No taxable gain on Land Purchased & Sold as Agricultural land

J.K. Bros Constrafin Ltd Vs ITO (ITAT Hyderabad)

The issue under consideration is whether the land purchased by the assessee as agricultural land & whether the income from such sale is business income or capital gains?

ITAT states that, the assessee is a company which is engaged in the business of real estate and has apparently purchased the property for development of the same into plots as is evident from the Balance sheet of the company. If the assessee had carried on such activity and had derived income therefrom, it would definitely be business income, as held by the AO. However, the assessee has not carried on any agricultural activity nor has it converted the said agricultural land into non-agricultural land and had not shown any intention of developing the same into plots. Undisputedly, the assessee has sold the land as it is i.e. in the same status of agricultural land to the vendee for a sale consideration in acres. Therefore, we agree with the contention of the assessee that the land did not loose its character of being agricultural land at the time of sale. Since the location of the land is beyond 8 kms from the Municipal area, it did not become a capital asset u/s 2(14) of the I.T. Act. Since the assessee before us has purchased the agricultural land and had sold it as agricultural land and there is no evidence brought on record that the assessee has carried on any developmental activities on the said land and since the land was described by the Revenue authorities as agricultural land only, we accept the contention of the assessee and hold that the land, in question, is agricultural land and the profit therefrom is not taxable in the hands of the assessee either as business income or as capital gains. Appeal of the assessee is accordingly allowed.

FULL TEXT OF THE ITAT JUDGEMENT

This is assessee’s appeal for the A.Y 2013-14 against the order of the CIT (A)-2, Hyderabad, dated 20th October, 2017.

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