Agricultural land is not “fixed asset” if the purchasing company retains the character of the land: ITAT Delhi [Read Order]

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sale - Agricultural - Land - tribunal de grande instance de bombay - ITAT Delhi - Taxscan

Delhi’s Income Tax Appeal Tribunal (ITAT) ruled in January that agricultural land cannot be treated as capital property if the company buying the land retains its character as agricultural land.

The Assessee Company, Kushal Infra project Industries bought farmland and sold it after a short time. The Assessing Officer (AO) rejected the appraiser’s request who treated the profits from the sale of the land as exempt under section 2 (14) of the Information Technology Act because ‘they did not fall within the definition of “capital property”. The assessor had claimed that the profit on the sale of land was exempt for this reason since the agricultural operations were carried out on said land by the farmer.

The transaction on said land was carried out during the period 2009-2010 when its status in the register of tax authorities was, agricultural land and agricultural operations were in progress, which was confirmed by the Ministry of Land Revenue, the government of Delhi and still the status of the land is agricultural land. The Tehsildar had issued a certificate confirming that the land in question was agricultural land and beyond the municipal boundary. The Income Tax Commissioner (appeals) [CIT(A)] reviewed the documents on file in light of various case law. The case law has ruled that the land in question is agricultural land and that the profit made on the sale of said land is a capital receipt.

Confirming the findings of CIT (A), Judicial Member Bhavnesh Saini and Accountant Member Dr BRR Kumar agreed that, “where the intention of the appraised from the outset was to operate a farm on the land in question, the gain from the sale could not be taxed as the profit from an adventure of a commercial nature simply because of the short period of detention.

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