Rural land near mining zone

If on the date of sale, the land was rural agricultural land (i.e., situated beyond the specified municipal limits under section 2(14)(iii)) and not converted to NALA by the assessee, it is not a capital asset, and no capital gains tax arises, irrespective of high sale consideration or later conversion by the purchaser.
Subsequent conversion to NALA and quarrying by the buyer cannot retrospectively change the nature of the asset in the seller’s hands.
Accordingly, Section 50C (SDV ₹45 lakh vs consideration ₹2.25 crore) is irrelevant if the land is not a capital asset.

In Favour of Assessee

✅ CIT v. Manilal Somnath (1977) 106 ITR 917 (Guj HC)

Subsequent use of land for non-agricultural purposes is irrelevant.

✅ CIT v. Madhabhai H. Patel (1988) 177 ITR 417 (Guj HC)

Intention of purchaser and future development do not decide nature of land.

✅ Sarabibi Mohamed Ibrahim v. CIT (1993) 204 ITR 631 (SC)

Nature of land must be judged at the time of sale, based on cumulative factors.

✅ DCIT v. Capital Local Area Bank Ltd (2009) 122 TTJ 630 (Chd ITAT)

Conversion to non-agricultural land after sale is irrelevant.

✅ ITO v. Smt. Shanti Devi (2012) 50 SOT 33 (Del ITAT)

High consideration or location near industrial area does not alter agricultural character.

In Favour of Revenue (Distinguishable)

❌ CIT v. Raja Benoy Kumar Sahas Roy (1957) 32 ITR 466 (SC)

Revenue relies on actual agricultural operations — distinguishable if land was classified agricultural in records.

❌ CIT v. Gemini Pictures Circuit Pvt Ltd (1996) 220 ITR 43 (Mad HC)

Land already converted and earmarked for non-agricultural use before sale.

📌 Not applicable where:

• No NALA conversion by assessee

• Revenue records show agricultural land on sale date