SHRI KHETILAL SHARMA HUF, Jaipur V. ITO, Jaipur

ITA 103/JPR/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5339 (ITAT-JAIPUR)
• Duration Of Justice: 4 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 31-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P R MEENA JCIT DHK
• Keywords: Capital asset; Cost of acquisition; Valuation report; Competent authority
• Section: 54B; 54F; 2(14); 142(1); 147; 148; 54; 139

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA -@ ITA NO. 103/JP/2012 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2006-07 KHETILAL SHARMA HUF, VILLAGE- SARANGPURA, TEHSIL- SANGANER, JAIPUR. CUKE VS. I.T.O., WARD 7(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAHHK 3191 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI P.R. MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 05/02/2016 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 18/03/2016 VKNS'K@ ORDER PER T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 16/11/2011 OF THE LEARNED CIT(A)-III, JAIPUR FOR A.Y . 2006-07. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ON FACTS AND IN LAW IN NOT ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE AGRICULTURAL LAND SOLD IS NOT A 2 ITA NO. 103/JP/2012 KHETILAL SHARMA HUF VS ITO CAPITAL ASSET AS PER SEC. 2(14)(III)(B) OF THE ACT AND THEREFORE NOT LIABLE FOR CAPITAL GAIN U/S 45 OF THE ACT. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION O F THE A.O. IN ASSESSING THE LONG TERM CAPITAL GAIN AT RS. 2,75,09,939/- AS AGAINST NIL INCOME DECLARED BY THE ASSESSEE BY:- (I) NOT ALLOWING THE CLAIM OF TRANSFER EXPENSES OF RS. 4,00,000/- FROM THE SALE CONSIDERATION. (II) ALLOWING THE INDEX COST OF ACQUISITION AT RS. 1,70,461/- AS AGAINST RS. 3,23,050/- CLAIMED BY THE ASSESSEE. (III) NOT ALLOWING THE CLAIM OF DEDUCTION U/S 54F A T RS. 70,00,000/- AND DEDUCTION U/S 54B AT RS. 1,99,57,350/-. 2.1 THE LD COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION O F THE A.O. IN HOLDING THAT SINCE THE INVESTMENT IN PROPERTY AND IN AGRICULTURE LAND IS NOT MADE IN THE NAME OF THE HUF BUT IN THE NAME OF THE INDIVIDUAL MEMBERS OF THE FAMILY, DEDUCTION U/S 54F AND 54B IS NOT AVAILABLE TO THE ASSESSEE. 2.2 THE LD COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HOLDING THAT THE DEDUCTION U/S 54B IS NOT AVAILABLE TO HUF. 1.1 THE ASSESSEE HAS RAISED ADDITIONAL GROUND, WHICH IS AS UNDER:- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE GAIN ON SALE OF AGRICULTURAL LAND IS NOT LIABLE TO 3 ITA NO. 103/JP/2012 KHETILAL SHARMA HUF VS ITO CAPITAL GAIN TAS AS THE LAND SOLD BY THE ASSESSEE I S OUTSIDE THE PURVIEW OF CAPITAL ASSET AS PER ITEM (B) OF SUB CLAUSE(III) OF SECTION 2(14) OF THE INCOME TA X ACT, 1961 READ WITH NOTIFICATION NO. 9447 DATED 06/1/1994. 2. THE ASSESSEE IS HAVING INCOME FROM LONG TERM CAPI TAL GAIN AND INTEREST INCOME. THE ASSESSEE HUF FILED RETURN OF IN COME IN RESPONSE TO NOTICE U/S 142(1) OF THE INCOME TAX ACT, 1961 (IN SH ORT THE ACT) DECLARING TOTAL INCOME OF RS. 2,57,794/- UNDER THE HEAD INCOME FROM OTHER SOURCES AS INTEREST FROM BANK ON 27/09/2007. THE CASE HAS BEEN SCRUTINIZED U/S 144/147 OF THE ACT. AFTER RECORDING THE SATISFACTION U/S 147 BY THE ASSESSING OFFICER, HE ISSUED NOTICE U/S 148 OF THE ACT ON 15/1/2010 FOR FILING THE RETURN. IT WAS SUBMITTED BY THE ASSESSEE IN REPLY IN RESPONSE TO NOTICE U/S 148 THAT ORIGINAL R ETURN MAY BE TREATED AS RETURN IN RESPONSE TO THIS NOTICE. VARIOUS NOTIC ES WERE ISSUED BY THE ASSESSING OFFICER U/S 142(1) OF THE ACT AND IT WAS G ATHERED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD SOLD LAND O N 30/4/2015 AT VILLAGE SARANGPURA, KHASRA NO. 399, 400, 403, 407, 409 AND 149 TOTAL 2.33 HECTARE FOR RS. 2,76,80,400/-. THE LD ASSESSIN G OFFICER FOUND THAT THE LAND SOLD WAS WITHIN THE DISTANCE OF 8 KM FROM TH E MUNICIPAL LIMIT AND THE SAME HAS ALSO BEEN CONFIRMED FROM THE NAGAR NIGAM, JAIPUR. IN 4 ITA NO. 103/JP/2012 KHETILAL SHARMA HUF VS ITO REPLY THERETO, THE TEHSILDAR, NAGAR NIGAM, JAIPUR VI DE HIS LETTER NO. 351 DATED 13/12/2010 HAS GIVEN THE DISTANCE BETWEEN KHAS RA SOLD BY THE ASSESSEE AND THE MUNICIPAL LIMIT AS 4.9 KM ONLY. IT IS FURTHER NOTICED BY HIM THAT THE LAND WAS HELD FOR MORE THAN 03 YEARS A S PER LAND RECORD FURNISHED BY THE ASSESSEES AR AND BELONGING TO HUF . NO DOCUMENTARY EVIDENCE OF THE COST OF ACQUISITION HAS BEEN FURNIS HED. AS PER THE COPIES OF THE REGISTRIES FURNISHED BY THE DIG, STAMPS, THE PER BIGHA COST OF ACQUISITION IN THE VILLAGE-SARANGPURA COMES TO RS. 3,680 PER BIGHA AS THE 12.5 BIGHAS LAND WAS SOLD FOR THE SUM OF RS. 46, 000/- AND GOT REGISTERED ON 23/09/1980. THEREBY THE COST OF ACQUIS ITION FOR THE LAND SOLD COMES TO RS. 3,.680/-. 9.32 BIGHAS (2.33 HECTA RE) AT RS. 34,298. IN VIEW OF THIS THE INDEXED COST OF ACQUISITION CALCULA TED BY THE ASSESSING OFFICER AT RS. 1,70,461/-. HE FURTHER OBSERVED THAT THE ASSESSEE CLAIMED DEDUCTION U/S 54B AND 54F OF THE ACT ON ACCOUNT OF INVESTMENTS MADE IN THE NAMES OF SH. PRAHALAD SAHAI SHARMA S/O- SH. KHETILAL SHARMA ON 15/7/2005, SMT. PREM DEVI W/O- SH. PRAHALAD SAHAI O N 26/10/2005, SMT. BARJI DEVI W/O- SH KHETILAL, SMT. PREM DEVI W/ O- SH. PRAHALAD AND SMT. PREM DEVI W/O LATE SH. NARAYANLAL SHARMA ON 11 /5/2005, SMT. PREM DEVI W/O- SH. PRAHALAD AND SMT. PREM DEVI W/O LATE SH. 5 ITA NO. 103/JP/2012 KHETILAL SHARMA HUF VS ITO NARAYANLAL SHARMA ON 10/5/2005, SMT. PREM DEVI W/O- SH. PRAHALAD AND SMT. PREM DEVI W/O LATE SH. NARAYANLAL SHARMA O N 11/5/2005 AND SH. KHETILAL ON 10/4/2006 FOR RS. 9,84,000/-. THE PR OPERTIES PURCHASED ARE IN THE NAME OF THE OTHER INDIVIDUALS OF THE FAM ILY AND NOT IN THE NAME OF THE HUF, THEREFORE, THE SAME CANNOT BE TREA TED AS THE APPLICATION OF FUNDS ELIGIBLE OF THE CLAIM OF DEDUC TION U/S 54B. THUS, THE DEDUCTION U/S 54B IS NOT ALLOWABLE TO THE ASSESSEE I N THE HUF CAPACITY. FURTHER IN RESPECT OF THE INVESTMENT MADE IN THE NA ME OF SH. KHETILAL ON 10/04/2006, THE INVESTMENT MADE CAN ALSO BE NOT TRE ATED TO BE THE INVESTMENT QUALIFYING FOR THE DEDUCTION U/S 54B AS THE INVESTMENT HAS BEEN MADE IN THE INDIVIDUAL NAME INSTEAD OF THE HUF CAPACITY. HE FURTHER HELD THAT THE ASSESSEE HAD CLAIMED CONSTRUC TION DONE ON THE PROPERTIES SITUATED AT VILLAGE-SARANGPURA AND IN SU PPORT OF THIS, THE ASSESSEE HAD FURNISHED COPY OF VALUATION REPORT FRO M THE AUTHORIZED VALUER. THE REPORT FURNISHED REVEALS THAT:- 1. THE INVESTMENT HAS BEEN DONE IN THE HOUSE IN THE INDIVIDUAL LAND OF THE ASSESSEE; I.E. MR. KHETI LAL SHARMA AS SINGLE OWNER. 6 ITA NO. 103/JP/2012 KHETILAL SHARMA HUF VS ITO 2. THE PERIOD OF CONSTRUCTION IS MENTIONED AS NOV. 2005 TO 31/01/2010. 3. THEREFORE, IN VIEW OF THE POINT NO. THE CONSTRUC TION HAS ALSO BEEN DONE AFTER THE DUE DATE OF FILING THE RETURN O F INCOME U/S 139(1) I.E. 31/07/2006 AND NO AMOUNT HAS BEEN DEPOSITED IN THE CAPITAL GAIN SCHEME BEFORE THAT DATE. FURTHER NO EVIDENCE HAS BEEN FILED BY HIM IN SUPPO RT OF THE CLAIM MADE. FURTHER, THE INVESTMENTS IN THE PROPERTIES AR E IN THE INDIVIDUAL CAPACITY AND NOT AS THE HUF. THUS, THE INVESTMENT C LAIMED TO BE ELIGIBLE FOR DEDUCTION U/S 54F DOES NOT QUALIFY FOR DEDUCTIO N U/S 54F. HE RELIED ON THE DECISION IN THE CASE OF CIT VS G.K. DEVARAJUL U (1991) 191 ITR 211 (MAD) WHEREIN IT HAS BEEN HELD THAT DEDUCTION U/ S 54 IS NOT ALLOWABLE FOR HUF. THE ASSESSEE ALSO CLAIMED DEDUCTIO N ON ACCOUNT OF EXPENSES INCURRED ON TRANSFER OF SUM OF RS. 4 LACS BUT NO EVIDENCE HAS BEEN SUBMITTED BEFORE THE ASSESSING OFFICER. THE SAM E HAS NOT BEEN ALLOWED BY THE ASSESSING OFFICER. THE LD ASSESSING OF FICER FINALLY CALCULATED THE CAPITAL GAIN AT RS. 2,77,67,733/-. 7 ITA NO. 103/JP/2012 KHETILAL SHARMA HUF VS ITO 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WH O HAD CONFIRMED THE ADDITION BY OBSERVING THAT NOTIFICATION NO. 944 7 DATED 06/01/1994 AS CLAIMED BY THE ASSESSEE IS NOT APPLICABLE IN SUB SEQUENT CHANGE MADE IN THE MUNICIPAL LIMIT FOR CALCULATING THE DISTANCE WITHIN 8 KM. THE PURPOSE OF NOTIFICATION WAS ISSUED TO COVER THE AGRI CULTURAL LANDS OF SPECIFIED AREA WHICH HAVE BECOME PART OF THE URBANIZ ATION PROCESS OF SUCH AREAS AND CONVERTED INTO COMMERCIAL ASSETS DUE TO ITS PROXIMITY TO CITY LIMITS AND BECOME ELIGIBLE TO WINDFALL OF SUCH PROCESS, BUT OTHERWISE WOULD HAVE NOT FELL IN THE TAX-NET, BEING AGRICULTUR E LAND IN NATURE AND NOT CAPITAL ASSETS AS SUCH. SINCE THE MUNICIPAL LIM ITS DOING KEEP CHANGES FROM TIME TO TIME, DEPENDING UPON THE PACE OF URBAN IZATION PROCESS OF THE PARTICULAR CASE, THEREFORE, THE VALUE AND IMPOR TANCE OF THE SURROUNDING AGRICULTURE LANDS ALSO VARIES FROM TIME TO TIME. ACCORDINGLY, THE MUNICIPAL LIMIT CANNOT BE ASSUMED AS A STATIC C ONCEPT RELATED TO A PARTICULAR DATE OR PERIOD OF PAST. IF WE GO BY THE A PPELLANTS LOGIC, EVEN SUCH PRIME LAND WOULD BE EXEMPTED U/S 2(14)(III)(B) AS IT WAS BEYOND 8KM FROM THE CITY LIMIT AS PRESCRIBED IN 1994. THE C ONCEPT OF MUNICIPAL LIMIT IS AN ONGOING PROCESS AND THUS HAS TO BE TAKE N, AS EXISTED ON THE 8 ITA NO. 103/JP/2012 KHETILAL SHARMA HUF VS ITO DAY OF THE LAND TRANSACTION, TO MAKE IT EFFECTIVE A ND LOGICAL IN THE LINE OF THE SPIRIT OF THE LAW. THE LD ASSESSING OFFICER HAS M ENTIONED IN THE ASSESSMENT ORDER THAT AS PER THE CERTIFICATE OBTAIN ED FROM THE NAGAR NIGAM JAIPUR, THE PROPRIETIES FALLS WITHIN 8 KM OF T HE PRESENT MUNICIPAL LIMIT, THEREFORE, THE SAME DOES NOT FALL UNDER THE EXEMPTION, AS STIPULATED U/S 2(14)(III)(B) OF THE ACT. ACCORDINGL Y, THE SAME IS HELD AS LIABLE FOR CAPITAL GAIN U/S 45 OF THE ACT. HE FURTH ER HELD THAT CLAIM OF DEDUCTION U/S 54B BY HUF IS ALSO NOT FOUND TENABLE AS SECTION ITSELF PROVIDES THIS DEDUCTION FOR INDIVIDUAL AND HIS PARE NTS. THE INTENTION OF THE LEGISLATURE IS QUITE APPARENT AND ALLOWS THE BE NEFIT OF SUCH SECTION TO THE INDIVIDUAL HUMAN BEING AND NOT ANY OTHER TY PES OF PERSON, BEING A LEGAL ENTITY LIKE FIRM, HUF, COMPANY ETC. THE LAW O N THIS ISSUE IS CLEAR AND UNAMBIGUOUS, THEREFORE, IT CANNOT BE INTERPRETE D IN DIFFERENT MANNER TO CONFER BENEFIT ON ASSESSEE, FOR WHICH HE RELIED ON THE DECISION IN THE CASE OF: (I) DHARMENDRA TEXTILE LTD. 306 ITR 277 (SC) (II) VIJAY KUMAR & ORS 151 ITR 48 (KAR) (III) T & ARVINDA READY 120 ITR 461 (SC) (IV) IPCA LABORATORY LTD. 266 ITR 521 (SC) HE FURTHER RELIED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF G.K. DEVARAJULU (SUPRA) WHEREIN IT HAS BEEN HELD THAT DEDUCTION 9 ITA NO. 103/JP/2012 KHETILAL SHARMA HUF VS ITO U/S 54B CANNOT BE ALLOWED TO THE HUF. ACCORDINGLY, H E CONFIRMED THE DISALLOWANCE OF RS. 1,99,57,350/- U/S 54B OF THE ACT . HE FURTHER HELD THAT THE ASSESSEES CLAIM U/S 54F FOR INVESTMENT OF RS. 70 LACS IN CONSTRUCTION OF HOUSE IN THE NAME OF SHRI KHETILA L SHARMA WHILE UTILIZING PART OF THE SALE PROCEEDS OF THE LAND UND ER CONSIDERATION OF THE HUF, WHICH WAS MADE IN THE INDIVIDUAL NAME OF SHRI KH ETILAL SHARMA AND THE COMPLETION OF CONSTRUCTION SHOWN AS JANUARY , 2010, WHICH WAS BEYOND THE DATE OF FILING OF RETURN U/S 139(1) I.E. ON 31/07/2006. SINCE THE SURPLUS UNUTILIZED FUND OF CAPITAL GAIN WAS ALSO NOT DEPOSITED IN THE CAPITAL GAINS ACCOUNT WITH NATIONALIZED BANK, THEREF ORE, THE DEDUCTION U/S 54F IS NOT ALLOWABLE IN THE APPELLANTS CASE. TH E LD AR SUBMITTED BEFORE HIM THAT LD ASSESSING OFFICER WRONGLY ASSUMED THAT THE CONSTRUCTION OF HOUSE IN THE NAME OF INDIVIDUAL BUT LAND WAS USED FOR CONSTRUCTION AS REMAINING PORTION OF HUF LAND ON WH ICH CONSTRUCTION WAS COMPLETED BETWEEN 17/11/2005 TO 31/1/2008. THE ASS ESSING OFFICER WRONGLY MENTIONED THIS DATE I.E. 31/1/2010 O N THE BASIS OF VALUATION REPORT. HE FURTHER CLAIMED BEFORE HIM THA T THIS CONSTRUCTION SHOULD HAVE BEEN COMPLETED BEFORE THE RETURN FILED U/S 139 OF THE ACT. THE RETURN U/S 139(4) BELATED COULD BE FILED BY THE ASSESSEE TILL 10 ITA NO. 103/JP/2012 KHETILAL SHARMA HUF VS ITO 31/3/2008. THE LD CIT(A) HAS CONSIDERED AND HELD THA T THE AR HAS NOT SUPPORTED ANY EVIDENCE THAT HOUSE WAS CONSTRUCTED O N THE BALANCE UNSOLD LAND OF THE HUF. HE AGREED WITH THE SUBMISSIO N OF THE AR THAT IN ABSENCE OF ANY CONTRARY PROVISION MADE IN SECTION 5 4F, THE REFERENCE OF ONLY SECTION 139 INCLUDED THE TIME LIMIT OF FILING OF THE RETURN U/S 139(4) OF THE ACT. WITH REGARD TO TYPOGRAPHICAL MISTAKE MA DE BY THE VALUER IN THE REPORT, IT IS ON THE ASSESSEE TO FILE REVISED V ALUATION REPORT WHILE MAKING NECESSARY CORRECTIONS. IN ABSENCE OF ANY REC TIFIED REPORT, NO BENEFIT CAN BE GIVEN TO THE ASSESSEE. ACCORDINGLY, HE NOT ALLOWED DEDUCTION U/S 54F ON INVESTMENT OF RS. 70 LACS. THE ASSESSEES APPEAL HAS BEEN DISMISSED BY THE LD CIT(A). 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEES FATHER S HRI GOVIND RAM OWNED CERTAIN AGRICULTURAL LAND AT VILLAGE SARANGPUR A, TEH. SANGANER, JAIPUR. HE HAS THREE SONS NAMELY SUNDARA, SUJILAL A ND KHETILAL. SUNDARA AND SUJILAL HAD NO ISSUE AND THEY EXPIRED IN THE YE AR 1975 AND 1988 RESPECTIVELY. THUS THE ENTIRE LAND CAME TO THE POSSE SSION OF THE ASSESSEE . THE AGGREGATE OF SUCH LAND WAS 13.370 BHIGA I.E. ARO UND 3.34 HECTARES. OUT OF THIS LAND, ASSESSEE SOLD 2.33 HECT ARES LAND ON 11 ITA NO. 103/JP/2012 KHETILAL SHARMA HUF VS ITO 30.4.2005 TO M/S. PRAVEEN MEHTA BUILDERS PVT. LTD. FOR RS. 2,76,80,400/- . DURING THE COURSE OF APPELLATE PROCEEDINGS, ASSESSEE BY TAKING AN ADDITIONAL GROUND, CONTENDED THAT THE AGRICULTURAL LAND SOLD IS BEYOND 8KMS OF MUNICIPAL LIMIT OF JAIPUR AS ENVISAGED U/S 2(14)(III)(B) OF THE INCOME TAX ACT, 1961 AND THEREFORE NO CAPITAL GAIN I S CHARGEABLE TO TAX SINCE THE AGRICULTURAL LAND SOLD IS NOT A CAPITAL A SSET U/S 2(14). THE CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE DISTANCE OF AGRICULTURAL LAND SOLD IS TO BE SEEN WITH REFEREN CE TO THE MUNICIPAL LIMIT AS ON THE DATE OF NOTIFICATION NO. 9447 DATED 06.01.1994 AND NOT WITH REFERENCE TO THE DATE OF SALE. HE HELD THAT THE RE IS NO SPECIFIC MENTION OF SUCH EFFECT OR PROVISION IN THE NOTIFICA TION ITSELF. THE MUNICIPAL LIMIT, AS PRESCRIBED IN THE NOTIFICATION, HAS TO BE TAKEN AS EXISTED AND DECLARED BY THE COMPETENT AUTHORITY AND RELEVANT TO THE DAY OF THE TRANSACTION. AS THE AGRICULTURAL LAND SOLD F ALLS WITHIN 8KMS OF THE PRESENT MUNICIPAL LIMIT, IT DOES NOT FALL UNDER THE EXEMPTION U/S 2(14)(III)(B) AND THE SAME IS LIABLE FOR CAPITAL GA IN U/S 45 OF THE ACT. AS PER SECTION 2(14)(III)(B) OF THE ACT, AN AGRICULTUR AL LAND SITUATED IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MORE THAN 8 KM FROM THE LOCAL LIMIT OF ANY MUNICIPALITY AS THE CENTRAL GOVERNMENT MAY S PECIFY IN THIS BEHALF 12 ITA NO. 103/JP/2012 KHETILAL SHARMA HUF VS ITO BY NOTIFICATION IN THE OFFICIAL GAZETTE IS CONSIDER ED AS A CAPITAL ASSET, THEREFORE, ANY AGRICULTURAL LAND WHICH FALLS BEYOND 8 KM OF LOCAL LIMITS OF THE MUNICIPALITY AS SPECIFIED IN THE NOTIFICATION I S NOT CONSIDERED AS CAPITAL ASSETS. THE CENTRAL BOARD OF DIRECT TAXES VID E ITS NOTIFICATION NO. 9447 DATED 6 LH JANUARY 1994 FOR THE PURPOSE OF 2(14)(III)(B) OF THE INCOME TAX ACT, 1961 HAS NOTIFIED THE MUNICIPALITY O F JAIPUR AS THE AREAS UPTO A DISTANCE OF 8 KMS. FROM MUNICIPAL LIMI TS IN ALL DIRECTIONS. IN THE NOTIFICATION, FOLLOWING EXPLANATION IS GIVEN:- (1) IN THIS NOTIFICATION, MUNICIPALITY SHALL ME AN ANY AREA------- -- (2) THE REFERENCE TO MUNICIPAL LIMIT OR THE LIMIT O F CANTONMENT BOARD IN THE SCHEDULE TO THIS NOTIFICATION IS TO TH E LIMITS AS EXISTING ON THE DATE ON WHICH THE NOTIFICATION IS PUBLISHED IN T HE OFFICIAL GAZETTE. [NOTIFICATION REPORTED AT (1994) 116 CTR (ST.) 13] HE FURTHER SUBMITTED THAT IN VIEW OF THIS EXPLANATIO N, FOR THE PURPOSE OF ASCERTAINING WHETHER A PARTICULAR LAND IS AGRICULTUR AL LAND OR NOT AS REFERRED IN SECTION 2(14), THE DISTANCE OF 8 KM. IS REQUIRED TO BE CONSIDERED FROM THE MUNICIPAL LIMIT WHICH WAS EXISTIN G ON THE DATE ON WHICH THE AFORESAID NOTIFICATION IS PUBLISHED IN THE OFFICIAL GAZETTE AND 13 ITA NO. 103/JP/2012 KHETILAL SHARMA HUF VS ITO NOT THAT MUNICIPAL LIMIT WHICH IS EXISTING ON THE DA TE OF SALE OF LAND. IT IS SUBMITTED THAT AS ON THE DATE OF THIS NOTIFICATION DATED 6 TH JANUARY 1994, THE MUNICIPAL LIMIT OF JAIPUR ON AJMER ROAD ON WHICH THE ASSESSEE LAND IS SITUATED IS UPTO THE ESI HOSPITAL . THE ASSESSEES LAND IS 16KM. AWAY FROM THE ESI HOSPITAL. THIS FACT IS NOT IN DISPUTE. HENCE, THE LAND SOLD BY THE ASSESSEE NOT A CAPITAL ASSET U/S 2(14) AND THER EFORE ON SALE OF SUCH ASSET, NO CAPITAL GAIN WOULD RISE. HE FURTHER STATED THAT THIS ISSUE IS NOW SETTLED BY DECISION OF HONBLE ITAT IN CASE OF DR. S UBHA TRIPATHI IN ITA NO.LL29/JP/2011 FOR A.Y 2008-09 DT. 24.05.2013 WHERE AFTER CONSIDERING THE PURPORT OF NOTIFICATION DT. 06.01.1994 AND ALSO THE AMENDMENT MADE BY F.A ACT, 2013 W.E.F. 01.04.2014, IT WAS HELD THAT THE MUNICIPAL LIMIT IS TO BE SEEN WITH REFERENCE TO THE DATE OF NOTIFICA TION I.E. 06.01.1994 AND NOT ON THE DATE OF THE SALE. THE RELEVANT FINDIN G OF HONBLE ITAT IS REPRODUCED AS UNDER:- WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL A S THE MATERIALS ON RECORD. THE QUESTION ARISES FOR OUR CONSIDERATIO N AND ADJUDICATION IS WHETHER THE LAND IN QUESTION THOUGH LOCATED BEYOND 8 KMS FROM THE MUNICIPAL LIMITS OF JAIPUR MUNICIPAL ITY AS ON THE DATE OF NOTIFICATION 6-01-1994 BUT SUBSEQUENTLY IT FALLS WITHIN THE DISTANCE OF 8 KMS FROM THE MUNICIPAL LIMITS DUE TO THE EXPANSION OF THE MUNICIPAL LIMITS WOULD STILL BE REGARDED AS AGR ICULTURAL LAND NOT FALLING IN THE DEFINITION OF CAPITAL ASSET IN TERMS OF SECTION 14 ITA NO. 103/JP/2012 KHETILAL SHARMA HUF VS ITO 2(14)(III)(B) OF THE ACT. THERE IS NO DISPUTE THAT JAIPUR MUNICIPALITY HAS BEEN DULY NOTIFIED VIDE SAID NOTIFICATION DATED 6-01-1994 AND AS ON THE DATE OF SAID NOTIFICATION, THE LAND IN QU ESTION WAS BEYOND 8 KMS FROM THE MUNICIPAL LIMITS EXISTS AT THAT POIN T OF TIME. THE DISPUTE ARISES BECAUSE OF THE EXPANSION OF MUNICIPA L LIMITS AND THEREBY THE SAID DISTANCE FROM THE MUNICIPAL LIMITS AS ON THE DATE OF SALE OF THE LAND IN QUESTION IS ONLY 2 KMS AND T HEREBY THE AUTHORITIES BELOW HAVE TREATED THE LAND IN QUESTION AS NOT FALLING UNDER THE EXCLUSION CLAUSE OF SECTION 2(14)(III)(B) OF THE ACT. THERE IS NO QUARREL ON THE POINT THAT AS PER SUB-CLAUSE ( B) OF CLAUSE (III) OF SECTION 2(14), THE NOTIFICATION OF THE CENTRAL G OVT, IS MANDATORY TO BRING THE LAND IN THE DEFINITION OF CAPITAL ASSE T WHICH IS NOT LOCATED WITHIN THE LIMITS OF THE MUNICIPALITY BUT L OCATED WITHIN THE DISTANCE OF 8 KMS FROM THE LOCAL LIMITS. SO FAR, TH E AGRICULTURAL LAND WHICH IS LOCATED IN THE LIMITS OF MUNICIPAL LIMITS, THE SAME WILL BE TREATED AS CAPITAL ASSET AND NO FURTHER REQUIREMENT IS TO BE EXAMINED. SINCE THE LAND IN QUESTION IS LOCATED OUT SIDE THE LOCAL LIMITS OF MUNICIPALITY, THEREFORE, IN ORDER TO DETE RMINE WHETHER THE LAND IN QUESTION FALLS UNDER MISCHIEF OF SUB-CLAUSE (B) OF SECTION 2(14)(III) OF THE ACT, THE DISTANCE OF 8 KMS HAS TO BE TAKEN INTO ACCOUNT IN TERMS OF NOTIFICATION DATED 6-01-1994, A S PER EXPLANATION 2 OF THE SAID NOTIFICATION DATED 06.01. 1994, THE MUNICIPAL LIMITS IS TO BE THE LIMITS AS EXISTING ON THE DATE ON WHICH THE NOTIFICATION IS PUBLISHED IN THE OFFICIAL GAZET TE. WE QUOTE THE EXPLANATION 2 OF THE NOTIFICATION (SUPRA) AS UNDER: - '(2) THE REFERENCE TO THE MUNICIPAL LIMITS OR THE LIMIT OF C ANTONMENT BOARD IN THE SCHEDULE TO THIS NOTIFICATION IS TO THE LIMI TS AS EXISTING ON THE 15 ITA NO. 103/JP/2012 KHETILAL SHARMA HUF VS ITO DATE ON WHICH ON WHICH THE NOTIFICATION IS PUBLISHE D IN THE OFFICIAL GAZETTE.' IF THE STAND OF THE REVENUE IS ACCEPTED THAT THE D ISTANCE OF 8 KMS SHOULD BE CONSIDERED FROM THE MUNICIPAL LIMIT E XISTS AS ON THE DATE OF THE SALE OF LAND THEN IT WOULD RENDER THE N OTIFICATION ISSUED BY THE CENTRAL GOVT, AS INEFFECTIVE AND UNWORKABLE / OTIOS. AS IT IS MADE CLEAR BY EXPLANATION 2 OF THE SAID NOTIFICATIO N THAT MUNICIPAL LIMITS IS TO BE CONSIDERED AS EXISTING ON THE DATE ON WHICH NOTIFICATION IS PUBLISHED IN THE OFFICIAL GAZETTE, THEREFORE, THE DATE OF NOTIFICATION IS RELEVANT AND MATERIAL POINT TO D ETERMINE THE DISTANCE OF 8 KMS FROM MUNICIPAL LIMITS. THERE IS N O AMENDMENT OR WITHDRAWAL OF THE SAID NOTIFICATION EXCEPT A RECENT AMENDMENT HAS BEEN BROUGHT IN THE STATUTE BY THE FINANCE ACT 2013 WHEREBY THE REQUIREMENT OF SAID NOTIFICATION HAS BEEN DISPENSED WITH FOR INVOKING SUB-CLAUSE (B) OF CLAUSE (III) OF SECTION 2(14) OF THE ACT W.E.F. 01-04-2014. THUS IT IS DISCERNIBLE FROM THE NOTIFICATION DATED 06-01-1994 AND THE RECENT AMENDMENT IN THE STATUTE WHEREBY THE SAID NOTIFICATION HAS BEEN DISPENSED WITH THAT THE DISTANCE OF 8 KMS HAS TO BE CONSIDERED FROM THE MUNICIPAL LIMITS AS E XISTS ON THE DATE OF NOTIFICATION FOR THE PURPOSE OF INVOKING SU BCLAUSE (B) OF CLAUSE (III) OF SECTION 2(14) OF THE ACT. ACCORDING LY WE HOLD THAT THE LAND IN QUESTION WHICH WAS LOCATED BEYOND 8 KMS FRO M THE MUNICIPAL LIMITS AS ON 6-01-1994 WHEN THE NOTIFICAT ION WAS PUBLISHED IN THE OFFICIAL GAZETTE, THE SAME WOULD F ALL UNDER THE EXCLUSION CLAUSE OF THE TERM 'CAPITAL ASSET AS PER PROVISIONS OF 2(14)(III)(B) OF THE ACT. 16 ITA NO. 103/JP/2012 KHETILAL SHARMA HUF VS ITO IN VIEW OF ABOVE, THE AO BE DIRECTED TO DELETE THE A DDITION FROM LONG TERM CAPITAL GAIN ON SALE OF AGRICULTURAL LAND ASSE SSED BY HIM. 5. AT THE OUTSET, THE LD DR HAS VEHEMENTLY SUPPORTE D THE ORDER OF THE LD CIT(A) AND ARGUED THAT THE MUNICIPAL LIMIT HAS BEEN VERIFIED BY THE LD ASSESSING OFFICER AND LAND TRANSACTION WAS FO UND WITHIN 8 KM FROM THE MUNICIPAL LIMIT. THEREFORE, IT IS A CAPITAL ASSET AS PER SECTION 2(14)(III)(B) OF THE ACT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE AS SESSEE SOLD THE AGRICULTURAL LAND ON 30/4/2005 AT VILLAGE SARANGPUR A MEASURING 3.33 HECTARE (9.32 BIGHA) FOR RS. 2,76,80,400/-. THE LD A SSESSING OFFICER HAS CONFIRMED FROM THE NAGAR NIGAM THAT THE LAND TRANSA CTION IS WITHIN 8 KM OR NOT. THE NAGAR NIGAM, JAIPUR VIDE HIS LETTER NO. 315 DATED 13/12/2010 HAS GIVEN THE DISTANCE BETWEEN THE KHASRA SOLD BY THE ASSESSEE AND MUNICIPAL LIMIT AS 4.9 KM ONLY. IT IS NOT CLEAR FROM THE ORDER OF THE AL AND CIT(A) THAT WHAT WAS THE MUNICIPAL LIMIT AND WHETHER THIS WAS WITH REFERENCE TO LAND TRANSACTION D ATED 30/4/2005. THE MAIN DISPUTE BETWEEN THE ASSESSEE AND THE REVENUE IS THAT THIS LIMIT IS TO BE CALCULATED FROM THE DATE OF NOTIFICA TION BY THE CENTRAL GOVT. 17 ITA NO. 103/JP/2012 KHETILAL SHARMA HUF VS ITO OR ON THE BASIS OF CHANGE OF MUNICIPAL LIMIT FROM T IME TO TIME. THIS ISSUE HAS BEEN CONSIDERED BY THE COORDINATE BENCH IN THE CASE OF DR. SUBHA TRIPATHI IN ITA NO. 1129/JP/2011 FOR A.Y. 2008-09 OR DER DATED 24/5/2013. THE OPERATIVE PORTION OF THE ORDER HAS BE EN REPRODUCED IN THE REPLY OF THE ASSESSEE. IT HAS BEEN HELD BY THE COORDINATE BENCH THAT THERE IS NO DISPUTE THAT THE JAIPUR MUNICIPALITY HA S BEEN DULY NOTIFIED VIDE SAID NOTIFICATION DATED 06/1/1994 AND AS ON TH E DATE OF SAID NOTIFICATION, THE LAND IN QUESTION WAS BEYOND 8 KM F ROM THE MUNICIPAL LIMIT EXIST ON THAT POINT OF TIME. IN THE CASE OF A SSESSEE, ON THE DATE OF THIS NOTIFICATION DATED 6 TH JANUARY, 1994, THE MUNICIPAL LIMIT OF JAIPUR ON AJMER ROAD ON WHICH THE ASSESSEE LAND IS SITUATED WAS UP TO ESI HOSPITAL. THE LD AR PLACED THE EVIDENCE IN PAPER BOO K AT SL. NO. 91. THE ASSESSEES LAND IS 16 KM AWAY FROM THE ESI HOSPITAL. THESE FACTS HAS NOT BEEN CONTROVERTED BY THE LD DR. BEING A PRECEDE NCE, WE RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINATE BENCH AND HELD THAT LAND SOLD BY THE ASSESSEE IS NOT A CAPITAL ASSET U/S 2(14) OF TH E ACT. THUS, CAPITAL GAIN DOES NOT ARISE. ON THIS GROUND, THE ASSESSEES APPEAL IS ALLOWED. 7. THE GROUND NO. 2 OF THE ASSESSEES APPEAL IS AGAI NST NOT ALLOWING THE TRANSFER EXPENSES OF RS. 4 LACS, NOT ALLOWING TH E INDEXED COST OF 18 ITA NO. 103/JP/2012 KHETILAL SHARMA HUF VS ITO ACQUISITION AT RS. 3,23,050/-, DEDUCTION U/S 54F AT RS. 70 LACS AND DEDUCTION U/S 54B AT RS. 1,99,57,350/- AS INVESTMEN T MADE IN THE NAME OF FAMILY MEMBERS NOT IN THE NAME OF HUF, AS THE AS SESSEES APPEAL IN GROUND NO. 1 HAS BEEN ALLOWED BY THE BENCH IN FAVOUR OF THE ASSESSEE, THEREFORE, WE HAVE CONSIDERED VIEW THAT THIS GROUND I S NOT REQUIRED TO BE ADJUDICATED. 8. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/03/2016. SD/- SD/- YFYR DQEKJ VH-VKJ-EHUK (LALIET KUMAR) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 18 TH MARCH, 2016 RANJAN* VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- KHETILAL SHARMA HUF,JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ITO, WARD 7(2), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 103/JP/2012) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR