IN THE INCOME TAX APPELLATE TRIBUNAL
`F' : NEW DELHI
DELHI BENCH `F
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND
SIDHU, JUDICIAL MEMBER
SHRI H.S. SIDHU,
No.4733/Del/2011
ITA No.
2006-07
Assessment Year : 2006-
Assistant Commissioner of Vs. Shri Vijay Singh Kadan,
Income Tax, Legal Heir of Late Shri Randhir
Circle-
Circle-41(1), Singh Kadan,
Delhi.
New Delhi. 186, Munirka Vihar,
New Delhi 110 067.
PAN : AGHPK3734A.
(Appellant) (Respondent)
No.4603/Del/2011
ITA No.4603/Del/2011
2006-07
Assessment Year : 2006-
Shri Vijay Singh Kadan, Vs. Additional Commissioner of
Legal Heir of Late Shri Income Tax,
Randhir Singh Kadan, Range-41,
Range-
186, Munirka Vihar, New Delhi.
New Delhi 110 067.
PAN : AGHPK3734A.
(Appellant) (Respondent)
Department by : Shri Vikram Sahay, Sr.DR.
Assessee by : Shri V.K. Aggarwal, AR.
ORDER
PER G.D. AGRAWAL, VP :
ITA No.4603/Del/2011 Assessee's appeal
This appeal by the assessee is directed against the order of
learned CIT(A)-XXVII, New Delhi dated 5th August, 2011 for the AY
2006-07.
2. Though the assessee has raised as many as thirteen grounds of
appeal, they are all against the addition of `7,75,12,500/- made by the
Assessing Officer on account of long term capital gain. The facts of the
2 ITA-4733 & 4603/D/2011
case are that for the year under consideration, the assessee, viz., Late
Shri Randhir Singh Kadan filed the return declaring total income of
`25,64,290/-. During the course of assessment proceedings, the
Assessing Officer noticed that on 9.9.2005, the assessee had
transferred the property admeasuring 5.9625 acres at Village Ghata,
Tehsil Sohna, District Gurgaon. It was claimed by the assessee that
the capital gain from the sale of above land is not taxable because the
land is agricultural land which does not fall within the definition of
capital asset under Section 2(14). The assessee had claimed that the
land does not fall within the jurisdiction of the municipality viz. Sohna
Municipality. He also claimed that the distance of the land is more
than 8 Kms. from Sohna Municipality and therefore, the assessee's
case does not fall in clause (a) or (b) of Section 2(14)(iii). The
Assessing Officer was of the opinion that the distance of the land is to
be considered from the outer limit of Gurgaon municipality and not
Sohna municipality. It was further contended by the assessee that the
distance of the land from Gurgaon municipality is also more than 8
Kms., in support of which, the assessee produced the following
letters/certificates:-
"36. Whereas the appellant has relied on the following
letters from the various authorities-
- Certificate dated 22.12.2008 issued by Patwari, Tehsil
Sohna to the appellant on his request wherein the
distance of village Ghata was mentioned as
approximately 15 Kms from Market Committee Sohna
and approximately 9 Kms from Gurgaon Municipal
Committee.
- Certificate dated 27.12.2008 from Sub-Divisional
Engineer, Provincial Sub Divisional Engineer, Provincial
Sub Division No.1, PWD, Road & Buildings, Gurgaon,
wherein distance of village Ghata from Gurgaon Bus
Stand was mentioned at 10.20 Kms.
- Two certificates dated 29.12.2008, one from Shri I.D.
Rastogi, and the other from M/s Chottani and
3 ITA-4733 & 4603/D/2011
Associates, both certifying identical figures of distance
between village Ghata Bus Stand to the land (1.48 Km),
Village Ghata Bus Stand to Jharsa Chowk on NH 8
(8.165) Km."
3. The Assessing Officer, relying upon the following certificates,
held that the distance of the land from the outer limit of Gurgaon
Municipal Corporation is 6.6 Kms. :-
"- Certificate dated 10.11.2008 issued by Executive
Engineer, Municipal Corporation, Gurgaon, wherein it
was stated that the distance of the land from the outer
limits of Municipal Corporation, Gurgaon was 6.6 Kms.
- Letter dated 24.12.2008 issued by Tehsildar, Village
Sohna in response to the AO's reference of the
Patwari's letter to him which was produced by the
appellant in his support, wherein the distance of land
was held to be 6.6 Kms."
4. The Assessing Officer also took the view that for the purpose of
determining the distance of the land from the limit of municipal
corporation, the aerial distance is to be considered. Accordingly, the
Assessing Officer held that as per clause (b) of Section 2(14)(iii), the
agricultural land sold by the assessee was a capital asset. He,
therefore, made the addition of `7,75,12,500/- as long term capital
gain. On appeal, learned CIT(A) did not accept the Assessing Officer's
view that the distance is to be measured as per aerial distance. He
also rejected both the certificates relied upon by the Assessing Officer.
The relevant finding of the CIT(A) in this regard reads as under:-
"37. As far as the AO's reliance on the
certificates/letters mentioned above is concerned, the
same was admittedly with respect to aerial distance of
the land from the Municipal limits of Gurgaon. As has
already been held above, the distance is to be
measured along the road from the local limits of
Gurgaon Municipality of the area in which the land is
situated. Therefore, these letters are not relevant for
the purpose of the issue in hand and are accordingly
4 ITA-4733 & 4603/D/2011
rejected. It may be mentioned here that the appellant
had pointed out a number of defects in these
certificates relied upon by the AO vide his written
submissions filed during the course of the appellate
proceedings especially vide letter dated 25.02.2011.
However, the same are not discussed here because
these certificates have already been held as irrelevant
for the decision of the issue being considered here."
5. He also did not accept any of the certificates furnished by the
assessee. The relevant finding in this regard reads as under:-
"38. With regard to the appellant's reliance on the
Patwari's (Tehsil Sohna) letter dated 22.12.2008, it is
seen that he has mentioned the distance of Village
Ghata from Market Committee Sohna as 15 Kms and
approximately 9 Kms from Gurgaon Municipal
Committee. As already held above, the distance that is
relevant for our purposes is from the outer limit of the
Gurgaon Municipality. In this letter the distance
mentioned is from Gurgaon Municipality, not from any
specific point from local limits of the Municipality.
Moreover, the distance mentioned is only approximate
distance and not exact distance. Therefore, this letter
is not relevant. As far as the appellant's reliance on the
Sub Divisional Engineer, PWD, Gurgaon's letter dated
27.12.2008 is concerned, wherein he had stated that
the distance to be 10.20 Kms, it is seen that the letter
cannot be relied upon for the reason that this letter
measures the distance of village Ghata from Gurgaon
Bus Stand whereas for our purpose the distance is
required to be measured from the local limit of the
Gurgaon Municipality. Moreover, the Executive
Engineer, a superior officer of SDE had mentioned in his
letter dated 30.12.2008 that the distance from the
outer limit of Gurgaon Municipality cannot be furnished
as there were no records in their office of the Municipal
limit. As far two certificates dated 29.12.2008 from Sh.
I.D. Rastogi and M/s Chottani and Associates are
concerned both these certificates mention the distance
of village Ghata Bus Stand from the Jharsa Chowk on
NH-8. These are not the relevant points between which
the distance is required to be measured i.e. local limits
of Gurgaon Municipality and outer limit of village Ghata,
the area in which the land is situated. Therefore, these
5 ITA-4733 & 4603/D/2011
certificates are also no help for the present
proceedings."
6. Thereafter, the assessee furnished before him one certificate
from Patwari, Tehsil Sohna, District Gurgaon dated 31st January, 2011
which was countersigned by the Tehsildar and other one from Assistant
Engineer, Municipality Gurgaon dated 22nd February, 2011. The
Assessing Officer filed a certificate from Officer Surveyor on behalf of
Directorate, Survey, Air. The certificates furnished by the assessee
were confronted to the Assessing Officer and vice-versa. After
considering all these new certificates furnished before him as well as
the comments of the Assessing Officer and the assessee, learned
CIT(A) rejected the certificates furnished by the assessee on the
ground that the distance is to be taken from the local limits of the
municipal corporation to the area in which land is situated and not up
to the land as mentioned in the report of the Patwari. He also rejected
the report of the Assistant Engineer on the ground that the Assistant
Engineer did not appear before the Assessing Officer and moreover, in
the certificate, the name of the Assistant Engineer is not mentioned.
He accepted the certificate furnished by the Assessing Officer which
was from Directorate of Survey (Air) and DGDC Data Center, New
Delhi. On the basis of the above certificate, he came to the conclusion
that the land sold by the assessee was a capital asset in terms of
provisions of Section 2(14)(iii)(b) of the Act. The assessee, aggrieved
with the order of learned CIT(A), is in appeal before us.
7. We have heard the arguments of both the sides and perused
relevant material placed before us. After considering the arguments of
both the sides and the facts of the case, in our opinion, following four
issues arise for determination:-
6 ITA-4733 & 4603/D/2011
(A) Whether the distance of the land is to be considered only
from Sohna Municipal Corporation or it can be considered
from any municipal corporation viz. Gurgaon which is
admittedly nearer to the land than Sohna Municipal
Corporation.
(B) Whether the distance is to be considered as per aerial
distance or as per road distance.
(C) Whether the distance is to be considered from the outer
limit of the municipal corporation up to the land or up to
the outer limit of the village in which such land is situated.
(D) In the light of outcome on the above three issues in (A), (B)
& (C) to determine whether the land in question is capital
asset within the meaning of Section 2(14)(iii)(b).
8. We have considered the arguments of both the sides with
reference to all the above four issues and our opinion with regard to
each of these issues is as under.
(A) Whether distance of the land is to be considered from Sohna
Municipal Corporation or Gurgaon Municipal Corporation.
9. Section 2(14)(iii) reads as under:-
"[(iii) agricultural land in India, not being land situate
(a) in any area which is comprised within the
jurisdiction of a municipality (whether known as a
municipality, municipal corporation, notified area
committee, town area committee, town committee, or
by any other name) or a cantonment board and which
has a population of not less than ten thousand
[according to the last preceding census of which the
relevant figures have been published before the first
day of the previous year]; or
7 ITA-4733 & 4603/D/2011
(b) in any area within such distance, not being more
than eight kilometers, from the local limits of any
municipality or cantonment board referred to in item
(a), as the Central Government may, having regard to
the extent of, and scope for, urbanization of that area
and other relevant considerations, specify in this behalf
by notification in the Office Gazette;]."
10. Admittedly, the land does not fall in any area which is comprised
within the jurisdiction of a municipality or a cantonment board which
has a population of not less than ten thousand. Therefore, clause (a)
of Section 2(14)(iii) is not applicable. As per Revenue, clause (b) is
applicable while, as per assessee, even clause (b) is not applicable. To
buttress his claim, it was the contention of the assessee that the
distance of the land is to be considered from the local limits of Sohna
Municipality and not Gurgaon Municipality because the land is within
Sohna Tehsil. This contention of the assessee has not been accepted
by either of the lower authorities. From a plain reading of clause (b)
also makes it clear that this clause would be applicable where the land
is situated in any area which is not more than 8 Kms. from the local
limits of any municipality. Thus, the provisions of clause (b) of Section
2(14)(iii) are unambiguous, plain and simple i.e. distance of the land
can be considered from the local limits of any of the municipalities.
While rejecting the assessee's claim, the learned CIT(A) has relied
upon the decision of Hon'ble Punjab & Haryana High Court in the case
of Smt. Anjana Sehgal vide Income Tax Appeal No.276 of 2004,
wherein their Lordships held as under:-
"A perusal of the above provisions makes it clear that
what is intended to be covered in term `Capital Asset' is
agricultural land comprised within the jurisdiction of a
municipality and within the specified distance from the
local limits of municipality or other local bodies
mentioned therein as specified in the notification. It is
undisputed that the land in question is within the
specified distance from Panchkula municipality which
falls in the State of Haryana while land is in the State of
Punjab. Thus land is urban land for the purpose of
8 ITA-4733 & 4603/D/2011
definition of `capital asset' under Section 2(14).
Concept of municipality as a unit of State or the fact
that a State has no jurisdiction to make law beyond its
territory have no relevance for the purpose of
determining whether particular land was `capital asset'
or not for the purpose of taxing capital gain. If the land
is adjacent to a municipality and is urban land covered
under Section 2(14), even if municipality and the land
fall in different States, the land will continue to be
urban land. If such land is excluded from the definition
`capital asset', purpose of statutory scheme will not be
achieved. Accordingly, we answer substantial questions
in favour of the revenue and against the assessee."
11. Thus, their Lordships have held the land in question to be capital
asset which was within the distance of 8 Kms. from a municipality in
Haryana while the land was situated in the State of Punjab. The ratio
of the above decision would be squarely applicable to the case of the
assessee. We, therefore, uphold the finding of the lower authorities
that distance of the land under consideration can be measured from
Gurgaon Municipal Corporation for the purpose of Section 2(14)(iii)(b).
(B) Whether aerial distance is to be considered or as per road
distance.
12. We find that the learned CIT(A) has held that the distance is to
be measured as per road distance and not as per aerial distance.
While taking this view, the CIT(A) has relied upon the following decision
of Hon'ble Punjab & Haryana High Court:-
"CIT v. Satinder Pal Singh [2010] 229 CTR 82 (Punj. &
Har.)
Headnote
"Income tax Sec 2(14)(iii) agricultural land as capital
asset whether distance notified in the gazette from
the municipal areas to be measured by approach road
or as per straight line distance on a horizontal plane or
as per crow's flight? Tribunal holds distance is to be
measured in terms of road distance held, since the
9 ITA-4733 & 4603/D/2011
municipal areas are notified based on urbanization, Sec
2(14) is very clear that it should be measured as per
road distance no infirmity in Tribunal's order
Revenue's appeal dismissed"
Held
A perusal of the aforesaid provision shows that `capital
asset' would not include any agricultural land which is
not situated in any area within such distance as may be
specified in this behalf by a notification in the Official
Gazette which may be issued by the Central
Government. The maximum distance prescribed by
section 2(14)(iii)(b) of the Act which may be
incorporated in the notification could not be more than
8 Kms. from the local limits of municipal committee or
cantonment board etc. The notification has to take into
account the extent of, and scope for urbanization of
that area and other relevant considerations. The
reckoning of urbanization as a factor for prescribing the
distance is of significance which would yield to the
principle of measuring distance in terms of approach
road rather than by straight line on horizontal plane. If
principle of measurement of distance is considered
straight line distance on horizontal plane or as per
crow's flight then it would have no relationship with the
statutory requirement of keeping in view the extent of
urbanization. Such a course would be illusory. It is in
pursuance of the aforesaid provision that Notification
No.9447, dated 6-1-1994 has been issued by the
Central Government. In respect of the State of Punjab,
at item No.18, the Sub-Division, Khanna has been listed
at serial No.19. It has, inter alia, been specified that
area up to 2 Kms. from the municipal limits in all
directions has to be regarded other than agricultural
land. Once the statutory guidance of taking into
account the extent and scope of urbanization of the
area has to be reckoned while issuing any such
notification then it would be incongruous to the
argument of the Revenue that the distance of land
should be measured by the method of straight line on
horizontal plane or as per crow's flight because any
measurement by crow's flight is bound to ignore the
urbanization which has taken place. Moreover, the
judgment of the Mumbai Bench appears to have
attained finality. Keeping in view the principle of
consistency as laid down in Radhasoami Satsang v. CIT
[1992] 193 ITR 321 (SC) we are of the view that the
10 ITA-4733 & 4603/D/2011
opinion expressed by the Tribunal does not suffer from
any legal infirmity warranting interference of this Court.
Accordingly question No.1 is answered against the
Revenue and in favour of the assessee by upholding the
order of the Tribunal."
13. No contrary decision of Hon'ble Jurisdictional High Court or
Hon'ble Apex Court or any other High Court is brought to our
knowledge. The CIT(A) has rejected the Assessing Officer's view that
the distance up to the land is to be measured by aerial distance or as
per crow's flight. The Revenue is in appeal against the order of
learned CIT(A) on some other ground but this finding of the CIT(A) has
not been challenged in the appeal filed by the Revenue. Moreover, the
issue is covered by the decision of Hon'ble Jurisdictional High Court
which is binding on the lower authorities within the jurisdiction of the
High Court. We, therefore, respectfully following the above decision of
Hon'ble Jurisdictional High Court, hold that the distance of the land is
to be measured as per road distance and not aerial distance as per
crow's flight.
(C) Whether distance up to the land should be considered or up to
the village within which such land is situated.
14. In the assessment order, the Assessing Officer had taken the
distance from the outer limit of Gurgaon municipal corporation up to
the land, though the distance was taken as per crow's flight. However,
during remand proceedings, the Assessing Officer has suggested that
the distance is to be taken from the local limits of the municipal
corporation to the area in which land is situated and not up to the land
as mentioned in the report of the Patwari. This contention of the
Assessing Officer is accepted by the learned CIT(A) which is evident
from paragraph 47 of his order which is reproduced below:-
11 ITA-4733 & 4603/D/2011
"47. The contents of the letter and AO's objections to
the same have been carefully considered. As already
held above, the distance is to be taken from the local
limits from the Municipal Corporation to the "area" in
which the land is situated and not up to the land as
mentioned in the report of the Patwari. Therefore, this
report cannot be relied upon. As far as report of the
Asstt. Engineer, Gurgaon is concerned, no name of the
Assistant Engineer is mentioned who has issued this
report. A letter was written by the A.O. to Assistant
Engineer, Gurgaon for attending his office on 23.7.11.
Nobody attended the A.O.'s office on that date,
therefore, the veracity of the letter, itself is not beyond
doubt. Moreover, from the letter it is not clear by which
road and from which point the distance of 9.94 Km has
been measured. Therefore, this letter filed by the
appellant also cannot be relied upon."
15. Learned CIT(A), in paragraph 34 also, has recorded the finding
that the distance is to be measured from the local limit of the
municipality to the area in which land is situated. The same is also
reproduced below for ready reference:-
"34. I have carefully considered the observations of the
AO and the submissions of the appellant on the issue.
The facts of the judgment relied upon by the appellant
are different in as much as the issue before the Hon'ble
High Court was whether the CIT(A) and the ITAT had
correctly relied upon the report of the Tehsildar as
against the report of the departmental inspector. The
issue whether the distance is to be measured up to the
land or to the area in which the land is situated was not
before Hon'ble Court and, therefore, there is no
question of decision on this issue. The provisions of the
Act in this regard, i.e. Section 2(14)(iii)(b) are very clear
and unambiguous, "agricultural land in India, not being
land situate-in any area within such distance, not being
more than 8 Km from the local limit of any
municipality...., wherein it is stated that the distance is
to be measured from local limits of the Municipality to
the area in which the land is situated. Therefore, it is
held that the distance is to be measured from the local
limits of the municipality to the area in which the land is
situated."
12 ITA-4733 & 4603/D/2011
16. At the time of hearing before us, the learned counsel for the
assessee referred to the provisions of Section 2(14)(iii)(b) and claimed
that `in any area within such distance not being more than 8 Kms. from
the local limit of any municipality' would mean that the land should be
within the area which is 8 Kms. from the local area of any municipality.
To further explain his point, he made a graphical presentation showing
the area of the municipality, the circumference of 8 Kms. from that
area and the various situations in which whether the land is within the
area of 8 Kms. from the limits of the municipal corporation. The
graphical presentation produced by the assessee is annexed as
Annexure-A. He also relied upon the decision of Hon'ble Jurisdictional
Annexure-
High Court in the case of CIT Vs. Lal Singh & Ors. [2010] 325 ITR 588
to support his claim that the distance is to be measured up to the land
and not up to the village in which land is situated. In the above
mentioned case, the assessee had produced a certificate from the
Tehsildar to the effect that the land which the assessee had sold
situated beyond 8 Kms. from Gurgaon municipal limits. The Assessing
Officer did not accept the report of the Tehsildar and instead relied
upon the report of the Inspector rejected the assessee's claim. On
appeal, learned CIT(A) as well as ITAT accepted the certificate from the
Tehsildar. The appeal by the Revenue to the High Court was dismissed
and their Lordships held as under:-
"Held, dismissing the appeal, that the Commissioner
(Appeals) had rightly not accepted the report of the
inspector. In the report, neither the khasra number of
the land of the assessee was given nor had it been
explained how the distance of the land from the
municipal limits was measured. On the other hand, the
Commissioner (Appeals) has rightly relied upon the
report given by the Tehsildar on the application of the
Assessing Officer himself and it could not be discarded."
13 ITA-4733 & 4603/D/2011
17. The learned counsel for the assessee has also relied upon the
decision of the ITAT, Amritsar Bench in ITO Vs. Ranjit Rattan Mehra
(HUF) vide ITA No.442/Asr/2011, wherein the ITAT held as under:-
"Therefore, no new facts are emerging and the earlier
distance certificate of the Distt. Town Planner, Gurgaon
also does not serve any purpose as the same is
describing the measurement from the village Fazilpur
Jharsa to the Gurgaon Municipal Committee limits and
not from the point of limitation of assessee's land to the
Gurgaon Municipal Limits. The assessee's evidence is
well more relevant and specific to the point of actual
distance involved in the present case."
18. Learned DR, on the other hand, has stated that from the plain
reading of Section 2(14)(iii)(b), it is evident that the distance from the
local limit of the municipality is to be considered up to the area within
which the land is situated. Therefore, distance is to be taken not from
the land but from the area within which the land is situated. In the
case under appeal, during remand proceedings, the Assessing Officer
has relied upon the certificate of Directorate of Survey (Air) who had
measured the distance from the municipal boundary of Gurgaon to the
outer limit of Ghata Village within which the land is situated. That the
land of the assessee is situated within Ghata village and, therefore,
learned CIT(A) rightly accepted the views of the Assessing Officer that
the distance up to the outer limit of Ghata village is to be considered
and not up to the land.
19. After considering the arguments of both the sides and the facts
of the case, we are unable to agree with the views of the learned
CIT(A) as well as learned DR. Section 2(14)(iii)(b) provides for
consideration of any area within such distance not being more than 8
Kms. from local limit of any municipality. Thus, the land should be
within the area whose distance is not more than 8 Kms. There is no
mention that if the land is in any particular village, then the distance of
14 ITA-4733 & 4603/D/2011
8 Kms. is to be considered from the outer limit of the village. "Area"
word has not been defined in the Income-tax Act. Dictionary meaning
of the word "area" as per Webster's Comprehensive Dictionary is any
open space, tract or portion of the earth's surface, region, superficial
extent, total outside surface. Thus, the `area' only means any open
space or portion of earth's surface. The presumption of the Assessing
Officer as well as CIT(A) that the `area' means the village in which such
land is situated is without any basis. In fact, the correct interpretation
of the word `in any area within such distance not being more than 8
Kms. from the local limits of any municipality' would mean the land
should be within such area which is not more than 8 Kms. from the
local limit of the municipality. In the graphical presentation given by
the learned counsel which is annexed as Annexure-A to this order, he
has given two circles, one circle is mentioned as municipality which is
marked as Circle-1 and the other is a big circle which is marked as
Circle-2 which has an outer distance of 8 Kms. from the local limit of
the municipality in all directions. The land within Circle-1 would be
covered by clause (a) of Section 2(14)(iii) and the land outside Circle-1
but within Circle-2 would fall within the ambit of clause (b) of Section
2(14)(iii). Therefore, in effect, the land should be within the distance of
8 Kms. from the local limit of the municipality and not from the outer
limit of the village in which such land falls.
(D) Final determination of distance of the land from Gurgaon
Municipality.
20. In assessment proceedings before the Assessing Officer, the
assessee has given four certificates i.e., from Patwari, Tehsil Sohna,
from the SDO, Gurgaon and from two experts viz., Shri I.D. Rustogi and
M/s Chotani & Associates. The Assessing Officer had rejected all these
certificates and learned CIT(A) had also agreed with the finding of the
Assessing Officer in this regard. The Assessing Officer has relied upon
15 ITA-4733 & 4603/D/2011
two certificates, one from Executive Engineer, Municipal Corporation,
Gurgaon and other from Tehsildar, Village Sohna. During appellate
proceedings, the assessee produced two more certificates, one from
Patwari, Tehsil Sohna countersigned by Tehsildar and the other from
Assistant Engineer, Municipal Corporation, Gurgaon. The Assessing
Officer also filed a certificate from Surveyor on behalf of Directorate of
Survey (Air). The CIT(A) finally decided the issue in favour of the
Revenue relying upon the certificate from the Surveyor on behalf of
Directorate Survey (Air). It would be relevant to reproduce paragraph
48 of the CIT(A)'s order wherein he has discussed this certificate :-
"48. The A.O. filed a copy of letter from Sh. J.S. Tariyal,
Officer Surveyor from the office of the Directorate of
Survey (AIR) & DGDC, Data Centre, New Delhi bearing
No.T-1077/39-Air (Data) dated 18.7.2011 the contents
of which are reproduced are as under.
"Sub : Supply of information u/s 133(6) of the Act in the
case of Sh. Randhir Singh Kadan for A.Y. 2006-07.
Ref : Your letter No.F.No.DCIT/Circle-41(1)/2011-12/101
dated 08.07.2011.
The shortest distance from the NH-28 and Ring road on
outer limit of Gurgaon Municipal boundary limit to outer
limit of Ghata village has been measured from three
places by digital method based on 1:50.000 Scale map
Survey in the year 2005-06 and found as follows:
i) 7.17 Km IFFCO junction of the municipal
boundary along the road upto the Northern outer limit
of Ghata village.
ii) 9.21 Km Rajeev Chowk on Municipal boundary to
Western outer limit of Ghata village.
iii) 5.82 Km Aerial distance from Rajeev Chowk on
Municipal Boundary upto North-West outer limit of
Ghata Village.
iv) 6.64 Km Junction of Road near Sector-15-1 on
NH-8 upto Western outer limit of Ghata village.
16 ITA-4733 & 4603/D/2011
Encl : OSM Series map Sheet No.H43X3.
Sd/-
(J.S. Tariyal)
Officer Surveyor.
For Directorate, Survey (Air) & DGDC."
21. In the certificate, it has been mentioned by the Officer Surveyor
that he has measured the distance from the outer limit of Gurgaon
municipal boundary to the outer limit of Ghata village. Thus, the
distance is not measured up to the land but up to the Ghata village.
Moreover, the distance has not been measured by actual physical
verification but on the basis of digital method from Survey map. While
discussing issue (c), we have already mentioned that the distance is to
be measured from the land and not from the limits of the village. As
per the certificate, its distance at western limit of Ghata village is 9.21
Kms. from the municipal boundary of Gurgaon. Thus, even as per this
certificate, some land in this village is certainly more than 8 Kms. from
the limits of Gurgaon municipal boundary. Therefore, in our opinion,
this certificate cannot be relied upon to adjudicate the distance of the
land from outer limit of Gurgaon municipal boundary.
22. The assessee has produced the certificate dated 31st January,
2011 from Tehsildar, Sohna in which the distance of the land from
Rajeev Chowk, Gurgaon, i.e., the outer limit of Gurgaon municipal area
is certified to be approximately 9 Kms. by road. Copy of the certificate
is at page 88 of the assessee's paper book. During remand
proceedings, the Assessing Officer summoned the Tehsildar, Shri
Sunder Singh and recorded his statement on 24th March, 2011. In
question No.4, the Assessing Officer asked Shri Sunder Singh the basis
of his certificate in which he has certified the distance of the land to be
9 Kms. He stated that from Rajeev Chowk committee area, which is the
outer limit of Gurgaon municipal corporation, he travelled by his bike
up to the land of the applicant viz. Shri R.S. Kadan and found that the
distance of the land was 9 Kms. Learned CIT(A) rejected the certificate
17 ITA-4733 & 4603/D/2011
of the Tehsildar on the ground that he has taken the distance up to the
land and not up to the area. We have already decided this issue above
and have taken the view that the distance up to the land has to be
taken. No other reason is given by the Revenue to discard the
certificate of the Tehsildar. The Assessing Officer had examined the
Tehsildar on oath in which he reiterated that the distance of the land
has been actually measured by him by road which is approximately 9
Kms. In view of the above, in our opinion, there was no justification for
rejecting the certificate of the Tehsildar.
23. That the Assistant Engineer, Municipal Corporation, Gurgaon has
certified the distance of the land at 9.94 Kms. The copy of his
certificate is at page 90 of the assessee's paper book which is
reproduced below for ready reference :-
"From
Assistant Engineer
Municipal Corporation,
Gurgaon
To
Sh. Randhir Singh Kadan
186, Munirka Vihar,
New Delhi
Memo no.AE(B)/1413 dated : 22/2/11
Sub : Distance of land from outer Municipal limits
Income Tax Act.
The distance by existing village road of the
impugned land, bearing khasra no.35//21/2, 22:51//
1,2,10,11/1 : 52//15/2; of village Ghata from the outer
boundary of the east while Municipal council is 9.94 K.M
as on 09.09.2005. The plan showing the distance by
road is attached.
The Administrator control over the impugned land
was of B.D.O., Sohna.
Plan enclosed
Assistant Engineer
18 ITA-4733 & 4603/D/2011
Municipal Corporation,
Gurgaon."
24. Learned CIT(A) rejected the above certificate of the Assistant
Engineer on the ground that in response to the summons issued by the
Assessing Officer, the Assistant Engineer did not turn up. In our
opinion, merely because the Assistant Engineer did not turn up in
response to notice issued under Section 131, that cannot be a ground
for rejecting the certificate. His non-appearance is not the fault of the
assessee. The Assessing Officer had enough power to enforce the
attendance of a witness and moreover, he could have got verified the
certificate by sending the Inspector.
25. The assessee had also produced the certificates from Shri I.D.
Rustogi, former Additional Director General, CPWD who had certified
the distance of the land from Gurgaon Municipality as 10.4 Kms. in
which he has given point to point route distance. No valid reason has
been given by the Revenue authorities for rejecting this certificate.
Considering the certificate of the Tehsildar coupled with his statement
before the Assessing Officer, certificate of the Assistant Engineer,
Gurgaon Municipal Corporation and the certificate from Shri I.D.
Rustogi, former Additional Director General, CPWD, in our opinion, the
distance of the land from Gurgaon Municipal Corporation is established
to be beyond 8 Kms. In view of the above, we hold that the land sold
by the assessee does not fall within the ambit of either clause (a) or (b)
of Section 2(14)(iii). We, therefore, hold that the land sold by the
assessee was agricultural land and therefore, out of the purview of
capital asset, hence, not chargeable to capital gain tax.
ITA No.4733/Del/2011 Revenue's appeal -
26. The only ground raised in this appeal by the Revenue reads as
under:-
19 ITA-4733 & 4603/D/2011
"On the facts and in the circumstances of the case and
in law, the ld.CIT(A) has erred in ;
i) deleting the additions of Rs.27,66,016/- on account
of amount forfeited (balance) out of advance money
received under forfeiture clause, made by the AO under
the head income from other sources without
considering the fact that this amount remained to be
adjusted against the cost of acquisition of the asset."
27. The Assessing Officer made the addition with the following
finding:-
"6.1 As mentioned earlier, the assessee has forfeited
the advance money of Rs.77,51,000/- received from
Assotech Realty Pvt.Ltd., with whom he had entered
into an "agreement to sell" on 02.02.2005. Due to non-
compliance with the various clauses with the said
agreement and especially because the sale deed was
not executed within the period of 90 days from the date
of agreement, because of the default of the prospective
vendee, the assessee resorted to the forfeiture clause
in the agreement and forfeited the entire advance
money. Applying the provisions of section 51 of the IT
Act, the advance money of Rs.77,51,000/- has already
been reduced from the indexed cost of the value of the
same land (Rs.49,84,984/-) sold subsequently to Active
Promoters Pvt.Ltd. However, there is still a balance of
Rs.27,66,016/- (Rs.77,51,000 Rs.49,84,984) left with
the assessee, which retains the character of income."
28. Learned CIT(A) deleted the addition on the ground that balance
amount of the forfeited advance was in the nature of capital receipt
and cannot be brought to tax as income from other sources. The
Revenue, aggrieved with the order of learned CIT(A), is in appeal
before us.
29. We have heard the arguments of both the sides and perused
relevant material placed before us. It has been brought to our
knowledge by the learned counsel that the Finance No.2 Act, 2014 has
20 ITA-4733 & 4603/D/2011
inserted clause (ix) of Section 56(2) with effect from 1.4.2015 which
reads as under:-
"(ix) any sum of money received as an advance or
otherwise in the course of negotiations for transfer of a
capital asset, if, -
(a) such sum is forfeited; and
(b) the negotiations do not result in transfer of such
capital asset."
30. He, therefore, pointed out that the advance received in the
course of negotiations for transfer of capital asset would be taxable
only after 1.4.2015 and not earlier. The assessment year under
consideration is 2006-07 when there was no such clause under Section
56. At the relevant time, Section 51 was in existence which provided
for adjustment of the forfeited advance against the cost of acquisition
of the asset. Section 51 reads as under:-
"51. Where any capital asset was on any previous
occasion the subject of negotiations for its transfer, any
advance or other money received and retained by the
assessee in respect of such negotiations shall be
deducted from the cost for which the asset was
acquired or the written down value or the fair market
value, as the case may be, in computing the cost of
acquisition."
31. Thus, as per Section 51, any advance received and forfeited by
the assessee in respect of any negotiations for transfer of capital asset
is to be deducted from the cost of the asset, the Assessing Officer is
aware of this provision and after applying this provision, he has noted
that since the amount of forfeiture exceeds the cost of the asset, he
treated the balance sum as income from other sources. In our opinion,
at the relevant time i.e. during AY 2006-07, there was no provision
under the Income-tax Act for treating the forfeiture of advance
received during the course of negotiations of a transfer of a capital
21 ITA-4733 & 4603/D/2011
asset as income from other sources. The provision has come into
effect with effect from 1.4.2015 only. We, therefore, do not find any
justification to interfere with the order of learned CIT(A) in this regard.
The same is sustained.
32. In the result, the appeal of the assessee is allowed while the
appeal of the Revenue is dismissed.
Decision pronounced in the open Court on 12th December, 2014.
Sd/- Sd/-
SIDHU)
(H.S. SIDHU) AGRAWAL)
(G.D. AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 12.12.2014
VK.
Copy forwarded to: -
1. Appellant : Assistant Commissioner of Income Tax,
Circle-41(1), New Delhi.
Circle-
2. Respondent : Shri Vijay Singh Kadan,
Legal Heir of Late Shri Randhir Singh Kadan,
186, Munirka Vihar, New Delhi 110 067.
3. CIT
4. CIT(A)
5. DR, ITAT
Assistant Registrar
.....Annexure-A/..
22 ITA-4733 & 4603/D/2011
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