Tribunal holds village land sold as industrial-purpose property was a capital asset; s. 54B deduction denied and s. 263 challenge rejected

5-Second Takeaway

The Tribunal held that the land sold by the assessee was a capital asset, not agricultural land, so the capital gain was taxable and deduction under s. 54B was unavailable. It also rejected the assessee’s challenge to the s. 263 revision order because that order had never been appealed and could not be questioned in proceedings arising from the later assessment.

The assessee sold land at Village Vaki Khurd and disclosed capital gains in the return while claiming deduction under s. 54B. The dispute turned on whether the land was agricultural land or a capital asset, and whether the assessee could still question a prior revision order under s. 263 in the appeal from the subsequent assessment.

On the facts, the Tribunal found that the registered sale deed described the property as land for industrial purpose. The land had been sold to non-agriculturists, the revenue record in Form 7/12 reflected it as paid land, and there was no agricultural activity on the property. The surrounding circumstances, including the sale consideration and the assessee’s own conduct, showed that the land was held and transferred as a capital asset within s. 2(14).

Because the transferred land had not been used for agricultural purposes in the two years immediately preceding the sale, the Tribunal held that the conditions for s. 54B were not satisfied. The deduction was therefore denied.

The Tribunal also held that the assessee could not challenge the validity of the s. 263 order in the later appeal, since that revision order had never been separately assailed. The ground was dismissed.