2019 (3) TMI 1151 - AT - Income Tax

Claim of deduction u/s 54G - shifting of unit from urban to rural area - assessee s industrial unit was not located in a notified urban area as per the provisions of section 54G - HELD THAT - Section 54G of the I.T.Act allows exemption of capital gains on transfer of assets in case of shifting the industrial undertaking from urban area. None of the places in Kerala State have been notified as an urban area under Explanation 2 to section 54G(1) of the Central Government. Hence, the deduction claimed by the assessee u/s 54G of the I.T.Act was rightly disallowed by the A.O. and the same was confirmed by the CIT(A). Hence, we see no reason to interfere with the order of the CIT(A) and we affirm the same. - Decided against assessee.

Summary

Issues:
1. Denial of deduction under section 54G of the Income Tax Act.
2. Interpretation of "urban area" under section 54G.
3. Confirmation of CIT(A)'s order disallowing the deduction.

Analysis:
1. The appellant contested the denial of deduction under section 54G of the Income Tax Act for the assessment year 2013-2014. The appellant, an industrial undertaking engaged in wheat production, claimed a deduction of ?4,45,00,000 under section 54G for long term capital gains arising from the sale of land. The Assessing Officer disallowed the claim, stating that the industrial unit was not in a notified "urban area" as required by section 54G. The CIT(A) upheld this decision, leading to the appellant's appeal before the Tribunal.

2. The key issue revolved around the interpretation of the term "urban area" under section 54G. The appellant argued that due to protests from local residents, the industrial unit had to be relocated from a congested urban area to a non-urban area. However, the Tribunal noted that none of the places in Kerala State had been notified as an urban area under the relevant provisions. Therefore, the deduction claimed by the appellant under section 54G was rightfully disallowed by the Assessing Officer and confirmed by the CIT(A).

3. The Tribunal, after considering the submissions and relevant provisions, affirmed the decision of the CIT(A) to disallow the deduction under section 54G. The Tribunal emphasized that the absence of any notified urban areas in Kerala State precluded the appellant from availing the exemption provided by section 54G. Consequently, the appeal filed by the assessee was dismissed, upholding the denial of the deduction and confirming the CIT(A)'s order.

In conclusion, the Tribunal's judgment in this case centered on the strict interpretation of the provisions of section 54G regarding the eligibility criteria for claiming deductions on capital gains. The absence of notified urban areas in Kerala State played a pivotal role in the denial of the appellant's claim, highlighting the importance of adherence to statutory requirements in tax assessments.