2023 (4) TMI 572 - AT - Income Tax

Appellant's Claim on Agricultural Land Rejected, Deduction Allowed Under Section 54F

The appellant's claim regarding the agricultural status of land was rejected as evidence supporting its agricultural nature was not provided. The CIT(A) ... Computation of capital gains on sale of land - Nature of land sold - assessee argued that the impugned land sold by the assessee along with other co-owners is an agricultural land which is situated beyond 8 kms from the limits of local municipality - HELD THAT:- CIT(A) has recorded categorical finding that the assessee could not file any evidence to prove that the impugned land sold by the assessee along with other co-owners is an agricultural land which does not come under the purview of capital gains. CIT(A) had discussed the issue in light of facts brought out by the AO and arguments advanced by the assessee and came to the conclusion that the remand report called for from the AO with respect to the claim of the assessee, the AO gave his findings that the impugned land is not an agricultural land. Assessee neither filed any evidences nor explained how said land is agricultural land which is outside the scope of capital gains tax. The findings of the facts recorded by the CIT(A) is uncontroverted. Assessee neither appeared nor filed any details. No error in the reasons given by the ld. CIT(A) to sustain computation of capital gains on sale of land and thus, we reject grounds taken by the assessee. ISSUES PRESENTED AND CONSIDERED 1. Whether the land sold by the assessee constituted 'agricultural land' situated beyond eight kilometres from the limits of the local municipality and therefore fell outside the charge to capital gains. 2. Whether the assessee was entitled to deduction under section 54F of the Income-tax Act for investment in residential property purchased in the name of the assessee's wife. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Characterisation of the property as agricultural land beyond 8 kms (relevance to chargeability to capital gains) Legal framework: Capital gains provisions apply to transfer of capital assets; agricultural land is excluded from such charge if it qualifies as agricultural land within the statutory definition and falls beyond the prescribed municipal limits (8 km rule as applied in the impugned assessment). Precedent Treatment: The Tribunal and CIT(A) relied on the factual inquiry and standard evidentiary requirements for establishing the agricultural character and location of land; no novel precedent was overruled or distinguished in the decision under review. Interpretation and reasoning: The assessing officer adopted a higher sale consideration and treated the assessee's share as resulting in long-term capital gains. On appeal the assessee asserted the land was agricultural and beyond 8 kms from municipal limits. The Commissioner (Appeals) remanded to the AO and recorded that the AO's remand report concluded the land was not agricultural; the assessee failed to produce documentary evidence or appear to explain how the land met the statutory criteria for exclusion from capital gains. The Tribunal examined the record, noted the categorical finding by the CIT(A) that no evidence was filed to substantiate the agricultural character and location, observed that the remand report supported the AO's conclusion, and emphasised that the factual findings were uncontroverted because the assessee neither filed material nor appeared. Ratio vs. Obiter: The holding that the land is not agricultural (and thus chargeable to capital gains) based on absence of evidence and reliance on the AO's remand report is ratio decidendi for the appeal outcome. Observations about the procedural consequence of non-appearance and failure to produce evidence are also operative parts of the decision. Conclusions: The Tribunal upheld the CIT(A)'s finding that the impugned land is not agricultural land beyond 8 kms and therefore properly attracts capital gains tax; the assessee's ground challenging that finding was rejected. Issue 2 - Entitlement to deduction under section 54F when the new residential property is purchased in the name of spouse Legal framework: Section 54F provides relief from long-term capital gains where net consideration is invested in a residential house, subject to statutory conditions and judicial interpretation regarding beneficial ownership and mode of investment. Precedent Treatment: The Commissioner (Appeals) directed allowance of deduction under section 54F by following the jurisdictional High Court decision in Natarajan (Madras) which was applied to permit the deduction where conditions were satisfied despite purchase in the spouse's name. The Tribunal did not disturb the CIT(A)'s application of that precedent. Interpretation and reasoning: The CIT(A) considered the assessee's submissions and, relying on the cited High Court authority, allowed the section 54F deduction. The Tribunal's order records that the CIT(A) directed the AO to allow the benefit of section 54F following that precedent. The Tribunal's review concentrated on the agricultural-land issue and found no error in the CIT(A)'s factual findings; it did not overrule or reverse the CIT(A)'s allowance of section 54F under the precedent relied upon. Ratio vs. Obiter: The application of the High Court precedent to allow section 54F deduction in these facts was treated as binding on the fact situation and formed part of the operative outcome; the Tribunal's silence on overturning that grant indicates it stands as part of the decision's ratio in respect of relief claimed under section 54F. Conclusions: The CIT(A)'s direction to the AO to allow deduction under section 54F, in accordance with the cited jurisdictional High Court authority, was sustained and not disturbed by the Tribunal. Cross-reference and Procedural Findings Where factual findings rest on absence of evidence from a party and on a remand report from the assessing officer, such uncontroverted findings will be upheld (see Issue 1). The Tribunal emphasized procedural consequence - non-appearance and failure to file evidence by the assessee resulted in acceptance of AO/CIT(A) findings. The Tribunal dismissed the appeal in its entirety on those bases.