2018 (2) TMI 745 - AT - Income Tax

Taxability of gains on sale of lands claimed to be agricultural lands by assessee - nature of land - Held that - Here the lands in question are away from Municipal limits and cannot be treated as urban lands under W.T. Act or under IT Act. Be that as it may, what is noticed from the agreement of sale-cum-GPA and sale deed entered by assessee is that assessee never brought the said lands in his name. The agreement of sale-cum-GPA is from the original owners and assessee sold the same as GPA holder only. Thus, the ownership of land has to be examined. The mutation of land in assessee name was not placed on record. It is admitted that assessee has not earned any income from the land. Whether any agricultural/ development activity was undertaken on the land was also not explained or examined. As seen from the record, there is a rectification deed dt. 30-04-2008, the contents of which are not available. The lands were not mutated in assessee name, what assessee has sold as GPA holder was only assessee s right to property. Then, it can also become an adventure in nature of trade , if the intention is only for subsequent sale on profit. As these aspects are not examined, it is of the opinion that the AO and CIT(A) have erred in treating the same as sale of urban land - set aside the orders of AO and CIT(A) and restore the issue to the file of AO to examine afresh and to determine the nature of transaction - Appeal of assessee allowed for statistical purposes.

Summary

Issues involved:
1. Taxability of gains on sale of lands claimed to be agricultural lands.

Detailed Analysis:
1. The appellant filed an appeal against the order of the Commissioner of Income Tax (Appeals)-4, Hyderabad, for the AY 2009-10 concerning the taxability of gains on the sale of lands claimed to be agricultural lands. Initially, the assessment was done under section 143(3) of the Income Tax Act, where an amount was added as interest received on FD/Bank A/c, resulting in the determination of the appellant's income at a certain amount. Subsequently, the case was reopened under section 147, and the Assessing Officer treated the sale of lands as sale of 'urban lands' under the Wealth Tax Act, resulting in the addition of Short Term Capital Gain. The appellant contended that the lands were agricultural in nature, located away from Municipal limits, and had a population of less than 10,000, hence capital gains did not arise. However, the Assessing Officer rejected these contentions.

2. The appellant appealed to the Ld. CIT(A) and relied on the judgment of the Hon'ble Gujarat High Court in a specific case. Despite the appellant's submissions, the Ld. CIT(A) upheld the order of the Assessing Officer, emphasizing that the lands were sold as per a Sale Deed and, therefore, capital gains were applicable. The Ld. CIT(A) referred to a decision of Hon'ble ITAT, Chennai, to support the decision. The appellant reiterated that the lands were agricultural in nature.

3. The Ld. Counsel further argued that the lands in question were indeed agricultural and not subject to capital gains tax. The Ld. DR, however, contended that as the appellant did not engage in agricultural operations, the capital gains could not be considered of agricultural source. The Ld. Counsel presented a detailed response to each case law cited by the Ld. DR, emphasizing the differences in facts and circumstances between those cases and the present case.

4. After considering the submissions and case laws presented by both parties, the Tribunal observed that the lands in question were away from Municipal limits and could not be classified as urban lands under the relevant Acts. However, the Tribunal noted discrepancies regarding the ownership of the lands, mutation status, and lack of clarity on agricultural or development activities undertaken on the land. As critical aspects were not adequately examined, the Tribunal set aside the orders of the Assessing Officer and CIT(A) and remanded the issue to the Assessing Officer for a fresh examination to determine the nature of the transaction and its taxability based on facts and law, providing the appellant with a fair opportunity.

5. Consequently, the appeal of the appellant was allowed for statistical purposes, and the case was remanded for further assessment based on a thorough examination of the transaction's nature and relevant factors.