VISHAL GIFT CENTRE - LLP,INDORE vs. ACIT CENTRAL CIRCLE - 1, INDORE

ITA 347/IND/2024Status: DisposedITAT Indore30 October 2025AY 2019-2030 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the capital gain accruing on the land until the date of its diversion for non-agricultural use should be treated as arising from agricultural land and would be exempt from tax. The fair market value of the land as on the date of diversion would be considered as the cost of acquisition for computing capital gains on the diverted land. The Tribunal noted that the AO had rejected the assessee's claim that the land was beyond 8 kms, relying on the Tehsildar's report. However, the Tribunal, adopting a pre-existing view, decided that the fair market value of the land as on the date of diversion should be computed. This fair market value would be the cost of acquisition for the 'diverted/non-agricultural' land. The matter was remanded to the AO to ascertain this fair market value with the support of a Valuation Officer. Regarding Section 54B, the Tribunal held that since the capital gain on agricultural land until diversion is exempt, Section 54B exemption is not required for that portion. For the post-diversion period, the land is considered non-agricultural, and Section 54B only applies to capital gains from agricultural land, thus the claim for exemption under Section 54B for the post-diversion gain was dismissed as infructuous. The addition of Rs. 88,78,365/- made by the AO was set aside.

What were the facts?

The assessee, an individual, filed his return of income for AY 2014-15 declaring a total income of Rs. 10,81,630/- and agricultural income of Rs. 2,11,500/-. The case was selected for scrutiny. The Assessing Officer (AO) noted two undisclosed land sale transactions: 2.50 acres sold on 29.08.2013 for Rs. 1,00,00,000/- and 3 acres sold on 06.03.2014 for Rs. 1,50,00,000/-. The AO questioned the taxability of the capital gains. The assessee claimed the land was agricultural and outside the definition of capital asset under Section 2(14)(iii), or alternatively, that the sale consideration was invested in new agricultural land, entitling exemption under Section 54B. The AO rejected both claims, holding the land was within 8 kms of a municipal area and had been diverted for non-agricultural use. The AO made an addition of Rs. 2,54,36,399/-. The CIT(A) partly allowed the appeal by accepting the actual sale consideration for the first transaction instead of the stamp duty valuation, but upheld the AO's rejection of the assessee's main claims. The assessee appealed to the ITAT.

What were the issues?

1. Whether the impugned land sold by the assessee was situated within the prescribed area/distance as per Section 2(14)(iii)(a)/(b) of the Income-tax Act, 1961, making it a capital asset and its gain taxable? 2. Whether the assessee is entitled to exemption under Section 54B of the Act for the capital gain arising from the sale of agricultural land? 3. Whether the sale of land was completed prior to its diversion for non-agricultural use, impacting its classification as a capital asset? Assessee's Contentions: - The land was situated beyond the 8 km prescribed distance from Bhopal, as confirmed by the Patwari's report, thus not a capital asset under Section 2(14)(iii). - The land was used for agriculture, and income was shown, making it eligible for exemption under Section 54B. - The land was sold in April 2013 (possession handed over), before the diversion application (May 2013) and sale deed registration (August 2013), meaning the sale was completed when it was agricultural land. - Relied on various judgments for reverse indexation method for fair market value determination. Revenue's Contentions: - The revenue relied on the AO's and CIT(A)'s findings that the land was within the prescribed distance and had been diverted for non-agricultural use, making it a capital asset.

Which sections of the Income-tax Act were involved?

Section 2(14)(iii),Section 54B,Section 143(3)

AI-generated summary — verify with the full judgment below

arrest eur,

IN THE INCOME TAX APPELLATE TRIBUNAL

INDORE BENCH, INDORE

BEFORE SHRI B.M. BIYANI, ACCOUNTANT MEMBER

AND SHRI PARESH M. JOSHI, JUDICIAL MEMBER Assessment Year:2014-15

Rajesh Kumar Garg, ITO 2(4) Bunglow No.6, Phase-KK Bhopal

Shri Golden City,

Hoshangabad Road aaa/

Jhatkhedi, Bhopal

Vs.

(Assessee/Appellant) (Revenue/Respondent)

PAN: AAYPG5968R

Assessee by Shri Pankaj Shah & Soumya Bumb, ARs

Revenue by Shri Ashish Porwal, Sr. DR

Date of Hearing 09.09.2025

Date of Pronouncement 30.10.2025

3Tg3v0 RD ER

Per B.M. Biyani, A.M.:

Feeling aggrieved by order of first appeal dated 10.07.2023 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 29.12.2016 passed by learned

ITO-2(4), Bhopal [“AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2014-15, the assessee has filed this appeal.

2.

The background facts leading to present appeal are as under:

Rajesh Kumar Garg ITA No. 340/Ind/2023 - AY 2014-15

The assessee-individual filed his return of income of AY 2014-15 u/s 139 declaring a total income of Rs. 10,81,630/- and

The order continues below.

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