2015 (2) TMI 939 - AT - Income Tax

Tax Tribunal: Property Transfer Date, Exemption Eligibility, Capital Gains Calculation

The ACIT. Circle-6, And Others Jaipur Versus Smt. Vinita Agarwal

The Tribunal upheld the Assessing Officer's view that the date of transfer of immovable property in a compulsory acquisition was when the assessee ... Capital gain determination - compulsory acquisition - in lieu of the acquisition of land, certain area of residential and commercial plots allotted to assessee - assessee has sold converted plots in the same financial year just after taking the possession and allotment of the said land - agriculture land or not - As per assessee’s submission, the land was agricultural land and was purchased on 21/04/2005, which was acquired by the JDA and in lieu of it, residential and commercial plots were allotted on 22/05/2008, thus period of holding was more than three years. - whether date of transfer of immovable property in the case of compulsory acquisition will be the date when final award was given to the assessee and not the date when the assessee extinguished her rights in the property by accepting terms of acquisition and made unconditional surrender of her rights in the land in pursuance of notification for acquisition of land? Held that:- For determining whether the assessee was using the agricultural land for agriculture purposes during the period of two years immediately preceding the date of transfer, the date of transfer is material effect. When the assessee relinquished their rights in land on 30/5/2006, the assessee has not completed two years and has not used the agricultural land for agriculture purposes. It is a fact that the compulsory acquisition proceedings were completed on 29/12/2007 and when award was passed by the Land Acquisition Officer U/s 12(2) of the Act. The assessee was allotted residential and commercial plot on 21/8/2008 at village Khatwada, Tehsil- Sanganer, district- Jaipur. The assessee received the compensation on 21/8/2008. The learned Assessing Officer has adopted the reserve rate fixed for residential plot @ 2800 per sq. mt and ₹ 5600 per sq.mt for commercial plot on the basis of reserve rate fixed by the JDA for villages Jhai, Khatwada, Bagru, Khurd, Palri and Bhambhoria. The residential and commercial plots allotted to the appellant in the area of Khatwara. Therefore, the Assessing Officer concluded short term capital gain on the basis of reserve rate is justified. The learned CIT(A) was not justified by holding that agricultural land was not a capital asset on the basis of certificate issued by the Tehsildar, Tehsil- Sanganer, that land was situated in village Khatwada, which was beyond 8 K.M. from the municipal limit. - Decided in favour of revenue. Issues Involved:1. Date of transfer of immovable property in compulsory acquisition.2. Commencement of capital gain process in compulsory acquisition.3. Eligibility for exemption under Section 10(37) of the Income Tax Act.4. Application of Fair Market Value versus Reserve Price for capital gain computation.5. Claim of exemption under Section 10(37) not made in the return of income.6. Determination of short-term capital gain on acquisition of land.Issue-wise Detailed Analysis:1. Date of Transfer of Immovable Property in Compulsory Acquisition:The Revenue contended that the date of transfer should be the date when the assessee extinguished her rights by accepting the terms of acquisition, i.e., 30/05/2006. However, the CIT(A) held that the transfer was completed on 29/12/2007 when the court order was passed, and the mutation was made. The Tribunal supported the Assessing Officer's view that the transfer was complete when the assessee relinquished her rights on 30/05/2006, as per Section 2(47) of the Act.2. Commencement of Capital Gain Process in Compulsory Acquisition:The CIT(A) opined that the capital gain process starts with the notification for acquisition and culminates with the final award. The Tribunal disagreed, stating that the capital gain arises on the date of transfer of the asset, which was 30/05/2006, when the assessee relinquished her rights.3. Eligibility for Exemption under Section 10(37) of the Income Tax Act:The CIT(A) allowed the exemption under Section 10(37), stating that the assessee continued to possess the land and carried out agricultural operations until 29/12/2007. The Tribunal found that the assessee did not fulfill the condition of using the land for agricultural purposes for two years preceding the transfer date (30/05/2006) and had not provided evidence of agricultural expenditure. Thus, the exemption under Section 10(37) was not applicable.4. Application of Fair Market Value versus Reserve Price for Capital Gain Computation:The Assessing Officer used the reserve price fixed by the JDA for computing capital gains, while the CIT(A) directed the application of Fair Market Value. The Tribunal upheld the Assessing Officer's method, stating that the reserve rate was justified given the privileges and amenities associated with the land.5. Claim of Exemption under Section 10(37) Not Made in the Return of Income:The Assessing Officer disallowed the exemption claim as it was not made in the original return, referencing the Supreme Court's decision in Goetze (India) Ltd. The CIT(A) allowed the claim, but the Tribunal reversed this, emphasizing that claims must be made through a revised return.6. Determination of Short-term Capital Gain on Acquisition of Land:The Assessing Officer determined a short-term capital gain of Rs. 3,00,35,000/- based on the reserve price, while the CIT(A) found no taxable capital gain due to the exemption under Section 10(37). The Tribunal confirmed the Assessing Officer's determination, rejecting the CIT(A)'s exemption allowance and the use of Fair Market Value.Conclusion:The Tribunal reversed the CIT(A)'s decision, confirming the Assessing Officer's findings on the date of transfer, inapplicability of Section 10(37) exemption, and use of reserve price for computing capital gains. The Revenue's appeal was allowed, and the assessee's cross objection was dismissed.