TMI Blog2023 (3) TMI 1238X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was eligible for claim of deduction u/s 2(14)(iii) of the Act on sale of aforesaid agricultural land. Disallowance of interest expense - AO observed that while these interest expenses were for the period March 2011 but the land in question was already sold on 10-01-2011. Therefore, these interest expenses are not related to the above land transaction - CIT(A) allowed the appeal of the assessee on the ground that the AO erred in facts in holding that the interest expenditure was paid after the date on which the aforesaid land was sold - HELD THAT:- CIT(A) on appreciation of the facts of the case has observed that the assessee has been able to establish the nexus between interest paid on borrowed fund and the sale of land and accordingly the assessee in the instant set of facts was justified in claiming interest expenditure as interest paid on the purchase of said land against sale of land at Soyala Gam. CIT(A) on going through the relevant records has also satisfied itself that no portion of interest expenses were incurred after the date of sale of the aforesaid property. Accordingly, we do not find any infirmity in the order of Ld. CIT(A) so as to call for any interferenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 94 ITR 433 (Del) the Delhi High Court held that in order to determine whether a particular land is agricultural land, the question whether income derived from such land was agricultural income as defined in the Act would be relevant factor and also the use to which the land is put would be a very relevant factor to be considered for determining whether the land sold is agricultural land or not. The Ld. Assessing Officer held that the assessee had purchased the said property with the sole intention to sell the same for profit. Therefore, the said asset could not be considered to be used for agricultural purpose. Therefore, the said gain consequent to the sale of such land cannot be claimed to be exempt u/s 2(14)(iii) of the Act and the same would have to be treated as either as a business income or Capital Gains. Accordingly, the Ld. Assessing Officer disallowed the claim of exemption u/s 2(14)(iii) of the Act on such sale of land amounting to Rs. 1,67,024/-. 4. In appeal before Ld. CIT(A), the assessee contended that the land qualifies as agricultural land and for the following reasons the assessee is eligible to claim exemption section 2(14)(iii) of the Act: (a) The agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om Ahmedabad Municipal Corporation and is agricultural land. However, he denied the exemption merely on the ground that there is no agriculture activity carried out andno agriculture income shown. There is no dispute that the land is agriculture land as per Section 2(14)(Hi), and therefore, is not capital asset. In view of the above, the gain arising out of it is not amenable to capital gain. The addition made by the Assessing Officer is accordingly deleted. The ground of appeal is accordingly allowed. 5. The Department is in appeal before us against the aforesaid order passed by Ld. CIT(A) allowing the appeal of the assessee with respect to the eligibility of the assessee to claim exemption u/s. 2(14)(iii) of the Act in respect of sale of aforesaid land. The Ld. Departmental Representative primarily relied upon the observations made by the Ld. Assessing Officer in the assessment order. In response, Ld. Counsel for the assessee submitted that there is no infirmity in the order of Ld. CIT(A) and as per the Act there is no criterion which has been mentioned that for holding a land to be agricultural land , agricultural produce must be done on such land and agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue records as an agricultural land and no permission was ever obtained for non-agricultural use by assessees. It was also noted that permission for non-agricultural use was obtained for first time by 'V' Ltd. i.e., purchaser, after it purchased land. Therefore, the High Court held that since on facts, finding recorded by two authorities below that land was used for purpose of agriculture, was based on appreciation of evidence and by application of correct principles of law and, therefore, said finding did not require any interference. In the case of CIT v. Nitish Rameshchandra Chordia57 taxmann.com 394 (Bombay) , the High Court held that where agricultural land sold by assessee was situated beyond 8 kms from municipal limits when measured through road distance, profit from sale of said land was not taxable. In the case of CIT v. K.R.N. Prabhakaran (HUF)73 taxmann.com 305 (Madras) , the High Court held that where Survey Department of State government and Tahsildar of relevant zone, had consistently certified that land sold by assessee was agricultural land situated beyond 8 kms from municipal limits, Assessing Officer could not have relied on report of investigation win ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Accordingly, the AO disallowed the aforesaid interest expenses amounting to ₹ 47,72,054/- and added the same to the total income of the assessee. 8. In appeal, Ld. CIT(A) allowed the appeal of the assessee on the ground that the AO erred in facts in holding that the interest expenditure of ₹ 24,85, 581/- was paid after the date on which the aforesaid land was sold. The Ld. CIT(A) held that the assessee has been able to establish from records that it had claimed only a sum of ₹ 9,70,718/- as interest to Ganesh Plantation which was paid before the date of sale of aforesaid land. Accordingly, Ld. CIT(A) allowed the appeal of the assessee with the following observations: 4.3. I have carefully considered the facts of the case, assessment order, and submission of the appellant. The appellant while computing the gain sale of land at Soyala Gam has claimed interest expenses of Rs.47,72,054/- as interest paid in the purchase of land. The Assessing Officer has disallowed the claim on the ground that appellant has not been able to prove that interest paid was for purchase of land. The Assessing Officer has also noted that the interest included the interest payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly the assessee in the instant set of facts was justified in claiming interest expenditure of ₹ 47,72,054/-as interest paid on the purchase of said land against sale of land at Soyala Gam. Further, Ld. CIT(A) on going through the relevant records has also satisfied itself that no portion of interest expenses were incurred after the date of sale of the aforesaid property. Accordingly, we do not find any infirmity in the order of Ld. CIT(A) so as to call for any interference. 9. In the result, ground number 2 of the Department s appeal is dismissed. 10. In the result, the appeal of the Department is dismissed. CO-1/Ahd/2020 11. The assessee has also filed Cross objection against appeal filed by the Department. The assessee has taken the following grounds in its Cross objection: All the grounds in this Cross Objections are mutually exclusive and without prejudice to each other :- 1. The Ld.CIT(A) after carefully considering the facts of the case, submission of the appellant as well as the various judicial pronouncements relied upon by the appellant has rightly held that the AO has not doubted the fact that land is situated beyond 8 kms from Ahmedabad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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