Agricultural land character and development agreement transfer rules shape capital gains treatment and remand in this tax dispute.

For capital gains purposes, land is treated as agricultural only if actual cultivation and surrounding factual indicators show that character at the date of sale; revenue records are relevant but not conclusive, and the land here was found to be barren, so it was held to be a capital asset and long-term capital gain was sustained. A development agreement amounts to a transfer under section 2(47)(v) only where possession is given in part performance of a contract satisfying section 53A, but the record was insufficient for final determination, so the issue was remitted to the CIT(A) for fresh adjudication. Earlier additions treating disclosed agricultural income as income from other sources were upheld because the non-agricultural character finding survived.

---

---

Issues: (i) Whether the one acre of land sold by the assessee was agricultural land or a capital asset chargeable to capital gains tax; (ii) whether the land given under the development agreement amounted to a transfer within the meaning of section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882; (iii) whether the agricultural income disclosed for the earlier assessment years could be assessed as income from other sources.

Issue (i): Whether the one acre of land sold by the assessee was agricultural land or a capital asset chargeable to capital gains tax.

Analysis: The land revenue records were relevant but not conclusive. The decisive enquiry was whether the land had in fact been put to agricultural use for a reasonable period before sale and whether it retained that character on the date of sale. On the facts, the evidence did not establish actual cultivation, the survey number sold was not covered by the relied-upon revenue order, and the supporting material regarding sale of agricultural produce was disbelieved. The surrounding circumstances showed that the land was barren and not under agricultural use.

Conclusion: The land was held to be a capital asset and the addition on account of long-term capital gain was upheld against the assessee.

Issue (ii): Whether the land given under the development agreement amounted to a transfer within the meaning of section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882.

Analysis: The statutory fiction under section 2(47)(v) applies where possession is allowed to be taken or retained in part performance of a contract of the nature referred to in section 53A. The agreement, the handing over of possession, the consideration structure, and the developer's rights and obligations required examination. However, the record was not sufficient for a final determination on whether the developer had actually taken steps in furtherance of the contract and whether the conditions of section 53A were fully met. The matter therefore required a fresh factual and legal examination by the first appellate authority.

Conclusion: The issue was set aside and remitted to the CIT(A) for fresh decision in accordance with law.

Issue (iii): Whether the agricultural income disclosed for the earlier assessment years could be assessed as income from other sources.

Analysis: The additions for the earlier years were founded on the finding that the lands were not agricultural in nature. Since that finding had been sustained in relation to the assessment year 2007-08, the basis for the additions for the earlier years also survived. No independent material was shown to dislodge that conclusion.

Conclusion: The additions treating the disclosed agricultural income as income from other sources were upheld against the assessee.

Final Conclusion: The appeals were disposed of by upholding the finding that the land sold was not agricultural land, remanding the transfer issue arising from the development agreement for fresh adjudication, and sustaining the additions made for the earlier years.

Ratio Decidendi: For capital gains purposes, the character of land as agricultural depends on actual agricultural use and surrounding factual indicators, while a development agreement attracts section 2(47)(v) only if possession is allowed in part performance of a contract satisfying section 53A.

---