M/s Rachana Constructions, Nagpur V. Assistant Commissioner of Income Tax Central Circle-2(2), Nagpur

ITA 34/NAG/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9679 (ITAT-NAGPUR)
• Duration Of Justice: 4 year(s) 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-04-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 21-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Capital asset
• Section: 2(14); 133(6); 147; 148; 132; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P.K. BANSAL, VICE PRESIDENT AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO. 34/NAG./2013 ( ASSESSMENT YEAR : 200708 ) M/S. RACHANA CONSTRUCTIONS 153B, SHIVAJI NAGAR NAGPUR 440 010 PAN AAHFR5896G APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE2(2), NAGPUR .... RESPONDENT ASSESSEE BY : SHRI K.P. DEWANI REVENUE BY : SHRI A.R. NINAWE DATE OF HEARING 22.06.2017 DATE OF ORDER 28.06 .2017 O R D E R PER AMARJIT SINGH, J.M. THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST T HE IMPUGNED ORDER DATED 23 RD NOVEMBER 2012, PASSED BY THE LEARNED COMMISSIONER (APPEALS)I, NAGPUR, RELEVANT TO THE ASSESSMENT YEA R 200708. THE EFFECTIVE GROUND RAISED BY THE ASSESSEE IS REPRODUC ED BELOW: 1. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEALS )-!, WAS TOTALLY ARBITRARY AND UNJUSTIFIED IN NOT ACCEPTING THE CLAIM OF THE ASSESSEE THAT THE AGRICULTURAL LAND IN QUESTION IS NOT A CAPITAL ASSETS AS PER SECTION 2(14) (III) (A) AND (B) AND S URPLUS ARISING ON SALE OF THE SAME IS NOT LIABLE TO TAX. 2. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEALS) -I HAS TAKEN A WRONG AND UNJUSTIFIED METHOD OF CALCULATION OF DISTANCE OF LAND IN QUESTION BY A STRAIGHT LINE DISTANCE ON HOR IZONTAL PLANE AREA, I.E. CROW'S FLIGHT INSTEAD OF MOTORABLE ROAD. 2 M/S. RACHANA CONSTRUCTIONS 3. THE HON'BLE COMMISSIONER OF INCOME TAX (APPEALS) -I WAS ARBITRARY IN REJECTING THE CERTIFICATE OF PATWARI ( REVENUE LAND RECORD KEEPER) WHICH CERTIFIES THAT THE DISTANCE OF THE AGRICULTURAL LAND IS MORE THAN 8 KM FROM MUNICIPAL LIMIT. 4. THE DIRECTION OF HON'BLE COMMISSIONER OF INCOME TAX (APPEALS)-I TO ASSESS THE SURPLUS AMOUNT ON SALE OF THE AGRICULTURAL LAND AS CAPITAL GAIN INCOME IS UNJUSTI FIED, UNWARRANTED AND BAD IN LAW. 5. THE ASSESSEE CRAVES LEAVE TO, ADD TO ALTER, AMEN D, MODIFY, SUBSTITUTE, DELETE AND / OR RESCIND ANY OF THE GROU ND/GROUNDS OF THE APPEAL ON OR BEFORE THE FINAL HEARING OF THE AP PEAL. 2. BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND SEIZUR E ACTION WAS CONDUCTED ON 13 TH JANUARY 2009, UNDER SECTION 132 OF THE ACT AT THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE COURS E OF SEARCH, CERTAIN BOOKS OF ACCOUNTS, DOCUMENTS WERE SEIZED. T HE ASSESSEE HAD PURCHASED LAND ON 22 ND AUGUST 2005, BEING AGRICULTURAL LAND OF 3.43 HECTARES AT MOUZA KANHALGAON, PH NO.38, TEHSIL AND DISTRICT NAGPUR, S.NO.59 FOR AN AGGREGATE AMOUNT OF ` 36,91,480. THE SAID PROPERTY WAS SOLD ON 18 TH NOVEMBER 2006 FOR ` 1,08,80,000. THUS, THERE WAS GAIN OF ` 71,88,520 WHICH WAS LIABLE FOR CAPITAL GAIN UNDER THE ACT. THE ASSESSING OFFICER HAS, THEREFORE, INITIATED PROCEED INGS UNDER SECTION 147 OF THE ACT AND ISSUED NOTICE UNDER SECTION 148 WHICH WAS SERVED UPON THE ASSESSEE ON 10 TH JANUARY 2011. THE ASSESSEE HAS CLAIMED THAT THE PROFIT FROM SALE OF LAND IN QUESTION IS EX EMPT FROM TAX AS IT IS AN AGRICULTURAL LAND AND NOT A CAPITAL ASSET ACCORD ING TO THE PROVISIONS OF SECTION 2(14) OF THE ACT. ASSESSEE HAS STATED TH AT THE ACTUAL DISTANCE BETWEEN THE PROPERTY AT MOUZA KANHALGAON, PH. NO.38, TEHSIL 3 M/S. RACHANA CONSTRUCTIONS AND DISTRICT NAGPUR, S.NO.59, AND THE MUNICIPAL JUR ISDICTION IS MORE THAN 8 KM AND FURNISHED A CERTIFICATE FROM THE PATW ARI IN SUPPORT OF ITS CLAIM. THE ASSESSING OFFICER HAS REJECTED THE APPEL LANT'S CLAIM HOLDING THAT THE PROPERTY IN QUESTION WAS WITHIN THE SPECIF IED DISTANCE OF THE MUNICIPAL JURISDICTION OF NAGPUR AND THEREFORE BROU GHT TO TAX AN AMOUNT OF ` 71,88,520 UNDER THE HEAD SHORT TERM CAPITAL GAIN. IN THIS CONNECTION, THE ASSESSING OFFICER HAS RELIED ON THE LETTER RECEIVED BY NMC IN RESPONSE TO NOTICE UNDER SECTION 133(6) DATE D 24 TH OCTOBER 2011, STATING THAT THE DISTANCE TO KANHALGAON IS 5. 3 KM. FROM NMC LIMITS. FURTHER, THE ASSESSING OFFICER HAS ALSO ASC ERTAINED THE AERIAL DISTANCE WITH THE HELP OF THE GOOGLE EARTH SOFTWARE WHICH SHOWED THAT THE DISTANCE IS LESS THAN 8 KM. FROM MUNICIPAL LIMI TS. THE ASSESSING OFFICER HAS RELIED ON SECTION 11 OF THE GENERA CLAU SES ACT, 1897, IN SUPPORT THAT DISTANCE MUST BE MEASURED NOT BY ROAD DISTANCE BUT BY THE SHORTEST DISTANCE 'AS THE CROW FLIES' . BEING AGGRIEVED BY THIS ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN THE LEARNED COMMISSIONE R (APPEALS) UPHELD THE ORDER OF THE ASSESSING OFFICER BY DISMIS SING THE APPEAL OF THE ASSESSEE. BEING AGGRIEVED, THE ASSESSEE IS IN FU RTHER APPEAL BEFORE THE TRIBUNAL. ISSUE NO.1 TO 4 4 M/S. RACHANA CONSTRUCTIONS 3. UNDER THESE ISSUES, THE CLAIM OF THE ASSESSEE RELATE S TO ASSESSMENT OF SURPLUS ARISING ON SALE OF AGRICULTUR AL LAND AT ` 71,88,520 ON ACCOUNT OF CAPITAL GAIN. LEARNED COUNS EL FOR ASSESSEE SUBMITTED THAT THE ASSESSEE FIRM HAS ACQUIRED AGRIC ULTURAL LAND ON 22 ND AUGUST 2005. THE AFORESAID AGRICULTURAL LAND WAS SO LD ON 18 TH NOVEMBER 2006. THE REVENUE RECORD BEING EXTRACTS IN FORM NO.7/12 WERE SUBMITTED BEFORE ASSESSING OFFICER WHICH INDIC ATE THAT THE AGRICULTURAL LANDS HELD BY ASSESSEE IN REVENUE RECO RDS IS SHOWN AS AGRICULTURAL LAND. HE SUBMITTED THAT THE ASSESSEE H AS NEVER APPLIED FOR PERMISSION TO USE AGRICULTURAL LANDS FOR NON-AGRICU LTURAL PURPOSE NOR IT WAS CONVERTED FOR NON AGRICULTURAL USE BY ANY AUTHO RITY TILL THE DATE OF SALE. THE LEARNED COUNSEL FOR ASSESSEE SUBMITTED TH AT THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE AGRICULTURAL LA ND OWNED BY ASSESSEE WAS PUT TO USE FOR THE PURPOSE OTHER THAN AGRICULTURAL ACTIVITY. HE SUBMITTED THAT THE FACT ON RECORD IS T HAT AGRICULTURAL LAND SOLD BY ASSESSEE IS LOCATED BEYOND 8 KMS. FROM MUNI CIPAL LIMIT OF NAGPUR AND SAME IS NOT WITHIN THE RADIUS OF 8 KMS. OF ANY MUNICIPAL CORPORATION. THE AGRICULTURAL LAND THUS IS NOT CAPI TAL ASSET AS DEFINED UNDER SECTION 2(14) OF THE ACT. THE LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT THE AGRICULTURAL LAND SOLD BY ASSESS EE BEING NOT A CAPITAL ASSET IN TERMS OF PROVISIONS OF SECTION 2(1 4), SURPLUS ARISING ON SALE OF SAME IS NOT EXIGIBLE TO TAX UNDER HEAD LONG TERM CAPITAL GAIN. THE LEARNED COUNSEL SUBMITTED THAT IT IS SETTLED PR OPOSITION OF LAW THAT 5 M/S. RACHANA CONSTRUCTIONS WHEN ON THE DATE OF PURCHASE AND ON THE DATE OF SAL E IF THE CHARACTER OF ASSET SOLD IS AGRICULTURAL LAND, THE SURPLUS ARI SING ON SAME IS NOT EXIGIBLE TO TAX. IN SUPPORT OF THIS CONTENTION THE LEARNED COUNSEL RELIED UPON THE FOLLOWING CASE LAWS: 1. SANJAY NAGORAO PAIDLEWAR, ITA NO.112/NAG/2012, ORDE R DATED 22/03/2013; 2. NITISH RAMESH CHANDRA CHORDIA ITA NO.120 OF 2013 OR DER DATED 30/03/2015; 3. DLF UNITED LTD. VS. CIT (1996) 217 ITR 333 (DEL.); 4. CIT VS. M/S. D.L.F. UNITED LTD. (SLP)(CIVIL) CC 172 7-1729/98; 5. HINDUSTAN INDUSTRIAL RESOURCES LTD. VS. ACIT (2011) 331 ITR 59; 6. CIT VS. SMT. DEBBIE ALEMAO (PAGE 41,42); 4. THE LEARNED COUNSEL FOR ASSESSEE FURTHER SUBMITTED THAT SURPLUS ARISING ON SALE OF AGRICULTURAL LAND IS IN THE NATU RE OF AGRICULTURAL INCOME IN TERMS OF PROVISIONS OF SECTION 2(1A) AND THUS THE SAME IS NOT EXIGIBLE TO TAX. IN SUPPORT OF THIS CONTENTION, THE LEARNED COUNSEL RELIED UPON THE FOLLOWING CASE LAWS: 1) ITAT ORDER IN ITA NO.362/JU/2010 IN THE CASE OF SMT . SUPRIYA KANWAR VIDE ORDER DATED 13/05/2014 2) (2001) 247 ITR 150(SC) SINGHAI RAKESH KUMAR V S. UNION OF INDIA & ORS. 3) (1981) 128 ITR 87(BOM.) MANUBHAI A. SHETH & O RS. V/S ITO. 6 M/S. RACHANA CONSTRUCTIONS 5. THE LEARNED COUNSEL FOR ASSESSEE FURTHER SUBMITTED THAT THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APP EALS) BOTH HAS REFERRED TO ENQUIRY MADE FROM NMC UNDER SECTION 133 (6) IN RESPECT TO DISTANCE FROM MUNICIPAL LIMITS. PERUSAL OF INQUIRY REPORT INDICATES THAT IT IS AERIAL DISTANCE AND NOT BY ROAD. IN VIEW DECI SION OF BOMBAY HIGH COURT IN THE CASE OF SHISHIR DIOTE IN ITA NO.122 OF 2013 JUDGMENT DATED 30 TH MARCH 2015 DISTANCE HAS TO BE MEASURED BY ROAD AND NOT AERIAL DISTANCE FOR THE YEAR UNDER CONSIDERATION. 6. LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, THE ADDIT ION HAS BEEN MADE UNDER THE HEAD CAPITAL GAIN IN RESPECT TO SURPLUS ARISING ON SALE OF AGRICULTURAL LAND WHICH WAS CLAIMED EXEMPT IN THE R ETURN OF INCOME. THE ASSESSING OFFICER HAS VERIFIED BY MAKING ENQUIR Y FROM NAGPUR IMPROVEMENT TRUST (NIT) BY ISSUE OF NOTICE UNDER SE CTION 133(6) AND CAME TO CONCLUSION THAT AGRICULTURAL LAND IS SITUAT ED AT 5.3KMS. (AERIAL DISTANCE AS PER CROW FLY METHOD) AND THUS SURPLUS A RISING ON SALE OF AGRICULTURAL LAND IS EXIGIBLE TO TAX AT THE HANDS O F ASSESSEE, AS IT IS CAPITAL ASSET UNDER SECTION 2(14) OF THE ACT. THE L EARNED COMMISSIONER (APPEALS) UPHELD THE ORDER OF THE ASSESSING OFFICER , AS IT WAS HELD BY THE ASSESSING OFFICER THAT THE DISTANCE OF LAND IN QUESTION IS TO BE 7 M/S. RACHANA CONSTRUCTIONS MEASURED NOT BY MOTORABLE ROAD BUT IN STRAIGHT LINE ON A HORIZONTAL PLANE. THE COORDINATE BENCH OF THE TRIBUNAL, NAGPUR , IN THE CASE OF SHRI NITESH P. CHORADIA, ITA NO.113/NAG./2012, HAS HELD AT PARA15 THAT HE DISTANCE OF 8 KMS. HAS TO BE MEASURED THRO UGH APPROACH ROAD AND NOT BY STRAIGHT LINE DISTANCE ON HORIZONTAL PLA NE OR CROWS FLIGHT. THE AFORESAID DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL, NAGPUR, HAS BEEN UPHELD BY HONBLE JURISDICTIONAL H IGH COURT IN ITA NO.12 OF 2013 VIDE JUDGMENT DATED 30 TH MARCH 2015. THE PROVISIONS OF SECTION 2(14) OF THE ACT, HAVE BEEN AMENDED FROM TH E ASSESSMENT YEAR 2014-15, WHEREIN IT IS PROVIDED THAT DISTANCE IS TO BE MEASURE AERIALLY. THIS AMENDMENT HAS BEEN NOTED BY THE HON BLE JURISDICTIONAL HIGH COURT AT PARA15 OF THE JUDGMENT AND THE SAME IS HELD TO BE APPLICABLE PROSPECTIVELY. THE CIRCULAR NO.3/240 DAT ED 24 TH JANUARY 2014 SHOWS THAT AMENDMENT IN THE DEFINITION OF CAPITAL ASSET WILL TAKE EFFECT PROSPECTIVELY. IN THE APPEAL UNDER CON SIDERATION IS FOR THE ASSESSMENT YEAR 2007-08 AND THUS, SUBSEQUENT AMENDM ENT MADE TO SECTION 2(14) OF THE ACT WILL NOT BE APPLICABLE. TH E NIT, IN REPLY TO ENQUIRIES MADE UNDER SECTION 133(6) OF THE ACT BY A SSESSING OFFICER, HAD GIVEN RESPONSE VIDE ITS COMMUNICATION DATED 24 TH NOVEMBER 2011, WHEREIN AERIAL DISTANCE IS SPECIFIED AT 5.30 KMS. FROM THE MUNICIPAL LIMITS OF NAGPUR. IT IS THIS CERTIFICATE WHICH IS CONSIDERED BY THE ASSESSING OFFICER ANT THE LEARNED COMMISSIONER (APPEALS) TO HOLD THAT AGRICULTURAL LAND OF ASSESSEE IS CAPITAL ASSET BEING LOCATED WITHIN 8 8 M/S. RACHANA CONSTRUCTIONS KMS. FROM MUNICIPAL LIMIT. THE CERTIFICATE ISSUED B Y TALATI DATED 12 TH SEPTEMBER 2008 AS REGARD TO DISTANCE BY APPROACH RO AD IS PLACED IN PAPER BOOK AT PAGE61 WHICH SHOWS THAT AGRICULTURAL LAND IS SITUATED BEYOND 8 KMS. FROM MUNICIPAL LIMITS OF NAGPUR. AS THE AGRICULTURAL LAND IS SITUATED BEYOND 8 KMS. FROM MUNICIPAL LIMIT S OF NAGPUR BY APPROACH ROAD THE AGRICULTURAL LAND SOLD BY ASSESSE E IS NOT CAPITAL ASSET UNDER SECTION 2(14) OF THE ACT. THUS, RESPECT FULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N ITA NO.120 OF 2012 IN CASE OF NITISH RAMESHCHANDRA CHORADIA (SUPRA) WH ICH SQUARELY APPLIES TO THE FACTS IN THE PRESENT CASE, WE HOLD T HAT PROFIT ON SALE OF AGRICULTURAL LAND SITUATED BEYOND 8 KMS. OF MUNICIP AL LIMIT AS PER APPROACH ROAD IS NOT EXIGIBLE TO TAX. IN CASE OF AS SESSEE, AGRICULTURAL LAND SOLD IS SITUATED BEYOND 8 KMS. OF MUNICIPAL C ORPORATION BY APPROACH ROAD AND IS NOT CAPITAL ASSET AS DEFINED U NDER SECTION 2(14) OF THE ACT, AS IS EVIDENT FROM CERTIFICATE ISSUED B Y TALATI. THE AGRICULTURAL LAND NOT BEING CAPITAL ASSET AND SURPL US ARISING ON SALE OF SAME IS NOT EXIGIBLE TO TAX. CONSIDERING THE TOTALI TY OF FACTS IN THE PRESENT CASE, WE HOLD THAT THE ADDITION MADE BY ASS ESSING OFFICER AT ` 71,88,520 IS IN RESPECT TO THE SURPLUS ARISING ON A GRICULTURAL LAND IS NOT EXIGIBLE TO TAX AND IS DIRECTED TO BE DELETED. THUS, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 9 M/S. RACHANA CONSTRUCTIONS 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.06.2017 SD/- P.K. BANSAL VICE PRESIDENT SD/- AMARJIT SINGH JUDICIAL MEMBER NAGPUR, DATED: 28.06.2017 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, NAGPUR CITY CONCERNED; (5) THE DR, ITAT, NAGPUR; (6) GUARD FILE. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, NAGPUR