The Income Tax Appellate Tribunal ( ITAT ), Delhi bench has held that income tax is payable on the sale of agricultural land if the same was declared as the industrial plot by the competent authorities at the time of the registration of sale deed.
The division bench, while dismissing an appeal by the assessee, also clarified that the fact that the land was agricultural land at the time of ‘Agreement to Sale’ would have no relevance in such circumstances.
The assessee is an agriculturist and sold agriculture land and agriculture activity was done on the land at the time of transfer of agricultural land. An agreement to sell the same was executed without transferring the possession. However, as per the sale deed, the properties in question have been referred as “industrial plot” for industrial purposes. In the sale deed, it is also mentioned that the plot under sale has been declared as the industrial area by Khurja Development Authority as per master plan.
During the course of the assessment proceedings, the Assessing Officer denied the capital gain exemption to the assessee and held that the gain in respect of the sale is taxable as long-term capital gain.
On appeal, the CIT(A) confirmed the order.
On second appeal, the Tribunal noted that the possession of the property in question was not transferred at the time of Agreement to Sale. “After the Agreement to Sale the SDM vide order dated 26.02.2009 changed the land use and declared the land as non-agricultural. The sale deed dated 24.03.2009 was registered thereafter. It is therefore clear that the sale transaction was completed on the execution of the sale deed and at that time the land had acquired the character of the non-agricultural land. Thus, on the date of sale, the land in question was not an agricultural land. The same would qualify to be considered as capital assets u/s 2(14) of the Income Tax Act.”
The bench further noted that the Jot chankbandi document is not relevant on the face of the findings of fact recorded above. “The sale deed in question is executed by the assessee and is the document produced by the assessee. The assessee is therefore bound by the contents of the registered sale deed. The Agreement to Sale has no relevance to the matter in issue on the execution of the registered sale deeds. Since prior to the sale of the property in question, it was declared as the industrial plot by the competent authority, therefore, it could not assume the character of agriculture land. Since the industrial plot was sold by the assessee, therefore, it was correctly considered as capital assets for the purpose of computing long-term capital gain,” the bench said.
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