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Assistant Commissioner of Income Tax, Circle- New Delhi.
December, 15th 2014
               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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