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Facts
The assessee appealed against the CIT(A) order confirming the addition made by the AO for AY 2014-15. The primary dispute revolved around whether the land sold by the assessee was agricultural land and thus exempt from capital gains tax. The assessee argued that the land was agricultural, located beyond 8 km from municipal limits, and agricultural income was consistently shown in previous years. The Revenue authorities had treated it as non-agricultural.
Held
The Tribunal held that the land was agricultural land as per revenue records and located beyond municipal limits, fulfilling the conditions for exemption under Section 2(14) of the Act. They noted that agricultural income was consistently reported and the non-agricultural conversion was initiated by the purchaser, not the assessee. The Tribunal relied on precedents where similar documentary evidence was accepted.
Key Issues
Whether the land sold was 'agricultural land' as defined under Section 2(14) of the Income Tax Act, 1961, and thus eligible for exemption from capital gains tax.
Sections Cited
143(3), 147, 2(14), 234A, 234B, 234C, 250
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Income Tax Appellate Tribunal, “DB” BENCH, NAGPUR
The assessee has filed the aforesaid appeal challenging the impugned order dated 20/02/2025, passed by the National Faceless Appeal Centre, Delhi, [“Ld.CIT(A)], for the assessment year 2014-15. The assessee has raised the following grounds of appeal:
1. The CIT(A) NFAC erred in confirming the order passed U/s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 by assessing officer, therefore order passed is illegal, invalid and bad in law;
1. ITA431/Nag/2024 (A.Y. 2014–15) Ashutosh Ram Shewalkar 2. On the facts and circumstances of the case, the Ld. NFAC failed to consider that agriculture income were duly shown and accepted in previous years by revenue, therefore the order passed is illegal, invalid and bad in law; 3. On the facts and circumstances of the case, the Ld. CIT(A) NFAC failed to consider actual use of the land at the time of Memorandum of Understanding dated 15/06/2012 was agriculture land, therefore order passed is illegal, invalid and bad in law; 4. On the facts and circumstances of the case, the Ld. CIT(A) NFAC failed to consider that land were duly shown as agriculture land on records and in sale deed as well as Memorandum of Understanding dated 15/06/2012, therefore the order passed is unjustified, unwarranted and excessive; 5. On the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) National Faceless Appeal Center erred in confirming the addition of Rs. 1,11,50,582/- made by assessing officer and same is unjustified, unwarranted and excessive; 6. On the facts and circumstances of the case, the Ld. CIT(A) NFAC erred in not considering that the land sold by the assessee is agriculture land and situated beyond 8 Kms from Municipal limit of Nagpur and is exempt from tax, therefore addition made is unjustified, unwarranted and excessive; 7. On the facts and circumstances of the case, the Ld. CIT(A) NFAC erred in considering definition provided U/s. 2(14) of the Income Tax Act, 1961, therefore the order passed U/s. 143 r.w.s. 147 is illegal, invalid and bad in law; 8. On the facts and circumstances of the case, the Ld. CIT(A) NFAC erred in not considering that the aforesaid agriculture land was converted into non-agriculture as per the order of the Deputy Divisional Officer, Nagpur, in which clearly mentioned that conversion application made by the Purchaser Varon Auto Kast Ltd. and not assessee, therefore addition made is illegal, invalid and bad in law; 9. The assessee is denied the liability of interest charge U/s. 234A, 234B and 234C of the Income Tax act, the same may kindly be deleted 10. The appellant craves leave to amend, add or take a new ground or grounds at the time of hearing;”
ITA431/Nag/2024 (A.Y. 2014–15) Ashutosh Ram Shewalkar 2. At the very outset, we noticed that there is a delay of 79 day in filing the present appeal before the Tribunal. In the Ld. AR submitted that the earlier the matter has been handled by Shri V.T. Buldeo, CA who is senior citizen and order u/s 250 of the Act was received by the staff of Shri V.T. Buldeo, CA was not communicated to assessee and he is not used to about used of online portal, hence not aware of order. The Ld. AR humbly requested due to above reason appeal filed by the assessee is delay of 79 days and delay may kindly be condoned in the interest of justice and appeal be heard and decided on merits.
On the other hand, the ld DR of the revenue not opposed the plea of delay raised by the assessee.
We have heard counsel for both the parties, perused the material placed on record, and the judgment cited before us on application seeking condonation of delay. Considering the entire factual position as explained before us and also keeping in view the principles laid down by Hon’ble Supreme Court in the case of Collector Land Acquisition, Anantnag & Ors v sMst. Katiji & Ors 1987 AIR 1353 (SC) wherein it has been held that where substantial justice is pitted against the technicalities of non-deliberate delay then in that eventuality substantial justice is to be preferred. In our view, the principle of advancing substantial justice is of prime importance, hence, considering the explanation put forth by the ITA431/Nag/2024 (A.Y. 2014–15) Ashutosh Ram Shewalkar assessee by justifiably and properly explaining the delay which occurred in filing the appeal and considering the expression “sufficient cause” liberally we are inclined to condone the delay in filing the appeal before us. Consequently, the delay is condoned and the appeal is admitted to be heard on ground of merits.
On various grounds of appeal, the Ld. AR stated that the grounds of appeal raised by the assessee is squarely covered in favour of the assessee by the decision of this bench in case of co-owner namely Manisha Ashutosh Shewalkar Vs ITO in dated 04/04/2025, copy of which is filed.
On the other hand, the Ld. DR relied upon the orders passed by the revenue authorities and requested for dismissal of assessee appeal.
We have heard the counsel for both the parties, perused the material placed on record. The Ld. AR stated that the issue in question is squarely covered in favour of the assessee in one of the other co-owner of the same property by the order of this Tribunal in by order dated 04/04/2025 in case of Manisha Ashutosh Shewalkar Vs Income Tax Officer, Ward-5(3), Nagpur. The operative portion of the same is reproduced hereunder 8. We have given a thoughtful consideration to the arguments made by the rival parties and perused the material available on record. As also contended by the learned counsel for the assessee, we find that the land was agriculture land as per 4 ITA431/Nag/2024 (A.Y. 2014–15) Ashutosh Ram Shewalkar revenue records and located beyond the municipal limits, qualifying the exemption under section 2(14) of the Act. The agricultural income had been consistently reported in previous years, demonstrating the said land as agricultural in nature. We further find that the enquiry conducted by the Assessing Officer is after six years of sale of the said immovable property and as such the same is futile due to passage of time. While going through the material on record, we further find that the sale was for agricultural purposes and the non-agricultural conversion was initiated by the purchaser and not by the assesse. Page-47 & 48 of the Paper Book is relevant in this regard. The learned Counsel for the assessee relied on various case laws in support of his contentions. We particularly consider it relevant to reproduced from the order passed by the Co-ordinate Bench of the Tribunal, Chennai Bench, in ShriPanditVettrivel v/s ACIT, ITA No. 146/Chny./2020, Α.Υ. 2007-08, vide order dated 22/09/2023, wherein the Hon'ble Judicial Member was a party to the Coram, on similar issue, the Bench held as under :- "8. We find that the assessee has furnished Adangal Extract Receipts issued by Tahsildar, Perundural dated 21-10-2017 where the agricultural crop 'corn' is shown as cultivated on the agricultural land. The assessee has also furnished Electricity Board Receipts. The assessee has been granted subsidy on electricity charges. The assessee has also furnished Land test Report mentioning soil content and nature of crop which could be grown on the land. The copy of Land Recenue Tax Receipt dated 29.03.2007 for Fasli Year 1416-PerunduraiTaluk has also been placed on record. The Village Administrative officer Letter dated 29-03-2007 confirm that the village Kengayapalaym has population of less than 1600 people. In the Patta, land has been classified as "Punjal" wet land. The assessee has furnished agricultural Income Receipts dated 10-11-2006 & 10-08- 2006 in support of agricultural produce. The Ploughing Expenses Receipts has also been placed on record. All these documents supports the case of the assessee. However, the lower authorities has not placed on record any contrary document to rebut the same rather they have gone on the prime reasoning that the area where the impugned land was 5 ITA431/Nag/2024 (A.Y. 2014–15) Ashutosh Ram Shewalkar situated, had commercial potential and the land was acquired only as a part of real estate business to reap the benefits of commercialization. However, the fact that the land was classified as agricultural land in the revenue record remain uncontroverted before us thought he assessee may not be successful in establishing that the whole parcel of land was put to agricultural activities during the year. However, the said fact, in our considered opinion, would not jeopardize the claim of the assessee and would not alter the character of land as an agricultural land. Upon perusal of all these documents, it could be concluded that the assessee has fairly established that the land was agricultural land and had duly discharged the onus as casted upon him, in this regard. The onus, now, was on revenue to rebut the documentary evidences of the assessee and bring on record adverse material to suggest that the land was not classified as an agricultural land. However, nothing of that sort is available on record.
The Hon'bje High Court Madrass in the case law of ShakuntalaVedachalam (369 ITR 558), considering the decision of Hon'ble Apex Court in Raja Benoy Kumar Sahas Roy (32 ITR 466), held as under :- 9. The issue involved in the above Tax Case (Appeals) lies on the narrow compass, viz, whether the lands sold by the assessee are agricultural lands and whether they are entitled to the benefit of exemption capital gains tax 10. It is on record that in a report has been submitted by the revenue authorities, it is admitted that the lands are classified as agricultural lands in the revenue records and they are dry lands. The remand report of the Assessing Officer in this regard reads as follows: "During the time of assessment proceedings itself, a confirmation was obtained from the Headquarters Deputy Tahsildar, Thirukazhukundram who has certified in his letter dated 23.12.2010, refer to at 2 above, that in land in question casuarinas are grown for the past one and a half year and hence the same are agricultural lands. He has also confirmed in the said letter that the lands are situated at one kilometer distance from the Town Panchayat of Mamaliapuram 6 ITA431/Nag/2024 (A.Y. 2014–15) Ashutosh Ram Shewalkar (i.e. within the specified distance from the outer limits of the nearest municipality/town panchayat) and the population of the Mamallapuram Town Panchyat as per 2001 census was 12,345"
The assessee has also produced a copy of the adangal and the letter from the Tahsildar, which showed that the lands were agricultural in nature and the Revenue has also accepted that the lands are falling within the restricted zone in terms of Section 2(14) of the Income Tax Act.
Hence, the only point that has to be considered is that whether the test as laid down in the decision reported in Siddharth J. Desai (supra) has been satisfied by the assessees. In the said decision, in paragraph 11, it is held as follows; "On a conspectus of these cases, several factors are discernible which were considered as relevant and which were weighed against each other while determining the true nature and character of the land. It may be useful to extract from those decisions some of the major factors which were considered as having a bearing on the determination of the question. Those factors are : (1) Whether the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue? (2) Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time? (3) Whether such user of the land was for a long period or whether it was of a temporary character or by way of a stop- gap arrangement? (4) Whether the income derived from the agricultural operation carried on in the land bore and rational proportion to the investment made in purchasing the land? (5) Whether, the permission under s. 65 of the Bombay Land Revenue Code was obtained for the non-agricultural use of the land? If so, when and, by whom (the vender or the vendee)? Whether such permission was in respect of the whole or a portion of the land? If the permission was in respect of a portion of the land and if it was obtained in the past, what was the nature of the user of the said portion of the land on the material date?
ITA431/Nag/2024 (A.Y. 2014–15) Ashutosh Ram Shewalkar (6) Whether the lands, on the relevant date, had ceased to be put to agricultural use? If so, whether it was put to an alternative use? Whether such cesser and/or alternative user was of a permanent, or temporary nature? (7) Whether the land, though entered in revenue records, had never been actually used for agriculture, that is, it had never been ploughed or tilled? Whether the owner meant or intended to use it for agricultural purposes? (8) Whether the land was situated in a development area? Whether it physical characteristics, surrounding situation and use of the lands in the adjoining area were such as would indicate that the land was agricultural? (9) Whether the land itself was developed by plotting and providing roads and other facilities? (10) Whether there were any previous sales of portions of the land for non-agricultural use? (11) Whether permission under s. 63 of the Bombay Tenancy and Agricultural Lands Act, 1948, was obtained because the sale or intended sale was in favour of the non agriculturist? If so, whether the sale or intended sale to such non- agriculturist was for non-agricultural or agricultural user? (12) Whether the land was sold on yardage or on acreage basis? (13) According to the Tribunal that if the above test are applied, the assessee could not satisfy any of the conditions except condition No. 1,5,11 and 12. The Tribunal held that the assesses could not prove that the lands was actually or ordinarily used for agricultural purposes. This reasoning does not appear to be correct in view of the above-said decision of the Gujarat High Court, wherein it was clearly held in Clause (10 in paragraph 11 that whether the land was classified in the revenue records as agricultural and whether it was subject the payment of land revenue has to be considered for grant of exemption. (14) Thus it is evident from the above, which clearly states that any one of the above factors can be present in a case to qualify for the benefit of classification as agricultural lands. In this case, the assessee have qualified under clause 11(1) since as per the adangal records, these 8 ITA431/Nag/2024 (A.Y. 2014–15) Ashutosh Ram Shewalkar lands were classified as agricultural lands and the assessee have also paid revenue kist, namely, revenue payment. Therefore, the Tribunal has misconstrued the judgment of the Gujarat High Court 9supra) that all conditions laid down in paragraph 11 should be satisfied, which is not a correct interpretation.
To get exemption, assesse has to satisfy the conditions laid down in Section 2(14) of the Income Tax Act, which read as under 2(14) "capital asset" means-property of any kind held by an assessee, whether or not connected with his business or profession, but does not include (i) any stock-in-trade [other than the securities referred to in sub-clause (b)], consumable stores or raw materials held for the purposes of his business or profession ; (ii) personal effects, that is to say, movable property (including wearing apparel and furniture) held for personal use by the assessee or any member of his family dependent on him: Explanation 1. For the purposes of this sub-clause, "jewellery" includes (a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi- precious stone, and whether or not worked or sewn into any wearing apparel; (b) precious or semi- precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel: (iii) agricultural land in India, not being land situate (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year b) in any area within such distance, not being more than eight kilometres from the local limits of any municipality or cantonment board referred to in item (a), as 9 ITA431/Nag/2024 (A.Y. 2014–15) Ashutosh Ram Shewalkar the Central Government may, having regard to the extent of, and scope for, urbanisation of that area are other relevant considerations, specify in this behalf by notification in the Official Gazette: 9iv) 68 per cent Gold Bonds, 1977, or 7 per cent. Gold Bonds 1988, or National Defence Gold Bonds, 1980, issue by the Central Government: (v) Special Bearer Bond, 1991, issued by the Central Government (vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by the Central Government.
Once the Tribunal has accepted that the classification of lands as per the revenue records are agricultural lands, which are evidenced by the adangal and the letter of the Tahsildar and satisfies other conditions of Section 2(4) of the Income Tax Act, we are of the view that the Tribunal has misdirected itself as stated above.
Yet other reason given by the Tribunal is that the adjacent lands are put to commercial use by way of plots and therefore, the very character of the lands of the assessee is doubted as agricultural in nature. The manner in which the adjacent lands are used by the owner therein is not a ground for the Tribunal to come to a conclusion that the assessees' lands are not agricultural in nature. The reason given by the Tribunal that the adjacent lands have been divided into plots for sale would not mean that the lands sold by the assessee were for the purpose of development of plots. Also the reasoning given by the Tribunal "No agriculturist would have purchased the land sold by the assessee for pursuing any agricultural activity" is based on mere conjecture and surmises.
The plea of the learned standing counsel appearing for the Revenue that there was no agricultural operations prior to the date of sale is of no avail as the definition under Section 2(14) of the Income Tax Act has the answer to such a plea raised. Furthermore, it is also on record that the lands are agricultural lands classified as dry lands, for which kit has been paid.
The view of the assessee is fortified by the decision reported in Raja Benoy Kumar Sahas Roy (Supra), wherein, it is held as follows: "There was authority for the 10 ITA431/Nag/2024 (A.Y. 2014–15) Ashutosh Ram Shewalkar proposition that the expression "agricultural land" mentioned in Entry 21 of List II of the Seventh Schedule to the Government of India Act, 1935, should be interpreted in its wider significance as including lands which are used or are capable of being used for raising any valuable plants or trees or for any other purpose of husbandry (see Sarojinidevi v. ShriKrish Anjanneya) 20. Subrahmanyam and other (1) and Megh Raj v. Allah Rakhia (2) For the forgoing reasons, we pass the following order (i) On the question of law raised, w are of the view that the Tribunal was not justified in rejecting the exemption. According, the questions of law are answered in favour of the assessees; (ii) Consequently, the order of the Tribunal dated 11.4.2013 is set aside. In the result, both the above Tax Case (Appeals) are allowed. No costs. Consequently, connected Miscellaneous Petitions are closed The above case law clearly supports the case of the assesse. The Hon'ble Court has held that one the factum of agricultural land is evidenced by Adangal and the letter of Tahsildar, the assessee could not be deprived-off its claim. The manner in which the adjacent lands were used would not jeopardize the claim of the assessee. The manner of usage by purchaser would also be not much material. Considering this binding decision, the claim of the assessee was to be allowed.”
In the light of the above judicial precedent in assesses co- owners case, we find that the grounds of appeal raised by the assessee are squarely covered in favour of the assessee. Thus, the impugned order passed by learned CIT(A) is hereby quashed and the grounds raised by the assessee are allowed.
ITA431/Nag/2024 (A.Y. 2014–15) Ashutosh Ram Shewalkar 9. In the result, the appeal filed by the assessee stands allowed.