Case Law Details
Chander Mani Sharma Vs ITO (ITAT Delhi)
Introduction: In a crucial legal development, the Income Tax Appellate Tribunal (ITAT) Delhi has directed the re-adjudication of the case involving Chander Mani Sharma and the Income Tax Officer (ITO). The case revolves around the nature of land sold and whether it qualifies as agricultural land or not. The ITAT’s decision underscores the significance of the sale deed in determining the status of the land.
Detailed Analysis: The appeal was filed by the Assessee, Chander Mani Sharma, challenging the order of the Commissioner of Income Tax (Appeals) [CIT (A)], Aligarh. The CIT (A) order was in response to an appeal against the order passed under Section 144/147 of the Income Tax Act, 1961, by the Income Tax Officer, Ward-3(1), Bulandshahar (Ld. AO).
The core issue in this case revolves around the nature of the land sold. The Assessee claimed that the land sold should be considered agricultural, resulting in exempt income. In contrast, the Ld. AO, based on the sale deed, concluded that the land was in the form of an industrial plot, potentially attracting capital gains tax. The Assessee argued that at the time of the execution of the sale deed, there was an agreement to sell, which indicated the agricultural nature of the land.
The case hinges on the interpretation of the sale deed and the agreement to sell. The written submissions on behalf of the Assessee, supported by legal counsel Shri Jai Kisan, advocate, argued that the nature of the land should be considered agricultural, citing relevant case law, including CIT vs. Smt. Sanjeeda Begum [2006] 154 Taxman 346 and the judgment in ITO, Ward – 2, Bulandshahar vs. Sh. Jitender Kumar of the Delhi Tribunal. These judgments emphasize that agricultural land sold in the form of an industrial plot is still considered agricultural and is not liable for capital gains tax.
The Ld. DR supported the findings of the tax authorities below, stating that the clauses of the sale deed justified their decision to deny the tax benefits.
In this context, it is crucial to note that the Assessee’s claim is based on the location of the land, which was beyond the municipal limits and used for agricultural purposes. The Ld. AR relied on the proviso in Section 50C, effective from 01.04.2017, which the CIT (A) applied retrospectively to compute the sales consideration for capital gains. However, the CIT (A) did not consider the agreement dated 26.08.2008, which preceded the change in land use on 04.09.2008. This oversight led to the incorrect determination of the land’s nature at the time of the sale deed, which should have been considered when applying the retrospective proviso.
Conclusion: The ITAT Delhi, in its judgment, has emphasized the significance of the sale deed and agreement to sell in determining the nature of land for tax purposes. It has directed the case back to the CIT (A) for a re-examination of the land’s status on the date of the registered agreement to sell, which is crucial for deciding whether the land falls under the definition of a capital asset as per Section 2(14) of the Income Tax Act.
This decision highlights the importance of accurately assessing the nature of assets in taxation matters, ensuring fairness and compliance with relevant tax laws. The case serves as a reminder that precise documentation and timing are critical when determining the tax liability associated with property transactions.
FULL TEXT OF THE ORDER OF ITAT DELHI
The appeal has been preferred by the Assessee against the order dated 30.11.2017 of CIT (A), Aligarh (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) arising out of an appeal before it against the order dated 19.10.2016 passed u/s 144/147 of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the ITO, Ward-3(1), Bulandshahar (hereinafter referred as the Ld. AO).
2. Heard and perused the record.
3. At the time of hearing, none has appeared for the assessee and notices have been issued repeatedly. The record shows that on behalf of the assessee/ appellant written submissions are on record along with letter forwarded by Shri Jai Kisan, Adv. Ld. AR of the assessee that the order may be passed on the basis of written submissions and other documents on the record.
4. The ground raised and the impugned orders when considered brings forth that assessee had sold land which assessee claimed has given rise to exempt income as it was agriculture land while Ld. AO on the basis of sale deed concluded that the land sold was in the form of an industrial plot. The assessee has claimed that at the time of execution of sale deed there was an agreement to sale and on the basis of agreement to sale the nature of land should be considered to be agricultural in nature.
4.1 Ld. DR supporting the findings of ld. Tax Authorities below has submitted that on the basis of clauses of sale deed Ld. Tax Authorities have rightly denied the benefits.
5. It can be appreciated from the matter on record that the claim of assessee is on the basis that the lands sold was situated beyond the municipal limits and was giving agricultural produce. In the written submissions, Ld. AR has relied the Hon’ble Allahabad High Court judgment in CIT vs. Smt. Sanjeeda Begum [2006] 154 Taxman 346 and the judgment in ITO, Ward – 2, Bulandshahar vs. Sh. Jitender Kumar of the Delhi Tribunal to submit that the agricultural land sold in the form of industrial plot is an agricultural land and same is not liable for capital gains tax.
6. Appreciating the matter on record it comes up that Ld. CIT(A) has relied the proviso in Section 50C which has come in effect from 01.04.2017, considering the same to be clarificatory in the nature and applied the same with retrospective effect to arrive at the computation of sales consideration for the purpose of capital gains. However, the agreement dated 26.08.2008 has not been considered for the purpose of ascertaining the nature of land being agricultural or non-agricultural and has gone on the basis of recitals of the sale deed executed on 17.02.2009 to hold that when the land was transferred its land use had been changed and it was declared to be non-agricultural land. Admittedly, the land use was changed on 04.09.2008 while the agreement to sale was registered on 26.08.2008, thus for all intents and purposes when the Ld. CIT(A) was taking the proviso to Section 50C to be clarificatory in nature and giving retrospective effect the nature of land at the time of agreement to sale should be accepted.
7. In the light of aforesaid, the issue is restored to the files of ld. CIT(A) to examine the nature of land on the date of registered agreement to sale on 26.08.2008 and then ascertain whether the land sold would fall within the definition of capital asset u/s 2(14) of the Act. The appeal is allowed for statistical purposes.
Order pronounced in the open court on 14th September, 2023.
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