Stamp duty valuation or classification for fiscal purposes not change character of Agri land

Stamp duty valuation or classification for fiscal purposes does not determine the character of the property under the Income-tax Act – ITAT

In a recent judgment, ITAT Ahmedabad has quashed addition holding that held that stamp duty valuation or classification for fiscal purposes does not determine the character of the property under the Income-tax Act

ABCAUS Case Law Citation:
4844 (2025) (11) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) National Faceless Appeal Centre (NFAC) in confirming the addition made by the Assessing Officer (AO) invoking the provisions of Section 56(2)(x) of the Income Tax Act, 1961 (the Act).

During the course of assessment, the AO noted that the assessee had jointly purchased agricultural land for which the stamp duty valuation was more than the purchase price and the value adopted for stamp duty purposes.

The Assessing Officer invoked the provisions of section 56(2)(x) of the Act and treated this difference as income from other sources, holding that the assessee had received property for consideration less than its fair market value.

In first appeal, the assessee submitted that the land purchased was agricultural land and not non-agricultural land, as erroneously assumed by the AO. The assessee submitted that the land fell under a proposed draft Town Planning Scheme of Urban Development Authority, which was not yet finalized. Due to the draft scheme, the Sub-Registrar’s Office had charged higher stamp duty treating the land as non-agricultural land, although, in reality, the land continued to retain its agricultural character.

The CIT(A) observed that the land was covered under a proposed scheme of Urban Development Authority and that stamp duty was charged at rates applicable to urban land indicated that the land had lost its agricultural character.

Before the Tribunal, the assessee reiterated the submissions made before CIT(A) and further submitted that the land in question was registered within the “Agricultural Taluka” records, which itself confirmed its agricultural nature. The assessee also drew attention to Extract of the Rural Land Record (Form No. 7) in which even after purchase, the land continued to be classified as agricultural land.

The assessee also submitted that no conversion proceedings had been initiated or completed to convert the land into non-agricultural use even till date. Hence, the land retained its agricultural character in law and in fact.

The Tribunal observed that the sale deed and the Form No. 7 extract demonstrated that the land purchased was agricultural and not non-agricultural. The Bench opined that the charging of higher stamp duty by the Sub-Registrar’s Office based on a draft scheme would not, alter the inherent nature of the land. It is a settled legal position that stamp duty valuation or classification for fiscal purposes does not determine the character of the property under the Income-tax Act.

The Tribunal further opined that the fact that the assessee had paid consideration higher than the jantri rate applicable to agricultural land further supported that there was no underreporting of value or benefit derived by the assessee that could warrant the application of section 56(2)(x) of the Act.

The Tribunal further observed that the Assessing Officer’s assumption that 40% of the land was acquired was factually incorrect, as no such acquisition had taken place and the draft Scheme remained unapproved.

Therefore, the Tribunal held that the addition made by the AO under section 56(2)(x) of the Act by treating the property as non-agricultural and applying non-agricultural rates was not sustainable in law or on facts.

Accordingly, the Tribunal set aside the order of the CIT(A) and directed the Assessing Officer to delete the addition made under section 56(2)(x) of the Act.

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