Village Officer Certificate Alone Not Enough to Prove Agricultural Land: Supreme Court upholds Capital Gains Tax on Sale of Land [Read Order]

The Supreme Court has upheld the levy of capital gains tax on the sale of land, holding that a Village Officer certificate alone is not sufficient to prove that the land sold was agricultural.

The case arose from an assessment for the year 2006-07 relating to the sale of 5.21 acres of land at Kakkanad village in Kerala by late M.J. George for about Rs. 9.77 crore. During assessment, the Income Tax Department noticed a large credit in the assessee’s bank account. The assessee explained that the amount was received from sale of agricultural land and claimed exemption from capital gains tax.

The Assessing Officer rejected this claim and taxed the sale proceeds as capital gains. The assessee initially succeeded before the First Appellate Authority, which relied mainly on a Village Officer certificate describing the land as agricultural. The Revenue challenged this order before the Income Tax Appellate Tribunal.

After remand by the Kerala High Court, the tribunal examined the evidence and held that the assessee failed to prove actual agricultural use of the land. The tribunal observed that the land was recorded as “Purayidom” in revenue records and that no evidence of cultivation or agricultural activity was produced. It restored the capital gains assessment.

The legal heirs of the assessee approached the Kerala High Court. The Division Bench observed that the tribunal had examined the issue as a question of fact and had given detailed reasons for rejecting the claim of agricultural land.

The court observed that the assessee had failed to produce cogent evidence of agricultural use and had relied mainly on the Village Officer certificate. The court explained that when an assessee claims exemption from capital gains tax, the burden lies on the assessee to establish eligibility for such exemption.

The court pointed out that the findings of the Tribunal were based on evidence and could not be treated as arbitrary or perverse. It held that no substantial question of law arose for consideration and dismissed the appeal.

The assessee’s legal heirs then filed a Special Leave Petition before the Supreme Court. The Supreme Court bench comprising Justice Rajesh Bindal and Justice Vijay Bishnoi found no reason to interfere with the High Court’s judgment and dismissed the petition.

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