Clayking Minerals LLP Vs ITO (ITAT Ahmedabad)
Sec 56(2)(x) applies to any immovable property, including agricultural land & when the assessee disputes stamp duty valuation, AO must refer to DVO
Assessee’s income tax return filed declaring loss was selected for ‘Limited Scrutiny’ through CASS to examine whether the purchase value of a property was less than the value determined by the stamp valuation authority u/s 56(2)(x). AO noted that the assessee purchased a property for Rs. 42,72,000/-, whereas the stamp duty value of the same was Rs. 1,15,62,880/-. Assessee contended that the land in question, located was agricultural at the time of purchase on 21.09.2017. The land was later converted to non-agricultural use after obtaining permission from the Collector on 23.10.2017, & the property was registered on 26.03.2018. Assessee submitted that since the property was agricultural land at the time of purchase, it did not qualify as a “capital asset” as per sec 2(14), & therefore, sec 56(2)(x) was not applicable. Assessee contended that the nature of land at the time of purchase & its use as agricultural land excluded it from the purview of sec 56(2)(x).
However, AO held that although the land was purchased as agricultural, the assessee’s intention was always to use it for non-agricultural purposes, as evident from the early application & subsequent conversion. AO placed reliance on the Supreme Court’s decision in Sarif Abibi Ibrahim (204 ITR 631) in which it was held that agricultural status depends on actual use & intention & not merely on classification in revenue records. Since the land was not used for agricultural purposes & was bought with a clear intention to convert it, it qualified as a capital asset. Accordingly, AO held that the provisions of sec 56(2)(x) were attracted & the difference of Rs. 72,90,880/- between the purchase consideration & the stamp duty value was liable to be taxed.
