2018 (11) TMI 1337 - HC - Income Tax

Treating sale of agriculture land as long term capital gain tax - capital asset u/s 2(14) - municipal limits demarcations - Held that - According to notification of the Central Government, the agricultural land situated beyond 5 kms of the municipal limits was liable to be excluded from the definition of capital asset chargeable to tax. On that basis, the Assessing Officer came to the conclusion that the land of the assessee was not an agricultural land, rather urban land in nature. Even the argument of the assessee that any kind of rural land is excluded from the scope of definition of the capital asset under Section 2(14) does not hold water in the light of the notification issued by the Central Government as the provision itself empowers the Central Government to prescribe the agricultural land situated at such a distance, having regard to the extent, and scope of urbanization of that area and other relevant consideration and, therefore, it is apparent that the land of the appellant falls within 5 kms of the municipal limits which included in the definition of capital assets chargeable to tax. The said findings were affirmed by CIT(A) and the Tribunal. No illegality or perversity could be pointed out by the learned counsel for the appellant in the concurrent findings of fact recorded by the authorities below. - Decided against assessee. Allowance of exemption u/s 54F - entertainment to claim made at this point - Held that - In the present case, the assessee having lost before the Assessing Officer, CIT(A), and the Tribunal has now sought to raise an issue that the assessee would be entitled to benefit of provisions of Section 54F of the Act as there was an investment made in the residential house. A perusal of the order of the Assessing Officer, CIT(A) and the Tribunal clearly shows that no such claim was ever made and no facts relating to this issue had been pleaded, proved or established before any of the authorities below. There is no material on record on the basis of which the claim of the assessee under Section 54F of the Act can be entertained, at this stage.- Decided against assessee.

Summary

Issues:
1. Whether the sale of agricultural land can be treated as long-term capital gain tax.
2. Whether agricultural land situated in a rural area can be considered a capital asset.
3. Whether the report of the Naib Tehsildar stating the land is rural was wrongly ignored.
4. Whether the assessee is entitled to the benefit of exemption under Section 54F of the Income Tax Act.

Analysis:
1. The appellant challenged the order of the Income Tax Appellate Tribunal regarding the treatment of the sale of agricultural land as long-term capital gain tax. The Assessing Officer considered the land as falling within 4 kilometers of municipal limits and charged long-term capital gains tax. The appellant argued that the land was agricultural and outside municipal limits. However, the Central Government's notification excluded land beyond 5 kilometers from municipal limits from the definition of capital asset. The court upheld the findings that the land was within 5 kilometers of municipal limits, making it a capital asset. The appellant failed to show any illegality or perversity in the lower authorities' findings.

2. The appellant contended that the agricultural land situated in a rural area should not be considered a capital asset. The court noted that the Central Government's notification allowed for the inclusion of land within 5 kilometers of municipal limits as a capital asset. The appellant's argument that rural land is excluded under Section 2(14) of the Act was dismissed as the law empowered the Central Government to prescribe the status of agricultural land based on urbanization factors. The court found no error in the lower authorities' decisions.

3. The appellant claimed that the report of the Naib Tehsildar stating the land's rural nature was ignored. However, the court found that the authorities had considered the location of the land concerning municipal limits and the Central Government's notification. The appellant failed to demonstrate any legal flaw in the assessment based on the Naib Tehsildar's report.

4. The appellant sought the benefit of exemption under Section 54F of the Act, claiming investment in a residential house. However, the court found that the appellant had not raised this claim before the lower authorities. As no facts or evidence were presented to support the claim, the court dismissed the appellant's request for the benefit of Section 54F exemption. The court concluded that the appeal lacked merit and dismissed it accordingly.