No addition u/s 56(2)(vii)(b) if the property purchased is a Rural Agricultural Land : Jaipur ITAT

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No addition u/s 56(2)(vii)(b) if the property purchased is a Rural Agricultural Land : Jaipur ITAT

 

Here is an important Ruling by Jaipur ITAT wherein it is held that no additition can be made against  the property is purchased below it’s stamp duty value if the property is not a “Capital Asset” u/s 2(14).

 

The citation of the case is as under :

 

ITAT JAIPUR

 

  1. PREM CHAND JAIN VERSUS ACIT, CIRCLE- SAWAI MADHOPUR

 

ITA No. 98/JP/2019

 

Brief Overview :

 

– Issue of Addition u/s 56(2)(vii)(b) in case property acquired by the assessee is not a capital asset

 

–  Above section refers to “capital Assets” in the meaning of “Property” given in the Explanation to section 56(2).

 

– Question is, where the agricultural land doesn’t qualify as falling in the definition of capital asset, provisions of section 56(2)(vii)(b) can be invoked?

 

– Assessee contended that the assessee had purchased two pieces of agriculture land during the year and the agriculture land not being a capital asset, the provisions of section 56(2)(vii)(b) are not applicable

 

– ITAT held that Only those immovable properties which are held as capital assets and is in nature of land or building or both are only covered u/s 56(2)(vii).

 

ITAT categorically mentioned as under:

 

 

  1. We agree with the contention of the ld AR that where the term “property” has been defined to mean a capital asset as so specified and where an immoveable property as so specified being land, building or both is not held as an capital asset, it will not be subject to the provisions of section 56(2)(vii)(b) of the Act. In the instant case, therefore, where the agricultural land doesn’t qualify as falling in the definition of capital asset, provisions of section 56(2)(vii)(b) cannot be invoked.”

 

 

  1. In the instant case, whether agriculture land so acquired falls in the definition of capital asset or not, one has to refer to the provision of section 2(14) which exclude agriculture land in India subject to certain exceptions. However, there are no findings of the lower authorities in this regard. Therefore, we deem it appropriate to set-aside the matter to the file of the AO for the limited purposes of examining whether the two plots of agricultural land so acquired falls in the definition of capital asset or not.

 

We find that the AO has not appreciated the objection of the assessee regarding adoption of DVO value as against the sale consideration. Therefore, where the assessee has objected to the stamp duty valuation, as per the provisions of section 50C(2) of the Act which are equally relevant for the purpose of provisions of section 56(2)(vii)(b)(ii) of the Act, the matter should have been referred by the Assessing Officer to the DVO for determination of fair market value.

 

 

 

  1. Therefore, in the instant case, where it is so determined by the Assessing officer that the agricultural land so acquired falls in the definition of capital asset, he has to refer the matter to DVO to further determine the fair market value of the two plots of agricultural land and thereafter, decide the matter afresh.

 

 

 

  1. Appeal of the assessee is allowed for statistical purposes.

 

 

With above judgment, one can say that Jaipur ITAT has also held that the notional taxation u/s 56(2) will not be applicable of the property purchased is not a capital assets.

 

 

 

 

 

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