Agricultural land outside the capital asset definition keeps transfer outside capital gains tax and section 50C inapplicable.

Agricultural land supported by revenue records, a Tahsildar's certificate and the sale agreement was treated as remaining agricultural in character, situated beyond 8 kilometres from municipal limits and not converted for non-agricultural use. On those facts, it fell outside the definition of "capital asset" under section 2(14) of the Income-tax Act, so no capital gains tax arose on its transfer. The same factual position was not displaced by any contrary material from the Revenue, and the issue was also consistent with an earlier coordinate bench view on identical facts. As a result, the deeming fiction under section 50C was held inapplicable.

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Issues: Whether the land sold by the assessee was agricultural land outside the definition of capital asset under section 2(14) of the Income-tax Act, 1961, so as to exclude capital gains tax and render section 50C inapplicable.

Analysis: The land was supported by revenue records, a Tahsildar's certificate, and the sale agreement showing that it remained agricultural land, was situated beyond 8 kilometres from the municipal limits, and had not been converted for non-agricultural use. The Revenue did not bring contrary material to displace these findings. The matter was also found to be covered by the earlier coordinate bench decision in the assessee's spouse's case on identical facts. On these facts, the statutory exclusion for agricultural land applied and the deeming fiction under section 50C could not be invoked.

Conclusion: The land was not a capital asset and no capital gains tax arose from its transfer; the assessee succeeded on the merits.

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