2013 (10) TMI 594 - AT - Income Tax

Tribunal remands land capital asset determination for re-examination. Fresh adjudication on improvement cost, Section 54F deduction, and interest charges ordered.

Smt. (Dr.) Subha Tripathi Versus Deputy Commissioner of Income-tax, Circle - 6, Jaipur

The Tribunal set aside the determination of whether the land qualified as a capital asset to the AO for re-examination, directing consideration of the ... Capital asset u/s 2(14)(iii)(b) - Whether the land in question though located beyond 8 kms from the Municipal Limits of Jaipur Municipality as on the date of notification dated 06-01-1994 but subsequently it falls within the distance of 8 kms from the Municipal Limits due to the expansion of the Municipal Limits would still be regarded as agricultural land not falling in the definition of capital asset - Held that:- in order to determine whether the land in question falls under mischief of sub-clause (b) of Section 2(14(iii) of the Act, the distance of 8 kms has to be taken into account in terms of notification dated 6-01-1994 - Therefore, land in question which was located beyond 8 kms from the Municipal Limits as on 6-01-1994 when the notification was published in the official gazette, the same would fall under the exclusion clause of the term 'capital asset' as per provisions of 2(14)(iii)(b) of the Act. Whether the land in question can be termed as an agricultural land and not falling under the definition of expression asset - Held that:- It is not the mere potentiality but its actual condition and intended user which have to be seen for the purpose of exemption. The determination of character of land, according to the purpose for which it is meant or set apart and can be used, is a matter which ought to be determined on the facts of each particular case - the issue has not been examined by the lower authorities by considering this aspect of actual use of the land in question by the assessee and the purchaser because it has been treated as capital asset by invoking the provisions of sub-clause (b) of clause (iii) of Section 2(14) of the Act. Therefore, this issue is required to be examined after verification of the relevant facts - Following decision of Sarifabibi Mohmed Ibrahim And Others Versus Commissioner of Income-Tax [1993 (9) TMI 10 - SUPREME Court] and CIT v. Raja Benoy Kumar Sahas Roy [1957 (5) TMI 6 - SUPREME Court] - Decided partly in favour of assessee. Issues Involved:1. Addition of Rs. 2,78,37,285/- as long term capital gain on transfer of agricultural land.2. Substitution of cost of improvement at Rs. 1,50,000/- instead of Rs. 3,46,775/-.3. Disallowance of deduction of Rs. 1,19,39,511/- under Section 54F.4. Charging of interest under Sections 234B & 234C.Issue-wise Detailed Analysis:1. Addition of Rs. 2,78,37,285/- as Long Term Capital Gain:The core issue was whether the land sold by the assessee qualified as a 'capital asset' under Section 2(14)(iii)(b) of the Income Tax Act, 1961. The assessee argued that the land was agricultural and located beyond 8 km from the municipal limits as per the CBDT Notification No. 9447 dated 6-01-1994. The AO, however, found that the land was within 8 km from the municipal limits at the time of sale and thus did not qualify for exemption. The CIT(A) upheld this view, stating that the relevant date for determining the distance was the date of sale, not the date of acquisition or notification.The Tribunal considered the rival submissions and the material on record. It noted that as per the notification dated 6-01-1994, the municipal limits existing on the date of notification should be considered. The Tribunal held that the land, initially beyond 8 km from the municipal limits as per the 1994 notification, would still qualify for exemption despite subsequent municipal expansion. The Tribunal thus concluded that the land in question fell under the exclusion clause of Section 2(14)(iii)(b).2. Substitution of Cost of Improvement:The assessee contested the AO's substitution of the cost of improvement from Rs. 3,46,775/- (declared for the year 1992-93) to Rs. 1,50,000/- (relevant to the year 2000). The Tribunal did not provide a detailed analysis on this issue separately, as it was consequential to the determination of whether the land was a capital asset.3. Disallowance of Deduction under Section 54F:The assessee claimed a deduction of Rs. 1,19,39,511/- under Section 54F for investment in a new residential house. This claim was also contingent on the land being classified as a capital asset. The Tribunal did not address this issue separately, as it depended on the outcome of the primary issue regarding the land's status.4. Charging of Interest under Sections 234B & 234C:The assessee challenged the charging of interest under Sections 234B & 234C. The Tribunal noted that this issue was consequential and dependent on the final determination of the primary issue.Conclusion:The Tribunal set aside the issue of whether the land was a capital asset to the AO for re-examination, considering the guidelines laid down by the Supreme Court. The Tribunal directed the AO to verify the relevant facts and records and decide accordingly. Consequently, the issues related to the cost of improvement, deduction under Section 54F, and charging of interest were also set aside to the AO for fresh adjudication.Order:The appeal was partly allowed for statistical purposes, with the AO directed to re-examine the primary issue and the consequential issues. The order was pronounced in the open court on 24/05/2013.