2012 (2) TMI 587 - AT - Income Tax

Summary

Issues Involved:
1. Whether the land sold by the assessee constitutes a capital asset u/s 2(14) of the IT Act.
2. Whether the capital gains arising from the sale of the land are taxable.
3. Whether the CIT(A) erred in not adjudicating all grounds raised by the assessee.

Summary:

Issue 1: Whether the land sold by the assessee constitutes a capital asset u/s 2(14) of the IT Act.

The Assessing Officer (AO) determined that the land sold by the assessee was within eight kilometers from the limits of the Hyderabad Municipal Corporation, thus qualifying as a capital asset u/s 2(14) of the IT Act. The CIT(A) admitted an additional ground raised by the assessee, arguing that the jurisdictional municipality was Rajendra Nagar Municipality, which was not notified by the Central Government. The CIT(A) held that the agricultural land sold did not constitute a capital asset within the meaning of section 2(14) of the Act, and thus, no tax u/s 45 of the Act was applicable.

Issue 2: Whether the capital gains arising from the sale of the land are taxable.

The AO rejected the assessee's claim of exemption u/s 54B and 54F in the individual return and assessed the total sale consideration of Rs. 5,28,75,000/- for 47 guntas of land as taxable. The CIT(A) deleted the addition made towards long-term capital gains, following the judicial proposition laid down by the Tribunal, Hyderabad. However, the Tribunal, referencing the case of CIT vs. Bola Ramaiah, held that the land in question was urban land and thus a capital asset liable for capital gains tax. The Tribunal allowed the ground raised by the Revenue, holding that the land transferred is a capital asset liable for capital gain.

Issue 3: Whether the CIT(A) erred in not adjudicating all grounds raised by the assessee.

The Tribunal noted that the CIT(A) had only decided on the additional ground regarding the application of section 2(14)(iii)(b) and had not adjudicated the other grounds of appeal raised by the assessee. The Tribunal, citing the case of CIT Vs Assam Shipping & Travels and Linklaters LLP Vs. ITO International Taxation, remitted the issue back to the CIT(A) to pass an order adjudicating on the other grounds raised by the assessee.

Conclusion:

The Tribunal allowed the appeals of the Revenue for statistical purposes, holding that the land transferred by the assessee is a capital asset liable for capital gain and remitted the issue back to the CIT(A) for adjudication on the other grounds raised by the assessee.

Order pronounced in the open court on: 10.2.2012