2018 (2) TMI 268 - AT - Income Tax

Addition on account of long term capital gain - whether the land sold by the appellant was a capital asset within the meaning of section 2(14) - sale of agricultural land - Held that - The land in question is treated as agricultural land and the capital gains arising out of sale of agricultural land is entitled for exemption u/s.2(14) of the Act. Accordingly, we set aside the orders of the CIT(A) and direct the AO to delete the addition and allow the grounds of appeal in favour of the assessee.

Summary

Issues:
Appeal against CIT(A) orders for assessment years 2008-09 and 2010-2011 regarding addition of long-term capital gain and tax exemption on sale of agricultural land.

Analysis:
1. Grounds of Appeal: The appellant contested the addition of long-term capital gain by AO and CIT(A), claiming the land sold was agricultural and exempt from capital gains tax. The AO found the land was not agricultural and taxed the gain. The appellant relied on certificates and legal precedents to support the agricultural land claim.

2. Assessment Proceedings: The AO initiated reassessment for the assessment year 2010-2011, disputing the agricultural nature of the land sold by the appellant. The AO questioned the lack of evidence regarding the land's agricultural status and its sale to NRDA for non-agricultural use. The AO relied on notifications and court decisions to deny exemption.

3. CIT(A) Decision: The CIT(A) upheld the AO's order, emphasizing the lack of submitted evidence and the land's treatment as a capital asset. The appellant's additional evidence submission was referred back to the AO, who maintained the land was not agricultural. The CIT(A) dismissed the appeal based on the AO's findings.

4. Tribunal Appeal: The appellant appealed to the Tribunal, arguing that the land was indeed agricultural, meeting the conditions for exemption under section 2(14) of the Income Tax Act, 1961. The appellant presented documents and certificates supporting the agricultural land claim.

5. Tribunal's Decision: The Tribunal reviewed all evidence and submissions. It referenced a similar case and legal precedents to determine that the land in question was agricultural, thus qualifying for exemption under section 2(14) of the Act. The Tribunal set aside the CIT(A) orders, directing the AO to delete the addition of long-term capital gain and ruled in favor of the appellant for both assessment years.

6. Outcome: The Tribunal allowed both appeals of the appellant, concluding that the land sold was agricultural and the capital gains were exempt. The decision was pronounced on 1/2/2018, in accordance with IT rules.

This detailed analysis outlines the progression of the case, including the grounds of appeal, assessment proceedings, CIT(A) decision, Tribunal appeal, and the final decision by the Tribunal, resulting in the allowance of the appellant's appeals for both assessment years.