ITO Vs Urmila Bharatbhushan Agarwal (ITAT Ahmedabad)
Conclusion: Where an agricultural land was sold to a non-agriculturist, the same did not loose its status as agricultural land and could not be classified as a capital assets.
Held: During the relevant year, assessee reported agricultural income after deducting agricultural expenses. The return was subjected to a complete scrutiny to verify the claim of exempt income related to capital gains/losses from the sale of lands. Assessee owned 34 bighas of agricultural land and had consistently reported agricultural income from these lands ranging from ₹4,96,779 to ₹8,13,361 for the assessment years 2011-12 onwards. Assessee sold agricultural land for ₹10, 53,81,144 to M/s. Industrial Cluster Private Ltd., which had obtained permission from the Industries Commissioner of Gujarat for purchasing agricultural land for bona fide industrial use. This purchase was in accordance with the Gujarat Industrial Policy, 2015, to establish an Industrial Park. Despite the provided documentation, AO sought information from the Director of the Bhaskaracharya Institute for Space Applications and Geo Informatics, Gandhinagar. Based on the satellite imagery report, AO treated the land as non-agricultural, invoking Section 63AA of the Land Revenue Code, and denied the exemption under Section 2(14)(iii). Consequently, AO determined a Long-Term Capital Gain of ₹9, 78,66,687 and demanded tax accordingly. Assessee appealed the assessment order to CIT (A). It was held that AO misinterpreted Section 63AA of the Land Revenue Code by classifying the sale as non-agricultural. According to the Gujarat High Court ruling in CIT vs. Rajshibhai Meramanbhai Odedra, land sold to a non-agriculturist did not lose its agricultural character. Thus, the sale of agricultural land could not be treated as capital assets.
