The Chennai bench of the Income Tax Appellate Tribunal (ITAT) held land in question cannot be treated as non-agricultural land and to be treated as agricultural land not liable for tax on capital gain on sale.
The assessee along with his three family members had jointly owned the lands situated at Uddanapally Village, Agram Agraharam, Shoolagiri Taluk, Krishnagiri District, Tamil Nadu and the said lands were sold to M/s. AVS Tech Building Solutions India Pvt Ltd by a registered sale deed dated 25-04-2018 for an apparent sale consideration of Rs. 66,42,000/-. A Search under section 132 of the Income-tax Act,1961 was conducted on 25 and 26th April 2018.
In the course of the search, the Search Team has found Sale Agreements of the aforesaid lands in the premises of the Purchaser M/s. AVS Tech Building Solutions India Pvt Ltd and as per the said Agreements the consideration agreed for sale was of Rs. 3,16,42,000/-, out of which a sum of Rs. 2,50,00,000/- was stated to have been received in cash by the assessee and his three family members and the balance of Rs 66,42,000/- was stated to have acknowledged as mentioned in the Sale Deed. The assessee has stated that the Sale Consideration of Rs. 66,42,000/- was mentioned in the sale deed on the basis of the prevailing guidance value applicable as on the date of sale.
The assessee in the return of income has not offered his 1/4th share of Sale Proceeds received in cash on the ground that the Sale Proceeds are not chargeable to tax since the lands sold were the agricultural lands and exempted under Section 2(14) of the Act. The Assessee further contended that the agricultural lands were situated beyond 20Kms from the Hosur Municipality limit and the population was around 4000. The AO has rejected the contention of the Assessee as to the exemption claimed.
The AO in view of the reasons mentioned above has held that the lands sold were not agricultural lands and hence the assessee was not entitled for the exemption in respect of the sale consideration attributable to his 1/4th share amounting to Rs. 79,10,500/- out of the total sale consideration of Rs. 3,16,42,000/- . The AO has computed the Long-Term Capital Gains at Rs. 76,30,419/- being 1/4th share of the assessee and the same was brought to tax as Long-Term capital gains.
The assessee challenged treating the impugned land as non agricultural land and the consideration on sale of such land is liable to capital gain tax. Aggrieved by the order of the CIT(A), the assesse appealed before the tribunal.
After hearing both the parties, the tribunal held that the land which does not fall under the provisions of Section 2(14)(iii) of the Income Tax Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as non-agricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, and also it is not the transfer of any share in the right in the development of such land through any joint development agreement, in such circumstances, in our opinion, such transfer like the case before us cannot be considered as a transfer of capital asset.
The two bench member consisting of Beena Pillai (Judicial member) and Chandra Poojari (Accountant member) held that land in question cannot be treated as non-agricultural land and has to be treated as agricultural land not liable for tax on capital gain. Since the bench has held that land is an agricultural land, other arguments raised by assessee did not require any adjudication.
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