Krishna Mohan Choursiya Vs ITO (ITAT Indore)
We find that there is a clear distinction between a municipality and a gram panchayat as also enunciated in the judgment of Hon’ble Madras High Court in the case of CIT v. P.J. Thomas as reported in [1995] 211 ITR 897 (MAD.), therefore, we are of the view that the land in question was not situated within the limit of any municipality or cantonment board. Thus, in view of these facts and circumstances of the case, we find that the agricultural land initially purchased by the assessee was not a capital asset as per section 2(14)(iii) of the Act. Accordingly, the amount of capital gain accruing to the assessee till the diversion of agricultural land on 25.11.2010 shall not be eligible to tax. Further, for the purpose of computation of the amount of capital gain that shall be exempt from tax, the assessee submitted that fair market value on the date of diversion shall be considered as full value of consideration and such fair market value shall be considered as cost for determination of the amount of capital gain chargeable to tax subsequent to diversion of land. The assessee filed detail regarding rate of compensation determined by the Government in respect of compulsory acquisition at Page No. 64 of the paper book for determination of fair market value of land. The fair market value of land determined by the Government was Rs. 48,00,000/- per hectare. The assessee sold land admeasuring 1.515 hectares during the year and thus, fair market value of the said land as on the date of diversion was Rs.72,72,000/-(Rs.48,00,000/- * 1.515 hectares). Alternatively, the Ld. Counsel for the assessee submitted that fair market value shall be determined on the basis of reverse indexation method. The fair market value of land computed on the basis of reverse indexation method comes to Rs.68,90,415/-. The reverse indexation method for determination of fair market value of a capital asset is duly accepted and approved in the following judgments:
