By TIOL News Service

MUMBAI, APRIL 13, 2018: THE ISSUE BEFORE THE BENCH IS - Whether mere categorisation of a land as agricultural land in records because of past use for cultivation is sufficient to prove character of such land as agricultural land. AND THE ITAT VERDICT IS NO.

Facts of the case

The Assessee, an individual, filed return of income for the relevant AY. During the assessment proceedings the AO noted that the Assessee had not offered the profit earned on sale of piece of agriculture land and claimed exemption of STCG. Accordingly, the AO asked the Assessee to furnish detail about the claim in respect of exemption of profit earned on sale of said agriculture land. However, no detail was furnished by the Assessee and therefore, the AO treated the profit earned as taxable. Accordingly, the AO worked out the STCG on sale of such piece of land. Aggrieved, by the order of AO, the Assessee filed appeal before CIT(A), however no relief was granted to the Assessee.

The Tribunal held that,

++ the land was not an agricultural land when it was sold to M/s Effect Developer and to Hobert Josheph D'souza. The assessee had not filed any documentary evidence, to prove his intention to prove that the piece of land was purchased for cultivation or soon after purchases it from its previous owner or during the period it remained under his ownership it was used for cultivation. Even otherwise merely showing the land as agriculture in the land record and the use for agriculture purpose in remote past are not the decisive factors. The use of the land for non-agricultural purpose at the time of sale would change the character of the land from agriculture to non-agricultural. As observe earlier the assessee has not shown any such document to prove his bonafide claim for exemption. The scheme and object of exempting agricultural land from the definition of capital asset is give incentive to the person who are using the agriculture land for cultivation operations. Therefore, for the purpose of granting exemption, a restricted meaning has to be given to the expression 'agricultural land' as contemplated under section 2(14)(iii)(b). Further, to ascertain the true character and the nature of the land, it must be seen whether it has been put to use for agricultural purposes for a reasonable span of time prior to the relevant date of sale and purchase and further whether on the relevant date the land was intended to be put to use for agricultural purposes in the future.

(See 2018-TIOL-549-ITAT-MUM)