“Section 2(14)(iii)(b)”
The decision most relied on for Section 2(14)(iii)(b) is PCIT, Central-3 v. Allied Perfumers (P.) Ltd. (124 Taxmann.com 358), cited in 54 judgments on BharatTax.
Leading authorities on Section 2(14)(iii)(b)
The case is cited for various issues including the definition of capital assets, reassessment procedures under sections 153A and 153C, and the effect of clarificatory amendments.
The addition of cash deposits to an assessee's income under Section 68 is justified when the Assessment Officer notices huge cash deposits, as the onus is on the assessee to explain their nature and source.
If agricultural operations are being carried out on land at the time of sale and revenue records indicate it is agricultural land, a presumption arises that it is agricultural in character, which the revenue must rebut. Permission to convert land to non-agricultural use does not render it non-agricultural if not obtained before the sale.
If land is recorded as agricultural land in revenue records, it is considered agricultural land for tax purposes, entitling the assessee to exemption from tax.
Section 56(2)(vii)(b) of the Income-tax Act, 1961, which deals with income from acquisition of property for inadequate consideration, does not apply to agricultural land purchased by an assessee, as it is not considered a capital asset under Section 2(14) of the Act.
The determination of whether land is agricultural or not depends on its status at the time of transfer, and subsequent usage or location in a commercial area is irrelevant. The purpose for which a purchaser buys the land also does not affect its classification as a capital asset at the time of sale.
Disallowance of interest expenditure under Section 36(1)(iii) is not permissible if the Assessing Officer fails to establish a nexus between borrowed funds and funds diverted for investment or loans, especially when sufficient interest-free funds are available with the assessee.
The intention of the assessee at the time of selling land, evidenced by applications to convert agricultural to non-agricultural status and subsequent payment of non-agricultural taxes by the buyer, indicates the land should be treated as non-agricultural for tax purposes.
