The Aryavarth Express
Agency(Bombay): In a landmark decision, the Bombay High Court has established that the actual execution of agricultural operations is not a prerequisite for classifying parcels of land as agricultural. This judgment was delivered by the bench comprising Justice K. R. Shriram and Justice Dr. Neela Gokhale, who also set aside a prior order and mandated a reevaluation to determine the authenticity of evidence regarding the agricultural nature of the land in question.
The case involved an individual petitioner, Ashok Chaganlal Thakkar, who faced an income tax assessment on profits from the sale of certain land parcels. Initially, the Assessing Officer (AO) deemed these lands as capital assets, thereby subjecting the sale to capital gains tax, on the presumption that the short-term holding of the land indicated an investment motive rather than an agricultural one.
The AO’s decision was based on the absence of proof of agricultural activities by the petitioner during the relevant period. This led the petitioner to challenge the assessment, arguing that the parcels were indeed agricultural lands and thus exempt from capital gains tax.
Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] requested documentation to substantiate the land’s agricultural status. The petitioner submitted evidence, including documents from local government officials, confirming the land’s location beyond urban limits and certifying the rural population size, thereby supporting its agricultural classification.
However, the CIT(A) dismissed the appeal on the grounds of insufficient governmental records explicitly categorizing the land as agricultural. This led to a further appeal to the Income Tax Appellate Tribunal (ITAT), which upheld the CIT(A)’s decision, emphasizing that the presence of agricultural activity was contingent upon the land’s classification as agricultural.
The High Court’s ruling overturned these findings, highlighting that the assessment’s focus should solely be on the veracity of the evidence presented to claim the land as agricultural. The Court underscored that the rejection of such a claim requires the AO to present contradictory evidence, necessitating a thorough inquiry with relevant government authorities.
This decision reiterates that the mere absence of active farming does not disqualify land from being considered agricultural. It emphasizes the need for a genuine assessment of evidence rather than presumptions about the landowner’s intentions.
Counsel for the petitioner, Devendra H. Jain, and for the respondent, Akhileshwar Sharma, presented their arguments before the Court, which has now directed a fresh assessment to be conducted in light of its judgment. This case, Ashok Chaganlal Thakkar versus National Faceless Assessment Centre, Writ Petition No. 3099 of 2022, sets a significant precedent in determining what constitutes agricultural land for tax purposes, ensuring a more nuanced approach in future assessments.