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2020 (2) TMI 1141 - AT - Income TaxMAT computation - exclusion of profit on sale of agricultural land while computing book profit u/s 115JB - . CIT(A)held that profit from sale of agriculture land which is not a Capital Asset cannot be included for the purpose of computing book profit u/s 115JB - HELD THAT - The assessee held the agricultural land for more than 9 years as investment and this land was situated in rural area more than 17 Km away from Municipal Limit. This land was used for agricultural purpose and considering the location of this land, in near future it cannot be used for non-agricultural purposes. The AO himself has accepted that the land is an agricultural land out of definition of capital assets. No infirmity in the order of the ld. CIT(A) for holding that the gain arising from sale of agricultural land cannot be taxed U/s 115JB of the Act. The detailed finding so recorded by the ld. CIT(A) after applying judicial pronouncements are as per the material on record which do not require any interference on our part. Hence, we uphold the same.
Issues Involved:
1. Exclusion of profit on sale of agricultural land while computing book profit under Section 115JB of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Exclusion of profit on sale of agricultural land while computing book profit under Section 115JB of the Income Tax Act, 1961: The primary issue in this appeal is whether the profit from the sale of agricultural land should be included in the book profit calculation under Section 115JB of the Income Tax Act, 1961. Facts and Arguments: - The assessee sold agricultural land and earned a gain of ?3,01,19,198/- during the year under consideration. - The land was not considered a capital asset as per Section 2(14)(iii) of the Act, and thus, the gain was claimed to be non-taxable. This fact was accepted by the Assessing Officer (A.O.). - However, the A.O. included this gain in the book profit under Section 115JB, which led to the dispute. CIT(A) Observations: - The CIT(A) excluded the profit from the sale of agricultural land from the book profit calculation under Section 115JB, noting that the land was not a capital asset as defined under Section 2(14) of the Act. - The CIT(A) referenced Explanation (1) of Section 115JB, which allows certain amounts to be reduced from book profit, including income exempt under Sections 10, 11, or 12. - The CIT(A) emphasized that the legislature did not intend to tax income exempt under the Income Tax Act through Section 115JB, as supported by the Kerala High Court's decision in Karimtharuvi Tea Estates Ltd. v. DCIR. ITAT Analysis: - The ITAT reviewed the contentions and judicial precedents, affirming that the gain from the sale of agricultural land, not being a capital asset, is not taxable under Section 115JB. - The ITAT noted that the land sold was situated more than 17 KM from municipal limits, qualifying it as agricultural income under Section 2(1A) and exempt from tax. - The ITAT referenced several judicial pronouncements, including ACIT v. Nilgiri Tea Estate Ltd., Sutlej Cotton Mills Ltd. v. ACIT, and Agri Gold Foods & Farm Products Ltd., supporting the non-taxability of such gains under Section 115JB. - The ITAT distinguished this case from ACIT v. Sunil Bansal and ITO v. Krish Home Pvt. Ltd., where the land was treated as a capital asset or used for non-agricultural purposes. Conclusion: The ITAT upheld the CIT(A)'s decision, confirming that the profit from the sale of agricultural land, which is not a capital asset, cannot be included in the book profit calculation under Section 115JB. The appeal by the revenue was dismissed, and the order was pronounced in the open court on 20th February 2020.
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