2013 (8) TMI 595 - AT - Income Tax

Land classified as agricultural for tax purposes exempt from capital gains tax; Revenue's appeal dismissed

Deputy Commissioner of Income Tax Versus Ms. Gunawanthi

The Tribunal upheld the CIT(A)'s decision, ruling that the land in question was agricultural based on revenue records and previous rulings. Consequently, ... Land sold is agricultural land or it is to be treated as a capital asset in the terms of section 2(14) of the Act – Held that:- If a land is situated within 8 kms of the municipal limits of a city even if it is recorded as agricultural land in the revenue records, it is to be treated as non-agricultural land and for that matter an Asset but in this case, the admitted fact is that this land falls beyond 8 kms from the notified limit. It is true that as per revenue records, the land has been recorded as agricultural land - Assessee has been showing agricultural income from this very land and the same has been accepted by the Revenue as such year after year – Assessee’s land has been agricultural land for the past many years and has been classified as such in the records of the revenue Department – Even if no agricultural production was done by the assessee on this land, this mere fact will not take out the land out of the nomenclature of 'agricultural land' – agricultural land to be held as agricultural land – Decided in favor of Assessee. Issues Involved:1. Classification of land as agricultural or non-agricultural.2. Assessment of gains from the sale of land as capital gains.3. Validity of documentary evidence supporting the agricultural nature of the land.4. Comparison of the assessee's case with the case of her husband.Issue-wise Detailed Analysis:1. Classification of Land as Agricultural or Non-Agricultural:The primary issue was whether the land sold by the assessee was agricultural and thus exempt from capital gains tax. The Assessing Officer concluded that the land was non-agricultural based on various inquiries and evidence, including the sale deed stating the land was not used for productive purposes and the Tahsildar's certification that the land was vacant for four years. The CIT(Appeals), however, followed the Tribunal's decision in the case of the assessee's husband, holding the land to be agricultural.2. Assessment of Gains from the Sale of Land as Capital Gains:The Assessing Officer added Rs. 12,23,82,098/- as Long Term Capital Gains, asserting that the land was non-agricultural. The CIT(Appeals) disagreed, referencing the Tribunal's earlier decision in the case of the assessee's husband, which classified similar land as agricultural, thus exempting it from capital gains tax.3. Validity of Documentary Evidence Supporting the Agricultural Nature of the Land:The Revenue argued that the documents provided by the assessee, such as Adangal extracts and Kist payment receipts, were either outdated or created to claim exemption. The CIT(Appeals) and the Tribunal found these documents, along with the consistent classification of the land as agricultural in revenue records and the payment of agricultural tax, sufficient to support the assessee's claim.4. Comparison of the Assessee's Case with the Case of Her Husband:The Revenue attempted to distinguish the assessee's case from her husband's by highlighting differences such as the lack of agricultural income disclosure by the assessee and the timing of Kist payments. However, the Tribunal found these distinctions insufficient to alter the classification of the land. The Tribunal noted that the land was part of a contiguous parcel owned by the husband, who had already been deemed to own agricultural land.Conclusion:The Tribunal upheld the CIT(Appeals)' decision, dismissing the Revenue's appeal. It concluded that the land in question was agricultural, based on consistent revenue records, agricultural tax payments, and the Tribunal's previous ruling in the case of the assessee's husband. Therefore, the gains from the sale of the land were not subject to capital gains tax.Order Pronounced:The appeal of the Revenue was dismissed, and the order was pronounced on Monday, the 12th August 2013, at Chennai.