2023 (6) TMI 1125 - AT - Income Tax

Addition of long term capital gain - Addition made by AO on sale of undisputedly rural agricultural land u/s 2(14) - difference between the rural agricultural land u/s 2(14) and urban agricultural land subjected u/s 54B - HELD THAT - AO misdirected himself in applying provision of section 54B of the Act which are applicable on urban agricultural land claiming deduction u/s 54B of the Act and not agricultural activity in showing in agricultural land carried out agricultural land activity thereon obtaining crops therefore, therefrom and thereafter in the same status rural agricultural land she sold land to 3rd party then such transaction of sale does not fall within the meaning of section 2(14) read with section 54B of the Act attracting levy of tax on account long term capital gain. Therefore, grounds of assessee are allowed and AO is directed to delete the addition. Decided in favour of assessee.

Summary

Issues involved: Appeal against order of ld CIT(A) regarding addition of long term capital gain on sale of rural agricultural land u/s 2(14) of the Income Tax Act, differentiation between rural and urban agricultural land u/s 2(14) and 54B of the Act.

Summary:
1. The appeal was filed against the order of ld CIT(A) for the Assessment Year 2014-15. The main contention was the addition of long term capital gain on the sale of rural agricultural land u/s 2(14) of the Act.

2. The assessee argued that the land sold was rural agricultural land supported by revenue records, and the ld CIT(A) erred in doubting the agricultural activity on the land. The differentiation between rural and urban agricultural land was also highlighted.

3. The AO's assessment considered the land as a capital asset attracting long term capital gain. However, the counsel presented evidence from the sale deed and revenue records proving agricultural activity on the land, contradicting the ld CIT(A)'s doubts.

4. The Sr. DR supported the AO's decision, stating that no agricultural activity was performed on the land. The land's location on a national highway was cited as a reason for it being a capital asset.

5. The Tribunal noted details from the purchase and sale deeds, confirming the land as agricultural. The revenue records showed agricultural activities in the preceding years, supporting the assessee's claim.

6. Referring to a Delhi High Court case, the Tribunal concluded that the land qualified as agricultural land based on the agricultural activities conducted there. The misapplication of section 54B of the Act was highlighted, and the addition of long term capital gain was directed to be deleted.

7. The appeal was allowed, and the addition on account of long term capital gain was ordered to be deleted.

Judgment: The appeal was allowed, and the addition on account of long term capital gain was directed to be deleted.