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2014 (11) TMI 338 - AT - Income TaxLTCG Transaction of sale of agricultural land land constitutes agricultural land or not Held that - Assessee has purchased agricultural land and put to agricultural use as such earlier - This fact was admitted by AO in the order itself - Even though AO considered that amount spent towards development of agricultural land, the fact was that it was spent for ratification deed and not for any development activity on the agricultural land - assessee has sold only agricultural land which was also used and put to agricultural use earlier and the purpose for which the purchaser utilized the land cannot be considered as an evidence of change of nature of land as was considered by AO - CIT(A) rightly was of the view that the intention of the purchaser has nothing to do with the nature of land so sold by the seller at the time of sale - what the assessee sold during the year to the purchaser is agricultural land and this was evidenced and certified by the revenue records CIT(A) rightly followed the decision in ClT v. Debbie Almao and Joaqyam Atrnao 2010 (9) TMI 560 - Bombay High Court - no capital gains arises on the sale of agricultural land even though purchaser purchased the property with an intention of selling it for non-agricultural purposes - assessee s land was used as agricultural land and is away from GHMC limits beyond 8 KMs, the transaction does not give rise to taxable capital gains Decided against revenue.
Issues Involved:
1. Levy of capital gains on the sale of agricultural land. 2. Characterization of the land as agricultural or non-agricultural at the time of transfer. 3. Impact of the purchaser's intended use of the land on its characterization. 4. Examination of agricultural income and land use history. Detailed Analysis: 1. Levy of Capital Gains on the Sale of Agricultural Land: The core issue in this appeal is the levy of capital gains on the transaction where the assessee sold agricultural land to M/s. Ramky Estates and Farms P. Ltd. The Assessing Officer (A.O.) contended that the transaction indicated the land was meant for commercial exploitation and thus did not retain its agricultural character at the time of transfer. The assessee purchased the land on 22.08.2002 and later entered into an agreement of sale on 08.02.2006, receiving an advance. On 05.05.2007, an irrevocable General Power of Attorney (GPA) was executed. The assessee declared capital gains as NIL, claiming the land was agricultural and situated beyond 8 KM from any municipality. The A.O. treated the conveyance through the GPA as a sale and taxed the long-term capital gain after allowing certain deductions. 2. Characterization of the Land as Agricultural or Non-Agricultural at the Time of Transfer: The A.O. argued that the land was meant for commercial exploitation based on clauses in the irrevocable GPA. However, the CIT(A) accepted the assessee's contention that the land was agricultural, supported by revenue records and the absence of any application for conversion to non-agricultural land. The CIT(A) noted that the expenditure of Rs. 14.50 lakhs was for ratification charges, not for development, and the land was certified as agricultural by revenue authorities. 3. Impact of the Purchaser's Intended Use of the Land on Its Characterization: The A.O. believed the purchaser's intention to use the land for commercial purposes affected its characterization. However, the CIT(A) and subsequent judgments clarified that the purchaser's intended use does not alter the nature of the land sold by the assessee. The CIT(A) referenced the Bombay High Court decision in CIT v. Debbie Almao, which held that the land's agricultural status in revenue records and the lack of conversion to non-agricultural use meant no capital gains arose. 4. Examination of Agricultural Income and Land Use History: The A.O. did not examine whether the assessee had reported any agricultural income in previous years. The CIT(A) and the Tribunal found no reason to differ from the CIT(A)'s findings, noting that the land was used for agricultural purposes earlier and was situated beyond 8 KM from GHMC limits. The Tribunal referenced the Madras High Court decision in M.S. Srinivasa Naicker, which emphasized that the land's character as agricultural at the time of sale is crucial, regardless of the purchaser's future use intentions. Conclusion: The Tribunal upheld the CIT(A)'s decision, confirming that the land sold was agricultural and situated beyond 8 KM from any municipality, thus not attracting capital gains tax. The appeal by the Revenue was dismissed, reinforcing the principle that the nature of the land at the time of sale and its use in revenue records are decisive factors, not the purchaser's subsequent use. The Tribunal's order was pronounced on 24.10.2014.
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