ITAT Pune: No Section 56(2)(vii)(b) on Agricultural Land Held as Stock-in-Trade

Mubarak Gafur Korabu Vs ITO (ITAT Pune)

ITAT Pune: Section 56(2)(vii)(b) Not Applicable to Purchase of Agricultural Land Held as Stock-in-Trade

The Pune ITAT held that the provisions of section 56(2)(vii)(b) could not be invoked to tax the difference between the stamp duty value and the actual purchase consideration of agricultural land.

The Tribunal noted that the land purchased by the assessee was agricultural land, which is specifically excluded from the definition of “capital asset” under section 2(14) of the Income-tax Act. Further, the land was held as stock-in-trade, reflected as a current asset in the books, and was subsequently sold with the resultant income offered and accepted as business income.

The Tribunal observed that the definition of “property” in the Explanation to section 56(2)(vii) is confined to specified capital assets. Since agricultural land (and stock-in-trade) does not qualify as a capital asset, the deeming provisions of section 56(2)(vii)(b) could not be applied.

Accordingly, the addition made towards the difference between the stamp duty value and the purchase price was deleted, and the assessee’s appeal was allowed. The Tribunal also declined to follow the Jaipur Bench decision in ITO v. Trilok Chand Sain, observing that it had not considered the definition of “property” contained in the Explanation to section 56(2)(vii).

Cases Discussed

• ITO Vs. Trilok Chand Sain (Jaipur Tribunal), (2019) 101 taxmann.com 391 (Jaipur – Trib.)

FULL TEXT OF THE ORDER OF ITAT PUNE