2019 (2) TMI 647 - HC - Income Tax

Nature of land sold - whether the land which was sold by the assessee was an agricultural land or not? - Held that - We need not labour much to answer the question since the first Appellate authority viz., the CIT (A) as well as the Tribunal have made a thorough factual exercise and found that the land sold by the assessee was sold as an agricultural land. More importantly, the CIT (A) called for a remand report from the AO as to the distance between the property in question and the outer limit of the notified municipality. AO conducted inspection of the property in the presence of revenue officials and submitted a remand report, in which, it has been categorically stated that the land is situated at a distance of more than 8 kms away from the outer limits of St.Thomas Mount Cantonment Board. The remand report was taken into consideration by the CIT (A) as one of the factors for allowing the appeal filed by the assessee. CIT (A) also referred to the certificate issued by the Tahsildar and one of the important entry in the said certificate is by stating that the lands are classified as agricultural lands. Though the certificate may state that there is no cultivation carried on the lands as per the land records, there is nothing on record to show that the land in question was put to use for any non-agricultural purposes. Apart from that the assessee has also paid taxes which has been recorded by the CIT(A). - Decided against revenue.

Summary

Issues:
1. Whether the land sold by the assessee was treated as agricultural land for capital gains tax purposes.
2. Whether the non-cultivation of the land affects its classification as agricultural land.

Issue 1:
The main issue in this case revolved around determining whether the land sold by the assessee should be considered agricultural land for the purpose of levying capital gains tax. The appellate authority and the Tribunal conducted a detailed factual analysis and concluded that the land in question was indeed agricultural land. The Commissioner of Income Tax (Appeals) (CIT (A)) specifically requested a remand report from the Assessing Officer regarding the distance of the property from the outer limit of the municipality. The remand report confirmed that the land was situated more than 8 kilometers away from the outer limits of the Cantonment Board. Additionally, a certificate issued by the Tahsildar classified the lands as agricultural lands, even though there was no cultivation as per land records. The absence of evidence showing non-agricultural use, coupled with the payment of taxes by the assessee, further supported the classification of the land as agricultural. Consequently, the High Court upheld the findings of the lower authorities, dismissing the appeal by the Revenue.

Issue 2:
The second issue in this case concerned whether the non-cultivation of the land affected its classification as agricultural land. The Tribunal and the CIT (A) found that the land retained its character as agricultural land despite the lack of cultivation, as long as the nature of the land had not been specifically changed. The absence of evidence indicating a change in land use for non-agricultural purposes, along with the classification of the land as agricultural in official documents, reinforced the conclusion that the land maintained its agricultural status. The High Court, therefore, concurred with the lower authorities' factual findings and determined that no substantial questions of law arose for consideration in the appeal. As a result, the appeal was dismissed without costs.

This detailed analysis of the judgment highlights the key legal issues, the factual findings, and the reasoning behind the High Court's decision in this case involving the classification of land for capital gains tax purposes.