Assessee's Appeal Partly Allowed, Agricultural Land Status Remanded for Verification, Section 54F Deduction Restriction Upheld

The appeal of the assessee is partly allowed for statistical purposes. The issue regarding the agricultural land's status as a capital asset is remanded to the AO for proper verification, while the restriction of deduction under section 54F to one residential property is upheld.

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Issues Involved:
1. Whether the agricultural land sold by the assessee is a capital asset under section 2(14) of the IT Act.
2. Whether the deduction under section 54F of the IT Act should be restricted to one residential property or allowed for investments in multiple properties.

Issue-wise Detailed Analysis:

1. Agricultural Land as a Capital Asset:
The primary issue is whether the agricultural land sold by the assessee qualifies as a capital asset under section 2(14) of the IT Act. The assessee argued that the land sold is not a capital asset as it is situated beyond 8 KM from the municipal limits of Jaipur. The CIT (A) rejected this claim, stating that the assessee had declared the capital gain in the return of income and did not raise this issue before the AO.

The Tribunal noted that determining whether the land is within 8 KM of the municipal limits involves both factual and legal questions. The Tribunal emphasized that the CIT (A) could have verified the facts by calling for a remand report from the AO. The Tribunal found that the documents provided by the assessee, such as a Google map and certain municipal reports, were insufficient to determine the exact distance. The Tribunal highlighted the need for a proper investigation to ascertain whether the land is within or beyond the 8 KM limit from the municipal boundaries.

The Tribunal cited section 2(14)(iii)(b) of the IT Act, which excludes agricultural land from the definition of a capital asset if it is situated beyond 8 KM from the local limits of a municipality. The Tribunal clarified that the distance should be measured from the municipal limits to the area in which the land is situated, considering the entire revenue state. The Tribunal set aside this issue to the AO for proper verification and determination of the distance from the municipal limits to the area where the land is situated.

2. Deduction under Section 54F:
The second issue concerns the restriction of deduction under section 54F to one residential property. The assessee claimed a deduction for investments in three properties, but the AO allowed the deduction only for one constructed residential house and rejected the claim for the other two residential plots. The CIT (A) upheld the AO's decision.

The Tribunal examined the details of the properties and noted that only one property was a constructed house, while the other two were residential plots. The Tribunal emphasized that the three properties were situated in different parts of Jaipur and could not be considered as a single residential house. The Tribunal referred to previous judgments, including those of the Hon'ble Supreme Court and various High Courts, which interpreted the phrase "a residential house" to mean a single residential unit.

The Tribunal agreed with the CIT (A) that the deduction under section 54F is intended for investment in a residential house for the assessee's own requirement, not for future investment in multiple properties. The Tribunal found no error in the CIT (A)'s decision to restrict the deduction to one residential property and dismissed the assessee's claim for deduction on multiple properties.

Conclusion:
The appeal of the assessee is partly allowed for statistical purposes. The issue regarding the agricultural land's status as a capital asset is remanded to the AO for proper verification, while the restriction of deduction under section 54F to one residential property is upheld.

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