KRISHNA KISHORE REDDY MANYAM ,HYDERABAD V. INCOME TAX OFFICER, WARD-6(4) , HYDERABAD

ITA 58/HYD/2020

AI Insights

The case revolves around the appeal by Krishna Kishore Reddy Manyam against the order of the Commissioner of Income-Tax (Appeals), Hyderabad, which upheld the Assessing Officer's decision taxing the Long Term Capital Gain (LTCG) from the sale of agricultural land. The primary contention was whether the agricultural land sold was a 'capital asset' under Section 2(14) of the Income Tax Act, 1961, given its location within the municipal limits of Rajendranagar, which was not a notified municipality at the time of sale. The Tribunal considered various judicial precedents and the administrative restructuring of municipalities in Hyderabad, particularly the formation of the Greater Hyderabad Municipal Corporation (GHMC), to determine the applicability of capital gains tax.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 397987 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Assessment Year: 2008-2009
• Other Referred Cases: CIT Vs. Smt. Anjana Sehgal, Gousia Begum Vs. Dy. CIT, CIT Vs. Bolla Ramaiah, DCIT Vs. Capital Local Area Bank Limited, CIT Vs. Sri Srinivas Pandit (HUF)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Cost of acquisition; Capital Gains
• Section: 143(3); 54; 54B; 54F; 139; 2(14)

Judgement Text

"आयकर अपीलीय न्यायाधिकरण में, हैदराबाद ‘बी’ बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B‘ Bench, Hyderabad श्री रवीश सूद, माननीय न्याययक सदस्य एवं श्री मिुसूदन सावडिया, माननीय लेखा सदस्य SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER आयकरअपीलसं./I.T.A.No.58/Hyd/2020 (निर्धारण वर्ा/ Assessment Year : 2008-09) Krishna Kishore Reddy Manyam. R/o. Hyderabad. PAN : AHQPM0086M. Income Tax Officer, Ward – 6(4), Hyderabad. (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri K.C. Devdas, C.A. राजस्व का प्रतततितित्व/ Department Represented by : Dr. Sachin Kumar, Sr.D.R सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 24.04.2025 घोर्णध की तधरीख/Date of Pronouncement : 02.06.2025 O R D E R प्रनत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M. The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), Hyderabad – 10, dated 24.10.2019, which in turn arises from the 2 ITA No.58/Hyd/2020 order passed by the A.O. under Section 143(3) of the Income Tax Act, 1961 (for short, “the Act”) dated 29.12.2010 for A.Y. 2008-09. The assessee has assailed the impugned order on the following grounds of appeal before us: “1. The order of the Hon'ble CIT(A) is erroneous in law as well as facts of the case. 2. The Hon'ble CIT(A) is not justified in holding that the land sold was capital asset within the meaning of Section 2(14) of the IT Act ignoring the fact that the land in question was agricultural land. 3. The Hon'ble CIT(A) ought to have observed that the sale proceeds of such agricultural land would not come within the purview of capital gain liable for Income Tax. 4. The Hon'ble CIT(A) ought to have observed that land in question was outside the Municipal limits of Rajendranagar Municipality and therefore not liable to capital gain tax in the light of decision of various judicial decisions. 5. The Hon'ble CIT(A) ought to have directed the assessing officer to allow further claim of expenditure towards cost of acquisition of Rs.70,17,970/- (indexed cost of acquisition) while calculating long term capital gain. 6. In the facts and circumstances of the case, the Hon'ble CIT(A) ought to have directed the assessing officer to allow entire claim of the assesse amounting to Rs.3,14,19,300/- u/s.548 of the IT Act. 7. The Hon'ble CIT(A) is not justified with regard to further restricting the claim u/s.548 to Rs.1,01,07,115/- as against Rs.1,17,15,000/- allowed by the assessing officer. 8. The Hon'ble CIT(A) without giving any enhancement notice ought not to have restricted the deduction u/s.54B to Rs.1,01,07,115/- as against Rs.1,17,15,000/-allowed by the assessing officer. 9. The Hon'ble CIT(A) ought to have directed the assessing officer to allow claim of the assesse u/s.54F of the IT Act which was completed rejected by the assessing officer. 10. The Hon'ble CIT(A) ought to have directed the assessing officer to allow the entire claim u/s.54F of the IT Act amounting to 3 ITA No.58/Hyd/2020 Rs.2,53,56,201/- instead of reworking out of the same (by the Hon'ble CIT(A) to) Rs.1,62,00,000/-. 11. Any other ground will be raised at the time of hearing of appeal.” 2. Succinctly stated, the assessee had filed his return of income for A.Y. 2008-09 on 29.12.2008, declaring an income of Rs.6,28,250/- along with agriculture income of Rs.1,60,600/-. Thereafter, the assessee filed a “revised” return of income on 30.03.2009, wherein he had declared an income of Rs.50,72,667/- along with agriculture income of Rs.1,60,600/-. Subsequently, the case of the assessee was selected for scrutiny assessment under Section 143(2) of the Act. 3. During the course of assessment proceedings, it was observed by the A.O. that the assessee in his “revised” return of income had admitted “Long Term Capital Gain” (LTCG) of Rs.6,04,32,280/- arising from the sale of agricultural lands situated at Village: Manchirevula falling within the Rajendranagar Municipality. The A.O. observed that the assessee had against the LTCG of Rs.6.04 crore (approx.) claimed exemptions under Section 54B of Rs.3,14,19,300/- and Section 54F of Rs.2,53,56,201/-. 4 ITA No.58/Hyd/2020 4. On being queried, the assessee to support his claim for exemption under Section 54B of the Act filed with the A.O. copies of the sale deeds/sale agreements evidencing investments in agricultural lands of Rs.1,17,75,000/-. However, the assessee despite sufficient opportunity, failed to place on record any evidence of investment made by him towards the purchase or construction of a residential house in support of his claim for exemption raised under Section 54F of the Act. Apart from that, the A.O. in the absence of any evidence substantiating the assessee’s claim for deduction of expenditure incurred both towards acquiring and improving the subject land, viz. (i). commission expenditure (claimed to have been paid at the time of purchase of land): Rs.10 lacs; and (ii). Indexed cost of development: Rs.82,05,632/-, disallowed the same. 5. Ostensibly, the assessee during the course of the assessment proceedings came up with a new claim, wherein based on a revised statement of computation of income that was filed with the A.O. on 29.08.2010, it was claimed by him that as the agricultural land situated at Village: Manchirevula was not a “capital asset” within 5 ITA No.58/Hyd/2020 the meaning of Section 2(14) of the Act, therefore, the profit/gain arising on the transfer of the same was not exigible to tax. For the sake of clarity, the claim of the assessee that the gain arising on the transfer of agricultural land situated at Village: Manchirevula was not liable to be taxed is culled out as under: “(i) The agricultural land sold is situated at Manchirevula village, Rajendranagar Mandal, R.R.Dist and the sale of land under consideration was made through Rajendranagar Revenue authorities. (ii) The said agricultural land is within the Rajendranagar Mandal and Rajendranagar Muncipality. Rajendranagar Municipality is not a notified Municipality for the purpose of treating agricultural land as a capital asset for the purpose of Section 2(14) of the I.T. Act, 1961. (iii) Rajendranagar Municipality is not a municipality notified by Central Government as envisaged u/s 2(14)(iii)(a) of the I.T.Act, 1961. As the nearest municipality is Rajendranagar Municipality, the question of applying 8 Kms limit from the Municipal limits of twin cities does not arise as held by ITAT, Hyderabad in the case of Srinivas Pandit (HUF) Vs. ITO (ITA No.56/Hyd/2007). 6. However, the aforesaid claim of the assessee that the subject land i.e. agricultural land situated at Village: Manchirevula was not a “capital asset” did not find favour with the A.O. The A.O. observed that the State Government of Andhra Pradesh had on 16.04.2007 issued a Notification (published on the same date in A.P. Gazette under G.O.Ms.No.261) as per which the limits of the erstwhile Hyderabad Municipal Corporation (for short, “HMC”) 6 ITA No.58/Hyd/2020 were altered by including areas covered by 12 adjacent Municipalities and Greater Hyderabad Municipal Corporation (for short, “GHMC”) was constituted. It was observed by him that “Rajendranagar Municipality” was one such Municipality that was included within GHMC. The A.O. based on his aforesaid observation was of the view that as the subject land, i.e. agricultural land situated at Village: Manchirevula as per the aforesaid notification dated 16.04.2007 was included within GHMC, therefore, the same fell within the meaning of “capital asset” as per the express provisions of Section 2(14)(iii)(a) of the Act. Also, the A.O. observed, that now when the agricultural land situated at Village: Manchirevula on 07.09.2007 was situated within GHMC, and thus, a “capital asset” u/s 2(14)(iii)(a) of the Act, therefore, the contentions of the assessee regarding the wrong application of distance of 8 Kms from the municipal limits of HMC were no more relevant. Apart from that, the A.O. observed that though the subject agricultural land was outside the municipal limits at the time of purchase but at the time of sale fell within the extended municipal limits of GHMC, therefore, the same was brought within the meaning of a “capital asset” u/s 2(14)(iii)(a) of 7 ITA No.58/Hyd/2020 the Act. Accordingly, the A.O. based on his aforesaid observations, concluded that as the agricultural land sold by the assessee at the time of sale was an “urban land” and hence, a “capital asset” within the meaning of Section 2(14)(iii)(a) of the Act, therefore, the gain arising on the sale of the same was exigible to tax. Accordingly, the A.O. based on his aforesaid deliberations, reworked out the LTCG on the sale of the subject agricultural land at Rs.5,69,67,912/-. 7. Aggrieved, the assessee carried the matter in appeal before the CIT(A). Apropos the assessee’s claim that as the agricultural land was situated within the municipal limits of Rajendranagar Municipality which was not a notified municipality under Section 2(14)(iii)(b) of the Act, therefore, the same cannot be treated as a “capital asset”, the CIT(A) did not find favour with the same. The CIT(A) relied upon the judgment of the Hon'ble Punjab and Haryana High Court in the case of CIT Vs. Smt. Anjana Sehgal, ITA No. 276 of 2004; dated 01.03.2011, wherein it was held that the land will be held as “urban land” if the same falls within the distance of 8 Kms. from the limits of any notified municipality. The 8 ITA No.58/Hyd/2020 CIT(A) observed that the aforesaid judgment in the case of Anjana Sehgal (supra) was followed by the jurisdictional ITAT, Hyderabad in the case of Gousia Begum Vs. Dy. CIT in ITA No.1024/Hyd/2011, dated 16.01.2012. Also, the CIT(A) had drawn support from the judgment of the Hon'ble High Court of Andhra Pradesh in CIT Vs. Bolla Ramaiah (1988) 174 ITR 154 (AP), wherein under similar circumstances, it was held that capital gains arising on the sale of land situated within 8 Kms. of local limits of Hyderabad Municipality is liable for tax, irrespective of the fact whether or not it falls under the limits of Rajendranagar Mandal or otherwise. Accordingly, the CIT(A) based on the aforesaid judicial pronouncements, observed, that as the agricultural land sold by the assessee was located within 8 Km from the municipal limits of GHMC, therefore, the same was a “capital asset” within meaning of Section 2(14) of the Act. 8. On merits, the CIT(A) observed that the assessee after having sold the subject land vide sale deed dt.07.09.2007, had invested in a “new asset” i.e. a residential house, vide a registered sale deed dated 23.07.2011 an amount of Rs. 90 lac. Apart from that, it was 9 ITA No.58/Hyd/2020 observed by him that the assessee had made payments of Rs.72 lacs towards the construction/renovation based on an unregistered agreement dated 18.04.2008 in respect of the new house property. Considering the aforesaid facts, the CIT(A) accepted the assessee’s claim for exemption under Section 54F of the Act to the extent of Rs.1.62 lacs (Rs.92 lacs + Rs.72 lacs). 9. Apropos, the assessee’s claim for exemption under Section 54B of Rs.3,14,19,300/-, the CIT(A) observed that the A.O. had while framing the assessment allowed the same based on the documentary evidence that was furnished by the assessee in respect of the purchase of new agricultural lands only to the extent of Rs.1,17,15,000/-. However, it was observed by him that the A.O. vide his “remand report”, dated 04.07.2012, had furnished an “annexure” containing a detailed report, wherein it was stated by him that the eligible amount of exemption u/s 54B amounted to Rs.29,50,155/-. The CIT(A) based on the aforesaid “remand report” called upon the assessee/appellant to show cause as to why his income may not be enhanced by restricting the claim for exemption under Section 54B to Rs.29,50,155/-. In reply, the 10 ITA No.58/Hyd/2020 assessee filed his explanation regarding the observations of the A.O. in the “remand report” and also the enhancement notice. The CIT(A) based on the facts before him called upon the A.O. to carry out further inquiries and submit his report. In compliance, the A.O. filed his “remand report” dt.22.06.2015, wherein it was now stated by him that the assessee had invested in agricultural lands an amount of Rs. 85 lacs. However, the CIT(A) after considering the reasons given by the A.O. in his “remand report” dated 04.07.2012 (supra), observed that the eligible amount of the assessee’s claim for exemption under Section 54B amounted to Rs.29,50,155/-. At the same time, the CIT(A) accepted the assessee’s claim for exemption under Section 54B, i.e the investments in two properties which though were made by him vide registered sale deeds but in the name of his wife amounting to Rs.71,56,960/-. Accordingly, the CIT(A) based on his aforesaid observations allowed the assessee’s claim for exemption under Section 54B of Rs. 1,01,07,115/- (Rs. 71,56,960/- + Rs. 29,50,155/-). 11 ITA No.58/Hyd/2020 10. Apropos the assessee’s claim for deduction of the cost of improvement of Rs.39,20,100/- and Rs.15,80,000/-, the CIT(A) observed that in the absence of any documentary evidence to substantiate the aforesaid claim for deduction, the same did not merit acceptance. At the same time, the CIT(A) was of the view that as the assessee had at the time of purchase of the subject land incurred the commission expenditure of Rs.10 lac through two cheques drawn on ABN Amro Bank, viz. (i). Cheque No. 625970, dated 20.08.2002: Rs. 5,00,000/-; and (ii). Cheque No. 626178, dated 28.08.2002, directed the A.O. to allow the same while working out the Indexed cost of acquisition. Accordingly, the CIT(A) based on his aforesaid deliberations partly allowed the appeal. 11. The assessee being aggrieved with the order of CIT(A) has carried the matter in appeal before us. 12. We have heard the learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial 12 ITA No.58/Hyd/2020 pronouncements that were pressed into service by the ld.AR to drive home his contentions. 13. Shri K.C. Devdas, Advocate, learned Authorized Representative (for short, “ld. AR”) for the assessee, at the threshold of hearing, submitted that as the agricultural land situated at Village: Manchirevula, Rajendranagar Mandal, Ranga Reddy District was not a “capital asset” u/s 2(14) of the Act, therefore, the profit/gain arising on the sale of the same could not have been brought to tax under the head “Long Term Capital Gain ” (LTCG). Elaborating on his contention, the Ld. AR submitted that as Village: Manchirevula falls within Rajendranagar Revenue Mandal, therefore, it could not have been taken as a part and parcel of Hyderabad Municipal Corporation. The Ld. AR submitted that “Rajendranagar” is also one of the Municipal Corporation. Elaborating further on his contention, the Ld. AR submitted that as the agricultural land at Village: Manchirevula was admittedly situated in Rajendranagar Revenue Mandal, which falls within Rajendranagar i.e. one of the Municipal Corporation, therefore, there was no justification for the A.O. to have applied the 8 Kms. 13 ITA No.58/Hyd/2020 radius that was notified by the Government under Section 2(14)(iii)(b) of the Act, vide “Notification No. S.O……..,dated January 06, 1984” for the municipal limits of Hyderabad. To sum up, it was the Ld. AR’s claim that as the agricultural land sold by the assessee was within the administrative jurisdiction of Rajendranagar Municipality and not Hyderabad Municipality, therefore, it was fallacious on the part of the authorities below to reckon the distance of the subject land considering the radius of 8 Kms. notified for the Municipality of Hyderabad, and thus, bring it within the meaning of a “capital asset” under Section 2(14)(iii)(b) of the Act. The Ld. AR to support his contention had relied upon the order of ITAT, Hyderabad Bench “B” in the case of Shri Srinivas Pandit (HUF) Vs. ITO, Ward 7(4), Hyderabad, ITA No.56/Hyd/2007, dt.23.04.2010. The Ld. AR submitted that the Tribunal in its order, had observed, that since Rajendranagar Municipality is admittedly not notified by the Central Government, therefore, the agricultural land in the case before them could not have been treated as a “capital asset” by taking the distance from the limits of Hyderabad Municipality. Elaborating further on his contention, the Ld. AR submitted that the Tribunal in its order had 14 ITA No.58/Hyd/2020 drawn support from the view taken by the co-ordinate Bench of the ITAT, Amritsar in the case of DCIT Vs. Capital Local Area Bank Limited 123 TTJ (ASR) 918 (2009). Further, the Ld. DR submitted that the order of the ITAT in Shri Srinivas Pandit (HUF) (supra) had been upheld by the Hon'ble High Court vide its order dated 04.07.2013, Pages 1 and 2 of APB. The Ld. AR had drawn our attention to the judgment of the Hon'ble High Court of Andhra Pradesh in the case of CIT Vs. Sri Srinivas Pandit (HUF) in ITA No.195 of 2013, dt.04.07.2013. The Ld. AR submitted that the Hon'ble High Court in its order had approved the view taken by the Tribunal, and observed that as there was nothing before them which would reveal that the decision of ITAT in the case of DCIT Vs. Capital Local Area Bank Limited (supra) had been challenged or upset, therefore, the appeal of the revenue cannot be admitted to unsettle the settled issue. The Ld. AR submitted that as the issue involved in the present appeal was no more res integra in the backdrop of the aforesaid order of the Hon'ble High Court, therefore, the observation of the A.O. that the agricultural land situated in Village Manchirevula was to be held as a “capital asset” under Section 2(14)(iii)(b) of the Act by reckoning its 15 ITA No.58/Hyd/2020 distance from the municipal limits of Hyderabad was based on a wrong application of the law, and thus, cannot be sustained. The Ld. AR on being confronted with the fact that the Government of Andhra Pradesh vide its Notification GOM No. 261, MA & UD (Ele.II) Department dated 16.04.2007 had merged 12 municipalities (including Rajendranagar municipality) and 8 Gram Panchayats with the Municipal Corporation of Hyderabad and established Greater Hyderabad Municipal Corporation (GHMC), Page Nos. 18 to 21 of APB, submitted that the said notification no. 261 (supra) had thereafter vide GOMs No. 12, dated 07.01.2014 giving effect to the Hon’ble High Courts orders, dated 26.09.2013 in W.P No. 26350 of 2013 and batch cases had been canceled., Page Nos. 5 & 6 of APB. It was, thus, the Ld. ARs contention that the Governments notification No. 261 (supra) pursuant to the Hon’ble High Court orders dated 26.09.2013 in W.P No. 26350 of 2013 was canceled by the Government vide its GOMs No. 12, dated 07.01.2014. 14. On merits, the Ld. AR submitted that the CIT(A) had arbitrarily restricted the assessee’s claim for exemption under 16 ITA No.58/Hyd/2020 Section 54B to Rs.1,07,07,115/-. Elaborating on his contention, the Ld. AR submitted that the authorities below had grossly erred in restricting the assessee’s claim for exemption on two counts, viz. (i). that the investments made by the assessee for the purchase of agricultural lands through “agreements to sell” had not been considered; and (ii). though the CIT(A) had observed that it was established that the assessee had made payments/invested to the extent mentioned in the “agreements to sell”, but had thereafter most arbitrarily concluded that the exemption was to be allowed only to the extent of the value reflected in the corresponding registered sale deeds. 15. The Ld. AR further submitted that the authorities below had erred in not appreciating the facts in the right perspective, and had most arbitrarily restricted the assessee’s claim for exemption u/s 54F to an amount of Rs.1,62,00,000/- 16. Apart from that, the Ld. AR submitted that both the authorities below have without any justification scrapped the assessee’s claim for deduction of the indexed cost of improvement amounting to Rs.82,50,632/-. 17 ITA No.58/Hyd/2020 17. Per contra, Dr. Sachin Kumar, the learned Senior Departmental Representative (for short “ld. DR”) relied upon the orders of lower authorities. The Ld. DR submitted that on 16.04.2007, GHMC was formed, by merging 12 Municipalities and 8 Gram Panchayats with the Municipal Corporation of Hyderabad. It was submitted by him that “Rajendranagar Municipality” was, inter alia, one of the 12 municipalities that was merged into GHMC. Elaborating further on his contention, the Ld. DR submitted that as on the date when the assessee had sold the agricultural land i.e. on 07.09.2007 the “Rajendranagar Municipality” was no more in existence and had merged with GHMC, therefore, there was no substance in the ld. AR’s claim that the A.O. had erred in treating the agricultural lands as a “capital asset” for the reason that the same was within a distance of 8 Km. from the municipal limits of Hyderabad. The Ld. DR submitted that as the agricultural land sold by the assessee was within a distance of 8 Kms. from the municipal limits of Hyderabad (GHMC), therefore, the same had rightly been held by the CIT(A) 18 ITA No.58/Hyd/2020 as a “capital asset” u/s 2(14)(iii)(b) of the Act. On merits, the Ld. DR relied upon the orders of lower authorities. 18. We have thoughtfully considered the contentions advanced by the Ld. Authorized Representatives on the aforesaid issues in the backdrop of the orders of the lower authorities. 19. Controversy involved in the present appeal is two-fold i.e. (i). that whether or not the agricultural land at village: manchirevula (supra) sold by the assessee during the subject year was on the date of sale i.e 07.09.2007 a “capital asset”?; and (ii). that whether or not the CIT(A) is right in law and facts of the case in restricting the assessee’s claim for exemption u/ss. 54B and 54F of the Act, and also declining his claim for deduction of Indexed cost of acquisition?. 20. At the threshold, we may herein observe that the ITAT, Hyderabad Bench “B” in the case of Shri Srinivas Pandit (HUF) Vs. ITO, Ward 7(4), Hyderabad, ITA No.56/Hyd/2007, dt. 23.04.2010, for A.Y 2003-04 had observed, that since Rajendranagar Municipality was not admittedly notified by the 19 ITA No.58/Hyd/2020 Central Government, therefore, the agricultural land in the case before them which was within the administrative jurisdiction of “Rajendranagar Municipality” could not be held to be a “capital asset”, based on the fact that the same was situated within the notified distance of 8 Kms from the Hyderabad Municipality i.e a separate municipality. As observed hereinabove, the Tribunal, while so concluding had drawn support from the order of ITAT, Amritsar in the case of DCIT Vs. Capital Local Area Bank Limited (2009) 123 TTJ 918 (Amritsar). For the sake of clarity, the observations recorded by the Tribunal in the case of Shri Srinivas Pandit (HUF) Vs. ITO, Ward 7(4), Hyderabad are culled out as under: 20 ITA No.58/Hyd/2020 21 ITA No.58/Hyd/2020 22 ITA No.58/Hyd/2020 23 ITA No.58/Hyd/2020 24 ITA No.58/Hyd/2020 21. As is discernible from the record, the aforesaid order of the Tribunal had thereafter been upheld by the Hon'ble High Court of Andhra Pradesh and the appeal filed by the Revenue was dismissed. For the sake of clarity, the observations of the Hon’ble High Court are culled out as under: “This appeal is sought to be preferred against the judgment and order of the Tribunal dated 23.4.2010 on the following suggested questions of law for the assessment year 2003-2004: 1. Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the subject- land situated in Himayatsagar Village In Rajendranagar Mandal does not fall within the purview of capital asset under Section 2(14)(iii)(b) of Income Tax Act, inspite of is being situated within 8 kilometers from Hyderabad Municipal Corporation. merely because Rajendranagar Municipal Corporation constituted by the Government of Andhra Pradesh was not notified by the Union Government in terms of Sec.2(14)(iii) (b) of Income Tax Act? 2. Whether on the facts and in the circumstances of the case, the view of the Appellate Tribunal that the expression \"any Municipality or Cantonment Board referred to in item (a)\" found in Section 2(14)(iii) (b) of the Income Tax Act is referable to Municipality in which the concerned land is situate, can be said to be tenable in law? The learned Tribunal while rendering the decision has followed the decision of Amritsar Bench of the Tribunal in the case of DCIT Vs. Capital Local Area Bank Ltd., reported in 123 TTJ (Asr) 918 (2009). There is no statement in the appeal papers that the aforesaid judgment and order of the Amritsar Bench of the Tribunal has been challenged or upset. Therefore, we cannot admit the appeal to unsettle the settled issue. The Appeal is accordingly dismissed. No order as to costs.” 25 ITA No.58/Hyd/2020 22. We respectfully follow the aforesaid judgment of the Hon'ble High Court in the case of CIT Vs. Sri Srinivas Pandit (HUF) (supra), wherein the order of the Tribunal disposing off the assessee’s appeal for A.Y 2003-04 stands approved. The Tribunal in its order had observed, that as the agricultural land in the case before them was situated within Rajendranagar Mandal and Rajendranagar is a separate Municipal Corporation, which though was not notified by the Central Government for the purpose of Section 2(14)(iii)(b) of the Act, the subject agricultural land could not be held to be a “capital asset” based on the fact that the same is situated within the notified distance of 8 Kms from the Hyderabad Municipality i.e a separate municipality. However, we are of the view that as the facts involved in the case before us are distinguishable, therefore, the reliance placed by the ld.AR from the aforesaid judicial pronouncement will not assist his case for the reasons stated hereinafter. 23. On 16.04.2007, the Government of Andhra Pradesh vide its Notification published in the A.P. Gazette, dated 16.04.2007, had abolished 12 municipalities which, inter alia, included 26 ITA No.58/Hyd/2020 Rajendranagar Municipality. That pursuant to the Notification dated 16.04.2007 (supra) the areas covered by the aforesaid 12 municipalities were included in the limits of “Hyderabad Municipal Corporation” (HMC), so as to constitute the “Greater Hyderabad Municipal Corporation” (GHMC). For the sake of clarity, the G.O.Ms.No.261, dated 16.04.2007 along with the Notification issued by the Government of Andhra Pradesh is culled out as under: 27 ITA No.58/Hyd/2020 28 ITA No.58/Hyd/2020 29 ITA No.58/Hyd/2020 30 ITA No.58/Hyd/2020 24. Accordingly, w.e.f. 16.04.2007 the Rajendranagar Municipality was abolished. On verification, we find that as a step towards broader administrative restructuring the Village Manchirevula was transferred from “Rajendranagar Mandal” to “Gandipet Mandal” which was also in Ranga Reddy District. However, we find that “Gandipet Mandal” unlike Rajendranagar was not a separate municipality in the year 2007 but an area falling in the periphery of GHMC. 25. Apropos the Ld. ARs claim that the Government of Andhra Pradesh - Notification dated 16.04.2007 abolishing 12 municipalities which, inter alia, included “Rajendranagar Municipality”, had thereafter been canceled vide G.O.Ms No. 12, dated 07.01.2014 for giving effect to the orders of the Hon’ble High Court, dated 26.09.2013 in W.P No. 26350 of 2013 and batch cases, Page 5-6 of APB, we find that the said contention in itself is based on the misconceived and incorrect set of facts. 26. Admittedly, it is a matter of fact borne from the record that the Government of Andhra Pradesh, vide its Notification dated 16.04.2007 had abolished 12 municipalities including 31 ITA No.58/Hyd/2020 “Rajendranagar Municipality”, and had included the areas covered by the said erstwhile municipalities in the limits of “Hyderabad Municipal Corporation” (HMC), so as to constitute the “Greater Hyderabad Municipal Corporation” (GHMC). 27. Independent of the aforesaid, the Government of Andhra Pradesh had thereafter come up with (i). G.O.Ms No. 407, MA & UD (Elec. II) Dept. dated 31.08.2013; (ii). G.O.Ms No. 410, MA & UD (Elec. II) Dept., dated 03.09.2013; and (iii). G.O.Ms No. 416, MA & UD (Elec. II) Dept., dated 05.09.2013, wherein orders were issued notifying the inclusion of areas covered by 36 Gram Panchayats which, inter alia, included Gram Panchayat of Village: Manchirerevula (Rajendranagar Manda) into the limits of GHMC. However, pursuant to the Hon’ble High Courts orders, dated 26.09.2013 in W.P. No. 26350 of 2013 and batch cases, the Government vide G.O.Ms No. 12, dated 07.01.2014 canceled the merger of the aforesaid 36 Gram Panchayats into GHMC, Page 5- 6 of APB. It was, thus, the G.O.Ms No. 407, 410 & 416 MA & UD (Elec. II) Dept. of the Government of Andhra Pradesh ordering the inclusion of 36 Gram Panchayats into GHMC that had been 32 ITA No.58/Hyd/2020 canceled, and not the G.O.Ms No. 261, dated 16.04.2007 abolishing the 12 Municipalities (including “Rajendranagar Municipality”) and including their the areas covered by the said erstwhile municipalities in the limits of “Hyderabad Municipal Corporation” (HMC) so as to constitute the “Greater Hyderabad Municipal Corporation” (GHMC). For the sake of clarity, Government of Andhra Pradesh – G.O.Ms No. 12 and Notification, dated 07.01.2014, (Page 5-6 of APB) as per which it had canceled its Notifications issued in viz., (i). G.O.Ms No. 407, MA & UD (Elec. II) Dept. dated 31.08.2013; (ii). G.O.Ms No. 410, MA & UD (Elec. II) Dept., dated 03.09.2013; and (iii). G.O.Ms No. 416, MA & UD (Elec. II) Dept., dated 05.09.2013 on the merger of thirty six (36) Gram Panchayats into GHMC is culled out as under: -left blank intentionally- 33 ITA No.58/Hyd/2020 34 ITA No.58/Hyd/2020 28. Be that as it may, pursuant to the Government of Andhra Pradesh Notification dated 16.04.2007 the “Rajendranagar Municipality” (being one of the 12 municipalities) was abolished. Also, as observed by us hereinabove, pursuant to the broader administrative restructuring the Village: Manchirevula (supra) was shifted from “Rajendranagar Mandal” to “Gandipet Mandal” w.e.f 35 ITA No.58/Hyd/2020 16.04.2007. As the Rajendranagar municipality was abolished on 16.04.2007 and Village: Manchirevula (supra) had become a part of Gandipet mandal (which did not have a separate municipality) but was an area falling in the periphery of GHMC, therefore, unlike as in the case of CIT Vs. Sri Srinivas Pandit (HUF) (supra), wherein the subject land at the relevant point of time was in Rajendranagar mandal, which had a separate municipality i.e Rajendranagar municipality, the assessee in the present case before us cannot claim that as the subject land i.e at Village: Manchirevula (supra) was within a “Mandal” which had a separate administrative municipality, therefore, there was no justification for the A.O. to have applied the 8 Kms. radius that was notified by the Government under Section 2(14)(iii)(b) of the Act, vide “Notification No. S.O……..,dated January 06, 1984” for the municipal limits of Hyderabad (GHMC) and bring the same within the meaning of a “capital asset”. 29. We thus, are of the view that as on the date when the assessee had sold his land at Village: Manchirevula, vide sale deed dt.07.09.2007, the same was in “Gandipet Mandal” which was not 36 ITA No.58/Hyd/2020 a separate municipality (i.e unlike Rajendranagar), but an area falling in the periphery of GHMC i.e. erstwhile Hyderabad Municipal Corporation (HMC) – a Municipality notified by the Central Government vide its “Notification No. So..….,dt. January, 06, 1994” for purpose of Section 2(14)(iii)(b) of the Act, therefore, no infirmity arises from the view taken by the CIT(A), who had rightly concluded that the subject agricultural land is to be held as a “capital asset” if the same was located within 8 Kms radius from the municipal limits of GHMC. However, we are of the view that as the distance of the subject agricultural land at Village: Manchirevula from the municipal limits of GHMC is neither discernible from the record; nor any details establishing the same was there before the CIT(A), therefore, the matter requires to be restored to the file of A.O. The A.O. is directed to verify the distance of the subject agricultural land at Village: Manchirevula from the municipal limits of GHMC on the date of sale i.e. on 07.09.2007. In case, the agricultural land is found to be within the notified area limit of 8 Kms. from the municipal limits of Hyderabad Municipality (now known as GHMC), then the view taken by the 37 ITA No.58/Hyd/2020 CIT(A) that the same is a “capital asset” under Section 2(14)(iii)(b) of the Act will stand approved. 30. Apropos the merits of the case, we find no infirmity in the view taken by the CIT(A) who had based on the documentary evidence as was available before him, viz. (i). registered sale deed dated 23.07.2011: Rs. 90 lacs; and (ii). unregistered construction agreement dated 18.04.2008: Rs. 72 lacs, had after observing that the assessee had invested an amount of Rs.1.62 crore in the new house, allowed his claim of exemption under Section 54F of the Act to the said extent. At the same time, we are unable to concur with the CIT(A), who had observed that the payments made by the assessee towards investment in the new house property were to be allowed only to the extent the same were made by him before the “due date” for filing of his return of income. We say so, for the reason that Section 54F of the Act, inter alia, contemplates the utilization of the “net consideration” towards the purchase or construction of the new house before the “date of furnishing the return of income under section 139”, and does not mandate the utilization of the same before the “due date” for furnishing the 38 ITA No.58/Hyd/2020 return of income under Section 139 of the Act. Therefore, it can safely or rather inescapably be inferred that the same takes within its meaning the time available with the assessee for filing a delayed return of income under sub-section (4) of Section 139 of the Act. Our aforesaid view is supported by the judgment of the Hon'ble High Court of Punjab and Haryana in the case of CIT-II Vs. Ms. Jagriti Aggarwal in ITA 176 of 2011 dt.03.10.2011. The Hon'ble High Court after drawing support from the judgment of the Hon'ble High Court of Karnataka in the case of Fatima Vs. ITO 32 DTR 243 (Kar), and that of the Hon'ble High Court of Gauhati in the case of CIT Vs. Rajesh Kumar Jalan (2006) 286 ITR 274 (Gauhati), had held, that sub-section (4) of Section 139 of the Act, is in fact, a proviso to sub-section (1) of Section 139 of the Act. It was thus, held that the period available to the assessee for making the investment u/s 54 of the Act will be available up to the period contemplated under sub-section (4) of Section 139 of the Act. We thus, in terms of our aforesaid observations, direct the A.O. to allow the investment made by the assessee in the new house property up to the date of filing of the delayed return of income 39 ITA No.58/Hyd/2020 under sub-section (4) of Section 139 of the Act applicable in his case. 31. Apropos the assessee’s claim for exemption under Section 54B of the Act, we are of the view that no infirmity arises from the observation of the CIT(A). Although the CIT(A) had observed that as per the “agreements to sell” it was an established fact that the payments/investments made by the assessee in agricultural lands were higher than the sale consideration reflected in the sale deeds, but the value reflected in the registered sale deeds which were executed subsequent to the “agreements to sell” was only to be considered. Accordingly, we are of the view that the CIT(A) had adopted a fair approach and allowed the assessee’s claim for exemption under Section 54B of the Act of Rs.1,01,07,115/-, viz. (i). agricultural lands purchased by the assessee in his own name (as per the value stated in the registered sale deed): Rs.29,50,155/-; and (ii). agricultural lands that were though purchased by the assessee from his own sources but the registered sale deeds were executed in the name of his wife: Rs. 71,56,960/- . We thus, in terms of our aforesaid observations, uphold the view 40 ITA No.58/Hyd/2020 taken by the CIT(A), wherein he had restricted the assessee’s claim for exemption under Section 54B of the Act to an amount of Rs.1,01,07,115/- (supra). 32. Apropos the assessee’s grievance that the CIT(A) had erred in declining his claim for deduction of the Indexed cost of improvement of Rs.82,50,632/-, we find no substance in the same. Although, the assessee had as per his computation of income claimed to have incurred expenditure towards the improvement of the subject lands, viz. (i) Financial Year 2001-02: Rs.39,20,100/-; and (ii). Financial Year 2002-03: Rs.15,80,000/-, but he had failed to place on record any material that would substantiate his aforesaid claim for deduction. As the assessee had raised the aforesaid claim based on the notings in his rough note book, therefore, the authorities below had declined to consider the same while computing the capital gain. 33. We have thoughtfully considered the observations of the CIT(A) and find no infirmity in the same. Ostensibly, in the absence of any material based on which the authenticity of the aforesaid claim of the assessee of having incurred the subject expenditure 41 ITA No.58/Hyd/2020 towards the improvement of subject lands could be established, the authorities below could not have allowed the same. We thus, uphold the order of the CIT(A) on the aforesaid issue. 34. In the result, the appeal filed by the assessee is partly allowed for statistical purposes in terms of our aforesaid observations. Order pronounced in the Open Court on 2nd June, 2025. Sd/- (श्री मिुसूदन सावडिया) (MADHUSUDAN SAWDIA) लेखा सदस्य/ACCOUNTANT MEMBER Sd/- (श्री रवीश सूद) (RAVISH SOOD) न्यायिक सदस्य/JUDICIAL MEMBER Sd/- Hyderabad, dated 02.06.2025. *TYNM/sps आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : Krishna Kishore Reddy Manyam, No.8-2, F:702 Sarita Apartments, Road No.4, Banjara Hills, Hyderabad – 500034. C/o.B. Narsing Rao & Co., Chartered Accountants, Plot No.554, Road No.92, Jubilee Hills, Hyderabad. – 500 096. 2. रधजस्व/ The Revenue : The Income Tax Officer, Ward –6(4), Hyderabad. 3. The Principal Commissioner of Income Tax, Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER "