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2020 (1) TMI 770 - AT - Income Tax


Issues Involved:
1. Whether the land sold by the assessee qualifies as a Capital Asset under section 2(14) of the Income Tax Act.
2. Whether the addition of ?77,65,000/- as Income from Capital Gain is justified.

Issue-wise Detailed Analysis:

1. Whether the land sold by the assessee qualifies as a Capital Asset under section 2(14) of the Income Tax Act:

The primary issue in this appeal is determining whether the land sold by the assessee falls under the definition of a Capital Asset as per section 2(14) of the Income Tax Act or is excluded under the same section. The assessee argued that the land, even after conversion into a Farm House Scheme under 90B of Jaipur Development Authority (JDA), retained its agricultural character and thus should not be considered a capital asset. The assessee referred to the Patta issued by the JDA, which stipulated that the land's basic character would remain environmental-friendly and agriculture-based, allowing only agricultural activities.

The Revenue countered that the land's conversion to a Farm House meant it was no longer agricultural, as the permitted activities were restricted to environmental-friendly residential use. The Revenue cited the Tribunal's decision in ACIT vs. Sunil Bansal, upheld by the Hon’ble Jurisdictional High Court, which supported their stance that such converted land does not qualify as agricultural land under section 2(14).

The Tribunal examined the facts, noting that the land was sold after conversion to a Farm House, with the JDA specifying its use for environmental-friendly residence. The Tribunal referenced various judicial precedents, including the Hon'ble Supreme Court's decisions, emphasizing that the actual use and intended future use of the land are crucial in determining its character. They concluded that the land, at the time of sale, was not agricultural and thus did not fall under the exclusion clause of section 2(14).

2. Whether the addition of ?77,65,000/- as Income from Capital Gain is justified:

Given the Tribunal's finding that the land in question was not agricultural at the time of sale, it was deemed a capital asset. Consequently, the income arising from its sale was subject to capital gains tax. The Tribunal dismissed the assessee's reliance on previous decisions and explanations under section 2(1A) of the Act, noting that these were based on different facts and did not apply to the current case. They also highlighted that the incentive to exempt agricultural land from capital gains tax is intended to encourage genuine agricultural activities, not transactions by non-agriculturists for non-agricultural purposes.

The Tribunal upheld the addition of ?77,65,000/- as Income from Capital Gain, aligning with the Revenue's assessment and rejecting the assessee's appeal.

Conclusion:

The Tribunal concluded that the land sold by the assessee did not qualify as agricultural land under section 2(14) of the Income Tax Act at the time of sale and was therefore subject to capital gains tax. The appeal was dismissed, and the addition of ?77,65,000/- as Income from Capital Gain was upheld. The order was pronounced in the open court on 20/12/2019.

 

 

 

 

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