TaxTMI 
TaxTMI 
2011 (8) TMI 512
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and in the circumstances of the case, the learned Commissioner erred in law and facts of the case in confirming the addition of Rs. 73,18,992 being the part of the consideration on sale of land as short term capital gain. The learned Commissioner ought to have appreciated that the sale is a distress sale and the consideration to that extent was not received by the appellant. 4. On the facts and in the circumstances of the case the learned Commissioner ought to have appreciated the fact that the appellant made investment in acquiring the agricultural land within the time prescribed ought not have denied the exemption as per the law. 5. The appellant crave leave to add to/delete/alter/ modify/amend/substitute all or any of the above grounds." Ground Nos. 1 and 5 are general in nature and hence they require no adjudication. Other grounds relate to the assessment of capital gains arising in the hands of the assessee on sale of lands. 3. The facts relating to the issues are stated in brief. The assessee filed its return of income for the year under consideration initially declaring Nil income. Subsequently he filed a revised return of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d by the assessee are situated within the limits of Greater Visakha Municipal Corporation. (e) The Assessing Officer also rejected the claim of exemption under section 54B of the Act for the reason that the assessee did not deposit the long term capital gain in "Capital gains account scheme" before the due date for filing return of income, as prescribed in section 54B of the Act. Accordingly the Assessing Officer concluded that the assessee has sold only vacant lands, which fall in the category of "Capital assets" exigible for capital gains. The Assessing Officer accordingly computed long term capital gains in respect of the land sold on 5-2-2007 (first land stated above) at Rs. 1,28,24,700 and short term capital in respect of the land sold on 23-2-2007 (second land stated above) at Rs. 73,18,992. While computing the said short term capital gain, the Assessing Officer adopted the value of Rs. 96,02,600 determined for stamp duty purposes as the full value of sale consideration as per the provisions of section 50C of the Act. The assessee carried the matters in appeal before Learned CIT(A), but could not succeed. Hence the assessee is in appeal before us. 4. The ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cation is a legislative act and the courts do not have jurisdiction to legislate an Act nor does it have power to make a subordinate legislation in a particular manner, as held Hon'ble Supreme Court in the case of State of U.P. v. Mahindra & Mahindra Ltd. [2011] 10 taxmann.com 344 (SC). Thus only the Central Government has power to include GVMC in the notification, since issuing of notification is a legislative activity. Since the name of GVMC does not find place in the notification, one cannot say that the said GVMC is covered by clause (a) of section 2(14)(iii) of the Act. However, the ITAT, Visakhapatnam has exceeded its power by holding that the lands situated outside the limits of old Visakhapatnam Municipal Corporation, but within the limits of newly formed GVMC also fall within the clause (a) of section 2(14)(iii) of the Act. Thus, the ITAT, Visakhapatnam Bench has indulged in making subordinate legislation, which is ultra vires. (e) The assessee has complied with the conditions prescribed under section 54B of the Act for availing the exemption under that section, i.e. it has utilized the capital gain before the date of furnishing the return of income un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....He has further contended that the ITAT, Visakhapatnam has usurped the domain of the Legislature by making amendments in the notification issued by the Central Government under section 2(14)(iii)(b) of the Act. We shall first address these contentions. We extract below section 2(14)(iii) of the Act for the sake of convenience. "2(14) "capital asset" means property of any kind held by an assessee whether or not connected with his business or profession, but does not include- ** ** ** (iii) agricultural land in India, not being land situate- (a) in any area which is comprised within the jurisdiction of a municipality (whether known as municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year or (b) in any area within such distance, not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (a), as the Centr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mpugned land cease to be the agricultural land and on its sale capital gain is to be computed." On a careful consideration of the provisions of section 2(14)(iii) and the interpretation given by the ITAT, Visakhapatnam, we find no merit in the contention of Learned A.R that the Visakhapatnam Bench of ITAT has indulged in enacting any subordinate legislation. The Tribunal has only interpreted the provisions of section 2(14)(iii) of the Act by closely reading the said provision. In this connection, a specific query was raised to Learned A.R as to whether the municipalities which are newly created are not to be included in clause (a) of section 2(14)(iii) of the Act. Though the Learned A.R fairly agreed that the new municipalities are squarely covered by clause (a), yet he contended that the municipalities, which were existing at the time the notification dated 6-1-1994 was issued, if converted into greater municipalities, then the limits of old municipalities will only be covered by clause (a) and the limits of the extended municipalities would not be covered by clause (a) unless they are notified under clause (b) of section 2(14)(iii) of the Act. In our view, the view put forth b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ity of claim of exemption under section 54B of the Act. We shall explain the same. If the Assessing Officer comes to the conclusion that the impugned lands are "Vacant lands" only and not agricultural lands, then the capital gain arising on their sale is liable for taxation and the assessee cannot claim exemption under section 54B at all on the reinvestment made by him. However, if the Assessing Officer comes to the conclusion that the impugned lands are agricultural lands, still the capital gain arising on their sale is assessable under the head "Capital gains" for the reason that the impugned lands are located within the limits of municipality, viz., GVMC. However, the assessee would be entitled for exemption under section 54B of the Act on the reinvestment made by him in purchase of another agricultural land. For that purpose, the assessee has to prove that the new land purchased by him is also agricultural land and the said claim is also required to be examined by the Assessing Officer. Accordingly, we direct the Assessing Officer to verify the nature of new land purchased by the assessee also, if the Assessing Officer comes to the conclusion that the impugned lands sold by the....