2013 (12) TMI 1050 - AT - Income Tax

Partial Success in Tax Appeals: Some Allowed for Stats, Others Dismissed. Decision Date: March 8, 2013.

The Tribunal partly allowed ITA Nos. 773, 775, 776, 777, and 851/Hyd/2012 for statistical purposes, while dismissing ITA Nos. 774, 778, 852, 853, and ... Overriding title on property – Held that:- There is no material to show that the brothers and sisters of the forefathers having any title over the property - The assessees have not placed any document to show that the payments to whom the assessees have made any title over the property - The conduct of the co-owners to whom the payment has been made is not supported by any arrangement either under the Income-tax Act or under the Muslim law – Decided against assessee. Agricultural land – capital asset or not – Held that:- Following Smt. Gousia Begum v. Deputy CIT [2013 (9) TMI 559 - ITAT HYDERABAD] - The capital gains arising out of sale of land situated within 8 k.m. of local limits of Hyderabad Municipality, is liable for tax on capital gains irrespective of the fact whether it falls under the limits of Rajendra Nagar Mandal or otherwise - Mere fact that the land in question was agricultural land cannot be a ground to claim for exemption under section 2(14) of the Act as the land is situated within the local limits of Hyderabad Municipal Corporation – Decided against assessee. Inam Land – capital asset or not – Held that:- According to the order of Mandal Revenue Officer (MRO), Rajendra Nagar Mandal, Rangareddi District dated March 4, 1999, the property bearing Sy. No. 21, Peeramcheruvu village an extent of 0.09 acres the nomenclature was changed from inam to patta with effect from March 4, 1999 – Decided against assessee. Deduction u/s 54F – Held that:- If the assessee constructs any residential house, the assessee is required to place necessary evidence to prove that the construction has taken place - No evidence has been furnished regarding the construction of new house so as to show that the sale proceeds of the land were utilised for the purpose of construction of the new house - The onus lies on the assessees to prove by way of evidence to justify their claim for deduction - The onus was not discharged by the assessees - The assessees could not furnish the requisite evidence to prove the fact that there was any actual construction within the time stipulated in section 54F - Merely producing a copy of permission from Gram Panchayat with regard to construction permission by itself cannot discharge the assessees from proving actual construction – Decided against assessee. Deduction under section 54B – Held that:- There is no adjudication by the Commissioner of Income-tax (Appeals) on this ground – The issue was restored for fresh adjudication. Brokerage – Held that:- There is no adjudication by the Commissioner of Income-tax (Appeals) on this ground – The issue was restored for fresh adjudication. Issues Involved:1. Disallowance of payment made to brothers and sisters by the vendors.2. Treatment of land as a capital asset.3. Non-adjudication of the ground that capital gain on inam lands cannot be assessed to tax.4. Non-granting of deduction under section 54F of the Act.5. Non-granting of deduction under section 54B of the Act.6. Non-deduction of brokerage paid while computing the capital gains.Issue-wise Analysis:1. Disallowance of Payment Made to Brothers and Sisters:The first common issue in ITA Nos. 773, 774, 775, 776, and 777/Hyd/2012 pertains to the disallowance of payment made to brothers and sisters by the vendors directly. The assessees argued that these payments were made as per Muslim law, which recognizes preexisting shares in ancestral property. They claimed this should be allowed as a deduction while computing capital gain. However, the Tribunal found no material evidence to show that the brothers and sisters had any title over the property. The payments were not supported by any arrangement under the Income-tax Act or Muslim law. Thus, the Tribunal concluded that these payments were personal appropriations and not costs related to the transfer of the asset. Consequently, this ground was rejected.2. Treatment of Land as a Capital Asset:The next common issue was treating the land as a capital asset even though it was situated beyond 8 km from Hyderabad Municipal limits. The assessees contended that the land was agricultural and not a capital asset as per section 2(14) of the Income-tax Act. However, the Tribunal noted that the land was situated within 8 km from the local limits of Hyderabad Municipal Corporation, a notified area. The Tribunal referred to the Delhi High Court's decision in CIT v. Surjan Singh, which held that the population of the municipality as a whole should be considered, and the land in question was indeed a capital asset. Thus, this ground was also rejected.3. Non-adjudication of Ground on Inam Lands:In ITA Nos. 774, 851, 852, 853, and 854/Hyd/12, the issue was that capital gain on inam lands should not be assessed to tax as there was no cost involved. The Tribunal examined the order of the Mandal Revenue Officer, which indicated that the property had changed from inam to patta land before the sale. Therefore, the property could not be treated as inam land during the assessment year under consideration. This ground was rejected.4. Non-granting of Deduction Under Section 54F:In ITA Nos. 773, 774, 775, 777, 778, 851, 852, and 853/Hyd/2012, the issue was the non-granting of deduction under section 54F of the Act. The assessees claimed they had invested the sale consideration in constructing new residential buildings. However, the Tribunal found that the assessees failed to provide sufficient evidence to prove that the sale proceeds were utilized for construction. The Tribunal emphasized the need for concrete evidence to support the claim for deduction under section 54F. Therefore, this ground was rejected, and the orders of the lower authorities were confirmed.5. Non-granting of Deduction Under Section 54B:In ITA No. 777/Hyd/2012, the issue was the non-adjudication of the ground relating to deduction under section 54B of the Act for the purchase and development of agricultural land. The Tribunal noted that the Commissioner of Income-tax (Appeals) had not adjudicated this ground. Therefore, the issue was remitted to the Commissioner of Income-tax (Appeals) for fresh consideration in light of the evidence provided.6. Non-deduction of Brokerage Paid:In ITA Nos. 773, 775, 776, 777, and 851/Hyd/12, the issue was the non-deduction of brokerage paid while computing capital gains. The Tribunal observed that the Commissioner of Income-tax (Appeals) had not adjudicated this ground. Consequently, the issue was remitted to the Commissioner of Income-tax (Appeals) for fresh consideration and to decide the issue in accordance with the law.Judgment Summary:- ITA Nos. 773, 775, 776, 777, and 851/Hyd/2012 were partly allowed for statistical purposes.- ITA Nos. 774, 778, 852, 853, and 854/Hyd/2012 were dismissed.The order was pronounced in open court on the 8th of March, 2013.