CPT V24P7-Art1 (Content).pmd - Taxmann

Landmark Rulings
capital asset and consideration from such land
had to assessed as capital gain. The assessee
contended that the sum did not amount to
capital gain as sale was attributable to agriculture
land, and such land was not coming either
within the limits of any municipality or within
the distance of 8 kms. from any notified
municipality or urban area. The revenue took
a stand that the subject land was located within
8 kms. of city’s Municipal Council.
The High Court held in favour of assessee -
It held that an agricultural land is not a capital
asset; it becomes a capital asset when the subject
agricultural land is located within the limits
of municipal corporation, notified area committee,
town area committee, town committee of
cantonment which has a population of not less
than 10,000. Definition of capital asset given
under section 2(14) of the IT Act, 1961, covers
the situation where the land is not only located
within the distance of 8 kms. from the local
limits, but also requires the fulfilment of the
condition that the Central Government has
issued a notification under this clause for the
purpose of including the area up to 8 kms.
from the municipal limits to render the land
as a ‘Capital Asset’.
Though it was contended by revenue that it
was located within 8 kms. within the municipal
limits of city municipal corporation, in the
absence of any notification it could not be
taken to be a capital asset within the meaning
of section 2(14) and, therefore, the sale of
agricultural land would not attract capital gains.
692
Allowance for additional depreciation
prerequisites ‘existence of eligible business’
on date of purchase of asset
In Shiva Cargo Movers Ltd. v. Dy. CIT [2012]
23 taxmann.com 184 (Chennai - Trib.), the
assessee was engaged in the business of transport
of spirit & molasses. During the year, assessee
bought a wind mill. The assessee, in addition
to the normal depreciation, claimed additional
depreciation under section 32(1)(iia). AO
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disallowed the additional depreciation, as prior
to purchase of wind mill assessee was not
engaged in the business of manufacturing or
producing any article or thing. On appeal, the
CIT(A) upheld the order of AO. It held that
before buying the wind mill, the assessee was
not engaged in the business of manufacturing
or producing any article or thing.
The Tribunal held in favour of revenue - It
held that there are two separate situations for
claiming additional depreciation one in which
the acquisition of plant & machinery results
in the establishment of a new industrial
undertaking and the other in which plant &
machinery is acquired for the purpose of
enhancing the installed capacity of the existing
business under section 32(1)(iia) of the IT Act.
However, in any case the condition of
engagement of the assessee in the business of
manufacture or production should be satisfied,
which was not there in the present case.
Therefore, additional depreciation was disallowed
to the assessee.
First receipt of income is material for
determining place of accrual; subsequent
bank transfer is not relevant
In Dr. Sarmishtha Mukherjee v. ITO [2012]
22 taxmann.com 24 (Kol. - Trib.), assessee
sold her residential property in the UK through
agents. Sale consideration was credited to her
bank account in the UK. Subsequently, said
amount was remitted to her in India. The CIT
initiated revision proceedings under section
263 on the ground that assessment under section
143(3) was erroneous and prejudicial to interest
of revenue, because capital gains on sale of
a house property in UK by assessee were not
brought to tax. According to the CIT, since
sale was completed after the assessee returned
to India and the sale proceeds of the house
property were also received by her in India,
the income was taxable in the hands of the
assessee in India, even though assessee was,
admittedly, a ‘resident but not ordinarily
resident’. The AO was, accordingly, directed
to bring to tax the capital gains.