Rajesh Kumar Garg Vs ITO (ITAT Indore)
Rural Agri Land Outside 8 KM Limit – Pre-Diversion Gains Not Taxable – ITAT Indore’s Balanced View on Capital Gains from Diverted Land; Agricultural Land Beyond 8 km Limit Not Taxable as Capital Asset: ITAT Indore; ITAT Rules Agricultural Land Outside Municipal Limits Exempt from Capital Gains Tax; Land Sold Before Diversion Retains Agricultural Character, Says ITAT Indore; ITAT: Capital Gain Not Chargeable on Sale of Agricultural Land Outside 8 km Radius; Capital Gains Exemption Allowed as Land Beyond Prescribed Municipal Distance; Agricultural Land Sold Before Diversion Not Taxable: ITAT Clarifies Section 2(14); ITAT Accepts Patwari Report Over Tehsildar’s Letter to Determine Distance from Municipality; Agricultural Land Beyond 8 km and Used for Farming Not a Capital Asset: ITAT Ruling; ITAT Partly Allows Appeal: Recognizes Agricultural Status, Denies Sale Timing Claim; ITAT Applies Precedent: Capital Gains Exempt Up to Date of Diversion.
The Assessee sold two parcels of agricultural land totalling 5.5 acres for ₹2.5 crore. AO treated the gains as taxable long-term capital gains, holding that (i) the land was within 8 km of Bhopal & (ii) it had been diverted for non-agricultural use before sale.
Before the Tribunal, Assessee produced Patwari’s report confirming that at the time of sale (FY 2013-14), the land was 9 km from Bhopal Nagar Nigam and 4 km from Mandideep Nagar Palika, both beyond the prescribed limits of s. 2(14)(iii). The ITAT held that the land was rural agricultural land and therefore not a “capital asset” under s. 2(14) till 30-05-2013, when it was diverted for residential use by the purchaser.
