The Delhi Bench of Income Tax Appellate Tribunal has held that the valuation of agricultural lands as ‘Non-Agricultural’ for stamp papers could not be a ground to deny the tax benefit under Section 54B of the Income Tax Act 1961.
The AIR information from sub registrar, in this case was received w.r.t sale of property for consideration. The assesses in his reply to the query made by AO, stated that he had sold his agricultural land situated outside of municipal limit and the land in question was not a capital asset within the meaning of Section 2(14) of the Income Tax Act. Besides, after the sale of land, he had purchased another agricultural land for cultivation.
AO observed that the assessee had not, filed any evidence for purchase of agricultural land and claim of exemption u/s 54B of the Income Tax Act and on the perusal of sale deed it was found that above property was co-owned by two persons namely Vipin Kumar and Sh. Sankoch (assessee). The said Immovable property was sold for a sum of sale consideration and in view of the provisions of section 50C of the Income Tax Act 1961, AO was of view that the sale consideration was required to be adopted for computation of Capital gains.
AO made an addition of sales consideration as per section 50C of the Income Tax Act and also added purchase consideration, arising at long term capital gain believing that he had escaped the income.
Section 54B deals with Exemption claimed in respect of capital gains arising on transfer of capital asset, being agricultural land (may be long-term or short-term)
R.K.Garg, on behalf of the assessee submitted that, submitted that only on the basis of high stamp duty levied by the registration authority, AO has concluded the land was a capital asset being non-agricultural land while copies of Khasra and Khatauni and other relevant documents were ignored in which the land was shown as agricultural land and the nature of standing crops is also mentioned.
He further referred to the Punjab & Haryana High court decision in CIT vs. Sarita Rani in which it was held that if at the time of sale of land, no agriculture was done but the assessee was doing agriculture on the land within 2 years from the sale, he would be entitled to the benefit of section 54B.
He also relied upon the, Goverdhan Bhai Kahan Das Dalwadi vs CIT Gujarat (1981) 127 ITR Page 669 to submit that if entries of land in land revenue shows that land was agriculture, land revenue was paid, land was for agriculture use and permission for non-agriculture use not obtained by the purchaser before the date of sale, presumption is that land is agriculture.
R.S. Yadav, on behalf of the revenue, submitted that when the Stamp Authority had considered the land to be non-agricultural and the land was not established to be within the statutory limits the same had been rightly treated as capital asset. It was submitted that by merely mentioning growing crops in the revenue record, the nature of land would not change from a capital asset to agricultural land.
The Division Bench of Shamim Yahya, (Accountant Member) and Anubhav Sharma, (Judicial Member) allowed the petition observing that the, “It appears that Ld. AO has not taken any inquiry to ensure that when there were various co-sharers holding different title in a survey number to which assessee was also a co-sharer, then if the whole land in the survey number was converted to non-agricultural purpose or land falling in the share of assessee was not converted to non-agriculture purpose.”
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