2012 (8) TMI 766 - AT - Income Tax

Capital assets u/s 2(14) - assessability of capital gains on sale of land situated at Rajendra Nagar Mandal, within municipal limits of Rajendra Nagar assesee contended that Rajendra Municipality is not notified by the Central Government and therefore land cannot be considered as capital asset u/s 2(14) - Held that - Issue is covered by decision in case of Ghousia Begum and others (2011 (11) TMI 475 - ITAT HYDERABAD) wherein it has been held that impugned land is in fact urban land akin to the Hyderabad Municipality situated within 8 KM from the local limits of Hyderabad Municipal Corporation, liable for tax on capital gains irrespective of the fact whether it falls under the limits of Rajendra Nagar Mandal or otherwise. Further, mere fact that the land in question was agricultural land cannot be a ground to claim for exemption u/s 2(14) as the land is situated within the local limits of Hyderabad Municipal Corporation, and consequently, tax leviable u/s 45. Order of CIT(A) set aside and matter restored to file of CIT(A) Decided against assessee-

Summary

Issues:
Assessability of capital gains on the sale of land under S.2(14) of the IT Act for assessment year 2007-08.

Analysis:

1. Assessability of Capital Gains:
- The case involved the sale of land by the assessee, leading to a dispute regarding the assessability of capital gains under S.2(14) of the IT Act. The assessing officer contended that the land sold was within eight kilometers of the Hyderabad Municipal Corporation limits, making it a capital asset. The CIT(A) disagreed, citing precedents where agricultural land was not considered a capital asset. The ITAT, Hyderabad, in a similar case, held that the land in question was indeed a capital asset, subject to tax under S.45 of the Act. Consequently, the ITAT set aside the CIT(A)'s order on this aspect, allowing the Revenue's grounds on this issue.

2. Other Grounds Raised by Assessee:
- Despite the CIT(A) not addressing other issues raised by the assessee, such as deductions under S.54B and 54F of the Act, the ITAT's decision on the capital gains assessability impacts these aspects. The ITAT set aside the CIT(A)'s order and remanded the case for further consideration on the remaining grounds raised by the assessee, now that the land was deemed a capital asset.

3. Decision and Conclusion:
- The ITAT, Hyderabad, concluded that the land sold by the assessee was a capital asset within the meaning of S.2(14) of the IT Act, making the capital gains taxable under S.45. The Revenue's appeal was treated as allowed for statistical purposes, and the matter was remanded to the CIT(A) for a decision on the other grounds raised by the assessee. The judgment clarified the interpretation of the term "capital asset" and its implications on tax liability in cases involving the sale of land within specified municipal limits.

This detailed analysis highlights the key legal issues, arguments presented, and the final decision rendered by the ITAT, Hyderabad, in the case concerning the assessability of capital gains on the sale of land for the assessment year 2007-08.