Whether gains from sale of agricultural land is exempt even though purchaser intends to use the land for commercial purposes?

Last updated: 01 November 2014

Court :
ITAT-Hyderabad

Brief :
Assessee purchased for a consideration by entering into an agreement of sale in 2002 for a consideration of Rs.13.44 crores and received an advance of Rs.7.70 crores. However, in 2007, assessee as ‘guarantor’ executed irrevocable General Power of Attorney (GPA) in favour of the purchaser of land. Assessee declared capital gains on this transaction at NIL claiming that the land sold is an agricultural land and situated beyond 8 KM from any municipality. The property conveyed through this irrevocable GPA was treated as sale by A.O. and relying on some clauses of irrevocable GPA, held that the land was meant for commercial exploitation on the date of transfer. He accordingly, brought to tax the long term capital gain and allowed deduction under section 54F to the extent assessee invested in House at Banjara hills and taxed an amount of Rs.2,33,73,151 as long term capital gain. Held on basis of decision of Bombay High Court in the case of CIT vs. Debbi Almao and Joaqyam Almao and also on facts that assessee’s land was used as agricultural land and is away from GHMC limits beyond 8 KMs, the said transaction does not give rise to taxable capital gains.

Citation :
DCIT – Appellant – Versus – Mr. M. Kalyan Chakravarthy – Respondent