Whether an agricultural land held by assessee, which is suitable for agricultural operation, loses the characteristics of agricultural land merely because no agricultural operation was carried by assessee on such land?
A.O. computed capital gains on transfer of lands for the reason that the lands sold by the assessee are not agricultural lands and liable for capital gains. The A.O. further observed that the lands are situated within 8 kms. from the limits of GVMC and hence, previous limits of Visakhapatnam Municipal Corporation is irrelevant to determine the distance. Since, as on the date of transfer of lands, the extended limits of GVMC has been notified by the Govt. of Andhra Pradesh, the distance from the extended limits of GVMC has to be considered to determine whether the particular land is situated within 8 kms. from such distance or not. The assessee claims that the lands are agricultural lands and agricultural operations were carried out till 2007 and after which there were disputes and as a result agricultural operations could not be carried out. We find force in the arguments of the assessee for the reason that the impugned lands are classified as agricultural lands in the revenue records of the State Government. Though there is no agricultural operation carried out by the assessee, the lands held by the assessee are classified as agricultural lands in the revenue records and also suitable for agricultural operations. Therefore, impugned lands cannot be held as non-agricultural lands, just because the assessee has not carried out any agricultural operations. Once, the lands are classified as agricultural lands in the revenue records and suitable for agricultural operations, whether or not agricultural operations carried out by the assessee, the characteristics of land does not change from agricultural land to non-agricultural lands. Therefore, we are of the view that the lower authorities were erred in holding the impugned lands are non agricultural lands.
Gain on Sale of Agriculatural Land situated within 8 kms distance boundary of Greater Visakhapatnam Municipal Corporation (GVMC) is liable to Capital Gain Tax
Having said, let us examine whether the lands sold by the assessee are capital assets within the meaning of section 2(14) of the Act or agricultural lands not liable for capital gain tax. Admittedly, the lands sold by the assessee are within 8 kms. from the distance of GVMC, however, the lands are beyond 8 kms. from the limits of Visakhapatnam Municipal Corporation. It is the contention of the assessee that for the purpose of determination of distance, notified municipal limits of Visakhapatnam Municipal Corporation has to be considered, but not newly incorporated extended limits of GVMC. We do not find any merits in the arguments of the assessee, for the reason that the Visakhapatnam Municipal Corporation is a notified municipality vide notification no. 9477 dated 6.1.1994. As per said notification, any land situated within 8 kms. from the distance of Visakhapatnam Municipal Corporation is agricultural land coming within the definition of capital asset. We further observed that the Visakhapatnam Municipal Corporation has been upgraded to Greater Visakhapatnam Municipal Corporation by the State Government of Andhra Pradesh, vide notification no.937 dated 21.5.2005 with extended boundary. Since, the lands sold by the assessee are situated within 8 kms distance from the newly incorporated boundary of GVMC, the distance should be measured from the limits of GVMC to determine whether a particular land is a capital asset or not for the purpose of section 2(14) of the Act. In the present case, it is no doubt lands are situated within 8 kms. from the limits of GVMC. Therefore, we are of the view that the lands sold by the assessee are capital assets within the meaning of section 2(14) of the Act and liable for capital gains. The CIT(A) after considering the relevant facts, has rightly held that the lands are capital assets and liable for capital gain tax. Therefore, we uphold the CIT(A) order and reject ground raised by the assessee.
Comments are closed.