2021 (5) TMI 60 - AT - Income Tax

Income from other sources u/s 56(2)(vii)(b) - adopted the fair market value of the property as determined by the stamp duty authority and made addition to the extent of assessee s share in the land - AR submitted that the provision of section 56(2)(vii)(b) of the Act are not attracted as agriculture land does not fall within the definition of capital assets - whether the agriculture land falls within the meaning of property as defined in Explanation to section 56(2)(vii) of the Act? - HELD THAT - A bare perusal of the definition of property shows that it is an inclusive definition. The expression property includes capital asset of the assessee. The term capital asset has been defined under section 2(14) of the Act. The capital asset does not include agriculture land, however, there are certain exceptions to it. In the present case, we find that the assessee has not brought any evidence to show that the agricultural land purchased with other co purchasers does not fall within the exceptions as specified in definition of agricultural land under section 2(14) of the Act. Even the AO has not made any effort to examine whether the agricultural land in question falls within the exception as specified under section 2(14) We find that in the case of Prem Chand Vs. ACIT 2020 (7) TMI 188 - ITAT JAIPUR held that per se the agriculture land does not fall within the definition of property as defined in Explanation to Section 56(2)(vii) of the Act. The Tribunal referred the issue back to the file of AO to examine whether the land in question falls under any of the exceptions provided in section 2(14). AR during the course of his submission stated that in case the issue is restored back to the AO for determination of the fact, that the agriculture land falls under exception or not, and in case the agriculture land purchased by the assessee falls within the definition of the capital asset and consequently, the provisions of Section 56(2)(vii) of the Act are attracted, then the AO may be directed to refer the valuation of land to the DVO. We have considered the contentions of the assessee, liberty is granted to the assessee to make a requisite application before the AO to refer valuation of land in question to DVO in case the agricultural land falls within the ambit of definition of property under section 56(2)(vii) of the Act. Appeal of the assessee is party allowed for statistical purposes

Summary

Issues:
1. Whether the provision of section 56(2)(vii)(b) of the Income-tax Act, 1961 is attracted to agricultural land?
2. Whether the agricultural land purchased falls within the definition of 'property' as defined in Explanation to section 56(2)(vii) of the Act?
3. Whether the matter should be referred back to the Assessing Officer (AO) for determining if the agricultural land falls under exceptions specified in section 2(14) of the Act?
4. Whether the valuation of the land should be referred to the Departmental Valuation Officer (DVO) if the agricultural land falls within the ambit of the definition of property under section 56(2)(vii) of the Act?

Analysis:
1. The appeal involved a dispute regarding the applicability of section 56(2)(vii)(b) of the Income-tax Act, 1961 to agricultural land purchased by the assessee. The assessee contended that agricultural land does not fall within the definition of 'capital assets' and cited a precedent to support this argument. The department, however, argued that the definition of property under section 56(2)(vii) includes immovable property without differentiation between agriculture and non-agriculture land.

2. The Tribunal examined whether the agricultural land purchased by the assessee falls within the definition of 'property' as defined in the Explanation to section 56(2)(vii) of the Act. The Tribunal noted that the AO did not dispute that the land was agricultural and analyzed the relevant provisions of the Act. The Tribunal observed that the definition of property is inclusive and includes capital assets of the assessee, with exceptions for agricultural land as per section 2(14) of the Act.

3. The Tribunal found that the assessee did not provide evidence to show that the agricultural land purchased did not fall within the exceptions specified in the definition of agricultural land under section 2(14) of the Act. The Tribunal also noted that the AO did not examine whether the land fell within the exceptions. Referring to a previous decision, the Tribunal directed the matter to be sent back to the AO to determine if the land falls under the exceptions provided in section 2(14) of the Act.

4. The Tribunal granted the assessee liberty to apply before the AO to refer the valuation of the land to the DVO if the agricultural land falls within the definition of property under section 56(2)(vii) of the Act. The appeal was partially allowed for statistical purposes based on the above analysis. The Tribunal emphasized the need for a detailed examination by the AO regarding the classification of the agricultural land and the application of relevant provisions.