Sale of Agricultural Land Even If Held as Investment is Not Liable to Income Tax
Citation :- Shri Vanit Kumar Inderkumar Gupta Versus The Jt. Commissioner of Income Tax- Range 12 (2) , Mumbai - 2016 (1) TMI 79 - ITAT MUMBAI
Facts :- The assessee is engaged in the business of trading in Iron & Steel and other Ferrous/Non-ferrous metals. He has sold certain agricultural lands during the year under consideration and earned a gain of ₹ 232.23 lakhs.
The assessee declared the same as short term capital gains in his return of income. However, during the course of assessment proceedings, the assessee realized that the agricultural land sold by him does not fall in the category of “Capital asset” as defined in sec. 2(14) of the Act, since the land was not located in a municipality or within the prescribed distance from the limits of municipality. Accordingly, he filed a letter dated 30-10-2010 requesting the assessing officer to treat the gains arising on sale of agricultural land as not taxable. The assessing officer, however, did not consider the same and completed the assessment by assessing the short term capital gain declared by the assessee as arising on “sale of Shares”.
CIT ( A) - The Ld CIT(A) agreed that the lands sold by the assessee are agricultural lands and they shall not fall in the category of “Capital assets” as they are situated outside the prescribed limits. However, he noticed that the assessee has purchased and sold the lands within short period of six months to one year. Hence he proceeded to examine the issue from the angle as to whether the same constitutes the agricultural activity or business activity of the assessee.
Accordingly, the Ld CIT(A) came to the conclusion that the buying and selling of properties has been carried out by the assessee as part and parcel of his regular business activity. He further noticed that the assessee has not carried out any agricultural activities on the land. He also observed that the assessee has failed to clarify as to why he has sold the sold within a short span of time. He further noticed that the assessee has been purchasing the land continuously in installments. Accordingly he came to the conclusion that the intention of the assessee was to trade in „agricultural land‟ in order to earn quick profits. Accordingly he held that the profits arising on sale of agricultural land is required to be assessed as business income.
ITAT Held as under:-
a) We are of the view that the absence of agricultural activity, per se, will not be useful to determine the intention of the assessee.
b) We are of the view that the intention of the assessee at the time of purchase of lands cannot be held to be holding the same as stock in trade. Accordingly, we agree with the contentions of the Ld A.R that the assessee has held the impugned agricultural lands as investment only and hence they cannot be categorized as “Capital asset” within the meaning of sec. 2(14) of the Act. Hence the gains arising on sale of the same is not liable for taxation under the provisions of the Act. Even though the assessee has initially declared the same as short term capital gain, yet the same is required to be corrected, since there is no estoppels against the law.