2022 (7) TMI 887 - AT - Income Tax

LTCG on sale of agricultural land - Nature of land sold - agricultural land or capital asset u/s 2(14) - whether the land sold by the assessee was in the nature of the agricultural land exempted from the definition of the capital asset liable for long-term capital gain? - HELD THAT - One of the conditions for excluding the land from the definition of the capital asset is that said land should be agriculture land in India not being land situated within prescribed limit from the municipal Corporation as per section 2(14)(iii) of the Act. During relevant time said distance was prescribed at 8kms from the outer limit of the municipal Corporation . The term agriculture has not been defined in the Act and various courts from time to time has explained as what constitutes agriculture . The Hon ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim ( 1993 (9) TMI 10 - SUPREME COURT has approved the decision of a division Bench of the Hon ble Gujrat High Court in the case of CIT Vs Siddharth J Desai ( 1981 (9) TMI 48 - GUJARAT HIGH COURT and has led down 13 test or factors which are required to be considered and upon consideration of which, the question whether the land is agricultural or not, has got to be decided or answered. We find that before the lower authorities, the assessee has not filed any evidence in support for justifying whether the land was situated beyond the 8 km from the outer limits of the municipal Corporation or satisfies the test laid down in the case of Sarifabibi (supra). As the question of distance of the land sold from the outer limit of the Municipal Corporation and other 13 test laid down in the case of the Sarifabibi (supra), which goes to the root of the question whether the land of the assessee is agricultural land, beyond the outer limit of the multiple Corporation, were not raised specifically by the lower authorities, therefore in the fact and circumstances of the case and in the interest of substantial justice, we feel it appropriate to restore this issue to the file of the Assessing Officer for deciding afresh - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Whether the long-term capital gain for the sale of agricultural land was correctly confirmed by the Ld. CIT(A) for assessment year 2013-14?

Detailed Analysis:
1. The assessee claimed exemption for long-term capital gain on the sale of land as agricultural land in the return of income. However, the Assessing Officer rejected the claim and assessed the long-term capital gain. The Ld. CIT(A) upheld the addition as the assessee failed to provide evidence that the land was agricultural. The land was situated in an area covered by the Mumbai municipality, and no evidence supported the claim that it was agricultural land. The CIT(A) observed that the land had been converted into a residential colony, and basic amenities were provided by the Mumbai Municipality. The claim that it remained agricultural land was deemed untenable. The appellant's arguments were dismissed, and the addition was upheld.

2. The appellant contended that the land was purchased as agricultural but due to its distance from Mumbai, agricultural operations were not feasible. The land was sold to two parties, and the appellant claimed the capital gain as exempt income, believing it to be agricultural land. The appellant argued that the land was never converted to non-agricultural use and relied on the location of the land in Erangal Village to support its claim. However, no evidence was presented during assessment or appellate proceedings to substantiate the land's agricultural status.

3. The Tribunal considered the issue of whether the land sold was agricultural land exempt from long-term capital gain tax. Referring to Section 2(14)(iii) of the Act, which defines agricultural land, the Tribunal noted the absence of a specific definition of "agriculture" in the Act. Citing the Supreme Court's decision in a related case, the Tribunal highlighted 13 factors to determine if land qualifies as agricultural. The Tribunal found that the assessee had not provided evidence to establish the land's distance from the municipal limit or satisfy the criteria outlined in the Supreme Court's decision.

4. In light of the incomplete consideration of crucial factors by the lower authorities, the Tribunal decided to remand the issue back to the Assessing Officer for a fresh assessment. The Tribunal emphasized the importance of verifying whether the land was situated beyond the prescribed limit from the municipal Corporation and evaluating the 13 factors laid down by the Supreme Court. The appeal was allowed for statistical purposes, and the decision was pronounced in favor of the assessee.

5. The Tribunal's decision to remand the issue to the Assessing Officer for a detailed examination based on the legal criteria outlined by the Supreme Court demonstrates a meticulous approach to determining the tax treatment of the land sold by the assessee. The judgment ensures a thorough evaluation of all relevant factors to arrive at a just and legally sound conclusion regarding the nature of the land and its tax implications.