2021 (11) TMI 874 - AT - Income Tax

Capital gain on sale of land - Nature of land sold - agricultural land - calculation of shortest route - whether the said land is within eight kilometers from the limits of municipal corporation of Allahabad , and thus falls within the inclusive definition of Capital Asset u/s 2(14)? - HELD THAT - We have to consider shortest road route, and hence we are not concerned with the other two road routes which are not the shortest road routes. Unfortunately, the assessee is relying vide certificate dated 18.12.2012 issued by Tehsildar , Karchana who in turn is relying on afore-stated report dated 14.12.2012, but mentioning the longer road routes number 2 and 3 to reach the land in question, but there is no whisper of road route number 1 via Main Mirzapur road to reach the land in question. Thus, we reject the reliance of the assessee on this report dated 18.12.2012. CIT(A) has passed well reasoned and speaking order, after detailed inquiries and principles of natural justice were duly complied with as the assessee was confronted with the all the material . CIT(A) relied upon the certificates, reports and maps submitted by Land Revenue and Survey authorities who are Government Authorities assigned with duties of maintaining of land records and other relevant records connected thereto with measurement of land distance . Their reports can not be brushed aside lightly and has to be given weightage , although there is no doubt that conflicting reports were issued by these authorities, but the conclusive report dated 14.12.2012 made it very clear that there are three road routes to reach the land in question, while the shortest road route is from Main Mirzapur Road , and the distance of Aarzai No. 318 is only 7.800 Kms., which is well within 8 kms. Thus, we hold that the land in question is within 8kms from the Municipal limits of Allahabad and is a capital asset as defined u/s 2(14) and capital gains arising on the sale of land shall be chargeable to income-tax within the provisions of the 1961 Act. This effective issue is decided against the assessee Applicability of the Section 50C - assessee has challenged before us the value so adopted by stamp valuation authorities and has stated that fair market value is much lower than the said value as adopted by stamp valuation authorities and has claimed that the actual sale consideration of ₹ 48 lacs was the real consideration - As in fairness to both the parties and in the interest of justice ,we are remanding the matter back to the file of the AO for limited purposes of referring the matter to DVO for determining the fair market value of property , in accordance with provisions of Section 50C(2) and 50C(3) , for the purposes of ascertaining the full value of consideration of land in question for the purposes of Section 48 ,in order to bring to tax income chargeable to capital gain tax , of the which the assessee is liable to pay in accordance with the provisions of the 1961 Act - Appeal filed by the assessee is partly allowed for statistical purposes.

Issues Involved:

1. Validity of the order passed under Section 143(3) of the Income Tax Act.
2. Applicability of Section 50C of the Income Tax Act.
3. Determination of the nature of land as a capital asset under Section 2(14) of the Income Tax Act.
4. Calculation of capital gains and the correctness of sale consideration.
5. Admission of additional evidence.
6. Distance of the land from municipal limits.
7. Interest charged under different sections.

Detailed Analysis:

1. Validity of the Order Passed Under Section 143(3):
The assessee contended that the order dated 22.12.2010 under Section 143(3) was incorrect both in facts and law, leading to an incorrect determination of income at ?70,05,590. The Tribunal upheld the validity of the order as the assessment was made following due process under Section 143(3) read with Section 143(2).

2. Applicability of Section 50C of the Income Tax Act:
The assessee argued that the provisions of Section 50C were unjustly invoked. The Tribunal noted that Section 50C creates a deeming fiction where the value adopted by the stamp valuation authority is considered as the full value of consideration for computing capital gains. The Tribunal remanded the matter back to the AO to refer the matter to the DVO for determining the fair market value of the property in accordance with Section 50C(2) and 50C(3).

3. Determination of the Nature of Land as a Capital Asset Under Section 2(14):
The primary dispute was whether the land sold was a capital asset under Section 2(14). The Tribunal examined various certificates and reports from revenue authorities and confirmed that the land was within 8 kms from the municipal limits of Allahabad, making it a capital asset as defined under Section 2(14). Consequently, the gains from the sale were taxable.

4. Calculation of Capital Gains and Correctness of Sale Consideration:
The AO computed capital gains by adopting the stamp duty value as the sale consideration under Section 50C, resulting in a higher capital gain. The assessee contended that the actual sale consideration was ?48,00,000. The Tribunal directed the AO to refer the matter to the DVO to determine the fair market value of the property for accurate calculation of capital gains.

5. Admission of Additional Evidence:
The CIT(A) admitted additional evidence submitted by the assessee, including a certificate from the Tehsildar, under Rule 46(A)(1)(c). This evidence was considered sufficient cause for admission as it was not initially furnished due to the assessee's impression that the AO had accepted their plea.

6. Distance of the Land from Municipal Limits:
The Tribunal scrutinized various reports and maps to determine the shortest road distance from the municipal limits to the land. It concluded that the shortest road distance was 7.8 kms, thus falling within the 8 kms limit, making the land a capital asset under Section 2(14). Conflicting reports were reconciled, and the Tribunal relied on the final report dated 14.12.2012.

7. Interest Charged Under Different Sections:
The assessee contended that the interest charged was unjustified. However, the Tribunal did not specifically address this issue, implying that the interest was correctly charged as per the provisions of the Act.

Conclusion:
The Tribunal upheld the applicability of Section 50C and confirmed that the land was a capital asset under Section 2(14). It remanded the matter to the AO for referring the valuation of the property to the DVO for accurate computation of capital gains. The appeal was partly allowed for statistical purposes.

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