2021 (9) TMI 449 - AT - Income Tax

Addition u/s 56(2)(vii)(b) - sale of agricultural land - Status of the land - difference in the stamp duty valuation and transaction value - Assessee contended that addition under section 56(2)(vii)(b)(ii) of the Act cannot be made against the assessee as the assessee has purchased agricultural land, which is situated beyond 8 km from local municipal limit and that, the agricultural land, is not a capital asset - HELD THAT - We find that the lower authorities has not disputed the fact that the land purchased by the assessee are beyond the 8 km from the mentioned unit of SMC - CIT(A) further admitted that the assessee purchased the agricultural land. We have seen the sale /purchase deed dated 25.102013, which is placed on record on the direction of the bench, wherein the nature of land is described as agricultural land . We find that grounds of appeal raised by the assessee is covered by the decision of Pune Bench of Tribunal in Mubharak Gafur Korabu 2019 (4) TMI 1877 - ITAT PUNE and in Yogesh Maheshwari 2021 (1) TMI 832 - ITAT JAIPUR Therefore, we find merit in the submission of the ld.AR of the assessee that provision of section 56(2)(vii)(b) of the Act are of the Act not applicable in the present case. - Decided in favour of assessee.

Issues Involved:
1. Applicability of Section 56(2)(vii)(b) of the Income Tax Act on the purchase of agricultural land.
2. Interpretation of the term "property" under Section 56(2)(vii)(b) and its applicability to agricultural land.
3. Determination of whether agricultural land situated beyond 8 km from municipal limits qualifies as a capital asset.

Detailed Analysis:

1. Applicability of Section 56(2)(vii)(b) of the Income Tax Act on the purchase of agricultural land:
The primary issue was whether the difference between the stamp duty valuation and the transaction value of agricultural land should be taxed under Section 56(2)(vii)(b) of the Income Tax Act. The Assessing Officer (AO) added ?18.84 lakhs to the assessee's income, arguing that the provision applies to any immovable property, not just capital assets. The AO's stance was that the legislative intent behind Section 56(2)(vii)(b) was to curb the practice of 'on money' in property transactions, thus making the difference in valuation taxable as income from other sources.

2. Interpretation of the term "property" under Section 56(2)(vii)(b) and its applicability to agricultural land:
The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, interpreting that the explanation in Section 56(2)(vii)(b) pertains to clause (c) and not clause (b). The CIT(A) argued that the word "property" in clause (b) should not be interpreted to include only capital assets, as this would lead to absurd interpretations like "immovable shares and securities" or "immovable jewelry." Thus, the CIT(A) rejected the assessee's argument that the land being agricultural and beyond 8 km from municipal limits should be exempt from this provision.

3. Determination of whether agricultural land situated beyond 8 km from municipal limits qualifies as a capital asset:
The Tribunal examined whether the agricultural land in question, situated beyond 8 km from municipal limits, qualifies as a capital asset under Section 2(14) of the Income Tax Act. The Tribunal noted that the lower authorities did not dispute the land's status as agricultural and beyond the specified distance from municipal limits. The Tribunal referenced decisions from the Jaipur and Pune Benches, which held that agricultural land is not governed by Section 56(2)(vii)(b) as it is not a capital asset. The Tribunal concluded that since the land is agricultural and not a capital asset, the provisions of Section 56(2)(vii)(b) do not apply.

Conclusion:
The Tribunal allowed the appeals, ruling that the provisions of Section 56(2)(vii)(b) are not applicable to the agricultural land in question. The Tribunal's decision was based on the interpretation that agricultural land beyond 8 km from municipal limits does not qualify as a capital asset and thus is exempt from the provisions of Section 56(2)(vii)(b). The appeals in ITA Nos. 305 & 306/SRT/2018 were also allowed on similar grounds, as the facts were common across all cases.

Order:
The Tribunal announced the order on 07 September 2021, allowing all the appeals and placing the result on the notice board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rules-1963.

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