2019 (6) TMI 341 - AT - Income Tax

LTCG - capital assets in terms of section 2(14) OR agricultural land - applicability of section 50C - HELD THAT - In this case it is evident from the record that at the time of sale the assessee s land was more than 8 KMs away from the local limits of Municipal Council. CIT(A) was thus not correct in rejecting the additional evidence which was merely corroborative in nature as supported the earlier two letters from Tehsildar obtained by the AO in his inquiry; and in order to reconcile the same, assessee has filed a certificate from the revenue authorities. To adjudicate the issue and in the interest of justice same should have been admitted by the CIT(A). And more so, once AO was confronted with the said certificate and remand report was called for. Accordingly, it is held that assessee s land cannot be treated as a capital asset in terms of section 2(14), because it was an agricultural land and was more than 8 KMs away from the local limit of the municipality and population was also less. Hence the chargeability of capital gain on sale of such agricultural land does not arise. The addition thus made is deleted. - Decided in favour of assessee.

Summary

Issues:
Challenge to addition of long-term capital gain under section 50C based on stamp duty valuation.

Analysis:
The appeal was filed against the assessment order for the Asstt. Year 2013-14, challenging the addition of long-term capital gain under section 50C. The assessee sold land in MP and claimed exemptions under sections 54 and 54F. The AO questioned the capital gain calculation based on stamp duty valuation. The assessee argued the land was agricultural and not a capital asset. The AO treated the land as a capital asset, leading to the disputed addition.

The assessee contended the land was agricultural, supported by Tehsildar's letters confirming its status. The AO's subsequent letter mentioned the land's distance from the municipal limit, but the initial letter was not shared with the assessee. The assessee provided additional evidence, including a distance certificate, to support the agricultural land claim.

The CIT (A) rejected the additional evidence, relying on the AO's assessment. The ITAT analyzed the evidence, noting the land's distance from the municipal limit and population criteria. The ITAT found the land qualified as agricultural, being over 8 KM from the municipal limit and with a population below 3000. The ITAT considered the evidence and ruled in favor of the assessee, deleting the capital gain addition.

In conclusion, the ITAT allowed the appeal, holding that the land was agricultural and not a capital asset under section 2(14). The distance certificate and earlier letters from Tehsildar supported the assessee's claim. The ITAT emphasized the land's status at the time of sale, concluding that no capital gain was chargeable on the sale of agricultural land situated beyond the municipal limit.