2017 (11) TMI 1651 - HC - Income Tax

Whether an asset is capital asset u/s 2(14) and liable for capital gain tax - Held that - Jaipur Municipality has been duly notified vide said notification dated 06/1/1994 and as on the date of said notification, the land in question was beyond 8 km from the municipal limit - on the daye of notification which is 06.01.1994, the municipal limit of Jaipur on Ajmer Road on which the assessee land is situated was up to ESI hospital - here assessee s land is 16 km away from the ESI hospital - thus the land sold by the assessee is not a capital asset u/s 2(14) and no question of capital asset - Decided in favor of assessee.

Summary

Issues:
1. Long Term Capital Gains addition deletion
2. Justification of penalty deletion on Long Term Capital Gain

Analysis:
1. The appellant challenged the tribunal's decision allowing the assessee's appeal regarding the addition of Long Term Capital Gains. The substantial question of law raised was whether the tribunal was justified in deleting the addition of Long Term Capital Gains of ?2.75 crore, despite the finding that the land sold by the assessee was within 8 km from the municipal limit and qualified as a 'capital asset' under section 2(14) of the IT Act. The facts revealed that the land was sold for ?2,76,80,400, and the Assessing Officer calculated the capital gain at ?2,77,67,733. The appellant contended that the tribunal erred in following a previous decision. However, the tribunal considered the distance from the municipal limit and held that the land sold was not a capital asset under the Act, thus no capital gain arose. The issue was resolved in favor of the assessee.

2. The second issue pertained to the deletion of the penalty levied under section 271(1)(c) on Long Term Capital Gain. The substantial question of law raised was whether the tribunal was justified in deleting the penalty, considering the same facts as the first issue. The tribunal's decision in favor of the assessee on the main appeal led to the dismissal of the penalty appeal as it did not survive. The appeals were ultimately decided in favor of the assessee, resulting in the dismissal of both appeals.

In conclusion, the High Court of Rajasthan, in a common judgment, addressed the issues of Long Term Capital Gains addition deletion and the justification of penalty deletion on Long Term Capital Gain. The court ruled in favor of the assessee, determining that the land sold did not qualify as a capital asset under the IT Act, leading to the deletion of the capital gains addition and the penalty. The appeals were dismissed, upholding the tribunal's decision in favor of the assessee.