Krishna Murthy Vallu, Visakhapatnam V. Income tax Officer, Visakhapatnam

ITA 530/VIZ/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7391 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 28-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: TH LUCAS PETER
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Revised return
• Section: 54B; 50C; 2(14); 139

Judgement Text

ITA NO 530 F 2010 KRISHNA MURTHY VALLU VISAKHAPATNA M PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.530/VIZAG/2010 ASSESSMENT YEAR: 2007 - 08 KRISHNA MURTHY VALLU, VISAKHAPATNAM VS. ITO WARD-1(1) VISAKHAPATNAM (APPELLANT) PAN NO: AFNPV 1868 H (RESPONDENT) APPELLANT BY: SHRI SAMUEL NAGADESI, CA RESPONDENT BY: SHRI TH LUCAS PETER, CIT (DR) ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 02.12.2010 PASSED BY LEARNED CIT(A), VISAKHAPATNAM AND IT RELATES TO THE ASSESSMENT YEAR 2007-08. 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRONEOUS IN LAW AND FACTS OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND FACTS OF THE CASE IN CONFIRMING TH E ADDITION OF ` 1,28,24,700/- BEING THE PART OF THE SALE CONSIDERATION ON THE SALE OF AGRICULTURAL LAND AS L ONG TERM CAPITAL GAIN. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE HELD THE SAME IS NOT TAXABLE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER ERRED IN LAW AND FACTS OF THE CASE IN CONFIRMING THE ADDITION OF ` 73,18,992/- BEING THE PART OF THE CONSIDERATION ON SALE OF LAND AS SH ORT TERM CAPITAL GAIN. THE LEARNED COMMISSIONER OUGHT T O HAVE APPRECIATED THAT THE SALE IS A DISTRESS SALE A ND ITA NO 530 F 2010 KRISHNA MURTHY VALLU VISAKHAPATNA M PAGE 2 OF 11 THE CONSIDERATION TO THAT EXTENT WAS NOT RECEIVED B Y THE APPELLANT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LEARNED COMMISSIONER OUGHT TO HAVE APPRECIATED THE FACT THAT THE APPELLANT MADE INVESTMENT IN ACQUIRIN G THE AGRICULTURAL LAND WITHIN THE TIME PRESCRIBED OU GHT NOT HAVE DENIED THE EXEMPTION AS PER THE LAW. 5. THE APPELLANT CRAVE LEAVE TO ADD TO/DELETE/ALTER/ MODIFY/ AMEND/ SUBSTITUTE ALL OR ANY OF THE ABOVE GROUNDS. GROUND NO.1 AND 5 ARE GENERAL IN NATURE AND HENCE T HEY REQUIRE NO ADJUDICATION. OTHER GROUNDS RELATE TO THE ASSESSMEN T OF CAPITAL GAINS ARISING IN THE HANDS OF THE ASSESSEE ON SALE OF LANDS. 3. THE FACTS RELATING TO THE ISSUES ARE STATED IN B RIEF. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATI ON INITIALLY DECLARING NIL INCOME. SUBSEQUENTLY HE FILED A REVISED RETURN OF I NCOME ADMITTING A TOTAL INCOME OF ` 54,280/-. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SOL D THE FOLLOWING LANDS DURING THE YEAR UNDER CONSIDERATION: A) LAND HAVING AN EXTENT OF 5614.4 SQ.YARDS IN SUR VEY NO.338/1, 338/2 AND 338/3 AT THIMMAPURAM VILLAGE, HAMLET OF M ADHURAWADA IN VISAKHAPATNAM RURAL MANDAL. THIS LAND WAS SOLD F OR A CONSIDERATION OF ` 1,79,66,200/- ON 5.2.2007. THE MARKET VALUE DETERMINED FOR STAMP DUTY PURPOSES WAS THE SAME AS DECLARED BY THE ASSESSEE IN THE CONVEYANCE DEED. THIS LAND WAS PURCHASED ON 23.1.2004 AND HENCE IT WAS HELD FOR MORE THAN 36 MO NTHS. B) LAND HAVING AN EXTENT OF 3000.8 SQ.YARDS SITUATE D IN SURVEY NO.338/4 AND PART OF 338/5. THIS LAND WAS SOLD FOR A CONSIDERATION OF ` 30,94,800/- ON 23.2.2007. THE MARKET VALUE DETERMIN ED FOR STAMP DUTY PURPOSES WAS ` 96,02,600/-. THIS LAND WAS PURCHASED ON 31.1.2007 AND 13.2.2007, I.E. THIS LAND WAS HELD FO R LESS THAN 36 MONTHS. 3.1 THE ASSESSEE CLAIMED THAT BOTH THE IMPUGNED LAN DS ARE AGRICULTURAL LANDS AND HENCE THE CAPITAL GAIN ARISING ON THE SAL E IS EXEMPT UNDER THE ITA NO 530 F 2010 KRISHNA MURTHY VALLU VISAKHAPATNA M PAGE 3 OF 11 INCOME TAX ACT. ALTERNATIVELY, THE ASSESSEE SUBMITT ED THAT HE HAS INVESTED A SUM OF ` 1,50,94,000/- IN PURCHASE OF ANOTHER AGRICULTURAL L AND IN DECEMBER, 2007 AND FEBRUARY, 2008 IN A VILLAGE CALLED VELLAN KI AND ACCORDINGLY CLAIMED EXEMPTION UNDER SECTION 54B OF THE ACT AGAI NST THE CAPITAL GAIN ARISING ON SALE OF FIRST LAND CITED ABOVE. 3.2 THE ASSESSING OFFICER REJECTED BOTH THE CLAIMS OF THE ASSESSEE WITH THE FOLLOWING REASONS: A) THE NATURE OF LAND SOLD BY THE ASSESSEE ON 5.2. 2007 IS DESCRIBED AS VACANT LAND IN THE CONVEYANCE DEEDS BOTH AT THE TIME OF PURCHASE AND SALE. THE ASSESSEE DID NOT FURNISH CE RTIFIED COPY OF ADANGAL COPY/PATTADAR PASS BOOK IN SUPPORT OF HIS CLAIM THA T THE SAID LAND IS AN AGRICULTURAL LAND. B) THE NATURE OF LAND PURCHASED BY THE ASSESSEE ON WHICH EXEMPTION SECTION 54B OF THE ACT WAS CLAIMED IS ALS O DESCRIBED AS VACANT LAND IN THE CONVEYANCE DEED. IN RESPECT OF THIS LA ND ALSO, THE ASSESSEE DID NOT FURNISH ADANGAL COPY/PATTADAR PASS BOOK. C) THERE WAS NO INTENTION ON THE PART OF THE ASSE SSEE TO CARRY OUT ANY AGRICULTURAL OPERATIONS ON THE SAID LANDS AND T HE ASSESSEES MOTIVE SEEMS TO BE TO MAKE PROFIT OUT OF INVESTMENT. D) THE LANDS SOLD BY THE ASSESSEE ARE SITUATED WI THIN THE LIMITS OF GREATER VISAKHA MUNICIPAL CORPORATION. E) THE ASSESSING OFFICER ALSO REJECTED THE CLAIM OF EXEMPTION UNDER SECTION 54B OF THE ACT FOR THE REASON THAT THE ASSE SSEE DID NOT DEPOSIT THE LONG TERM CAPITAL GAIN IN CAPITAL GAINS ACCOUNT SC HEME BEFORE THE DUE DATE FOR FILING RETURN OF INCOME, AS PRESCRIBED IN SEC. 54B OF THE ACT. ACCORDINGLY THE ASSESSING OFFICER CONCLUDED THAT TH E ASSESSEE HAS SOLD ONLY VACANT LANDS, WHICH FALL IN THE CATEGORY OF CAPITA L ASSETS EXIGIBLE FOR CAPITAL GAINS. THE ASSESSING OFFICER ACCORDINGLY CO MPUTED LONG TERM CAPITAL GAINS IN RESPECT OF THE LAND SOLD ON 05-02-2007 (FI RST LAND STATED ABOVE) AT ` 1,28,24,700/- AND SHORT TERM CAPITAL IN RESPECT OF THE LAND SOLD ON 23-02- 2007 (SECOND LAND STATED ABOVE) AT ` 73,18,992/-. WHILE COMPUTING THE SAID SHORT TERM CAPITAL GAIN, THE ASSESSING OFFICER ADOPTED THE VALUE OF ` 96,02,600/- DETERMINED FOR STAMP DUTY PURPOSES AS T HE FULL VALUE OF SALE ITA NO 530 F 2010 KRISHNA MURTHY VALLU VISAKHAPATNA M PAGE 4 OF 11 CONSIDERATION AS PER THE PROVISIONS OF SEC.50C OF T HE ACT. THE ASSESSEE CARRIED THE MATTERS IN APPEAL BEFORE LEARNED CIT(A) , BUT COULD NOT SUCCEED. HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE CONTENTIONS RAISED BY THE LEARNED AUTHOR ISED REPRESENTATIVE BEFORE US ARE SUMMARIZED BELOW:- (A) THE LANDS SOLD BY THE ASSESSEE ARE AGRICULTUR AL LANDS FALLING WITHIN THE MUNICIPALITY OF GREATER VISAKHA MUNICIPA L CORPORATION. IN SUPPORT OF THE SAID CLAIM, THE ASSESSEE HAS PLACED RELIANCE ON THE CERTIFICATE ISSUED BY THE VILLAGE REVENUE OFFICER AND ALSO COPIES OF ADANGAL REGISTER. (B) THE LAND PURCHASED BY THE ASSESSEE IN VELLANK I VILLAGE IS ALSO AGRICULTURAL LAND ONLY AND HENCE THE CONDITIONS PRE SCRIBED UNDER SECTION 54B OF THE ACT ARE COMPLIED WITH. (C) THE AGRICULTURAL LANDS SOLD BY THE ASSESSEE A RE SITUATED WITHIN THE LIMITS OF GRATER VISAKHA MUNICIPAL CORPORATION (GVMC). HOWEVER, IN THE NOTIFICATION DATED 06-01-1994 ISSUED BY THE CENTRAL GOVERNMENT FOR THE PURPOSES OF SEC. 2(14)(III)(B) OF THE ACT, THE REFE RENCE IS MADE ONLY TO VISAKHAPATNAM. THE GVMC WAS CREATED BY A NOTIFIC ATION DATED 21-11- 2005 ISSUED UNDER SECTION 3 OF VISAKHAPATNAM MUNICI PAL CORPORATION ACT, BY INCLUDING ONE MUNICIPALITY NAMED GAJUWAKA AND 32 GRAM PANCHAYATS WITHIN THE LIMITS OF GVMC. THE IMPUGNED LANDS ARE LOCATED IN ONE OF THE GRAM PANCHAYATS, VIZ., MADHURAVADA, SO INCLUDED. H OWEVER, FOR THE PURPOSES OF SEC. 2(14)(III)(B) OF THE ACT THE NOTIF ICATION ISSUED BY THE CENTRAL GOVERNMENT ON 06-01-1994 STILL HOLDS THE FI ELD AND HENCE THE EXTENDED AREA OF GVMC CANNOT BE CONSIDERED FOR THE PURPOSES OF SEC. 2(14)(III) OF THE INCOME TAX ACT. ACCORDINGLY THE IMPUGNED AGRICULTURAL LANDS DO NOT FALL IN THE CATEGORY OF CAPITAL ASSET S AND HENCE THE PROFIT ARISING ON THEIR SALE IS NOT TAXABLE. (D) THE ITAT, VISAKHAPATNAM, IN ITS ORDER DATED 27-09-2010 IN THE CASE OF SMT. C.GIRIJA IN ITA NO.424/VIZAG/2009 HAS HELD THAT THE AGRICULTURAL LANDS SITUATED WITHIN THE LIMITS OF AN Y MUNICIPALITY SHALL BE TREATED AS CAPITAL ASSETS. ACCORDINGLY IT WAS HEL D THAT THE AGRICULTURAL LANDS SITUATED WITHIN THE LIMITS OF GVMC SHALL FALL IN THE CATEGORY OF CAPITAL ASSETS. HOWEVER, THE GVMC IS NOT INCLUDED IN THE NOTIFICATION ISSUED BY THE CENTRAL GOVERNMENT FOR THE PURPOSES OF SEC.2(14 )(III)(B) OF THE ACT. THE NOTIFICATION NAMES ONLY VISAKHAPATNAM. THE M UNICIPALITIES INCLUDED IN CLAUSE (A) OF SEC. 2(14)(III) SHOULD BE READ WIT H THE NOTIFICATION ISSUED BY THE CENTRAL GOVERNMENT UNDER CLAUSE (B) OF THE SAID SECTION. THE ISSUING OF NOTIFICATION IS A LEGISLATIVE ACT AND THE COURTS DO NOT HAVE JURISDICTION TO LEGISLATE AN ACT NOR DOES IT HAVE POWER TO MAKE A S UBORDINATE LEGISLATION IN A PARTICULAR MANNER, AS HELD HON'BLE SUPREME COURT IN THE CASE OF STATE OF ITA NO 530 F 2010 KRISHNA MURTHY VALLU VISAKHAPATNA M PAGE 5 OF 11 U.P VS. MAHINDRA & MAHINDRA LTD. (2011)(10 TAXMANN. COM 344(S.C). THUS ONLY THE CENTRAL GOVERNMENT HAS POWER TO INCLUDE GV MC IN THE NOTIFICATION, SINCE ISSUING OF NOTIFICATION IS A LEGISLATIVE ACTI VITY. SINCE THE NAME OF GVMC DOES NOT FIND PLACE IN THE NOTIFICATION, ONE CANNOT SAY THAT THE SAID GVMC IS COVERED BY CLAUSE (A) OF SEC. 2(14)(III) OF THE ACT . HOWEVER, THE ITAT, VISAKHAPATNAM HAS EXCEEDED ITS POWER BY HOLDING THA T THE LANDS SITUATED OUTSIDE THE LIMITS OF OLD VISAKHAPATNAM MUNICIPAL C ORPORATION, BUT WITHIN THE LIMITS OF NEWLY FORMED GVMC ALSO FALL WITHIN TH E CLAUSE (A) OF SEC. 2(14)(III) OF THE ACT. THUS, THE ITAT, VISAKHAPATN AM BENCH HAS INDULGED IN MAKING SUBORDINATE LEGISLATION, WHICH IS ULTRA VIRE S. (E) THE ASSESSEE HAS COMPLIED WITH THE CONDITIONS PRESCRIBED UNDER SECTION 54B OF THE ACT FOR AVAILING THE EXEMPTION U NDER THAT SECTION, I.E. IT HAS UTILIZED THE CAPITAL GAIN BEFORE THE DATE OF FU RNISHING THE RETURN OF INCOME UNDER SECTION 139 OF THE ACT. HENCE THE QUE STION OF DEPOSITING THE AMOUNT IN THE CAPITAL GAIN ACCOUNT SCHEME DOES NOT ARISE. IN THIS REGARD, RELIANCE IS PLACED ON THE DECISION OF ITAT, BANGALO RE IN THE CASE OF NIPUN MEHROTRA VS. A.C.I.T (2008)(297 ITR (AT) 0110). (F) THE ASSESSING OFFICER HAS WRONGLY APPLIED THE PROVISIONS OF SEC. 50C WHILE COMPUTING THE SHORT TERM CAPITAL GAIN WIT HOUT REFERRING THE MATTER TO DVO AND WITHOUT FOLLOWING THE REAL INCOME PRINCIPLE. 5. ON THE CONTRARY, THE LEARNED DEPARTMENTAL RE PRESENTATIVE SUBMITTED THAT THE CASE OF THE TAX AUTHORITIES IS THAT THE IM PUGNED LANDS ARE NOT AGRICULTURAL LANDS, BUT ONLY VACANT LANDS. HENCE T HERE IS NO NECESSITY TO GO INTO THE APPLICABILITY OF SEC. 2(14)(III) OF THE AC T TO THE INSTANT CASE, AS THE SAID PROVISION IS APPLICABLE ONLY TO THE AGRICULTUR AL LANDS. THE ITAT, VISAKHAPATNAM DID NOT INDULGE INTO ENACTING ANY SUB ORDINATE LEGISLATION AS ALLEGED BY THE LEARNED A.R. THE TRIBUNAL HAS THE D ECISION IN THE CASE OF C.GIRIJA BY MAKING A PLAIN INTERPRETATION OF THE PR OVISIONS OF SEC. 2(14)(III) OF THE ACT. THE CONSTITUTIONAL VALIDITY OF SEC. 2( 14)(III) HAS BEEN UPHELD BY HON'BLE SUPREME COURT IN THE CASE OF SINGHAI RAKESH KUMAR VS. UNION OF INDIA AND OTHERS (247 ITR 150) AND ACCORDINGLY IT WA S HELD BY THE APEX COURT THAT THE GAINS ARISING FROM TRANSFER OF LANDS FALLING UNDER SECTION 2(14)(III)(IA) AND 2(14)(III)(B) ARE ASSESSABLE AS CAPITAL GAINS. EVEN IF THE LANDS SOLD BY THE ASSESSEE, AS WELL AS, THE NEW LAN D PURCHASED BY HIM IS TREATED AS AGRICULTURAL LANDS FOR A MOMENT, THE ASS ESSEE WOULD NOT GET EXEMPTION UNDER SECTION 54B OF THE ACT, AS HE HAS F AILED TO COMPLY WITH THE ITA NO 530 F 2010 KRISHNA MURTHY VALLU VISAKHAPATNA M PAGE 6 OF 11 MANDATORY CONDITIONS PRESCRIBED IN THAT SECTION WIT H REGARD TO THE DEPOSIT OF UNUTILIZED MONEY IN THE CAPITAL GAINS ACCOUNT S CHEME. HE FURTHER STATED THAT THE ASSESSING OFFICER WAS LEGALLY RIGHT IN INVOKING THE DEEMING PROVISIONS OF SEC.50C WHILE COMPUTING THE SHORT TER M CAPITAL GAIN. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. THE MAIN CONTENTION OF THE LEARNED A.R IS THAT THE AGRICULTURAL LANDS SITUATED WITHIN THE LIMITS OF GVMC, BUT BEYOND 8 KI LO METERS FROM THE OUTER LIMITS OF VISAKHAPATNAM MUNICIPAL CORPORATION CAN NOT BE TREATED AS CAPITAL ASSETS WITHIN THE MEANING OF PROVISIONS O F SEC. 2(14)(III) OF THE ACT. HE HAS FURTHER CONTENDED THAT THE ITAT, VISAK HAPATNAM HAS USURPED THE DOMAIN OF THE LEGISLATURE BY MAKING AMENDMENTS IN THE NOTIFICATION ISSUED BY THE CENTRAL GOVERNMENT UNDER SECTION 2(14 )(III)(B) OF THE ACT. WE SHALL FIRST ADDRESS THESE CONTENTIONS. WE EXTRA CT BELOW SEC. 2(14)(III) OF THE ACT FOR THE SAKE OF CONVENIENCE. 2(14) CAPITAL ASSET MEANS PROPERTY OF ANY KIND H ELD BY AN ASSESSEE WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION, BUT DOES NOT INCLUDE- .. (III) AGRICULTURAL LAND IN INDIA, NOT BEING LAND S ITUATE (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURISDICTION OF A MUNICIPALITY (WHETHER KNOWN AS MUNICIPALITY, MUNICIPAL CORPORATION, NOTIFIED AREA COMMITTEE, TOWN 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 CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR OR (B) IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MORE THAN EIGHT KILOMETERS, FROM THE LOCAL LIMITS O F ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITEM (A), AS THE CENTRAL GOVERNMENT MAY, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANIZATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS, SPECIFY IN THIS BEHALF BY NOTIFICAT ION IN THE OFFICIAL GAZZETTE. ITA NO 530 F 2010 KRISHNA MURTHY VALLU VISAKHAPATNA M PAGE 7 OF 11 THE ITAT, VISAKHAPATNAM BENCH IN THE CASE OF C. GIR IJA IN ITA NO.424/VIZAG/2009 HAS INTERPRETED THE ABOVE SAID PR OVISION IN THE FOLLOWING LINES. 7. HAVING CAREFULLY EXAMINED THE ORDERS OF LOW ER AUTHORITIES IN THIS REGARD AND THE PROVISIONS OF SECTION 2(14)( III) OF THE ACT RELATING TO AGRICULTURAL LAND, WE FIND THAT AS PER CLAUSE (A), ANY LAND WHICH SITUATED IN AN AREA WHICH IS COMPRISED W ITHIN THE JURISDICTION OF MUNICIPALITY OR A CANTONMENT BOARD WHICH HAS A POPULATION OF NOT LESS THAN 10,000 ACCORDING TO THE LAST PRECEDING CENSUS WOULD NOT BE AN AGRICULTURAL LAND. THE CLAUSE (B) OF SECTION 2(14)(III) DEALS WITH THOSE LANDS WH ICH SITUATES IN ANY AREA WITHIN SUCH DISTANCE NOT BEING MORE THAN 8 KMS FROM THE LOCAL LIMITS OF THE MUNICIPALITY OR CANTONMENT BOARD AS THE CENTRAL GOVERNMENT MAY HAVING REGARD TO THE EXTENT OF AND SCOPE FOR URBANIZATION OF THAT AREA AND OTHER RELEV ANT CONSIDERATION SPECIFY IN THIS BEHALF BY NOTIFICATIO N IN THE OFFICIAL GAZETTE. TO BRING A LAND WITHIN THE PURVIEW OF CLA USE (B), THE CENTRAL GOVERNMENT IS REQUIRED TO ISSUE A NOTIFICAT ION IN THE OFFICIAL GAZETTE. WITHOUT A NOTIFICATION, A LAND FA LLS WITHIN THE 8 KMS FROM THE LOCAL LIMITS OF ANY MUNICIPALITY WOULD NOT CEASE TO BE AN AGRICULTURAL LAND. BUT IN THE INSTANT CASE, THE IMPUGNED LAND IS ADMITTEDLY SITUATES WITHIN AREA OF A LOCAL LIMIT OF THE GVMC FOR WHICH NO NOTIFICATION AS SPECIFIED IN CLAU SE (B) IS REQUIRED TO BE ISSUED BY THE CENTRAL GOVERNMENT. WE HAVE ALSO EXAMINED THE CONTENTION OF THE ASSESSEES THAT THE G VMC WAS NOTIFIED BY LOCAL LAWS AND LOCAL LAWS CANNOT SUPERS EDE THE CENTRAL LAWS. BUT WE DO NOT FIND ANY FORCE IN THIS ARGUMENT BECAUSE THE MUNICIPALITY OR CANTONMENT BOARD ARE SU BJECT TO LOCAL LAWS AND WITHIN A STATE SUBJECT AND ARE CREAT ED BY A NOTIFICATION BY THE STATE GOVERNMENT. CENTRAL GOVE RNMENT HAS NO JURISDICTION TO CREATE A MUNICIPALITY, CANTONMEN T BOARD IN ANY STATE OF THE COUNTRY. CENTRAL GOVERNMENT IS CO NCERNED WITH THE CENTRAL ACT. ONCE THE MUNICIPALITY OR THE CANT ONMENT BOARD IS CREATED BY A NOTIFICATION BY THE STATE GOVERNMEN T AS PER LOCAL LAWS, THE CENTRAL ACT WILL APPLY. THEREFORE ONCE T HE IMPUGNED LAND IS SITUATED WITHIN THE JURISDICTION OF THE LOC AL LIMIT OF THE GVMC, THE IMPUGNED LAND CEASE TO BE THE AGRICULTURA L LAND AND ON ITS SALE CAPITAL GAIN IS TO BE COMPUTED. ON A CAREFUL CONSIDERATION OF THE PROVISIONS OF SEC . 2(14)(III) AND THE INTERPRETATION GIVEN BY THE ITAT, VISAKHAPATNAM, WE FIND NO MERIT IN THE CONTENTION OF LEARNED A.R THAT THE VISAKHAPATNAM BE NCH OF ITAT HAS INDULGED IN ENACTING ANY SUBORDINATE LEGISLATION. THE TRIBUNAL HAS ONLY ITA NO 530 F 2010 KRISHNA MURTHY VALLU VISAKHAPATNA M PAGE 8 OF 11 INTERPRETED THE PROVISIONS OF SEC. 2(14)(III) OF TH E ACT BY CLOSELY READING THE SAID PROVISION. IN THIS CONNECTION, A SPECIFIC QUE RY WAS RAISED TO LEARNED A.R AS TO WHETHER THE MUNICIPALITIES WHICH ARE NEWL Y CREATED ARE NOT TO BE INCLUDED IN CLAUSE (A) OF SEC. 2(14)(III) OF THE AC T. THOUGH THE LEARNED A.R FAIRLY AGREED THAT THE NEW MUNICIPALITIES ARE SQUAR ELY COVERED BY CLAUSE (A), YET HE CONTENDED THAT THE MUNICIPALITIES, WHICH WER E EXISTING AT THE TIME THE NOTIFICATION DATED 06-01-1994 WAS ISSUED, IF C ONVERTED INTO GREATER MUNICIPALITIES, THEN THE LIMITS OF OLD MUNICIPALITI ES WILL ONLY BE COVERED BY CLAUSE (A) AND THE LIMITS OF THE EXTENDED MUNICIPAL ITIES WOULD NOT BE COVERED BY CLAUSE (A) UNLESS THEY ARE NOTIFIED UNDE R CLAUSE (B) OF SEC. 2(14)(III) OF THE ACT. IN OUR VIEW, THE VIEW PUT FORTH BY LEARNED A.R DOES NOT APPEAR TO BE IN CONSONANCE WITH THE SPIRIT AND ALSO NOT IN ACCORDANCE WITH THE MEANING CONVEYED BY THE PROVISIONS OF SEC. 2(14)(III) OF THE ACT. HENCE, WE ARE UNABLE TO AGREE WITH THE INTERPRETATI ON ADVANCED BY LEARNED A.R. AS STATED IN THE CASE OF C.GIRIJA, (SUPRA), A NY LAND SITUATED IN AN AREA WHICH IS COMPRISED WITHIN THE JURISDICTION OF A MUN ICIPALITY ETC. ARE SQUARELY COVERED BY CLAUSE (A) OF SEC. 2(14)(III) OF THE ACT . IN THE INSTANT CASE, THERE IS NO DISPUTE THAT THE NEWLY CREATED GVMC IS A MUNI CIPALITY AND THE IMPUGNED LANDS SOLD BY THE ASSESSEE ARE SITUATED WI THIN THE LIMITS OF GVMC. ACCORDINGLY, WITHOUT PREJUDICE TO THE CONTENTIONS O F THE REVENUE THAT THE IMPUGNED LANDS ARE NOT AGRICULTURAL LANDS, THE SAI D LANDS WOULD FALL IN THE CATEGORY OF CAPITAL ASSETS WITHIN THE MEANING OF CLAUSE (A) OF SEC. 2(14)(III) OF THE ACT, IF THEY ARE HELD TO BE AN AG RICULTURAL LAND. 7. HOWEVER, IN THE INSTANT CASE, THE CONTENTION OF THE ASSESSEE THAT THE IMPUGNED LANDS ARE AGRICULTURAL LANDS HAS NOT BEEN ACCEPTED BY THE DEPARTMENT. THE ASSESSING OFFICER HAS CATEGORICALL Y STATED THAT THE ASSESSEE DID NOT PRODUCE ANY DOCUMENT IN SUPPORT OF HIS CONTENTIONS, BESIDES OBSERVING THAT THE IMPUGNED LANDS HAVE BEEN DESCRIBED AS VACANT LANDS IN THE CONVEYANCE DEEDS. HOWEVER, IT APPEAR S THAT THE ASSESSEE HAS FURNISHED COPIES OF ADANGAL REGISTER BEFORE LEARNED CIT(A) AND THE FIRST APPELLATE AUTHORITY WAS UNDER THE IMPRESSION THAT T HE ASSESSING OFFICER HAS ITA NO 530 F 2010 KRISHNA MURTHY VALLU VISAKHAPATNA M PAGE 9 OF 11 CONSIDERED THESE DOCUMENTS ALSO. HENCE IT SEEMS TH AT THE SAID CLAIM OF THE ASSESSEE HAS NOT BEEN EXAMINED AT ALL BY THE TAX AU THORITIES. IT IS WELL SETTLED THAT THE QUESTION ABOUT THE NATURE OF LAND, I.E. THE QUESTION, WHETHER OR NOT A LAND IS AN AGRICULTURAL LAND, HAS TO BE DECIDED BY CONSIDERING VARIOUS ASPECTS. IN THE INSTANT CASE, A S STATED EARLIER, THE SAID CLAIM OF THE ASSESSEE HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER, IN THE ABSENCE OF REQUIRED DETAILS. HENCE, IN OUR VIE W, THE SAID ISSUE NEEDS TO BE EXAMINED AT THE END OF THE ASSESSING OFFICER. A CCORDINGLY WE SET ASIDE THE QUESTION OF DETERMINATION OF THE NATURE OF LAND TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE THIS ISSUE AFRESH IN ACCORDANCE WITH THE LAW BY DULY CONSIDERING THE DETAILS THAT W ERE/MAY BE FURNISHED BY THE ASSESSEE. 8. HOWEVER, THE SAID QUESTION IS RELEVANT ONLY FOR DETERMINING THE ELIGIBILITY OF CLAIM OF EXEMPTION UNDER SECTION 54B OF THE ACT. WE SHALL EXPLAIN THE SAME. IF THE ASSESSING OFFICER COMES TO THE CONCLUSION THAT THE IMPUGNED LANDS ARE VACANT LANDS ONLY AND NOT AGRI CULTURAL LANDS, THEN THE CAPITAL GAIN ARISING ON THEIR SALE IS LIABLE FOR TA XATION AND THE ASSESSEE CANNOT CLAIM EXEMPTION UNDER SECTION 54B AT ALL ON THE REINVESTMENT MADE BY HIM. HOWEVER, IF THE ASSESSING OFFICER COMES TO THE CONCLUSION THAT THE IMPUGNED LANDS ARE AGRICULTURAL LANDS, STILL THE CA PITAL GAIN ARISING ON THEIR SALE IS ASSESSABLE UNDER THE HEAD CAPITAL GAINS F OR THE REASON THAT THE IMPUGNED LANDS ARE LOCATED WITHIN THE LIMITS OF MUN ICIPALITY, VIZ., GVMC. HOWEVER, THE ASSESSEE WOULD BE ENTITLED FOR EXEMPTI ON UNDER SECTION 54B OF THE ACT ON THE REINVESTMENT MADE BY HIM IN PURCH ASE OF ANOTHER AGRICULTURAL LAND. FOR THAT PURPOSE, THE ASSESSEE HAS TO PROVE THAT THE NEW LAND PURCHASED BY HIM IS ALSO AGRICULTURAL LAND AND THE SAID CLAIM IS ALSO REQUIRED TO BE EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO VERIFY THE NATURE OF NEW L AND PURCHASED BY THE ASSESSEE ALSO, IF THE ASSESSING OFFICER COMES TO TH E CONCLUSION THAT THE IMPUGNED LANDS SOLD BY THE ASSESSEE ARE AGRICULTURA L LANDS. ITA NO 530 F 2010 KRISHNA MURTHY VALLU VISAKHAPATNA M PAGE 10 OF 11 9. IF THE ASSESSING OFFICER COMES TO THE CONCLUS ION THAT THE IMPUGNED LANDS SOLD BY THE ASSESSEE AND THE NEW LAND PURCHAS ED BY THE ASSESSEE ARE AGRICULTURAL LANDS, THEN THE QUESTION THAT REQUIRES CONSIDERATION IS ABOUT THE ELIGIBILITY OF THE ASSESSEE TO CLAIM EXEMPTION UNDE R SECTION 54B OF THE ACT. THE ASSESSEE HAS PURCHASED THE NEW LAND IN DECEMBER 2007 AND FEBRUARY, 2008. THE DUE DATE FOR FILING THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS 31 ST JULY, 2007. THE ASSESSING OFFICER TOOK THE VIEW T HAT THE ASSESSEE DID NOT COMPLY WITH THE CONDITIONS PRE SCRIBED UNDER SECTION 54(2) OF THE ACT BY DEPOSITING THE AMOUNT NOT UTILI ZED BEFORE THE DUE DATE OF RETURN IN THE CAPITAL GAINS SCHEME. IN THIS R EGARD, THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF ITAT BANGALORE I N THE CASE OF NIPUN MEHROTRA VS. A.C.I.T REPORTED IN (2008) (297 ITR (AT ) 0110). ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO CONSIDER THE CLA IM OF THE ASSESSEE IN THE LIGHT OF PRINCIPLES STATED IN THE ABOVE CITED CASE. 11. WITH REGARD TO THE INVOKING OF PROVISIONS OF S EC. 50C FOR COMPUTING SHORT TERM CAPITAL GAINS, THE LEARNED AUTHORISED RE PRESENTATIVE CONTENDED THAT THE ASSESSING OFFICER WAS NOT CORRECT IN INVOK ING THE SAID PROVISION AND FURTHER THE ASSESSING OFFICER HAS FAILED TO APPLY REAL INCOME PRINCIPLE. THE LEARNED AUTHORISED REPRESENTATIVE, IN HIS WRITT EN SUBMISSIONS, HAS NARRATED GIST OF VARIOUS CASE LAW. HOWEVER, THE LE ARNED AUTHORISED REPRESENTATIVE DID NOT POINT THEIR RELEVANCE TO THE FACTS OF THE INSTANT CASE. AS CONTENDED BY THE LEARNED D.R, THE PROVISIONS OF SEC.50C ARE DEEMING PROVISIONS, WHICH HAVE TO BE NECESSARILY APPLIED BY THE ASSESSING OFFICER WHILE COMPUTING THE INCOME FROM CAPITAL GAINS. THE LEARNED CIT(A) HAS SPECIFICALLY NOTICED THAT THE ASSESSEE DID NOT OBJE CT BEFORE ASSESSING OFFICER FOR ADOPTING THE SALES VALUE DETERMINED FOR STAMP D UTY PURPOSES FOR COMPUTING THE SHORT TERM CAPITAL GAIN AS PER THE PR OVISIONS OF SEC.50C OF THE ACT. HENCE THERE WAS NO NECESSITY FOR THE ASSE SSING OFFICER TO MAKE A REFERENCE TO THE VALUATION OFFICER. BEFORE US, NO MATERIAL WAS PLACED TO SHOW THAT THE ASSESSEE DID OBJECT BEFORE THE ASSESS ING OFFICER FOR APPLYING ITA NO 530 F 2010 KRISHNA MURTHY VALLU VISAKHAPATNA M PAGE 11 OF 11 THE PROVISIONS OF SEC. 50C. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LEARNED CIT(A) ON THIS ISSUE. 12. THE ORDER OF LEARNED CIT(A) STANDS MODIFIED ACCORDINGLY ON OTHER ISSUES. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 8 TH AUGUST, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 08-08-2011 COPY TO 1 SHRI KRISHNA MURTHY VALLU C/O DMRAO, DM RAO & CO. CHARTERED ACCOUNTANT 305, 2 ND FLOOR, GVK PLAZA SEETHAMMAPETA VISAKHAPATNAM 530016 2 THE ITO WARD-1(1) VISAKHAPATNAM 3 4. THE CIT 1, VISAKHAPATNAM THE CIT(A), VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM