Land under the aegis of a town planning authority but administered by a gram panchayat is not a capital asset: ITAT Ahmedabad

The classification and recognition of capital asserts as a rural agri land or urban agri land is a matter of litigation and disputes in numerous cases. More particularly, the issue has arisen due to setting up of a development authority at various location. Here is an interesting judgement by ITAT Ahemdabad wherein it is held that Agri land under the aegis of a town planning authority but administered by a gram panchayat is not a capital asset: ITAT Ahmedabad

The shower overview of the case is as under:

Dashratbhai Gopalbhai Patel vs ITO (I.T.A. No. 1356/Ahd/2017) (ITAT Ahmedabad)

Facts:

1. The assessee sold an agricultural land located in village Adalaj in Gujarat, which is administered by the gram panchayat and not municipality.

2. The Gandhinagar Urban Development Authority (GUDA) was created on 12.03.1996 under “The Gujarat Town Planning & Urban Development Act, 1976” with a view to carry out sustained planned development of the area. In short, it was the planning authority of the land mentioned above.

3. The question was whether the fact that GUDA was the planning authority, would lead to the land being considered as a capital asset U/S 2(14) of the IT Act and would the sale thereof, be taxable as a capital gain?

Note: Agricultural land located 8 kms from the municipal limits are not considered as a capital asset U/S 2(14)(iii). 

Ahmedabad ITAT held as below:

1. A Municipality or Municipal Corporation is Constitutional body, while a Development Authority is a creation of statute.

2. It is held by Hon’ble Kerala High Court in the case of CIT v/s Murali Lodge 194 ITR 125 (Ker) that only those local authorities, township, etc. can be treated as municipality within meaning of section 2(14)(iii)(a).

3. GUDA does not have elected representatives but only nominated representatives by the Government further it does not provide civic amenities etc.

4. The agricultural land in question is not a capital asset.