2023 (1) TMI 402 - AT - Income Tax

Tribunal orders reexamination of agricultural land status under Income Tax Act, emphasizing burden of proof

Income Tax officer, Ward-1 (1), Jabalpur Versus Sheel Rani Jain

The Tribunal remitted the matter back to the Assessing Officer for further examination to determine the status of the agricultural land as a capital asset ... Gain on sale of land - nature of land sold - capital asset or agricultural land - whether the agricultural land sold by the assessee on 30/03/2009, i.e., during the relevant year, is a capital asset under the Act or not, on the sale of which therefore ‘capital gains’ shall, or as the case may be, shall not arise to the assessee? - HELD THAT:- The subject land in the instant case is neither located within the local limits of Panagar Municipality (Nagar Palika) nor within the specified distance of a notified municipality. We find no infirmity in the ld. CIT(A) regarding it as not a capital asset on that basis - He has for the purpose referred to the Notification dated 06/01/1994, also reproducing the same. He has however not stated if the said Notification is the latest such. We say so in view of the considerable time that has elapsed, with urban India expanding at a rapid pace since 1994, even as the law (s.2(14)(iii)), removing the requirement for the Notification by the CG, stood amended only w.e.f. 01/4/2014. There is also no basis on record for the stated distance of 18 km. of the subject land from the limits of the Jabalpur Municipal Corporation (MC), with reference to which, apparently the nearest notified municipal corporation, the agricultural land under reference has been found by him as an agricultural land u/s. 2(14)(iii) and, thus, not a capital asset. In fact, the said distance stands mentioned variously at 15 km.and 18 km. ( of his order. It is also not clear from his order if the said distance of 15 km/18 km from the local limits of the MC – which change from time to time, is as obtaining as on the date of transfer and, further, if it is the shortest distance by road, an aspect of the matter which has, for years prior to AY 2014-15, attained finality with the Board Circular 17/2015, dated 06/10/2015. It is, in view of apparently two Villages, in fact even not clear if the land sold is a single, or more than one, piece of land. The matter is clearly factually indeterminate. Under the circumstances, we only consider it proper that the matter is restored back to the file of the AO to determine the issue with reference to the distance of the subject land from the extant local limits of the Jabalpur MC. If the same is more than 8 kms., i.e., the limit specified in the Notification for the Jabalpur MC, the subject land would be an agricultural land under the Act and, thus, not a capital asset, so that no capital gain shall arise on the sale thereof, else it shall. As we are remitting the matter, it would only be proper to require the AO to examine the aspect of the 1994 Notification as being the latest issued by CG in the matter, i.e., up to March, 2009, whereat the transfer in the instant case takes place. AO shall, accordingly, determine each of these aspects, of course upon confronting the relevant material to the assessee and hearing her thereon, i.e., where the same is/are contrary to her claim/s, adversely impacting the status of the subject land as held by the ld. CIT(A), and finally decide the issue of the status of the subject land u/s. 2(14)(iii) by rendering definite finding/s of fact. Revenue’s appeal is allowed for statistical purposes. Issues:1. Whether the agricultural land sold by the assessee is a capital asset under the Income Tax Act, 1961.Analysis:Issue 1:The appeal raised the issue of whether the agricultural land sold by the assessee during the relevant year qualifies as a capital asset under the Income Tax Act. The Assessing Officer initially subjected the entire capital gain arising from the sale of the land to tax. However, the Commissioner of Income Tax (Appeals) allowed relief to the assessee, stating that the land was not a capital asset as it did not fall within the specified distance from a notified municipality. The Revenue appealed this decision, arguing that the AO rightly considered the distance from the nearest municipal limit of Panagar Nagar Palika. The Tribunal found that the subject land was neither within the local limits of Panagar Municipality nor within the specified distance of a notified municipality, thus agreeing with the CIT(A)'s decision. However, the Tribunal noted factual inconsistencies and lack of clarity regarding the distance of the land from the local limits of the Jabalpur Municipal Corporation. Therefore, the Tribunal remitted the matter back to the AO for further examination to determine the status of the land as a capital asset under the Act. The Tribunal emphasized the burden of proof on the Revenue to establish the distance and related aspects, while also requiring the assessee to provide the location of the land for verification. The Tribunal highlighted the importance of adhering to natural justice principles and ensuring a fair determination of the issue.In conclusion, the Tribunal allowed the Revenue's appeal for statistical purposes, emphasizing the need for a thorough examination of the factual aspects related to the distance of the land from the municipal limits to determine its status as a capital asset under the Income Tax Act.