Extracts from land revenue registers, insufficient evidence to prove agricultural activity: ITAT

The Mumbai Bench of the Income Tax Appeal Tribunal (ITAT) confirmed that the assessee objects to the addition being made for short-term capital gains by treating the land as capital property.

The two-member bench chaired by Pramod Kumar (Vice President) and Sandeep Singh Karhail (Judicial Member) noted that apart from the deeds of purchase and sale of transfer and the 7/12 extracts from the land registers, no other proof was reported by the appraised of having cultivated the land or carried out any agricultural activity during the period the land was held by the assessee or the period before or after its sale.

Assessed is individual and derived income from principal home ownership, business income, capital gains and other sources. For the year under review, the assessee electronically filed their tax return, declaring the total income. In the tax return, the assessee claimed a profit of Rs. 47,58,980, arising from the sale of land claimed as agricultural land, as exempt under Section 45 read with Section 2(14 ).

During the valuation process, the valuator was asked to submit details of earnings as well as documentary evidence to support the claim that the land was agricultural land and that the valuator had carried out agricultural activities on Earth.

In response, the assessee, referring to the deeds of purchase and sale of conveyance, argued that the land is agricultural land. The copy of the land revenue register, i.e. extract 7/12, was also provided, in which the land in question was declared suitable for cultivation.

The assessee also argued that his case does not fall under the other conditions set out in Article 2(14), i.e. relating to the distance from the local boundaries of any municipality or township board as well as to population.

The assessee argued that there is nothing in law to suggest that when no agricultural activity is carried out by the assessee on the land, the land ceases to be agricultural land.

The AO disagreed with the assessee’s observations and felt that no agricultural activity had been carried out on the land since the 7/12 extract itself shows that the land is barren .

The AO further considered that nothing had been recorded to prove that the agricultural activity was carried out on the land in question and that the mere fact that the land was registered as agricultural in the tax registers would not mean that the land is agricultural land.

The AO treated the land as a “fixed asset” and the profit of Rs. 47,58,980 on the sale of land as a “short term capital gain” and added the same to the total income of the assessee .

The CIT(A) rejected the appeal lodged by the assessee. The CIT(A) considered that to fall under the category of agricultural land, it was necessary not only that it could be used for agricultural purposes, but that it had actually been used as such at a given time. The CIT(A) also ruled that a temporary non-user for agricultural purposes may not affect the character of the land, but the permanent abandonment of a user for agricultural purposes will certainly affect the character of the land as agricultural land.

The assessee argued that the term “Jirayat land” used in the Land Revenue Registry means land where cultivation depends on annual rainfall and therefore the land cannot be called barren as it was cultivatable soil.

The department argued that there was no evidence on file to prove that the land had ever been used for agricultural purposes.

The court found no infirmity in the order issued by the CIT(A).

Case Title: Noshir Darabshaw Talati v Asst. Central Circle Income Tax Commissioner – 7(1), Mumbai

Reference: ITA n°1516/Mum./2021

Date: 03.10.2022

Counsel for the Appellant: Maître BV Jhaveri

Counsel for the Respondent: Sr. AR Hoshang B. Irani

Click here to read the order

Sallie R. Loera