Assessee purchased for a consideration by entering into an agreement of sale in 2002 for a consideration of Rs.13.44 crores and received an advance of Rs.7.70 crores. However, in 2007, assessee as ‘guarantor’ executed irrevocable General Power of Attorney (GPA) in favour of the purchaser of land. Assessee declared capital gains on this transaction at NIL claiming that the land sold is an agricultural land and situated beyond 8 KM from any municipality. The property conveyed through this irrevocable GPA was treated as sale by A.O. and relying on some clauses of irrevocable GPA, held that the land was meant for commercial exploitation on the date of transfer. He accordingly, brought to tax the long term capital gain and allowed deduction under section 54F to the extent assessee invested in House at Banjara hills and taxed an amount of Rs.2,33,73,151 as long term capital gain. Held on basis of decision of Bombay High Court in the case of CIT vs. Debbi Almao and Joaqyam Almao and also on facts that assessee’s land was used as agricultural land and is away from GHMC limits beyond 8 KMs, the said transaction does not give rise to taxable capital gains.
DCIT – Appellant – Versus – Mr. M. Kalyan Chakravarthy – Respondent
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES “B” : HYDERABAD
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
SHRI SAKTIJIT DEY, JUDICIAL MEMBER
Assessment Year 2008-2009
DCIT, Circle 1(3)
Mr. M. Kalyan Chakravarthy,
For Revenue : Mr. Rajat Mitra
For Assessee : Mr. A.V. Raghuram
Date of Hearing : 15.10.2014
Date of Pronouncement : 24.10.2014
PER B. RAMAKOTAIAH, A.M.
This appeal by Revenue is directed against the Order of the Ld. CIT(A)-V, Hyderabad dated 31.01.2013. The issue in the appeal is with reference to levy of capital gains on transaction entered by assessee on sale of agricultural land to M/s. Ramky Estates and Farms P. Ltd. It was the Assessing Officer’s contention that transaction of GPA entered indicates that land was meant for commercial exploitation and did not have the character of agricultural land at the time of transfer.
2. Briefly stated, assessee purchased ac.30.00 gts of land at Survey No. 230, Srinagar village, Maheswaram Mandal on 22.08.2002 for a consideration of Rs.8,03,450/- from M/s. Vishwas Agri Plantation P. Ltd., Assessee entered into an agreement of sale on 08.02.2006 with M/s. Ramky Estates and Farms P. Ltd., for sale of the above land for a consideration of
Rs.13.44 crores and received an advance of Rs.7.70 crores. However, on 05.05.2007, assessee as ‘guarantor’ executed irrevocable General Power of Attorney in favour of M/s. Ramky Estates & Farms P. Ltd. Assessee declared capital gains on this transaction at NIL claiming that the land sold is an agricultural land and situated beyond 8 KM from any municipality. The property conveyed through this irrevocable GPA was treated as sale by A.O. and relying on some clauses of irrevocable GPA, held that the land was meant for commercial exploitation on the date of transfer. He accordingly, brought to tax the long term capital gain and allowed deduction under section 54F to the extent assessee invested in House at Banjara hills and taxed an amount of Rs.2,33,73,151 as long term capital gain.
3. Before the Ld. CIT(A), it was contended that transaction is of sale of agricultural land which is beyond 8 KMs from GHMC. A.O. was of the opinion that the amount of Rs.14.50 lakhs spent by assessee was towards development of land and conversion from agriculture to non-agriculture. It was contended before the Ld. CIT(A) that this was not development expenditure but towards ratification charges of title. It was further contended that the land in question was assessed by land revenue authorities as the agricultural land and assessee never applied for conversion of the said land into nonagricultural land and has filed pattadar pass books in confirmation thereon. Assessee relied on various decisions, as extracted by the Ld. CIT(A) in his order, to contend that the transaction does not result any capital gains. Ld. CIT(A) after considering the submissions accepted the contention and deleted the same by stating as under :
“5.2. I have gone through the assessment order, submissions and evidences filed by the appellant. Going by the facts involved in the present case, I find there is merit in the contentions of the appellant. The appellant in the return of income admitted that he had sold the land in question during the year through an irrevocable GPA to M/s Ramky Estates and Farms Pvt Ltd. The contention of the appellant is that the land so conveyed to the vendee is an agricultural land and in support of the above, he has filed the copy of purchase deed and also the irrevocable GPA wherein it was mentioned that the transaction is in respect of agricultural land. The revenue records certify that-the land so sold by the appellant during the year is an agricultural land. The appellant at no stage applied to revenue authorities for conversion of his land as non-agricultural land.
5.2.1. As regards the view of the Assessing Officer that the appellant has spent Rs.14.50 lakhs towards development of the agricultural lands, it was clarified by the appellant that the amount spent is not for development of the land but the same is towards ratification deed for the property purchased. The facts relating to this expenditure were explained that at the time of original purchase of land, one of the vendor, Sri K. Anand Rao was a minor and the lands were sold to M/s Vishwas Agro Plantations in the year 1993. The appellant purchased the land in the year 2002 from Mls Vishwas Agro Plantations. In the year 2006, the appellant the appellant got a ratification deed from the hitherto minor, Sri K. Anand Rao in favour of M/s Vishwas Agro Plantations, the seller to the appellant, and paid the amount of Rs.14.50 lakhs to them. In support of the above claims, the appellant filed ratification deed and also an affidavit from Sri K. Anand Rao.
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