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Facts
The assessee sold land and declared Nil income, claiming it was agricultural land exempt from capital gains tax. The Assessing Officer (AO) and CIT(A) treated the land as a capital asset, noting the past existence of a plywood factory and the classification of the land as 'Purayidom' (dry land) by the Village Officer. The assessee provided certificates and inspection reports showing ongoing agricultural activities.
Held
The tribunal held that the land sold by the assessee was agricultural land, relying on reports from various authorities, including the department's inspector, confirming current plantain farming. The tribunal emphasized that the nature of the land at the time of sale and its actual use are paramount, and the past factory or non-reporting of agricultural income did not alter its agricultural character. Consequently, the sale proceeds are not subject to capital gains.
Key Issues
Whether the land sold by the assessee constitutes an agricultural land or a capital asset, and thus, whether the sale proceeds are liable for capital gains tax under the Income Tax Act.
Sections Cited
133(6), 2(14), 45
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH : COCHIN
Before: SHRI INTURI RAMA RAO & SHRI SOUNDARARAJAN K.
PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 05/09/2023 in respect of the A.Y. 2015-16 and raised the following grounds: Tax effect relating to each ground of Grounds of Appeal appeal (see note below) Land sold is agricultural land 1. and Not a capital asset and No 1617479 capital gain attracts. The Page 2 of 7 learned authorities have failed to appreciate the evidences in a judicious manner (detailed grounds attached) Ground without Prejudice to above-Indexed Cost of Cost of land not Considered. Cost of 2. stamp paper & registration 0 charges Not Considered in Computing Cost (detailed grounds attached) Total Tax Effect Rs. 16,17,479
The assessee filed her return of income on 07/09/2015 declaring Nil income. Thereafter, the return was processed and subsequently, it was selected for limited scrutiny under CASS in which the details of the immovable property sold and the computation of capital gains were sought for by the AO. The assessee filed her detailed reply and also furnished the copy of the sale deed and a certificate from the Agricultural Officer, Aloor to show that the property sold was an agricultural land and not liable to be taxed under the provisions of the IT Act.
During the assessment proceedings, the assessee filed various documents to show that the lands are agricultural lands and also having a LT-V connection of Kerala State Electricity Board. The AO also sought for the information from the village officer about the land sold by the assessee. The village officer also sent a report to the AO in which the officer had reported that the major portion of the land in the said survey no. falls under the category of “Purayidom” (dry land) and only 2.41 ares falls under the category of Nilam i.e. wet land / agricultural lands. Thereafter, the AO had deputed his inspector for inspecting the property. The inspector also furnished his report on 15/11/2017 and reported that there was a plywood factory under the name and style of “Sylvan Plywoods” around 10 to 15 years back and after the stoppage of the business, the said plywood factory was demolished. From then onwards, agricultural activity of growing plantain farming is going on in the said property.
Page 3 of 7 ITA No. 816/Coch/2023
The AO further, called for the details from the Secretary, Aloor Grama Panchayat about the existence of the plywood factory. The Secretary also sent a communication on 30/11/2017 and informed that there was a plywood factory as per the D &O Licence and the said factory was there till 31/03/2000. Despite the categorical reports given by the Agricultural Officer, Village Officer, Inspector of the Income Tax department, the AO had proposed to treat the said land as a capital asset since it has commercial importance and a few agricultural activities are going on there at present. The AO also observed that the land is not a Nilam but only “Purayidom” (dry land). On that basis, the assessment was made in which the capital gains were estimated and the assessee’s share of 1/4 was subjected to tax under the long term capital gains.
As against the said order, the assessee filed an appeal before the Ld.CIT(A) and relied on the reports furnished by the authorities and contended that the land sold by the assessee is nothing but an agricultural land and therefore the capital gain provision would not be applicable. The Ld.CIT(A) had dismissed the appeal on the ground that the assessee had not produced any details regarding the sale of agricultural produce and no agricultural income was reported during the earlier years.
As against the said order, the assessee is in appeal before this Tribunal.
The appeal was filed with a delay of 23 days for which the assessee filed a delay condonation application and in the affidavit filed in support of the said delay condonation application, assessee submitted that he is not checking the mails regularly and therefore the assessee had not noticed about the order passed by the Ld.CIT(A) and only when the tax consultant checked the portal to know about the status of the appeal, it came to the knowledge of the assessee that Ld.CIT(A) had passed an order. The assessee
Page 4 of 7 further submitted that the said delay is not intentional and prayed to condone the said delay by taking a liberal view to do substantial justice.
We have considered the said application filed by the assessee and the reasons stated therein and also considered that the delay is only 23 days, we took a lenient view and condoned the said delay in filing the appeal and proceeded to decide the appeal on merits.
At the time of hearing, the Ld.AR submitted that the land sold in question is an agricultural land as evidenced from the certificates issued by the Village Officer and the Agricultural Officer and therefore the order of the authorities treating the said land as capital asset is not correct. The Ld.AR also submitted that the authorities had accepted that agricultural activities are going on in the said property and therefore the order of the authorities treating the said land as capital asset is not correct. The Ld.AR also filed a paper book and also enclosed the judgment of the Hon’ble Supreme Court as well as the Hon’ble Gujarat High Court and Hon’ble Madras High Court. The Ld.AR also relied on the judgment of the Hon’ble Jurisdictional High Court reported in (2022) 440 ITR 121 in the case of CIT vs. Cochin Malabar Estates & Industries Ltd. and prayed to allow the appeal filed by the assessee.
The Ld.DR relied on the orders of the lower authorities.
We have heard the arguments of both sides and perused the materials available on record.
The only dispute to be decided in this appeal is about the nature of the property sold by the assessee. Admittedly, in the present appeal, the assessee along with the other co-owners sold their agricultural property on 23/09/2014. The assessee had not shown any capital gains out of the land
Page 5 of 7 sold by her on the ground that the said land is an agricultural land eligible for exemption.
In support of her contention, the assessee produced a certificate from the Agricultural Officer, Aloor dated 29/08/2014 in which he has categorically stated that the lands are agricultural land. Not satisfied with the certificate issued by the said Agricultural Officer, the AO also issued a notice u/s. 133(6) of the Act to the Village Officer, Aloor seeking the details of the property sold by the assessee. The said officer also issued a certificate to the effect that most of the lands are “Purayidom” i.e. dry lands and a portion as wet land. Still not satisfied with the report of the village officer, the AO deputed his inspector for spot verification and the inspector also gave a report about the said lands on physical verification. In the said report, the inspector accepted that the agricultural activities of growing plantain farming is going on and before that there was a plywood factory which was later on demolished.
The AO again sought for a report from the Secretary, Aloor Grama Panchayat about the existence of the plywood factory. The Secretary also intimated that there was a plywood factory upto 31/03/2000. From the above said reports sent by the various authorities and including the inspector of the department, it is clearly established that the land in question is used for agricultural activities. The said fact was also supported by the report given by the inspector of the department but in fact he has also mentioned that at the time of his visit, agricultural activities of growing plantain farming is going on in the said property.
We have also perused the report of the village officer in which the village officer had not stated that the lands are not agricultural lands but only classified the said lands as “Purayidom” or dry land and Nilam or wet land. Simply because the lands are dry or wet, it will not lose its character of agriculture in nature. Even though all the details were furnished before
Page 6 of 7 the AO as well as before the Ld.CIT(A), both the authorities had not accepted the case of the assessee and subjected the said income earned from the sale of agricultural land as capital gains. When the inspector of the department had visited the particular property, and he has categorically admitted that the agricultural activities of plantain farming is going on, the authorities below has no other evidences to take a view that the lands are not agricultural lands. When the department is not having any materials to show that the lands sold by the assessee is not an agricultural land, then naturally, the certificates issued by the various authorities are to be relied upon. But unfortunately, in this case, the AO took a different view when all the reports available before him shows that the land is used for agricultural operations. When the agricultural operations are carried on in the said land, the existence of the plywood factory would not alter the character of the land in question. Further the non reporting of the agricultural income is not a fatal when there are other evidences available to prove that there are agricultural activities going on.
We have also gone through the judgment of the Hon’ble Jurisdictional High Court cited supra in which it was held as follows: “Whether the sale of an asset constitutes sale of a capital asset or agricultural land is case-specific and to be determined on a case-to-case basis. What is required to be considered is, was it agricultural land when it was sold. If the land is recorded as agricultural land in the revenue records and if till the date of its sale it is used and exploited as agricultural land and if the owner of the land had not taken any steps which would indicate his intention to exploit the land thereafter as non-agricultural land, such a piece of land will have to be regarded as agricultural, even though it is included within the municipal limits or is sold as arable land without actual agriculture. Further, the determination of an issue in fact, whether the land is agricultural or not, is not a one-stop remedy, but essentially a question of fact. The question has to be answered in each case having regard to the facts and circumstances of that case.”
Page 7 of 7 ITA No. 816/Coch/2023
By considering the facts of the present case as well as the principles laid down by the Hon’ble Jurisdictional High Court in the judgment cited supra, we are of the view that the lands sold by the assessee is an agricultural lands and therefore the sale proceeds would not attract the provisions of capital gain. We, therefore, set aside the orders of the authorities below.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 11th June, 2025.