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2024 (6) TMI 1359 - AT - Income TaxNature of land sold - LTCG - land was converted into non-agriculture prior to date of sale but assessee has been carrying on agricultural activities right the date of sale of land - DR submitted that as per revenue records the land was a non-agricultural land as on the date of sale hence AO had correctly invoked the provisions of Section 50C - as argued land qualified as agricultural land since it was situated beyond the prescribed municipal limits HELD THAT - Firstly the Department has not disputed/contested the claim of the assessee that the assessee has been carrying on agricultural activities right the date of sale of land. Secondly we agree with the argument of the assessee that once the assessee is carrying on agricultural activities right up to the date of sale then the land continues to be agricultural land respective of conversion of such land into non-agriculture land. The mere fact that land use was converted to non-agricultural prior to date of sale would not convert the land as agricultural land as held by the VAJULAL CHUNILAL (HUF) 1979 (2) TMI 45 - GUJARAT HIGH COURT Whether the land sold qualifies as agricultural land within the meaning of Section 2(14) of the Act has not been analysed by the Tax Department. AO has made a reference at page 2 of the assessment order that the land sold by the assessee is situated at the distance of 4 km from Deesa and hence the land should be taxed at Jantri value of Rs.3, 73 32, 000/-. Therefore it is not clear from the facts available on record whether land qualified as an agricultural land within the meaning of Section 2(14) of the Act. Accordingly in the interest of justice the issue is being set aside to the file of AO with the view to verify whether the conditions of Section 2(14) of the Act are being met in the instant set of facts. The assessee would be at liberty to produce all supporting documents to show that land is situated as per prescribed limits given under Income Tax Act so as to qualify as agriculture land and also file copies of any notification etc. in respect of this land which support the fact that the land is an agriculture land and is situated as per the prescribed municipal limits under Section 2(14) of the Act. Claim of deduction and Section 54F/54B - As we observe that Ld. CIT(Appeals) had already directed the Assessing Officer to allow the claim of deduction under Section 54B/54F after due verification about the fulfillment of conditions contained therein. Accordingly to that extent we find no infirmity in the order of Ld. CIT(Appeals) to call for interfere. Appeal of the assessee is party allowed for statistical purposes.
Issues Involved:
1. Whether the land sold by the assessee qualifies as a capital asset and is subject to Section 50C of the Income Tax Act, 1961. 2. Denial of exemption claims under Sections 54B and 54F of the Income Tax Act. 3. Permission to raise additional grounds of appeal regarding the exemption claims under Sections 54B and 54F. Issue-wise Detailed Analysis: 1. Land as a Capital Asset and Application of Section 50C: The primary contention revolves around whether the land sold by the assessee qualifies as a capital asset, thereby invoking Section 50C of the Income Tax Act, 1961. The Assessing Officer (AO) treated the land as a capital asset and used the Jantri value of Rs. 3,73,32,000 for stamp duty purposes, leading to an addition of Rs. 1,23,97,837 to the assessee's income. The AO rejected the assessee's argument that the land was agricultural and had been used for agricultural purposes up to the date of sale. The CIT(A) partially allowed the appeal by adjusting the valuation to Rs. 2,86,21,000 as determined by the Departmental Valuation Officer (DVO), but upheld the AO's treatment of the land as non-agricultural. 2. Denial of Exemption Claims under Sections 54B and 54F: The assessee claimed exemptions under Sections 54B and 54F, arguing that the sale proceeds were invested in constructing a residential house and purchasing agricultural land. The AO did not address these claims in the assessment order. The CIT(A) noted that the issue was raised during the assessment proceedings but was not included in the grounds of appeal in Form No. 35. Consequently, the CIT(A) directed the AO to verify and allow the deductions under Sections 54B and 54F if the conditions were met. 3. Permission to Raise Additional Grounds of Appeal: The assessee argued that the CIT(A) erred in denying permission to raise additional grounds of appeal regarding the exemption claims under Sections 54B and 54F. The CIT(A) acknowledged that the issue was raised during the assessment proceedings but did not formally address it due to its absence in the grounds of appeal. Tribunal's Findings: The Tribunal considered the following key points: - The Department did not dispute that the assessee was carrying out agricultural activities on the land up to the date of sale. - Citing precedents from the Gujarat High Court (CIT v. Vajulal Chunilal and Manilal Somnath), the Tribunal held that the land's agricultural character is not lost merely due to its conversion to non-agricultural use before the sale. - The Tribunal noted that the AO did not analyze whether the land qualified as agricultural under Section 2(14) of the Act. Conclusion and Directions: The Tribunal set aside the issue to the AO to verify if the land meets the conditions of Section 2(14) of the Act, allowing the assessee to produce supporting documents. The Tribunal upheld the CIT(A)'s direction to the AO to verify and allow deductions under Sections 54B and 54F after due verification. The appeal was partly allowed for statistical purposes. Result: The appeal of the assessee was partly allowed for statistical purposes, with directions for further verification by the AO. The Tribunal pronounced the order in open court on 15/02/2024.
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