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TMI Blog2018 (1) TMI 1735X X X X Extracts X X X X X X X X Extracts X X X X ..... ound appeal filed by the revenue is allowed. LTCG - Deduction u/s 54G - Assessee shifted the industrial unit situated in urban area i.e. Whitefield to non-urban area and investment of a sum towards purchase of land was made - Whether unit sold was situated within notified urban areas? - HELD THAT:- Parliament has enacted the provisions of section 54G with the intention of promoting de-congestion of urban area and also to balance regional growth by exempting capital gains arising on the transfer of plant and machinery and building used for the purpose of industrial undertaking and the capital gains are exempt from tax to the extent capital gains are utilised in acquiring new plant and machinery and building for the purpose of business of undertaking in the area to which it is shifted plus incurring expenses in the purchase of the new plant and machinery etc It is undisputed fact that factory building sold by the assessee company is not situated in the notified urban area. From the above notifications[No. 9489 on 23/02/1994, second notification was issued on 02/04/1996 and third notification was issued on 20/12/1999] it is clear that Whitefield is not one of the notified urban areas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot set up any factory to carry on industrial activity. The facts on this issue are set out by the Assessing Officer from page 3 onwards and up to 10. The Assessing Officer also made addition based on the papers seized during the course of survey operations wherein it was shown that an amount of Rs. 183,00,000/- was invested. When the assessee company was confronted with this evidence it could not explain the nature of the transaction to the satisfaction of the Assessing Officer therefore the Assessing Officer drew adverse inference and treated unexplained investment and brought to tax Rs. 183,00,000/-. The Assessing Officer also disallowed commission payment of Rs. 10 lakhs on the ground that no TDS was deducted at source. 3. Being aggrieved, an appeal was preferred before the ld. CIT(A) who vide impugned order, allowed deduction to the extent investment in land and building of Rs. 19 crores and the balance was confirmed. The relevant finding of the ld. CIT(A) is as follows: 6.8 Following the decision of the Hon'ble ITAT, Mumbai cited above, the amounts utilised for acquisition of assets for the purpose of its business should qualify for the purpose of exemption u/s. 54G as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred. 4. The CIT(A) erred in allowing the deduction u/s. 54G without appreciating the fact that all the 4 conditions laid down in the section should be satisfied compositely and as the industrial undertaking had not been shifted to a non urban area, being one of the conditions, the assessee was not eligible for deduction u/s. 54G. 5. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the CIT(A) be reversed and that of the Assessing Officer be restored. 6. The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of the appeal. 6. Ground Nos. 1 to 5 are general in nature and do not require any adjudication. 7. Ground No. 2 challenges the findings of the ld. CIT(A) in deleting addition made under section 69 of the Act. 7.1 The facts leading to the above addition are set out by the Assessing Officer vide pages 10 to 12 wherein the Assessing Officer had confronted the assessee with seized material found during the course of survey operations indicating some undisclosed investment, the MD of the assessee company merely denied having made any undisclosed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by holding that if the amount is utilised for the purpose of purchase of new plant and machinery and land it satisfies the conditions stipulated under section 54G of the Act. For better appreciation, the provisions of section 54G are extracted hereunder: [Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area. 54G. (1) Subject to the provisions of sub-section (2), where the capital gain arises from the transfer of a capital asset, being machinery or plant or building or land or any rights in building or land used for the purposes of the business of an industrial undertaking situate in an urban area, effected in the course of, or in consequence of, the shifting of such industrial undertaking (hereafter in this section referred to as the original asset) to any area (other than an urban area) and the assessee has within a period of one year before or three years after the date on which the transfer took place,- (a) purchased new machinery or plant for the purposes of business of the industrial undertaking in the area to which the said undertaking is shifted; (b) acquired building or land or constructed building for the purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme Notification No. 9489, dated 23 February, 1994. which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for all or any of the purposes aforesaid together with the amount, so deposited shall be deemed to be the cost of the new asset : Provided that if the amount deposited under this sub-section is not utilised wholly or partly for all or any of the purposes mentioned in clauses (a) to (d) of sub-section (1) within the period specified in that sub-section, then,- (i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act 1961 (43 of 1961): III. In exercise of the powers conferred by the Explanation below sub-section (1) of section 54G of the Income-tax Act, 1961 (43 of 1961) the Central Government, having regard to the population, concentration of industries, need for proper planning of the area and other relevant factors, hereby declares the areas falling within the limits of Municipal Corporation mentioned in column (3) of the Schedule hereto annexed and situated within the State shown in column (2) thereof, as urban areas for the purposes of sub-section (1) of section 54G of the Income-tax Act, 1961 (43 of 1961). 2. This notification shall come into force on the date of its publication in the Official Gazette. 8.2 It is undisputed fact that factory building sold by the assessee company is not situated in the notified urban area. From the above notifications, it is clear that Whitefield is not one of the notified urban areas which is eligible for deduction under section 54G. Thus, assessee-company had failed to satisfy the condition that unit sold was situated within notified urban areas. Therefore the assessee-company is not eligible for deduction under section 54G. The ld. CIT(A) had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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