Rural agricultural land situated beyond the specified limits was converted for non agricultural purposes but was used for agriculture till the date of sale-
Facts: Assessee claimed that land is situated beyond the Municipal limits 10 kms. and therefore, it is not a capital
asset as per section 2(14) of the Act. Revenue contended that the land was converted for non agricultural purposes before execution of sale deed, therefore, it is a capital asset u/s 2(14) & cannot be exempted u/s 10(1).
Tribunal noted and held:
(i) The lands in question do not cease to be agricultural
lands merely because it stood converted in the records of
the land revenue authorities of the state government.
(ii) The land continued to be agricultural land for the
limited purpose of determining whether the same falls
under the definition of capital asset under section 2(14) of
the Act in view of the following facts :-
(a) The said land was put to use as agricultural land by the
assessee right up to the date of sale and the assessee has
also been declaring the agricultural income earned
therefrom in the returns of income filed before the
Department in this period;
(b) The assessee did nothing to change the physical character
of land from agricultural to non-agricultural even after
obtaining the permission to convert;
(c) The land continued to be agricultural land in actual
physical condition even after a period of six years after its
(d) The assessee obtained permission to convert the land
merely to facilitate its sale to corporate entity as the sale
would otherwise not been possible.
The land was treated as not a capital asset as per section 2(14) of the Act.