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Issues involved: Determination of whether the land in question qualifies as agricultural for the purpose of computing long term capital gains.
Summary: The Revenue appealed against the deletion of an addition of Rs. 38,62,452 made by the Assessing Officer (AO) towards long term capital gains, arguing that the land was not agricultural in nature. The Village Administrative Officer's chitta adangal indicated that a portion of the land claimed as agricultural by the assessee was barren and uncultivated for two years before the sale. The AO agreed that a part of the land was agricultural, but considered the remaining portion as barren and subject to capital gains tax. The assessee contended that the land had a basic agricultural character, supported by historical agricultural use and classification in records. The CIT(A) accepted this argument, emphasizing that the land fell outside the definition of a capital asset under section 2(14) of the Income Tax Act. The Tribunal noted that the land was situated beyond the specified distances from municipal limits, making it exempt from capital gains tax. Despite recent lack of cultivation, historical agricultural use and official records classified the land as agricultural. Citing relevant case law, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal. In conclusion, the Tribunal affirmed that the land qualified as agricultural and was not liable for capital gains tax. The appeal by the Revenue was dismissed, and the order was pronounced on 26-11-2010.
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