2014 (1) TMI 389 - AT - Income Tax

Rectification of order u/s 254(2) of the act Held that - Assessee contended that capital gains does not arise where the agreement is cancelled subsequently - the ITAT, in their order has merely held that the decisions relied upon by the applicant are not is a mistake in not considering the decision of this Tribunal without discussing the facts though brought to notice of the Hon ble ITAT - this will amount to review of decision in the order - Under sec 254(2) only patent mistakes are liable to be rectified and not a review of the decision of the tribunal. The entire computation of capital gains in respect of the property under dispute in accordance with law and giving reasonable opportunity to the Assessee set aside - The AO was also specifically directed to consider allowability of relief u/s 54F - When recomputing the capital gains, no doubt the AO has to take into account all components including cost of acquisition, deduction u/s 54F and other related provisions for arriving at taxable capital gains thus, any further rectification is not required in the order. The tribunal cannot decide whether profit on sale of land is exempt from capital gains on the ground the land is agricultural land, without first establishing that the land was in fact agricultural land - This factum does not appear to have been examined by lower authorities - While the Tribunal does not have the power for enhancement of assessment, it certainly has the power and in fact it is obliged to enquire into all aspects an allowance which is questioned before them Relying upon Commissioner Of Income-Tax Versus Cochin Refineries Limited 1987 (1) TMI 9 - KERALA High Court - it cannot be held that profit on sale is exempt from capital gains without first being certain that all the requirements for the provisions of the Act are satisfied - If the lower authorities have not considered one of the aspects required to be satisfied for allowance, the tribunal is well within rights to remand the matter to the files of the AO for fresh consideration in accordance with law - Decided against Assessee.

Summary

Issues Involved:
1. Rectification of errors in the order related to capital gains computation and allowance of deductions.
2. Classification of land as agricultural for tax purposes and the applicability of exemptions based on distance from a municipality.

Analysis:
1. Rectification of Errors in Capital Gains Computation:
- The applicants sought rectification of the order regarding the computation of capital gains and allowance of deductions under sec 54F. The Tribunal had directed the AO to consider the relief u/s 54F and recompute the capital gains in accordance with the law. The Tribunal found no further rectification necessary as the AO was directed to consider all components, including cost of acquisition and deductions, for arriving at taxable capital gains. The Tribunal clarified that only patent mistakes can be rectified under sec 254(2), not a review of the decision.
- The Tribunal dismissed the rectification application, emphasizing that the order had already addressed the computation of capital gains and directed the AO to consider all relevant aspects for determining taxable capital gains.

2. Classification of Land as Agricultural for Tax Purposes:
- The issue revolved around the classification of land as agricultural for tax purposes and the applicability of exemptions based on the distance from a municipality. The Tribunal remitted the issue to the AO to re-examine whether the land could be classified as agricultural and its distance from any Municipality.
- The Tribunal highlighted that the basic issue to be decided was whether the land was genuinely agricultural, not just its distance from a Municipality. It emphasized that exemptions would apply only if both conditions were met and that the Tribunal had the authority to enquire into all aspects necessary for granting relief.
- Referring to a precedent, the Tribunal underscored that if lower authorities had not considered all required aspects for granting relief, it was within the Tribunal's rights to remand the matter for fresh consideration by the AO. The Tribunal dismissed the rectification applications as it found no infirmity in its directions regarding the classification of land as agricultural for tax purposes.

In conclusion, the Tribunal dismissed all the Miscellaneous Applications (M.As.) under consideration, addressing issues related to rectification of errors in capital gains computation and the classification of land as agricultural for tax purposes. The Tribunal upheld its orders and directions, emphasizing the importance of considering all relevant aspects for determining taxable capital gains and eligibility for exemptions based on land classification.