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2007 (7) TMI 339 - AT - Income TaxCapital asset u/s 2(14)(iii)(b) - Sale Of Land - Agricultural Or Non-Agricultural - Not cultivated the land for a period of fourteen years - land falling beyond 8 kms from Committee Area - HELD THAT - Merely because the assessee has not cultivated the land for a period of fourteen years i.e., from the date of purchase till the date of its sale, however, ignoring the explanation given by the assessee why he could not cultivate the land for a period of fourteen years and also ignoring the other evidence placed on record by the assessee clearly indicating that from the date of purchase till the date of its sale the land remained an agricultural land in the Revenue records and the assessee did not convert the user of the land as nonagricultural either temporarily or permanently. We are of the opinion that the CIT(A) was not justified in rejecting the contention of the assessee merely because the land of the assessee was not mentioned in the certificate issued by the Tehsildar because, undisputedly, the land in question was situated in village Roz-Ka-Gurjar, which has been certified by the Tehsildar to be situated beyond a distance of 8 kms from the Town Committee Area. Hence, on the basis of the certificate issued by the Tehsildar, we hold that in view of the CBDT circular the land of the assessee fell outside the purview of capital asset. Thus, we conclude that in the existing facts and circumstances the tax authorities below were not justified in treating the land in question as non-agricultural land and computing the capital gains on the sale thereof. Accordingly. the orders of tax authorities below in this regard are set aside and the issue involved in the grounds of appeal is decided in favour of the assessee. The grounds of appeal taken by the assessee are allowed. In the result the appeal filed by the assessee is allowed.
Issues Involved:
1. Taxability of capital gains on the sale of land. 2. Classification of the land as agricultural or non-agricultural. 3. Applicability of CBDT Notification No. 9447 regarding the distance from municipal limits. Issue-wise Detailed Analysis: 1. Taxability of Capital Gains on the Sale of Land: The primary issue was whether the assessee was liable to pay tax on the capital gains arising from the sale of land situated in village Roz-ka-Gurjar during the assessment year 1998-99. The assessee argued that the land was agricultural and thus exempt from capital gains tax under the IT Act, 1961. 2. Classification of the Land as Agricultural or Non-Agricultural: The determination of whether the land was agricultural was crucial. The assessee provided evidence, including a certificate from Land Revenue authorities and the sale deed, indicating that the land was agricultural. The land was covered under Chakbandi, restricting its use to agricultural purposes. The assessee also cited several judicial precedents to support the claim that the land should be considered agricultural. However, the tax authorities, relying on the Gujarat High Court's decision in Rasiklal Chimanlal Nagri vs. CWT and the Supreme Court's decision in CWT vs. Officer-In-Charge (Court of Wards), Paigah, argued that the land was non-agricultural. They emphasized that the land's character should be determined based on its actual use and intention for agricultural purposes, not merely its potential use. The authorities noted that the assessee had not used the land for agriculture for 14 years and had not provided evidence of an intention to use it for agriculture. The tribunal analyzed various judicial precedents, including CIT vs. Madhabhai H. Patel, Gemini Pictures Circuit (P) Ltd. vs. CIT, and CWT vs. H.V. Mungale. These cases highlighted that the land's classification in Revenue records, its actual use, and the owner's intention were critical factors in determining its agricultural nature. The tribunal concluded that the land was recorded as agricultural in Revenue records, and the assessee had not converted it to non-agricultural use. The non-cultivation was justified due to the assessee's international athletic commitments. 3. Applicability of CBDT Notification No. 9447: The assessee argued that the land fell outside the purview of a capital asset as per CBDT Notification No. 9447, dated 6th Jan. 1994, which exempted land situated beyond 5 kms from municipal limits. A certificate from the Tehsildar confirmed that village Roz-ka-Gurjar was beyond 8 kms from the Committee Area, Sohna. The tribunal accepted this argument, holding that the land was outside the purview of a capital asset based on the Tehsildar's certificate and the CBDT notification. Conclusion: The tribunal concluded that the tax authorities were not justified in treating the land as non-agricultural and computing capital gains thereon. The land remained agricultural in the Revenue records, and the assessee provided a valid explanation for the non-cultivation. The Tehsildar's certificate and the CBDT notification further supported the assessee's claim. Consequently, the tribunal allowed the appeal, ruling in favor of the assessee and setting aside the orders of the tax authorities. Result: The appeal filed by the assessee was allowed.
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