ACIT, Cir-8(1), Hyderabad V. Ch. Laxmamma, R.R.Dist

ITA 437/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61915 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 17-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAO
• Keywords: Capital asset; Cost of acquisition
• Section: 54B; 54F; 2(14); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 437/HYD/2011 ASSESSMENT YEAR : 2007-08 ASSTT. COMMISSIONER OF INCOME-TAX, APPELLANT HYDERABAD. VS. CH. LAXMAMMA, RESPONDENT PEERAMCHERU VILLAGE, RR DT. APPELLANT BY : SHRI M.S. RAO RESPONDENT BY : NONE DATE OF HEARING : 08/05/2012 DATE OF PRONOUNCEMENT : 06/06 /2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A), VIJAYAWADA, DATED 29/12/2010 FOR THE ASSESSMENT YEAR 2007-08. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE ALONG W ITH OTHER FAMILY MEMBERS SOLD LAND ADMEASURING 5.16 ACRES IN PEERAMC HERU VILLAGE, RAJENDRA NAGAR MANDAL, RANGA REDDY DT. TO M/S PBEL PROPERTY DEVELOPMENT (INDIA) PVT. LTD. FOR A SALE CONSIDERAT ION OF RS. 26.46 CRORES. IN THE ASSESSMENT ORDER, THE AO OBSERVED TH AT OUT OF THE 216 GUNTAS OF LAND, 199 GUNTAS WERE RELATABLE TO NI NE HUFS OF THE DAPPU FAMILY GROUP AND 17 GUNTAS BELONGED TO THE AS SESSEE AND CONCLUDED THAT CAPITAL GAINS ARISING ON SALE OF 17 GUNTAS OF LAND 2 ITA NO. 437/HYD/2011 SMT. CH. LAXMAMMA WAS CLEARLY TAXABLE IN THE HANDS OF THE ASSESSEE. T HE AO OBSERVED THAT THE LAND SOLD WAS LOCATED WITHIN A DISTANCE OF EIGHT KILOMETERS FROM THE LIMITS OF THE HYDERABAD MUNICIPAL CORPORAT ION AND, THEREFORE, WAS A CAPITAL ASSET WITHIN THE MEANING O F SECTION 2(14) OF THE IT ACT. AS THE TRANSACTION OF SALE OF SUCH LAND ATTRACTED CAPITAL GAINS AND AS NO RETURN OF INCOME HAD BEEN FILED BY THE ASSESSEE, NOTICE U/S 148 OF THE ACT WAS ISSUED. THE ASSESSEE FILED A RETURN ON 29/07/2009 DECLARING TOTAL INCOME AT RS. 2,32,000/- IN RESPECT OF THE SAME TRANSACTION AFTER CLAIMING STATUTORY DEDUC TIONS. 3. THE AO DETERMINED THE ASSESSEES SHARE IN THE TO TAL LAND SOLD AT 17 GUNTAS IN TWO SURVEY NUMBERS. THE AO AFTER EX AMINING THE RETURN OF INCOME FILED BY THE ASSESSEE, OBSERVED TH AT THE CLAIM OF EXEMPTION OF RS. 34,10,000/- U/S 54B OF THE ACT AND EXEMPTION OF RS. 1,21,70,000/- U/S 54F F THE ACT RELATABLE TO TH E INVESTMENT IN THE PROPERTY DISCLOSED IN THE INDIVIDUAL RETURN WAS REJECTED. SIMILARLY, THE CLAIM OF EXEMPTION FROM CAPITAL GAIN S ON INAM LAND WAS ALSO REJECTED. THE ASSESSEES SHARE OF SALE CON SIDERATION FOR 17 GUNTAS OF LAND WAS QUANTIFIED AT RS. 1,91,25,000/-. AFTER REDUCING THE COST OF ACQUISITION ADOPTED AT RS. 2/- PER SQUA RE YARD AS ON 01/04/1981 AS PER THE INFORMATION OBTAINED FROM THE SUB-REGISTRAR OFFICE, THE AO DETERMINED THE LONG TERM CAPITAL GAI N TAXABLE AT RS. 1,91,03,648/-. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE C ARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) AND RAISED THE F OLLOWING ADDITIONAL GROUND OF APPEAL:- THE LEARNED AO OUGHT TO HAVE HELD THAT THE PROPERTY SOLD, WHICH IS AN AGRICULTURAL LAND SITUATED BEYOND THE M UNICIPAL LIMITS OF RAJENDRANAGAR, WHICH IS NOT NOTIFIED FOR THE PURPOSE OF CAPITAL GAIN, AS NOT COVERED BY THE DEFINITION OF CAPITAL ASSET WHICH IS DEFINED IN THE SECTION 2(14) OF THE IT ACT . 3 ITA NO. 437/HYD/2011 SMT. CH. LAXMAMMA 5. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HELD AS UNDER:- 8..THE ISSUE OF TAXABILITY OF CAPITAL GAINS A RISING OUT OF LANDS SITUATED IN A REVENUE MANDAL WHERE NO NOTIFICATION OF THE CENTRAL GOVERNMENT WAS AVAILABLE FOR THAT PA RTICULAR MUNICIPALITY IN TERMS OF SECTION 2(14)(III)(B) OF T HE ACT WAS CONSIDERED IN DETAIL BY THE HONBLE ITAT IN THE CAS E OF SRINIVAS PANDIT(HUF) VS. ITO, WARD-74, HYD. IN THAT CASE, TH E LAND WAS SITUATED ALSO IN RAJENDRA NAGAR MANDAL AS IN THE AP PELLANTS CASE. THE HONBLE TRIBUNAL HELD THAT IN THE ABSENCE OF A SPECIFIC NOTIFICATION FOR RAJENDRA NAGAR MUNICIPALI TY, THE AGRICULTURAL LAND WITHIN THE REVENUE MANDAL COULD N OT BE CONSIDERED AS A CAPITAL ASSET FOR THE PURPOSE OF LE VYING THE TAX. IN THE CASE OF DCIT VS. JASTI VAYUNANDANA RAO & OTH ERS, THE HONBLE ITAT, VISAKHAPATNAM, BEING THE JURISDICTION AL TRIBUNAL, HELD THAT FOR CONSIDERING AN AGRICULTURAL LAND SITU ATED IN A MUNICIPALITY AS A CAPITAL ASSET FOR THE PURPOSE OF LEVYING OF TAX U/S 45 OF THE ACT, A NOTIFICATION BY THE CENTRAL GO VERNMENT WAS A DEFINITE REQUIREMENT NOTIFYING THE MUNICIPALITY F OR THE PURPOSE OF SEC. 2(14)(III)(B) OF THE ACT. THE DECISION OF T HE ITAT, AMRITSAR RELIED UPON BY THE APPELLANT ALSO STRENGTHENS THIS VIEW. 8. RESPECTFULLY FOLLOWING THE JUDICIAL PROPOSITION LAID DOWN BY THE HONBLE ITAT, HYDERABAD AND THE JURISDICTION AL TRIBUNAL, IT IS HELD THAT THE AGRICULTURAL LAND SOLD BY THE A PPELLANT DOES NOT CONSTITUTE A CAPITAL ASSET WITHIN THE MEANING O F THE PROVISIONS OF SECTION 2(14) OF THE ACT. THE ADDITIO N MADE IN THE ASSESSMENT ORDER TOWARDS LONG TERM CAPITAL GAINS IS , THEREFORE, DELETED. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US RAISING VARIOUS GROUNDS, INTER-ALIA, THA T THE CIT(A) ERRED IN HOLDING THAT THE LAND OR THE CAPITAL ASSET IN QU ESTION TRANSFERRED BY THE ASSESSEE IS UNDER RAJENDRA NAGAR MUNICIPALIT Y, WHICH IS NOT NOTIFIED BY THE CENTRAL GOVERNMENT FOR THE PURPOSE OF TREATING THE SAME AS CAPITAL ASSET AS REQUIRED U/S 2(14)(III)(B) OF IT ACT, 1961. 6. NONE APPEARED ON BEHALF OF THE RESPONDENT-ASSESS EE. HOWEVER, WE PROCEED TO DECIDE THE APPEAL AFTER HEARING THE L EARNED DR AND ON MERITS. 4 ITA NO. 437/HYD/2011 SMT. CH. LAXMAMMA 7. AFTER HEARING THE LEARNED DR AND PERUSING THE RE CORD AS WELL AS THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THA T SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THIS TRIBUNAL IN I TA NOS. 1024 TO 1027/HYD/2011 AND 4 OTHERS IN THE CASE OF GOUSIA BE GUM, HYDERABAD AND OTHERS, ORDER DATED 16 TH JANUARY, 2012 WHEREIN THE TRIBUNAL HELD AS UNDER:- 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE D O NOT FIND MERIT IN THE CONTENTION OF THE ASSESSEE. THE LAND IN QUESTION GI VING RISE TO CAPITAL GAIN WAS, IN FACT, URBAN LAND THOUGH AGRICULTURAL OPERAT IONS HAVE BEEN CARRIED OUT ON THEM. THE ASSESSEE PLACED BEFORE THE LOWER AUTHO RITIES PAHANI PATRIKA, CERTIFICATE AND DETAILS OF ELECTRICITY BILL/SLAB PA SS BOOK ETC. WE HAVE HELD ON THAT BASIS IN EARLIER PARAS THAT THE ASSESSEE DERIV ED AGRICULTURAL INCOME. BUT, THE QUESTION STILL REMAINS WHETHER THE IMPUGNED LAN D COME WITHIN THE MEANING OF 'CAPITAL ASSET'. THE LAND IS SITUATED AT NARSING VILLAGE OF RAJENDRA NAGAR MANDAL, R.R. DISTRICT WHICH IS WITHIN THE MUN ICIPAL LIMITS OF RAJENDRA NAGAR. ACCORDING TO THE LEARNED COUNSEL FOR THE ASS ESSEE, RAJENDRA MUNICIPALITY IS NOT NOTIFIED BY THE CENTRAL GOVERNM ENT AND THEREFORE THE AGRICULTURAL LANDS WHICH FALL UNDER THE JURISDICTIO N OF THE RAJENDRA NAGAR MANDAL CANNOT BE CONSIDERED AS CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE INCOME-TAX ACT. BUT, THE FACT IS THAT THIS IS URBAN LAND AKIN TO THE HYDERABAD MUNICIPALITY SITUATED WITHIN 8 KM FROM TH E LOCAL LIMITS OF HYDERABAD MUNICIPAL CORPORATION. IN SIMILAR CIRCUMS TANCES, THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. BOLA RAMAIAH (174 ITR 154) HELD THAT THE CAPITAL GAINS ARISING OUT OF SALE OF LAND SITUATED WITHIN 8 KM OF LOCAL LIMITS OF HYDERABAD MUNICIPALITY, IS LIABLE FOR TAX ON CAPITA L GAINS IRRESPECTIVE OF THE FACT WHETHER IT FALLS UNDER THE LIMITS OF RAJENDRA NAGAR MANDAL OR OTHERWISE. FURTHER, MERE FACT THAT THE LAND IN QUESTION WAS AG RICULTURAL LAND CANNOT BE A GROUND TO CLAIM FOR EXEMPTION UNDER SECTION 2(14) O F THE ACT AS THE LAND IS SITUATED WITHIN THE LOCAL LIMITS OF HYDERABAD MUNIC IPAL CORPORATION. FURTHER, IT WAS HELD RECENTLY BY THE HON'BLE PUNJAB & HARYANA H IGH COURT IN THE CASE OF CIT VS. SMT. ANJANA SEHGAL (SUPRA) THAT THE EXPRESS ION 'FROM THE LOCAL LIMITS OF ANY MUNICIPALITY' USED IN SECTION 2(14)(III)(B) OF THE INCOME-TAX ACT DENOTES 'ANY MUNICIPALITY OR MUNICIPALITY OF THE DISTRICT I N WHICH THE LAND IS SITUATED'. FURTHER, CAPITAL GAINS ARISING FROM THE TRANSFER OF AGRICULTURAL LAND SITUATED IN MUNICIPAL OR OTHER URBAN AREAS OR NOTIFIED ADJOININ G AREAS WILL BE LIABLE TO INCOME-TAX. IN THIS VIEW OF THE MATTER, AND CONSIDE RING THE FACTS AND THE CIRCUMSTANCES OF THE PRESENT CASE, IN OUR CONSIDERE D VIEW, THE LOWER AUTHORITIES ARE JUSTIFIED IN DETERMINING THE LAND I N QUESTION, AS CAPITAL ASSET LIABLE FOR INCOME-TAX. WITH REGARD TO DETERMINATION OF COST OF ACQUISITION OF THE LAND DISPOSED OF, WE ARE OF THE OPINION THAT CONSID ERING THE PROXIMITY OF THE 11 ITA NO.1024 TO LAND TO THE CITY, IT IS REASONABLE T O FIX THE VALUE OF AS ON 1.4.1981 AT RS.30,000 PER ACRE, INSTEAD OF RS.10,00 0 DETERMINED BY THE ASSESSING OFFICER, AS AGAINST RS.1,40,000 CLAIMED B Y THE ASSESSEE. ONE OF THE REASONS FOR WHICH THE CLAIM OF THE ASSESSEE FOR REL IEF UNDER S.54B WAS REJECTED BY THE ASSESSING OFFICER WAS THAT WHAT WAS PAID BY THE ASSESSEE WAS ONLY AN ADVANCE FOR PURCHASE, AND UNLESS IT IS ACTUAL PURCHASE OF LAND, ASSESSEE WOULD NOT BE ENTITLED FOR RELIEF UNDER S.5 4B. THERE IS SOME MERIT IN 5 ITA NO. 437/HYD/2011 SMT. CH. LAXMAMMA THIS REASONING OF THE ASSESSING OFFICER. HOWEVER, I N TERMS OF S.54B OF THE ACT, ASSESSEE HAS TO PURCHASE THE AGRICULTURAL LAND WITH IN A PERIOD OF TWO YEARS. HENCE, THOUGH MERE PAYMENT OF ADVANCE DOES NOT ENTI TLE THE ASSESSEE FOR RELIEF UNDER S.54B OF THE ACT, IF ULTIMATELY WHOLE TRANSACTION OF PURCHASE OF LAND WAS COMPLETED WITHIN A PERIOD OF TWO YEARS AS CONTEMPLATED UNDER S.54B OF THE ACT, ASSESSEE IS ENTITLED FOR RELIEF U NDER S.54B OF THE ACT. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES, AND RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFF ICER FOR VERIFYING WHETHER THE ASSESSEE HAS PURCHASED THE AGRICULTURAL LANDS WITHI N A PERIOD OF TWO YEARS, SO AS TO QUALIFY FOR RELIEF UNDER S.54B OF THE ACT, AND ACCORDINGLY RE-DECIDE THIS ISSUE IN ACCORDANCE WITH LAW AND AFTER GIVING REASO NABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. GROUNDS OF THE ASSESSEE ON THIS ISSUE ARE ALLOWED FOR STATISTICAL PURPOSE. SINCE THE ISSUE UNDER CONSIDERATION IS IDENTICAL T O THE ONE DECIDED BY THE TRIBUNAL IN THE CASE OF GOUSIA BEGUM (SUPRA), RESPECTFULLY FOLLOWING THE SAME, WE SET ASIDE THE O RDER OF THE CIT(A) AND HOLD THAT THE LAND TRANSFERRED BY THE ASSESSEE IS A CAPITAL ASSET, LIABLE FOR CAPITAL GAIN. HENCE, THE GROUNDS RAISED BY THE REVENUE IN THIS REGARD ARE ALLOWED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 06/06/2012. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJ AYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 6 TH JUNE, 2012 KV COPY TO:- 1) ACIT, CIRCLE 8(1), 8 TH FLOOR, C-BLOCK, IT TOWERS, HYDERABAD. 2) SMT. CH. LAXMAMMA PEERAMCHERU VILLAGE, RAJENDRA NAGAR MANDAL, RR DT. 3) THE CIT (A), VIJAYAWADA 4) THE CIT-II, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., 6 ITA NO. 437/HYD/2011 SMT. CH. LAXMAMMA HYDERABAD