Amendment in Section 2(14) Capital Gains
In a recent amendment in Income Tax Act 1961, that came into effect on 01.04.2014 with its assessment year 2014-15, item (b) was substituted to provide for different distances 2, 6 and 8 kms , aerially measured from any municipal or cantonment limit. The Delhi High Court has observed that there was no merit in S.L.P. (Civil) No CC 1727-1729/98 between DLF United Ltd vs Commissioner of Income Tax, 1995 (9) TMI 51, and dismissed the same on the grounds of the above said amendment. Furthermore, it was found out unnecessary dispute was raised by revenue.
It was clearly stated in the amendment that it will come into effect from AY 2014-15. But, the tax authorities have applied the amendment retrospectively in AY 2013-14, as it could bring numerous plots under ‘capital asset’ according to it. Most of the assessing officers have applied the amendment with effect from 2013-14. The revenue approached High Court and Bombay High Court to prove the amendment was not applicable retrospectively.
However, in cases that has taken a view contrary to circular of CBDT, the tax payers will be at the suffering end. The court must be liberal in awarding costs in favor of assesse to reprieve. Moreover, the tax authorities should be warned that if they continue in unnecessary litigation, they will have to compensate the tax payers.
According to a recent circular from the Board, they accepted the judgement of Bombay High Court. Also the amendment will not be retrospectively applied. Furthermore, the appeal should not be filed on this issue, and former appeals will be withdrawn. The circular did not mention about assessment and related issues.
In order to bring clarity about the amendment and to assure that it is not applicable retrospectively, and to act against the proceedings taken after mistaking it to be retrospective, the circular should throw light on matters related to:
- Rectification of assessment orders in light of the settled legal position- if an addition has been made by the AO, by applying amendment retrospectively, the same should be rectified by AO himself to set at rest mistakes and in any case at least on application of assessee, rectification must be made immediately.
- To drop any reassessment, revision or rectification proceedings started taking the view that the amendment was retrospective.
- Not making additions and assessment by considering an amendment as retrospective.
- Not restoring to reassessment or revision by treating amendment as retrospective.