2017 (12) TMI 1358 - HC - Income Tax

Nature of land - agricultural or capital asset - disallowance of the claim of the assessee for exemption from capital assets - Held that - As observed by the Tribunal that the assessee is not an agriculturist and is the Proprietor of a Management Institute, and there is no evidence to indicate that the land has been put to any agricultural use. In the decision reported in Sarifabibi Mohmed Ibrahim and others v. Commissioner of Income Tax, 1993 (9) TMI 10 - SUPREME Court , it is held that the question whether a particular piece of land is agricultural or not is essentially a question of fact, to be decided after a consideration of circumstances appearing for and against the assessee Certificate of the Village Officer showing the land as Nilam (paddy land) alone may not be sufficient for the crucial question is whether the land was actually used for agricultural purposes during the two years prior to the date of transfer. The mere categorisation of the land as Nilam in the revenue records would not hence, suffice to raise a valid claim of exemption. In the instant case, the Tribunal has concluded that the subject land has to be treated as capital asset within the meaning of Section 2(14) of the Act. Ordinarily, the question whether a land is an agricultural land or not is a question of fact and the finding on the question of fact recorded by the Tribunal is final. We are not inclined to upset the decision of the Tribunal.- Decided against assessee.

Summary

Issues:
1. Challenge to findings of Income Tax Appellate Tribunal regarding exemption claim for agricultural land.
2. Interpretation of Section 2(14) of the Income Tax Act.
3. Application of relevant case laws in determining the nature of the land.
4. Assessment of evidence for agricultural use of the land.
5. Final decision on the appeal.

Issue 1: Challenge to ITAT findings on exemption claim for agricultural land
The appellant challenged the Income Tax Appellate Tribunal's decision regarding the exemption claim for agricultural land. The Tribunal had upheld the disallowance of the claim of the assessee for exemption from 'capital assets'.

Issue 2: Interpretation of Section 2(14) of the Income Tax Act
The crux of the matter was whether the property in question qualified as agricultural land under Section 2(14) of the Act. The appellant argued that the land was agricultural and, therefore, not a capital asset. The Tribunal, however, concluded that the subject land should be treated as a capital asset within the meaning of Section 2(14) of the Act.

Issue 3: Application of relevant case laws
Various case laws were cited to determine the nature of the land. The court referred to Commissioner of Income Tax v. Gemini Pictures Circuit Pvt.Ltd., Gopal C.Sharma v. Commissioner of Income Tax, and Commissioner of Income Tax v. V.A.Trivedi to emphasize that the character and nature of the land are crucial in deciding whether it qualifies as agricultural land for exemption from capital gains.

Issue 4: Assessment of evidence for agricultural use
The Tribunal observed that there was no evidence to indicate that the land had been used for agricultural purposes. The court highlighted the importance of actual agricultural use in determining whether a land qualifies as agricultural for exemption.

Issue 5: Final decision on the appeal
After considering the arguments and evidence presented, the court dismissed the appeal, stating that the Tribunal's decision on the nature of the land as a capital asset was final. The court upheld the Tribunal's findings, emphasizing that the mere categorization of land as 'Nilam' in revenue records does not automatically qualify it for agricultural exemption under the Act.

This detailed analysis of the judgment covers all the issues involved in the case, providing a comprehensive understanding of the legal aspects and decisions made by the court.