2019 (3) TMI 639 - AT - Income Tax

Deduction claimed u/s 54G - Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area - the transfer of capital asset used for purpose of business undertaking is from a non-urban area to another non-urban area which does not fulfill the primary condition for eligibility of the exemption u/s 54G - HELD THAT - In the case of the assessee in the year under consideration, the transfer of capital asset used for purpose of business undertaking is from a non-urban area to another non-urban area which does not fulfill the primary condition for eligibility of the exemption u/s 54G. The contention of Learned A. R. that shifting of premises was a continuous process which ended with the sale of land received as sale consideration has no force as the assessee had already availed exemption u/s 54G in the earlier year treating the land received as part of consideration as the investment in non-urban area and in the year under consideration the capital gain has arisen from sale of land in non-urban area. The learned CIT(A) has very categorically held that in the year under consideration the transfer of land was from a non-urban area to a non-urban area and therefore, section 54G was not applicable. The findings of learned CIT(A) are quite relevant - Decided against assessee.

Issues Involved:
Appeal against order disallowing deduction u/s 54G of ?60,70,996 for assessment year 2013-2014.

Detailed Analysis:

1. Background of the Case:
The appellant, an assessee, had an industrial unit in an urban area which was transferred to a non-urban area. The appellant claimed exemption u/s 54G for the gain on shifting the industrial undertaking from urban to non-urban area. However, the Assessing Officer denied the claim, leading to an appeal before the CIT(A) and subsequently before the ITAT.

2. Appellant's Argument:
The appellant contended that the entire gain from the transfer was invested in establishing a new manufacturing setup in the non-urban area within the specified time frame as per Sec 54G. The appellant argued that the shifting of the industrial unit was a continuous process, and the gain claimed was part of this process.

3. Revenue's Argument:
The Departmental Representative supported the orders of the lower authorities disallowing the deduction u/s 54G.

4. ITAT's Decision:
The ITAT analyzed the provisions of Sec 54G, emphasizing that the primary condition for eligibility of exemption is the transfer of a capital asset from an urban area to a non-urban area. In this case, the transfer was from one non-urban area to another, which did not fulfill the conditions for exemption u/s 54G. The ITAT upheld the findings of the CIT(A) stating that the exemption was not applicable as the transfer was not from an urban to a non-urban area as required by the law.

5. Relevant Legal Analysis:
The ITAT referred to the legislative intent behind Sec 54G, which aims to deurbanize populated areas and promote industrialization in underdeveloped non-urban areas. The ITAT highlighted that the exemption u/s 54G is specifically for the shifting of industrial undertakings from urban to non-urban areas to foster inclusive growth. The ITAT concluded that the appellant did not satisfy the primary condition for exemption under Sec 54G, as the transfer was from one non-urban area to another non-urban area.

6. Final Decision:
The ITAT dismissed the appeal of the assessee, affirming the findings of the CIT(A) that the exemption u/s 54G was not applicable in this case due to the nature of the transfer. The judgment was pronounced on 08/03/2019.

This detailed analysis provides a comprehensive overview of the legal judgment involving the denial of deduction u/s 54G for the appellant in the assessment year 2013-2014.

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