Agricultural Land used for Agricultural purposes is entitled for Exception u/s 2(14) of Income Tax Act: ITAT [Read Order]

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT), ruled that agricultural land used for agricultural purposes is entitled for exception under Section 2(14) of the Income Tax Act, 1961.

The assessee, A. Ramesh along with his wife sold 11 acres of land for a sum of Rupees one crore to M/s. Shree Krishna Polystrap Pvt Ltd, by virtue of a sale deed dated. The above sale consideration was paid in the form of allotment of 12,60,000 equity shares.

The assessee has claimed the capital gains arising on the sale of the above lands as exempt on the ground that the same is arising on sale of agricultural lands. In support of his claim for exemption, the assessee has furnished Village Revenue Officer’s certificate certifying that the said land is situated beyond 8 kms from municipal limits and that the assessee and his wife (co-owner of the impugned land) were carrying on agricultural activity in the said land.

The Assessing Officer was of the opinion that the gains arising from the sale of land would be assessable to tax as capital gains and observed that the assessee has not admitted any agricultural income for the assessment years 2008-09 and 2009-10 and therefore, the assessee has not utilized the said lands for carrying out agricultural activities.

The test applied by the Assessing Officer is not correct. It is for the Assessing Officer to ascertain as to whether the land sold by the assessee is an agricultural land as per revenue records, the assessee has carried agricultural operation or not and it is not for the Assessing Officer to see to whom the land was sold.

A Bench consisting of V. Durga Rao, Judicial Member and G. Manjunatha, Accountant Member observed that “The sugar factory is situated nearer to assessee’s land as there is sizeable agricultural activities are carried out and it is clear that it is an agricultural belt as sugar mill was established. Therefore, it cannot be said that the land is not an agricultural land.”

“The land sold by the assessee is an agricultural land used for agricultural purposes and entitled for exception provided under section 2(14) of the Income Tax Act” the Tribunal said.

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