2012 (7) TMI 393 - AT - Income Tax

Exemption under section 2(14) of the Act - agriculture land versus capital asset - transferred by the assessee - which is not notified by the Central Government for the purpose of treating the same as capital asset as required by u/s. 2(14)(iii)(b) of I.T. Act Held that - Mere fact that the land in question was agricultural land cannot be a ground to claim for exemption under section 2(14) of the Act as the land is situated within the local limits of Hyderabad Municipal Corporation - mere payment of advance does not entitle the assessee for relief under S. 54B of the Act if ultimately whole transaction of purchase of land was completed within a period of two years as contemplated under S. 54B of the Act assessee is entitled for relief under S. 54B of the Act - land transferred by the assessee is a capital asset liable for capital gain - ground of the Revenue is allowed. Condonation of delay - CO filed by the assessee was delayed by 164 days - assessee explained the reasons in its affidavit. It is submitted that the delay is neither wilful nor intentional Held that - Reason advanced by the assessee cannot be considered as good and sufficient reason to condone the delay - delay involved is inordinate and not marginal - delay of 164 cannot be condoned simply because the assessee s case is hard and calls for sympathy or merely out of benevolence to the party seeking relief - delays are not properly explained by the assessee - no reason for condoning such delay - appeal of the Revenue is allowed

Summary

Issues Involved:
1. Interpretation of Section 2(14)(iii)(b) of the Income Tax Act, 1961 regarding the classification of land as a capital asset.
2. Treatment of agricultural land situated within municipal limits for capital gains tax purposes.
3. Delayed filing of Cross Objection by the assessee.

Analysis:

Issue 1: Interpretation of Section 2(14)(iii)(b) of the Income Tax Act, 1961
The key contention in the appeal by the Revenue was whether the land transferred by the assessee qualified as a capital asset under Section 2(14)(iii)(b) of the Income Tax Act, 1961. The Tribunal referred to previous judgments and held that the land, despite being used for agricultural purposes, was considered urban land situated within the municipal limits of Rajendra Nagar. The Tribunal emphasized that the proximity of the land to the city justified treating it as a capital asset liable for capital gains tax. The Tribunal also highlighted the requirement for the assessee to purchase agricultural land within two years for relief under Section 54B of the Act.

Issue 2: Treatment of Agricultural Land for Capital Gains Tax
The Tribunal relied on precedent and held that the land in question, although used for agricultural operations, was classified as urban land within the municipal limits. The Tribunal cited the judgment of the Punjab & Haryana High Court to support the view that capital gains arising from the transfer of agricultural land in urban areas are subject to income tax. The Tribunal also addressed the determination of the cost of acquisition of the land and the conditions for claiming relief under Section 54B of the Act.

Issue 3: Delayed Filing of Cross Objection
The assessee filed a Cross Objection, contending that the CIT(A) failed to adjudicate on certain grounds of appeal. However, the Cross Objection was delayed by 164 days. The Tribunal considered the reasons provided by the assessee for the delay but ultimately dismissed the Cross Objection as barred by limitation. The Tribunal emphasized the importance of diligence and avoiding negligence in filing appeals within the prescribed timelines.

In conclusion, the Tribunal allowed the appeal of the Revenue based on the interpretation of the land as a capital asset for capital gains tax purposes. The delayed Cross Objection by the assessee was dismissed due to the significant delay in filing, highlighting the importance of timely compliance with legal procedures in tax matters.