2013 (4) TMI 830 - AT - Income Tax

Summary

Issues Involved:
1. Classification of land as agricultural or non-agricultural.
2. Applicability of Section 50C of the Income-tax Act, 1961.
3. Admissibility of revenue records as evidence.

Summary:

Issue 1: Classification of Land as Agricultural or Non-Agricultural

Assessees, mother and daughter, jointly owned land measuring 59.60 acres, out of which 3 acres were sold. The Assessing Officer (A.O.) contended that the land was not agricultural, citing lack of evidence of agricultural operations and classification as dry land by revenue authorities. The A.O. also noted adverse possession by Shri O.P. Nambiyar and absence of agricultural income in returns. The CIT(Appeals) relied on revenue records and a letter from the Tehsildar indicating casuarina crops to classify the land as agricultural. However, the Tribunal found that the land was not used for agricultural purposes at the time of sale, and the evidence provided was insufficient to prove agricultural use. The Tribunal concluded that the land could not be classified as agricultural.

Issue 2: Applicability of Section 50C of the Income-tax Act, 1961

The A.O. applied Section 50C of the Income-tax Act, 1961, considering the guideline value of Rs. 2,51,80,000/- against the actual sale consideration of Rs. 90 lakhs, and computed long-term capital gains. The CIT(Appeals) ruled in favor of the assessees, stating that the land was agricultural and exempt from capital gains tax. The Tribunal, however, reinstated the A.O.'s addition for long-term capital gains, finding that the land was not agricultural and thus subject to capital gains tax u/s 50C.

Issue 3: Admissibility of Revenue Records as Evidence

The CIT(Appeals) accepted revenue records (adangal and a letter from the Tehsildar) as evidence of the land's agricultural nature. The Tribunal questioned the admissibility of these records, noting a specific certification that the adangal record could not be used in courts or before authorities except for income-tax purposes. The Tribunal found that the evidence provided did not conclusively prove agricultural use, especially given the recent origin of casuarina cultivation and lack of agricultural income in returns.

Conclusion:

The Tribunal set aside the order of the CIT(Appeals) and reinstated the A.O.'s addition for long-term capital gains, concluding that the land was not agricultural and the sale proceeds were subject to capital gains tax. The appeals filed by the Revenue were allowed.