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Facts
The assessee sold agricultural land which they claimed was not a capital asset. The Assessing Officer treated it as a capital asset, considered the cost of acquisition as Nil, and made an addition of Rs. 4,89,83,438/- as long-term capital gains. The assessee's share in the total sale consideration was Rs. 4,89,83,437/-.
Held
The Tribunal held that the land in question was agricultural land and not a capital asset as per Section 2(14)(iii) of the Income Tax Act, following a coordinate bench decision concerning a co-owner of the same property. Therefore, the addition made by the AO was deleted.
Key Issues
Whether the land sold, situated in Adalaj village, falls under the definition of 'agricultural land' and is thus excluded from 'capital asset' under Section 2(14)(iii) of the Income Tax Act.
Sections Cited
2(14), 2(14)(iii)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
(Assessment Year: 2013-14) Assistant Commissioner of Vs. Rakeshkumar Jayantilal Patel, Income Tax, 1, Someswar Complex, Central Circle-1(3), 132 Feet Ring Road, Ahmedabad Ahmedabad-380054 [PAN No.ADIPP7048J] (Appellant) .. (Respondent) Appellant by : Shri Abhijit, Sr. DR Respondent by: Shri Vartik Choksi, AR 22.07.2025 Date of Hearing Date of Pronouncement 11.08.2025 O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Department against the order passed by the Ld. Commissioner of Income Tax (Appeal)-11, (in short “Ld. CIT(A)”), Ahmedabad vide order dated 21.02.2025 passed for A.Y. 2013-14.
The Department has raised the following grounds of appeal:
“1) In the facts and on the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.4,89,83,438/- made by the AO without appreciating the fact that the AO has thoroughly verified the provisions of section 2(14) (iii) of the Act. 2) In the facts and on the circumstances of the case and in law, the Ld. CIT(A) has erred in accepting the evidences submitted by assessee during appellate proceedings without giving opportunity to AO. 3) In the facts and on the circumstances of the case and in law, the Ld. CIT(A) has erred in considering the land as agricultural land relying upon Gandhinagar Municipal Corporation’s letter dated 08.02.2016 without appreciating the fact of the case.
ACIT vs. Rakeshkumar Jayantilal Patel Asst.Year –2013-14 - 2– 4) The Revenue craves leave to add/alter/amend and/on substitute any or all of the grounds of appeal
.”
3. The brief facts of the case are that during the assessment proceedings, the Assessing Officer noted that the assessee, along with other co-sellers, had sold five immovable properties for a total consideration of ₹19,59,33,750/-. The assessee’s share in the transaction was 25%, amounting to ₹4,89,83,437/-. The properties sold were located in Adalaj Village, which, based on the 2001 Census, had a population of 11,957 and is situated approximately 4 kilometers from the municipality of Gandhinagar. In light of these facts, the Assessing Officer was of the view that the land in question qualifies as a capital asset as per section 2(14) of the Income Tax Act (Act). However, the assessee did not report any capital gains in the return of income for the relevant year, and nor did the assessee comply with notices issued or furnish any documents, including the purchase deed with respect to this property, which made it impossible to ascertain the cost of acquisition. As a result, the Assessing Officer took the cost of acquisition as “Nil” and the entire sale consideration was treated as long-term capital gain amounting to ₹4,89,83,438/-, which as per the Assessing Officer was deemed to have escaped assessment.
4. In appeal before CIT(Appeals), the assessee submitted that the land sold was not a capital asset but rather it was “agricultural land” which was excluded from the definition of a capital asset under Section 2(14)(iii) of the Act. The assessee submitted that Adalaj is not governed by a municipality or municipal corporation, thereby excluding the land from clause (a) of Section 2(14)(iii) of the Act, and hence was not subject to capital gains tax. With respect to clause (b) of Section 2(14)(iii) of the Act, the assessee relied on Notification No. 9447 dated 06.01.1994 issued by the Central Government, which specifies that only areas within a 4 km radius from the municipal limits of Gandhinagar fall under ACIT vs. Rakeshkumar Jayantilal Patel Asst.Year –2013-14 - 3– the ambit of an urban area for tax purposes. The assessee further supported his claim by placing on reliance a coordinate decision of the Ahmedabad ITAT in the case of a co-owner of the same property, Mr. Kaushalkumar Gangaram Patel, who held a 17% share in the same property. In that case, the ITAT Ahmedabad, after examining various evidences (including a letter issued by the Gandhinagar Urban Development Authority stating that the land in question was located beyond the 5 km radius of the Gandhinagar Municipal Corporation), held that the land was “agricultural” in nature and hence not a capital asset. The assessee also submitted the relevant sale deeds and official correspondence to establish that the sold lands, bearing block numbers 94, 59, 244, 243, and 45, were similarly situated. The CIT(Appeals) noted that the same land parcels had already been adjudicated upon by the Hon’ble Ahmedabad Tribunal in the co- owner’s case, where it was held—based on facts and official records—that the land was situated outside the specified urban limits and was therefore qualified as “agricultural land”. The CIT(Appeals) held that since the decision by the jurisdictional Ahmedabad Tribunal in the case of the co-owner of the land on identical facts had held that the land in question was agricultural land and the said decision is binding on lower authorities, the CIT(Appeals) accepted the assessee’s claim that the land sold did not constitute a capital asset within the meaning of Section 2(14) of the Act. Accordingly, the CIT(Appeals) held that the sale of land by the assessee, being agricultural land, did not attract capital gains tax, and the addition of ₹4,89,83,438/- made by the Assessing Officer was deleted.
The Department assessee is in appeal before us against the order passed by CIT(Appeals) allowing the appeal of the assessee. Before us, the Counsel for the assessee submitted that the case of the assessee is directly covered in its ACIT vs. Rakeshkumar Jayantilal Patel Asst.Year –2013-14 - 4– favour by decision of Ahmedabad ITAT in the case of co-owner of the same property which was sold, in which it was held by ITAT that the land in question was an “agricultural land” and hence did not attract capital gains tax. The Counsel for the assessee submitted that this decision passed by Ahmedabad ITAT was brought to the attention of CIT(Appeals) and after taking the same into consideration, he allowed the appeal of the assessee. Accordingly, there is no infirmity in the order of Ld. CIT (Appeals) so as to call for any interference. In response, the Ld. DR placed reliance on the observations made by the Assessing Officer in the assessment order.
We have heard the rival contentions and perused the material on record. On going through the facts of the case, we are of the considered view that the case of the assessee is directly covered by the decision of Ahmedabad ITAT in the case of the co-owner of the same property which was sold, in which it was held by ITAT that the land in question was an “agricultural land” and hence did not attract capital gains tax. The copy of decision has been placed before us for our records. It was on the basis of the findings made by Ahmedabad ITAT that CIT(Appeals) allowed the appeal of the assessee. It would be useful to reproduce the relevant extracts of the decision in the case of ITO vs. Shri Kaushalkumar Gangaram Patel in order dated 17.06.2019 for ready reference:
“7. We have gone through the impugned order and heard both the parties. Undisputedly land is situated at village Adalaj Revenue district Gandhinagar and land in question is 5 KM outside the radious of Gandhinagar Municipal Corporation and we draw support from the letter issued by the Gandhinagar Urban Development Authority Junior Town Planning Officer who has specifically mentioned that land in question is situated outside 5Km radious of Gandhinagar Municipal Corporation vide letter No. GUDA/Tech/692/2015 letter dated 08.02.2016.
8. We have also gone through the Notification No. 9447 dated 06.01.1994 issued by the Govt. of Gujarat wherein it is mentioned that Adalaj (CT) (Guj, population:
9776, Class-V) and municipal limit is area up to a distance of 4 KM from the Municipal limits in all direction whereas land in question is outside the 5 KM radious of Gandhinagar Municipal Corporation and as per Section 2(14)(iii)(a) capital asset means property of any kind hold by an assessee, whether or not connected with his business or profession and agricultural land in Indian, not being land situate (a) in any area which comprised within the jurisdiction of a municipality (whether known as 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 not less than 10,000.
In this case, agricultural land in question is situated beyond 5Km radious of Gandhinagar Municipal Corporation and in our considered opinion, same is agricultural land which is not a capital asset as per Income Tax Act. Therefore, we are not inclined to interfere in the order passed by the ld. CIT(A). Thus, we dismiss this ground of appeal
of the Revenue.
10. In the result, appeal filed by the Revenue is dismissed.”
7. In view of the decision referred to above and the observations made by CIT(Appeals), who gave relief to the assessee in light of findings made by Ahmedabad ITAT in the co-owner of the same property which was sold, we are of the considered view that there is no infirmity in the order of Ld. CIT (Appeals) so as to call for any interference.
In the result, appeal of the Department is dismissed. This Order pronounced in Open Court on 11/08/2025