Taxation on Sale of agricultural land after dividing the land in to plots

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Taxation on Sale of agricultural land after dividing the land in to plots

In the present case, Assessee has sold the agricultural land situated in a village which was beyond 8 kms, of the municipal limit after dividing the land into plots

Question arises as to whether the amount is exempt or not?

Here is the judgment of Allahabad High Court on the issue.

Allahabad High Court

Cit vs Smt. Sanjeeda Begum on 25 February, 2005

Equivalent citations: 2006 154 TAXMAN 346 All

ORDER The Income Tax Appellate Tribunal, Delhi has referred following question of law under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for opinion to this Court:

‘Whether on the facts and in the circumstances of the case, the ITAT was legally correct in upholding the order of the Appellate Assistant Commissioner that because the land was situated beyond 8 kms., of municipal limit and being agricultural land no capital gains tax was eligible while all the facts of the case were not fully appreciated by the ITAT ?”

The reference relates to the assessment year 1983-84.

  1. Briefly stated the facts giving rise to the present reference is as under :
  2. Briefly stated the facts giving rise to the present reference is as under :

The respondents assessees are individuals. They owned 1/3rd share each in the land measuring 10 bigha 15 biswas and 19 biswansis in Village Pinjora Baroon, Pargana and Tehsil Saharanpur having acquired the same by inheritance on 16-8-1976. They sold land measuring 2,888 sq. yards during the assessment years in question to 12 different persons after dividing the land into plots each plot having an area of about 200 sq. yards and the colony having been named Shiv Vihar Colony. The sales were made in pursuance of agreements to sell executed earlier. The respondents assessees claimed that as the land was agricultural land and also situated outside the municipal limits and it was not covered by the notification of Government of India issued under section 2(14)(iii)(b) of the Income Tax Act, 1961 and, therefore, no capital gains were exigible. However, the assessing authority did not accept the plea as the land was under regulated area of Saharanpur for which the Additional District Magistrate had fixed a circle rate and it was situated very near to Saharanpur city and was in the proximity of buildings and building side. He took the view that agricultural land had been converted into non-agricultural land before the date of the agreements to sell i.e., 24-1-1983 and therefore the provisions regarding capital gains were attracted. He therefore, computed capital gains in the case of Smt. Ruksana Begum at Rs. 56,005 and in the case of Smt. Sanjeeda Begum at Rs. 51,410.

  1. Feeling aggrieved the respondents assessees preferred separate appeals before the Appellate Assistant Commissioner, Income-tax, Dehradun, who accepted the plea of the respondents and having come to the conclusion that the land were not within 8 km. of the municipal limits and were agricultural land was not exigible to capital gains.
  2. Feeling aggrieved the respondents assessees preferred separate appeals before the Appellate Assistant Commissioner, Income-tax, Dehradun, who accepted the plea of the respondents and having come to the conclusion that the land were not within 8 km. of the municipal limits and were agricultural land was not exigible to capital gains.
  3. Feeling aggrieved the revenue filed appeal before the Tribunal and the Tribunal has considered the report dated 19-6-1987 filed by the Income-tax Officer and upheld the conclusion drawn by the Appellate Assistant Commissioner that the land in question was situate beyond the municipal limits and agricultural operations were carried on till the date of transfer of the land. Therefore there was no capital gains.
  4. Feeling aggrieved the revenue filed appeal before the Tribunal and the Tribunal has considered the report dated 19-6-1987 filed by the Income-tax Officer and upheld the conclusion drawn by the Appellate Assistant Commissioner that the land in question was situate beyond the municipal limits and agricultural operations were carried on till the date of transfer of the land. Therefore there was no capital gains.
  5. Heard learned counsel for the parties.
  6. Heard learned counsel for the parties.
  7. On the findings recorded by the Tribunal that the land was agricultural land and stood beyond eight kms. of the municipal limits of Saharanpur it was not included in the definition of capital assets as given in section 2(14)(iij)of the Act. Thus there is no infirmity in the order of the Tribunal. We answer the question of law referred to us in affirmative i.e., in favour of the assessee and against the revenue. However, there shall be no order as to costs.
  8. On the findings recorded by the Tribunal that the land was agricultural land and stood beyond eight kms. of the municipal limits of Saharanpur it was not included in the definition of capital assets as given in section 2(14)(iij)of the Act. Thus there is no infirmity in the order of the Tribunal. We answer the question of law referred to us in affirmative i.e., in favour of the assessee and against the revenue. However, there shall be no order as to costs.

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