CIT v. Cochin Malabar Estates & Industries Ltd (2021) 208 DTR 119 / (2022) 440 ITR 121/324 CTR 246/134 taxmann.com 162/ 285 Taxman 69 (Ker.) (HC)

S. 2(14)(iii) : Capital asset-Agricultural land-Land continued to be agricultural land in the revenue records-located 20 kms. away from municipal corporation limits-Cutting and carrying away of rubber trees did not change classification of land from agricultural to non-agricultural land-User by buyer is not relevant for assessing the gain in the hands of the assessee-Not liable to be assessed as capital gains [S. 45]

The assesseee sold the agricultural land. As per the condition of MOA the assessee agreed to cut and carry away all rubber trees on said land at his own expenses before sale.  Land continued to be agricultural land in the revenue records and the land is located 20 kms. away from municipal corporation limits. The   Assessing Officer held that   with cutting and carrying away of rubber trees land became barren land and a barren land could not be treated as agricultural land and, further, KSIDC, in due course of time, upon purchase from assessee, converted said land into an industrial  Estate. The Assessing Officer assessed the gain  on sale of said land  as liable to capital gains tax.  The Tribunal held that the  sale of agricultural land  cannot be assessed as capital gains. On appeal by the revenue land the Court held that the  land in question was located 20 kms. away from municipal corporation limits.  Assessee had demonstrated that classification of land continued to be an agricultural land in revenue records even as on date of sale.  Land was put to use only for agricultural purposes by assessee-The assessee could not be expected to have control over activities of buyer once transfer was completed. Cutting and carrying away of rubber trees did not change classification of land from agricultural to non-agricultural land.  Order of Tribunal was affirmed.   (AY. 1996-97)

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