Case Law Details
Shri Kamanahalli Pilla Reddy Nagesh Vs ITO (ITAT Bangalore)
Conclusion: Even though the agricultural land was converted for non-agricultural purposes, but cultivation of land continued till the date of sale of the land. Thus, the land should have been treated as agricultural land and exempt from capital gain in view of section 2(14).
Held: AO made addition of Rs.2.06 crores as long term capital gain arising from sale of land. Assessee claimed that the said land was situated beyond the Municipal limits 10 kms. and therefore, it was not a capital asset as per section 2(14). However, AO held that, the land was converted for nonagricultural purposes before execution of sale deed, therefore, it was a capital asset u/s 2(14) and it could not be exempted u/s 10(1). Accordingly, the same was brought into taxation as capital gain. It was held that the main reason for treating the land as non-agricultural was that the land was converted for usage of non-agricultural purposes. However, the assessee filed revenue records wherein it was stated that the land still continued to be agricultural land wherein crops like Ragi & Paddy were cultivated by the assessee. Further, it was brought on record by assessee that the land revenue was paid as applicable to agricultural land only. The land got converted by assessee for non agricultural purposes and conversion permission was granted on the condition that the land should be used for non-agricultural purposes within two years, otherwise original character of the land i.e., agricultural in nature would be restored. Assessee has not used the land for non-agricultural purposes even after conversion of the land for non-agricultural purposes. Tribunal observed that though the said land was converted for non-agricultural purposes, but cultivation of land continued till the date of sale of the land. Thus, the land should have been treated as agricultural land and exempt from capital gain in view of section 2(14). As the revenue failed to bring anything on record to controvert the tribunal’s observation, the exemption u/s 10(1) was allowable as the sale did not amount to capital asset.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
Present appeal is filed by assessee against order dated 28.03.2019 passed by Ld. CIT(A)-9, Bangalore for A.Y. 2014-15 on the following grounds of appeal:
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