central Government feels that a particular area within 8 kms of the limitsof the municipality has to be treated as an urban area, the need for exercise of power u/s 507(a)would also cease. Thus two provisions are in a way complimentary to each other and at timesoverlap. Therefore it is not required that central Government should keep on issuing notification. Ithas further been submitted that notification cannot override the provisions of law. For this reliancewas placed on the decision of Kerala High Court in the case of Alexander George Vs CIT(262 ITR367) where the question arose whether a particular land could be treated as agricultural land withreference to Notification in 1973 when it was found to be outside notified area on a subsequentnotification in1994 then it was held that since at the time of transfer, it was within the notified area,therefore the liability could not be avoided. It was accordingly concluded that the onus was on theassessee to show that the character of the lands changed after the acquisition of the capital asset bythe assessee and that the lands were agricultural lands at the time of transfer of the asset. Thematerial date with reference to which the question whether the particular asset which had been soldwas agricultural land or not was to be decided was the date of sale. In other words, the assesseeshould further prove that it was agricultural land at the time of transfer. He further referred therelevant para of the order of ld. CIT(A) wherein he had noticed that the land sold by the assesseewas within the distance of 8 kms from the municipal limits of Jaipur Municipal corporation as perthe Tehsildar, Jaipur Tehsil vide his letter dated 24.12.2010. Further, the inspector sent by the AOalso reported that land in question was located within 2 to 3 kms from the Jaipur Municipality and alarge number of residential towers had come up in the adjoining areas. Accordingly, the land sold bythe assessee was within 8 kms for Jaipur Municipal Corporation and therefore not an agriculturalland but an urban land and the capital gain earned on sale of such land was liable to be taxed. Heaccordingly submitted that the Ld. CIT(A) had correctly upheld the action of the AO to treat thesame as capital asset within the meaning of section 2(14)(iii)(b) of I.T. Act, 1961.

5.0 In the rejoinder, the ld. A/R referred our attention towards annexure to his written submissionswherein he has already submitted that various case laws referred by the authorities are not relevantin the following manner : -

Arun Sunny vs. Dy. CIT [2 ITR 380 (ITAT, Cochin Bench)] Facts Decision Relevancein present case Assessee purchased a Whether an asset is By applyingthis case property in 1975 for Rs. liable for capital gains into present case, 9,000/-.tax and the question as notification prevailing to what would be the on the date oftransfer He sold this property on amount of capital gain will be applied to find19.01.2006 for Rs.

are two different things. out whether the land in 11,02,71,200/-



question is capital The date of notification This property became asset or not is relevantonly in capital asset by virtue of deciding the nature of notification dtd. 06.01.1994.

the property. On the Hence assessee applied the date of transfer it is FMV of property as on found that the asset is a 06.01.1994 instead of capital asset eligible for 01.04.1981being no FMV capital gain, the can be assigned when the relevance of the property was not at all notification is complete. capital asset. The statutory date for the FMV cannot be substituted with a subsequent conversion date determined by Central Government through a notification.

Alexander George vs. CIT [262 ITR 367 (Ker)]

Facts Decision Relevance in present case

Assessee was the owner of 2.47 In the present case, CIT(A)acres of land at Thrikkakara It was held by the did not apply this casePanchayat. Hon'ble High Court ofGovt. acquired his land by Kerela that proceeding is law in correct manner.invoking urgency clause . to be completed on the basis of law that was In 262 ITR 367 it wasPossession was taken on existing at that time (i.e.29.01.1985 and compensation at the time of transfer). held that notification prevailingwas paid on 01.04.1986. on the date of transferOn the date of transfer, will be applicable on thenotification dt. 6.02.1973 was

prevailing as per which land was transaction.capital asset.In 1993, another notification wasissued de-notifying the place atwhich assessee's land wassituated and consequentlymaking assessee's land non-capital asset.Assessee contended that since thenotification de-notifying suchplace came into force during thependency of appeal, so land isnot a capital asset

M. Venkatesan vs. CIT [144 ITR 886 (MAD)]




Assessee owns a land Tax treatment of the In the present case, situated in town havingassessee's transaction, CIT(A) did not applied population of more than therefore to be this case lawin correct 10000 considered in the light manner.

of amended provision He sold such land on In 144 ITR 886 it was since that was the law in 4.03.1970 held that the law in force during the force at the time of Hitherto all agricultural relevant A.Y. transfer will be lands were outside the In other words, taxation applicable on the purview of capital asset. or exemption from transaction However, Amendment in taxation depends upon section 2(14)(iii) came the subject of transfer w.e.f. 1.04.1970 treating the answering or not agricultural lands situated answering the definition within the limits of of capital asset at the municipalities and other time of transfer and at local authorities with a no other point of time. population of 10000 or more. Assessee contended that his land is not capital asset

Ranchhodbhai Bhaijibhai Patel vs. [CIT 81 ITR 446 (GUJ)] Facts Decision Relevance in present case In this case assessee got the If the land is being used In the present case convertedagricultural land for agricultural purpose, land is being used for into non-agricultural by it isagricultural land agricultural purpose taking permission from otherwise following will Collector asrequired by be considered:-

Bombay Tenancy Act to Intention of the sell the construction owner of land



company Development & use of lands in the adjoining area and the surroundings Situation of the land

Physical characteristics of land Land is assessed for agricultural purpose Measurement of land (i.e. in sq. ft./acre/bigha)

Therefore, land in question was held to be capital asset.

CIT vs. Bolla Ramaiah & Ors. [174 ITR 154 (AP)]


Assessee owned an It was held that when the But in present case, agricultural land situated land under requisition is land is not situated

either within the municipal acquired, it vests in the within 8 kms of the limits or within 8 km fromState on the date of local limits of publication of the Municipality on the the local limits. acquisitionnotification date of transfer in the Official Gazette, This land was proposed to so 12.3.1970 washeld to be acquired and a be the date of transfer.

notification dtd. 12.02.1970 was published on 12.3.1970. Assessee's land fall either within the Agricultural lands situated municipal limits or within the limits of a within 8 kms of the localmunicipality or within 8 limits. Hence land in kms of the limits of any question was held to bemunicipality was made a capital asset.

"capital asset" w.e.f. 1.4.1970 i.e. applicable for A.Y. 1970-71. Section 47(viii) exempted sale of agricultural lands effected before 1.3.1970 (the date of introduction of the Finance bill in the Parliament) . Assessee contended the acquisition was completed



before 1.3.1970 and the land was agricultural land on the date of acquisition

6.0 We have heard the rival submission and have carefully perused the available

material on record. We find that in the case of Smt. Subha Tripathi Vs. DCIT (58 SOT

139), this Bench has already considered the similar matter in respect of land situated in the samevillage Machwa for the same assessment year. This Bench has found that the land is situated out ofthe limit of Jaipur Municipal Corporation and therefore, was not covered in sub-clause (a) of section2(14)(iii). It has been held by this Bench that for the purpose of application of sub-clause (b) ofclause (iii) of section 2(14) and to measure 8 KMs from the radius of Jaipur Municipal Corporation,the relevant date would be the date of notification i.e. 6.1.1994 and not the date of sale of land inquestion. We find that the 4 bigha land in question was part of total 16 bigha land of the assesseeallotted to him by the Government in lieu of his retirement from defense services. As per theGovernment record in form of Girdawari which can be said to be conclusive evidence in this respect,the land was being cultivated by the assessee during the year under consideration and subsequentlyalso. The assessee has shown Agricultural Income in the return of income of the previous year andalso in the subsequent years which has been accepted. To further support this, assessee has alsoreferred certain electricity bills showing consumption of electricity for agricultural use. Thesedocuments clearly suggest that agricultural activities were there on the said land during the relevantyear. The use of land differently by the buyers on a subsequent date of inspection is not a relevantfactor for us. In this view of the matter, following the order of this Bench in the case of Smt. SubhaTripathi vs. DCIT we allow this ground of the assessee's appeal. 7.0 Though the above decisions goesto decide the non-taxability of the entire capital gain, still for the sake of disposing off the groundraised by the both the assessee and department, we are proceeding to decide Ground No. 2 ofassessee's appeal and also Ground No. 2 of the departmental appeal. The issue involved is that onwhat basis Fair Market Value of the assessee's land should be considered as on 01.04.1981 for thepurpose of computation of capital gain. The AO quoted an alleged comparable instance wherein therate has been Rs.2,700/- per bigha and total cost was considered at Rs.10,800/- for 4 bigha of land.It has been taken on the basis of enquiry from Dy. Inspector General, Registrar & Stamps, Jaipurwho was called upon by the AO to provide the same. Dy. Inspector General, Registrar & Stamps,Jaipur furnished a copy of sale deed of agricultural land at similar location executed on 27.12.1980.As per this sale deed, the total sale consideration was Rs. 16,000/- for 6 bigha. Accordingly the fairmarket value of the property as on the date of transaction works out to Rs. 2,666/- per bigha.Considering the same, the fair market value of the land in question as on 1.4.1981 was estimated bythe AO at Rs. 2,700/- per bigha resulting total value of land 10,800/- (2700*4). Hence amount ofRs. 10,800/- was adopted as the fair market value of the land in question on 1.04.1981. The assesseeraised objections that the comparable case cited by the AO was distinguishable due to the followingreasons:

a) The land sold by SH. Panna S/o Sh. Mahadev Jat consisted of Khasra No. 226,



246, 244, 245 & 233. These khasras of land were scattered over an area of 2 kms. onthe other hand, the land of appellant was a big single chunk of land and it wascompatible for residential use after plotting.

b) The land of the appellant was in close proximity to the state highway (nearly500mt.) whereas in the comparable case cited by the AO, the land was 3 to 4 kmsaway from the main road.

c) The land sold by Sh. Panna S/o Sh. Mahadev Jat was already in possession of thebuyers and they were cultivating the land for past many years.

The assessee submitted that all these factors make a lots of difference in the value of land. Therecannot be any basis to make suitable adjustment for the above factors in case of land. According tothe assessee when no comparable case is found, the Fair Market Value of the captioned land shouldbe computed on the basis of reverse indexation in the manner approved by Third MemberJudgment of ITAT Agra in the case of Jahanganj Cold storage Vs ACIT (133 TTJ 278). Accordingly,the value comes to Rs.18,87,477/-. After considering the objections raised by the assessee, the ld.CIT(A) found that the case sited by ld. AO was not comparable. He however made his ownestimation and adopted a rate of Rs.10,000/- per bigha and took the Fair Market Value as on1.4.1981 of the total land at Rs.40,000/-.

8.0 We have heard the rival parties and considered the material on record. We find that value ofland differs drastically due to its surroundings, distance from road, disputes, possession etc. There isno dispute on the issue that the in the instances quoted by the ld. AO, the buyers were already in thepossession of land in question which is major factor which affects the rates of the transaction andattached obligations. Further, there are issues regarding proximity from road and scattered land.We also find that AO has given a finding that multistoried projects have been developed near theassessee's land and the buyer of the assessee's land is also developing some project on this land. Nosuch development of the comparable land has been brought on record by the AO. Ld. CIT(A) alsoagreed that the instance quoted by the AO is not comparable. However, he has taken a arbitraryvalue without any basis. In these facts and circumstances, where no comparable case is available,the best way to estimate the cost would be to compute the Fair Market Value on the basis of reversecalculation considering the cost inflation index as held in Third Member Decision of ITAT Agra(Supra) in which one of us was also a party. Accordingly, the estimation made by the assessee in thisrespect had to be accepted. We thus allow this ground of appeal of the assessee and reject theground of the departmental appeal.

9.0 Ground no. 3 of the assessee's appeal is against rejecting the agricultural income of Rs.42,000/-.As already found by us, the assessee has shown evidences of land being cultivated. The agricultureincome has been accepted in the previous year and also in the subsequent years. In these facts andcircumstances, size of land, government records of crop and the amount of agricultural incomeshown, we find no reason to reject the assessee's claim. We accordingly allow this ground of theassessee's appeal also. 10.0 Now we come to the remaining ground no.1 of department's appealwhich is against holding that the provision of section 50C would not apply as the land was sold by



the assessee through agreement and the sale deed was not registered. The AO had observed thatland has been developed and is in the possession of the buyers and sale consideration has beenreceived in toto by the assessee. Further, assessee has claimed that the property has not yet beenregistered and hence, provisions of section 50C are not applicable. In this regard, AO observed thatthe registration of sale property has not been made only to evade the stamp duty payments on thesale. Therefore, section 50C would be applicable on the sale of property and accordingly applicableDLC rates i.e. 1,40,00,000/- would be applied on such transfer. Accordingly, the AO took the saleconsideration of Rs. 1,40,00,000/- as per section 50C instead of actual sale consideration of Rs.1,04,00,000/-. In the first appeal, ld CIT(A) made a reliance on the decision of Hon'ble JodhpurTribunal in the case of Navneet Kumar Thakkar Vs ITO (298 ITR 042) where it was held that toattract section 50C, the property under transfer from the assessee to another person should havebeen assessed for stamp valuation purpose at a higher value than that received or accruing to theassessee. Unless the property transferred have been registered by sale deed and for the purpose thevalue had been assessed and stamp duty have been paid by the parties, section 50C could not comeinto operation. Further reliance was made on the decision of Hon'ble Jaipur Tribunal in the case ofVijaylaxmi Dhaddha Vs ITO(20 DTR 365) and Hon'ble Lucknow Tribunal in the case of CarltonHotel Pvt Ltd. (122 TTJ 515) have held that if the property sold is not registered then section 50Cwould not have any application. Accordingly, Ld. CIT(A) held that in the present case, the sale deedshad not been registered and the buyers had not paid any stamp duty therefore section 50C wouldnot have any application and directed the ld. AO to adopt the sale consideration at Rs.1,04,00,000/- instead of Rs. 1,40,00,000/-. 11.0 We have heard the rival parties and perused thematerial on record. The present case is for A Y 2008-09, i.e. prior to amendment made in theprovisions of section 50C to take into consideration the transfers which have not been registered forstamp duty purpose. In view of the various decisions quoted by the ld. CIT(A), we are in agreementwith his order and confirm the same. This ground of the departmental appeal is also rejected.

12.0 In the result, the appeal of the assessee is allowed and the appeal of the revenue is dismissed.

Order pronounced in the open Court on 30 -01-2014.

Sd/- Sd/- (.N.K. SAINI) (HARI OM MARATHA)ACCOUNTANT MEMBER JUDICIAL MEMEBR

Jaipur

Dated: 30th JAN 2014*MishraCopy forwarded to:- By Order1. Shri Satya Dev Sharma Jaipur2. The ITO , Ward- 5 (2), Jaipur3. The ld. CIT(A)4. The ld. CIT5. The DR6. The Guard File (ITA No.25/JP/12) A.R., ITAT, Jaipur



Documents

Sh. Satya Dev Sharma , Jaipur vs Assessee on 23 January, 2014