The Assistant Commissioner of Income Tax, Hyderabad V. Shri Syed Mahaboob Hussain, R.R.Dist

ITA 849/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66580 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 09-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Capital asset; Question of law; Cost of acquisition
• Section: 54F; 2(14)

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. 849/HYD/2011 ASSESSMENT YEAR : 2007-08 THE ASST. COMMISSIONER OF INCOME-TAX, APPELLANT CIRCLE 8(1), HYDERABAD. VS. SYED MAHABOOB HUSSAIN, RESPONDENT PEERAMCHERU VILLAGE, R.R. DT. (PAN NO. CBWPS5315K) APPELLANT BY : SMT. VIDISHA KALRA RESPONDENT BY : SHRI A.V. RAGHURAM DATE OF HEARING : 13/12/2012 DATE OF PRONOUNCEMENT : 28/12/ 2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A), VIJAYAWADA DATED 21/03/2011 FOR TH E ASSESSMENT YEAR 2007-08. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE ALONG WITH OTHERS SOLD LAND ADMEASURING 93 GUNTAS IN PEERAMCHE RU VILLAGE, RAJENDRA NAGAR MANDAL, RANGA REDDY DISTRICT TO SRI THOTA NARSINGA RAO FOR A SALE CONSIDERATION OF RS. 10,46,25,000/-. IN THE ASSESSMENT ORDER, THE AO OBSERVED FROM THE AGREEMEN T OF SALE- CUM-GPA VIDE DOCUMENT NO. 1705/07 DT. 09/02/2007 TH AT THE 2 ITA NO. 849/HYD/2011 SYED MAHABOOB HUSSAIN ASSESSEE HAD SOLD 9 GUNTAS OF HIS LAND FOR SALE CON SIDERATION OF RS. 67,50,000/-. THE ASSESSEE FILED A RETURN ADMITTING AN INCOME OF RS. 1,40,250/- AFTER CLAIMING EXEMPTION OF CAPITAL GAIN S ON THE SALE PROCEEDS OF RS. 33,75,000/- ARISING OUT OF 3 GUNTAS OF INAM LANDS, DEDUCTION OF RS. 21,58,875/- U/S 54F OF THE ACT AND CLAIM OF PAYMENT OF RS. 8,90,610/- TO SISTERS AS PER MUSLIM LAW. FOR THE DETAILED REASONS GIVEN IN THE ASSESSMENT ORDER, THE CLAIMS RELATING TO EXEMPTION ON INAM LAND, DEDUCTION U/S 54F AND PA YMENT TO SISTERS AS PER MUSLIM LAW WERE REJECTED RESULTING I N THE INCOME OF THE ASSESSEE BEING ASSESSED AT RS. 66,15,375/-. 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A), THE ASSESSEE HAD RAISED THE F OLLOWING ADDITIONAL GROUNDS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE AO FAILED TO APPRECIATE THAT THE DOCUMENT WHICH HE REL IED UPON IS WITH RESPECT TO AGRICULTURAL LAND IN PEERAMCHERU VI LLAGE, RAJENDRANAGAR MANDAL, RANGA REDDY DT., WHICH IS OUT SIDE THE MUNICIPAL LIMITS OF RAJENDRANAGAR AND THEREFORE COU LD NOT HAVE BEEN BROUGHT TO TAX. WITHOUT PREJUDICE AND AT ANY RATE, THE AO FAILED TO APPRECIATE THAT RAJENDRANAGAR MUNICIPALITY IS NOT A NOTIFIED M UNICIPAL AREA BY THE CENTRAL GOVERNMENT AND THEREFORE THE TRANSFE R OF AGRICULTURAL LAND IN QUESTION CANNOT BE TAXED. 5. BEFORE THE CIT(A), THE LEARNED AR OF THE ASSESSE E PRESENTED HIS ARGUMENTS IN ADDITION TO FILING DETAILED WRITTE N SUBMISSIONS AND ALSO MADE SUBMISSIONS WITH REGARD TO ADDITIONAL GRO UNDS, WHICH WERE EXTRACTED BY THE CIT(A) AT PAGES 3 & 4 OF HIS IMPUGNED ORDER. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) 3 ITA NO. 849/HYD/2011 SYED MAHABOOB HUSSAIN OBSERVED THAT THERE WAS NO DISPUTE OVER THE FACT TH AT THE LAND SOLD BY THE ASSESSEE IS LOCATED AT PEERAMCHERU VILLAGE W HICH FALLS WITHIN THE RAJENDRA NAGAR REVENUE MANDAL IN RANGA REDDY DT . HE FURTHER OBSERVED THAT IT WAS ALSO A FACT THAT THE LANDS ARE NOT WITH THE JURISDICTIONAL LIMITS OF THE MUNICIPAL CORPORATION OF HYDERABAD AND THESE LANDS ARE SITUATED IN THE RAJENDRA NAGAR MUNI CIPALITY WHICH IS NOT A NOTIFIED MUNICIPALITY AS PER SECTION 2(14)(II I)(B) OF THE IT ACT. HE ALSO OBSERVED THAT THE LAND WAS SOLD THROUGH THE RAJENDRA NAGAR REVENUE AUTHORITIES AND THE JURISDICTIONAL MUNICIPA LITY IS RAJENDRA NAGAR MUNICIPALITY AND NOT THE MUNICIPAL CORPORATIO N OF HYDERABAD. HE, THEREFORE, HELD THAT THE ISSUE OF TAXABILITY OF CAPITAL GAINS ARISING OUT OF AGRICULTURAL LAND SITUATED IN A REVE NUE MANDAL WHERE NO NOTIFICATION OF THE CENTRAL GOVERNMENT WAS AVAIL ABLE FOR THAT PARTICULAR MUNICIPALITY IN TERMS OF SECTION 2(14)(I II)(B) OF THE IT ACT WAS CONSIDERED IN DETAIL BY THE ITAT IN THE CASE OF SRINIVAS PANDIT (HUF) VS. ITO, WARD-7(4), HYD. WHEREIN THE LAND WAS SITUATED ALSO IN RAJENDRA NAGAR MANDAL AS IN THE ASSESSEES CASE AND THE ITAT HELD THAT IN THE ABSENCE OF A SPECIFIC NOTIFICATION FOR RAJENDRA NAGAR MUNICIPALITY, THE AGRICULTURAL LAND WITHIN THE REVE NUE MANDAL COULD NOT BE CONSIDERED AS A CAPITAL ASSET FOR THE PURPOS E OF LEVYING THE TAX. THE CIT(A) ALSO REFERRED THE CASE OF DCIT VS. JASTI VAYUNANDANA RAO & OTHERS, WHEREIN THE ITAT, VIJAZ B ENCH HELD THAT FOR CONSIDERING AN AGRICULTURAL LAND SITUATED IN A MUNICIPALITY AS A CAPITAL ASSET FOR THE PURPOSE OF LEVYING OF TAX U/S 45 OF THE IT ACT, A NOTIFICATION BY THE CENTRAL GOVERNMENT WAS A DEFINI TE REQUIREMENT NOTIFYING THE MUNICIPALITY FOR THE PURPOSE OF SECTI ON 2(14)(III)(B) OF THE ACT. RESPECTFULLY FOLLOWING THE SAID DECISIONS , THE CIT(A) HELD THAT THE LAND SOLD BY THE ASSESSEE DOES NOT GIVEN R ISE TO ANY TAXABLE CAPITAL GAINS, THE GROUNDS RELATING TO EXEM PTION OF CAPITAL 4 ITA NO. 849/HYD/2011 SYED MAHABOOB HUSSAIN GAINS ON SALE OF INAM LAND, DEDUCTION U/S 54F AND P AYMENT TO SISTERS AS PER MUSLIM LAW ARE RENDERED REDUNDANT AN D BEING ACADEMIC IN NATURE, NO ADJUDICATION OF THE REST OF THE GROUNDS OF APPEAL ARE WARRANTED AND AS THE ASSESSEE HAD ADMITT ED AN INCOME OF RS. 1,40,250/- FROM THE ABOVE SALE TRANSACTION I N THE RETURN FILED ON 19/03/2009, THE ASSESSEE IS ENTITLED TO RELIEF T O THE EXTENT OF THE ADDITIONS MADE IN THE ASSESSMENT ORDER. ACCORDINGLY , THE CIT(A) DELETED THE ADDITIONS MADE BY THE AO. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS OF A PPEAL: 1. THE CIT(A) ERRED IN LAW AND FACTS IN ACCEPTING T HE APPEAL OF THE ASSESSEE AND GRANTING RELIEF TO THE ASSESSEE. 2. THE CIT(A) ERRED IN HOLDING THAT THE LAND OR THE CAPITAL ASSET IN QUESTION TRANSFERRED BY THE ASSESSEE IS UN DER RAJENDRA NAGAR MUNICIPALITY, WHICH IS NOT NOTIFIED BY THE CENTRAL GOVERNMENT FOR THE PURPOSE OF TREATING THE SAME AS CAPITAL ASSET AS REQUIRED BY U/S 2(14)(III)(B) OF T HE ACT, 1961. 3. THE CIT(A) FAILED TO APPRECIATE THAT THE LAND OR THE CAPITAL ASSET IN QUESTION IS WITHIN THE DISTANCE OF EIGHT K ILOMETERS FROM THE MUNICIPAL LIMITS OF HYDERABAD MUNICIPAL CO RPORATION, WHICH IS NOTIFIED BY THE CENTRAL GOVERNMENT UNDER N OTIFICATION. 4. THE CIT(A) ERRED IN APPRECIATING THE FACT THAT T HE LAND OR CAPITAL IN QUESTION BEING REGISTERED BY THE RAJENDR A NAGAR REVENUE AUTHORITIES DOES NOT PARTAKE THE CHARACTER OF THE LAND OR CAPITAL ASSET AS ENVISAGED U/S 2(14)(III)(B) OF THE IT ACT, 1961, AS THE LAND IN QUESTION LIES WITHIN 8 KILOMET ERS DISTANCE FROM THE MUNICIPAL LIMITS OF HYDERABAD MUNICIPAL CO RPORATION. 5. THE CIT(A) ERRED IN APPRECIATING THE FACT THAT T HOUGH THE LAND OR CAPITAL ASSET IN QUESTION IS SITUATED UNDER RAJENDRA NAGAR MANDAL, IT IS STILL WELL WITHIN THE DISTANCE OF EIGHT KILOMETERS FROM THE LIMITS OF HYDERABAD MUNICIPAL C ORPORATION, WHICH IS NOTIFIED BY THE CENTRAL GOVERNMENT. 6. THE CIT(A) RELIED UPON THE FACT THAT THE LAND OR CAPITAL ASSET IN QUESTION FALLS WITHIN THE DISTANCE OF EIGHT KILO METERS FROM LIMITS OF RAJENDRA NAGAR MUNICIPALITY, WHICH IS NOT NOTIFIED BY THE CENTRAL GOVERNMENT, WHILE NOT RECOGNIZING THE F ACT THAT 5 ITA NO. 849/HYD/2011 SYED MAHABOOB HUSSAIN THE LAND OR THE CAPITAL ASSET IN QUESTION IS WITHIN 8 KILOMETERS FROM THE MUNICIPAL LIMITS OF HYDERABAD MUNICIPAL CO RPORATION WHICH IS NOTIFIED BY THE CENTRAL GOVERNMENT AS ENVI SAGED U/S 2(14)(III)(B) OF THE IT ACT, 1961. 7. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT TH E SAID INTERPRETATION OF SECTION 2(14)(III)(B) WOULD RENDE R THE INTENTION OF THE LEGISLATION OTIOSE, WHICH GIVES RI SE TO A QUESTION OF LAW. 7. WE HAVE HEARD THE LEARNED DR SMT. VIDISHA KALRA AND THE LEARNED COUNSEL FOR THE ASSESSEE SHRI A.V. RAGHURAM AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF TH E AUTHORITIES BELOW. IT IS OBSERVED THAT SUBSEQUENT TO THE DECISI ON OF SRINIVAS PANDIT (HUF) VS. ITO, WARD-7(4), HYD., THE ITAT, HY DERABAD IN THE CASE OF SMT. GOUSIA BEGUM AND OTHERS IN ITA NOS. 10 24/HYD/2011 AND OTHERS HAS PASSED AN ELABORATE ORDER VIDE ORDER DATED 16/01/2012 WHEREIN IT HAS BEEN HELD AS FOLLOWS: 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, VRO'S CERTIFICATE AND DETAILS OF ELECTRICITY BILL/S LAB PASS BOOK ETC. WE HAVE HELD ON THAT BASIS IN EARLIER PARAS THAT THE ASSESS EE DERIVED AGRICULTURAL INCOME. BUT, THE QUESTION STILL REMAINS WHETHER THE IMPUGNED LAND COME WITHIN THE MEANING OF 'CAPITAL ASSET'. THE LAND IS SITUATED AT NARSING VILLAGE OF RAJENDRA NAGAR MANDAL, R.R. DISTRICT WHICH IS WI THIN THE MUNICIPAL LIMITS OF RAJENDRA NAGAR. ACCORDING TO THE LEARNED COUNSEL FO R THE ASSESSEE, 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 FRO M THE 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 6 ITA NO. 849/HYD/2011 SYED MAHABOOB HUSSAIN 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 DI STRICT IN WHICH THE LAND IS SITUATED'. FURTHER, CAPITAL GAINS ARISING FROM THE TRANSFER OF AGRICULTURAL LAND SITUATED IN MUNICIPAL OR OTHER URBAN AREAS OR NOTIF IED ADJOINING AREAS WILL BE LIABLE TO INCOME-TAX. IN THIS VIEW OF THE MATTER, A ND CONSIDERING THE FACTS AND THE CIRCUMSTANCES OF THE PRESENT CASE, IN OUR CONSI DERED 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 CO NSIDERING THE PROXIMITY OF THE LAND TO THE CITY, IT IS REASONABLE TO FIX THE V ALUE OF AS ON 1.4.1981 AT RS.30,000 PER ACRE, INSTEAD OF RS.10,000 DETERMINED BY THE ASSESSING OFFICER, AS AGAINST RS.1,40,000 CLAIMED BY THE ASSE SSEE. ONE OF THE REASONS FOR WHICH THE CLAIM OF THE ASSESSEE FOR RELIEF UNDE R S.54B WAS REJECTED BY THE ASSESSING OFFICER WAS THAT WHAT WAS PAID BY THE ASS ESSEE WAS ONLY AN ADVANCE FOR PURCHASE, AND UNLESS IT IS ACTUAL PURCH ASE OF LAND, ASSESSEE WOULD NOT BE ENTITLED FOR RELIEF UNDER S.54B. THERE IS SOME MERIT IN THIS REASONING OF THE ASSESSING OFFICER. HOWEVER, IN TER MS 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 REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. GROUNDS OF THE ASSESSEE ON THIS ISSUE ARE ALLOWED FOR STATISTICAL PURPOSE. 8. IN VIEW OF THE DECISION OF THE SMT. GOUSIA BEGUM (SUPRA), WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE I SSUE TO THE FILE OF THE CIT(A) WITH A DIRECTION TO DECIDE THE ISSUE IN DISPUTE IN THE LIGHT OF THE DECISION OF SMT. GOUSIA BEGUM (SUPRA) AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE, WHO SHALL CLARIFY WITH RESPECT TO THE DISTANCE FROM RAJENDRA NAGAR MU NICIPALITY AND FILE ANY OTHER MATERIAL, IF ANY, IN ORDER TO SUPPOR T HIS CLAIM. 7 ITA NO. 849/HYD/2011 SYED MAHABOOB HUSSAIN 9. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 28 TH DECEMBER, 2012. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAY ARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 28 TH DECEMBER, 2012 KV COPY TO:- 1) ACIT, CIR-8(1) 8 TH FLOOR, C-BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 2) SHRI SYED MAHABOOB HUSSAIN, 1-52, PEERAMCHERU VILLA GE, RAJENDRA NAGAR MANDAL, R.R. DT. 3) THE CIT(A), VIJAYAWADA 4) CIT-II, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYD ERABAD.