By TIOL News Service

ERNAKULAM, AUG 27, 2018: THE ISSUE IS - Whether waterlogged area comprised within the backwaters, which is adjacent to an agricultural land and has made the land more fertile, should also deemed to be considered as agricultural land only. YES IS THE VERDICT.

Facts of the case:

The assessee, an individual, had sold 130.73 acres of land lying contiguously, but registered in the name of assessee in two Thandapers as per the Transfer of Registry Rules. Out of the whole land, 97.60 acres was registered under one Thandaper and 33.13 acres in another Thandaper; the latter being backwaters. During the course of assessment, the AO found that 97.60 acres of land was agricultural land. However with respect to 33.13 acres, he found that it was a water-logged area, being comprised in the backwaters and, hence, there could be no classification as an agricultural land. Accordingly, capital gains were sought to be assessed on that portion of land, which was held to be water-logged and part of backwaters.

When the matter went on appeal, the Tribunal found that the contention of assessee that the Kayal portion was used for irrigating the other portion, was acceptable. It was found that the Kayal land had acquired the character of a water tank, used for the irrigation of the other land.

High Court held that,

++ it is noticed that the AO had accepted the fact that 97.60 acres of land sold by the assessee is agricultural land. In fact, the said finding was also on proof of specific agricultural operations having been undertaken in the said land. The adjacent land which is lying as Kayal land and water-logged, would only have made the adjacent land more fertile and admittedly it was not used for any other purpose. The adjacent land remaining as water-logged and comprised within the backwaters, sold along with the agricultural land, could be deemed to be only agricultural land. Hence, this Court is not inclined to interfere with the orders of the Tribunal.

(See 2018-TIOL-1707-HC-KERALA-IT)