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2026 Supreme(Online)(ITAT) 2198
INCOME TAX APPELLATE TRIBUNAL (CHENNAI BENCH)
ABY T Varkey, Judicial Member, S. R. Raghunatha, Accountant Member
INCOME TAX OFFICER- WARD-1/JAO NAGERCOIL – Appellant
Versus
ARULANANDHAM BER SYRIL ANTOW NAGERCOIL – Respondent
ITA No.2079/Chny/2025
For the Appellants/Petitioners: Shri. Bipin C.N., C.I.T.
For the Respondents: Shri. M.Ramesh Kumar, F.C.A.
Rural agricultural land beyond 8km municipal limits, certified by VAO, not capital asset u/s.2(14); revenue certificates prevail over AO approximations.
Headnote:The Income Tax Act, 1961 defines 'capital asset' under S.2(14), excluding rural agricultural land situated beyond specified distances from municipal limits. The assessee, an individual, sold land certified as agricultural and beyond 8 km from Nagercoil municipal limits by Village Administrative Officer. The Assessing Officer treated it as capital asset based on Google Maps, adding long-term capital gains; CIT(A) deleted the addition relying on VAO certificate and jurisdictional precedents. Tribunal upheld CIT(A), affirming land not a capital asset. Key issue: Whether land constitutes capital asset u/s.2(14). Ratio: Certificates from revenue authorities like VAO on land nature and aerial distance prevail over AO's approximations; original assessment accepted exemption after verification; no Rule 46A violation as document pre-existed. Appeal by Revenue dismissed; capital gains addition deleted.
| Table of Content |
|---|
| 1. revenue and assessee arguments on addition (Para 2 , 5 , 6 , 7 , 8) |
| 2. facts of agricultural land sale and assessments (Para 3 , 4 , 9 , 13 , 14) |
| 3. s.2(14) excludes rural agricultural land (Para 11 , 12 , 15 , 16) |
| 4. precedents uphold vao certificates (Para 17 , 18) |
| 5. no rule 46a violation; appeal dismissed (Para 19 , 20 , 21 , 22) |
आदेश/ORDER
PER S. R. RAGHUNATHA, AM:
This appeal by the revenue is filed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2015-16, dated 28.05.2025.
2. The Revenue has raised the following effective grounds:
1. The Ld. CIT(A) erred in law and on facts in deleting the addition made towards capital gains.
2. The Ld. CIT(A) erred in admitting additional evidence without remanding the same to the Assessing Officer, in violation of Rule 46A of the Income-tax Rules, 1962.
3. The Ld. CIT(A) ought to have restored the order of the Assessing Officer.
3. The brief facts emanating from the records are that the assessee is an individual filed his return of income for A.Y.2015-16 on 31.10.2015, declaring total income of Rs.9,71,540/-. The return was processed u/s.143(1) of the Act and subsequently assessed u/s.143(3) of the Act on 27.09.2017, assessing income at Rs.72,66,560/-.
4. Later, the assessment was reopened u/s.147 of the Act, and reassessment was completed u/s.144 r.w.s. 144B of the Act on 28.03.2022, making the following additions:
i) Disallowance u/s.40(a)(ia) of Rs.2,68,449/- for alleged non-deduction of TDS on interest paid of Rs.8,94,831/- to M/s.Cholamandalam Finance Ltd.
ii) Addition of Rs.10,18,03,600/- by treating sale of land situated at Villukuri Village, Kanyakumari District as taxable long-term capital gain, holding that the land was a capital asset under section 2(14) of the Act.
4.1 On appeal the Ld.CIT(A) confirmed the disallowance u/s.40(a)(ia) and deleted the addition made towards capital gains, holding that the land sold by the assessee was rural agricultural land situated beyond the prescribed municipal limits and therefore not a capital asset u/s.2(14) of the Act by passing an order dated 28.05.2025 by holding as under:
“9.8 Therefore, considering the facts and circumstance of the case and placing reliance upon the certificate issued by the village administrative officer, as mentioned supra, it is inferred that the impugned land transferred by the assessee and his wife is situated beyond 8 km of the municipal limits of the Nagercoil Municipal Limits. As such, the impugned land cannot be termed as capital asset within the meaning of provisions of section 2 (14) of the IT Act.
9.9 It may be appreciated that the nature and character of the agricultural and as compared to its distance from the municipal limits is a cardinal principle with respect to the taxability of transfer of agricultural land. When the agricultural land is situated beyond prescribed limits as mentioned in provisions of section 2 (14), the same cannot be brought to tax under the provisions of the IT Act. The reliance is placed on the decision of Hon'ble jurisdictional Madras High Court in case of Ramesh Shroff Vs CIT, Chennai [2020] 120 taxmann.com 403 wherein it is found that the Assessee sold a land on 18-1-2011 for sale consideration of certain amount and the Assessee filed its return of income contending that said land was agricultural land and, thus, capital gain on its transfer was exempt. Same was accepted and return of assessee was processed under section 143(3). Subsequently, Assessing Officer issued a reopening notice against assessee on ground that land sold by assessee was situated within limits of city corporation and same could not be treated as an agricultural land. Accordingly, he assessed sale consideration from sale of lands as long-term capital gains. It was noted that Tribunal found that land sold by assessee came within corporation limits by virtue of Government order no. 97, dated 19-7- 2011. Thus, when asses
