2023 (2) TMI 262 - AT - Income Tax

Deduction u/s 54B - proof of agricultural activities on the land- whether the piece of land sold by the assessee is eligible for claiming exemption? - case of the assessee is that the assessee has inherited a piece of land and the same was sold in which assessee s share of sale consideration and the assessee has claimed exemption u/s 54B on the ground that the land was used for agricultural purposes for many years - HELD THAT - The piece of land sold by the assessee is within the purview of Coastal Regulation Zone CRZ adjoining to sea. The case of the assessee is that he has carried agricultural operation. Except adangal, there was no evidence bought on record that the assessee carried agricultural operations. The adangal filed by the assessee shows that there were few coconut trees. Simply because, there are coconut trees, it does not mean that the assessee carried agricultural operation, particularly, when the assessee has not reported any agricultural income. Apart from that, the said extent of land was just adjacent to the sea not useful for any agricultural purposes, whereas, the assessee s statement is that he has carried agricultural operation. To carry agricultural operation water is very much required and sea water is not useful for carrying any agricultural activities or to raise any agricultural crop. Thus we are of the considered opinion that the assessee has not carried any agricultural activities and thus, we find no infirmity in the orders of authorities below and accordingly, the appellate order passed by the ld. CIT(A) is confirmed. Decided against assessee.

Summary

Issues:
1. Eligibility for claiming exemption under section 54B of the Income Tax Act.
2. Determination of whether the land sold by the assessee qualifies as agricultural land.

Issue 1: Eligibility for claiming exemption under section 54B of the Income Tax Act:
The case involved appeals against the disallowance of deductions claimed under sections 54B and 54EC of the Income Tax Act for the assessment years 2013-14 and 2014-15. The assessee had sold a capital asset and claimed deductions under the mentioned sections. The Assessing Officer disallowed the deduction under section 54B, leading to a series of appeals. The ITAT directed a re-examination of the matter with additional evidence to determine the eligibility for the claimed deduction. The Assessing Officer, after considering submissions and relevant judgments, concluded that the property sold was not agricultural land, thus disallowing the deduction. The CIT(A) upheld this decision, leading to the appeal before the ITAT.

Issue 2: Determination of whether the land sold by the assessee qualifies as agricultural land:
The primary contention was whether the land sold by the assessee was eligible for claiming exemption under section 54B of the Act. The assessee argued that the land was used for agricultural purposes, supported by adangal and other documents. However, the Assessing Officer required evidence of agricultural operations prior to the sale to allow the deduction under section 54B. Despite the presence of coconut trees on the land, the authorities found no substantial evidence of agricultural activities being carried out. The location of the land adjacent to the sea raised doubts about its agricultural utility, as sea water is unsuitable for agricultural purposes. The ITAT concurred with the lower authorities, concluding that the assessee had not conducted agricultural activities on the land, thereby confirming the disallowance of the deduction under section 54B. The decision was supported by the lack of agricultural income reported by the assessee and the impracticality of utilizing sea-adjacent land for farming.

In conclusion, the ITAT dismissed both appeals filed by the assessee, upholding the disallowance of deductions claimed under section 54B of the Income Tax Act for the assessment years 2013-14 and 2014-15. The judgment emphasized the importance of providing substantial evidence of agricultural activities on the land to qualify for exemptions under the Act, especially when dealing with properties located in environmentally challenging areas like Coastal Regulation Zones.