2024 (6) TMI 655 - AT - Income Tax

LTCG on sale of land - sale of agricultural land - determination of the property's location in relation to municipal limits u/s 2(14) - Scope of expansion of municipal limits - HELD THAT - It is correct that the distance of 5 kms. from Dasna flyover, Govindpuram confirmed by Inspectors of Income-tax Department and Tehsildar were on the date of their respective inspections i.e. February and March 2016. On the other hand, assessee s plea that the distance of land in question should be reckoned as existed on the date of Notification No.9447 dated 06.01.1994 when the municipal limits were upto Hapur Chungi and from where the distance was 8.7 kms. approx. as per IT Inspector s report. The basis of submission is that for the purpose of exemption u/s 2(14)(iii)(b) of the Act, the notification by Central Government is mandatory and there was no notification after 06.01.1994. Hence, the expansion of municipal limits from Hapur Chungi to Dasna Flyover on 41.08.1994 should be irrelevant in absence of any further notification. Therefore, the land in question at Village Masuri is not a capital asset. Appeal of the assessee is allowed.

Summary

Issues Involved:
The judgment involves the assessment of long-term capital gains on the sale of agricultural land, specifically focusing on the determination of the property's location in relation to municipal limits u/s 2(14) of the Income-tax Act, 1961.

Assessment of Long-Term Capital Gains:
The appeal by the assessee challenged the order of the ld. CIT (Appeals) regarding the addition of long-term capital gain of Rs. 13,23,058. The Assessing Officer (AO) noted that the land sold by the assessee was within 5 kms from the municipal limits of Ghaziabad. Despite the assessee's argument that the distance should be calculated based on the 1994 municipal limits, the AO concluded that the property was a capital asset chargeable to capital gain tax. The AO considered various reports and confirmed the property's proximity to the municipal limits. The assessee contended that the property was beyond 8 km from the municipal limits in 1994, supported by reports and notifications. The Tribunal found merit in the assessee's arguments, setting aside the lower authorities' orders and ruling in favor of the assessee.

Interpretation of Legal Provisions:
The ld. CIT (A) upheld the AO's decision, stating that the property was a capital asset as it fell within the municipal limits of Ghaziabad at the time of sale in FY 2012-13. The appellant's argument that the 1994 municipal limits should apply was dismissed, leading to the dismissal of the appeal. The assessee further argued based on reports and notifications that the property was beyond 8 km from the municipal limits in 1994, thus not constituting a capital asset. The Tribunal agreed with the assessee's interpretation, emphasizing the relevance of the 1994 notification and setting aside the lower authorities' orders in favor of the assessee.

Conclusion:
After considering the submissions and legal precedents cited by both parties, the Tribunal found the assessee's arguments regarding the property's distance from municipal limits in 1994 to be valid. The Tribunal set aside the orders of the lower authorities and ruled in favor of the assessee, allowing the appeal.