Section 2(14) of the Income Tax Act
The decision most relied on for Section 2(14) is Smt. Sarifabibi Mohmed Ibrahim v. CIT (204 ITR 631), cited in 197 of the 1,130 judgments on BharatTax that turn on this section.
Leading authorities on Section 2(14)
The determinative test for whether land is agricultural land or a capital asset is its actual user for agricultural purposes, not merely ownership. An explicit intention to stop cultivation or convert the land to non-agricultural use can cause it to lose its agricultural character, making its sale proceeds chargeable to capital gains tax.
The Supreme Court established the foundational test for distinguishing between capital and revenue expenditure, holding that the aim and object of the expenditure and whether it brings into existence an asset or an advantage of an enduring nature determines its character, irrespective of the payment method. An advantage lasting five years or more can be considered enduring.
Income is considered agricultural income, exempt under Section 10(1), only if the land undergoes a measure of cultivation involving basic primary operations prior to germination and subsequent post-germination activities requiring human skill and labour.
A right to purchase property under an agreement to sell is a capital asset as defined under Section 2(14) of the Income-tax Act. The relinquishment or extinguishment of such a right constitutes a transfer of a capital asset, the consideration for which is taxable as capital gains.
Forfeited advance money received for the transfer of a capital asset is not taxable as revenue receipt. Such forfeiture pertains to a capital receipt directly related to the potential sale of a capital asset.
The Supreme Court upholds the constitutional validity of Section 269SS of the Income Tax Act, 1961, which prohibits certain cash loans and deposits. This ruling is foundational for penalties under Section 271D and considering exemptions under Section 273B.
The assessee bears the onus to prove the genuineness and voluntary nature of donations received, including corpus donations. Failure to discharge this burden allows the Assessing Officer to treat such donations as non-genuine or accommodation entries.
Even if statutory language appears merely enabling, courts infer a duty to exercise such power when it aids a citizen's right. Public authorities cannot decline to act when circumstances warrant help, nor can they act to a person's detriment without justification.
The determination of whether share transactions constitute a business activity or an investment depends on the facts of the case. Factors like volume, frequency, and regularity indicate business activity, irrespective of how such transactions are presented in accounts.
This case lays down 13 specific tests and factors for determining whether land qualifies as agricultural land under the Income-tax Act. It holds that obtaining permission to sell agricultural land for non-agricultural purposes shortly before the sale does not automatically alter its agricultural character.