Yatin Hariram Ruparel v. ITO-17(3)(4), Parel
[Citation -2016-LL-1004-62]

Citation 2016-LL-1004-62
Appellant Name Yatin Hariram Ruparel
Respondent Name ITO-17(3)(4), Parel
Court ITAT-Mumbai
Relevant Act Income-tax
Date of Order 04/10/2016
Assessment Year 2009-10
Judgment View Judgment
Keyword Tags compulsory acquisition • transfer of property • additional evidence • adverse possession • valuation officer • business asset • capital asset • capital gain • legal title
Bot Summary: The said agricultural land, not falling within the exceptions laid down in, or the areas referred to under, s.2(14)(iii)(a)/(b), the gain on the transfer of the said land could not be in any case charged to tax. The land is an agricultural land and not meant for business. The same reads as under, clarifying thus that agricultural land has been allotted, in satisfaction of an evacuee claim in lieu of the agricultural land of the OC in West Pakistan: GOVERNMNET OF INDIA Ministry of Labour, Employment and Rehabilitation Department of Rehabilitation Office of the Custodian of Evacuee Property Contractor. The assignment deed itself clarifies that the assignee has the right to, among others, take possession of land in question, toward which we may reproduce from the assignment deed: 10) That you will bear and pay all the expenses for obtaining allotment of the lands, their possession, transfer, registration etc. The irrevocable general power of attorney dated 28.9.1967 reiterates the same, the attorney holder being also entitled to sell or otherwise dispose the land in question, as under: b) To make application for allotment of land or property and obtain possession thereof from the Regional Settlement Commissioner or any other authority competent to grant the same. 5.3 Coming back to the status of the land under the Act, the land is admittedly an agricultural land. Clearly, if the land is, as claimed, an agricultural land, which is to be determined as on the date of transfer, i.e., 18.02.2009, the same is not a capital asset u/s.


IN INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SANJAY ARORA, AM AND SHRI AMARJIT SINGH, JM I.T.A. No.2424/Mum/2014 (Assessment Year: 2009-10) Yatin Hariram Ruparel ITO-17(3)(4), 7, View Villa, Piramal Chambers, 425, Shradhanand Cross Road, Vs. Lalbaug, Parel-12 Matunga, Mumbai-400 019 PAN/GIR No. AACPR 2921 D (Appellant) : ( Respondent) Appellant by : Shri Dinesh Shah Respondent by : Shri Airiju Jaikaran : 20.6.2016 Date of Hearing : 04.10.2016 Date of Pronouncement O R D E R Per Sanjay Arora, A. M.: This is Appeal by Assessee directed against Order by Commissioner of Income Tax (Appeals)-19, Mumbai ( CIT(A) for short) dated 07.2.2014, partly allowing Assessee s appeal contesting its assessment u/s.143(3) of Income Tax Act, 1961 ( Act hereinafter) for assessment year (A.Y.) 2009-10 vide order dated 28.12.2011. 2. issue arising in instant appeal, raised per several grounds, is exigibility to tax of gains arising to assessee on sale of his interest in land and, in case taxable, value and manner of taxability of such gain under Act. 2 ITA No. 2424/Mum/2014 (A.Y. 2009-10) Yatin Hariram Ruparel vs. ITO facts 3. facts of case are that assessee-individual, along with his brother, Shri Ashwin H. Ruparel, inherited plot of land admeasuring 4960 sq. mtrs on demise on their sister, Vijaylaxmi Hariram Ruparel, on 07.4.1994 (*) sister having no other survivor. said land was initially allotted to one, Narain Lilaram Chandwani, by Government of India (acting through Ministry of Labour, Employment and Rehabilitation, Department of Rehabilitation, Office of Custodian of Evacuee Property) on 22.5.1971 (refer PB pgs. 241-242, 257-258) as evacuee property under Displaced Persons (Compensation and Rehabilitation) Act, 1954; he having migrated to Bombay from, and in lieu of his agricultural land in, Sindh (now in Pakistan). Narain Chandwani, original claimant, had earlier (in 1967) sold his right to compensation against his claim under said Act, since verified, to Vijaylaxmi H. Ruparel, vide agreement dated 28.9.1967 (PB pgs. 225-229), for consideration of Rs.3,200/-; also executing irrecoverable general power of attorney in her favour, as also her father, Hariram D. Ruparel and one, S. P. Joshi, on 30.9.1967 (PB pgs. 230-234). intimation of GPOA, constituting attorneys, both jointly and severally, by OC was duly made by him to Regional Settlement Commissioner (PB pg. 243). same clearly constitutes transfer u/s. 2(47) of Act. claim of original claimant (OC) had been, as afore-stated, since verified, bearing Index number S/DD-7/1187-C and registration number B/T/UT/4493/IV-NT dated 29.8.1967 for 8-30 standard acres of agricultural land or, in alternative, payment of Rs.3,786/-, as compensation (PB pgs. 255-256). agricultural land (14-37 local acres), allotted subsequently, was at Village Hedutane, Taluka Kalyan, Dist. Thane, Maharashtra. (*) Though we observe mention of said date as 07.4.1974 at more than one place, same appears to be typographical mistake in view of her having executed GPOA on 10.12.1974 (PB pgs. 218-223) as well as her date of death being stated as on or about 31.3.1994 in GPOA dated 18.10.2008 by Narain L. Chandwani (OC) as well as in statement of facts (SOF) (PB pgs. 10-11). 3 ITA No. 2424/Mum/2014 (A.Y. 2009-10) Yatin Hariram Ruparel vs. ITO assessee, during relevant year, along with his brother, Ashwin H. Ruparel, transferred all their rights in said property to M/s. Lodha Dwellers Pvt. Ltd. (LDPL), company in business of development of real estate on as is, where is basis, for consideration of Rs.12,41,750/-, returning 50% thereof (Rs.6,20,875/-), being assessee s share, as his business income. respective cases 4. As per assessee, agricultural land was not in possession of assessee and his brother or even OC, but of agricultural tenants, whose names find mention in 7/12 Extracts (PB pgs. 259-261). agreement, titled Agreement of Assignment , dated 18.2.2009, had in fact been signed by them as confirming parties (PB pgs. 147-158). What assessee had thus sold was only right to conveyance or right to legal title. assessee s right to land was limited to it s user. tenants were, in fact, protected by Bombay Tenancy and Agricultural Lands Act. De hors possession, there could be no transfer even in terms of section 2(47) of Act. agreement to sell, which is what agreement dated 28.9.1967 is, would not confer either legal or beneficial ownership of subject property. said agricultural land, not falling within exceptions laid down in, or areas referred to under, s.2(14)(iii)(a)/(b), gain on transfer of said land could not be in any case charged to tax. In view of Revenue, on other hand, what assessee had sold was agricultural land, gain on which is chargeable under head capital gains . land having not been cultivated by either assessee or his parent at any time, much less in two years preceding transfer, condition of exemption u/s.10(37) was not met. land is agricultural land and not meant for business. It had even otherwise not been converted into assessee s stock-in- trade at any time. Why, assessee himself does not dispute it being so, claiming it as not excepted by section 2(14)(iii)(a)/(b). Further, being land, gain on its transfer would stand to be computed u/s.50C of Act. Its value, initially adopted at 4 ITA No. 2424/Mum/2014 (A.Y. 2009-10) Yatin Hariram Ruparel vs. ITO Rs.146.60 lacs, i.e., as per stamp valuation, on being objected to by assessee, was referred to Valuation Officer, who valued same at Rs.66.06 lacs, 50% of which has accordingly been assessed in assessee s hands. Discussion 5. We have heard parties, and perused material on record. 5.1 foregoing (paras 3 & 4) delineate broad facts of case as well as respective cases of both parties. first question before us is if land under question and, therefore, what has been sold, can be regarded as part of assessee s stock-in-trade. This is as only in that case it could be regarded as business income, i.e., as returned. Else, even if connected with assessee s business, gain would be only on capital account. No connection with assessee s proprietor of firm Ruparel Electronics , business has been shown. It is rather assessee s father who is stated to purchase evacuee claims from persons in need of funds; assessee and his brother having only inherited same. assessee, in fact, himself admits same per SOF before first appellate authority; relevant part of which reads as under: However although it is not business asset it is also not capital asset as it is agricultural land as per clause (14)(iii) of Section 2. We accordingly find no basis for, or any material on record toward, subject land being assessee s business asset or gain on its transfer being assessable as business income. 5.2 second question before us is if subject land is capital asset u/s. 2(14)(iii) of Act, which would determine whether income by way of gain on its transfer is chargeable to tax or not. However, before we address this issue, it would be relevant to examine and determine nature of assessee s interest in land, i.e., whether proprietary or, as claimed, mere right to use land. That is, what assessee transferred is land itself or right to cultivate it. land was finally allotted 5 ITA No. 2424/Mum/2014 (A.Y. 2009-10) Yatin Hariram Ruparel vs. ITO to Narain Chandwani, OC, on 22.5.1971; assessee s father power of attorney holder, predeceasing (the allotment of land) on 10.5.1970. same reads as under, clarifying thus that agricultural land has been allotted, in satisfaction of evacuee claim in lieu of agricultural land of OC (or his ancestors) in West Pakistan: GOVERNMNET OF INDIA Ministry of Labour, Employment and Rehabilitation Department of Rehabilitation Office of Custodian of Evacuee Property Contractor. Bldg. Nicol Bond, Bellard Estate, Bombay-1, Dated 22.5.91. Allotment Order No. Thana/50 Order No. S/DD-1/1187-C & S/DD-1/1230-D CIF No. B/T/UT/4493/IV NT Name and address of allottee Particulars of verified claim. Under I.T. Act. _____________________________________________________________________ Shri Narain Lilaram Assessee in 42-15 499/2560 St. Acres C/o. Shri V. H. Ruparel Area due after Punjab cut. 28-14 3059/5120 S.A Nursi Natha Trust Bldg., Balance compensation Rs.3860/- 18/20, Kazi Syed Street, Bombay-9. 1. You are hereby allotted following agrl. Land in Thana District on Quasi permanent basis from date of this order. District Taluka Village Sr. Nos. allotted Local Acres Std. Areas allotted allotted Thana Kalyan Hedutane 131/1, 146, 147 14-37 6-10/ 4/5 2. You will be liable to pay land revenue/rent/cess and any other dues which may be payable to Government or to local Bodies under any Law for time being in force in MAHARASHTRA STATE 3. allotment will be liable to be cancelled if: i. You are found to have made false statement or declaration in application or in course of scrutiny thereof or have committed fraud in obtaining allotment of said land. ii. You fail to discharge any obligations as mentioned above or that may be prescribed hereafter. iii. You fail to pay land revenue/rent/cess or any other dues which may be payable by you to Government or local Bodies. You are requested to contract Collector Thana for possession Sd/- (MANAGING OFFICER) BOMBAY 6 ITA No. 2424/Mum/2014 (A.Y. 2009-10) Yatin Hariram Ruparel vs. ITO allotment, as apparent, casts no obligation on allottee (or person claiming through him), so that failing said condition where stipulated - property would get resumed or allotment cancelled. That is, allotment is conditioned only by circumstances stated in allotment letter and, accordingly, subject to some pre-emptive stipulations as to payment of land revenue/rent; declaration/s made being true (not false), etc., absolute in its scope. All rights, title and interest qua said land vests on allotment with OC, who had, in turn, and in fact apriori, assigned same to assessee s sister, whom assessee and his brother succeed, for consideration. Interest in property includes right to possession as well as right to cultivate. In fact, right to use or cultivate land, which assessee claims OC and, thus, person/s claiming through him, to have obtained, itself includes right to possession. In fact, assignment deed itself clarifies that assignee has right to, among others, take possession of land in question, toward which we may reproduce from assignment deed (dated 28.9.1967): (PB pg. 228) 10) That you will bear and pay all expenses for obtaining allotment of lands, their possession, transfer, registration etc., in your name or in name of your nominee or nominees. 11) That as soon as lands are proposed to be allotted by Authorities, you will be entitled to obtain possession and all documents in connection with same and to do such things as are necessary for fully assuring same permanently to yourself or your nominee/nominees. irrevocable general power of attorney (GPOA) dated 28.9.1967 reiterates same, attorney holder being also entitled to sell or otherwise dispose land in question, as under: (PB pg. 231-232) b) To make application for allotment of land or property and obtain possession thereof from Regional Settlement Commissioner or any other authority competent to grant same. 7 ITA No. 2424/Mum/2014 (A.Y. 2009-10) Yatin Hariram Ruparel vs. ITO c) To take possession of such land or other property that is ultimately allotted and to enter in such agreement or liabilities with such authority as authority may require. d) To make possession of and hold and manage and/or develop land and or property allotted (whether possession is provisional or final). If land is granted to cultivate, raise crops, sell same and do all things incidental to management and development thereof. If any other property to receive rents, or sell same, carry out repairs, improvements, develop such property or properties and manage same. GPOA dated 10.12.1974 executed by Vijaylaxmi H. Ruparel (alias Vijaylaxmi Jitendra Dhabliwala) in favour of Harish H. Ruparel and Ashwin H. Ruparel (PB pgs. 218-224) and as well as GPO dated 18.10.2008 by OC contain similar clauses, which we may reproduce as under: (PB pgs. 219-220) 3. To take possession of such lands or other property that is ultimately allotted and to enter in such agreement or liabilities with such authority or authorities which may be required. 4. To take possession of and hold and manage and/or develop properties acquired. If land is granted to cultivate, raise crops, sell same if any other property is acquired to receive rents, or sell same, carry our repairs, improvements, develop such property or properties and do things incidental thereto. That assessee, being not agriculturist, was, as it appears, not interested in cultivating land, or did not, take any steps (since allotment in May, 1971) to take possession of agricultural land, or did not consider it feasible to do so, etc., is another matter. He may also have, after all these years of adverse possession, found it infeasible to do so. How, one may ask, would then purchaser, LDPL, take possession of land? That is, if assessee (and his brother), from whom it derives its rights, did not have right to possession. reference, therefore, to clauses in Agreement dated 18.2.2009 (PB pgs. 147-158) to effect that OC or confirming parties (the assessee and his brother) are not in possession of land, is 8 ITA No. 2424/Mum/2014 (A.Y. 2009-10) Yatin Hariram Ruparel vs. ITO to no moment; said agreement clearly transferring all rights conferred by allotment letter, including right to possession, which is in fact admitted (refer clause 4(a)) thereof. That land user may be required to be changed; land being admittedly agricultural, for transferee to use it for its purposes, is another matter. Then, again, how does assessee explain non-possession of land claimed to be barren? (refer paragraph 4.6.1 of assessment order). non-possession of land by assessee, part of which is stated to be in possession of tenants and rest barren, is thus only deliberate and, at best, encumbrance, which may impact its valuation. In fact, assessee himself (vide his reply dated 8/12/2011) states it as one of encumbrances adversely impacting it s valuation (refer paragraph 4.6.1 of assessment order). assessee also claims to be not assignor, but only confirming party and, therefore, that it is not he who has transferred rights . Who, then, we wonder, is, assignor? Put differently, if confirming party, could assessee have sold right to conveyance, or any right for their matter? OC, Narain Chandwani, has already assigned all his rights in favour of assessee s sister for consideration, reserving no right. His, therefore, executing deed of confirmation on 18.10.2008 (PB pgs. 175-178) or GPOA of even date (PB pgs. 160-168) in favour of assessee and his brother, is of no moment. In fact, said documents itself clarify this aspect, i.e., of Vijaylaxmi H. Ruparel (alias Vijaylaxmi Jitendra Dhabliwala) being entitled to land, including its possession, and of assessee and his brother, Ashwin H. Ruparel, becoming entitled to said property as her legal heirs. execution of GPOA by assignee Vijaylaxmi H Ruparel (alias Vijaylaxmi Jitendra Dhabliwala), as explained therein, is only by way of delegating powers acquired under irrecoverable power of attorney in her favour, so as to enable execution of necessary acts. Similarly, execution of GPOA/s, as explained therein is only as OC could not purchase land or property utilizing claim certificate. same, thus, is only confirming document, affirming him having assigned his interest 9 ITA No. 2424/Mum/2014 (A.Y. 2009-10) Yatin Hariram Ruparel vs. ITO in land and, thus, to have no interest in subject property. This is, in fact, admitted position; assessee and his brother, Ashwin Ruparel, inheriting property from their sister (and father) as their legal heirs. It is therefore they, i.e., assessee and his brother, who are thus assignors, and who have agreed to transfer land on as-is-where-is basis, to LDPL, purchaser, for consideration. That is, notwithstanding Agreement stating OC as Assignor, on whose behalf assessee and his brother have signed as GPOA holders. GPOA dated 18.10.2008 (PB pg. 160-168) admits to this position. assessee s objection of being only confirming party is therefore to no consequence. assessee s claim, therefore, of having only limited right of cultivation of subject agricultural land, or only to acquire legal title, u/s.54 of Transfer of Property Act, 1882, is untenable and inconsistent with admitted facts and circumstances as well as material on record. same also meets assessee s objection to in-application of section 50C of Act on that ground. assessee s constant refrain to having no right of possession is thus also misplaced. reference in this regard to Bombay Tenancy and Agricultural Lands Act is again not clear, with we being even not as much as taken through said Act (PB pgs. 112- 116) during hearing nor do we find any reference thereto in Grounds of Appeal or SOF or even orders of Revenue authorities. land is agricultural, and if same status is sought to be ensured and sustained through law by, inter alia, prohibiting it s transfer to non-agriculturalist, it would not make assessee any less owner or impact his ownership status (of said land). Even regarding it as encumbrance, same is by law, applicable for all owners, and would only impact use to which land can be put to and, consequentially, its value, which aspect is admitted. assessee is thus under terms of allotment deemed to be agriculturalist with constructive possession of land. Again, how then, one may ask, same stands assigned/sold to LDPL, which is per registered document? As it 10 ITA No. 2424/Mum/2014 (A.Y. 2009-10) Yatin Hariram Ruparel vs. ITO appears, land user would be required to be changed for being put to use for other than agriculture, with same purchased in anticipation thereof. 5.3 Coming back to status of land under Act, land is admittedly agricultural land. However, for purposes of Act, it is still regarded as capital asset where it falls in areas referred to in sub-clause (a) or (b) of section 2(14)(iii). Toward this, assessee claims it as falling under neither, so that it is agricultural land as defined u/s. 2(14)(iii) of Act and, thus, not capital asset. That being so, gain on its transfer would stand to be chargeable as capital gains . Section 10(37) of Act, reading as under, stipulates exclusion by way of exemption of gain on transfer of agricultural land situate in areas referred to in section 2(14)(iii)(a)/(b) in certain circumstances, so that it would therefore not apply: Incomes not included in total income. 10. In computing total income of previous year of any person, any income falling within any of following clauses shall not be included (1) (2) (37) in case of assessee, being individual or Hindu undivided family, any income chargeable under head "Capital gains" arising from transfer of agricultural land, where (i) such land is situate in any area referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of section 2 (ii) such land, during period of two years immediately preceding date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or parent of his; (iii) such transfer is by way of compulsory acquisition under any law, or transfer consideration for which is determined or approved by Central Government or Reserve Bank of India; (iv) such income has arisen from compensation or consideration for such transfer received by such assessee on or after 1st day of April, 2004. Explanation .. 11 ITA No. 2424/Mum/2014 (A.Y. 2009-10) Yatin Hariram Ruparel vs. ITO We agree with assessee in principle. first thing to ascertain, therefore, is if subject land is situate in areas referred to in sub-clauses (a) or (b) of section 2(14)(iii). Toward this, assessee has furnished certificate dated 01.8.2012, issued by Sub-Ward Officer s Office, Kalyan in response to assessee s request dated 09.7.2012, purportedly to effect that distance of subject land from local limits of Kalyan (stated to be nearest town) Municipality is 9 km (PB page 30). same, firstly, was not produced before AO. Even impugned order bears no reference thereto, including qua admission or, as case may be, non-admission of said additional evidence. As it appears, assessee made no application for admission of same as additional evidence before first appellate authority, so that same was not regarded as requiring adjudication qua its admission by him. We say so as there is no ground or even prayer before us with regard to its non- admission or non-consideration of admission. There is accordingly no finding qua satisfaction or otherwise of condition/s (as to location) of s. 2(14)(iii)(a)/(b) in impugned order. same, though, therefore, technically not incorrect in-as-much as no infirmity could be said to inflict said order on that score, we would be disinclined to proceed to decide matter on basis of said certificate not forming part of record. aspect sought to be evidenced goes to root of matter, i.e., whether subject (agricultural) land is capital asset u/s. 2(14)(iii) of Act or not? We, accordingly, relying on Prabhavati S. Shah vs. CIT [1998] 231 ITR 1 (Bom), direct admission of said evidence by first appellate authority. same is in fact, in vernacular, and would therefore require being translated in English. We are aware of English translation on record. same, however, has to be by authorized person. same also bears no reference to survey numbers of subject agricultural land, and indeed it is not even clear if it stands issued by competent authority. ld. CIT(A) shall cause examination of these aspects as well. Then, again, matter would require being verified and considered by Revenue authorities. Rather, reliance on said evidence is subject to mandatory 12 ITA No. 2424/Mum/2014 (A.Y. 2009-10) Yatin Hariram Ruparel vs. ITO procedure prescribed under rule 46A. He shall decide this matter after hearing both parties before him, issuing definite findings of fact, and in accordance with law. Clearly, if land is, as claimed, agricultural land (i.e., rural agricultural land in assessee s words), which is to be determined as on date of transfer, i.e., 18.02.2009, same is not capital asset u/s. 2(14) of Act and, accordingly, no capital gain chargeable to tax arises to assessee on its transfer. ld. CIT(A) shall in this regard also; assessee having returned same as business income, dwell on aspect of reduction in income to that extent. 5.4 Before parting, we may add that assessee has placed on record several orders/decisions, which were not referred to during hearing, much less read thereat. issues arising and decided by us are principally factual, so that same would be of little moment. As regards legal issue, qua which assessee relied on CIT vs. Nitish Rameshchandra Chordia [2015] 374 ITR 531 (Bom), we have restored matter back to file of first appellate authority, who shall decide same, determining facts, in accordance with law, and before whom assessee shall be at liberty to rely on any decision deemed proper. 5.5 We decide accordingly. 6. In result, assessee s appeal is allowed for statistical purposes. Order pronounced in open court on October 04, 2016 Sd/- Sd/- (Amarjit Singh) (Sanjay Arora) Judicial Member Accountant Member Mumbai; Dated : 04.10.2016 Roshani, Sr. PS 13 ITA No. 2424/Mum/2014 (A.Y. 2009-10) Yatin Hariram Ruparel vs. ITO Copy of Order forwarded to : 1. Appellant 2. Respondent 3. CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai Yatin Hariram Ruparel v. ITO-17(3)(4), Parel
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