Srichand Dembla, UDAIPUR V. DCIT, UDAIPUR

ITA 118/JODH/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4895 (ITAT-JODHPUR)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-08-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 06-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR DEEPAK SEHGALCIT
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Opportunity of being heard; Earning of tax free income; Cost of acquisition
• Section: 54B; 54F; 2(14); 54; 12; 28; 11

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 118/JODH/2013 (A.Y. 2009-10) SHRI SRICHAND DEMBLA VS DCIT, CENTRAL CIRCLE-2, L/H LATE SMT. PUSHPA DEMBLA UDAIPUR. 6, DURGA NURSERY ROAD, UDAIPUR. PAN NO. ABSPD2308K (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. AMIT KOTHARI. DEPARTMENT BY : DR. DEEPAK SEHGAL-CIT- DR. DATE OF HEARING : 27/08/2013. DATE OF PRONOUNCEMENT : 27/09/2013. O R D E R PER HARI OM MARATHA, J.M. : THIS APPEAL OF THE ASSESSEE, FOR A.Y. 2009-10, IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), JAIPUR, DATED 27/12/2012. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT F OR A.Y. 2009-10 THE ASSESSEE FILED HIS RETURN OF INCOME [ROI] U/S 139(1 ) OF IT ACT, 1961 (THE ACT FOR SHORT) ON 30/09/2009, DECLARING TOTA L INCOME AT RS. 2 13,07,676/- BEING INCOME DERIVED FROM BUSINESS OF D ISTRIBUTION OF KEROSENE, FROM HOUSE-PROPERTY AND FROM OTHER SOURCE S. ON VERIFICATION OF CAPITAL ACCOUNT IT WAS FOUND THAT AN AMOUNT OF R S. 1,07,57,716/- HAS BEEN SHOWN AS INCOME FROM SALE OF AGRICULTURAL LAND BUT THE SAME IS NOT OFFERED FOR TAXATION. ON DEMAND, THE ASSESSE E FURNISHED COMPUTATION OF INCOME WHEREIN THIS AMOUNT OF RS. 1, 07,57,716/- HAS BEEN TREATED AS EXEMPT INCOME UNDER THE HEAD INCOM E ON SALE OF AGRICULTURAL LAND. A COPY OF SALE DEED WAS FILED W HICH REVEALED THAT THIS LAND IS SITUATED IN THE REVENUE ESTATE OF VILL AGE SHOBHAGPURA, TEHSIL GIRWAR, WHICH FALLS UNDER GRAM PANCHAYAT SHO BHAGPURA, UDAIPUR. ADMITTEDLY, OR UNDISPUTEDLY, THIS LAND HAD BEEN USED FOR CARRYING OUT AGRICULTURAL ACTIVITIES, FOR THE LAST MORE THAN 2 (TWO) YEARS. SINCE, SECTION 2(14)(III)(A) PRESCRIBES SITU ATIONS IN WHICH AGRICULTURAL LAND CANNOT BE TREATED AS A CAPITAL A SSET, THE ASSESSEE HAS ASSERTED THAT THIS CASE SATISFIES THE STIPULATE D CONDITIONS AND IS THUS, EXEMPT FROM TAXATION U/S 45 OF THE ACT. THIS LAND IS UNDENIABLY GOVERNED BY THE PANCHYAT ACT. HOWEVER, ON FURTHER V ERIFICATION IT WAS NOTICED BY THE AO THAT THIS LAND IS SITUATED WITHIN 8 KMS. OF THE MUNICIPAL LIMITS OF THE UDAIPUR CITY. THE LAND WAS SOLD FOR A CONSIDERATION OF RS. 1,11,00,000/-. 3 2.1 AS PER THE AO THIS LAND BEING SITUATED WITHIN T HE LIMITS 8 KMS. OF THE MUNICIPALITY, IT HAS TO BE TREATED AS A CAPITA L ASSET U/S 2(14) OF THE ACT. WHEN ASKED TO, THE ASSESSEE FILED HIS OBJE CTIONS TO THE ABOVE PROPOSED ACTION VIDE REPLY DATED 20/12/2011 ON 21/1 2/2011, WHICH READS AS UNDER :- THE ASSESSEE HAS SOLD THE AGRICULTURAL LAND FOR RS . 1,11,00,000/- WHICH WAS PURCHASED PRIOR TO THE YEAR 2005. SHE HAS CLAIMED THE EXEMPTION OF RS. 1,07,57,716/- ON ACCOUNT OF INCOME NOT FALLING UNDER THE TAXABLE NET . AS PER THE SECTION 2(14)(III) SPECIFIED AGRICULTURAL LAND CANNOT BE TREATED AS CAPITAL ASSETS UNDER SECTION 2(14), THER EFORE, SAME CANNOT BE LIABLE FOR CHARGING OF CAPITAL GAINS U/S.45 OF THE ACT. 2. AS THE PROVISION OF SECTION 2(14) EXCLUDED CERTA IN ASSETS FROM THE DEFINITION OF THE CAPITAL ASSETS, 2(14)(II I) SAYS THAT 'AGRICULTURE LAND IN INDIA, NOT BEING SITUATE - (A) IN ANY AREA WHICH IS COMPRISED WITHIN JURISDICTION OF A MUNICIPALITY OR A CANTONEMENT BOARD.......; OR (B) IN ANY AREA WITHIN THE SUCH DISTANCE, NOT BEING MORE THAN EIGHT KM ,..,..., SPECIFY IN THIS BEHALF BY NO TIFICATION IN THE OFFICIAL GAZETTE; AS THE IMPUGNED AGRICULTURE LAND WAS WITHIN THE JURISDICTION OF GRAM PANCHYAT NAMELY 'SHOBHAGPURA' GRAM 4 PANCHAYAT. IF AN ASSESSEE TRANSFER THE AGRICULTURE LAND SITUATED IN THE TOWN HAVING POPULATION ABOVE 10000 BUT IT GOVERNED BY THE PANCHAYAT UNDER THE STATE PANCHAYAT ACT, THEN SUCH ASSETS CAN'T BE TREATED AS CAPITAL ASSETS UNDER SECTION 2(14) OF THE ACT. AS HELD IN THE CASE OF IT O VS P. VENKATRAMAN (1993) 47 TTJ549 (HYD)/[1993] 46 ITD 48 4 (HYD). IN THE PRESENT CASE ALSO THE AGRICULTURAL LAND SOLD BY THE ASSESSEE WAS SITUATED IN THE GRAM PACHAYAT SHOBHAGP URA AND IT IS GOVERNED BY THE PANCHAYAT ACT AS WELL, SO , THE LAND UNDER QUESTION CANNOT BE TREATED AS CAPITAL AS SETS U/S.2(14) OF THE ACT, IN THIS LIGHT OF JUDGMENT AND INTERPRETATION SHE HAS CLAIMED THE EXEMPTION FROM T HE CAPITAL GAINS TAX. FURTHERMORE, THE ASSESSEE HAD DERIVED AGRICULTURAL INCOME FROM THE IMPUGNED LAND IN THE PRECEDING PREVIOUS YE ARS AND SAME HAS BEEN DECLARED IN THE RETURN OF INCOME OF THE EARLIER YEARS. THE ASSESSEE FURNISHING HEREWITH A COPY OF RECEIPT AND OTHER DOCUMENTS ISSUED BY THE SARPANCH OF SHOBHAGPU RA PANCHAYAT WHICH CATEGORICALLY ESTABLISH THAT THE PA NCHAYAT IS GOVERNED BY THE PANCHAYAT ACT. SO AGRICULTURE LA ND IS NOT CAPITAL ASSETS EVEN IF IT IS LOCATED WITHIN THE EIG HT KILOMETERS OF THE MUNICIPAL LIMITS. 5 THE LAND PRICES WERE SUDDENLY INCREASED AFTER THE PURCHASED BY THE LATE ASSESSEE DUE TO DEVELOPMENT O F 100FT RING ROAD AROUND THE SAID LAND BY THE UIT, UD AIPUR. THE ASSESSEE FURTHER SUBMITS THAT THE DLC PRICE OF THE SAID AGRICULTURE LAND WAS RS. 30 LAKHS PER BIGHA AGAINST THE AMOUNT OF RS. 115.99 LACS PER BIGHA (RS, 111.00 LAC S FOR 22256 SQ FT. AND RS. 115.99 LACS FOR 23256 SQ.FT) F OR WHICH SHE HAS SOLD THE AGRICULTURAL LAND. LOOKING TO THE AFORESAID REASONS THE PRICES OF THE LAND WERE SPURT HEAVILY. BUT THE ASSESSEE HAD BASED ON THE AFORESAID DECISIO N AND WITHIN THE AMBIT OF THE PROVISIONS OF THE INCOME-TA X ACT HAS CORRECTLY CLAIMED THE EXEMPTION ON THE INCOME E ARNED ON TRANSFER OF AN AGRICULTURAL LAND. 2.2 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE THE A.O. OBSERVED AS UNDER: AFTER CAREFULLY GOING THROUGH THE SUBMISSION OF THE ASSESSEE, IT IS EVIDENT THAT THERE IS NO DISPUTE RE GARDING THE LAND NOT BEING WITHIN 8 K.M. OF THE MUNICIPAL L IMIT. IN THE CASE OF MANGLA INDUSTRIES VS CIT 216 ITR 635 TH E HON'BLE RAJASTHAN HIGH COURT HAS HELD THAT WHEN THE LAND IS SITUATED WITHIN 8 K.M. FROM THE MUNICIPAL LIMIT AND RECORDED AS AGRICULTURE LAND IN THE LAND REVENUE RE CORD, THE SALE OF SAID LAND IS LIABLE TO CAPITAL GAIN TAX 6 IRRESPECTIVE OF THE USE IT HAS BEEN PUT TO. AS SUCH THE CITATIONS QUOTED BY THE A.R. IN THE ABOVE LETTER AR E NOT OF ANY HELP. THIS IS MORESO, IN THE LIGHT OF THE PROVI SION OF SECTION 2(14)(III) WHEREIN CATEGORICAL INCLUSION OF THE AGRICULTURE LAND COMING WITHIN THE AMBIT OF DEFINIT ION OF CAPITAL ASSET IS GIVEN WHICH READS AS UNDER: '----AGRICULTURE LAND IN INDIA, NOT BEING LAND SITU ATE- (A) IN ANY AREA WHICH IS COMPRISED WITHI N THE JURISDICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPAL CORPORATION, NOTIFIED AREA COMMITTEE, TOW N AREA COMMITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAME) OR A CANTONMENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDING C ENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFO RE THE FIST DAY OF THE PREVIOUS YEAR; OR (B) IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MO RE THAN EIGHT KILOMETERS, FROM THE LOCAL LIMIT OF ANY MUNIC IPALITY OR CANTONMENT BOARD REFERRED TO IN ITEM (A), AS THE CENTRAL GOVERNMENT MAY, HAVING REGARD TO THE EXTENT OF, AN SCOPE FOR, URBANIZATION OF THAT AREA AND OTHER RELEVAN T CONSIDERATION, SPECIFY IN THIS BEHALF BY NOTIFIC ATION IN THE OFFICIAL GAZETTE' 7 2.3 AFTER CONSIDERING THE ABOVE REPLY, THE AO HAS O PINED THAT THE CASE OF THE ASSESSEE FALLS U/S 2(14) (II)(B) AND NO T U/S 2(14)(III)(A). TO BE SPECIFIC THIS LAND FALLS WITHIN 8 KMS. OF MUNICI PAL LIMITS, OF UDAIPUR. THEREFORE, HE HAS ADDED THE SALE PROCEEDS OF RS. 1, 07,57,716/- TO ASSESSEE TOTAL INCOME, BEING THE NET CONSIDERATION. 2.3 THE LD. CIT(A) HAS FOLLOWED SUIT. THE ASSESSEE IS FURTHER AGGRIEVED. 2.4 WE HAVE CAREFULLY ANALYZED ALL THE DOCUMENTS IN THE LIGHT OF THE ORAL SUBMISSIONS OF THE PARTIES. BOTH PARTIES HAVE REITERATED THEIR EARLIER STAND. THERE IS NO DISPUTE REGARDING THE M AIN FACTS OF THIS ISSUE. BEFORE WE MOVE FURTHER, WE WOULD LIKE TO DI SCUSS THE LEGAL POSITION ON THIS SUBJECT. 2.5. CHAPTER IV OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) BROADLY DEALS WITH THE COMPUTATION O F THE TOTAL INCOME UNDER FIVE HEADS OF INCOME CLASSIFIED AS UNDER :- A- SALARIES B- OMITTED (EARLIER INTEGRANT ON SECURITIES) C- INCOME FROM HOUSE PROPERTY D- PROFIT AND GAINS OF BUSINESS ON PROFESSION. E- CAPITAL GAINS F- INCOME FROM OTHER SOURCES. 8 2.6 THE SECTION E OF THIS CHAPTER DEALS WITH THE HEADS CAPITAL GAINS WHICH CONTAINS AS MANY AS 28 OPERATIVE SECTI ONS (EXCLUDING OMITTED ONES). THESE SECTIONS PROVIDE FOR COMPUTATI ON OF CAPITAL GAINS IN VIVID SITUATIONS AND SUBJECT TO CERTAIN CIRCUMST ANCES IN WHICH IT IS NOT BE CHARGED. 2.7 SECTION 45 IS THE BASIC PROVISION WHICH DEFINES CAPITAL GAINS AS ANY PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHALL, SAVE AS OTHERWISE PROV IDED IN SECTIONS 54, 54 B, 54D, 54E, 54EA, 54EB BE CHARGEABLE TO INCOME TAX UNDER THE HEAD CAPITAL GAINS AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE. 2.8 SECTION 48 PRESCRIBES THE MODE OF COMPUTATION O F CAPITAL GAIN. IT PROVIDES THAT CAPITAL GAINS HAS TO BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ASS URING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSETS, THE FOLLOWING A MOUNTS :- (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH SUCH TRANSFER; 9 (II) THE COST OF ACQUISITION OF THE ASSET AND THE COST O F ANY IMPROVEMENT THERETO. THE ABOVE PRESCRIPTION IS FURTHER SUBJECT TO 5 PROV ISIONS. SECTION 49, DEALS WITH THE MODES OF DETERMINATION COST OF THE A CQUISITION OF THE ASSET. SECTION 50, 50A, 50B, 50C, 50D PRESCRIBED SP ECIAL PROVISIONS FOR THE COMPUTATION OF CAPITAL GAINS OF DEPRECIABLE ASS ETS, COST OF ACQUISITION OF DEPRECIABLE ASSETS, COMPUTATION OF C APITAL GAINS IN CASE OF SLUMP SALE, PROVISION FOR FULL VALUE OF CONSIDER ATION IN CERTAIN CASES AND DEEMING PROVISION OF DETERMINING CONSIDERATION IN CERTAIN CASES, RESPECTIVELY. THEREAFTER, COMES THE PROVISIONS OF S ECTIONS WHICH DEAL WITH NET SALE CONSIDERATION IN SPECIFIC INSTANCES U NDER WHICH THE ASSESSEE CAN CLAIM EXEMPTION TO SOME EXTENT. 2.9 SECTION 54. DEALS WITH THE PROFIT ON THE SALE O F A PROPERTY USED FOR RESIDENCE. IF THE ASSESSEE SELLS HIS ORIGINAL A SSET AND HAS, WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DA TE ON WHICH THE TRANSFER TOOK PLACE, PURCHASED OR HAS, WITHIN A PER IOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED A RESIDENTIAL HOUSE, TH EN INSTEAD OF THE CAPITAL GAIN BEING CHARGED TO INCOME TAX AS INCOME OF THE PREVIOUS 10 YEAR IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOLLOWING PROVISIONS: (1) THE COST OF NEW ASSET (RESIDENTIAL HOUSE) WILL BE ADJUSTED AGAINST THE CAPITAL GAINS. IF THERE IS SOME BALANCE (CAPITAL GAINS) THAT SHALL BE CHARGED U/S 45 AS THE INCOME OF THE P REVIOUS YEAR. HOWEVER, IF THE NEW ASSET IS SOLD WITHIN 3 YEARS OF ITS PURCHASE / CONSTRUCTION, THE COST OF THAT NEW ASSET SHALL BE T AKEN AT NIL. MEANING THEREBY IF THE ASSESSEE SELLS THE NEW ASSET WITH THE 3 YEARS OF ITS PURCHASE OR CONSTRUCTION THEN ON THE E NTIRE NET CONSIDERATION WILL BE CHARGED TO INCOME TAX OF THAT PARTICULAR YEAR. (2) IN CASE THE CAPITAL GAIN IS EQUAL OR LESS THAN THE COST OF NEW ASSET, NO CAPITAL GAINS SHALL BE CHARGED U/S 45. HO WEVER, IF THE NEW ASSET IS SOLD WITH 3 YEARS THEN THE CAPITAL GAI NS SHALL BE REDUCED TO DETERMINE ITS COST. IN CASE THE CAPITAL GAIN IS NOT APPROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE O F THE NEW ASSET WITH THE TIME STIPULATED AS ABOVE, THEN TO AV AIL BENEFIT THE ASSESSEE HAS TO DEPOSIT THE CAPITAL GAINS AS DIRECT ED IN SUB SECTION (2) OF SECTION 54. LIKEWISE, MUTATIS MUTAND IS, SECTION 54B 11 DEALS WITH THE CAPITAL GAINS ON THE TRANSFER OF LAN D USED FOR AGRICULTURAL PURPOSES AND THE CIRCUMSTANCES ARE ALM OST SIMILAR WHEN THE ASSESSEE PURCHASES ANOTHER AGRICULTURAL LA ND WITHIN THE TIME STIPULATED, THEN CAPITAL GAINS IS NOT CHARGED. SECTION 54D DEALS WITH CAPITAL GAINS ARISING ON COMPULSORY ACQU ISITION OF LANDS AND BUILDINGS AND THE SITUATIONS IN WHICH IT WILL N OT BE CHARGED TO INCOME TAX. SECTION 54E DEALS WITH MODE AND MODALIT IES WHEN CAPITAL GAIN ARISING ON TRANSFER OF CAPITAL ASSETS WHEN IT WILL NOT BE CHARGED TO INCOME TAX. SECTION 54EA DEALS WITH C IRCUMSTANCES WHEN THE CAPITAL GAINS ARISING ON TRANSFER OF LONG TERM CAPITAL ASSETS SHALL NOT BE CHARGED WHEN IT IS INVESTED IN SPECIFIED SECURITIES. SIMILAR SECTION 54EB DEALS WITH CAPITAL GAINS ARISING ON TRANSFER OF LONG TERM CAPITAL ASSETS. SECTION 54EC TALKS ABOUT INVESTMENT OF CAPITAL GAINS IN CERTAIN BONDS TO ESC APE TAX. SECTION 54ED DEALS SUCH A SITUATION IN CASES OF TRA NSFER OF CERTAIN LISTED SECURITIES OR UNITS. NOW, WE COME TO SECTION 54F WHICH DEALS WITH THE CASES WHERE CAPITAL GAIN ARISING ON THE TRANSFER OF CERTAIN CAPITAL ASSETS IS NOT CHARGED TO TAX IF THE NET CONSIDERATION THEREFROM IS INVESTED IN THE RESIDENT IAL HOUSE. 12 UNDER THIS SECTION FOLLOWING CONDITIONS MUST EXIST TO CLAIM BENEFIT :- (I) THERE SHOULD BE TRANSFER OF A LONG TERM CAPITAL ASS ET WHICH SHOULD NOT BE A RESIDENTIAL HOUSE. (ORIGINAL ASSET) . (II) THE ASSESSEE MUST HAVE PURCHASED A RESIDENTIAL HOUS E (NEW ASSET) ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE ORIGINAL ASSET WAS TRANSFERRED. OR WITHIN 3 YEA RS OF SUCH TRANSFER A NEW ASSET HAS BEEN CONSTRUCTED. (III) IN SUCH CASES THE ASSESSEE SHALL BE BENEFITED. IF T HE COST OF THE NEW ASSET IS NOT LESS THAN THE NET CONSIDERATIO N IN RESPECT OF THE ORIGINAL ASSET, THE WHOLE OF SUCH CA PITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45. IF THE COST OF THE NEW ASSET IS LESS THAN THE NET CONSIDERATION IN RES PECT OF THE ORIGINAL ASSET, SO MUCH OF THE CAPITAL GAINS AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PROPORTION A S THE COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATIO N, SHALL NOT BE CHARGED UNDER SECTION 45. TO AVAIL THE ABOVE BENEFIT THE ASSESSEE MUST NOT OWN MORE THAN ONE RESIDENTIAL HOUSE, OTHER THAN THE NEW ASSET, ON THE DATE OF THE 13 TRANSFER OF THE ORIGINAL ASSET. OR HE PURCHASES ANY RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET WITHIN A PERIOD OF ONE YEAR AFTER THE DATE OF THE TRANSFER OF THE O RIGINAL ASSET. OR HE CONSTRUCTS ANY RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET, WITHIN A PERIOD OF 3 YEARS AFTER THE DAT E OF TRANSFER OF THE ORIGINAL ASSET. HOWEVER, THE ABOVE POSITIONS ARE SUBJECT TO A CONDITIONS THAT THE INCOME FROM TH E RESIDENTIAL HOUSE OTHER THAN THE ONE RESIDENTIAL HO USE OWNED ON THE DATE OF TRANSFER OF THE ORIGINAL ASSET , IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPER TY. THIS SECTION FURTHER PROVIDES MODALITIES AS TO HOW AND WHEN THE CAPITAL GAIN CAN BE DEEMED TO BE ASSESSEES INC OME CHARGEABLE TO TAX. 2.10 SECTIONS 54G, 54GA, 54GB, 54H, 55 AND 55A DEAL WITH ALLIED CIRCUMSTANCES. FOR THE NOW, WE ARE MORE CONCERNED W ITH THE PROVISIONS OF SECTION 54F. THE REQUIREMENTS OF THIS SECTION FOR TAX BENEFIT, IT SEEKS TO PROVIDE TO A ASSESSEE CAN BE P ICTOGRAPHED AS UNDER: (O)= ORIGINAL ASSETS (LONG TERM CAPITAL ASSET NOT B EING A RESIDENTIAL HOME) 14 PURCHASE NEW ASSET APART CONSTRUCTION NEW ASSE T (AS FROM ONE RESIDENTIAL HOME RESIDENCE) APART FROM O NE WITHIN ONE YEAR BEFORE THE RESIDENTIAL HOME WITH 3 YEARS TWO YEARS AFTER THE TRANSFER OF THE TRANSFER OF T HE A.O. (I) NOTHING LEFT OUT - CAPITAL GAINS IS CHARGEABL E (II) SOMETHING IS LEFT AND NOT DEPOSITED AS - CHARGEABLE TO TAX. STIPULATED) (III) IF DEPOSITED AS - NO TAX. STIPULATED (IV) HOWEVER, IF WITHIN A YEAR ASSESSEE PURCHASES ANY RESIDENTIAL HOUSE - CANNOT AVAIL ANY BEFIT OF SECTION 54F(1). WITHIN ONE YEAR OR CONSTRUCTIONS WITHIN 3 YEARS, A NEW RESIDENTIAL HOUSE AFTER THE TRANSFER OF THE ORIGINAL ASSET; AND THE INCOME FROM SUCH RESIDENTIAL HOUSE (OTHER THAN THE ONE RESIDENT IAL HOUSE OWNED ON THE DATE OF THE TRANSFER OF THE ORIGINAL ASSET) IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 2.11 IN NUT SHELL TO AVAIL BENEFIT OF SECTION 54F, WITHOUT VIOLATING ITS CONDITIONS, THE FOLLOWING CONDITIONS MUST CO-EXISTS . (I) THE ASSESSEE MUST OWN A (LONG TERM) CAPITAL ASSET, I.E., THE ORIGINAL ASSET. 15 (II) THIS ORIGINAL ASSET SHOULD NOT BE A RESIDENTIAL HOU SE. (III) THIS ORIGINAL ASSET SHOULD BE TRANSFERRED. (IV) THE NET CONSIDERATION SHOULD BE ARRIVED AT IN VIEW OF EXPLANATION APPENDED TO SECTION 54(1). (V) AT THE TIME OF TRANSFER OF THE ORIGINAL ASSET, THE ASSESSEE SHOULD NOT OWN / POSSESS MORE THAN ONE RESIDENTIAL HOUSE. (VI) IN CASE THE ASSESSEE ACQUIRES BY (I) OWNS MORE THAN ONE RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET ACQUIRES ON THE DATE OF THE TRANSFER OF ASSETS, OR (II) PURCHASES A NY RESIDENTIAL HOUSE WITHIN ONE YEAR AFTER OR (III) CO NSTRUCTS A RESIDENTIAL HOUSE WITHIN 3 YEARS AFTER, THE DATE OF TRANSFER OF THE ORIGINAL ASSET AND THAT OTHER (RESIDENTIAL H OUSE) IS CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCE S THEN THE ASSESSEE CANNOT AVAIL ANY BENEFIT OF SEC 5 4F(1). 2.12 TO SIMPLIFY : THE ASSESSEE (BEING AN INDIVIDUA L OR A HUF) CAN AVAIL TAX-BENEFIT) QUA CAPITAL GAINS ARISING ON THE SALE OF ORIGINAL ASSET (L.T. CAPITAL ASSET OTHER THAN A RESIDENTIAL HOUSE) PROVI DED THE ASSESSEE DOES NOT OWN MORE THAN ONE RESIDENTIAL HOUSE (OTHER THAN THE NEW ASSET I.E., NEW RESIDENTIAL HOUSE). BUT THE ABOVE I S SUBJECT TO THE 16 MODE OF DEALING WITH THAT CAPITAL GAINS. HOWEVER, I N OTHER TWO SITUATIONS : (I) WHEN THE ASSESSEE PURCHASES ONE MORE RESIDENTIAL HO USE WITHIN ONE YEAR AFTER THE DATE OF TRANSFER OF THE O RIGINAL ASSET OR (II) CONSTRUCTS ANY RESIDENTIAL HOUSE (OTHER THAN THE NE W ASSET RESIDENTIAL HOUSE) WITHIN A PERIOD OF THREE YEARS A FTER THE DATE OF TRANSFER OF THE ORIGINAL ASSET (L.T. CAPITA L AND) THE INCOME FROM SUCH RESIDENTIAL HOUSE, OTHER THAN THE ONE RESIDENTIAL HOUSE OWNED ON THE DATE OF THE TRANSFER OF THE ORIG INAL ASSET, IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPER TY. 3. ADVERTING TO THE FACTS OF THIS CASE WE CAN SAFEL Y CONCLUDE THAT THE PIECE OF AGRICULTURAL LAND SOLD BY THE ASSESSEE IS SITUATED WITHIN 8 KMS OF THE MUNICIPAL LIMITS. FOR THE PURPOSES OF S ECTION 2(14)(III) OF THE ACT, A SPECIFIC GAZETTE NOTIFICATION DATED 6.1 .1994 HAS BEEN ISSUED BY THE CENTRAL GOVERNMENT. FOR THE STATE OF RAJAST HAN, THE FOLLOWING RULES SHALL APPLY:- AS PER SUB CLAUSE (B) OF CLAUSE (III) OF SECTION 2 (14), ANY AGRICULTURAL LAND WHICH IS NOT SITUATED WITHIN 8 KM S FROM THE MUNICIPALITY AS THE CENTRAL GOVERNMENT MAY SPEC IFY IN 17 THIS BEHALF BY NOTIFICATION IN THE OFFICIAL GAZETTE . A RELEVANT PORTION OF SUCH A GAZETTE NOTIFICATION NO. (509447) (FILE NO. 164/3/87 ITA-1) DATED 06/01/19 94 READS AS UNDER :- AREAS UP TO A DISTANCE OF 8 KMS FROM THE MUNICI PAL LIMITS IN ALL DIRECTIONS. 4. WHAT EMERGES AS A RULE IS THAT ANY AGRICULTURAL LAND WHICH IS SITUATED WITHIN 8 KMS OF A NOTIFIED MUNICIPALITY ET C, IT WILL BE TREATED AS A CAPITAL ASSET, SUBJECT TO THE CONDITION THAT T HE POPULATION OF THAT MUNICIPALITY ETC., SHOULD NOT HAVE POPULATION LESS THAN 10,000 PERSONS. IN CASE A PIECE OF AGRICULTURAL LAND FALLS WITHIN 8 KM OF THE STATED MUNICIPALITY, BUT THE POPULATION OF THAT MUNICIPALI TY IS NOT MORE THAN 10,000 , THEN IN THAT CASE THE AGRICULTURAL LAND SO LD CANNOT BE TREATED A AS CAPITAL ASSET. LET US CLARIFY THE GENERAL RUL E THAT SALE OF AGRICULTURAL LAND IS NOT SUBJECT TO CAPITAL GAINS B UT THIS GENERAL RULE IS SUBJECT TO THE PROVISIONS OF SECTION 2(14)(III)(A) & (B). AS STATED THE DEFINITION OF THE MUNICIPALITY IS NOT PRESCRIBED IN THE ACT BUT THE NOTIFICATION REFERRED TO AS ABOVE IS DEFINITELY REL EVANT FOR THE PURPOSE AS THIS SPECIFIES THE MUNICIPALITY WITH CERTITUDE A ND WITH RESPECT TO A NEAREST MUNICIPALITY SO SPECIFIED HAS TO BE CONSIDE RED. THE PARTIES HAVE MOVED ON A DIFFERENT DIRECTION REGARDING THE C ONTEXT OF 18 POPULATION WHETHER OF THE VILLAGE PANCHAYAT OR TH AT OF THE MUNICIPALITY HAS TO BE CONSIDERED. THE LAW IS SETT LED ON THIS ASPECT AND THE PROVISIONS OF THE AT ARE ALSO CLEARLY ENUNC IATED. IT IS THE MUNICIPALITY ETC., MENTIONED IN THE SECTION WHOSE P OPULATION MUST BE MORE THAN 10,000. SO THE A.O. AS WELL AS THE ASSES SEE HAVE MOVED IN A WRONG DIRECTION. HOWEVER, THE QUESTION AS TO WHICH MUNICIPALITY IS RELEVANT, GIVEN THE NOTIFICATION OF THE CENTRAL GOV ERNMENT DESCRIBED ABOVE, IS A MOOT QUESTION, WHICH ESCAPED ATTENTION. THEREFORE, IN THE GIVEN FACTS AND CIRCUMSTANCES OF THIS CASE, IT WOUL D BE APT TO RESTORE THIS ISSUE TO THE FILE OF THE A.O. WITH A DIRECTION THAT HE MUST DECIDE THIS ISSUE IN THE SPECIFIC LIGHT OF OUR ABOVE STATE D OBSERVATIONS. WE DO ACCORDINGLY AND RESTORE THIS ISSUE TO THE FILE OF T HE A.O. NEEDLESS TO MENTION THAT THE A.O. SHALL GIVE CLEAR OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. 19 ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH SEPTEMBER, 2013. SD/- SD/- [N.K. SAINI] [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27 TH SEPTEMBER, 2013. VL/ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT BY ORDER 3. THE CIT 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR