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Tuesday, July 31, 2012

In absence of central govt. notification any area no being within more than eight kms. from the local limits be considered as agricultural land in India

Hon'ble High Court of Karnataka in the case of:

Commissioner of Income Tax 
Madhukumar N. (HUF)

[2012] 23 341 (Karnataka)

The assessee is a Hindu undivided family. The case relates to the assessment year 2005-06. 

Whether the agricultural land belonging to the family sold dated 02.03.2005 for a total consideration of Rs. 52,00,000/- resulted in long term capital gain in a sum of Rs. 48,94,784/- or not?

Contention of Assessee & Revenue:
The assessee claimed that the amount does not amount to capital gain being the sale attributable to the agricultural land and on the other hand revenue took a stand that the subjected land was located within 8 kms,of Dasarahalli City Municipal Council. 

Tribunal concluded:
The Tribunal accept assessee's contention who relied on the certificate issued by Dasanapura Gram Panchayath to the effect that the population of Adakemaranahalli village within whose limits the land was located was less than 10,000 and therefore opined that the subject land cannot be considered as one coming within the definition of capital asset under Section 2(14)(iii)(a) & (b) of the Act.

High Court has held that,-
"An agricultural land in India is not a capital asset but becomes a capital asset if it is the land located under Section 2(14)(iii)(a) & (b) of the Act, Section 2(14) (iii) (a) of the Act covers a situation where the subject agricultural land is located within the limits of municipal corporation, notified area committee, town area committee, town committee, or cantonment committee and which has a population of not less than 10,000.

10. Section 2(14)(m)(b) of the Act covers the situation where the subject land is not only located within the distance of 8 kms from the local limits, which is covered by Clause (a) to section 2(14)(iii) of the Act, but also requires the fulfilment of the condition that the Central Government has issued a notification under this Clause for the purpose of including the area up to 8 kms, from the municipal limits, to render the land as a "Capital Asset.

11. In the present case, it is not in dispute that the subject land is not located within the limits of Dasarahalli City Municipal Council therefore, Clause (a) to section 2(14][iii] of the Act is not attracted.

12. However, though it is contended that it is located within 8 knits,, within the municipal limits of Dasarahalli City Municipal Council in the absence of any notification issued under Clause (b) to section 2(14)(iii) of the Act, it cannot be looked in as a capital asset within the meaning of Section 2(14)(iii)(b) of the Act also and therefore though the Tribunal may not have spelt out the reason as to why the subject land cannot be considered as a 'capital asset' be giving this very reason, we find the conclusion arrived at by the Tribunal is nevertheless the correct conclusion."

Thank You !

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