No tax on sale of agricultural land if assessee continued to use it for agricultural operations after conversion: HC

Case Details: CIT v. M.R. Anandaram (HUF) - [2022] 142 taxmann.com 403 (Karnataka)

Judiciary and Counsel Details

• • P.S. Dinesh Kumar & C.M. Poonacha, JJ.
  • E.T. Sanmathi, Adv. for the Appellant.
  • A. Shankar, Sr. Adv. & M. Lava, Adv. for the Respondent.

Facts of the Case

The assessee was a Hindu Undivided Family (HUF) that owns several pieces of agricultural land. During the relevant assessment year, the assessee sold agricultural lands after converting them into non-agriculture land. The assessee filed the return of income without showing any capital gains from the sale of lands.

Assessing Officer (AO) contended that lands sold by them were capital assets and the capital gains arising on the said assets were chargeable to tax. On appeal, the CIT(A) also confirmed the order of AO which was later reversed by the Tribunal.

Aggrieved revenue filed the instant appeal before the Karnataka High Court.

High Court Held

The Karnataka High Court held that the Tribunal had duly recorded that the assessee had continued agricultural operations on the land though such land was converted. It was also evident from the fact that income derived from agricultural operations was accepted by the revenue.

Revenue also failed to bring on record to suggest that the lands were used for any other purpose other than cultivation after conversion. Further, the certificate of Senior Assistant Director of Horticulture also certified that there were fruit-yielding mangoes, sappota, coco, cashew, jackfruit, rose apple, and guava trees aged 25 to 30 years.

Thus, the mere inclusion of land without any infrastructure development does not convert the land into non-agricultural land. Hence, the order passed by the Tribunal, based on evidence on record, does not call for any interference.

List of Cases Reviewed

• • Order passed by ITAT, Bengaluru, Bench ‘B’ in IT Appeal No. 1651/Bang/2012 dated 21-11-2014 (para 27) affirmed.

List of Cases Referred to

• • CIT v. Murali Lodge [1991] 59 Taxman 590/[1992] 194 ITR 125 (Ker.) (para 15)
  • CWT v. Officer-in-Charge (Court of Wards) [1976] 105 ITR 133 (SC) (para 20)
  • Smt. Sarifabibi Mohmed Ibrahim v. CIT [1993] 70 Taxman 301/204 ITR 631 (SC) (para 22)
  • CIT v. Gemini Pictures Circuit (P.) Ltd. [1996] 85 Taxman 594/220 ITR 43 (SC) (para 23)
  • CIT v. Smt. T. Urmila [ITTA No. 297 of 2013, dated 17-7-2013] (para 28).