Parvatiben Gohil Vs ITO (ITAT Ahmedabad)
Assessee, was one of the 20 co-owners of a property situated in a rural area. The property was sold, & the total consideration for the entire land was ₹38,25,000/-. AO, however, treated the entire amount as short-term capital gain in Assessee’s hands, ignoring that she was only a fractional co-owner.
Assessee contended that her actual share was only ₹1,77,000/-, being 1/20th of the sale value, & the land in question was rural agricultural land, which is not a “capital asset” u/s 2(14)(iii) .
Assessee’s Argument
- The land sold was rural agricultural land, & thus, outside the ambit of capital gains tax.
- Her share of ₹1.77 lakh was below the basic exemption limit.
- There was no other source of income during the year.
Tribunal’s Findings
- Tribunal noted that AO erred in taxing the entire sale consideration of ₹38.25 lakh in Assessee’s hands.
- The order ignored the co-ownership structure & the fact that Assessee’s individual receipt was minimal.
- Bench also took into account that rural agricultural land is not a capital asset under the Income-tax Act, & therefore, no capital gain arises on its transfer.
- Since Assessee’s income was below taxable threshold, no addition could be sustained.
- ITAT allowed the appeal, directing deletion of the entire addition.
- It observed that AO’s approach was factually incorrect & contrary to law, as Assessee’s limited ownership & nature of land were disregarded.
Key Takeaway
Tribunal reaffirmed that rural agricultural land situated beyond specified municipal limits is not a capital asset, & co-ownership must be respected for determining taxable share. Where Assessee’s income is below the exemption limit, no capital gains tax is leviable merely because the total transaction value is high.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi, vide order dated 24.03.2025 relevant to the Assessment Year 2019-20.
2. The assessee has raised the following grounds of appeal:
1. Hon’ble CIT(A) has erred in law and in facts in dismissing appeal of your appellant without considering facts of the case of your appellant.
2. The sale being that of rural agricultural land not being a capital asset, entire sum of Rs. 38,25,000/- added as short term capital gain be directed to be deleted now. (Total Tax effect relating to ground Rs.2,16,624/-)
3. Your appellant prays to add, amend or alter ground of appeal at the time of hearing.
3. The Assessing Officer made an addition of the entire amount of the receipt on account of the sale of property, ignoring the fact that the assessee is only one of the 20 co-owners and had received an amount of Rs. 1,77,000/-. The assessee does not have any other source of income. Since the amount received is below the taxable limit, no addition is warranted in this case.
4. In the result, the appeal of the assessee is allowed.
The order is pronounced in the open Court on 08.10.2025.
