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November 30, 2022

Agriculture land taxable when no longer used for agricultural purposes

Agriculture land taxable when no longer used for agricultural purposes

Facts and Issue of the case

The facts of the case assessee, a person, received income from many sources, including business income, capital gains, and other sources under the head house property. The assessee e-filed his income tax return for the year in  on October 31, 2017, declaring a total income of Rs. 36,23,60,810. In the said return of income, the assessee claimed profit of Rs. 47,58,980, arising on sale of land claimed to be agricultural land, as exempt under section 45 r/w section2(14) of the Act. The assessee was required to provide information about these gains and documented proof to support the statements that the subject property was an agricultural land and that the assessee had engaged in agricultural activity on the subject property during the assessment proceedings. In response, the assessee said that the land is an agricultural land by citing the purchase and sale deeds of conveyance.Additionally, a copy of the land revenue record, or 7/12 extract, was provided, in which it was claimed that the disputed area was suitable for cultivation. The assessee further argued that its case did not meet the other requirements listed in section 2(14) of the Act, specifically those related to population and distance from any municipality or cantonment board’s local limits. In light of this, the assessee claimed that nothing in the law suggests that land ceases to be agricultural when the assessee no longer uses it for agricultural purposes.

The AO did not agree with the assessee’s arguments and found that no agricultural activity had been performed on the land as the 7/12 extract itself indicates that the land is barren in an order dated 23/12/2019 given under section 143(3) of the Act. The AO also ruled that no evidence had been presented to show that the agricultural activity had actually taken place on the land in question, and that just because a piece of land is listed as agricultural in revenue records does not necessarily mean that it is actually an agricultural area. As a result, the AO classified the land as a “capital asset” and included the profit of Rs. 47,58,980 from the sale of the land to the total as short-term capital gains and added the same to the total income of the assessee.

The only grievance of the assessee is against addition of Rs. 47,58,980 made on account of short term capital gains by treating the land as capital asset

The relevant findings of learned CIT(A) are as under: . In the case , however, it is evident from the extract of 7/12 document that the land was classified as barren and hence, the onus squarely on the assessee to establish that the land was ordinarily used for the purposes of agricultural or allied to agriculture, and that it was left fallow in a particular year or years owing to adverse seasonal conditions or to some other special reason. CIT ,however find that assessee has not induced any evidence to establish that the land was ever used for agricultural purposes, rather the claim of the assessee before me is that ‘having put the land for a culture purposes’ is not even a requirement for claiming exemption, which could not be accepted in light of the detailed discussion and judicial pronouncements referred to earlier. I am, therefore, of the considered view that the assessee has failed to discharge the onus to establish that the impugned land was ‘agricultural land’ as defined in section 2 (14) of the Act, which could not be subjected to charge of capital gain under section 45 of the Act.”

 In an appeal, the learned CIT(A) denied the assessee’s appeal and ruled that land must not only be able to be utilised for agricultural purposes but also have actually been used for those purposes at some point in the past in the impugned judgement dated 13/07/2021.

Observation of Tribunal

Aggrieved by the decision , assessee filed appeal before Tribunal

The learned Authorized Representative (the “learned AR”) claimed that the land is an agricultural plot of land by citing the conveyance deeds and the land revenue record. The knowledgeable AR said that because the term “Jirayat land” is used in the land revenue record to refer to land whose cultivation depends on rainfall, the aforementioned area cannot be considered barren because it is cultivable. The learned AR further submitted that from the dateof purchase to the date of sale, the said land was agricultural land and it was ready for cultivation of kharif crops. Further, the other conditions in section 2(14) of the Act are not applicable in the present case.

Meanwhile, the learned Departmental Representative (or “learned DR”) strongly supported the decisions made by the lower authorities and asserted that no proof had ever been presented to show that the land had ever been used for agricultural purposes.

Tribunal have considerd the rival submissions and perused the material available on record. The assessee, as noted above, is an individual and also claimed to be an agriculturist. The assessee purchased a plot of land bearing survey No. 88/3, admeasuring 36 Gunthas, situated at Village Kunenama, Maval Taluka, District-Pune on 06/12/2013 along with his wife for a total consideration of Rs. 1,56,65,000. In the deed of conveyance in respect of the aforesaid purchase transaction, the land is stated to be an agricultural land. Subsequently, vide deed of conveyance dated 20/07/2016 assessee along with his wife sold the said land for a total consideration of Rs. 2,60,00,000. Since, the assessee’s share was only to an extent of 50% in the aforesaid property, assessee claimed exemption of Rs. 47,58,980 (i.e. 50% of Rs. 95,17,960 being profit arising from sale of aforesaid property). It is the claim of the assessee that the aforesaid land, purchased in the year 2013 and thereafter sold in the year 2016, was an agricultural land and therefore the same is not a ‘capital asset’ for the purpose of section 2(14) and gains arising from transfer is not taxable under section 45 of the Act

The learned AR, during the course of hearing, referred to the various entries in the aforesaid record to submit that the land has been mentioned as suitable for cultivation and grass was grown on it. Apart from the deeds of conveyance and 7/12 extracts from land revenue records, no other document has been placed to substantiate that the land was an agricultural land or any agricultural activity was ever conducted on it


As noted above, in the present case as well, no other evidence of the assessee’s having farmed the land or engaged in any agricultural activity during the time the land was held by the assessee or during the period prior to or after its sale has been brought to the attention of the taxing authority. Respectfully following the aforementioned Abhijit Subash Gaikwad (supra) judgement of the coordination bench of the Tribunal, we do not see any flaws in the contested ruling made by the knowledgeable CIT.

The order passes in favour of CIT of Rs. 47,58,980 made on account of short term capital gains by treating the land as capital asset and dismiss the appeal of assesses


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