TMI Blog2013 (12) TMI 1050X X X X Extracts X X X X X X X X Extracts X X X X ..... ded against assessee. Inam Land – capital asset or not – Held that:- According to the order of Mandal Revenue Officer (MRO), Rajendra Nagar Mandal, Rangareddi District dated March 4, 1999, the property bearing Sy. No. 21, Peeramcheruvu village an extent of 0.09 acres the nomenclature was changed from inam to patta with effect from March 4, 1999 – Decided against assessee. Deduction u/s 54F – Held that:- If the assessee constructs any residential house, the assessee is required to place necessary evidence to prove that the construction has taken place - No evidence has been furnished regarding the construction of new house so as to show that the sale proceeds of the land were utilised for the purpose of construction of the new house - The onus lies on the assessees to prove by way of evidence to justify their claim for deduction - The onus was not discharged by the assessees - The assessees could not furnish the requisite evidence to prove the fact that there was any actual construction within the time stipulated in section 54F - Merely producing a copy of permission from Gram Panchayat with regard to construction permission by itself cannot discharge the assessees from provin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l-Ifta Jamia Nizamia. 4. The Departmental representative relied on the orders of the lower authorities. 5. We have heard both the parties and perused the material on record. Under section 48 of the Act, cost of certain assets should be considered as deduction while computing capital gain for the purpose of the Income-tax Act. The contention of the assessees is that the amount shared with the brothers and sisters of the ancestral property is part of the cost of acquisition and due to their share in the property a part of the consideration has been paid to them and the same has to be allowed as deduction while computing capital gain. Receipt for the part of consideration by the brothers and sisters of forefathers was furnished by the assessees and stated that it has been paid in accordance with Muslim law. The claim of the assessees was that the principles of diversion by overriding title apply to the facts of the case as the assessees were individuals, they are not having full domain over the property and the brothers and sisters are also having interest in the property. 6. In our opinion, there is no material to show that the brothers and sisters of the forefathers having any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is lane is situated at Rajendra Nagar Mandal and this Rajendra Nagar Mandal became municipality and merged with Greater Hyderabad Municipal Corporation later on. Furthermore, this land comes under Peeramcheruvu Village which is rural area covered by Hyderabad Municipal Corporation. As per section 2(14), the capital asset defines as under : "(a) in any area which is comprised within the jurisdiction of -a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or -a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year ; or (b) in any area within such distance, not being more than 8 kilometres, from the local limits of any -municipality, or -cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette ;" 10. The assessees land is within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 2(14) of the Income-tax Act. But, the fact is that this is urban land akin to the Hyderabad Municipality situated within 8 k.m. from the local limits of Hyderabad Municipal Corporation. In similar circumstances, the jurisdictional High Court in the case of CIT v. Bolla Ramaiah [1988] 174 ITR 154 (AP) held that the capital gains arising out of sale of land situated within 8 k.m. of local limits of Hyderabad Municipality, is liable for tax on capital gains irrespective of the fact whether it falls under the limits of Rajendra Nagar Mandal or otherwise. Further, 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. Further, it was held recently by the hon'ble Punjab Haryana High Court in the case of CIT v. Smt. Anjana Sehgal (I. T. A. No. 276 of 2004 dated March 1, 2011 (P H)) that the expression 'from the local limits of any municipality' used in section 2(14)(iii)(b) of the Income-tax Act denotes 'any municipality or municipality of the District in which the land is situated'. Further, capital gains arising from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the learned counsel for the assessee the assessees herein invested the consideration received on sale of capital asset in construction of new residential building. Being so, the assessees are entitled for deduction under section 54F of the Act as the investment is evidenced by the valuation report filed before the lower authorities. The authorised representative submitted that the assessees constructed a new building for which the assessees obtained permission from the Gram Panchayat, Peeramcheru Village, Rajendra Nagar Mandal and the house was completed within the time allowed by section 54F. The assessees also filed copies of valuation report before the lower authorities to support that the construction was completed for all practical purposes before July 31, 2007. 18. The learned Departmental representative submitted that the assessees not furnished any details for incurring expenditure in construction of new residential building and also there is no evidence to prove that the sale proceeds of the capital asset were utilised for the purpose of construction. Being so, the claims of the assessees were rejected. 19. We have heard both the parties and perused the material on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purposes of this section,'net consideration', in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. (2) Where the assessee purchases, within the period of two years after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head 'Income from house property', other than the new asset, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head 'capital gains' relating to longterm capital assets of the previous year in which such residential house is purchased or constructed. (3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hdraw the unutilised amount in accordance with the scheme aforesaid. 20. A bare look of the above provisions shows that the above provisions are incentive provisions intended to augment investment in residential houses. As per these provisions if the assessee, within a period of one year before or two years after the date on which the transfer taken place, purchases or within a period of three years after that date constructs a residential house then capital gain has to be dealt with in accordance with the provisions of section 54(1)(a) and (b) of the Act. If the assessee constructs any residential house, the assessee is required to place necessary evidence to prove that the construction has taken place. Before the lower authorities, the assessees furnished copy of permission letter from gram panchayat, Peeramcheruvu village. However, no evidence has been furnished regarding the construction of new house so as to show that the sale proceeds of the land were utilised for the purpose of construction of the new house. In the absence of any material to suggest the construction of the house, out of the sale proceeds of the land, we are not in a position to hold that the assessee is en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he grievance of the assessee herein is with regard to non-adjudication of the ground relating to deduction under section 54B of the Act with regard to purchase and development of agricultural land at Rs. 18,77,500. 23. We have carefully gone through the ground raised by the assessee before the Commissioner of Income-tax (Appeals). There is no adjudication by the Commissioner of Income-tax (Appeals) on this ground. Accordingly, we remit the issue to the file of the Commissioner of Income-tax (Appeals) to adjudicate the issue afresh in the light of evidence placed before him at the time of proceedings before him specifically agreement of sale dated April 10, 2007 between (1) Mohammed Ali, (2) K. Venkataiah (vendor) and Sri Mohammad Khan (vendee). 24. The next ground in ITA Nos. 773, 775, 776, 777 and 851/Hyd/12 (5 appeals) is with regard to non-deduction of brokerage paid while computing the capital gains. In these case, the assessee claimed payment of brokerage, as a deduction while computing the capital gain. The Commissioner of Income-tax (Appeals) not adjudicated this ground in ITA Nos.773, 775, 776, 777 and 851/Hyd/2012. Therefore, we remit the same to the file of the Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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