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of <h1>Appeals dismissed: land qualifies as agricultural; sale not liable to capital gains tax; purchaser obtained permission only after purchase</h1> HC dismissed appeals with costs, holding the land qualified as agricultural and its sale did not attract capital gains tax. The court found revenue ... Capital gains - Sale of agricultural land - whether the land qualified as agricultural land, thus exempt from capital gains tax - HELD THAT:- In our opinion, if an agricultural operation does not result in generation of surplus that cannot be a ground to say that the land was not used for the agricultural purpose. It is not disputed that the land was shown in the revenue record to be used for agricultural purpose and no permission was ever obtained for non-agricultural use by the respondents. The permission for non-agricultural use was obtained for the first time by the Varca Holiday Beach Resort Private Limited the purchaser after it purchased the land. Thus, the finding recorded by the two authorities below that the land was used for the purpose of agricultural is based on appreciation of evidence and by application of correct principles of law. The Tribunal has relied upon two unreported decisions of this court in CIT v. Minguel Chandra Pais [2005 (3) TMI 46 - BOMBAY HIGH COURT] and CIT v. Smt. Maria Leila Tovar Furtado Pais [2005 (3) TMI 46 - BOMBAY HIGH COURT] which involved identical issue. In those appeals, this court has upheld the order of the Tribunal holding that the land was agricultural land and its sale did not invite the payment of capital gain. It is not disputed before us that the facts of the said cases were similar to the facts of the present cases. We are bound by the decision in those cases. Thus, there is no merit in the appeals which are hereby dismissed with costs. Issues:1. Whether the land in question can be classified as agricultural land for tax purposesRs.Analysis:The case involved two tax appeals where the respondents, a wife and husband, were co-owners of a piece of land purchased as agricultural land but later sold for a significant profit. The Assessing Officer deemed the land to have non-agricultural potential due to its sale for a beach resort and assessed the profit as capital gains. The respondents contended that the land was agricultural, exempting them from tax liability. The Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal sided with the respondents, leading to an appeal by the Revenue.The main issue revolved around determining whether the land qualified as agricultural land, thus exempt from capital gains tax. The Revenue argued that the sale of the land for a beach resort within two years of purchase indicated non-agricultural intentions. They also highlighted the absence of agricultural income during this period. However, the court noted that the land was recorded as agricultural in revenue records and no permission for non-agricultural use was obtained by the respondents. The court emphasized that lack of surplus from agricultural activities does not negate the land's agricultural classification. Citing relevant legal provisions, the court upheld the lower authorities' findings that the land was indeed used for agricultural purposes.In conclusion, the court dismissed the appeals, stating that the findings were based on correct principles of law and evidence appreciation. The court referenced previous decisions with similar facts where it was held that the land was agricultural, reinforcing the current judgment's validity. Therefore, the court found no merit in the Revenue's appeals and dismissed them with costs.
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