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2014 (1) TMI 1860 - AT - Income TaxTaxation of capital gain on part of agricultural land sold by the assessee - Nature of land sold - whether land in question was capital asset u/s 2(14)? - assessee contended that FMV of the land as on 1.4.1981 should have been taken by computing the gain - HELD THAT - We find that value of land differs drastically due to its surroundings distance from road disputes possession etc. There is no dispute on the issue that the in the instances quoted by the AO the buyers were already in the possession of land in question which is major factor which affects the rates of the transaction and attached obligations. There are issues regarding proximity from road and scattered land. We also find that AO has given a finding that multistoried projects have been developed near the assessee s land and the buyer of the assessee s land is also developing some project on this land. No such development of the comparable land has been brought on record by the AO. CIT(A) also agreed that the instance quoted by the AO is not comparable. However he has taken a arbitrary value without any basis. In these facts and circumstances where no comparable case is available the best way to estimate the cost would be to compute the Fair Market Value on the basis of reverse calculation considering the cost inflation index as held in Jahanganj Cold Storage (2010 (4) TMI 765 - ITAT AGRA) in which one of us was also a party. Accordingly the estimation made by the assessee in this respect had to be accepted. We thus allow this ground of appeal of the assessee and reject the ground of the departmental appeal. Rejecting the agricultural income - As already found by us the assessee has shown evidences of land being cultivated. The agriculture income has been accepted in the previous year and also in the subsequent years. In these facts and circumstances size of land government records of crop and the amount of agricultural income shown we find no reason to reject the assessee s claim. We accordingly allow this ground of the assessee s appeal also. Provision of section 50C applicability as the land was sold by the assessee through agreement and the sale deed was not registered - AO had observed that land has been developed and is in the possession of the buyers and sale consideration has been received in toto by the assessee - Assessee has claimed that the property has not yet been registered and hence provisions of section 50C are not applicable - HELD THAT - In the first appeal CIT(A) made a reliance on the decision of Hon ble Jodhpur Tribunal in the case of Navneet Kumar Thakkar v. ITO 2007 (3) TMI 317 - ITAT JODHPUR where it was held that to attract section 50C the property under transfer from the assessee to another person should have been assessed for stamp valuation purpose at a higher value than that received or accruing to the assessee. Unless the property transferred have been registered by sale deed and for the purpose the value had been assessed and stamp duty have been paid by the parties section 50C could not come into operation. Further reliance on Smt. Vijay Laxmi Dhaddha v. ITO 2008 (9) TMI 944 - ITAT JAIPUR and Hon ble Lucknow Tribunal in the case of Carlton Hotel (P.) Ltd. v. Asstt. CIT 2008 (11) TMI 295 - ITAT LUCKNOW-A held that if the property sold is not registered then section 50C would not have any application. Accordingly Ld. CIT(A) held that in the present case the sale deeds had not been registered and the buyers had not paid any stamp duty therefore section 50C would not have any application and directed the ld. AO to adopt the sale consideration at 1, 04, 00, 000/- instead of 1, 40, 00, 000/-. The present case is for A Y 2008-09 i.e. prior to amendment made in the provisions of section 50C to take into consideration the transfers which have not been registered for stamp duty purpose. In view of the various decisions quoted by the ld. CIT(A) we are in agreement with his order and confirm the same. This ground of the departmental appeal is also rejected.
Issues Involved:
1. Taxation of capital gain on the sale of agricultural land. 2. Applicability of Section 50C for unregistered sale transactions. 3. Determination of Fair Market Value (FMV) as of 01.04.1981 for capital gain computation. 4. Rejection of agricultural income claim. Detailed Analysis: 1. Taxation of Capital Gain on the Sale of Agricultural Land The primary issue was whether the land sold by the assessee qualifies as a "capital asset" under Section 2(14) of the Income Tax Act, 1961. The assessee argued that the land was agricultural and thus outside the scope of a capital asset as per Section 2(14)(iii). The land was situated in Village Machwa, which was more than 8 km from the limits of Jaipur Municipal Corporation as of the notification dated 06.01.1994. The Assessing Officer (AO), however, claimed the land was within the limits of Jaipur Municipal Corporation and used for residential/commercial purposes. The Tribunal found that the land was indeed agricultural, based on government records and evidence of agricultural activities. Importantly, the Tribunal held that the relevant date for determining the 8 km distance should be the date of the notification (06.01.1994) and not the date of sale. Consequently, the land was not considered a capital asset, and the capital gains tax was not applicable. 2. Applicability of Section 50C for Unregistered Sale Transactions The AO applied Section 50C, considering the circle rate for computing the sale consideration, arguing that the property was within the limits of Jaipur Municipal Corporation. The assessee contended that Section 50C should not apply as the transaction was not registered, and the term "assessable" was included in Section 50C only from 01.10.2009. The Tribunal upheld the CIT(A)'s decision that Section 50C does not apply to unregistered transactions for the assessment year 2008-09. The Tribunal referred to various case laws, including the Hon'ble Jodhpur Tribunal in Navneet Kumar Thakkar and Hon'ble Jaipur Tribunal in Smt. Vijay Laxmi Dhaddha, supporting the view that Section 50C is inapplicable when the property is not registered. 3. Determination of Fair Market Value (FMV) as of 01.04.1981 for Capital Gain Computation The AO estimated the FMV of the land as Rs. 2,700 per bigha based on a comparable sale deed. The assessee argued that the cited comparable was not suitable due to differences in location, proximity to the main road, and possession status. The Tribunal found the AO's comparable instance not suitable and criticized the CIT(A) for adopting an arbitrary FMV of Rs. 10,000 per bigha without a proper basis. The Tribunal decided that the best method to estimate FMV would be reverse calculation using the cost inflation index, as held in the Third Member Decision of ITAT Agra in Jahanganj Cold Storage. Thus, the Tribunal accepted the assessee's estimation of FMV. 4. Rejection of Agricultural Income Claim The AO rejected the assessee's claim of Rs. 42,000 as agricultural income. The Tribunal found that the land was indeed used for agricultural purposes, supported by government records and electricity bills for agricultural use. The agricultural income had been accepted in previous and subsequent years. Therefore, the Tribunal allowed the assessee's claim of agricultural income. Conclusion The Tribunal allowed the appeal of the assessee, confirming that the land was agricultural and not a capital asset, thus exempting it from capital gains tax. The Tribunal also confirmed that Section 50C did not apply to the unregistered transaction and accepted the assessee's method for determining FMV. The claim of agricultural income was also upheld. The appeal of the revenue was dismissed.
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