Urban agricultural land within statutory limits is taxable as a capital asset. Registered sale deed consideration prevails unless contrary evidence exists. Exemption under Section 54F cannot be denied on technicalities if substantive bank evidence supports construction investment. Mere assertion of ancestral origin is insufficient to establish co-ownership without documentary proof.
ITAT Chennai – ITA No.2873/Chny/2024 | A.Y. 2014-15 | Order dated 01.09.2025
Facts of the Case
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The assessee, Mr. Natesan Ekambaram, owned 121 cents of land at Siruseri Village, Thiruporur Taluk, Kancheepuram District.
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Through a power of attorney, he sold 30.35 cents to M/s Jacaranda Properties Pvt. Ltd. on 14.10.2013 for a recorded value of ₹1,00,44,000.
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The Assessing Officer (AO), however, determined that the assessee had actually received ₹2.5 crore, and brought the entire sum to tax as long-term capital gains (LTCG).
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The AO also rejected the assessee’s contention that the land was “agricultural” and exempt from tax, holding it to be urban agricultural land under Section 2(14)(iii).
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Further, exemption claimed under Section 54F for investment in a residential house was denied on the ground of inadequate proof.
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The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the AO’s order.
Issues for Consideration
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Whether the land sold was excluded from the definition of “capital asset” under Section 2(14)(iii).
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Whether the entire ₹2.5 crore should be treated as sale consideration, or only the ₹1,00,44,000 reflected in the registered deed.
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Whether capital gains should be apportioned among family members as the land was allegedly acquired from ancestral property.
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Whether the assessee was entitled to exemption under Section 54F.
Tribunal’s Ruling
1. Nature of Land – Agricultural or Capital Asset
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The ITAT observed that although the land retained agricultural characteristics, its location within 8 km of Semmencherry, which forms part of the Greater Chennai Corporation, brought it within the scope of urban agricultural land.
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As per Section 2(14)(iii)(b), land within 8 km of a municipality with population exceeding 10 lakh is a capital asset.
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Hence, the transfer was exigible to capital gains tax.
2. Sale Consideration – Deed Value vs. Total Receipts
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The Tribunal held that only 30.35 cents were transferred during AY 2014-15, under a registered deed for ₹1,00,44,000.
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The balance ₹1.5 crore was merely advance for the remaining 90.5 cents, duly disclosed in the books.
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In absence of evidence showing that Jacaranda Properties paid more than ₹1,00,44,000 for the specific transfer, the AO erred in taxing ₹2.5 crore.
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Accordingly, sale consideration was restricted to ₹1,00,44,000.
3. Ownership and Family Claim
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The assessee contended that the land was acquired from ancestral property proceeds and hence his children were co-owners.
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Since the title deed was solely in his name, and no HUF evidence was produced, the Tribunal held that the entire capital gain is taxable in the assessee’s hands.
4. Section 54F Exemption
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The assessee produced bank statements showing withdrawals and payments towards construction of a residential house amounting to ₹82,15,610.
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The ITAT held that the exemption could not be denied merely because bills were on plain paper. Substantive evidence from bank transactions demonstrated genuine investment.
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The Tribunal allowed exemption under Section 54F.
Decision
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The ITAT partly allowed the appeal:
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Held the land to be a capital asset.
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Restricted sale consideration to ₹1,00,44,000.
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Allowed Section 54F exemption of ₹82,15,610.
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Dismissed the claim of co-ownership by family members.
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Significance
This ruling underscores:
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Urban agricultural land within statutory limits is taxable as a capital asset.
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Registered sale deed consideration prevails unless contrary evidence exists.
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Exemption under Section 54F cannot be denied on technicalities if substantive bank evidence supports construction investment.
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Mere assertion of ancestral origin is insufficient to establish co-ownership without documentary proof.
Endnotes
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Union of India v. Ashish Agarwal (2022) 444 ITR 1 (SC) – on reassessment notices and applicability of amended regime.
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Goetze (India) Ltd. v. CIT (2006) 284 ITR 323 (SC) – on making fresh claims before AO versus appellate authorities.
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CIT v. Abhinitha Foundation (P.) Ltd. [2017] 83 taxmann.com 100 (Mad.) – appellate authorities can entertain fresh claims if supporting material is on record.
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CIT v. Ramco Cements Ltd. [2015] 373 ITR 146 (Mad.) – scope of appellate powers to admit additional claims.
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NTPC Ltd. v. CIT (1998) 229 ITR 383 (SC) – Tribunal’s jurisdiction to consider questions of law arising from facts on record.