2023 (4) TMI 111 - AT - Income Tax

Revision u/s 263 - treating the capital gains on sale of agricultural lands as short term capital gains - only contention of the Ld. Pr. CIT is that the assessee has purchased the land in Acres and sold the same in Square Yards within a span of one month for a huge consideration - HELD THAT - Assessee has acted as a intermediary for the purchase and sale of agricultural lands during the impugned assessment year. CIT erred in appreciating the fact that the purchase and sale of land within a span of one month cannot alter the character of the land as established by the assessee. Certificate issued by the Village Revenue Officer, Devarapalli, dated 24/2/2023 has confirmed the land as an agricultural land. There is also no dispute by the Revenue on the consideration received by the assessee. In our considered opinion, since the said lands were entered into the Revenue Records as agricultural lands which was not disputed by the Revenue, the gain on sale of land cannot be considered as capital gains for the purpose of the Act. Pr. CIT has not brought on record that the assessee has sought any permission for conversion of the agricultural land to non-agricultural land. Since the character of the land remained as agricultural land both on the date of purchase and on the date of sale, it is a sale of agricultural land and no capital gains arise on the sale of such agricultural land and we therefore have no hesitation to quash the order of the Ld. Pr. CIT on this issue. Accordingly, the appeal of the assessee is allowed.

Summary

Issues Involved:
The judgment involves determining whether the capital gains on the sale of agricultural lands should be treated as short term capital gains.

Comprehensive Details:

Issue 1: Treatment of Capital Gains on Sale of Agricultural Lands
The appeal was filed against the order passed under section 263 of the Income Tax Act, 1961, regarding the treatment of capital gains on the sale of agricultural lands as short term capital gains for the assessment year 2015-16. The assessee, engaged in a business involving Cashew Nuts, was found to have purchased and sold agricultural lands within a short period. The Principal Commissioner of Income Tax, in exercise of powers under section 263, considered the order of the Assessing Officer as erroneous and prejudicial to the revenue's interests due to lack of rejection of the assessee's claims based on documentary evidence. The assessee contended that the lands remained agricultural, supported by the Village Revenue Officer's certificate, and no conversion to non-agricultural use occurred. The Tribunal held that the character of the land as agricultural was maintained throughout, and as such, no capital gains arose from the sale of agricultural lands. The order of the Principal Commissioner was quashed, and the appeal of the assessee was allowed.

Conclusion:
The Tribunal ruled in favor of the assessee, determining that the sale of agricultural lands did not result in capital gains due to the lands' continuous agricultural status, as confirmed by the Village Revenue Officer's certificate.