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April 2012

The assessee was engaged in the business of construction of buildings

By K. B. Bhujle, Advocate
Reading Time 1 mins
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The assessee had sold the agricultural land on which agricultural activities were carried out till the date of transfer. Thereafter order permitting non-agricultural use was obtained. The assessee claimed that it is a case of transfer of an agricultural land and therefore there was no capital gain chargeable to tax. The Assessing Officer held that the land was a capital asset and assessed the capital gain as taxable. The CIT(A) accepted the assessee’s claim and allowed the assessee’s appeal. The Tribunal held that the land sold by the assessee retained its agricultural character till the date of the order permitting non-agricultural use and that it could be treated as a capital asset only thereafter. The Tribunal held that there was no need to interfere with the finding of the CIT(A) that the sale transaction was not a transaction involving transfer of a capital asset and, therefore, no need to bring to tax the income referable to the capital gains.

On an appeal filed by the Revenue, the Karnataka High Court upheld the decision of the Tribunal and held that there was no illegality in the order of the Tribunal.

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