May 23, 203: Money received from the sale of agricultural land can’t be treated as capital gains, the Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has ruled recently. If an agricultural operation does not result in generation of surplus that cannot be a ground to say that the land was not agricultural land, the ITAT said in its order.
For the uninitiated, capital gains are the profit you earn from the sale of an asset, and capital gains tax is the tax you pay to the government on that income.
The case: George Gee Varghese Vs ITO
In 2006, Tamil Nadu’s George Gee Varghese purchased land in Kerala for Rs 92 lakh. He sold it to the Rubber Board Employees Co-operative Housing Society for Rs 6.81 crores in FY2015. He claimed that the agricultural land used for agricultural operations and out of the scope of capital asset as defined under Section 2(14).
He also argued that even though the new owners of the land were using it for commercial purposes, the subsequent use of land by the purchaser was not relevant to deciding the nature of land when it was sold.
What did the ITAT say?
While delivering its order in the case, the tax tribunal said: “The commissioner of income tax (appeals) ought to have appreciated that what is required is the classification of the land as agricultural purpose land in the government records and as long as the land has been cultivated in any of the earlier years, then the land has to be treated as agricultural land.”
“He ought to have appreciated that the purchase deed clearly mentions that the assessee bought agricultural land and the classification of land was not changed at any point of time subsequently till the sale,” it added.
The Bench also cited the Madras High Court order in the Sakunthala Vedachalam case, where the HC has ruled that a taxpayer cannot be denied exemption from capital gains tax once it was accepted by revenue authorities that the classification of lands according to the revenue records was agricultural lands, and it satisfied other conditions as well.
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An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.
In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
sunita.mishra@proptiger.com
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