Hiten Tulshibhai Engineer Vs ITO (ITAT Ahmedabad)
The Income Tax Appellate Tribunal, Ahmedabad Bench, adjudicated an appeal concerning addition of ₹3,56,70,539 as undisclosed capital gains arising from sale of land for Assessment Year 2016–17. The assessee had sold land to a company for ₹3,86,98,710 but did not offer any capital gains to tax, contending that the land was “rural agricultural land” and therefore not a “capital asset” under Section 2(14)(iii) of the Income Tax Act. The Assessing Officer rejected this claim, treating the land as non-agricultural on the basis that it was purchased by the buyer for industrial purposes under Section 63AA of the Gujarat Tenancy and Agricultural Lands Laws (Amendment) Act, 1997. The Dispute Resolution Panel upheld this view, leading to final assessment confirming the addition.
The Tribunal examined the nature of the land and the applicability of relevant land laws, including Section 63AA of the Gujarat Tenancy and Agricultural Lands Laws (Amendment) Act, 1997 and Sections 65 to 65B of the Bombay Land Revenue Code, 1879. It noted that Section 63AA permits sale of agricultural land to non-agriculturists for bona fide industrial purposes where such land is designated for industrial use and does not require prior permission for change of land use. However, the Tribunal clarified that such designation does not alter the character of the land at the time of sale. The land continues to remain agricultural until its actual use is changed and such change is notified and certified by the Collector after purchase.
