#capital asset

The ITAT Mumbai has ruled that land classified as agricultural in revenue records and located beyond municipal limits qualifies for capital gains tax exemption under Section 2(14)(iii), regardless of whether the owner reports agricultural income or actively cultivates the land. This affirms that statutory classification, not economic use, governs the exemption - a vital precedent for landowners in peri-urban areas facing development pressure.

The ITAT Ahmedabad has ruled that agricultural land situated beyond municipal limits cannot be treated as a capital asset under Section 2(14) of the Income-tax Act, rendering capital gains tax, Section 50C adjustments, and Section 69A cash addition inapplicable. This clarifies a critical exemption for rural landowners and invalidates revenue department tactics that misapply urban property valuation norms to agricultural sales.

The ITAT Delhi has ruled that Section 14A cannot be invoked to disallow expenses unless there is actual exempt income earned. Notional gains from foreign currency translation or interest on capital loans, even if hypothetically linked to exempt activities, do not trigger disallowance. This shields multinational entities from speculative tax adjustments based on accounting entries rather than real income.