Agricultural land would remain agricultural despite expansion of municipal limit

Area of agricultural land would still as agricultural land despite expansion of the municipal limit – ITAT

In a recent judgment, the ITAT Delhi has held that due to the expansion of the municipal limit the area of agricultural land would still as agricultural land not filing definition of the capital assets.

ABCAUS Case Law Citation:
ABCAUS 4094 (2024) (06) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the long-term capital gain computed by Assessing Officer (AO) by treating the agricultural land as capital asset under section 2(14) of the Income Tax Act, 1961 (the Act).

The appellant assessee was an individual was an unmarried senior citizen having physically disability by birth as 100 percent deaf and dumb. The assessee had sold an agriculture land and had not declared capital gains and not filed any income tax return.

The AO issued notice under Section 148 of the Act. The assessee did not appear before the AO and AO passed the ex-parte assessment order assessing the taxable income.

Before the CIT(A), the assessee contended that the agricultural land sold by the appellant was not a capital asset as per section 2(14) of the act, since it is beyond 8 KM from the municipality limit of Gurgaon as per CBDT notification No. 9447/F No. 164/3/87-ITA-I dated 06.01.1994.

However, the CIT(A) was of the view that the CBDT notification the distance of the land in question has to be seen as on 06.01.1994 and not on the date of sale of the agricultural land. Placing reliance on the report given by the concerned tehsildar, confirmed the action of the AO.

Before the Tribunal, the assessee contended that the Authorities below erred in considering and application of the CBDT notification dated 06.01.1994 that the distance of the land in question has to be seen as on 06.01.1994 and not on the date of sale of the agricultural land.

It was further contended that the CTT(A) erred in making the addition without considering the evidences produced by the appellant and declared that the land sold by the appellant is a capital asset solely based on their own findings and the wrong reports given by the tehsildar.

It was submitted that the appellant had obtained a distance certificate from a private authorized firm having GPS machine for measurement of distance but it was not verified by the concerned Patwari even though it had been marked by the Tehsildar for verification and further a request was made to the CIT(A) to obtain a fresh distance certificate as per CBDT notification.

It was submitted that the CIT(A) without making any independent enquiry or giving necessary directions, outrightly ignored the submissions made by the appellant and relied on the findings given by the A.O. in his assessment order and based on the incorrect reports from the Tehsildar office. Solely, on this ground alone the order passed by CIT(A) was bad in law and deserved to be set aside.

The assessee relied upon the judgment of the Co-ordinate Bench in which it was held that date of notification is relevant for assessing capital gains. Agricultural land, though located beyond 8 kms from municipal limits as on date of CBDT notification dated 6-1-1994, but subsequently fell within the distance of 8 kms from municipal limits due to expansion of municipal limits would still be regarded as agricultural land not falling in definition of capitals asset in term of section 2(14) (iii)(b).

The Tribunal observed that the sole issue to be decided was on one point that whether the agricultural land sold by assessee was within the municipal limit?

The Tribunal further noted that it was the submission of the assessee that as per the CBDT notification dated 6-1-1994 the land situated within 8 KM will be deemed in municipal area. The land was situated outside the eight kilometer and will not be considered in the municipal limit. Assessee had also stated that agricultural land sold in question was outside the municipal limits of eight kilometer which was also mentioned in the sale deed.

The Tribunal noted that the CIT(A) had not mentioned the date when the municipal limit of the District was extended. There was no other notification of CBDT after 1994 by which the limits were extended.

The Tribunal observed that the assessee had sold agricultural land which was not situated within the municipal limit. The Tribunal opined that due to the expansion of the municipal limit the area of agricultural land would still as agricultural land not filing definition of the capital assets. The AO and CIT(A) had wrongly held that sold agricultural land was within the prescribed limit of the municipal area.

The Tribunal held that the land sold by the assessee was agricultural land which had not come to the preview of the capital asset in term of section 2(14)(iii)(b) of the Act. Accordingly, the Tribunal allowed the appeal and the order passed by the CIT(A) and the AO were set aside.

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