2021 (10) TMI 1044 - AT - Income Tax

Deduction u/sec. 54B - Capital gain on transfer of land used for agricultural purposes not to be charged in certain cases - determination of distance of land - whether land in question falls beyond 8 km. from the local municipality? - conclusion of the Ld. Commissioner with regard to applicability of section 2(14)(iii)(b) is that the said section got amended w.e.f. 01/04/2014 where the distance is measured aerially, therefore, the amended provision is not applicable to A.Y. 2008-09 - HELD THAT - If we consider the conclusion of the ld. Commissioner to the effect that provisions of section 2(14)(iii)(b) which got amended w.e.f. 01/04/2014 will not be applicable to A.Y. 2008-09 qua the case of the Assessee, then in principle the provisions prior to shall be applicable, whereby in 1994 the Central Government has notified the areas within the limits of Visakhapatnam municipality and as per that notification, the Assessee s land in question is undoubtedly falls beyond 8 km. from municipal limits and thereafter no notification has been issued by the Central Government. Meaning thereby, the notification of 1994 still construed as in existence. Even otherwise, the coordinate bench of the tribunal in the case of Jasti Vayunandana Rao 2010 (10) TMI 1082 - ITAT VISAKHAPATNAM dealt with the exactly similar issue related to the A.Y. 2008-09 itself, of the same village i.e. Kapuluppada village, Bheemunipatnam Mandal of Vizag, where the land in question before the Co-ordinate Bench and the land sold by the Assessee is situated. The co-ordinate bench of the tribunal thoroughly examined the issue and came to a conclusion that undisputedly the impugned land was initially situated beyond 8km. from the municipal limit of Visakhapatnam Municipal Corporation, but later on, on incorporation of Greater Visakhapatnam Municipal Corporation, it falls within 8 km. from the Visakhapatnam limits, but no notification as required u/sec. 2(14) was issued in the official gazette by the Central Government to bring the land within the purview of section 2(14)(iii)(b). The Central Government is required to issue notification in the official gazette and without notification land falls within 8 km. from the local limits of any municipality would not declare to be an agricultural land. Thus we do not have any hesitation to set aside the order passed by the ld. Commissioner and to delete the addition as income of the previous year as per section 54B(1)(i) as held by the AO and sustained by the Ld. Commissioner. Consequently, the addition stands deleted - Decided in favour of assessee.

Summary

Issues:
- Applicability of section 2(14)(iii)(b) of the Income Tax Act, 1961 for A.Y. 2008-09.
- Determination of long term capital gain on the sale of rural agricultural land.
- Interpretation of Central Government notifications regarding the distance from the local municipality.
- Consideration of coordinate bench judgments on similar issues.

Analysis:
- The appeal was filed against the order passed by the Commissioner of Income Tax (Appeals) for A.Y. 2008-09 regarding long term capital gain on the sale of land. The Assessee claimed the land was rural agricultural and not liable for capital gain tax. The AO computed short term capital gain, leading to the appeal.
- The Assessee presented documents supporting the rural agricultural nature of the land, including a certificate and a notification. The Commissioner rejected the claim, citing an amendment in section 2(14)(iii)(b) effective from 01/04/2014, which was not applicable for A.Y. 2008-09.
- The Tribunal analyzed the situation, considering the notification issued by the Central Government in 1994 and the absence of subsequent notifications. Referring to a coordinate bench judgment, it was established that without the required notification, land within 8 km of municipal limits does not lose its agricultural status.
- The Tribunal disagreed with the Department's request for verification of the distance, as the issue had been conclusively addressed in the coordinate bench judgment. Consequently, the Tribunal set aside the Commissioner's order and deleted the addition of capital gain, ruling in favor of the Assessee.

Conclusion:
The Tribunal allowed the Assessee's appeal, emphasizing the importance of Central Government notifications in determining the agricultural status of land for capital gain tax purposes. The judgment highlighted the necessity of official notifications for such classification and relied on previous decisions to support the Assessee's position.