As per Section 2(14)(iii), agricultural land outside specified limit is not capital asset and hence there can be no capital gain on transfer of such agricultural land. Hence it is important to determine whether land is agriculture land or not. A few case laws relevant to the subject:

In Gemini Pictures Circuit (P.) Ltd. v. CIT [1981] 130 ITR 686/6 Taxman 42 (Mad.) it was held that onus is on the department to prove that land is non agricultural or that it forms part of business assets. Once the assessee proves that the land is raagricultul land the burden of proving that it is not agricultural land is on the revenue.

In case of Gordhanbhai Kahandas Dalwadi v. CIT [1981] 127 ITR 664 (Guj.), it was held that the correct test that has to be applied is whether on the date of sale the land was agricultural land or not. Just because after the sale the purchaser was going to put the land to non-agricultural use, it does not mean that the land had ceased to be agricultural land on the date of sale.

In case of CIT v. Borhat Tea Co. Ltd. [1982] 138 ITR 783/[1981] 7 Taxman 388 (Cal.), it was held that for the purpose of land being agricultural land, actual agricultural operations or cultivation or tilling of the land is not necessary. What is to be seen is whether such land is capable of agricultural operations being carried on.

In case of CIT v. Modhabhai H. Patel [1994] 208 ITR 638/77 Taxman 408 (Guj.), it was held that if a land is recorded as agricultural land in the revenue records and if till the date of its sale it is used and exploited as agricultural land, and if the owner of the land has not taken any step which would indicate his intention to exploit the land thereafter as non-agricultural land, then such a piece of land would have to be regarded as agricultural even though it was included within the municipal limits or it was sold on a per square yard basis and not acreage basis.

The purpose for which such a land is sold, though not relevant, will not have that much importance and weight as it would have in a case where the land has remained a spadatar or idle or is used for agricultural purposes only by way of a stop-gap arrangement.

Where assesse enters into agreement to sell agri land. There after makes an application to the authorities to permit to covert the land into farm houses and authority replies that no such conversion required for farm houses and there after the sale deed with buyer is registered. Whether the land ceases to be agricltual land on the date of registration of sale deed. What is the relevant date of transfer, the date of agreement or date of registration of sale deed?

As per Section 2(14)(iii), agricultural land outside specified limit is not capital asset and hence there can be no capital gain on transfer of such agricultural land. Hence it is important to determine whether land is agriculture land or not.

Where assesse enters into agreement to sell agri land. There after makes  an application to the authorities to permit to covert the land into farm houses  and authority replies that no such conversion required for farm houses and there after the sale deed with buyer is registered. Whether the land ceases to be agricltual land on the date of registration of sale deed. What is the relevant date of transfer, the date of agreement or date of registration of sale deed?

Held by Jaipur Tribunal in Megh Chand Meena, HUF [2016] 70 taxmann.com 374 (Jaipur - Trib.) MAY  17, 2016  that  it was clear that there was no conversion of agricultural land and what had been transferred by assessee continued to be agricultural land beyond 8 Kms. of municipal limits. it was not a capital asset under section 2(14)(iii) . therefore, sale consideration was not liable to capital gains tax under section 45.

Ratan Melting & Wire Industries, 2008 (12) STR 416. At paragraph 6 of the judgment, the Hon'ble Apex Court observed as follows "6. Circulars and Instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the Circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Govt. and/or the State Govt. are not concerned they represent merely their understanding of the statutory provisions. They are not binding upon the Court. It is for the Court to declare what the particular provision of statutes says, and it is not for the executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law

Registration of sale / transfer deed is not relevant factor to the matter of capital gain and related aspect. 1. CIT v. Poddar Cement (P.) Ltd. [1997] 226 ITR 625 (SC) 2. Mysore Minerals Ltd. - 239 ITR 775 (SC) 3. B.L. Sood - 245 ITR 727 (SC)

Old and Gold Rule of Law reiterated by Calcutta High Court in Sheo Kumar Mishra [2016] 70 taxmann.com 375 (Calcutta) FEBRUARY 26, 2016 that In the absence of an appeal or cross-objections by the department against the order in dispute, the Appellate Tribunal will have no jurisdiction or power to enhance the assessment. Under Section 251, CIT A has power to enhance the assessment but u/s 253 Tribunal does not have the power to enhance the enhancement. it is not open to the Tribunal itself to raise a ground or permit the party, who has not appealed, to raise a ground, which will work adversely to the appellant

Facts and Decision