Case Law Details
Brief of the case:
ITAT Chennai held in The ACIT Vs M/s Mansi Finance Chennai Ltd that if the agricultural land purchased by the assessee was not with an adventure in the nature of trade then that agricultural land could not be treated as a capital asset and liable for capital gain. Moreover as the land purchased by the assessee was an agricultural land in the revenue records which was further leased by the assessee to an another person for agricultural purposes. The assessee had also shown its income from agricultural purposes as it received rent from the leased land. So from the above facts it was clear that the land held by the assessee was an agricultural land which was not a capital asset. So, the proceeds from the sale of an agricultural land was exempt from tax.
Facts of the case:
The assessee was holding a land which it had shown under the fixed assets in the balance sheet as an agricultural land and on the sale of the same the assessee had shown the agricultural income on sale of agricultural land at Rs 3,79,99,376/ which was exempt from tax.The Assessing Officer called for information u/s.133(6) from the Tahsildar and in turn got reply that the above land was not cultivated for the past 8 years So, AO treated the sale of land as non- agricultural land and computed the capital gain on the same. So assessee filed an appeal with CIT(A) who confirmed the contentions of the assessee then revenue filed an appeal with ITAT.
Contention of the assessee:
Assessee was of the view that as the land sold by the assessee was an agricultural land because the same was used by the lessee for agricultural purposes and the same was used till the date of sale. Moreover the assessee had shown rent received from the leasing of land as an agricultural income exempt from tax.
Further assessee was of the view that the above mentioned land was recorded as an agricultural land in the revenue records. So, the above mentioned land was an agricultural land exempt from tax.
Further the assessee had recorded the same under heads fixed assets in the balance sheet not as a stock in trade. It was irrelevant to note the end use of the land by the purchaser. In other words it was of no use to see that the purchaser of an agricultural land was going to put to use the purchased land for agricultural purposes or not.
Further the assessee had paid taxes for cultivating crops individually on the said agricultural lands to the state government which was evidenced by the tax receipts acknowledged by the VAO.
So, considering all the above factors the land sold by the assessee was an agricultural land not liable to tax.
Contention of the revenue:
Revenue was of the view that as the land in the question was not cultivated since 8 years as evidenced by the records of Tehsildar. The Revenue Tahsildar was a competent authority to report whether the agricultural operations were carried on the lands. The land in question was not agricultural land at the time of sale as reported by the competent authority, the Revenue Tahsildar and hence the land should be treated as capital asset.
Held by ITAT:
ITAT held that the land in question was classified in the Revenue records as agricultural land and there was no dispute regarding this issue and actual cultivation had been carried on this land by leasing the same to Shri.D. David and income was declared from this land in the return of income filed by the assessee for the earlier years as agricultural income. It was also an admitted fact that the AO had not brought on record any evidence to show that the agricultural land was used for nonagricultural purposes and the assessee had not put the land to any purposes other than agricultural purposes. It was also an admitted fact that neither the impugned property was subject to any developmental activities at the relevant point of time of sale of the land. The land was also situated outside the jurisdiction of a municipality.
Moreover the assessee had purchased the land with not as an adventure in the nature of the land. The assessee had purchased the land with no intention to sell the same in future but with an intention to carry on agricultural operations.
The appeal of the revenue was dismissed.
