2018 (3) TMI 797 - HC - Income Tax

Land sold as agricultural not a capital asset. Appeal dismissed under Section 260-A, Income Tax Act.

The Commissioner of Income Tax Versus Venkateswara Hospital

The Commissioner of Income Tax Versus Venkateswara Hospital - TMI Issues Involved:1. Determination of whether the land sold by the assessee was agricultural land or a capital asset.2. Whether the Income Tax Appellate Tribunal's decision involved a substantial question of law warranting an appeal to the High Court.Issue-wise Detailed Analysis:1. Determination of whether the land sold by the assessee was agricultural land or a capital asset:The assessee, a registered firm running a nursing home and pharmacy, sold 2 acres and 78 cents of agricultural land at Thirutheri Village, Kattangalathur Panchayat for Rs. 8,01,00,000/- during the assessment year 2012-2013. The assessee claimed exemption from capital gains tax on the ground that the land was agricultural. The Village Officer certified that the land was beyond 8 kms from the municipality and the population was less than 10,000.However, the Revenue contended that mere entry of land in revenue records as agricultural land does not imply its use for agricultural purposes. It was noted that the assessee had shown income from business in returns from 2006-2007 to 2012-2013, suggesting non-agricultural use. The Tribunal held that the land was indeed agricultural, referencing the case of Mrs. Sakunthala Veachalam & Mrs. Vanitha Manickavasagam Vs. ACIT (2014) 369 ITR 558 (Mad), which stated that adjacent land being divided into plots for sale does not automatically classify the land as non-agricultural. The Tribunal concluded that the land sold by the assessee was agricultural and not a capital asset, thus exempting it from capital gains tax.2. Whether the Income Tax Appellate Tribunal's decision involved a substantial question of law warranting an appeal to the High Court:The High Court examined whether the Tribunal's decision involved a substantial question of law under Section 260-A of the Income Tax Act. It was emphasized that the right of appeal is not automatic and is confined to cases involving substantial questions of law. The Court referred to precedents, including Sir Chunilal V. Mehta & Sons Ltd. vs Century Spg. & Mfg. Co. Ltd. [AIR 1962 SC 1314] and Hero Vinoth Vs. Seshammal [(2006) 5 SCC 545], which define a substantial question of law as one that is debatable, not previously settled, and materially affects the case's outcome.The Court found that the Tribunal's decision was based on factual findings that the land was agricultural and not a capital asset. The issues raised did not meet the criteria for a substantial question of law, as they were covered by the judgment in The Commissioner of Income Tax v. Late Dr. N. Rangabashyam, MANU/TN/2523/2017.Conclusion:The High Court concluded that there was no substantial question of law involved in the appeal. The Tribunal's finding that the land was agricultural and not a capital asset was upheld, and the appeal was dismissed with no costs.