Land cannot be considered as non agricultural, simply because a Farm house located thereon

Land cannot be considered as non agricultural, simply because of a Farm house located thereon . Existence of a farm house cannot change the classification of land

ABCAUS Case Law Citation
ABCAUS 3504 (2021) (05) ITAT

Important case law relied referred:
Smt. Sarifabibi Mohmed Ibrahim vs. CIT [1993] 204 ITR 631 (SC)
Sanjeev Kumar Goyal vs. ITO
Haripal Singh vs. ACIT

Farm House situated on Agricultural land does not make it non agricultural land

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the action of the Assessing Officer (AO) in bringing to tax the agricultural land sold by the assessee by treating it as non-agricultural land.

The primary issue in this appeal was whether the land sold by the assessee, by way of a registered sale deed was a capital asset as defined under section 2(14) of the Income Tax Act, 1961 (the Act) Act?

Before the Bench, the assessee submitted that the he was a senior citizen and was having income only from pension and interest from savings bank account and fixed deposits account.

It was further submitted that he was not aware that no capital gains arises on purchase and sale of agricultural land and hence had submitted a legally incorrect and erroneous computation to the Revenue authorities initially.

It was also submitted that law has to be applied and acquiescence is no ground for taxing a transaction which is not taxable under the law. It was submitted that there is no estoppel against law.

It was vehemently contended that land of this size could not be considered as non-agricultural, simply because a house is located in that particular property and that a mere the existence of a farm house cannot convert agricultural land into non-agricultural land. She prayed for relief.

The Tribunal noted that the CIT(A) had opined that the land in question was a residential bungalow surrounded by gardens of mango, guava etc.

The Tribunal opined that the said residential bungalow situated at the land would be on much less area i.e less than five percent of the total land area. This confirms that all the mango, guava and other gardens were in fact located as agricultural land.

The Tribunal further observed that the sale deed recorded that the land in question was Don land. Don land are the terraced low lands on which mainly rice is grown. The land in question was classified as Don in the revenue records and is thus wet land in which paddy is grown. Based on these documentary evidences it was clear that the land in question was agricultural land.

Further, the assessee had submitted a copy of Indian Village Directory where the village in which the land was situated was stated to be 12 km away from sub-district headquarter and 60 km away from the district headquarter and that it was a gram panchayat that has a population of less than 4000 people.

The Tribunal stated that AO or the CIT(A) had no evidences to controvert the documentary evidences furnished by the assessee.

Accordingly, the Tribunal held the land in question was more than a distance of 8 km from the closest municipality and that it was agricultural land as defined u/s 2(14)(iii) of the Act.

The Tribunal also stated that it is well settled that there is no estoppel against the law.

Thus, the Tribunal allowed the appeal in the favour of the assessee.

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