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2016 (12) TMI 1406 - AT - Income TaxCapital gains income not offered to tax on sale of land - nature of land - whether the lands sold by the assessee are agricultural lands or capital assets liable for capital gains? - Held that:- No merits in the arguments of the assessee, for the reason that the Visakhapatnam Municipal Corporation is a notified municipality vide notification no.9477 dated 6.1.1994. As per said notification, any land situated within 8 kms. from the distance of Visakhapatnam Municipal Corporation is agricultural land coming within the definition of capital asset. We further observed that the Visakhapatnam Municipal Corporation has been upgraded to Greater Visakhapatnam Municipal Corporation by the State Government of Andhra Pradesh, vide notification no.937 dated 21.5.2005 with extended boundary. Since, the lands sold by the assessee are situated within 8 kms distance from the newly incorporated boundary of GVMC, the distance should be measured from the limits of GVMC to determine whether a particular land is a capital asset or not for the purpose of section 2(14) of the Act. In the present case, it is no doubt lands are situated within 8 kms. from the limits of GVMC. Therefore, we are of the view that the lands sold by the assessee are capital assets within the meaning of section 2(14) of the Act and liable for capital gains. The CIT(A) after considering the relevant facts, has rightly held that the lands are capital assets and liable for capital gain tax. Therefore, we uphold the CIT(A) order and reject ground raised by the assessee. Adoption of value u/s 50C for the purpose of determination of capital gains - Held that:- we find that the assessee has entered into a sale agreement in the year 2007 and as on that date, the stamp duty value of the property was less than sale consideration agreed to be paid between the parties. Although, stamp duty value of the property has been changed as on the date of sale deed, for the purpose of determination of deemed consideration u/s 50C of the Act, stamp duty value of the property as on the date of execution of agreement to sale should be adopted, instead of value on the date of execution of sale deed. Therefore, we are of the view that the A.O. was erred in adopting value of the property as on the date of sale deed to determine deemed consideration u/s 50C of the Act. Hence, we direct the A.O. to adopt value of the property as on the date of agreement to sale for the purpose of computation of capital gain u/s 50C of the Act. Disallowance of expenditure of transfer - A.O. observed that the assessee has failed to produce any evidences in support of expenses on transfer, therefore, disallowed entire expenditure of transfer for want of proper supporting evidences - Held that:- We do not find any merits in the findings of the A.O. for the reason that though assessee need to substantiate expenditure with necessary evidences, the possibility of certain expenditure on transfer cannot be ruled out. Therefore, considering the overall facts and circumstances of the case, we are of the view that certain expenditure being litigation expenses and development expenses should be allowed while computing the capital gains. Hence, we direct the A.O. to allow 50% of the expenditure claimed under the head litigation expenses and development expenses. Rejection of exemption claimed u/s 54F - Held that:- We find force in the arguments of the assessee, for the reason that the assessee has furnished a copy of valuation report in support of cost of construction of the property, wherein registered valuer has determined the cost of construction of ₹ 75,20,000/-. Though the A.O. has allowed exemption of ₹ 63,83,000/- in the consequential proceedings, the A.O. has not given any reasons for not considering the evidences filed by the assessee. Therefore, we set aside the issue to the file of the A.O. and direct the A.O. to examine the evidences filed by the assessee and allow exemption accordingly.
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