INCOME TAX ACT, 1961

Section 54G

Deduction under section 54G - Assessee located in Bangalore - Whether Bangalore classifiable as urban area -

Assessee had its factory at an Industrial Area, Bangalore. It decided to shift its operations from Bangalore to an Industrial Area in Rural Area in the State of Andhra Pradesh. Assessee claimed exemption under section 54G of the Act against Long Term Capital Gains. The AO rejected the claim of the assessee holding that Bangalore was not an urban area. It was opined that the assessee has shifted from non-urban area and since the original asset itself was not located in urban area, the benefit under section 54G of the Act was not allowable.Held: Explanation 2 to section 54G(1) of the Act expressly provides that having regard to population, concentration of industries, need for proper planning of the area and other factors, the Central Government may, by general or special order, declare to be an area to be urban area for the purposes of sub-section (1) of section 54G of the Act. In exercise of powers conferred by the aforesaid provision, the Central Government has issued Notification, dated 27-4-2006 and has declared Anekal where the factory of the assessee is situated to be an urban area for the purposes of sub-section (1) of section 54G of the Act. However, from perusal of the notification, no inference can be drawn that the same has any retrospective operation. The notification comes into force on the date of its publication in the Official Gazette.

Distinguished:CIT, (Central)-1 v. Vatika Township Private Limited', (2014) 367 ITR 466 (SC) : 2014 TaxPub(DT) 3934 (SC) and 'Commr. of Cus. (Imports) Mumbai v. Dilip Kumar & Co', 2018 68 GST 239 : 2018 TaxPub(EX) 737 (SC).

REFERRED : Fibre Boards Private Limited, Bangalore v. CIT (2015) 10 SCC 333 : 2015 TaxPub(DT) 3219 (SC).

FAVOUR : In favour of revenue.

A.Y. : 1998-99

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