M/s. Aakash Deep Farms Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-1(1), Ahmedabad

ITA 2564/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0816 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 02-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 08-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Transactions in derivatives
• Section: 2(14)

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ ITA NO.2138/AHD/2012 / . YEAR: 2009-2010 ITO, WARD - 1(1) AHMEDABAD. VS AKASH DEEP FARMS P.LTD. 2 ND FLOOR, SARTHIK ANNEXE NR.FUN REPUBLIC SATELLITE, AHMEDABAD. PAN : AABCA 6683 M ./ ITA NO.2564/AHD/2012 / ASSTT. YEAR: 2009-2010 AKASH DEEP FARMS P.LTD. 2 ND FLOOR, SARTHIK ANNEXE NR.FUN REPUBLIC SATELLITE, AHMEDABAD. VS ITO, WARD - 1(1) AHMEDABAD ! / (APPELLANT) '# ! / (RESPONDENT) REVENUE BY : SHRI JAMESH KURIAN, SR.DR ASSESSEE BY : SHRI DHIREN SHAH, AR / DATE OF HEARING : 02/08/2015 / DATE OF PRONOUNCEMENT: 11/08/2015 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE REVENUE AND THE ASSESSEE ARE IN CROSS-APPEALS AGAINST THE ORDER OF THE LD.CIT(A)-6, AHMEDABAD DATED 28.8.2012 FOR THE ASSTT.YEAR 2009-10. 2. THE GROUNDS OF THE APPEALS TAKEN BY THE REVENUE ARE NOT IN CONSONANCE WITH THE RULE 8 OF THE INCOME TAX (APPEL LATE TRIBUNAL) ITA NO.2564 AND 2138/AHD/2012 2 RULES, 1963 - THEY ARE DESCRIPTIVE AND ARGUMENTATIV E IN NATURE. IN BRIEF, THE GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT LAND SOLD BY THE ASSESSEE WAS AN AGRIC ULTURE LAND SITUATED BEYOND 8 KMS. OF THE MUNICIPAL LIMIT, AND THEREFORE , GAIN ARISEN TO THE ASSESSEE ON SALE OF THIS LAND IS NOT TAXABLE AS PER SECTION 2(14) OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ELECTRONICALLY ON 30.9.2009 DECLARING TOTAL INCOME AT RS.1,10,350/-. THE CASE OF THE ASSESSEE WAS SELECT ED FOR SCRUTINY ASSESSMENT, AND NOTICE UNDER SECTION 143(2) DATED 2 3.8.2010 WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY O F THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE HAD EARNED A P ROFIT OF RS.3,99,63,932/- ON SALE OF LAND. THE LD.AO HAS NO TICED THE DETAILS IN TABULAR FORM EXHIBITING NAME OF VILLAGE WHERE THE L AND WAS SITUATED AND SURVEY NO, DATE OF PURCHASE, PURCHASE AMOUNT, DATE OF SALE, SALE CONSIDERATION AND THE GAIN. SUCH DETAILS ARE PRODU CED AT PAGE NO.3 OF THE ASSESSMENT ORDER, WHICH READ AS UNDER: SR. VILLAGE SURVEY AGRI. DATE OF PURCHASE DATE OF SALE GAIN NO. OR NA PURCHASE AMOUNT SALE AMOUNT 1. KANETI 98/2 AGRI. 05.07.06 2,11,108 04.07.08 10,16,400 8,05,292 (ST) 2.* KANETI 99,100/1 NA 26.04.05 11,35,440 30.05.08 92,56,500 81,21,060* 100/2 3. TELAV 87/P AGRI 26.04.05 11,22,843 04.08.08 69,30,000 58,07,157 4. TELAV 87/P,95/L, AGRI 26.04.05 26,18,467 24.07.08 2,43,25,103 2,17,06,636 95/2,98, 100/1 5. TELAV 94/2 AGRI 20.07.05 3,85,216 24.07.08 39,10,897 35,25,681 TOTAL PROFIT/GAINS 3,99,65,826 ITA NO.2564 AND 2138/AHD/2012 3 *TRANSACTION AT SR.NO. 2 IS OFFERED TO TAX AS LON G TERM CAPITAL GAINS I.E RS.79,26,870/- (AFTER INDEXATION) FROM THE ABOVE LUCID CHART IT IS SEEN THAT THE ASSE SSEE HAS MADE A TOTAL PROFIT OF RS.3,99,65,826/- FROM SALE OF THE LANDS S ITUATED AT KANETI AND TELAV VILLAGES OF SANAND TALUKA OF AHMEDABAD DISTRI CT DURING THE YEAR. FROM THESE SALE TRANSACTIONS THE ASSESSEE HAS OFFER ED TO TAX ONLY THE GAINS RESULTING FROM TRANSACTION NO.2 AS LONG TERM CAPITAL GAINS SINCE THE LAND IN QUESTION HAS BEEN CONSIDERED AS NON-AGR ICULTURAL. THE BALANCE I.E RS.3,99,65,826 - RS.81,21,060 = RS.3,18 ,44,766 HAS NOT BEEN OFFERED FOR TAX AND CLAIMED AS EXEMPT U/S 10(1 ) AS AGRICULTURAL INCOME. 4. THE ASSESSEE HAS CONTENDED THAT THIS LAND WAS SI TUATED BEYOND 8 KMS. OF MUNICIPAL AREA. IT WAS AN AGRICULTURE LAND , AND THEREFORE, IT IS TO BE EXCLUDED FROM THE DEFINITION OF CAPITAL ASSE T PROVIDED IN SECTION 2(14)(III) OF THE INCOME TAX ACT. THUS, ANY GAIN A CCRUED TO THE ASSESSEE ON SALE OF THIS LAND WAS NOT TAXABLE. THE LD.AO HAS REJECTED THE CONTENTION OF THE ASSESSEE. 5. DISSATISFIED WITH THE ACTION OF THE AO, THE ASSE SSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). THE LD.CIT( A) HAS EXAMINED THE ISSUE IN DETAIL, AND BY WAY OF REASONED FINDING HEL D THAT GAIN ARISEN TO THE ASSESSEE ON ACCOUNT OF SALE OF AGRICULTURE LAND WOULD NOT BE TAXABLE. WELL REASONED FINDING OF THE LD.CIT(A) RE ADS AS UNDER: 3.5 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSES SMENT ORDER, AO'S REPORT AND APPELLANT'S WRITTEN SUBMISSION AND REJOINDER. APPELLANT SOLD CERTAIN AGRICULTURAL LANDS DURING TH E YEAR AND CLAIMED THE SAME AS EXEMPT WITHIN THE DEFINITION OF CAPITAL ASSET UNDER SECTION 2(14)(III). ASSESSING OFFICER FOUND T HAT THE AGRICULTURAL LANDS SOLD BY THE APPELLANT DURING THE YEAR WERE SITUATED V/ITHIN 8 KM FROM AHMEDABAD MUNICIPAL LIMI T AND THEREFORE THESE LANDS WERE CAPITAL ASSETS AND SALE THEREOF WERE LIABLE FOR CAPITAL GAINS. ASSESSING OFFICER GOT CER TIFICATE FROM ADDA THAT LANDS SITUATED IN TWO VILLAGES WERE WITHIN 8 K M OF AIR DISTANCE FROM THE LIMIT OF AHMEDABAD MUNICIPAL CORPORATION. A MAP DRAWN BY AUDA IS ALSO INCORPORATED IN ASSESSMENT ORDER QU OTED EARLIER. DURING APPEAL, APPELLANT TOOK TWO ARGUMENTS-(L) FOR CALCULATING DISTANCE FROM MUNICIPAL LIMIT, ROAD DISTANCE IS TO BE SEEN AND NOT AIR DISTANCE AS DONE BY THE AO. APPELLANT SUBMITTED SEVERAL ITA NO.2564 AND 2138/AHD/2012 4 JUDICIAL DECISIONS SUPPORTING ITS CONTENTION. (2) T HE AUDA HAS TAKEN PRESENT MUNICIPAL LIMIT WHEREAS MUNICIPAL LIM IT HAS EXPANDED OVER A PERIOD OF TIME. ASSESSING OFFICER IN THE REPORTS SUBMITTED THAT LIM ITS OF AHMEDABAD MUNICIPAL CORPORATION INCREASED FROM 2006 AND THEREFORE AT THE TIME OF SALE OF AGRICULTURAL LANDS , AHMEDABAD MUNICIPAL CORPORATION LIMITS HAVE ALREADY BEEN EXPA NDED AND THEREFORE FROM THE EXPANDED MUNICIPAL LIMIT, THE AG RICULTURAL LANDS SITUATED IN TELAV VILLAGE WERE WITHIN 8 KM AN D THEREFORE THE SAME WERE CAPITAL ASSET AND TAXABLE UNDER SECTION 4 5. AS REGARDS AGRICULTURAL LAND SITUATED IN KANETI VILLAGE, ASSES SING OFFICER DID NOT OBJECT THAT THE SAME WAS SITUATED BEYOND 8 KM R OAD DISTANCE FROM AHMEDABAD MUNICIPAL LIMIT. AS REGARDS THE ISSU E OF AIR DISTANCE OR ROAD DISTANCE FROM MUNICIPAL LIMITS, AS SESSING OFFICER COULD NOT COUNTER THE JUDICIAL DECISIONS RELIED UPO N BY THE APPELLANT EXCEPT MENTIONING THAT THESE DECISIONS WE RE NOT ACCEPTED BY THE DEPARTMENT. CONSIDERING THE ENTIRE SUBMISSIONS AND REPORTS REFE RRED EARLIER, THIS ISSUE CAN BE DIVIDED IN TWO PARTS-(L) WHILE CO MPUTING DISTANCE FROM MUNICIPAL LIMIT, WHICH DISTANCE- AIR DISTANCE OR ROAD DISTANCE TO BE CONSIDERED. (2) WHICH MUNICIPAL LIMIT SHOULD BE CONSIDERED FOR COMPUTING DISTANCE FROM AGRICULTURE LAND- MUNIC IPAL LIMIT ON THE DATE OF SALE OR MUNICIPAL LIMIT ON THE DATE OF ISSUE OF THE NOTIFICATION BY THE GOVERNMENT OR MUNICIPAL LIMIT A S ON DATE. AS REGARDS THE FIRST PART OF THE ISSUE, APPELLANT S UBMITTED DECISION OF HONOURABLE PUNJAB AND HARYANA HIGH COUR T IN WHICH IT IS CLEARLY HELD THAT IT IS THE ROAD DISTANCE FROM M UNICIPAL LIMIT AND NOT AIR DISTANCE TO BE CONSIDERED. SEVERAL TRIBUNAL DECISIONS HAVE ALSO UPHELD' THIS VIEW. THERE IS NO JUDICIAL DECISI ON CONTRARY TO THIS VIEW. EVEN IF DEPARTMENT HAS NOT ACCEPTED THESE DEC ISIONS, THESE ARE BINDING ON THE APPELLATE AUTHORITIES. RESPECTFU LLY FOLLOWING THESE DECISIONS ASSESSING OFFICER IS DIRECTED TO CO MPUTE DISTANCE OF THE AGRICULTURAL LANDS SOLD BY THE APPELLANT BY TAKING ROAD DISTANCE FROM THE LIMITS OF AHMEDABAD MUNICIPAL COR PORATION. AS REGARDS SECOND PART OF THE ISSUE AS TO MUNICIPAL LIMIT AS ON WHICH DATE IS TO BE CONSIDERED, IT WOULD BE RELE VANT TO REFER THE RELEVANT PROVISION OF INCOME TAX ACT AS WELL AS NOTIFICATION ISSUED BY GOVERNMENT IN THIS REGARD. 2(14) (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 ITA NO.2564 AND 2138/AHD/2012 5 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 FIR ST DAY OF THE PREVIOUS YEAR; OR (B) IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MOR E THAN EIGHT KILOMETRES, FROM THE FOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITE M (A), AS THE CENTRAL GOVERNMENT MAY, HAVING REGARD T O THE EXTENT OF, AND SCOPE FOR, URBANISATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS, SPECIFY IN F HIS BEHALF BY NOTIFICATION IN THE OFFICIAL GAZETTE AS PER CLAUSE (B), IN ORDER TO BE EXCLUDED FROM THE DEFINITION OF CAPITAL ASSET, THE LAND SHOULD NOT BE SITUATED WITH IN SUCH DISTANCE FROM THE LOCAL LIMITS OF ANY MUNICIPALITY {REFERRED TO IN CLAUSE (A)} AS SPECIFIED BY THE CENTRAL GOVERNMENT BY NOTI FICATION IN THE OFFICIAL GAZETTE. THE SAID NOTIFICATION I.E NOTIFIC ATION NO. (SO 9447) (FILE NO.L64/3/87-ITA.I) DATED 06.01.1994 FOR THE PURPOSE OF ITEM (B) OF SUB CLAUSE (III) OF CLAUSE (14) OF S ECTION 2 OF THE INCOME TAX ACT 1961 IS REPRODUCED BELOW: INCOME-TAX ACT, 1961 : NOTIFICATION UNDER SECTION 2(IA)(C), PROVISO. CLAUSE (II)(B) AND SECTION 2(14) (III)(B): URBANISATION OF AREAS NOTIFICATION NO. [SO 9447J (FILE NO. 164/3/87-ITA.I ), DATED. 6-1- 1994 WHEREAS A DRAFT NOTIFICATION WAS PUBLISHED BY THE C ENTRAL GOVERNMENT IN EXERCISE OF THE POWERS CONFERRED BY I TEM (B] OF CLAUSE (II) OF THE PROVISO TO SUB-CLAUSE (C] OF CLAUSE (1A], AND ITEM (B] OF SUB-CLAUSE (III) OF CLAUSE (]4J, OF SECTION 2 OF THE INCOME-TAX ACT, 196I (43 OF 1961J, IN THE GAZET TE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUBSECTIO N (II], DATED FEBRUARY 13, 1991, UNDER THE NOTIFICATION OF THE GOVERNMENT OF INDIA IN THE MINISTRY OF FINANCE (DEP ARTMENT OF REVENUE] NO. S.O. 91 (E], DATED FEBRUARY 8, 1991 , FOR SPECIFYING CERTAIN AREAS FOR THE PURPOSES OF THE SA ID CLAUSES AND OBJECTIONS AND SUGGESTIONS WERE INVITED FROM TH E PUBLIC WITHIN A PERIOD OF 45 DAYS FROM THE DATE THE COPIES OF THE GAZETTE OF INDIA CONTAINING SUCH NOTIFICATION BECAM E AVAILABLE TO THE PUBLIC; ITA NO.2564 AND 2138/AHD/2012 6 AND WHEREAS COPIES OF THE SAID GAZETTE WERE MADE AV AILABLE TO THE PUBLIC ON FEBRUARY 13, 1991; AND WHEREAS THE OBJECTIONS AND SUGGESTIONS RECEIVED FROM THE PUBLIC ON THE SAID DRAFT NOTIFICATION HAVE BEEN CONSIDERED BY THE CENTRAL GOVERNMENT; NOW, THEREFORE, IN EXERCISE OF THE POWERS CONFERRED BY ITEM (B) OF CLAUSE (II] OF THE PROVISO TO SUB-CLAUSE (C) OF CLAUSE (JA] AND ITEM (B) OF SUB-CLAUSE (III] OF CLAUSE (14 ] OF SECTION 2 OF THE INCOME-TAX ACT, 1961 (43 OF 1961], AND IN SUPERSESSION OF THE NOTIFICATION OF THE GOVERNMENT OF INDIA IN THE ERSTWHILE MINISTRY OF FINANCE (DEPARTMENT OF REVENUE AND INSURANCE] NO. S.O. 77(E], DATED FEBRUARY 6, 19 73, THE CENTRAL GOVERNMENT HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR URBANISATION OF THE AREAS CONCERNED AND O THER RELEVANT CONSIDERATIONS, HEREBY SPECIFIES THE AREAS SHOWN IN COLUMN (4] OF THE SCHEDULE HERETO ANNEXED AND FALLI NG OUTSIDE THE LOCAL LIMITS OF MUNICIPALITY OR CANTONM ENT BOARD, AS THE CASE MAY BE, SHOWN IN THE CORRESPONDING ENTR Y IN COLUMN (3] THEREOF AND AGAINST THE STATE OR UNION T ERRITORY SHOWN IN COLUMN (2] THEREOF FOR THE PURPOSES OF THE ABOVE MENTIONED PROVISION OF THE INCOME-TAX ACT, 1961 (43 OF 1961]. . GUJARAT 1. AHMEDABAD AREA UPTO A DISTANCE OF 8 KMS. FROM THE MUNICIPAL LIMITS IN ALL DIRECTIONS EXPLN1(2) - THE REFERENCE TO MUNICIPAL LIMITS OR TH E LIMIT OF CANTONMENT BOARD IN THE SCHEDULE TO THIS NOTIFICATI ON IS TO THE LIMITS AS EXISTING ON THE DATE ON WHICH THE NOT IFICATION IS PUBLISHED IN THE OFFICIAL GAZETTE.' FROM THE ABOVE, IT IS CLEAR THAT THE LAND SITUATED WITHIN 8 KILOMETERS FROM AHMEDABAD MUNICIPAL CORPORATION LIM IT IS URBAN LAND AND TO BE TREATED AS CAPITAL ASSET. HOWE VER LAND SITUATED OUTSIDE 8 KM LIMIT WILL BE AGRICULTURAL LA ND NOT TO BE TREATED AS CAPITAL ASSET. FOR COMPUTING THE DISTANC E OF 8 KM, THE MUNICIPAL LIMIT IS ALSO DEFINED. SINCE MUNI CIPAL LIMIT IS DYNAMIC AND CHANGING OVER A PERIOD OF TIME, AN EXPLANATION IS GIVEN AT THE END OF THE AFORESAID NO TIFICATION THAT MUNICIPAL LIMIT IS THE LIMIT AS EXISTING ON TH E DATE OF PUBLICATION OF THE NOTIFICATION AND NOT THE LIMIT O N THE DATE OF TRANSACTION OR AS ON DATE. THE NOTIFICATION IS P UBLISHED ON 6-1-1994 AND THEREFORE THE MUNICIPAL LIMITS AS ON 6 -1-1994 ITA NO.2564 AND 2138/AHD/2012 7 IS TO BE TAKEN FOR COMPUTING 8 KM ROAD DISTANCE TO DECIDE WHETHER AGRICULTURAL LAND IS A CAPITAL ASSET OR NOT . THE MUNICIPAL LIMIT ON THE DATE OF TRANSACTION IS NOT R ELEVANT AS FAR AS APPLICATION OF THIS NOTIFICATION IS CONCERNE D. APPELLANT SUBMITTED THAT PRIOR TO 2006, THE MUNICIPAL LIMIT O F AHMEDABAD MUNICIPAL CORPORATION WAS VERY RESTRICTED AND FORM THAT LIMIT, BOTH THE VILLAGES IN WHICH AGRICUL TURAL LANDS WERE SITUATED ARE MUCH BEYOND 8 KM DISTANCE. SINCE NOTIFICATIONS WITH REGARD TO AHMEDABAD MUNICIPAL CORPORATION LIMITS ARE AVAILABLE FROM WHICH ASSESSI NG OFFICER CAN WORK OUT THE DISTANCE OF THESE AGRICULTURAL LAN DS. IN VIEW OF THE CLEAR PROVISIONS IN THE NOTIFICATION RE FERRED EARLIER, IT IS HELD THAT THE MUNICIPAL LIMITS RELEV ANT FOR COMPUTING DISTANCE IS THE MUNICIPAL LIMIT EXISTING ON THE DATE OF ISSUE OF THIS NOTIFICATION I.E. 6-1-1994. A SSESSING OFFICER IS THEREFORE DIRECTED TO COMPUTE THE ROAD D ISTANCE OF THE AGRICULTURAL LANDS FROM THE MUNICIPAL LIMITS OF AMC AS ON 6-1 -1994. IF THE DISTANCE IS WITHIN 8 KM, APPELLAN T IS LIABLE FOR CAPITAL GAINS AND IF THE DISTANCE IS BEYOND 8 K M, THE AGRICULTURAL LANDS SOLD WILL BE OUTSIDE THE PURVIEW OF CAPITAL ASSET AND HENCE NO CAPITAL GAINS CAN BE CHARGED ON THE SAME. THIS GROUND IS ACCORDINGLY DISPOSED OFF. 6. BEFORE US, LIMITED DISPUTE IS WHETHER THE DISTAN CE FOR IDENTIFYING THE GEOGRAPHICAL LOCATION OF THE AGRICULTURE LAND I S TO BE TAKEN BY ROAD OR BY AERIAL. SECOND FOLD OF DISPUTE IS WHETHER TH E MUNICIPAL LIMIT ENHANCED BY THE STATE GOVERNMENT IS TO BE CONSIDERE D AS STARTING POINT OR IT IS TO BE TAKEN FROM NOTIFICATION ISSUED BY TH E CENTRAL GOVERNMENT DATED 6.1.1994. THE LD.CIT(A) HAS HELD THAT NOTIFI CATION ISSUED ON 6.1.1994 BY THE CENTRAL GOVERNMENT IS TO BE CONSIDE RED. 7. LD.DR RELIED UPON THE ORDER OF THE AO. ON THE O THER HAND, THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT HONBLE PUNJAB & HARYANA HIGH COURT IN THE DECISION REFERRED BY THE LD.CIT(A ) IN THE CASE OF CIT VS. SATINDER PAL SINGH, 229 CTR 82 HAS HELD THAT DI STANCE REQUIRES TO BE COMPUTED FOR IDENTIFYING THE GEOGRAPHICAL LOCATI ON OF THE AGRICULTURE LAND FROM THE MUNICIPAL LIMIT IS CONCERNED, IT IS T O BE MEASURED BY ROAD, AND IF THE DISTANCE IS BEYOND 8 KMS, THEN THAT LAND WOULD NOT FALL WITHIN THE DEFINITION OF CAPITAL ASSET. HE FURTHER POINTE D THAT HONBLE BOMBAY HIGH COURT HAS ALSO CONCURRED WITH THIS VIEW IN THE DECISION OF CIT VS. ITA NO.2564 AND 2138/AHD/2012 8 NITISH RAMESCHANDRA CHORDIA, 57 TAXMANN.COM 394. H E PLACED ON RECORD COPY OF THIS DECISION. IN THIS DECISION, THE HONBLE BOMBAY HIGH COURT HAS SPECIFICALLY LAID DOWN THAT THE DISTANCE IS TO BE MEASURED BY ROAD AND NOT AS PER CROWS FLIGHT. THE LD.COUNSEL FOR THE ASSESSEE POINTED OUT AFTER THIS DECISION OF THE HONBLE BOMB AY HIGH COURT, THE BOARD HAS ISSUED CIRCULAR BEARING NOS.17/2015 AND A CCEPTED THE DECISION. HE PLACED ON RECORD COPY OF THE CIRCULAR . 8. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. THE DEFINITION OF CAPITAL ASSET HAS BEEN PROVIDED IN SECTION 2(14) OF THE ACT. SUB-CLAUSE (A) AND (B) OF SECTION 2(14)(III) CONTEMPLATES THAT IF AN AGRICULTURE LAND IS IN INDI A, AND IT IS SITUATED AT A DISTANCE OF MORE THAN 8 KMS. FROM THE LOCAL LIMIT OF ANY MUNICIPALITY CANTONMENT BOARD, THEN, THAT LAND WOULD NOT FALL WI THIN THE AMBIT OF DEFINITION CAPITAL ASSET. IN OTHER WORDS, IF THE LAND WHICH IS NOT FORMING PART OF CAPITAL ASSET SOLD BY AN ASSESSEE, THEN, NO GAIN AS SUCH WOULD BE CONSIDERED, AS ACCRUED TO THE ASSESSEE. I N THE PRESENT CASE, THE LD.AO HAS OBSERVED THAT IF THE DISTANCE OF GEOG RAPHICAL SITUATION OF THE ASSESSEES LAND IS BEING MEASURED FROM MUNICIPA LITY LIMIT, BY WAY OF CROWS FLIGHT, THEN, IT IS WITHIN THE MUNICIPAL LIM IT. IN VARIOUS AUTHORITATIVE PRONOUNCEMENTS, AS DISCUSSED BY THE L D.CIT(A), IT HAS BEEN HELD THAT THE DISTANCE IS TO BE MEASURED BY RO AD AND NOT BY AERIAL ROUTE. AT THIS STAGE, IT IS IMPORTANT TO TAKE NOTE OF THE BOARD CIRCULAR BEARING NO.17/2015. IT READS AS UNDER: CBDT CIRCULAR NO -17/2015, DATED: OCTOBER 06, 2015 SUBJECT:- MEASUREMENT OF THE DISTANCE FOR THE PURPO SE OF SECTION 2(14)(III)(B) OF THE INCOME-TAX ACT FOR THE PERIOD PRIOR TO ASSESSMENT YEAR 2014-15 'AGRICULTURAL LAND IS EXCLUDED FROM THE DEFINITION OF CAPITAL ASSET AS PER SECTION 2(14)(III) OF THE INCOME-TAX ACT BAS ED, INTER-ALIA, ON ITS PROXIMITY TO A MUNICIPALITY OR CANTONMENT BO ARD. THE METHOD OF MEASURING THE DISTANCE OF THE SAID LAND F ROM THE MUNICIPALITY, HAS GIVEN RISE TO CONSIDERABLE LITIGA TION. ALTHOUGH, ITA NO.2564 AND 2138/AHD/2012 9 THE AMENDMENT BY THE FINANCE ACT, 2013 W.E.F. 1.04. 2014 PRESCRIBES THE MEASUREMENT OF THE DISTANCE TO BE TA KEN AERIALLY, AMBIGUITY PERSISTS IN RESPECT OF EARLIER PERIODS. 2. THE MATTER HAS BEEN EXAMINED IN LIGHT OF JUDICIA L DECISIONS ON THE SUBJECT. THE NAGPUR BENCH OF THE HON. BOMBAY HI GH COURT VIDE ORDER DATED 30.03.2015 IN ITA 151 OF 2013 IN T HE CASE OF SMT. MALTIBAI R KADU HAS HELD THAT THE AMENDMENT PR ESCRIBING DISTANCE TO BE MEASURED AERIALLY, APPLIES PROSPECTI VELY I.E. IN RELATION TO ASSESSMENT YEAR 2014-15 AND SUBSEQUENT ASSESSMENT YEAR. FOR THE PERIOD PRIOR TO ASSESSMENT YEAR 2014- 15, THE HIGH COURT HELD THAT THE DISTANCE BETWEEN THE MUNICIPAL LIMIT AND THE AGRICULTURAL LAND IS TO BE MEASURED HAVING REGARD T O THE SHORTEST ROAD DISTANCE. THE SAID DECISION OF THE HIGH COURT HAS BEEN ACCEPTED AND THE AFORESAID DISPUTED ISSUE HAS NOT B EEN FURTHER CONTESTED. 3. BEING A SETTLED ISSUE, NO APPEALS MAY HENCEFORTH BE FILED ON THIS GROUND BY THE OFFICERS OF THE DEPARTMENT AND A PPEALS ALREADY FILED, IF ANY, ON THIS ISSUE BEFORE VARIOUS COURTS/ TRIBUNALS MAY BE WITHDRAWN/ NOT PRESSED UPON. THIS MAY BE BROUGHT TO THE NOTICE OF ALL CONCERNED. [F. NO. 279/MISC./140/2015-ITJ] (D S CHAUDHRY) CIT (A&J), CBDT 9. THUS, IF THE FINDING OF THE LD.CIT(A) IS BEING E XAMINED IN THE LIGHT OF THE CIRCULAR, THEN ONE THING IS CLEAR THAT THE D ISTANCE IS TO BE MEASURED BY ROADS IN THIS ACCOUNTING YEAR. THE LAN D SOLD BY THE ASSESSEE IS SITUATED BEYOND 8 KMS. OF THE MUNICIPAL LIMIT. 10. NEXT OBJECTION OF THE AO WAS THAT THE STATE GOV ERNMENT HAS ENHANCED THE MUNICIPAL LIMIT IN 2006 AND THE DISTAN CE IS TO BE MEASURED FROM NEW BOUNDARY OF THE AHMEDABAD MUNICIP AL CORPORATION LIMIT. AMC LIMIT WAS EXTENDED UPTO SARKHEJ SINCE 2 006. THE LD.CIT(A) HAS EXAMINED THIS ASPECT, AND HAS OBSERVED THAT PER USAL OF SUB-CLAUSE (B) OF SECTION 2(14)(III) WOULD INDICATE THAT THE M UNICIPAL LIMIT IS TO BE TAKEN FROM THE AREA WHICH HAS BEEN NOTIFIED BY THE CENTRAL GOVERNMENT IN ITS GAZETTE NOTIFICATION. CENTRAL GOVERNMENT HA S NOTIFIED THE AREA ON 6.1.1994, AND FROM THAT NOTIFICATION, THE AGRICULTU RE LAND OF THE ITA NO.2564 AND 2138/AHD/2012 10 ASSESSEE WAS SITUATED BEYOND A DISTANCE OF 8KMS. T HIS ASPECT HAS BEEN LUCIDLY CONSIDERED BY THE LD.CIT(A) IN THE FIN DING EXTRACTED SUPRA. WE DO NOT SEE ANY REASON TO INTERFERE IN THIS FINDI NG. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT IN THE A PPEAL OF THE REVENUE. IT IS DISMISSED. 11. NOW WE TAKE THE APPEAL OF THE ASSESSEE. THE RE GISTRY HAS POINTED THAT THE APPEAL OF THE ASSESSEE IS TIME BAR RED BY NINE DAYS. IN ORDER TO EXPLAIN THE DELAY, THE ASSESSEE HAS FILED AN APPLICATION UNDER SUB-SECTION (5) OF SECTION 253 OF THE ACT. IT IS P LEADED IN THE APPLICATION THAT APPEAL AGAINST THE ORDER OF THE LD .CIT(A) WAS PREPARED WELL IN TIME, AND IT WAS FORWARDED BY THE TAX CONSU LTANTS TO THE OFFICE OF THE COMPANY FOR SIGNATURE. THE PERSON WHO HAS RECE IVED THE PAPERS DID NOT COMMUNICATE TO THE MANAGEMENT WELL IN TIME. WHEN HE REALIZED THE PENDING WORK, ONLY THEN, HE IMMEDIATEL Y GOT THE SIGNATURE OF THE DIRECTORS AND FORWARDED TO THE OFFICE OF THE AUTHORIZED REPRESENTATIVES. BUT BY THAT TIME, THE APPEAL HAS BECOME TIME BARRED BY NINE DAYS. THE LD.DR, ON THE OTHER HAND, CONTEN DED THAT THERE IS NO PLAUSIBLE EXPLANATION AT THE END OF THE ASSESSEE. 12. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND G ONE THROUGH THE RECORD. THOUGH THE APPEAL WAS TIME BARRED BY 9 DAY S, BUT TO OUR MIND, THE ASSESSEE HAS EXPLAINED AS TO HOW SUCH DELAY HAS HAPPENED. THERE IS NO DELIBERATE ATTEMPT AT THE END OF THE ASSESSEE TO MAKE THE APPEAL TIME BARRED, AND TO OUR MIND, THE ASSESSEE WILL NOT GAIN ANYTHING BY ADOPTING ANY DILATORY STRATEGY. THE DELAY OF NINE DAYS ON ACCOUNT OF HUMAN NEGLIGENCE COULD HAVE HAPPENED. THEREFORE, W E CONDONE THE DELAY AND PROCEED TO DECIDE THE APPEAL ON MERIT. 13. SOLITARY GRIEVANCE OF THE ASSESSEE IN ITS APPEA L IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF LOSS CLAIMED BY THE ASSESSEE AT RS.77,64,387/-. ITA NO.2564 AND 2138/AHD/2012 11 14. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AS CLAIMED LOSS OF RS.77,64,387/-. IT WAS CONTENDED BY THE ASSESSEE T HAT IT HAS CARRIED OUT FUTURE & OPTION (F&O) TRADING OF DERIVATIVES. IN ORDER TO EXPLAIN ITS TRANSACTION, THE ASSESSEE HAS FILED COMPLETE BILL-W ISE DETAILS OF F&O TRANSACTIONS. THE ASSESSEE HAS ALLEGED TO HAVE CAR RIED OUT THESE TRANSACTIONS THROUGH A BROKER VIZ. GOLDSTAR FINVEST P.LTD. THE ASSESSEE HAS SHOWN TOTAL PURCHASE OF RS.9,65,06,902/- AND IT HAD SHOWN SALES OF RS.8,87,42,515/-. THE DIFFERENCE I.E. RS.77,64,387 /- HAS BEEN CLAIMED AS LOSS FROM F&O TRADING. THE LD.AO HAS OBSERVED T HAT IN ORDER TO VERIFY THE AUTHENTICITY OF CLAIM UNDER F&O, INFORMA TION WAS CALLED FROM NATIONAL STOCK EXCHANGE BY QUOTING PAN OF THE ASSES SEE AND SEBI REGISTRATION NUMBER OF BROKERS. THE LD.AO HAS REPR ODUCED THE INFORMATION RECEIVED BY HIM FROM NSE. VICE-PRESIDE NT, NSE HAS TOLD THE AO THAT THE TRANSACTIONS HAVING COMBINATION OF PAN AND SEBI REGISTRATION NO. WERE NOT UNDERTAKEN IN THE STOCK E XCHANGE. THE LD.AO HAS DIRECTED THE ASSESSEE TO EXPLAIN ITS POSITION. THE ASSESSEE HAS SUBMITTED CONTRACT NOTES WITH THE BROKER, BANK DETA ILS, CONFIRMATION FROM THE BROKER, AND CONTENDED THAT IT HAS CARRIED OUT THESE TRANSACTIONS WITH NSE THROUGH THE BROKER. THE LD.A O HAS REJECTED THE CONTENTIONS OF THE ASSESSEE. HE OBSERVED THAT THE ASSESSEE HAS MADE A PROFIT OF RS.79,26,870/- IN ORDER TO SET OFF THIS PROFIT. IT HAS SHOWN SO- CALLED F&O LOSS OF RS.77,64,387/-. ACCORDING TO TH E AO, THERE IS NO ACTUAL TRANSACTION IN THE NAME OF ASSESSEE ON THE R ECOGNISED STOCK EXCHANGE. THE ASSESSEE MIGHT HAVE RECEIVED THE PAY MENTS AS PER THESE MADE-UP TRANSACTIONS UNDER ITS NAME. BROKER M IGHT HAVE SHOWN THESE TRANSACTIONS RELATING TO THE ASSESSEE UNDER S OME INTERNAL ADJUSTMENTS. ACCORDINGLY, HE DISALLOWED THE CLAIM OF THE ASSESSEE. 15. ON APPEAL, THE LD.CIT(A) HAS CONFIRMED THE ACTI ON OF THE AO BY OBSERVING AS UNDER: ITA NO.2564 AND 2138/AHD/2012 12 4.4 I HAVE CONSIDERED 1HE FACTS OF THE CASE; ASSESSMENT ORDER, INFORMATION RECEIVED FROM NATIONAL S TOCK EXCHANGE LTD AND APPELLANT'S WRITTEN SUBMISSION. APPELLAN T CLAIMED LOSS ON FUTURES AND OPTIONS TRANSACTIONS IN SHARES. FOR THIS APPELLANT SUBMITTED CONTRACT NOTES ISSUED BY GOLD STAR FINVES T P LTD AND CLAIMED THAT THE SAID BROKER IS REGISTERED WITH STO CK EXCHANGE AND THE LOSS SHOULD BE CONSIDERED ALLOWABLE. ASSESSING OFFICER MADE NECESSARY INQUIRIES FROM NATIONAL STOCK EXCHANGE L TD WHO CONFIRMED THAT THERE WAS NO TRADE ON ACCOUNT OF TH E APPELLANT. NSE LTD FURTHER SUBMITTED THAT GOLD STAR FINVEST P LTD IS NOT REGISTERED AS MEMBER OF THE EXCHANGE AND THE CONTRA CT NOTES ISSUED BY IT ARE FICTITIOUS BECAUSE SEBI REGISTRATI ON NUMBER MENTIONED ON CONTRACT NOTES ARE DIFFERENT. THE SAID GOLD STAR FINVEST P LTD WAS MEMBER WITH INTERCONNECTED STOCK EXCHANGE AND ITS REGISTRATION WAS CANCELLED BY SEBI ON JANUA RY 20, 2005. IN THE LIGHT OF THESE FACTS IT IS VERY CLEAR THAT G OLD STAR FINVEST P LTD WAS NOT A REGISTERED BROKER DURING THE YEAR AND THEREFORE IT WAS NOT ENTITLED TO TRADE CONTRACTS ON BEHALF OF TH E APPELLANT. IT WAS FURTHER CERTIFIED THAT CONTRACT NOTES ISSUED WE RE FICTITIOUS. IN THE LIGHT OF THESE FACTS, THERE REMAINS NO DOUBT AB OUT THE NATURE OF LOSS CLAIMED BY THE APPELLANT. WHEN THE PERSON I SSUING CONTRACT NOTES IS NOT EVEN REGISTERED MEMBER OF EXCHANGE, TH ERE IS NO QUESTION OF ANY TRANSACTION DONE BY IT ON BEHALF OF THE APPELLANT. CONTRACT NOTES ISSUED BY THE SAID PARTY ARE FICTITI OUS ON THE BASIS OF WHICH NO LOSS CAN BE ALLOWED. APPELLANT'S SUBMIS SION IN THIS REGARD CANNOT COUNTER THE FACTS EMERGED FROM THE CO MMUNICATION FROM NSE LTD. CONSIDERING THESE FACTS, ASSESSING OF FICER IS JUSTIFIED IN TREATING THE LOSS CLAIMED ON F & O TRA NSACTIONS FICTITIOUS. THE DISALLOWANCE OF SUCH FICTITIOUS LOS S IS ACCORDINGLY CONFIRMED. 16. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. A PERUSAL OF THE IMP UGNED ORDER WOULD SUGGEST THAT FOR REJECTING THE CLAIM OF THE ASSESSE E, BOTH THE REVENUE AUTHORITIES HAVE PRIMARILY RELIED UPON THE ALLEGED INFORMATION COLLECTED FROM THE NATIONAL STOCK EXCHANGE. THE LD.CIT(A) HA S MADE REFERENCE TO THE LETTER OF ADDITIONAL CIT, RANGE-I, AHMEDABAD DATED 27.7.2012. ACCORDING TO THE LD.CIT(A), IN THIS LETTER THE ADDL .CIT HAS BROUGHT TO HIS NOTICE THAT GOLDSTAR FINVEST P.LTD. WAS NOT REGISTE RED AS MEMBER OF THE STOCK EXCHANGE. THE CONTRACT NOTES ARE FICTITIOUS, SEBI REGISTRATION OF GOLDSTAR FINVEST P.LTD. IS IN241146233 AND THE SEBI HAS CANCELED THE REGISTRATION ON JANUARY, 20, 2005. ON THE OTHER HA ND, CASE OF THE ITA NO.2564 AND 2138/AHD/2012 13 ASSESSEE IS THAT IT HAS MADE PAYMENTS THROUGH ACCOU NT PAYEE CHEQUE. IT HAS RECEIVED PAYMENT THROUGH ACCOUNT PAYEE CHEQU E. BROKER HAS ISSUED CONTRACT NOTES. THE ASSESSEE HAS PRODUCED C OPY OF THE LEDGER ACCOUNT MAINTAINED BY HIM AS WELL BY THE BROKER. T HE ASSESSEE HAS PRODUCED ALL DETAILS EXHIBITING NUMBER OF SHARES, D ATE OF PURCHASE AND DATE OF SALE. THE AO HAS NOT COLLECTED ANY INFORMAT ION FROM THE BROKER. IF THE AO HAS MADE ANY ERROR IN REFERENCE OF PARTIC ULARS OR DETAILS ABOUT THE BROKER OR THE ASSESSEE, THEN THE NSE WILL NOT B E IN POSITION TO GIVE COMPLETE DETAILS. WE FIND THAT SEBI REGISTRATION Q UOTED BY THE ASSESSEE IN CONTRACT NOTE OF THE BROKER IS 230932431/23-1077 7. THE PAN OF THE SAID BROKER IS AABCA 6683 M. THESE VERY NUMBERS HA VE BEEN COMMUNICATED BY THE ASSESSEE TO THE AO. IN THE LET TER OF ACIT DATED 27.7.2012, WHICH IS A DEVELOPMENT AFTER THE ASSESSM ENT ORDER, THE SEBI REGISTRATION OF GOLDSTAR FINVEST P.LTD. IS MEN TIONED AS INB241146233. IT IS A DIFFERENT NUMBER. INFORMATI ON IS THAT IT WAS CANCELED IN JANUARY 20, 2005. WHAT IS THE STATUS I N THE ACCOUNTING YEAR 2009-10 HAS NOT BEEN REFERRED TO. THE AO OUGHT TO HAVE VERIFIED FROM THE BROKER ALSO WHETHER BROKER HAD CARRIED OUT TRAN SACTIONS OF THE ASSESSEE OR NOT. THE BROKER SHOULD HAVE BEEN CONFR ONTED WITH THE INFORMATION COLLECTED FROM THE NSE, ONLY THEN, CLEA R PICTURE WOULD COME OUT. IT SHOULD HAVE BEEN COLLECTED WHETHER THE BRO KER HAS CARRIED OUT THE TRANSACTIONS WITH HELP OF SOME OTHER BROKER OR THIS IS SOME PAPER TRANSACTIONS. CONSIDERING ALL THESE ASPECTS, WE AR E OF THE VIEW THAT THE ISSUE DESERVES TO BE RE-INVESTIGATED AT THE LEVEL O F THE AO, BECAUSE, THE LD.AO HAS NOT CROSS-VERIFIED THE DETAILS WITH THE N ATIONAL STOCK EXCHANGE AS WELL AS BROKER, THROUGH WHOM THE ASSESS EE ALLEGED TO HAVE CARRIED OUT ITS TRANSACTION. IT IS QUITE DIFF ICULT FOR THE ASSESSEE TO COMMENT ON THE NATURE OF THE EVIDENCE COLLECTED FRO M THE NSE, BECAUSE ACCORDING TO THE ASSESSEE IT HAS CARRIED OU T THE TRANSACTIONS THROUGH BROKER. NOW, IF SOME AMBIGUITY HAS COME ON THE RECORD, SUCH AMBIGUITY COULD BE EXPLAINED BY THE BROKER. THEREF ORE, WE ALLOW THE APPEAL OF THE ASSESSEE FOR STATISTICAL PURPOSE, AND SET ASIDE THIS ISSUE TO ITA NO.2564 AND 2138/AHD/2012 14 THE FILE OF THE AO FOR FRESH ADJUDICATION. THE ASS ESSEE WILL BE AT LIBERTY TO PRODUCE ANY DETAILS IN SUPPORT OF ITS CLAIMS. 17. THE OBSERVATIONS MADE BY US WILL NOT IMPAIR OR INJURE THE CASE OF THE AO AND WILL NOT CAUSE ANY PREJUDICE TO THE DEFENCE/EXPLANATION OF THE ASSESSEE. 18. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSE D AND THAT OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 11 TH AUGUST, 2016 AT AHMEDABAD. SD/- SD/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 11/08/2016 $% & ''() *$)' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! / CONCERNED CIT 4. ! ( ) / THE CIT(A) 5. $%& '' , / DR, ITAT, 6. &)* + / GUARD FILE. $% + / BY ORDER, ,/ - ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD