Thursday, May 5, 2016

An agricultural land couldn't be treated as non-agricultural land just because it was situated near a highway

a)    The assessee sold a land and claimed the same to be an agricultural land not being a capital asset within the meaning of section 2(14) of the Income-tax Act (‘Act’).
b)    The Assessing Officer (AO) opined that since the land was situated near a highway, it could not be considered as an agricultural land. Therefore, assessee was liable to pay tax on capital gain arising from sale of such land.
c)    CIT(A) reversed the order of the AO. Aggrieved by the order of the CIT(A), revenue filed the instant appeal before the tribunal.
The tribunal held in favour of assessee as under-

1)    The term 'agricultural land' is not expressly defined under the Act. In the case of CWT v. Officer-in-Charge (Court of Wards) [1976] 105 ITR 133 (SC), the Supreme Court held that the agricultural land must be a land which could be said to be either actually used or ordinarily used or meant to be used for agricultural purpose.
 2)    The assessee had submitted that the land was used for the coconut plantation and for the same he had relied upon the certificate of the Village Officer certifying that the land was used for coconut plantation and for growing other agricultural crops. It was clearly and unambiguously stated in the certificate that the land was used for coconut plantation, which left no manner of doubt that the land was used for agricultural purposes.

3)   The nearness of the land to highway could not alter the character of the land if agricultural operations were carried out by the assessee on such land.

4)    Thus, the land in question could not be treated as capital asset under section 2(14) of the Act. Accordingly, capital gain arising from sale of such land couldn’t be assessed to tax

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