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Kalpaka Oil Mills (In Liquidation) Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Reference No. 182 of 1979
Judge
Reported in(1985)44CTR(Ker)68; [1986]160ITR604(Ker)
ActsIncome Tax Act, 1961 - Sections 2(14) and 45
AppellantKalpaka Oil Mills (In Liquidation)
RespondentCommissioner of Income-tax
Appellant Advocate C. Kochumon, Adv.
Respondent Advocate P.K.R. Menon, Adv.
Excerpt:
.....existence of a good number of coconut and arecanut trees on the property must itself be taken as evidence in no uncertain measure of the basic character of the land as agricultural......the assessee had shown 50 cents of the land acquired as non-agricultural land and the remaining land as agricultural land. for the purpose of computing the ' capital gains ', the assessee thus had taken into account only the value of about 50 cents of land and the buildings thereon because, according to it, that alone can be treated as ' capital assets ' within the meaning of section 2(14)(iii) of the income-tax act, 1961 (for short 'the act').6. the assessing authority rejected the above plea of the assessee. he held that 'the acquired lands were purely non-agricultural' and hence, in computing the capital gains, the entire value awarded as compensation was taken into account. accordingly by order dated december 22, 1971, the assessing authority determined the tax liable to be paid.....
Judgment:

K.P. Radhakrishna Menon, J.

1. Pursuant to the direction issued by this court in O.P. No. 615 of 1977E, the Income-tax Appellate Tribunal, Cochin Bench, has referred the following questions to us for our opinion :

'1. Whether, on the facts and in the circumstances of the case, the reasoning and conclusion of the Appellate Tribunal to hold that ' the assessee cannot obtain protection under Section 2(14)(iii) of the Income-tax Act, 1961, to fall outside the net of Section 45 ' were valid and justified in law ?

2. Was the Appellate Tribunal justified in law in holding that the value of the plot of 5'3380 acres of land of the assessee compulsorily acquired by the Government can be assessed to capital gains '

2. The year of assessment is 1964-65, the accounting period being the period ending with December 31, 1963. The facts relevant for considering the points arising in the case lie in a narrow compass. The assessee is a company now under liquidation. On March 14, 1947, it purchased 5 acres and 5 cents of dry lands for a sum of Rs. 1,70,000. The property in question is situated by the side of the ship building yard and very near the Venduruthy bridge and it has both road frontage and water frontage. It has a frontage of about 141 links on the Thevara road.

3. For the purpose of carrying on its business, the company constructed on a portion of the property a godown of a plinth area of 2,700 sq. ft. It also constructed two other buildings, a car shed, a bath room and a compound wall. Its business of soap manufacturing and oil milling unit was housed in the buildings. In 1957, the assessee stopped the business and the godown and the buildings were let out to the Public Works Department of the State Government. From the year 1960 onwards, the assessee had not incurred any expenditure by way of agricultural operations on the land except the expenditure incurred for plucking cocoanuts during the period from 1960 to 1963.

4. The property with the buildings thereon was acquired by the State of Kerala, The Land Acquisition Officer awarded a sum of Rs. 4,65,930.66 as compensation inclusive of solatium at 15%, The assessee was not satisfied with this award of compensation. He took the matter to court and the sub-court by its judgment dated February 22, 1969, enhanced the compensation to Rs. 11,10,912.47. In doing so, the sub-court determined the value of the land of the extent of 4.85 acres at Rs. 1,700 per cent and the value of the remaining 20 cents of land--the finding is that this part of the land is liable to be submerged in water--at Rs. 1,445 per cent. The appeal filed against the judgment of the sub-court enhancing the compensation was dismissed.

5. On July 30, 1971, the Income-tax Officer issued a notice under Section 148 of the Income-tax Act, calling upon the assessee to file the return of its income for the assessment year 1964-65. This notice disclosed that income said to have escaped assessment represented the ' Capital gains ' arising from the acquisition of the aforesaid property of the assessee. The assessee filed the return of income declaring a total loss of Rs. 1,92,233. In the return, the assessee had shown 50 cents of the land acquired as non-agricultural land and the remaining land as agricultural land. For the purpose of computing the ' capital gains ', the assessee thus had taken into account only the value of about 50 cents of land and the buildings thereon because, according to it, that alone can be treated as ' capital assets ' within the meaning of Section 2(14)(iii) of the Income-tax Act, 1961 (for short 'the Act').

6. The assessing authority rejected the above plea of the assessee. He held that 'the acquired lands were purely non-agricultural' and hence, in computing the capital gains, the entire value awarded as compensation was taken into account. Accordingly by order dated December 22, 1971, the assessing authority determined the tax liable to be paid at Rs. 3,89,964. The assessment order is annexure D.

7. The Appellate Assistant Commissioner before whom the assessee had filed an appeal, confirmed the order of assessment as is seen from his order dated February 16, 1974, dismissing the appeal. The order is annexure F. The assessee thereupon filed an appeal before the Income-tax Appellate Tribunal, Cochin Bench, which by order dated March 6, 1976, dismissed the appeal. The order is annexure H.

8. The Income-tax Appellate Tribunal dismissed the petition under Section 256(1) the assessee had filed before it, seeking a reference of certain questions of law said to be arising out of the order of the Tribunal. The assessee thereupon filed a petition before this court, O.P. No. 615 of 1977E, under Section 256(2) of the Act to compel the Tribunal to refer the questions. The petition was allowed and the above questions were directed to be referred to us for our opinion. That is how the assessee is before us.

9. The learned counsel for the assessee submitted that inasmuch as there were 242 cocount trees and 14 areca trees in addition to trees like mango trees, tamarind trees, etc., on the land, the authorities concerned should have declared that the land in question was agricultural land irrespective of the fact whether the assignee at any time had an intention to use the land for agricultural purposes or whether he purchased the land with the intention of using it for agricultural purposes. In support of this plea, he referred to a decision of the Supreme Court in CWT v. Officer-in-Charge, Court of Wards, Paigah : [1976]10ITR133(SC) and a decision of this court in CIT v. K. Ananthan Pillai : [1974]94ITR122(Ker) .

10. The above submission of the counsel is nothing but a reiteration of the argument the assessee had advanced before the Income-tax Officer. The Income-tax Officer did consider this argument of the assessee before he entered the finding that the land in question was not agricultural land. The Income-tax Officer has stated thus in his order of assessment (annexure D):

' ......The assessee considers this piece of land to be agricultural only on the ground that there v/ere some trees thereon at the time when the transfer took place......

11. Again, one of the sure tests for a land to be agricultural, is that agricultural operations should have been carried on in the property. In the instant case, despite the presence of the trees (which I understand were all there intact even when the assessee purchased the land), the assessee was not carrying on any agricultural operations at least for 5 to 10 years immediately preceding the date of acquisition by the Government. The assessee himself has furnished to me the details of 'agricultural' expenditure, a break up of which is given below :

In the year 1963 till date of acquisitionRs.84 (all spent for plucking of the nuts)In the year 1962Rs.101 (all spent for plucking of the nuts)In the year 1961Rs.122 (all spent for plucking of the nuts)In the year 1960Rs.112 (all spent for plucking of the nuts) and so on.

It is manifest from the above that no agricultural operations worth the name were being carried on in this property.......

From what is stated above, it becomes abundantly clear and convincing that the acquired lands were purely non-agricultural and that they would fall under 'capital assets' for the purpose of income-tax.'

12. The Appellate Assistant Commissioner in his order (annexure F) has found thus :

' Therefore, I am convinced that when the appellant purchased the land, he had intended to utilise it only as a business asset. The further development in connection with this land also indicates that when the land was acquired by the Government, the appellant was not carrying on any agricultural operations and that land was, in fact, not agricultural land at the time. The Income-tax Officer was, therefore, justified in computing the capital gains on the sale of this property. '

13. The Appellate Tribunal has held :

' 8. It is also significant to note that the assessee itself had not considered the land as an agricultural land. The first thing that it appears to have done immediately after the purchase of the land was to construct buildings thereon. It thus constructed a godown of plinth area of 2,700 sq. ft. It also put up on the land two other buildings, a car shed, a bathroom and a compound wall. These constructions were valued in the award at Rs. 1,14,812. At least ever since 1960, admittedly, the asses-see had not spent one pie on this land in the form of agricultural operations, etc. In the years 1960 to 1963, the only expenditure incurred was for the plucking of coconuts. The award shows that most of the coconut trees stood unattended and unhusbanded. Some of them had become barren.

9. In the face of these significant facts, we find it difficult to accept the assessee's contention that the existence of a good number of coconut and arecanut trees on the property must itself be taken as evidence in no uncertain measure of the basic character of the land as agricultural. In Rasiklal Chimanlal Nagri v. CWT [1965] 56 ITR 608, it has been pointed out that in a case where the land is not being actually put to any use, the true test to be applied for the purpose of determining whether a particular land is agricultural land or not, is not whether the land is capableof being used for agricultural purpose, but whether, having regard to the various relevant factors, the general nature or character of the land, is such that it can be regarded as agricultural land.' (Emphasis* supplied).

14. The assessee has not challenged the above findings and hence is bound by them. The form of the first question itself indicates that the assessee has accepted the findings of the Tribunal that the land in question is not agricultural land within the meaning of Section 2(14)(iii) of the Act. To consider the argument the counsel for the assessee has now raised before us, we should go behind the above findings of the Tribunal.

15. The High Court while exercising the advisory jurisdiction has no authority to go behind the findings of the Tribunal or to question the statements of fact made by the Tribunal. It has been so held by the decision of the Supreme Court in Karnani Properties Ltd. v. CIT : [1971]82ITR547(SC) .

16. The Supreme Court has held thus (p. 554):

' When the question referred to the High Court speaks of ' on the facts and in the circumstances of the case ', it means on the facts and circumstances found by the Tribunal and not about the facts and circumstances that may be found by the High Court. We have earlier referred to the facts found and the circumstances relied on by the Tribunal, the final fact-finding authority. It is for the Tribunal to find facts and it is for the High Court and this court to lay down the law applicable to the facts found. Neither the High Court nor this court has jurisdiction to go behind or to question the statements of fact made by the Tribunal. The statement of the case is binding on the parties and they are not entitled to go behind the facts found by the Tribunal in the statement. '

17. In the circumstances indicated above, we are constrained to hold that we cannot entertain the arguments of the counsel stated supra.

18. In the above conclusion, the questions referred to us have been answered in the affirmative and against the assessee. No costs.

19. A copy of this judgment under the seal of the High Court and the signature of the Registrar shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.


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