2025 (2) TMI 1125 - AT - Income Tax

Tribunal Dismisses Revenue's Appeal for Rectification Under Section 254(2) on Non-Agricultural Land Sale for Capital Gains Tax.

The Appellate Tribunal dismissed the revenue's Miscellaneous Application under section 254(2) of the Income Tax Act, 1961, which sought rectification of a ... Rectification u/s 254 - sale of non-agriculture land and the valuation for capital gains tax purposes - nature of land was converted from agriculture to non-agriculture - revenue argued that the Tribunal had erred in not considering that the land sold by the assessee was a capital asset and should have attracted capital gains tax - CIT(A) while confirming the action of AO confined his finding only on the distance of location of land by referring CBDT Circular No. 03/2014 dated 21.01.2014 and held that shortest possible route has to be taken as crow flies. HELD THAT:- We find that case of assessee is that assessee is an agriculturist and sold her land situated Ubhrat, Dist – Navsari. The assessee set up his case that the land is situated eight kilometres beyond city limit and is not a capital asset, thus consideration receipt on sale thereof is not chargeable to tax. This Tribunal after considering the contention of both parties, restore the matter back to the file of AO to examine the distance of land from municipal limit on the basis of subsequent CBDT Circular No.17/2015. So far as specific contention of revenue in its MA that the nature of land was converted from agriculture to non-agriculture is concern, it is settled position of law that in State of Gujarat, the agriculturist is debarred from selling of his land to non-agriculturist, or for other than agriculture purpose, and if in case the purchaser is not agriculturist, or the land is being transferred for other than agriculture purpose, the permissions of revenue authorities are required, but it will not change the character of land in the hand of seller (agriculturist). Even, the Hon’ble jurisdictional High Court including a leading decision in the case of CIT vs. Siddharth J. Desai [1981 (9) TMI 48 - GUJARAT HIGH COURT] held that when the assessee sold agricultural land and permission was granted under section 63 of the Bombay Tenancy & Agricultural Lands,1960 for using it for residential purpose, the land continued to be agricultural land till the date of sale. The permission was obtained prior to sale as it was necessary only because land was agricultural land and it was governed by provisions of Bombay Tenancy & Agricultural Lands Act. It was held that mere such permission was obtained does not mean that land cease to be agricultural land used. Thus, the sole controversy in the order impugned before Tribunal was with regard to distance of location of land and the manner of measuring it, either by road distance or by aerial view. The revenue is now seeking review of the order which is beyond the scope of provisions of section 254(2) as has been held in case of Vrundavan Ginning and Oil Mills [2021 (3) TMI 905 - GUJARAT HIGH COURT]. Thus, we do not find any merit of in this Miscellaneous Application and the same is dismissed. The Appellate Tribunal considered a Miscellaneous Application filed by the revenue under section 254(2) of the Income Tax Act, 1961, seeking rectification of an order dated 27.03.2024 passed in ITA No.751/SRT/2023 for the assessment year 2012-13. The core issue revolved around whether the Tribunal had overlooked essential facts while deciding the appeal of the assessee, specifically related to the sale of non-agriculture land and the valuation for capital gains tax purposes.The revenue contended that the Tribunal had erred in not considering that the land sold by the assessee was a capital asset and should have attracted capital gains tax. The revenue argued that the Circular No.17/2015 issued by the CBDT was not applicable to the case at hand. On the other hand, the authorized representative for the assessee argued that the revenue's request for review was not permissible under section 254(2) and that the Tribunal had already considered all relevant facts and legal provisions in its order.Upon considering the arguments of both parties, the Tribunal reviewed the facts of the case. The assessee claimed that the land sold was situated beyond the city limits and was not a capital asset, thus not subject to capital gains tax. The Tribunal had remitted the matter back to the Assessing Officer to verify the distance of the land from the municipal limit based on the CBDT Circular No.17/2015. The Tribunal also noted that under the laws of Gujarat, agriculturists were restricted from selling their land to non-agriculturists without proper permissions, but such transactions did not change the character of the land in the hands of the seller.The Tribunal emphasized that the primary issue in the appeal was the distance of the land from the municipal limit and the method of measurement, either by road distance or aerial view. The Tribunal dismissed the revenue's Miscellaneous Application, stating that seeking a review of the order was beyond the scope of section 254(2) and referred to relevant case law supporting its decision.In conclusion, the Tribunal dismissed the revenue's application, affirming its previous order. The decision was pronounced in open court on 08/01/2025.