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2020 (1) TMI 770 - AT - Income TaxNature of land sold - agricultural land or capital asset u/s 2(14) - whether the land in question sold by the assessee will fall in the definition of Capital Asset u/s 2(14) of the IT Act or it will fall in exclusion clause of section 2(14)? - Conversion of land to Farm House - Subsequently, the JDA has issued Patta in favour of the purchaser - CIT-A confirming the order of Income Tax Officer of treating the sold of agricultural land (as per provision of section 2(14) as capital asset - HELD THAT - As per the terms and conditions of the said Lease issued by the JDA, the land in question was given only for environmental friendly residence/farm house. Further as per the conditions of conversion of the land to farm house, the activity permitted in the area is only construction of low coverage, low height structure for residential use. In the activities permitted on conversion of the land into farm house is restricted to the environmental friendly residence. Therefore, the land use was changed from agriculture to environmental friendly residence and no more an agricultural land. Once the land in question was no more an agricultural land at the time of transfer, then the same will not be considered as agricultural land for the purposes of section 2(14) of the Act. The sale deed dated 09.12.2009 clearly describes the intention of the parties not for agricultural use. Therefore, the very purpose and object of the incentive for giving the exemption under section 2(14) of the IT Act as per exclusion clause of the said section shall not be available once the actual use of the land is no more an agricultural. after conversion of the land, the land use was restricted was only for construction of environmental friendly residence (farm house). Accordingly, in the facts and circumstances of the case and in view of the order of this Tribunal in case of ACIT vs. Sunil Bansal 2019 (6) TMI 304 - RAJASTHAN HIGH COURT , we do not find any error or illegality in the impugned order of the ld. CIT (A). - Decided against assessee.
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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