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2014 (10) TMI 353 - AT - Income TaxComputation of capital gain on sale of the land - Land falls under capital asset or not u/s 2(14) - Whether the subject matter of the land which is situated in Kakkanad falls within the jurisdiction of the municipality or within 8 kms radius of the notified municipality – Held that:- Kakkanad village where the property is situated in all the appeals falls within the territorial jurisdiction of Trikkakara panchayat at relevant point of time - Trikkakara panchayat is not a notified area on and from 06-01-1994 - In the notification dated 06-01-1994 the Cochin municipality is a notified municipality including part of Eloor and Marad panchayats upto a distance of 8 kms from the municipal limits - lands are beyond municipal limits or beyond 8 kms radius from the cochin municipal limits - Therefore, the Kakkanad village where the subject land is situated does not form part of the notified area, hence the agricultural land situated in Kakkanad village which falls in Trikkakara panchayat was excluded from the definition of capital asset u/s 2(14) of the Act - the agricultural land situated in Kakkanad village which falls in Trikkakara panchayat does not fall within the definition of capital asset u/s 2(14) of the Act. Land agricultural or not – Held that:- Section 10(37) was introduced with a view to mitigate the hardship faced by the farmers whose agricultural land situate in specified urban limit has been compulsorily acquired - in respect of the agricultural land which was used for agricultural purpose during the two years immediately preceding the date of compulsorily acquition under any law or transfer for a consideration which was determined or approved by Central Government or Reserve Bank of India, then such capital gain would not form part of the total income of the assessee - section 2(14) has to be interpreted strictly - Therefore, the requirement using the land for two years immediately preceding the date of transfer cannot be a pre-condition for the purpose of section 2(14) of the Act - what is required for section 2(14) is connection with agricultural purpose. The assessee has not applied for conversion of land for non agricultural purpose - The land is classified as agricultural land and the village officer certified that the land was subjected to cultivation - The assessee is contributing to the Agricultural Labourer's Welfare Fund and also paying revenue tax as agricultural land which is evidence from Basic Tax Register - The Village Officer certified that the subject lands were subjected to cultivation - the subject lands were agricultural lands beyond the municipal limits or beyond 8 kms radius of the notified municipality - the land cannot be treated as capital asset within the meaning of section 2(14) of the Act - hence not liable for capital gain tax under the Income-tax Act. Interest on fixed deposits – Held that:- The deposits were made for the purpose of earning interest - the interest income arising out of the fixed deposits has to be classified as 'Income from other sources' and it has to be assessed accordingly - The assessees have also availed overdraft facility on the basis of the fixed deposit for the purpose of business - the interest payable by the assessees may be liable for deduction as business expenditure - interest paid under such circumstances cannot be deducted from the interest on the fixed deposit - CIT(A) is not justified in allowing the claim of the assessees – thus, the matter is remitted back to the AO for fresh consideration – Decided in favour of revenue. Payment of commission disallowed – Held that:- No material is available on record to suggest that the statements said to be recorded from third parties with regard to commission payments were furnished to the assessee - unless and until the copies of the statements recorded from third parties are furnished to the assessee, the same cannot be used against the assessee - before placing any reliance on the statement of third parties, the same shall be furnished to the assessee – thus, the matter is remitted back to the AO for fresh consideration – Decided in favour of assessee. Unexplained cash credit u/s 68 – Held that:- The CIT(A) is not justified in deleting the addition - one more opportunity to be given to the assessee to prove the credit would not prejudice the interest of the revenue – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of revenue.
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