2022 (5) TMI 243 - AT - Income Tax

Nature of land sold - agricultural land or capital asset u/s 2(14) - gains arising on transfer of capital asset would be chargeable to capital gains - definition of agricultural land - As distance between nearest municipality and the land was less than 8 Km, the land was to be treated as non-agricultural land - HELD THAT - Assessee s land is situated at Village No.92, Eachangaranai which is located near Sri Esani Angala Parameshwari Amman Temple and Avigna. The name of Village no. 92 has since been changed to No.94, Eachangaranai which is evidenced by certificate of VAO as placed on record. Another locality having similar name i.e., Eachankarania is located near Bethesda IPA Church. AR has submitted that the land is situated near Avigna which is approx. 9.90 Kms from Chengalpattu Village in comparison to second Eachankarania which is very close to Chengalpattu. In support, the copy of Google map has been placed on record which shows that shortest route between these two points is 9.90 Kms. The exact location of the land is also certified in various certificates issued by Village Administrative Officer (VAO), the copies of which have been placed on record. Quite clearly, the assessee s land is situated beyond 5 Kms since notification, as referred to by the assessee during appellate proceedings, has been accepted by Ld. CIT(A) and according to notification, the relevant area is 5 Kms. and not 8 Kms. Therefore, the assessee s land could not be considered as non-agricultural land and the same would be out of ambit of capital asset as defined in Sec.2(14). The fact that land continues to be agricultural land in revenue record could also not be controverted before us. This being the case, the assessment of capital gains, would have no legs to stands. By deleting the impugned additions, we allow the appeal.

Summary

Issues:
Assessment of capital gains on the sale of agricultural land, Interpretation of provisions related to agricultural land exclusion from capital asset definition, Discrepancy in determining the exact location of the land for tax purposes.

Analysis:
1. The appeal involved the assessment of capital gains at Rs.132.89 Lacs arising from the sale of agricultural land. The appellant challenged the order of the Commissioner of Income Tax (Appeals) on various grounds, including the genuineness of the agricultural land claim and the misinterpretation of judicial decisions.

2. The key contention revolved around the classification of the land as agricultural or non-agricultural. The appellant argued that the land was situated beyond 5 kilometers from the nearest municipal limits, making it agricultural land as per the Income Tax Act. The appellant presented evidence, including certificates and Google maps, to support this claim.

3. The lower authorities relied on the power of attorney indicating non-agricultural use of the land and Google maps showing distances less than 8 kilometers from the municipality. The Assessing Officer computed capital gains based on these findings and the 50C value.

4. During the appellate proceedings, the appellant provided additional evidence, including a certificate from the Village Administrative Officer classifying the land as wet agricultural land. The appellant contested the reliance on Google maps and highlighted the discrepancy in the distance measurement.

5. The Appellate Tribunal carefully considered the evidence presented, including the exact location of the land near Avigna and the distance from Chengalpattu Village. The Tribunal noted the change in village name and accepted the appellant's argument that the land was beyond 5 kilometers from the municipal limits, thus qualifying as agricultural land.

6. Ultimately, the Tribunal ruled in favor of the appellant, concluding that the land could not be considered a capital asset as defined in the Income Tax Act. By deleting the additions made by the lower authorities, the appeal was allowed, and the assessment of capital gains was overturned.

7. The judgment emphasized the importance of accurately determining the classification of land for tax purposes and highlighted the significance of documentary evidence in establishing the nature of the property. The decision provided clarity on the exclusion of agricultural land from the definition of a capital asset, ensuring a fair assessment of tax liabilities in such cases.