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2021 (4) TMI 46 - AT - Income TaxNature of land sold - Agricultural land - applicability of provisions of Capital Asset u/s. 2(14) - land as situated beyond 8 KM from the outer limits of municipality of Jaipur - HELD THAT - Since now before us, the assessee has successfully proved by placing on record the documentary evidences that the land in question at village Machhwa is 17 KM away from Jaipur and this village is having population of 2453 and land of the assessee is used for agriculture purposes as discussed therefore, keeping in view the totality of facts and circumstances and also keeping in view all the documentary evidences placed on record, we are of the view that the land in question of the assessee was situated beyond 8 KM from the municipal limits of Jaipur and was being used for agricultural purposes and was thus outside the scope of Section 2(14) of the Act and therefore, any gain on sale of the said land is exempted from tax. Thus, we allow these grounds of appeal and directed to delete the addition.- Decided in favour of assessee.
Issues Involved:
1. Whether the impugned land qualifies as rural agricultural land and is outside the scope of Section 2(14) of the Income Tax Act, 1961. 2. The correctness of the addition of ?1,15,77,722/- under long-term capital gain based on the fair market value determined by the DVO. Detailed Analysis: Issue 1: Qualification of Land as Rural Agricultural Land The primary contention was whether the land sold by the assessee was rural agricultural land and hence outside the scope of Section 2(14) of the Income Tax Act, 1961, which defines "capital asset." - Assessee's Argument: The land in question was situated more than 8 kilometers away from the municipal limits of Jaipur as on 06/01/1994, thus qualifying as rural agricultural land exempt from capital gains tax. The assessee provided additional evidence, including a sale deed, certificates from Nagar Nigam and Tehsildar, and Girdawari records, to support the claim that the land was used for agricultural purposes and located beyond the specified municipal limits. - Revenue's Argument: The Revenue contended that the application for additional evidence was an afterthought intended to fill gaps in the assessee's case. The CIT(A) had dismissed the appeal due to the lack of evidence proving the land's location and use for agricultural purposes. - Tribunal's Findings: The Tribunal admitted the additional evidence, noting that the CIT(A) had not explicitly asked the assessee to produce such documents. The Tribunal observed that the land was indeed located at village Machhwa, more than 8 kilometers from the municipal limits of Jaipur, based on various public documents and judicial precedents. The Tribunal referred to prior decisions, including those in the cases of Dr. Subha Tripathi and Khetilal Sharma HUF, which confirmed that land in village Machhwa was beyond the municipal limits as per the notification dated 06/01/1994. - Conclusion: The Tribunal concluded that the land in question was rural agricultural land, situated beyond 8 kilometers from the municipal limits of Jaipur, and used for agricultural purposes. Therefore, it was outside the scope of Section 2(14) and exempt from capital gains tax. Issue 2: Addition Under Long-Term Capital Gain The second issue was the addition of ?1,15,77,722/- under long-term capital gain based on the fair market value determined by the DVO. - Assessee's Argument: The assessee challenged the valuation carried out by the DVO, arguing that the land was rural agricultural land and hence any gain from its sale should be exempt from tax. - Revenue's Argument: The Revenue relied on the DVO's report to determine the fair market value of the property as on 01/04/1981, which led to the computation of LTCG at ?3,46,43,290/- as against the declared gain of ?2,30,65,568/-. - Tribunal's Findings: Given the Tribunal's conclusion that the land was rural agricultural land and exempt from capital gains tax, the addition of ?1,15,77,722/- under LTCG was unwarranted. - Conclusion: The Tribunal directed the deletion of the addition, thereby allowing the appeal in favor of the assessee. Final Judgment The Tribunal allowed the appeal, concluding that the land in question was rural agricultural land, situated beyond 8 kilometers from the municipal limits of Jaipur, and used for agricultural purposes. Consequently, any gain from the sale of the said land was exempt from tax, and the addition of ?1,15,77,722/- under long-term capital gain was deleted. The appeal was thus decided in favor of the assessee.
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