Rural agricultural land outside capital asset ambit bars section 56(2)(x) addition on stamp duty valuation difference.

Rural agricultural land situated beyond the prescribed municipal limits was held to fall outside section 2(14)(iii) of the Income-tax Act, so the difference between stamp duty value and purchase consideration could not be brought to tax under section 56(2)(x). The assessee's intended future use of the land for a solar power project, or its classification as fixed assets in the books, did not change its character. The expression "property" in section 56(2)(x) was treated as referring only to immovable property that is a capital asset, and the Revenue did not rebut the factual findings of the first appellate authority. The addition was therefore held unsustainable and the deletion was upheld.

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Issues: Whether the difference between the stamp duty valuation and the purchase consideration of rural agricultural land could be taxed under section 56(2)(x) of the Income-tax Act, 1961.

Analysis: The lands were found to be rural agricultural lands situated beyond the prescribed municipal limits and, therefore, outside the ambit of section 2(14)(iii) of the Income-tax Act, 1961. Their character could not be altered merely because the assessee intended future use for a solar power project or reflected them as fixed assets in the books. The expression "property" in section 56(2)(x) was treated as covering only immovable property which qualifies as a capital asset, and the Revenue did not rebut the factual findings recorded by the first appellate authority.

Conclusion: The addition under section 56(2)(x) was not sustainable and the deletion made by the first appellate authority was upheld.

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