The Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) has recently held that agricultural land did not fall under the head of capital asset under Section 2(14) of the Income Tax Act, 1961.Therefore Section 50C of the Income Tax Act would not be applicable .
Section 2(14) of the Income Tax Act 1961 defines the term Capital asset as any kind of property held by the assessee but which does not include agricultural land, stock in trade, personal effects.
Section 50C of Income Tax Act defines computation of capital gain under the sale of land or building or both belonging to the assessee which is held as the capital asset of the assessee.
Assesee Anilkumar Kantilal Trivedi, filed return of income declaring total income at Rs. 2,43,398/- While processing the returnThe Assessing Officer observed that the assessee sold immovable property for Rs. 7,73,020/- against the stamp duty value of Rs. 63,93,600/- under Section 50C of the Income Tax Act.
In the Assessment Year (A.Y.) 2012-13, assessee filed return of income. Therefore Notice under Section 148 of the Income Tax Act was issued. In response thereto, the assessee filed return of income declaring capital loss from the sale of the property.
Thereafter, the case was selected for compulsory scrutiny and the Assessing Officer made an addition of Rs.55,65,565/- as Long Term Capital Gain (LTCG) under Section 50C of the Income Tax Act.
Against the order assessee filed an appeal before CIT(A). The CIT(A) dismissed the appeal of the assessee. The Assesee filed a second appeal before the Tribunal.
P.B. Parmar, counsel for the assessee submitted that Section 50C is not applicable since the land in question, being an agricultural land did not fall within the ambit of capital assets, as defined under Section 2(14) of the Income Tax Act. Moreover In order to invoke provisions of Section 50C, the essential prerequisite is that the underlying asset must be a capital asset. The revenue records being 7/12 and 8/A extracts reveal that the land in question was used for cultivation of cotton.
Thus, the land in question was agricultural land and accordingly, it is outside the ambit of capital asset, as defined under Section 2(14) of the Income Tax Act.
Sanjay Jain, counsel for the revenue submitted that Sale Deed was registered in October 2011 and therefore, the Assessing Officer as well as the CIT(A) has rightly taken the amount which was mentioned in the registered documents and the assessee could not take a different view.
Further the Section 50C of the Income Tax Act is applicable in assessee’s case when the land was converted into non-agricultural land and it is a capital asset.
Thereafter, the tribunal observed that the land which was sold by the assessee was agricultural land. But the said property was sold to M/s.Inducto Cast Private Limited via two separate registered agreements dated 27.09.2010 mentioning that it was a sale agreement for sale of non-irrigated agricultural land.
Advance payment of Rs.1,50,000/- each was received by the assessee by account payee cheque and the rest was to be received after the conversion of the said land into non-agricultural use. The conversion expenses from agricultural land to non-agricultural land were to be borne by the buyer M/s. Inducto Cast Private Limited.
The assessee has sold agricultural land and, therefore, the same could not be termed as capital asset and would not come under the purview of Section 50C the Income Tax Act.
Whereas the single bench of the tribunal Suchitra Kamble, Judicial Member allowed the appeal filed by the assessee, held that addition made by the Assessing Officer could not be sustained.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
