2018 (7) TMI 217 - AT - Income Tax

Capital gain on sale of land - Treatment of land as capital asset - assessee has sold an immovable property being agricultural land - land situated beyond 8 Kms. of Municipal limits - Held that - The land in question is agricultural land situated beyond 8 Kms. of Municipal limits, therefore, the transactions of sale in land by the appellant cannot be regarded as capital asset within the meaning of sec. 2(14) of the Act. Transaction of sale of land in question is held to be not liable for charging of capital gains. - Decided in favour of assessee. Deduction u/s. 54B - Assessing Officer has denied the same on the ground that the sale deed has not been produced - Held that - Commissioner of Income Tax (Appeals) has given a finding that there is a proper agreement and the consideration has duly been made. This is not been disputed by the Revenue and, accordingly, we uphold the order of the ld. Commissioner of Income Tax (Appeals) on this issue also - Decided in favour of assessee.

Summary

Issues:
1. Treatment of land as capital asset.
2. Deduction u/s. 54B of the Act.

Issue 1: Treatment of land as capital asset

The appeal concerned the classification of land as a capital asset under Section 2(14) of the Income Tax Act, 1961. The Assessing Officer treated the land as a capital asset due to its proximity to the Nagpur Municipal Corporation within 8 kilometers. However, the Commissioner of Income Tax (Appeals) noted discrepancies in the method of measuring distance and considered the land to be agricultural based on various documents provided by the assessee, including a certificate from the Gram Panchayat and Google Maps indicating a distance of 9.2 kilometers from Nagpur Octroi limits. The Commissioner relied on ITAT decisions and the Punjab & Haryana High Court ruling emphasizing approachable road distance over aerial distance. Consequently, the Tribunal upheld the Commissioner's decision, ruling in favor of the assessee and dismissing the Revenue's appeal.

Issue 2: Deduction u/s. 54B of the Act

The Assessing Officer disallowed the assessee's claim under Section 54B of the Act, citing that the land did not qualify as agricultural and the absence of a sale deed. However, the Commissioner disagreed, emphasizing that an Agreement to Sale confers absolute rights upon the buyer if payment is made and possession taken. The Tribunal upheld the Commissioner's decision, noting that the Revenue failed to dispute the payment and possession aspects. The Tribunal confirmed the agricultural status of the land and allowed the deduction under Section 54B. The Revenue's appeal was dismissed, affirming the Commissioner's order.

In conclusion, the ITAT Nagpur Bench's judgment clarified the criteria for classifying land as a capital asset and upheld the agricultural status of the land in question. The Tribunal emphasized the significance of approachable road distance and proper documentation in determining eligibility for deductions under the Income Tax Act. The decision provided a comprehensive analysis of the issues raised and resolved in favor of the assessee based on legal precedents and factual evidence presented during the proceedings.