The Income Tax Appellate Tribunal (ITAT) Delhi in January held that agricultural lands cannot be treated as a capital asset if the company that purchases such land maintains its character as agricultural land.
The Assessee Company, Kushal Infra project Industries purchased agricultural land and sold it after a short period. The Assessing Officer(AO) rejected the claim of the assessee who treated profit on the sale of the land to be exempt under section 2(14) of the I.T. Act because it was not falling in the definition of “Capital Asset”. The assessee had claimed that the profit on the sale of the lands to be exempt on this ground since the agricultural operations were being carried on the said lands by the farmer.
The transaction on the said land was made during the period 2009-2010 when its status in the record of the Revenue Authorities was, agricultural land and agricultural operations were being carried out which was confirmed by the Department of Land Revenue, Government of Delhi and still status of the land is agricultural land. The Tehsildar had issued a Certificate confirming the land in question to be agricultural land and beyond the Municipal limit. The Commissioner of Income Tax (Appeals) [CIT(A)] considered the material on record in the light of various case Laws held that the land in question is agricultural land and profit earned on the sale of the said land is a capital receipt.
Upholding the findings of the CIT(A), Judicial member Bhavnesh Saini and Accountant Member Dr. B.R.R. Kumar agreed that, “where intention of assessee from inception was to carry on agricultural operation on the lands in question, the gain from the sale could not be taxed as the profit arising from adventure in the nature of trade merely because of the short period of holding.”
