Kerala High Court
George Stanley vs The Deputy Commissioner Of Income Tax on 25 August, 2025
Author: A.Muhamed Mustaque
Bench: A.Muhamed Mustaque
1
ITA No.45 of 2024 2025:KER:64834
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE A.MUHAMED MUSTAQUE
&
THE HONOURABLE MR.JUSTICE HARISANKAR V. MENON
MONDAY, THE 25TH DAY OF AUGUST 2025 / 3RD BHADRA, 1947
ITA NO. 45 OF 2024
AGAINST THE ORDER DATED 31.10.2023 IN ITA NO.587 OF 2022 OF
I.T.A.TRIBUNAL, COCHIN BENCH
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APPELLANT/APPELLANT/ASSESSEE:
GEORGE STANLEY, AGED 54 YEARS,
S/O.STANLEY, GRACE VILLA, NEAR HEAD POST OFFICE,
THIRUVALLA, PIN - 689101.
BY ADVS.
SHRI.SREEHARI INDUKALADHARAN
SHRI.SETHU NANDAKUMAR
SHRI.JAYASANKAR K.
SMT.D.SMITHA
RESPONDENT/RESPONDENT/REVENUE:
THE DEPUTY COMMISSIONER OF INCOME TAX
INCOME TAX, INTERNATIONAL TAXATION CIRCLE,
THIRUVANANTHAPURAM, PIN - 695003
BY ADVS.
SRI.P.G.JAYASHANKAR
SRI.G.KEERTHIVAS
SHRI.NAVANEETH.N.NATH, CGC
SRI.V.K.SHAMSUDHEEN, SENIOR GOVERNMENT PLEADER
THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 25.08.2025, THE
COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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ITA No.45 of 2024 2025:KER:64834
JUDGMENT
Harisankar V. Menon, J.
The appeal, at the instance of the assessee, questions the
findings of the Income Tax Appellate Tribunal, Cochin, in ITA
No.587 of 2022 with respect to the assessment year 2014-15.
2. The appellant-assessee, a non-resident, had a
substantial deposit in its bank accounts which was later
transferred abroad. The appellant, in reply to a query, pointed
out that he sold 94 cents of land with a residential building
situated in Pathanamthitta Village for a consideration of
Rs.6,20,40,000/-, stated to be an agricultural land, having no
liability to capital gains tax. The assessing authority by the
impugned assessment order refused to extend the afore benefit
and has sought to assess the long-term capital gain on the afore
value of consideration in accordance with the Income Tax Act,
1961 (hereinafter referred to as "Act"). The appeal against the
above assessment was unsuccessful, and the further appeal to
ITA No.45 of 2024 2025:KER:64834
the Tribunal also met with no success.
3. It is in such circumstances that the appellant-assessee
is before this Court.
4. Heard Sri.Sreehari Indukaladharan, the learned
counsel for the appellant-assessee, and Sri.P.G.Jayasankar, the
learned Standing Counsel for the respondent-revenue.
5. The first ground of challenge against the assessment
as above is with reference to the status of the property as an
"agricultural land". True, the provision of Section 10(37) of the
Act provides for non-inclusion of the capital gains arising from
the transfer of "agricultural land". In the case at hand, the
appellant-assessee had relied on certain photographs and a
certificate from the Village Officer in support of his contention as
above. A perusal of the certificate from the Village Officer shows
that during the financial year 2011-12, there were ten coconut
trees, one jackfruit tree, one mango tree, as well as around 100
tapping rubber trees. The Village Officer further certifies that
after the sale of the properties, along with the demolition of the
ITA No.45 of 2024 2025:KER:64834
residential building, the trees, including the rubber trees, were
cut down. However, we notice that the buyer of the property had
certified before the assessing authority that there were no
agricultural activities in the property. He has also stated that the
land was a commercial one. We further notice that the
appellant-assessee was provided with the required copies of the
incriminating statement from the buyer of the property, as well
as the clarifications obtained by the Department. This Court
further notices that the sale of the property, as well as the claim
for non-liability to taxation, was never disclosed in the return
filed for the year under assessment. Furthermore, the documents
of the Sub Registrar's office where the sale deed was registered
also did not contain any endorsement as regards the nature of
the property to be agricultural. Again, the appellant-assessee has
not been in a position to provide the nature of the agricultural
activities carried out, as well as the details of agricultural
income/expenses for any period. The assessing authority has
categorically found that the appellant-assessee had taken
ITA No.45 of 2024 2025:KER:64834
contradictory stands by originally contending that his parents
were taking income from the property and later changed his
statement, saying that he himself was receiving it.
6. Apart from all the above, under the provision of
Section 10(37) of the Act, it was the duty of the appellant-
assessee to have established that "such land, during the period
of two years immediately preceding the date of transfer, was
being used for agricultural purposes". A perusal of the
assessment order shows that the appellant-assessee has not
taken any steps in that regard. So, even assuming that the
property was planted with rubber trees, when there was no
evidence to show the same was being put to agricultural purpose,
the appellant-assessee could not have raised any claim for non-
liability of tax.
7. There is no dispute with respect to the fact that the
transfer of a capital asset has taken place. There cannot be any
dispute as regards the liability to capital gains as against such
transfer. However, when the appellant-assessee claims non-
ITA No.45 of 2024 2025:KER:64834
liability to capital gains tax, since what is transferred is an
agricultural land, the burden of proof would be on the appellant-
assessee. Viewed from that angle, we notice that apart from
relying on the certificate of the Village Officer and a confirmation
from a rubber tapper, which only supports the existence of the
rubber trees, no evidence was adduced by the appellant-
assessee to prove agricultural activity. It was incumbent on the
part of the appellant-assessee to have proven that on the date
of transfer, the property in question was agricultural in nature.
8. We also notice that the appellant-assessee had sold
the property to a non-resident. If the appellant-assessee had a
case that the property was an agricultural property, how the
same could be sold to a non-resident is also not clear, with
reference to the provisions of FEMA Regulations.
9. In such circumstances, we are of the opinion that the
appellant-assessee has not been able to prove that he was
entitled to non-liability to capital gain tax in a manner known to
law.
ITA No.45 of 2024 2025:KER:64834
10. The second question arising for consideration is as to
whether the rejection of the claim for deduction with reference
to Section 54F of the Act was correct. We notice that the
appellant-assessee has raised the above claim even at the stage
of assessment. However, it was not considered since, according
to the assessing authority, such a claim was not made originally
through the return. The first appellate authority has concluded
that the details thereof "were not available" with the authorised
representative of the assessee. The Appellate Tribunal also
concurred with the above findings. We are of the opinion that
even if a claim is not being raised through a return, when the
Department seeks to levy a capital gains tax, it was incumbent
on the part of the assessing authority to have verified the claim
raised under Section 54F of the Act, not sticking to technicalities,
when such a claim was raised by the appellant-assessee, as an
alternate plea. The officer, in such circumstances, was not to act
as a tax gatherer and ought to have adjudicated on the claim
raised by the assessee. Insofar as it is not so done, we are of the
ITA No.45 of 2024 2025:KER:64834
opinion that the matter has to travel back to the assessing
authority for a proper adjudication on the claim under Section
54F of the Act.
Resultantly, this Income Tax Appeal would stand partly
allowed, remitting the matter back to the assessing authority for
a proper adjudication on the claim raised by the appellant-
assessee under Section 54F of the Act.
Sd/-
A.MUHAMED MUSTAQUE
JUDGE
Sd/-
HARISANKAR V. MENON
JUDGE
ln
ITA No.45 of 2024 2025:KER:64834
PETITIONER'S ANNEXURES:
ANNEXURE A THE TRUE COPY OF THE ASSESSMENT ORDER PASSED BY
THE DEPUTY COMMISSIONER OF INCOME TAX,
INTERNATIONAL TAXATION CIRCLE,
THIRUVANANTHAPURAM DATED 28.12.2016.
ANNEXURE B A COPY OF ORDER PASSED BY THE LEARNED
COMMISSIONER OF INCOME TAX (APPEALS)-12,
BANGALORE DATED 20.12.2021.
ANNEXURE C A COPY OF THE APPEAL IN FORM 36 FILED BY THE
APPELLANT IN ITA 587/COCH/2022 OF THE INCOME
TAX APPELLATE TRIBUNAL, ERNAKULAM.
ANNEXURE D A COPY OF THE ORDER IN ITA 587/COCH/2022 OF THE
INCOME TAX APPELLATE TRIBUNAL, COCHIN DATED
31.10.2023.
ANNEXURE E A COPY OF FORM 1 (RULE 3) OF THE KERALA STAMP
ACT.
ANNEXURE F A COPY OF THE CERTIFICATE NO.1921/13 ISSUED BY
THE VILLAGE OFFICER, PATHANAPURAM DATED
29.05.2013.
ANNEXURE G A COPY OF THE AFFIDAVIT OF MR. ROY GEORGE FILED
BEFORE THE DEPUTY COMMISSIONER, INTERNATIONAL
CIRCLE, THIRUVANANTHAPURAM.
