2016 (6) TMI 1246 - AT - Income Tax

Sale of land - agricultural land or capital asset - nature of land - land converted - Held that - As in assessee s own case for the AYs 2007-08 to 2009-10 the admitted fact is that 188 cents of land was sold to various persons and an agreement was entered into for construction of villas. Therefore, it has to be ascertained what happened to the remaining part of the land after its conversion. The fact remains is that entire 512 cents of land was converted into residential plots on the basis of the resolution passed on 19-09-2006. Therefore, this Tribunal is of the considered opinion that the certificate issued by the village officer goes against the fact admitted by the assessee. Since the assessee itself admits that the land was converted into housing plots as on19-09-2006 the same cannot remain as agricultural land for any longer. In other words, the purpose and usage of the land was converted into non-agricultural land as on 19-06-2006 and part of the land was sold as on 27-03-2007. Therefore, this Tribunal is of the considered opinion that when the assessee itself claims that the land was converted into non agricultural land as on 19-06-2006 it cannot continue as agricultural land any further. Therefore, the certificate said to be issued by the village officer has no relevance in view of the facts admitted by the assessee. Hence, there is no justification in the claim of the assessee that the land is an agricultural land. The authorities below are justified in holding that the land in question is capital asset liable for taxation - Decided against assessee.

Summary

Issues Involved:
1. Exemption claim on profit from sale of agricultural land under section 2(14)(iii) of the Income Tax Act.
2. Addition made under section 14A of the Income Tax Act.

Issue 1: Exemption claim on profit from sale of agricultural land under section 2(14)(iii) of the Income Tax Act:

The assessee claimed exemption on profit from the sale of agricultural land situated outside municipal limits, arguing it falls under the exclusion of "capital asset" under section 2(14)(iii) of the Income Tax Act. However, the Assessing Officer (AO) assessed 50% of the gain as short-term capital gain and the remaining 50% as business income under section 45(2). The CIT(A) upheld the AO's decision, leading the assessee to appeal. The Tribunal analyzed the case and referred to a previous order where it was established that the land in question was not agricultural land and was therefore taxable. The Tribunal highlighted discrepancies between the certificate issued by the village officer and the actual conversion of the land into residential plots for commercial purposes. It concluded that the land ceased to be agricultural after conversion, making it liable for taxation. Consequently, the Tribunal rejected the assessee's claim for exemption.

Issue 2: Addition made under section 14A of the Income Tax Act:

In the second appeal, the only issue raised was regarding an addition made under section 14A of the Income Tax Act. During the hearing, the assessee's counsel did not press this ground, leading to its dismissal. As a result, both appeals filed by the assessee were dismissed by the Tribunal.

In conclusion, the Tribunal upheld the decisions of the lower authorities regarding the taxation of the land in question and the addition made under section 14A of the Income Tax Act. The detailed analysis of the facts, legal provisions, and previous judgments formed the basis for dismissing the appeals filed by the assessee.