The Chennai bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition made by the assessing officer and held that consideration received towards sale of agricultural land should not be taxable under the head of capital gain.
Assessee George Gee Varghese filed return of income for the assessment year 2015-16. The case was selected for scrutiny and during the course of assessment proceedings, it was noticed that the assessee has sold vacant land to M/s. Rubber Board Employees Co-operative Housing Society for a total consideration of Rs. 6,81,66,000/-.
Assessee purchased the land in 2006 and assessee has computed nill capital gains on sale of land by stating that land sold during the year is agricultural land which is outside the scope of capital asset as defined under Section 2(14) of the Income Tax Act, 1961.
Thereafter, the AO, The Assessing Officer, further noticed that the assessee is by profession is an educational consultant and ordinarily resides at Chennai. Therefore, it cannot be said that the land was used for carrying out agricultural activities.
The certificate issued by the Village Officer has not specified to the extent of land put into use for agricultural purposes.
Revenue records also did not mention the land as agricultural land. Hence the AO held that sale consideration received towards sale of said land is taxable under the head ‘capital gains’.
Aggrieved order assesee filed appeal,before the CIT(A). The CIT(A) rejected arguments of the assessee and sustained additions made towards computation of capital gain on sale of land.
Further, assessee filed a second appeal before the tribunal.
R. Vijayaraghavan, counsel for the assessee submitted that the certificate issued by the Village Officer clearly shows the nature of land as agricultural land and used for agricultural operations.
Further, the assessee has paid tax to Kerala Agricultural Workers Welfare Fund Board. All this evidence clearly showed that the assessee’s land in question was an agricultural land and used for agricultural operations in the past, the assessee representative further submitted.
P. Sajit Kumar, counsel for the revenue submitted that the land has been classified as ‘dry land’ as per government records. The land is connected by good roads and situated in a developed area. The land has been sold for non-agricultural purposes.
It was observed by the tribunal that certificate issued by the Additional Tahsildar and Village Officer at Manarcad Village and copy of receipt issued by the Kerala Government evidencing payment of basic land tax contribution towards Agricultural Workers Welfare Fund Board also clearly showed that said land was agricultural land.
As per evidence filed by the assessee including revenue records, it is very clear that the land was an agricultural land when it was purchased in the year 2006 and remained agricultural land when it was sold in the year 2015.
Therefore, the land sold by the assessee was held to be agricultural land and outside the scope of definition of capital asset as defined under Section 2(14) of the Income Tax Act.
The two member benches of the tribunal Mahavir Singh, (Vice President) and Manjunatha. G, (Accountant Member) after considering the facts and materials produced by the both parties allowed the appeal filed by the assessee.
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