2012 (12) TMI 900 - AT - Income Tax

Capital gain - Nature of land - Sale of agricultural land Exemption u/s 54B - Whether self-cultivated land will only be treated as agricultural land Agricultural operation was carried out by brother of assessee on the said land Held that - There is no requirement in any Act more especially the I.T. Act that only the self-cultivated land will be treated as agricultural land. The Tehsildar is the concerned revenue Officer who on the basis information/report of revenue Patwari issues a certificate. Since the brother of the assessee was doing agricultural operation, therefore, any income derived out of it will be treated as agricultural income. Even if less income has been shown, the assessee cannot be denied the character of agricultural income. Whether Tehsildar is a competent authority to issue a certificate regarding distance of land from the municipal limit Land sold was beyond 8 kms from the municipal limit Held that - Following the decision in case of Shri Lal Singh (2009 (11) TMI 63 - PUNJAB AND HARYANA HIGH COURT) that Tehsildar is the most competent revenue Officer to certify the proof of agricultural operation, distance of land from a particular place, rate of land, etc. Land was sold to developer Held that - Just because after the sale, the purchaser was going to put the land to non-agricultural use, it does not mean that on the date of sale the land has ceased to be agricultural land. If in the revenue record, the particular land is recorded as agricultural land and till the date of sale, it is exploited as agricultural land and the owner of the land has not taken any step to indicate his intention to exploit the land for non-agricultural purposes then such land to be regarded as agricultural land Therefore said land was agricultural land. In favour of assessee

Issues Involved:
1. Whether the land sold by the assessee qualifies as agricultural land.
2. Whether the land sold is situated beyond 8 kms from the municipal limit.
3. Competence of the Tehsildar to issue a certificate regarding the distance of land from the municipal limit.
4. Applicability of capital gains tax on the sale of the land.

Issue-wise Detailed Analysis:

1. Qualification of Land as Agricultural Land:

The Revenue contended that the first appellate authority erred in treating the land sold as agricultural land because the assessee failed to substantiate that any agricultural activity was carried out on the said land. The Revenue argued that the assessee, being an advocate, did not personally engage in agricultural operations. However, the Tribunal held that there is no requirement in the Income Tax Act that only self-cultivated land will be treated as agricultural land. The Tribunal noted that the land was inherited and agricultural operations were carried out by one of the brothers, which qualifies the land as agricultural land. The Tribunal emphasized that any agricultural income derived from such operations will be treated as agricultural income, irrespective of who performed the agricultural activities.

2. Distance from Municipal Limit:

The Revenue also contested that the land was within 8 kms from the municipal limit. However, the Tribunal found that various pieces of evidence, including the report of the Income Tax Inspector and certificates from the Executive Engineer, Public Works Department, and the Land Revenue Officer (Tehsildar), consistently indicated that the land was situated beyond 9 kms from the municipal limit. The Tribunal referenced section 2(14)(iii) of the IT Act, which defines agricultural land based on its distance from municipal limits and the population of the area. The Tribunal concluded that the land in question met the criteria of being beyond the prescribed limit of 8 kms from the municipal limit and was recorded as agricultural land in the revenue records.

3. Competence of the Tehsildar:

The Revenue argued that the Tehsildar is not a competent authority to issue a certificate regarding the distance of land from the municipal limit. The Tribunal disagreed, stating that the Tehsildar, being the concerned revenue officer, is competent to certify the distance of land from a particular place. The Tribunal also noted that the Income Tax Inspector had prepared a map of the land, further supporting the Tehsildar's certificate. The Tribunal cited the decision from the Hon'ble Punjab & Haryana High Court in CIT v. Lal Singh, which supported the competence of the Tehsildar in such matters.

4. Applicability of Capital Gains Tax:

The Tribunal examined whether the sale of the land attracted capital gains tax. The Tribunal noted that the land was recorded as agricultural land in the revenue records and was used for agricultural purposes until the date of sale. The Tribunal emphasized that the purpose for which the land was sold is not material; what matters is whether the land was agricultural at the time of sale. The Tribunal referenced various judicial pronouncements, including CIT v. Borhat Tea Co. Ltd. and CIT v. Satinder Pal Singh, which supported the view that land recorded as agricultural and used for agricultural purposes qualifies for exemption from capital gains tax. The Tribunal concluded that the land in question was agricultural land and not subject to capital gains tax.

Conclusion:

The Tribunal dismissed the appeal of the Revenue, affirming the decision of the first appellate authority that the land sold by the assessee qualifies as agricultural land and is situated beyond 8 kms from the municipal limit. The Tribunal upheld the competence of the Tehsildar to certify the distance of the land and concluded that no capital gains tax is exigible on the sale of the land.

← Previous Next →