Agricultural Land Covered Under Section 56(2)(x) | ITAT

Case Details: Clayking Minerals LLP vs. Income-tax Officer - [2025] 174 taxmann.com 1111 (Ahmedabad-Trib.)

Judiciary and Counsel Details

• Dr. BRR Kumar, Vice President & Siddhartha Nautiyal, Judicial Member
• Hem Chhajed, AR for the Appellant.
• Kalpesh Rupavatia, Sr. DR for the Respondent.

Facts of the Case

The assessee filed the income tax return, declaring a loss for the relevant assessment year. The case was selected for ‘Limited Scrutiny’ to examine whether the purchase value of a property was less than the value determined by the stamp valuation authority under section 56(2)(x).

During the proceedings, the assessee contended that the property was agricultural land at the time of purchase, and it did not qualify as a “capital asset” as per section 2(14). Therefore, section 56(2)(x) was not applicable.

However, the Assessing Officer (AO) held that the provisions of section 56(2)(x) were attracted, and the difference between the purchase consideration and the stamp duty value was liable to be taxed as “income from other sources”.

On appeal, the CIT(A) upheld the order of the AO. Aggrieved-assessee filed the instant appeal before the Tribunal.

ITAT Held

The Tribunal held that section 56(2)(x) mentions the term “any immovable property”. Now the issue for consideration is whether “Agricultural land” falls within the ambit of an “immovable property” as stated in section 56(2)(x). The term “immovable property” has not been defined in section 56(2)(x) or in any other section in the Income Tax Act. This renders the word to be interpreted in general parlance.

In general, the term “Immovable Property” means an asset that cannot be moved without destroying or altering it. Therefore, going by the general definition, “immovable property” would, in the view of the Tribunal, include any rural agricultural land, in the absence of any specific exclusion in section 56(2)(x).

Notably, section 56(2)(x) does not use the word “capital asset”. The sale of rural agricultural land is exempt from the seller’s hands since the word “capital asset” has been specifically defined to exclude agricultural land in rural areas under section 2, clause 14. Thus, the sale of rural agricultural land shall not give rise to any capital gains in the hands of the seller, as it is not considered a capital asset itself.

However, from the point of view of the “purchaser” of immovable property, section 56(2)(x) mentions “any immovable property” which, going by the plain words of the Statute, does not specifically exclude “agricultural land”. Therefore, going by the plain words of section 56(2)(x), which uses the term “immovable property”, agricultural land cannot be taken out of the purview of section 56(2)(x).

List of Cases Referred to

• Smt. Sarifabibi Mohmed Ibrahim v. CIT [1993] 70 Taxman 301/204 ITR 631 (SC) (para 3)
• Sunil Kumar Agarwal v. CIT [2014] 47 taxmann.com 158/225 Taxman 211/372 ITR 83 (Calcutta) (para 5)
• Amarshiv Construction Pvt. Ltd. v. DCIT [IT Appeal No. 3061 (Ahd) of 2015, dated 29-12-2017] (para 5)
• Nairin v. University of St. Andrews 1909 AC 147 (para 10)
• Ombalika Das v. Hulisa Shaw (2002) 4 SCC 539 (para 11)
• Dilip Manibhai Prajapati v. ITO [2024] 164 taxmann.com 224 (Ahmedabad – Trib.) (para 13).