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2011 (4) TMI 202 - AT - Income TaxAgricultural lands or not - Provision of section 194LA - There is no quarrel on this point that when there is a dispute about the question of whether the land acquired is a agricultural land the competent authority is the Income-tax authorities - The AO has dealt with the question and the CIT(A) has already considered this question and came to the conclusion that the land in question acquired by the authority is agricultural land and therefore no tax was required to be deducted under section 194LA - Therefore the question has been decided by the revenue authorities - Moreover after considering the relevant provisions of the Act and particularly section 194LA find that the land in question is basically an agricultural land and there is no material either pointed out by the AO or brought before us to show that the land acquired was used for non-agricultural purposes by the owners of the land. The AO has come out with the arguments that since the land was not under cultivation and it was not fit for agricultural therefore it cannot be treated as agricultural land - it is not a decisive factor when the land itself is agricultural land though may not be used for agricultural purposes but unless and until the same is used for non-agricultural purposes it cannot be said that the land cannot be treated as agricultural land for the purposes of section 194LA - The SLAO has already specified certain lands which were non-agricultural land and therefore, do no find any reason to interfere with the order of the CIT(A) - Accordingly the order of the CIT(A) is upheld.
Issues Involved:
1. Applicability of Section 194LA of the Income-tax Act, 1961. 2. Admissibility of fresh evidence by the CIT(A). 3. Classification of land as agricultural or non-agricultural under the Income-tax Act. Detailed Analysis: 1. Applicability of Section 194LA of the Income-tax Act, 1961 The core issue revolves around whether the provisions of Section 194LA, which mandates tax deduction at source (TDS) on compensation for compulsory land acquisition, apply to the lands in question. The Assessing Officer (AO) argued that the lands were non-agricultural based on the 7/12 extracts indicating the lands were barren or not under cultivation. Consequently, the AO treated the Special Land Acquisition Officer (SLAO) as an assessee in default for not deducting TDS, resulting in a liability of Rs. 2,43,42,329 under Sections 201(1) and 201(1A). The CIT(A), however, held that the lands were agricultural and thus exempt from TDS under Section 194LA. The CIT(A) cancelled the AO's order, a decision that was upheld by the Tribunal. The Tribunal emphasized that the definition of "agricultural land" under Section 194LA is distinct from that under Section 2(14) of the Income-tax Act, which pertains to capital gains. The Tribunal noted that the land was acquired as agricultural land and compensation was paid accordingly, thus Section 194LA did not apply. 2. Admissibility of Fresh Evidence by the CIT(A) The revenue contended that the CIT(A) erred by admitting fresh evidence (7/12 extracts) without giving the AO an opportunity to rebut it, allegedly violating Rule 46A of the Income-tax Rules, 1962. However, the Tribunal found that the AO was given an opportunity to comment on the evidence, as evidenced by the AO's report dated 13-3-2009, which was considered by the CIT(A). Therefore, the Tribunal rejected the revenue's objection, affirming that there was no violation of Rule 46A. 3. Classification of Land as Agricultural or Non-Agricultural The AO argued that the lands were non-agricultural because they were not under cultivation, as indicated by terms like "PAD" or "OSHAD" in the 7/12 extracts. The revenue cited several judicial precedents to support the view that land must be used for agricultural purposes to qualify as agricultural land under the Income-tax Act. The Tribunal, however, differentiated between the terms "agricultural land" for TDS purposes under Section 194LA and for capital gains under Section 2(14). It emphasized that the nature of the land as agricultural does not change merely because it was not cultivated at the time of acquisition. The Tribunal also noted that the land was acquired as agricultural land and compensation was paid accordingly, reinforcing its agricultural status. The Tribunal dismissed the AO's arguments and upheld the CIT(A)'s decision, affirming that the land was agricultural and exempt from TDS under Section 194LA. Conclusion The Tribunal dismissed the revenue's appeal, confirming that the lands in question were agricultural and thus not subject to TDS under Section 194LA. It upheld the CIT(A)'s order, which had cancelled the AO's demand for TDS and interest. The Tribunal also rejected the revenue's procedural objections regarding the admissibility of fresh evidence, concluding that the AO had been given a fair opportunity to comment on the evidence presented.
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