The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has recently held, in the case of revenue against the assessee-K. Dhandapani and Co. Ltd. that agricultural activity has been carried out by the assessee and income thereof has been declared and therefore the sale of land cannot be taxed under the head “Capital Gains”.
The appeal of Revenue was in regard to the order of CIT(A) deleting the addition made by A.O on account of profit on sale of land earned by the assessee at Mannur near Sriperumbudur holding the same as taxable income as against claimed by the assessee, represented by S Sridhar as agricultural land exempt from capital gains tax.
The assessee had sold 33.92 acres of agricultural land at Mannur near Sriperumbudur for a total sale consideration of Rs. 19.60 Crores. The assessee has declared the book value at Rs. 1.01 Crore in the assessee company’s books of accounts.
The Assessing Officer (AO) noted that the difference of Rs. 18.58 Crores was directly credited to the general reserve account being profit on sale of agriculture land held by the assessee for common business purpose and disallowed this as this profit was not credited to the profit and loss account as the assessee had treated the same as capital receipt.
The Commissioner of Income Tax (Appeals) deleted the additions on appeal of the assessee.
The contest of CIT M Rajan on behalf of the Revenue was that, this agricultural income was not declared in the returns of income. This was observed to be totally contrary to the fact that these incomes are declared in the financials, which has been produced before the Tribunal bench, which verified the same.
The Tribunal Bench of Vice President Mahavir Singh and Accountant Member Manoj Kumar Aggarwal observed that, the assessee had declared agricultural income varying from Rs.25,000/- to Rs.1,80,000/- and as per revenue records, the assessee has grown crops in the land and earned some agricultural income.
In light of the observation made, the appellate authority upheld the deletion of disallowance by CIT(A) and dismissed the appeal of the revenue.
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