Jignesh Harshadbhai Patel Vs ITO (ITAT Ahmedabad)
ITAT Deletes Capital Gains & Alleged On-Money Addition: Agricultural Land Outside Section 2(14), 50C Inapplicable
The Ahmedabad ITAT granted major relief to the assessee by holding that agricultural land situated beyond prescribed municipal limits does not constitute a “capital asset” under Section 2(14), and therefore no capital gains tax could be levied on its transfer. The Tribunal deleted addition of ₹44.21 lakh made as long-term capital gain and also quashed separate addition of ₹22.08 lakh made under Section 69A towards alleged cash “on-money” receipt.
The Assessing Officer had treated the land as non-agricultural mainly because it was sold to a company and because higher stamp duty valuation was allegedly applicable. The AO also invoked Section 50C through reverse calculation of jantri value and relied upon third-party statements and seized notings allegedly showing cash payments. However, the Tribunal noted that the assessee had produced Talati certificate, 7/12 extracts, Google Map evidence and details of agricultural cultivation proving that the land retained agricultural character till the date of sale.
Most importantly, the ITAT observed that in the cases of co-owners arising from the very same transaction, the Department itself had accepted the land as agricultural land not falling within Section 2(14). The Tribunal held that the Revenue cannot adopt inconsistent stands for different co-owners without distinguishing facts. It further clarified that future intended industrial use by the purchaser cannot determine the nature of land on the date of transfer.
The Tribunal also held that once the land itself is outside the definition of “capital asset”, provisions of Section 50C automatically become inapplicable. Consequently, alleged on-money receipts arising from the same agricultural land transaction also partake the character of exempt receipts and cannot separately be taxed under Section 69A/115BBE.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
