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2020 (11) TMI 346 - HC - Income TaxEntitled to deduction u/s 54G - Short term capital gain - contemporaneous notification No.9447 dated 6.1.1994 - Whether the tribunal was right in classifying Bangalore as a non-urban area for the purposes of Section 54G when it was previously categorized as an urban area until 1990? - Whether the tribunal was right in finding that an urban area such as Bangalore could be classified as a non-urban area for the purpose of Section 54G from 1990 and then once again be classified as an urban area from 27.04.2006? HELD THAT - Explanation to Section 54G(1) of the Act expressly provides that having regard to population, concentration of industries need for proper planning of the area and other factors, the Central Government may by general or special order declare to be an area to be urban area for the purposes of sub-Section (1) of Section 54G of the Act. In exercise of powers under the aforesaid provision, the Central Government has issued a Notification dated 27.04.2006 and has declared Anekal where the factory of the assessee is situated to be an urban area for the purposes of sub-Section (1) of Section 54G of the Act. However, from perusal of the Notification no inference can be drawn that the same has any retrospective operation. The Notification comes into force on the date of its publication in the Official Gazette. Section 280ZA of the Act was omitted by Finance Act, 1987 with effect from 01.04.1988. The Central Board of Direct Taxes (CBDT) has issued a Notification under Section 280Y(d) vide Notification dated 22.09.1967, by which Bangalore Corporation is declared as urban area for the purposes of Chapter XXIIB of the Act. However, the aforesaid Notification is applicable for Tax Credit Certificates for shifting of industrial undertakings from urban areas under Section 280YD read with Section 280ZA of the Act and therefore, the same cannot be held applicable for exemption under Section 54G of the Act. Decided against the assessee and in favour of the revenue
Issues:
1. Interpretation of Section 54G of the Income Tax Act, 1961. 2. Applicability of Notification dated 27.04.2006 regarding urban area classification. 3. Relevance of previous Notification dated 22.09.1967 for exemption under Section 54G. 4. Impact of the Supreme Court decision in 'FIBRE BOARDS PRIVATE LIMITED VS. COMMISSIONER OF INCOME-TAX'. 5. Eligibility of the assessee for exemption under Section 54G based on the facts of the case. Analysis: Issue 1: Interpretation of Section 54G The case involved the interpretation of Section 54G of the Income Tax Act, 1961, which provides for exemption of capital gains on transfer of assets for industrial undertakings shifting from urban to non-urban areas. The assessee claimed exemption under this section for the Assessment Year 1998-99, but the Assessing Officer treated the transaction as a short-term capital gain. The tribunal remitted the matter multiple times, leading to this appeal. Issue 2: Applicability of Notification dated 27.04.2006 The Notification dated 27.04.2006 declared Anekal as an urban area for the purposes of Section 54G. However, the court noted that the Notification does not have retrospective operation and only applies from the date of its publication in the Official Gazette. This clarification was crucial in determining the eligibility of the assessee for the claimed exemption. Issue 3: Relevance of previous Notification dated 22.09.1967 The court discussed the Notification dated 22.09.1967, which declared Bangalore Corporation as an urban area for specific provisions under the Act. However, this Notification was deemed inapplicable for the exemption claimed under Section 54G, as it was relevant for different sections related to tax credit certificates for shifting industrial undertakings from urban areas. Issue 4: Impact of Supreme Court decision in 'FIBRE BOARDS PRIVATE LIMITED VS. COMMISSIONER OF INCOME-TAX' The Supreme Court decision in 'FIBRE BOARDS PRIVATE LIMITED VS. COMMISSIONER OF INCOME-TAX' was cited by the assessee to support their claim for exemption. However, the court differentiated the facts of that case from the present case, emphasizing that the assessee failed to utilize the sale proceeds within the required timeframe, as mandated by Section 54G. Issue 5: Eligibility of the assessee for exemption After considering all submissions, the court ruled against the assessee, affirming that the substantial questions of law were answered in favor of the revenue. The court found no merit in the appeal and dismissed it, concluding that the assessee was not entitled to the benefit of exemption under Section 54G based on the facts and legal provisions analyzed during the case. This detailed analysis of the judgment provides a comprehensive understanding of the legal issues addressed and the court's decision in this case.
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