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2013 (9) TMI 611 - AT - Income TaxNature of Land - purchase and sale to be agricultural land – Whether the land sold accrues business income or income under the head capital gain - Held that:- The land in question is recorded as agriculture land, in the revenue record, on the date of purchase and sale of the same. The land is assessed to land revenue. The assessee has not taken any step till the date of sale, to convert the agricultural land to non- agricultural purposes and to undertake any improvement project on such land - Cumulative effect of all the material evidences clearly suggests that the land in question is agricultural land and the land does not fall under the definition of capital asset, within the meaning of Section 2(14)(iii) of the Act - The fact that the land was sold to industrialist for setting up industrial units, is of no legal consequence, in determining the nature and character of the land in question. The land remained agricultural land till it was sold to various parties. The future use by the purchaser is also irrelevant and immaterial for the purpose of determination of true character and nature of the land in question. Lands in question do not constitute capital asset within the meaning of Section 2(14)(iii) of the Act. Therefore, surplus realized on sale of such lands cannot be taxed as capital gains u/s 45 r.w. Section 10(37) of the Act. The provisions of Section 10(37) were inserted by the Finance Act 2004 (No.2) w.e.f. 1.4.2005. The revenue merely made an assertion and treated the surplus realized from the sale of rural agricultural lands as business profit, which don't fall u/s 2(14) of the Act. Therefore, having regard to the fact-situation of the present case, relevant record and judicial verdicts, the surplus realized on sale of such land, is not taxable receipts – Appeal of the assessee is allowed – Decided in favor of Assessee.
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