Vasudev Vs ITA DHAR (ITAT, Indore Bench)
Summary: The appeal concerned Assessment Year 2012-13 and arose from an assessment order dated 21.12.2019 passed by the ITO, Dhar, under section 144 read with section 147 of the Income-tax Act, 1961. The returned income was NIL, whereas the total income was assessed at Rs 1,35,78,710/-. The assessee had sold land valued at Rs 60,63,500/- during FY 2011-12.
The assessee’s case was that he and his mother owned approximately 1.783 acres of ancestral agricultural land situated at Baggad, District Dhar, in a rural area. The land had been used for agricultural purposes for many years. It was sold to M/s VE Commercial Vehicles Ltd., which established a manufacturing unit on the land. The registered sale deed was dated 24.11.2011, following an earlier sale agreement. At the instance of the buyer company, the land was diverted for industrial purposes by order of the Anuvibhagiya Adhikari, Dhar, dated 01.08.2011 and subsequently by the District Collector, Dhar, on 02.11.2011.
The assessee contended that despite the land being described as diverted land in the registered sale deed, it continued to be used for agricultural purposes. According to the assessee, the short interval between diversion and sale showed that the diversion was undertaken at the buyer’s instance to facilitate registration and did not alter the substance of the land. On this basis, the assessee claimed that the rural agricultural land was outside the definition of “capital asset” under section 2(14) of the Act and that the transaction was not chargeable to capital gains tax. The assessee also raised an alternative claim for exemption under section 54B, stating that another agricultural land had been purchased on 16.01.2012 out of the sale proceeds, for a total purchase price of Rs 27,16,970/-.
