LATE POBBATI RAMACHANDRA SETTY vs. ITO,

The assessee has raised the following grounds:

It was submitted by the learned AR of the assessee that only one issue is involved in this appeal whether the income arising on the sale of property in question is taxable as LTCG or not. He submitted that although the property in dispute was converted from agricultural land to non-agricultural land but even after that, actual agricultural operations were carried on till the date of sale and he submitted that under these facts, property in dispute has to be accepted as agricultural land and as a consequence, it is not a capital asset and therefore, the profit on sale of this property is not liable to be tax as capital gain tax. In support of his contention, he place reliance on the Tribunal’s order rendered in the case of Shri M.R.Seetharam Vs ACIT in dated 113-06-2014. He submitted a copy of this Tribunal’s order and drawn my attention to para-5 on page-4 of the Tribunal’s order and pointed out that in that case also, the land was already converted as non-agricultural land before the date of sale and was sold as converted land and the land was purchased by company and as per the Karnataka Land Reforms Act, no company was permitted to purchase agricultural land which confirms that the land was in fact non-agricultural land. Thereafter, he has drawn my attention to page 32 of the Tribunal’s order and in particular my attention was drawn to para-7.3 and it was submitted that it was held by the Tribunal in this case that the assessee had continued the agricultural operations unabated in the subject property on the date of sale even though the said land was converted for non-agricultural purposes by a conversion order of the State Government with a rider that the land should be used for the purpose for which the conversion was granted within two years from the date of issue of the said order but on the date of sale, the subject land was under active cultivation for agricultural purposes only. Finally, he has drawn my attention to para 7.3.10 of the Tribunal order wherein it was held by the Tribunal that this land should have been treated as agricultural land and thus, exempt from capital gains in view of sec.2(14) of the IT Act, 1961.

As against this, ld. DR of the revenue supported the order of the lower authorities below. He also submitted that this aspect has to be examined as to whether actual agricultural operations were actually carried out or not till the date of sale of the land in question as is being claimed. He also submitted that this aspect also needs examination whether the land in question is situated within 8 KMs of the Municipal area or not.

I have considered the rival submissions and find that although this Tribunal order is relevant in the present case but whether the assessee would get any benefit from this Tribunal’s order or not depends upon the facts as to whether he assessee has carried out agricultural operations or not till the date of sale of land in question and mere this fact alone that agricultural income has been declared by the assessee in the return of income and the same was accepted by the department, it can be concluded that actual agricultural operations were carried out. Hence, I feel that this matter should go back to the file of the AO for fresh decision. Accordingly, I set aside the order of the ld. CIT(A) and restore the matter back to the file of the AO for a fresh decision with a direction that the assessee should bring evidence on record to establish its claim that actual agricultural operations were carried out by the assessee on this land till the date of sale of this land. The AO should also examine as to whether the land is situated within 8 KMs of the Municipal limit or not and thereafter, he should pass necessary orders as