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TMI Blog2016 (12) TMI 1406X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 Rs. 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 2(14) of the Act and not liable to capital gain tax. It is further submitted that land is not situated within the territorial jurisdiction of any Municipality or within the specified distance of 8 kms. from any individual municipal limits and hence treated as agricultural lands and not liable for capital gains. However incorporated a note in her return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eater 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 Dr.No.56-49-7/A, she is not eligible for exemption u/s 54F of the Act. 5. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee has reiterated submissions made before the A.O. The assessee further contended that the lands sold by her are agricultural lands suitable for agricultural operations and also sit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 support of expenses of transfer, therefore, upheld the disallowance of expenses by the A.O. Similarly, as regards exemption u/s 54F of the Act, the CIT(A) held that the assessee has constructed only a single residential house though it may have 3 floors with independent residential unit in them. The section 54F of the Act uses the expression 'a' residential house and in the facts give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue 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. Having said, let us examine whether the lands sold by the assessee are capital assets within the meaning of section 2(14) of the Act or agricultural lands not liable for capital gain tax. Admittedly, the lands sold by the assessee are within 8 kms. from the distance of GVMC, however, the lands are beyond 8 kms. from the limits of Visakhapatnam Municipal Corporation. It is the contention of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on shown in the sale agreement. The said property has been conveyed through a registered sale deed on 1.9.2008 for a consideration of Rs. 3,40,00,000/-, whereas the stamp duty valuation of the property was fixed at Rs. 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 the property as on the date of sale deed. The facts relating to the market value as on the date of agreement to sale and as on the date of sale deed is not disputed. The only dispute is whether the stamp duty value as on the date of agreement to sale or sale deed to be considered for the purpose of computation of capital gain. The purpose of introducing section 50C of the Act was to counter suppression of sale consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. 14. The next issue that came up for our consideration is disallowance of expenditure of transfer. The assessee has claimed an expenditure of Rs. 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 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. 15. The next issue that came up for our consideration is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 63,83,000/- as against the claim made by the assessee of Rs. 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 Rs. 75,20,000/-, therefore requested to consider the value of the property as determined by the valuer. 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 Rs. 75,20,000/-. Though the A.O. has allowed exemption of Rs. 63,83,000/- in the consequential proceedings, the A.O. has not given any reasons for not consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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