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2022 (11) TMI 25 - HC - Income TaxDeduction u/s 54G - shifting of industrial undertaking - AO rejected the benefit on the ground that Bangalore was not an urban area - Tribunal classifying Bangalore as a non-urban area for the purposes of Section 54G when it was previously categorized as an urban area until 1990 - HELD THAT - By virtue of Notification under Section 280Y(d) of the Act dated 22.09.1967, Bengaluru Corporation was declared as Urban area - As in view of the law laid down in para 39 in Fibre Boards, Bengaluru continues to be an Urban area for the purpose of Section 54G. Assessee shall be entitled for the benefit u/s 54G of the Act. - Decided in favour of assessee.
Issues:
Classification of Bangalore as urban or non-urban area for Section 54G purposes Analysis: The appeal raised questions regarding the classification of Bangalore as an urban or non-urban area for Section 54G purposes. The appellant shifted its operations from Bangalore to a rural area in Andhra Pradesh and claimed exemption under Section 54G against long-term capital gains. The Assessing Officer initially rejected the benefit under Section 54G, arguing that Bangalore was not an urban area. The case went through multiple rounds of appeals and remands, with the ITAT ultimately dismissing the appeal based on the CBDT notification dated 27.04.2006 and a previous judgment. The appellant argued that the notifications issued under Section 280-ZA would be valid for Section 54G, citing a Supreme Court decision in a similar case. The main contention revolved around the applicability of notifications and definitions under the Income Tax Act. The appellant relied on the Supreme Court's decision in Fibre Boards Pvt. Ltd. case, which clarified the validity of notifications for Section 54G purposes. The respondent argued that certain sections had been omitted and introduced at different times, affecting the applicability of notifications. The court carefully considered the arguments and the undisputed facts of the case, including the sale of the property in Bangalore and relevant notifications declaring Bangalore as an urban area. The court referred to the Apex Court's decision in the Fibre Board case, which emphasized the continuity of urban area declarations under Section 54G post the omission of Section 280-ZA. The court held that the notification declaring Bangalore as an urban area continued to be in effect for Section 54G purposes. Consequently, the appellant was deemed entitled to the benefit under Section 54G. The appeal was allowed, questions of law were answered in favor of the assessee, and no costs were awarded in the judgment.
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