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TMI Blog2014 (4) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. - ITA NO. 118/Jodh/2013 - - - Dated:- 27-9-2013 - HARI OM MARATHA AND N.K. SAINI, JJ. For the Appellant : Amit Kothari. For the Respondent : Dr. Deepak Sehgal. ORDER:- PER : HARI OM MARATHA, J.M. This appeal of the assessee, for A.Y. 2009-10, is directed against the order of ld. CIT(A), Jaipur, dated 27/12/2012. 2. Briefly stated, the facts of the case are that for A.Y. 2009-10 the assessee filed his Return of Income [ROI] u/s 139(1) of IT Act, 1961 ('the Act' for short) on 30/09/2009, declaring total income at Rs. 13,07,676/- being income derived from business of distribution of kerosene, from house-property and from other sources. On verification of capital account it was found that an amount of Rs. 1,07,57,716/- has been shown as income from sale of agricultural land but the same is not offered for taxation. On demand, the assessee furnished computation of income wherein this amount of Rs. 1,07,57,716/- has been treated as exempt income under the head 'income on sale of agricultural land'. A copy of sale deed was filed which revealed that this land is situated in the revenue estate of Village Shobhagpura, Tehsil Girwar, which falls under Gram Panchay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned by the Panchayat Act as well, so, the land under question cannot be treated as capital assets u/s.2(14) of the Act, In this light of judgment and interpretation she has claimed the exemption from the capital gains tax. Furthermore, the assessee had derived agricultural income from the impugned land in the preceding previous years and same has been declared in the return of income of the earlier years. The assessee furnishing herewith a copy of receipt and other documents issued by the Sarpanch of Shobhagpura Panchayat which categorically establish that the panchayat is governed by the Panchayat Act. So agriculture land is not capital assets even if it is located within the eight kilometers of the municipal limits. The land prices were suddenly increased after the purchased by the late assessee due to development of 100ft ring road around the said land by the UIT, Udaipur. The assessee further submits that the DLC price of the said agriculture land was Rs. 30 Lakhs per Bigha against the amount of Rs. 115.99 Lacs per Bigha (Rs, 111.00 Lacs for 22256 sq ft. and Rs. 115.99 lacs for 23256 sq.ft) for which she has sold the agricultural land. Looking to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further aggrieved. 2.4 We have carefully analyzed all the documents in the light of the oral submissions of the parties. Both parties have reiterated their earlier stand. There is no dispute regarding the main facts of this issue. Before we move further, we would like to discuss the legal position on this subject. 2.5 Chapter IV of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') broadly deals with the 'computation of the total income' under five heads of income classified as under : A - Salaries B - Omitted (earlier integrant on securities) C - Income from house property D - Profit and gains of business on profession. E - Capital Gains F - Income from other sources. 2.6 The Section 'E' of this chapter deals with the heads 'capital gains' which contains as many as 28 operative sections (excluding omitted ones). These sections provide for computation of capital gains in vivid situations and subject to certain circumstances in which it is not be charged. 2.7 Section 45 is the basic provision which defines 'capital gains' as any profits or gains arising from the transfer of a capital asset effected in the previous year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year. (2) In case the capital gain is equal or less than the cost of new asset, no capital gains shall be charged u/s 45. However, if the new asset is sold with 3 years then the capital gains shall be reduced to determine its cost. In case the capital gain is not appropriated by the assessee towards the purchase of the new asset with the time stipulated as above, then to avail benefit the assessee has to deposit the capital gains as directed in sub section (2) of section 54. Likewise, mutatis mutandis, section 54B deals with the capital gains on the transfer of land used for agricultural purposes and the circumstances are almost similar when the assessee purchases another agricultural land within the time stipulated, then capital gains is not charged. Section 54D deals with capital gains arising on compulsory acquisition of lands and buildings and the situations in which it will not be charged to income tax. Section 54E deals with mode and modalities when capital gain arising on transfer of capital assets when it will not be charged to income tax. Section 54EA deals with circumstances when the capital gains arising on transfer of long term capital assets shall not be charged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances. For the now, we are more concerned with the provisions of Section 54F. The requirements of this section for tax benefit, it seeks to provide to a assessee can be pictographed as under: (O)= Original Assets (Long term capital asset not being a residential home) Purchase new 'asset' apart from one residential home within one year before the Two years after the transfer Construction new asset (as residence) apart from one residential home with 3 years of the transfer of the A.O. ( i ) Nothing left out - Capital gains is chargeable ( ii ) Something is left and not deposited as Stipulated) - Chargeable to tax. ( iii ) If deposited as Stipulated - No tax. ( iv ) However, if within a year assessee purchases any residential house - cannot avail any befit of Section 54F(1). Within one year or constructions within 3 years, a new residential house after the transfer of the original asset; and the income from such residential house (other than the one residential house owned on the date of the transfer of the original asset) is chargeable under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly: "As per Sub clause (b) of clause (iii) of Section 2(14), any agricultural land which is not situated within 8 KMs from the Municipality as the Central Government may specify in this behalf by notification in the official gazette. A relevant portion of such a gazette notification No. (509447) (File No. 164/3/87 - ITA-1) dated 06/01/1994 reads as under : Areas up to a distance of 8 kms from the municipal limits in all directions'." 4. What emerges as a Rule is that any agricultural land which is situated within 8 kms of a notified municipality etc, it will be treated as a capital asset, subject to the condition that the population of that Municipality etc., should not have population less than 10,000 persons. In case a piece of agricultural land falls within 8 km of the stated municipality, but the population of that municipality is not more than 10,000 , then in that case the agricultural land sold cannot be treated a as capital asset. Let us clarify the general rule that sale of agricultural land is not subject to capital gains but this general rule is subject to the provisions of section 2(14)(iii)(a) (b). As stated the definition of the 'Municipality' is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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