TaxTMI 
TaxTMI 
2014 (4) TMI 103
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....tuated in the revenue estate of Village Shobhagpura, Tehsil Girwar, which falls under Gram Panchayat Shobhagpura, Udaipur. Admittedly, or undisputedly, this land had been used for carrying out agricultural activities, for the last more than 2 (two) years. Since, section 2(14)(iii)(a) prescribes situations in which agricultural land cannot be treated as a 'capital asset', the assessee has asserted that this case satisfies the stipulated conditions and is thus, exempt from taxation u/s 45 of the Act. This land is undeniably governed by the Panchyat Act. However, on further verification it was noticed by the AO that this land is situated within 8 kms. of the Municipal Limits of the Udaipur City. The land was sold for a consideration of Rs. 1,11,00,000/-. 2.1 As per the AO this land being situated within the limits 8 kms. of the Municipality, it has to be treated as a 'capital asset' u/s 2(14) of the Act. When asked to, the assessee filed his objections to the above proposed action vide reply dated 20/12/2011 on 21/12/2011, which reads as under :- "The assessee has sold the agricultural land for Rs. 1,11,00,000/- which was purchased prior to the year 2005. Sh....
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....LC price of the said agriculture land was Rs. 30 Lakhs per Bigha against the amount of Rs. 115.99 Lacs per Bigha (Rs, 111.00 Lacs for 22256 sq ft. and Rs. 115.99 lacs for 23256 sq.ft) for which she has sold the agricultural land. Looking to the aforesaid reasons the prices of the land were spurt heavily. But the assessee had based on the aforesaid decision and within the ambit of the provisions of the Income-Tax Act has correctly claimed the exemption on the income earned on transfer of an agricultural land.' 2.2 After considering the submissions of the assessee the A.O. observed as under: After carefully going through the submission of the assessee, it is evident that there is no dispute regarding the land not being within 8 K.M. of the municipal limit. In the case of Mangla Industries Vs CIT 216 ITR 635 the Hon'ble Rajasthan High Court has held that when the land is situated within 8 K.M. from the municipal limit and recorded as agriculture land in the land revenue record, the sale of said land is liable to capital gain tax irrespective of the use it has been put to. As such the citations quoted by the....
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....r sources. 2.6 The Section 'E' of this chapter deals with the heads 'capital gains' which contains as many as 28 operative sections (excluding omitted ones). These sections provide for computation of capital gains in vivid situations and subject to certain circumstances in which it is not be charged. 2.7 Section 45 is the basic provision which defines 'capital gains' as any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 54 B, 54D, 54E, 54EA, 54EB be chargeable to income tax under the head 'capital gains' and shall be deemed to be the income of the previous year in which the transfer took place. 2.8 Section 48 prescribes the mode of computation of 'capital gain'. It provides that 'capital gains' has to be computed by deducting from the full value of the consideration received or assuring as a result of the transfer of the capital assets, the following amounts :- (i) Expenditure incurred wholly and exclusively in connection with such transfer; (ii) The cost of acquisition of the asset and the cost of any improvement thereto. The above ....
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....the assessee purchases another agricultural land within the time stipulated, then capital gains is not charged. Section 54D deals with capital gains arising on compulsory acquisition of lands and buildings and the situations in which it will not be charged to income tax. Section 54E deals with mode and modalities when capital gain arising on transfer of capital assets when it will not be charged to income tax. Section 54EA deals with circumstances when the capital gains arising on transfer of long term capital assets shall not be charged when it is invested in specified securities. Similar Section 54EB deals with capital gains arising on transfer of long term capital assets. Section 54EC talks about investment of capital gains in certain bonds to escape tax. Section 54ED deals such a situation in cases of transfer of certain listed securities or units. Now, we come to Section 54F which deals with the cases where capital gain arising on the transfer of certain capital assets is not charged to tax if the net consideration therefrom is invested in the residential house. Under this section following conditions must exist to claim benefit :- ....
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....Something is left and not deposited as Stipulated) - Chargeable to tax. (iii) If deposited as Stipulated - No tax. (iv) However, if within a year assessee purchases any residential house - cannot avail any befit of Section 54F(1). Within one year or constructions within 3 years, a new residential house after the transfer of the original asset; and the income from such residential house (other than the one residential house owned on the date of the transfer of the original asset) is chargeable under the head "income from house property". 2.11 In nut shell to avail benefit of Section 54F, without violating its conditions, the following conditions must co-exists. (i) The assessee must own a (long term) capital asset, i.e., the original asset. (ii) This original asset should not be a residential house. (iii) This original asset should be transferred. (iv) The net consideration should be arrived at in view of Explanation appended to Section 54(1). (v) At the time of transfer of the original asset, the assessee should not own / possess....