2018 (5) TMI 744 - AT - Income Tax

Agricultural land or not - nature of land - land sold being situated far beyond 8 K.M. from local limits of any municipality - Held that - In the instant case, the land which was sold is situated at Mouza - Gurap, J.L. No. 126 with the territorial limits of Gurap Police Station, Gram Gurap under Additional District Sub Registrar, Dhaniyakhali, about 36K.M. from the nearest municipality situated at Chinsura, Hooghly i.e. far beyond 8 K.M from the local limits of any municipality and the fact was also confirmed by the Ld. Assessing Officer from Gram Pancha at Gurap. The assessee has filed a certificate from Gurap Panchayat dated 07.11.2014 certifying the distance and the agricultural purpose for which the lands were put into use, copy of which along with a translated version are annexed hereto and marked as Annexure I Thus as per the above definition, the land sold being situated far beyond 8 K.M. from local limits of any municipality situated at Chinsura, Hooghly is an agricultural land and outside the ambit of the definition of capital asset We hold that the land in question is an agricultural land and we uphold the order passed by the CIT(A) on the basis of the observation made herein above. - Decided against revenue.

Summary

Issues:
1. Determination of whether the land in question qualifies as agricultural land for tax purposes.
2. Assessment of whether the income earned from the sale of the land should be treated as short term capital gain.

Detailed Analysis:
1. The primary issue in this case revolved around the classification of the land in question as agricultural land under Section 2(14)(iii) of the Income Tax Act. The Revenue contended that no agricultural activities were conducted on the land, which was located in an area showing industrial growth. The Assessing Officer (AO) treated the income from the land sale as short term capital gain. However, the assessee argued that the land was agricultural, supported by documents and a certificate from the Gurap Panchayat. The Appellate Tribunal considered various factors, including location, use, and distance from a municipality, to determine the land's classification. The Tribunal concluded that the land was indeed agricultural, as evidenced by the agricultural activities conducted by a caretaker and the land being situated far beyond municipal limits.

2. The second issue focused on whether the income derived from the sale of the land should be classified as short term capital gain. The Revenue contended that the land was purchased for industrial use, citing the substantial increase in its value within a short period. The Revenue argued that the assessee failed to provide evidence of agricultural activities during their possession of the land. Conversely, the assessee maintained that the land was agricultural, pointing to the nature of the land as 'Sali' and its classification in government records. The Appellate Tribunal, after considering all submissions and evidence, upheld the CIT(A)'s decision that the income from the land sale should not be treated as capital gains, as the land qualified as agricultural land under the Act. The Tribunal dismissed the Revenue's appeal, affirming that the land was indeed agricultural and exempt from capital gains tax.

In conclusion, the Appellate Tribunal determined that the land in question met the criteria to be classified as agricultural land under the Income Tax Act. Consequently, the income derived from the sale of the land was not considered short term capital gain, leading to the dismissal of the Revenue's appeal. The judgment highlighted the importance of considering various factors, such as location, land use, and documentary evidence, in determining the tax treatment of land transactions.