TMI Blog2016 (12) TMI 1406X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 6,30,160/-. The case has been selected for scrutiny under CASS and accordingly notices u/s 143(2) 142(1) of the Income Tax Act, 1961 (hereinafter called as 'the Act') were issued. In response to notices, the authorized representative of the assessee appeared from time to time and furnished the details called for. During the course of assessment proceedings, the A.O. noticed that the assessee along with other co-owners had sold vacant land measuring 5.89 acres situated at Vemulavalasa village, Anandapuram Mandal, Visakhapatnam for a consideration of 3,40,00,000/- in which the assessee had 1/3rd share. The A.O. further observed that the market value of the property for the purpose of stamp duty was fixed at ₹ 4,12,30,000/-. Since, the assessee has not offered capital gains on the said transaction, the A.O. issued a show cause notice and asked to explain why capital gains income was not offered to tax on sale of land. 3. In response to notice, the assessee submitted that land sold is agricultural land which is situated beyond 8 kms. from the local limits of Visakhapatnam Municipal Corporation and hence the land is not capital assets within the meaning of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be considered, but not the newly incorporated Greater Visakhapatnam Municipal Corporation limits is not correct, as Visakhapatnam Municipal Corporation is a notified municipal corporation u/s 2(14) of the Act, for the purpose of determination of whether the lands are capital assets or not vide notification no.9477 dated 6.1.1994, which was further enhanced to Greater Visakhapatnam Municipal Corporation with extended boundary of Municipal Corporation limits by the Government of Andhra Pradesh vide their notification no. GOMS 937 dated 21.5.2005. Therefore, any lands situated within the extended limits of GVMC are coming within the definition of capital assets as defined u/s 2(14) of the Act and hence liable for capital gains. Since, the assessee has failed to offer any capital gains on transfer of such lands, the A.O. held that the lands sold by the assessee are capital assets liable for capital gain tax and accordingly computed capital gains. In so far as exemption u/s 54F of the Act is concerned, the A.O. held that since the assessee is already having one residential house at Vijayawada and also the fact that the assessee has constructed 3 independent residential units at D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anations of the assessee, held that lands sold by the assessee are not agricultural lands and hence liable for capital gains. The CIT(A) further held that the assessee has not furnished any proof for having carried out agricultural operations in the impugned lands, therefore, opined that the lands are not agricultural lands. The CIT(A) further observed that since the lands sold by the assessee are held as non-agricultural lands, the issue of whether the particular land is a capital asset or not within the meaning of section 2(14) of the Act, becomes academic. In so far as adoption of value u/s 50C of the Act, for the purpose of determination of capital gains, the CIT(A) held that the date of transfer of land is important for the purpose of determination of value u/s 50C of the Act, but not the date of agreement for sale. As on the date of sale deed, the guidance value of the land for the purpose of payment of stamp duty is more than the consideration shown in the sale deed, therefore, the A.O. was rightly invoked the provisions of section 50C of the Act. In so far as disallowance of expenditure of transfer, the CIT(A) held that the assessee failed to produce any evidences in suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uated within 8 kms. from such distance or not. The assessee claims that the lands are agricultural lands and agricultural operations were carried out till 2007 and after which there were disputes and as a result agricultural operations could not be carried out. We find force in the arguments of the assessee for the reason that the impugned lands are classified as agricultural lands in the revenue records of the State Government. Though there is no agricultural operation carried out by the assessee, the lands held by the assessee are classified as agricultural lands in the revenue records and also suitable for agricultural operations. Therefore, impugned lands cannot be held as non-agricultural lands, just because the assessee has not carried out any agricultural operations. Once, the lands are classified as agricultural lands in the revenue records and suitable for agricultural operations, whether or not agricultural operations carried out by the assessee, the characteristics of land does not change from agricultural land to non-agricultural lands. Therefore, we are of the view that the lower authorities were erred in holding the impugned lands are non agricultural lands. 10. Ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e date of sale deed. We find force in the arguments of the assessee, for the reason that the assessee has sold the impugned lands by way of registered sale agreement dated 15.12.2007 for a consideration of ₹ 3,40,00,000/- and received an advance of ₹ 2,52,00,000/-. As on the date of agreement, the market value of the property for the purpose of payment of stamp duty is less than the consideration shown in the sale agreement. The said property has been conveyed through a registered sale deed on 1.9.2008 for a consideration of ₹ 3,40,00,000/-, whereas the stamp duty valuation of the property was fixed at ₹ 4,12,30,000/-. The A.O. adopted stamp duty value of the property as on the date of sale deed for the purpose of section 50C of the Act, to compute the deemed consideration for the purpose of capital gains. It is the contention of the assessee that market value as on the date of agreement to sale has to be considered, but not as on the date of sale deed for the purpose of determination of deemed consideration to compute capital gains. 12. Having heard both the sides and considered materials on record, we find that the A.O. has adopted stamp duty value of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. 14. The next issue that came up for our consideration is disallowance of expenditure of transfer. The assessee has claimed an expenditure of ₹ 4,20,000/- being litigation expenses and development expenses while computing the capital gains. The assessee contended that she had incurred various legal expenses from 1995, which should be considered for deduction. The 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AR also relied on the decision of Hon ble High Court of Delhi in the case of CIT Vs. Gita Duggal. I have considered the submissions made and find merits in the same. In my view the appellant has constructed only a single residential house, though it may have three floors with independent residential unit in them. The section 54F of the Act uses the expression a residential house , and in the facts given above the appellant had invested in a residential house and would be entitled to exemption u/s 54F. The AO is directed to allow deduction u/s 54F, however after verifying the claim regarding the quantum of investment in the residential house. Accordingly, this ground is allowed in favour of the appellant. 16. The Ld. A.R. submitted that though, the CIT(A) directed the A.O. to allow exemption claimed u/s 54F of the Act, the A.O. in the consequential assessment proceedings has allowed an amount of ₹ 63,83,000/- as against the claim made by the assessee of ₹ 79,50,000/-. The A.R. further submitted that the assessee has produced a valuation report, wherein the value of the property has been determined at ₹ 75,20,000/-, therefore requested to consider the va ..... X X X X Extracts X X X X X X X X Extracts X X X X
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