Agricultural Land was not converted at the Time of Sale: ITAT deletes Capital Gain Addition .

The ITAT Bangalore bench has held that since the agricultural land was not converted at the time of sale, the sale consideration shall not be included in the total income of the assessee to compute capital gain under the provisions of the Income Tax Act, 1961.

The assessee entered into sale agreement on 15.4.2013 to sell subjected property and the land was got converted as per condition laid down by the purchaser in sale agreement. As per this condition in sale agreement, the assessee got converted the said land for non-agricultural purposes on 16.9.2013 by order of Dy. Commissioner of Bangalore district OM. Later, the assessee entered into a sale deed on 18.9.2013.

The Assessing Officer was of the view that the land was converted for non-agricultural purpose before sale and the sale of converted land for non-agricultural purpose should be liable for tax as it is not an agricultural income in terms of section 2(14) of the Act.

Before the Tribunal, the assessee pleaded that the conversion of said property for non-agricultural purpose was only to fetch good price and not any other intention. It was contended that the property was sold within a period of 2 days after the order of conversion and the land was not subjected to use for non-agricultural purpose on any day and the sole intention of conversion is to get good price that cannot be reason to hold that the land sold by assessee is non-agricultural land.

A bench of Shri Chandra Poojari, Accountant Member and Smt. Beena Pillai, Judicial Member observed that the land is an agricultural land and only to facilitate to get good price, the assessee converted the land and at the time of entering into sale agreement, land was not converted into non-agricultural land.

“The assessee also declared agricultural income from the said land as an agricultural income at Rs.9 lakhs, which was accepted by the department and there was no disturbance on this count. The situation of land within the BMRDA limits cannot be considered as the land is situated within the limit of municipality and moreover, BMRDA is not a municipal or local authority in terms of section 2(14)(iii)(a) of the Act,” the Tribunal observed.

Quashing the addition based on the judicial precedents, the Tribunal held that the property sold by assessee is not liable for capital gains being an agricultural land.