2009 (1) TMI 1 - HC - Income Tax

Agricultural land - on the date of the purchase and as also on the date of acquisition, the land was agricultural land fact that the assessee intended to use the land for industrial purposes did not in any way alter the nature of the land mere fact that the assessee did not carry out any agricultural operation did not alter the nature and character of the land Tribunal was not justified in holding that the land acquired from the ownership of the appellant was not agricultural land

Summary

Issues:
1. Whether the order passed by the Income Tax Appellate Tribunal holding that the land acquired from the ownership of the appellant was not agricultural land, is perverse?

Analysis:
The issue in this case revolved around the treatment of land owned by the assessee company with the intention of setting up an industry. The Assessing Officer charged capital gains on the land, arguing that it was not agricultural land as no agricultural operations were carried out post-purchase. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal upheld this view, emphasizing the lack of agricultural activities and the intention to use the land for industrial purposes. However, the Tribunal acknowledged that the land was initially agricultural but deemed it non-agricultural due to the intention of industrial development and lack of agricultural operations.

The appellant contended that the character of the land at the time of acquisition, not future intentions, should determine its classification. They cited previous court decisions emphasizing the importance of the land's status at the time of acquisition. The revenue argued that the lack of agricultural activities post-purchase altered the land's nature, relying on a Supreme Court decision regarding intentions in land transactions.

The High Court analyzed the facts and found that the land was indeed agricultural both at the time of purchase and acquisition, as confirmed by the District Collector's Award. The court emphasized that the transitional period between purchase and acquisition did not change the land's agricultural nature, regardless of the intended industrial use or lack of agricultural operations. The court deemed the Tribunal's finding as contrary to its own record and reversed it, concluding in favor of the appellant and setting aside the Tribunal's order.

In conclusion, the court held that the nature of the land as agricultural remained unchanged despite the intention for industrial use, and the lack of agricultural operations did not alter its classification. The court's decision favored the appellant, highlighting the importance of the land's status at the time of acquisition and rejecting the relevance of post-purchase intentions or lack of agricultural activities in determining the land's classification.