Section 56(2)(x) talks about immoveable property and so Purchase of Rural agricultural land below its stamp duty valuation is taxable

 

The assessee purchased land classified as agricultural at the time of acquisition for ₹42.72 lakhs, while the stamp duty valuation was ₹1.15 crores. The AO taxed the difference as income from other sources under section 56(2)(x), which the assessee contested on the ground that rural agricultural land is not a capital asset, and hence, outside the scope of this section.

Tribunal’s Reasoning:
Section 56(2)(x) uses the term “any immovable property”, not “capital asset”.
The Income-tax Act does not define “immovable property”, so the Tribunal interpreted it in general terms, which includes agricultural land.
Since there is no express exclusion of agricultural land in section 56(2)(x), it falls within its scope, even if exempt from capital gains under section 2(14).
This approach follows a literal interpretation, giving effect to the plain wording of the law. The Tribunal relied on judicial principles that where language is unambiguous, legislative intent must be inferred from the text itself.

Key Implications:
Section 56(2)(x) applies to all immovable property acquisitions at undervalue, including rural agricultural land, despite such land being non-taxable in the seller’s hands.
It reflects a wider scope for taxation in the hands of the purchaser and creates a divergence between capital gains and deemed income provisions.

Concerns and Safeguards:
This interpretation could lead to increased litigation in rural land transactions, especially where conversion or development follows purchase.
However, the Tribunal held that since the stamp duty value was disputed, the AO was required to refer the matter to a DVO, as per the proviso to section 56(2)(x), and thus remanded the matter for proper valuation.

This judgment highlights the expansive reach of section 56(2)(x) and clarifies that agricultural land is not excluded from its ambit merely because it is not a capital asset. The decision underscores the need for legislative clarity, especially if the intention is to exempt rural agricultural land from the deeming provisions applicable to undervalued property transactions.

The copy of the order is as under:

1748324043-3kVBXv-1-TO (1)