2016 (12) TMI 610 - AT - Income Tax

Gain on sale of land - nature of land - agricultural land or capital asset within the meaning of Section 2(14)(iii) - measurement of distance - Held that - The position in law is clear that section 2(14)(iii)(b) of the Act covers the situation where the subject land is not only located within the distance of 8 kms from the local limits which is covered by Clause (a) to section 2(14)(iii) of the Act but also requires the fulfillment of the condition that the Central Government has issued a notification under this Clause for the purpose of including the area up to 8 kms from the municipal limits to render the land as a Capital Asset.There is no amendment or withdrawal of the said notification except the amendment brought in the statute by the Finance Act 2013 whereby the requirement of said notification has been dispensed with. The amendment by the Finance Act 2013 is with effect from 01-04-2014 and therefore applies prospectively in relation to the assessment year 2014-15 and subsequent assessment years. For the year under consideration the distance has to be measured by the approach road. The amendment brought in by the Finance Act 2013 to measure the distance aerially is effective from 01- 04-2014 and therefore applies prospectively in relation to the assessment year 2014-15 and subsequent assessment years. we find that the matter require fresh examination taking into consideration the above legal proposition. We accordingly set-aside the matter to the file of AO to examine the matter a fresh after giving reasonable opportunity to the assessee. - Decided in favour of assessee for statistical purposes only.

Issues Involved:
1. Whether the agricultural land sold by the assessee is a capital asset within the meaning of Section 2(14)(iii) of the Income Tax Act, 1961.
2. Whether the assessee is eligible for claiming deduction under Section 54F of the Income Tax Act, 1961.
3. Whether the documents furnished by the assessee were fabricated to defraud revenue.

Issue-Wise Detailed Analysis:

1. Capital Asset Determination under Section 2(14)(iii):
The primary contention was whether the agricultural land sold by the assessee qualifies as a capital asset under Section 2(14)(iii) of the Income Tax Act, 1961. The Assessing Officer (AO) concluded that the land sold was within 8 kilometers of the municipal limits of Jaipur Nagar Nigam, thus making it a capital asset. This conclusion was based on reports from the Tehsildar of Sanganer and the Commissioner of Jaipur Nagar Nigam, which indicated that the land was situated 2.5 to 5 kilometers from the municipal limits.

The assessee argued that the distance should be measured from the municipal limits as they existed on the date of the notification (06/01/1994) and not on the date of sale. The assessee relied on the decision of the ITAT Jaipur Bench in the case of Dr. Subha Tripathi, which supported this view. The ITAT held that the distance must be measured with reference to the municipal limits existing on the date of the notification and by the approach road, not aerially. The ITAT also emphasized that the notification dated 06/01/1994 and subsequent amendments must be considered, and the distance of 8 kilometers should be measured from the municipal limits as they existed on the date of the notification.

Given these arguments, the ITAT set aside the matter to the AO for fresh examination, instructing the AO to verify the facts from the Tehsildar/Nagar Nigam and determine whether the agricultural land sold qualifies as a capital asset under Section 2(14) of the Income Tax Act, 1961.

2. Eligibility for Deduction under Section 54F:
The AO denied the assessee's claim for deduction under Section 54F on several grounds. The AO noted that the assessee owned multiple residential properties and had not taken possession of the flat booked in Garden View apartment within the allowed period. Additionally, the assessee had purchased another residential house within the stipulated period, violating Section 54F(2) of the Income Tax Act, 1961.

The ITAT did not specifically address this issue in the judgment, as the primary focus was on determining whether the land sold was a capital asset. However, the ITAT's decision to set aside the matter for fresh examination implicitly includes re-evaluating the assessee's eligibility for deduction under Section 54F based on the outcome of the capital asset determination.

3. Allegation of Fabricated Documents:
The AO accused the assessee of furnishing fabricated documents, specifically the sale deed, which allegedly contained tampered information about the distance of the land from the municipal limits. The AO argued that the assessee inserted false information to claim that the land was more than 10 kilometers from the municipal limits, thereby attempting to defraud revenue.

The ITAT did not make a definitive ruling on this allegation. Instead, it directed the AO to re-examine the matter, including verifying the distance of the land from the municipal limits as per the approach road and the municipal limits existing on the date of the notification. This re-examination would inherently address the validity of the documents submitted by the assessee.

Conclusion:
The ITAT set aside the matter to the AO for a fresh examination, taking into account the legal propositions regarding the measurement of distance for determining whether the land sold is a capital asset under Section 2(14)(iii) of the Income Tax Act, 1961. The AO was instructed to verify the facts from the Tehsildar/Nagar Nigam and re-evaluate the assessee's eligibility for deduction under Section 54F based on the outcome of the capital asset determination. The ITAT's decision implicitly includes addressing the allegation of fabricated documents during the re-examination process.

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