2013 (3) TMI 857 - AT - Income Tax

Summary

Issues involved: The main issue in this case is whether the land sold by the assessee should be treated as agricultural land or a capital asset for the purpose of capital gain tax.

Revenue's Appeal (ITA No.1246/Ahd/2010):
The Revenue appealed against the order of the CIT(A) which treated the land as agriculture land and not a capital asset. The AO determined the total income of the assessee at Rs. 18,42,350 after selling an agricultural land for Rs. 13,68,000 claiming it as exempt. The AO considered the land as a capital asset and calculated the capital gain. However, the CIT(A) allowed the appeal of the assessee, stating that the land should be treated as agricultural land based on various factors presented by the assessee.

CIT(A)'s Decision:
The CIT(A) deleted the addition of capital gain by considering the land as agricultural land, not a capital asset. The CIT(A) reviewed the revenue records, the purpose of sale, and the history of the land to conclude that it should not be treated as a capital asset. The CIT(A) referred to a judgment by the High Court of Gujarat to support this decision.

Arguments in Appeal:
The Revenue argued that the land should be considered a capital asset as it was situated 5KMs from Valsad and collected additional stamp duty on the transfer deed. On the other hand, the assessee's representative argued that the land was agricultural, supported by the population and distance from the Tahsil Centre. The assessee had been deriving agricultural income from the land and had not applied for non-agricultural use.

Decision and Rationale:
The Tribunal upheld the CIT(A)'s decision, stating that the land was not within the jurisdiction of a Municipality and the assessee had been deriving agricultural income from it. Referring to a previous case, the Tribunal concluded that the land should be considered agricultural based on various factors presented by the assessee. Therefore, the appeal of the Revenue was dismissed.

Assessee's Cross Objection:
The assessee raised objections regarding the computation of capital gain and the joint ownership of the land. However, since the main issue of the land being agricultural was already decided in favor of the assessee, the objections were deemed irrelevant and rejected.

In conclusion, the Tribunal upheld the CIT(A)'s decision that the land in question should be treated as agricultural land, not a capital asset, for the purpose of capital gain tax. Both the Revenue's appeal and the Assessee's cross objection were dismissed.