ACIT, New Delhi V. Shri Randhir Singh Kadan, New Delhi

ITA 4733/DEL/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7588 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 25-11-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 31-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: V K AGGARWAL
• Keywords: Capital asset; Cost of acquisition; Capital receipt
• Section: 2(14); 56(2); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH F FF F : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND PRESIDENT AND PRESIDENT AND PRESIDENT AND SHRI SHRI SHRI SHRI H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU, JUDICIAL , JUDICIAL , JUDICIAL , JUDICIAL MEMBER MEMBER MEMBER MEMBER ITA NO ITA NO ITA NO ITA NO . .. . 4733/DEL/2011 4733/DEL/2011 4733/DEL/2011 4733/DEL/2011 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2006 2006 2006 2006 - -- - 07 0707 07 ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -41(1), 41(1), 41(1), 41(1), NEW DE NEW DE NEW DE NEW DELHI. LHI. LHI. LHI. VS. VS. VS. VS. SHRI VIJAY SINGH KADAN, SHRI VIJAY SINGH KADAN, SHRI VIJAY SINGH KADAN, SHRI VIJAY SINGH KADAN, LEGAL HEIR OF LATE SHRI RANDHIR LEGAL HEIR OF LATE SHRI RANDHIR LEGAL HEIR OF LATE SHRI RANDHIR LEGAL HEIR OF LATE SHRI RANDHIR SINGH KADAN, SINGH KADAN, SINGH KADAN, SINGH KADAN, 186, MUNIRKA VIHAR, 186, MUNIRKA VIHAR, 186, MUNIRKA VIHAR, 186, MUNIRKA VIHAR, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 067. 110 067. 110 067. 110 067. PAN : AGHPK3734A. PAN : AGHPK3734A. PAN : AGHPK3734A. PAN : AGHPK3734A. (APPELLANT) (RESPONDENT) ITA NO ITA NO ITA NO ITA NO .4603/DEL/2011 .4603/DEL/2011 .4603/DEL/2011 .4603/DEL/2011 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2006 2006 2006 2006 - -- - 07 0707 07 SHRI VIJAY SINGH KADAN, SHRI VIJAY SINGH KADAN, SHRI VIJAY SINGH KADAN, SHRI VIJAY SINGH KADAN, L LL LEGAL HEIR OF LATE SHRI EGAL HEIR OF LATE SHRI EGAL HEIR OF LATE SHRI EGAL HEIR OF LATE SHRI RANDHIR SINGH KADAN, RANDHIR SINGH KADAN, RANDHIR SINGH KADAN, RANDHIR SINGH KADAN, 186, MUNIRKA VIHAR, 186, MUNIRKA VIHAR, 186, MUNIRKA VIHAR, 186, MUNIRKA VIHAR, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 067. 110 067. 110 067. 110 067. PAN : AGHPK3734A. PAN : AGHPK3734A. PAN : AGHPK3734A. PAN : AGHPK3734A. VS. VS. VS. VS. ADDITIONAL COMMISSIONER OF ADDITIONAL COMMISSIONER OF ADDITIONAL COMMISSIONER OF ADDITIONAL COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, RANGE RANGE RANGE RANGE- -- -41, 41, 41, 41, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI VIKRAM SAHAY, SR.DR. ASS ESSEE BY : SHRI V.K. AGGARWAL, AR. ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP : :: : ITA NO.4603/DEL/2011 ITA NO.4603/DEL/2011 ITA NO.4603/DEL/2011 ITA NO.4603/DEL/2011 ASSESSEES APPEAL ASSESSEES APPEAL ASSESSEES APPEAL ASSESSEES APPEAL THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LEARNED CIT(A)-XXVII, NEW DELHI DATED 5 TH AUGUST, 2011 FOR THE AY 2006-07. 2. THOUGH THE ASSESSEE HAS RAISED AS MANY AS THIRTE EN 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 G AIN. THE FACTS OF THE ITA-4733 & 4603/D/2011 2 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 PROC EEDINGS, THE ASSESSING OFFICER NOTICED THAT ON 9.9.2005, THE ASS ESSEE HAD TRANSFERRED THE PROPERTY ADMEASURING 5.9625 ACRES A T 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 WITHI N THE DEFINITION OF CAPITAL ASSET UNDER SECTION 2(14). THE ASSESSEE HA D CLAIMED THAT THE LAND DOES NOT FALL WITHIN THE JURISDICTION OF THE M UNICIPALITY VIZ. SOHNA MUNICIPALITY. HE ALSO CLAIMED THAT THE DISTANCE OF THE LAND IS MORE THAN 8 KMS. FROM SOHNA MUNICIPALITY AND THEREFORE, THE ASSESSEES CASE DOES NOT FALL IN CLAUSE (A) OR (B) OF SECTION 2(14)(III). THE ASSESSING OFFICER WAS OF THE OPINION THAT THE DISTA NCE OF THE LAND IS TO BE CONSIDERED FROM THE OUTER LIMIT OF GURGAON MUNIC IPALITY AND NOT SOHNA MUNICIPALITY. IT WAS FURTHER CONTENDED BY TH E ASSESSEE THAT THE DISTANCE OF THE LAND FROM GURGAON MUNICIPALITY IS A LSO MORE THAN 8 KMS., IN SUPPORT OF WHICH, THE ASSESSEE PRODUCED TH E FOLLOWING LETTERS/CERTIFICATES:- 36. WHEREAS THE APPELLANT HAS RELIED ON THE FOLLOW ING LETTERS FROM THE VARIOUS AUTHORITIES- - CERTIFICATE DATED 22.12.2008 ISSUED BY PATWARI, T EHSIL 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, PROVI NCIAL 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 ITA-4733 & 4603/D/2011 3 ASSOCIATES, BOTH CERTIFYING IDENTICAL FIGURES OF DI STANCE BETWEEN VILLAGE GHATA BUS STAND TO THE LAND (1.48 K M), VILLAGE GHATA BUS STAND TO JHARSA CHOWK ON NH 8 (8.165) KM. 3. THE ASSESSING OFFICER, RELYING UPON THE FOLLOWIN G CERTIFICATES, HELD THAT THE DISTANCE OF THE LAND FROM THE OUTER L IMIT OF GURGAON MUNICIPAL CORPORATION IS 6.6 KMS. :- - CERTIFICATE DATED 10.11.2008 ISSUED BY EXECUTIVE ENGINEER, MUNICIPAL CORPORATION, GURGAON, WHEREIN I T WAS STATED THAT THE DISTANCE OF THE LAND FROM THE O UTER LIMITS OF MUNICIPAL CORPORATION, GURGAON WAS 6.6 KM S. - LETTER DATED 24.12.2008 ISSUED BY TEHSILDAR, VILL AGE SOHNA IN RESPONSE TO THE AO'S REFERENCE OF THE PATWARIS LETTER TO HIM WHICH WAS PRODUCED BY THE APPELLANT IN HIS SUPPORT, WHEREIN THE DISTANCE OF L AND WAS HELD TO BE 6.6 KMS. 4. THE ASSESSING OFFICER ALSO TOOK THE VIEW THAT FO R THE PURPOSE OF DETERMINING THE DISTANCE OF THE LAND FROM THE LIMIT OF MUNICIPAL CORPORATION, THE AERIAL DISTANCE IS TO BE CONSIDERE D. ACCORDINGLY, THE ASSESSING OFFICER HELD THAT AS PER CLAUSE (B) OF SE CTION 2(14)(III), THE AGRICULTURAL LAND SOLD BY THE ASSESSEE WAS A CAPITA L ASSET. HE, THEREFORE, MADE THE ADDITION OF `7,75,12,500/- AS L ONG TERM CAPITAL GAIN. ON APPEAL, LEARNED CIT(A) DID NOT ACCEPT THE ASSESSING OFFICERS VIEW THAT THE DISTANCE IS TO BE MEASURED AS PER AER IAL DISTANCE. HE ALSO REJECTED BOTH THE CERTIFICATES RELIED UPON BY THE ASSESSING OFFICER. THE RELEVANT FINDING OF THE CIT(A) IN THIS REGARD R EADS 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 RELEVAN T FOR THE PURPOSE OF THE ISSUE IN HAND AND ARE ACCORDINGL Y ITA-4733 & 4603/D/2011 4 REJECTED. IT MAY BE MENTIONED HERE THAT THE APPELL ANT 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 APPELLAT E PROCEEDINGS ESPECIALLY VIDE LETTER DATED 25.02.2011 . HOWEVER, THE SAME ARE NOT DISCUSSED HERE BECAUSE THESE CERTIFICATES HAVE ALREADY BEEN HELD AS IRRELE VANT FOR THE DECISION OF THE ISSUE BEING CONSIDERED HERE . 5. HE ALSO DID NOT ACCEPT ANY OF THE CERTIFICATES F URNISHED BY THE ASSESSEE. THE RELEVANT FINDING IN THIS REGARD READ S AS UNDER:- 38. WITH REGARD TO THE APPELLANTS RELIANCE ON THE PATWARIS (TEHSIL SOHNA) LETTER DATED 22.12.2008, I T 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 THA T IS RELEVANT FOR OUR PURPOSES IS FROM THE OUTER LIMIT O F THE GURGAON MUNICIPALITY. IN THIS LETTER THE DISTANCE MENTIONED IS FROM GURGAON MUNICIPALITY, NOT FROM AN Y SPECIFIC POINT FROM LOCAL LIMITS OF THE MUNICIPALIT Y. MOREOVER, THE DISTANCE MENTIONED IS ONLY APPROXIMAT E DISTANCE AND NOT EXACT DISTANCE. THEREFORE, THIS L ETTER IS NOT RELEVANT. AS FAR AS THE APPELLANTS RELIANC E ON THE SUB DIVISIONAL ENGINEER, PWD, GURGAONS LETTER DATE D 27.12.2008 IS CONCERNED, WHEREIN HE HAD STATED THAT THE DISTANCE TO BE 10.20 KMS, IT IS SEEN THAT THE L ETTER CANNOT BE RELIED UPON FOR THE REASON THAT THIS LETT ER 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 I N HIS LETTER DATED 30.12.2008 THAT THE DISTANCE FROM THE OUTER LIMIT OF GURGAON MUNICIPALITY CANNOT BE FURNI SHED AS THERE WERE NO RECORDS IN THEIR OFFICE OF THE MUN ICIPAL LIMIT. AS FAR TWO CERTIFICATES DATED 29.12.2008 FR OM SH. I.D. RASTOGI AND M/S CHOTTANI AND ASSOCIATES ARE CONCERNED BOTH THESE CERTIFICATES MENTION THE DISTA NCE OF VILLAGE GHATA BUS STAND FROM THE JHARSA CHOWK ON NH-8. THESE ARE NOT THE RELEVANT POINTS BETWEEN WH ICH 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 ITA-4733 & 4603/D/2011 5 CERTIFICATES ARE ALSO NO HELP FOR THE PRESENT PROCEEDINGS. 6. THEREAFTER, THE ASSESSEE FURNISHED BEFORE HIM ON E CERTIFICATE FROM PATWARI, TEHSIL SOHNA, DISTRICT GURGAON DATED 31 ST JANUARY, 2011 WHICH WAS COUNTERSIGNED BY THE TEHSILDAR AND OTHER ONE FROM ASSISTANT ENGINEER, MUNICIPALITY GURGAON DATED 22 ND FEBRUARY, 2011. THE ASSESSING OFFICER FILED A CERTIFICATE FROM OFFICER SURVEYOR ON BEHALF OF DIRECTORATE, SURVEY, AIR. THE CERTIFICATES FURNISH ED BY THE ASSESSEE WERE CONFRONTED TO THE ASSESSING OFFICER AND VICE-V ERSA. AFTER CONSIDERING ALL THESE NEW CERTIFICATES FURNISHED BE FORE HIM AS WELL AS THE COMMENTS OF THE ASSESSING OFFICER AND THE ASSES SEE, LEARNED CIT(A) REJECTED THE CERTIFICATES FURNISHED BY THE A SSESSEE ON THE GROUND THAT THE DISTANCE IS TO BE TAKEN FROM THE LO CAL 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 PATWA RI. HE ALSO REJECTED THE REPORT OF THE ASSISTANT ENGINEER ON THE GROUND THAT THE ASSISTANT ENGINEER DID NOT APPEAR BEFORE THE ASSESSING OFFICE R AND MOREOVER, IN THE CERTIFICATE, THE NAME OF THE ASSISTANT ENGINEER IS NOT MENTIONED. HE ACCEPTED THE CERTIFICATE FURNISHED BY THE ASSESS ING OFFICER WHICH WAS FROM DIRECTORATE OF SURVEY (AIR) AND DGDC DATA CENTER, NEW DELHI. ON THE BASIS OF THE ABOVE CERTIFICATE, HE C AME TO THE CONCLUSION THAT THE LAND SOLD BY THE ASSESSEE WAS A CAPITAL AS SET IN TERMS OF PROVISIONS OF SECTION 2(14)(III)(B) OF THE ACT. TH E ASSESSEE, AGGRIEVED WITH THE ORDER OF LEARNED CIT(A), IS IN APPEAL BEFO RE US. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D PERUSED RELEVANT MATERIAL PLACED BEFORE US. AFTER CONSIDER ING THE ARGUMENTS OF BOTH THE SIDES AND THE FACTS OF THE CASE, IN OUR OP INION, FOLLOWING FOUR ISSUES ARISE FOR DETERMINATION:- ITA-4733 & 4603/D/2011 6 (A) WHETHER THE DISTANCE OF THE LAND IS TO BE CONSIDERE D ONLY FROM SOHNA MUNICIPAL CORPORATION OR IT CAN BE CONSI DERED FROM ANY MUNICIPAL CORPORATION VIZ. GURGAON WHICH I S ADMITTEDLY NEARER TO THE LAND THAN SOHNA MUNICIPAL CORPORATION. (B) WHETHER THE DISTANCE IS TO BE CONSIDERED AS PER AER IAL DISTANCE OR AS PER ROAD DISTANCE. (C) WHETHER THE DISTANCE IS TO BE CONSIDERED FROM THE O UTER LIMIT OF THE MUNICIPAL CORPORATION UP TO THE LAND O R UP TO THE OUTER LIMIT OF THE VILLAGE IN WHICH SUCH LAND I S SITUATED. (D) IN THE LIGHT OF OUTCOME ON THE ABOVE THREE ISSUES I N (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 SID ES WITH REFERENCE TO ALL THE ABOVE FOUR ISSUES AND OUR OPIN ION WITH REGARD TO EACH OF THESE ISSUES IS AS UNDER. (A) WHETHER DISTANCE OF THE LAND IS TO BE CONSIDERE D FROM SOHNA MUNICIPAL CORPORATION OR GURGAON MUNICIPAL CORPORAT ION. 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 TH E RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIR ST DAY OF THE PREVIOUS YEAR]; OR ITA-4733 & 4603/D/2011 7 (B) IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MOR E THAN EIGHT KILOMETERS, FROM THE LOCAL 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, 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 CANT ONMENT BOARD WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAND. TH EREFORE, CLAUSE (A) OF SECTION 2(14)(III) IS NOT APPLICABLE. AS PER RE VENUE, CLAUSE (B) IS APPLICABLE WHILE, AS PER ASSESSEE, EVEN CLAUSE (B) IS NOT APPLICABLE. TO BUTTRESS HIS CLAIM, IT WAS THE CONTENTION OF THE AS SESSEE THAT THE DISTANCE OF THE LAND IS TO BE CONSIDERED FROM THE L OCAL LIMITS OF SOHNA MUNICIPALITY AND NOT GURGAON MUNICIPALITY BECAUSE T HE LAND IS WITHIN SOHNA TEHSIL. THIS CONTENTION OF THE ASSESSEE HAS NOT BEEN ACCEPTED BY EITHER OF THE LOWER AUTHORITIES. FROM A PLAIN R EADING OF CLAUSE (B) ALSO MAKES IT CLEAR THAT THIS CLAUSE WOULD BE APPLI CABLE WHERE THE LAND IS SITUATED IN ANY AREA WHICH IS NOT MORE THAN 8 KM S. 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. D ISTANCE OF THE LAND CAN BE CONSIDERED FROM THE LOCAL LIMITS OF ANY OF T HE MUNICIPALITIES. WHILE REJECTING THE ASSESSEES CLAIM, THE LEARNED C IT(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 T HAT WHAT IS INTENDED TO BE COVERED IN TERM CAPITAL ASS ET 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 WHIC H FALLS IN THE STATE OF HARYANA WHILE LAND IS IN THE STATE OF PUNJAB. THUS LAND IS URBAN LAND FOR THE PURPOSE OF ITA-4733 & 4603/D/2011 8 DEFINITION OF CAPITAL ASSET UNDER SECTION 2(14). CONCEPT OF MUNICIPALITY AS A UNIT OF STATE OR THE F ACT 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 AS SET OR NOT FOR THE PURPOSE OF TAXING CAPITAL GAIN. IF THE LAND IS ADJACENT TO A MUNICIPALITY AND IS URBAN LAND COV ERED UNDER SECTION 2(14), EVEN IF MUNICIPALITY AND THE L AND FALL IN DIFFERENT STATES, THE LAND WILL CONTINUE TO BE URBAN LAND. IF SUCH LAND IS EXCLUDED FROM THE DEFI NITION CAPITAL ASSET, PURPOSE OF STATUTORY SCHEME WILL N OT BE ACHIEVED. ACCORDINGLY, WE ANSWER SUBSTANTIAL QUEST IONS IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. 11. THUS, THEIR LORDSHIPS HAVE HELD THE LAND IN QUE STION 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 B E MEASURED FROM GURGAON MUNICIPAL CORPORATION FOR THE PURPOSE OF SE CTION 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 T HE DISTANCE IS TO BE MEASURED AS PER ROAD DISTANCE AND NOT AS PER AER IAL 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 C APITAL ASSET WHETHER DISTANCE NOTIFIED IN THE GAZETTE FRO M THE MUNICIPAL AREAS TO BE MEASURED BY APPROACH ROAD OR AS PER STRAIGHT LINE DISTANCE ON A HORIZONTAL PL ANE OR AS PER CROWS FLIGHT? TRIBUNAL HOLDS DISTANCE IS T O BE MEASURED IN TERMS OF ROAD DISTANCE HELD, SINCE THE ITA-4733 & 4603/D/2011 9 MUNICIPAL AREAS ARE NOTIFIED BASED ON URBANIZATION, SEC 2(14) IS VERY CLEAR THAT IT SHOULD BE MEASURED AS P ER ROAD DISTANCE NO INFIRMITY IN TRIBUNALS ORDER REVENUES APPEAL DISMISSED HELD A PERUSAL OF THE AFORESAID PROVISION SHOWS THAT CA PITAL ASSET WOULD NOT INCLUDE ANY AGRICULTURAL LAND WHIC H IS NOT SITUATED IN ANY AREA WITHIN SUCH DISTANCE AS MA Y BE SPECIFIED IN THIS BEHALF BY A NOTIFICATION IN THE O FFICIAL 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 O F THAT AREA AND OTHER RELEVANT CONSIDERATIONS. THE RECKONING OF URBANIZATION AS A FACTOR FOR PRESCRIBI NG THE DISTANCE IS OF SIGNIFICANCE WHICH WOULD YIELD TO TH E PRINCIPLE OF MEASURING DISTANCE IN TERMS OF APPROAC H ROAD RATHER THAN BY STRAIGHT LINE ON HORIZONTAL PLA NE. IF PRINCIPLE OF MEASUREMENT OF DISTANCE IS CONSIDERED STRAIGHT LINE DISTANCE ON HORIZONTAL PLANE OR AS PE R CROWS FLIGHT THEN IT WOULD HAVE NO RELATIONSHIP WI TH 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 NOTIFICAT ION NO.9447, DATED 6-1-1994 HAS BEEN ISSUED BY THE CENTRAL GOVERNMENT. IN RESPECT OF THE STATE OF PUN JAB, AT ITEM NO.18, THE SUB-DIVISION, KHANNA HAS BEEN LI STED AT SERIAL NO.19. IT HAS, INTER ALIA, BEEN SPECIFIE D THAT AREA UP TO 2 KMS. FROM THE MUNICIPAL LIMITS IN ALL DIRECTIONS HAS TO BE REGARDED OTHER THAN AGRICULTUR AL 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 O N HORIZONTAL PLANE OR AS PER CROWS FLIGHT BECAUSE AN Y MEASUREMENT BY CROWS 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 O F CONSISTENCY AS LAID DOWN IN RADHASOAMI SATSANG V. C IT [1992] 193 ITR 321 (SC) WE ARE OF THE VIEW THAT THE ITA-4733 & 4603/D/2011 10 OPINION EXPRESSED BY THE TRIBUNAL DOES NOT SUFFER F ROM 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 HONBLE APEX COURT OR ANY OTHER HIGH COURT IS BROUG HT TO OUR KNOWLEDGE. THE CIT(A) HAS REJECTED THE ASSESSING O FFICERS VIEW THAT THE DISTANCE UP TO THE LAND IS TO BE MEASURED BY AE RIAL DISTANCE OR AS PER CROWS FLIGHT. THE REVENUE IS IN APPEAL AGAINS T THE ORDER OF LEARNED CIT(A) ON SOME OTHER GROUND BUT THIS FINDIN G OF THE CIT(A) HAS NOT BEEN CHALLENGED IN THE APPEAL FILED BY THE REVE NUE. MOREOVER, THE ISSUE IS COVERED BY THE DECISION OF HON'BLE JURISDI CTIONAL HIGH COURT WHICH IS BINDING ON THE LOWER AUTHORITIES WITHIN TH E JURISDICTION OF THE HIGH COURT. WE, THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT, HOLD THAT THE DI STANCE OF THE LAND IS TO BE MEASURED AS PER ROAD DISTANCE AND NOT AERIAL DISTANCE AS PER CROWS FLIGHT. (C) WHETHER DISTANCE UP TO THE LAND SHOULD BE CONSI DERED 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 HA S SUGGESTED THAT THE DISTANCE IS TO BE TAKEN FROM THE LOCAL LIMITS O F THE MUNICIPAL CORPORATION TO THE AREA IN WHICH LAND IS SITUATED A ND NOT UP TO THE LAND AS MENTIONED IN THE REPORT OF THE PATWARI. THIS CO NTENTION OF THE ASSESSING OFFICER IS ACCEPTED BY THE LEARNED CIT(A) WHICH IS EVIDENT FROM PARAGRAPH 47 OF HIS ORDER WHICH IS REPRODUCED BELOW:- ITA-4733 & 4603/D/2011 11 47. THE CONTENTS OF THE LETTER AND AO'S OBJECTIONS TO THE SAME HAVE BEEN CAREFULLY CONSIDERED. AS ALREAD Y HELD ABOVE, THE DISTANCE IS TO BE TAKEN FROM THE LO CAL LIMITS FROM THE MUNICIPAL CORPORATION TO THE AREA IN WHICH THE LAND IS SITUATED AND NOT UP TO THE LAND A S 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 T HE ASSISTANT ENGINEER IS MENTIONED WHO HAS ISSUED THIS REPORT. A LETTER WAS WRITTEN BY THE A.O. TO ASSIST ANT 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 NO T BEYOND DOUBT. MOREOVER, FROM THE LETTER IT IS NOT CLEAR B Y WHICH ROAD AND FROM WHICH POINT THE DISTANCE OF 9.94 KM H AS BEEN MEASURED. THEREFORE, THIS LETTER FILED BY THE APPELLANT ALSO CANNOT BE RELIED UPON. 15. LEARNED CIT(A), IN PARAGRAPH 34 ALSO, HAS RECOR DED 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 O F THE AO AND THE SUBMISSIONS OF THE APPELLANT ON THE ISSU E. THE FACTS OF THE JUDGMENT RELIED UPON BY THE APPELL ANT ARE DIFFERENT IN AS MUCH AS THE ISSUE BEFORE THE HO NBLE HIGH COURT WAS WHETHER THE CIT(A) AND THE ITAT HAD CORRECTLY RELIED UPON THE REPORT OF THE TEHSILDAR A S 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 W AS NOT BEFORE HONBLE 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 B EING 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 DISTAN CE IS TO BE MEASURED FROM LOCAL LIMITS OF THE MUNICIPALIT Y TO THE AREA IN WHICH THE LAND IS SITUATED. THEREFORE, IT IS HELD THAT THE DISTANCE IS TO BE MEASURED FROM THE L OCAL LIMITS OF THE MUNICIPALITY TO THE AREA IN WHICH THE LAND IS SITUATED. ITA-4733 & 4603/D/2011 12 16. AT THE TIME OF HEARING BEFORE US, THE LEARNED C OUNSEL FOR THE ASSESSEE REFERRED TO THE PROVISIONS OF SECTION 2(14 )(III)(B) AND CLAIMED THAT IN ANY AREA WITHIN SUCH DISTANCE NOT BEING MO RE THAN 8 KMS. FROM THE LOCAL LIMIT OF ANY MUNICIPALITY WOULD MEAN THA T 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 P RESENTATION SHOWING THE AREA OF THE MUNICIPALITY, THE CIRCUMFERENCE OF 8 KMS. FROM THAT AREA AND THE VARIOUS SITUATIONS IN WHICH WHETHER TH E LAND IS WITHIN THE AREA OF 8 KMS. FROM THE LIMITS OF THE MUNICIPAL COR PORATION. THE GRAPHICAL PRESENTATION PRODUCED BY THE ASSESSEE IS ANNEXED AS ANNEXURE ANNEXURE ANNEXURE ANNEXURE- -- -A AA A . HE ALSO RELIED UPON THE DECISION OF HON'BLE JURI SDICTIONAL 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 MEA SURED 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 CERTIFI CATE FROM THE TEHSILDAR TO THE EFFECT THAT THE LAND WHICH THE ASS ESSEE HAD SOLD SITUATED BEYOND 8 KMS. FROM GURGAON MUNICIPAL LIMIT S. THE ASSESSING OFFICER DID NOT ACCEPT THE REPORT OF THE TEHSILDAR AND INSTEAD RELIED UPON THE REPORT OF THE INSPECTOR REJECTED THE ASSES SEES CLAIM. ON APPEAL, LEARNED CIT(A) AS WELL AS ITAT ACCEPTED THE CERTIFICATE FROM THE TEHSILDAR. THE APPEAL BY THE REVENUE TO THE HIGH C OURT WAS DISMISSED AND THEIR LORDSHIPS HELD AS UNDER:- HELD, DISMISSING THE APPEAL, THAT THE COMMISSIONER (APPEALS) HAD RIGHTLY NOT ACCEPTED THE REPORT OF TH E INSPECTOR. IN THE REPORT, NEITHER THE KHASRA NUMBE R 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 DISCA RDED. ITA-4733 & 4603/D/2011 13 17. THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO R ELIED UPON THE DECISION OF THE ITAT, AMRITSAR BENCH IN ITO VS. RAN JIT RATTAN MEHRA (HUF) VIDE ITA NO.442/ASR/2011, WHEREIN THE ITAT HE LD AS UNDER:- THEREFORE, NO NEW FACTS ARE EMERGING AND THE EARLI ER DISTANCE CERTIFICATE OF THE DISTT. TOWN PLANNER, GU RGAON ALSO DOES NOT SERVE ANY PURPOSE AS THE SAME IS DESCRIBING THE MEASUREMENT FROM THE VILLAGE FAZILPU R JHARSA TO THE GURGAON MUNICIPAL COMMITTEE LIMITS AN D NOT FROM THE POINT OF LIMITATION OF ASSESSEES LAND TO THE GURGAON MUNICIPAL LIMITS. THE ASSESSEES EVIDENCE IS WELL MORE RELEVANT AND SPECIFIC TO THE POINT OF ACT UAL 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 THA T 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 A SSESSING OFFICER HAS RELIED UPON THE CERTIFICATE OF DIRECTORATE OF S URVEY (AIR) WHO HAD MEASURED THE DISTANCE FROM THE MUNICIPAL BOUNDARY O F GURGAON TO THE OUTER LIMIT OF GHATA VILLAGE WITHIN WHICH THE LAND IS SITUATED. THAT THE LAND OF THE ASSESSEE IS SITUATED WITHIN GHATA VILLA GE AND, THEREFORE, LEARNED CIT(A) RIGHTLY ACCEPTED THE VIEWS OF THE AS SESSING 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 SID ES 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, T HE LAND SHOULD BE WITHIN THE AREA WHOSE DISTANCE IS NOT MORE THAN 8 K MS. THERE IS NO MENTION THAT IF THE LAND IS IN ANY PARTICULAR VILLA GE, THEN THE DISTANCE OF ITA-4733 & 4603/D/2011 14 8 KMS. IS TO BE CONSIDERED FROM THE OUTER LIMIT OF THE VILLAGE. AREA WORD HAS NOT BEEN DEFINED IN THE INCOME-TAX ACT. D ICTIONARY MEANING OF THE WORD AREA AS PER WEBSTERS COMPREHENSIVE D ICTIONARY IS ANY OPEN SPACE, TRACT OR PORTION OF THE EARTHS SURFACE , REGION, SUPERFICIAL EXTENT, TOTAL OUTSIDE SURFACE. THUS, THE AREA ON LY MEANS ANY OPEN SPACE OR PORTION OF EARTHS SURFACE. THE PRESUMPTI ON 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, TH E CORRECT INTERPRETATION OF THE WORD IN ANY AREA WITHIN SUCH DISTANCE NOT B EING MORE THAN 8 KMS. FROM THE LOCAL LIMITS OF ANY MUNICIPALITY WOU LD 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 M UNICIPALITY WHICH IS MARKED AS CIRCLE-1 AND THE OTHER IS A BIG CIRCLE WH ICH 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 WITHI N 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 FRO M GURGAON MUNICIPALITY. 20. IN ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS GIVEN FOUR CERTIFICATES I.E., FROM PAT WARI, TEHSIL SOHNA, FROM THE SDO, GURGAON AND FROM TWO EXPERTS VIZ., SH RI I.D. RUSTOGI AND M/S CHOTANI & ASSOCIATES. THE ASSESSING OFFICER HA D REJECTED ALL THESE CERTIFICATES AND LEARNED CIT(A) HAD ALSO AGREED WIT H THE FINDING OF THE ASSESSING OFFICER IN THIS REGARD. THE ASSESSING OF FICER HAS RELIED UPON ITA-4733 & 4603/D/2011 15 TWO CERTIFICATES, ONE FROM EXECUTIVE ENGINEER, MUNI CIPAL CORPORATION, GURGAON AND OTHER FROM TEHSILDAR, VILLAGE SOHNA. D URING APPELLATE PROCEEDINGS, THE ASSESSEE PRODUCED TWO MORE CERTIFI CATES, ONE FROM PATWARI, TEHSIL SOHNA COUNTERSIGNED BY TEHSILDAR AN D THE OTHER FROM ASSISTANT ENGINEER, MUNICIPAL CORPORATION, GURGAON. THE ASSESSING OFFICER ALSO FILED A CERTIFICATE FROM SURVEYOR ON B EHALF OF DIRECTORATE OF SURVEY (AIR). THE CIT(A) FINALLY DECIDED THE ISSUE IN FAVOUR OF THE REVENUE RELYING UPON THE CERTIFICATE FROM THE SURVE YOR ON BEHALF OF DIRECTORATE SURVEY (AIR). IT WOULD BE RELEVANT TO REPRODUCE PARAGRAPH 48 OF THE CIT(A)S ORDER WHEREIN HE HAS DISCUSSED T HIS 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 CONTENT S 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 MA P 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 LIM IT 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. ITA-4733 & 4603/D/2011 16 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 TH E OFFICER SURVEYOR THAT HE HAS MEASURED THE DISTANCE FROM THE OUTER LI MIT OF GURGAON MUNICIPAL BOUNDARY TO THE OUTER LIMIT OF GHATA VILL AGE. THUS, THE DISTANCE IS NOT MEASURED UP TO THE LAND BUT UP TO T HE GHATA VILLAGE. MOREOVER, THE DISTANCE HAS NOT BEEN MEASURED BY ACT UAL PHYSICAL VERIFICATION BUT ON THE BASIS OF DIGITAL METHOD FRO M SURVEY MAP. WHILE DISCUSSING ISSUE (C), WE HAVE ALREADY MENTIONED THA T THE DISTANCE IS TO BE MEASURED FROM THE LAND AND NOT FROM THE LIMITS O F 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. THEREFOR E, IN OUR OPINION, THIS CERTIFICATE CANNOT BE RELIED UPON TO ADJUDICAT E THE DISTANCE OF THE LAND FROM OUTER LIMIT OF GURGAON MUNICIPAL BOUNDARY . 22. THE ASSESSEE HAS PRODUCED THE CERTIFICATE DATED 31 ST JANUARY, 2011 FROM TEHSILDAR, SOHNA IN WHICH THE DISTANCE OF THE LAND FROM RAJEEV CHOWK, GURGAON, I.E., THE OUTER LIMIT OF GUR GAON MUNICIPAL AREA IS CERTIFIED TO BE APPROXIMATELY 9 KMS. BY ROAD. C OPY OF THE CERTIFICATE IS AT PAGE 88 OF THE ASSESSEES PAPER BOOK. DURING REMAND PROCEEDINGS, THE ASSESSING OFFICER SUMMONED THE TEH SILDAR, SHRI SUNDER SINGH AND RECORDED HIS STATEMENT ON 24 TH MARCH, 2011. IN QUESTION NO.4, THE ASSESSING OFFICER ASKED SHRI SUN DER SINGH THE BASIS OF HIS CERTIFICATE IN WHICH HE HAS CERTIFIED THE DI STANCE OF THE LAND TO BE 9 KMS. HE STATED THAT FROM RAJEEV CHOWK COMMITTEE A REA, WHICH IS THE OUTER LIMIT OF GURGAON MUNICIPAL CORPORATION, HE TR AVELLED BY HIS BIKE UP TO THE LAND OF THE APPLICANT VIZ. SHRI R.S. KADA N AND FOUND THAT THE DISTANCE OF THE LAND WAS 9 KMS. LEARNED CIT(A) REJE CTED THE CERTIFICATE ITA-4733 & 4603/D/2011 17 OF THE TEHSILDAR ON THE GROUND THAT HE HAS TAKEN TH E DISTANCE UP TO THE LAND AND NOT UP TO THE AREA. WE HAVE ALREADY DECID ED 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 D ISCARD THE CERTIFICATE OF THE TEHSILDAR. THE ASSESSING OFFICE R HAD EXAMINED THE TEHSILDAR ON OATH IN WHICH HE REITERATED THAT THE D ISTANCE 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 W AS NO JUSTIFICATION FOR REJECTING THE CERTIFICATE OF THE TEHSILDAR. 23. THAT THE ASSISTANT ENGINEER, MUNICIPAL CORPORAT ION, GURGAON HAS CERTIFIED THE DISTANCE OF THE LAND AT 9.94 KMS. TH E COPY OF HIS CERTIFICATE IS AT PAGE 90 OF THE ASSESSEES PAPER B OOK 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 O UTER BOUNDARY OF THE EAST WHILE MUNICIPAL COUNCIL IS 9.9 4 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 ITA-4733 & 4603/D/2011 18 MUNICIPAL CORPORATION, GURGAON. 24. LEARNED CIT(A) REJECTED THE ABOVE CERTIFICATE O F THE ASSISTANT ENGINEER ON THE GROUND THAT IN RESPONSE TO THE SUMM ONS ISSUED BY THE ASSESSING OFFICER, THE ASSISTANT ENGINEER DID NOT T URN UP. IN OUR OPINION, MERELY BECAUSE THE ASSISTANT ENGINEER DID NOT TURN UP IN RESPONSE TO NOTICE ISSUED UNDER SECTION 131, THAT C ANNOT BE A GROUND FOR REJECTING THE CERTIFICATE. HIS NON-APPEARANCE IS NOT THE FAULT OF THE ASSESSEE. THE ASSESSING OFFICER HAD ENOUGH POWER T O 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 W HO 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 COUPLE D WITH HIS STATEMENT BEFORE THE ASSESSING OFFICER, CERTIFICATE OF THE AS SISTANT ENGINEER, GURGAON MUNICIPAL CORPORATION AND THE CERTIFICATE F ROM SHRI I.D. RUSTOGI, FORMER ADDITIONAL DIRECTOR GENERAL, CPWD, IN OUR OPINION, THE DISTANCE OF THE LAND FROM GURGAON MUNICIPAL CORPORA TION 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 E ITHER CLAUSE (A) OR (B) OF SECTION 2(14)(III). WE, THEREFORE, HOLD THAT TH E LAND SOLD BY THE ASSESSEE WAS AGRICULTURAL LAND AND THEREFORE, OUT O F THE PURVIEW OF CAPITAL ASSET, HENCE, NOT CHARGEABLE TO CAPITAL GAI N TAX. ITA NO.4733/DEL/2011 ITA NO.4733/DEL/2011 ITA NO.4733/DEL/2011 ITA NO.4733/DEL/2011 REVENUES APPEAL REVENUES APPEAL REVENUES APPEAL REVENUES APPEAL - -- - 26. THE ONLY GROUND RAISED IN THIS APPEAL BY THE RE VENUE READS AS UNDER:- ITA-4733 & 4603/D/2011 19 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 ACCO UNT OF AMOUNT FORFEITED (BALANCE) OUT OF ADVANCE MONEY RECEIVED UNDER FORFEITURE CLAUSE, MADE BY THE AO UN DER THE HEAD INCOME FROM OTHER SOURCES WITHOUT CONSIDERING THE FACT THAT THIS AMOUNT REMAINED TO B E ADJUSTED AGAINST THE COST OF ACQUISITION OF THE ASS ET. 27. THE ASSESSING OFFICER MADE THE ADDITION WITH TH E FOLLOWING FINDING:- 6.1 AS MENTIONED EARLIER, THE ASSESSEE HAS FORFEIT ED 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 PROSPEC TIVE VENDEE, THE ASSESSEE RESORTED TO THE FORFEITURE CLA USE IN THE AGREEMENT AND FORFEITED THE ENTIRE ADVANCE MONEY. APPLYING THE PROVISIONS OF SECTION 51 OF TH E IT ACT, THE ADVANCE MONEY OF RS.77,51,000/- HAS ALREAD Y BEEN REDUCED FROM THE INDEXED COST OF THE VALUE OF THE SAME LAND (RS.49,84,984/-) SOLD SUBSEQUENTLY TO ACT IVE PROMOTERS PVT.LTD. HOWEVER, THERE IS STILL A BALAN CE OF RS.27,66,016/- (RS.77,51,000 RS.49,84,984) LEFT WI TH THE ASSESSEE, WHICH RETAINS THE CHARACTER OF INCOME . 28. LEARNED CIT(A) DELETED THE ADDITION ON THE GROU ND THAT BALANCE AMOUNT OF THE FORFEITED ADVANCE WAS IN THE NATURE O F CAPITAL RECEIPT AND CANNOT BE BROUGHT TO TAX AS INCOME FROM OTHER S OURCES. 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 A ND PERUSED RELEVANT MATERIAL PLACED BEFORE US. IT HAS BEEN BR OUGHT TO OUR KNOWLEDGE BY THE LEARNED COUNSEL THAT THE FINANCE N O.2 ACT, 2014 HAS ITA-4733 & 4603/D/2011 20 INSERTED CLAUSE (IX) OF SECTION 56(2) WITH EFFECT F ROM 1.4.2015 WHICH READS AS UNDER:- (IX) ANY SUM OF MONEY RECEIVED AS AN ADVANCE OR OTHERWISE IN THE COURSE OF NEGOTIATIONS FOR TRANSFE R OF A CAPITAL ASSET, IF, - (A) SUCH SUM IS FORFEITED; AND (B) THE NEGOTIATIONS DO NOT RESULT IN TRANSFER OF S UCH CAPITAL ASSET. 30. HE, THEREFORE, POINTED OUT THAT THE ADVANCE REC EIVED IN THE COURSE OF NEGOTIATIONS FOR TRANSFER OF CAPITAL ASSE T WOULD BE TAXABLE ONLY AFTER 1.4.2015 AND NOT EARLIER. THE ASSESSMEN T YEAR UNDER CONSIDERATION IS 2006-07 WHEN THERE WAS NO SUCH CLA USE UNDER SECTION 56. AT THE RELEVANT TIME, SECTION 51 WAS IN EXISTE NCE 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 TRANSF ER, 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 MARK ET VALUE, AS THE CASE MAY BE, IN COMPUTING THE COST OF ACQUISITION. 31. THUS, AS PER SECTION 51, ANY ADVANCE RECEIVED A ND FORFEITED BY THE ASSESSEE IN RESPECT OF ANY NEGOTIATIONS FOR TRA NSFER OF CAPITAL ASSET IS TO BE DEDUCTED FROM THE COST OF THE ASSET, THE A SSESSING OFFICER IS AWARE OF THIS PROVISION AND AFTER APPLYING THIS PRO VISION, HE HAS NOTED THAT SINCE THE AMOUNT OF FORFEITURE EXCEEDS THE COS T OF THE ASSET, HE TREATED THE BALANCE SUM AS INCOME FROM OTHER SOURCE S. 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 FORFEITUR E OF ADVANCE RECEIVED DURING THE COURSE OF NEGOTIATIONS OF A TRA NSFER OF A CAPITAL ITA-4733 & 4603/D/2011 21 ASSET AS INCOME FROM OTHER SOURCES. THE PROVISION HAS COME INTO EFFECT WITH EFFECT FROM 1.4.2015 ONLY. WE, THEREFO RE, DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF LEARNE D CIT(A) IN THIS REGARD. THE SAME IS SUSTAINED. 32. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED WHILE THE APPEAL OF THE REVENUE IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 12 TH DECEMBER, 2014. SD/- SD/- ( (( ( H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU ) )) ) (G.D. AGRAWAL (G.D. AGRAWAL (G.D. AGRAWAL (G.D. AGRAWAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 12.12.2014 VK. COPY FORWARDED TO: - 1. APPELLANT : ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -41(1), NEW DELHI. 41(1), NEW DELHI. 41(1), NEW DELHI. 41(1), NEW DELHI. 2. RESPONDENT : SHRI VIJAY SINGH KADAN, SHRI VIJAY SINGH KADAN, SHRI VIJAY SINGH KADAN, SHRI VIJAY SINGH KADAN, LEGAL HEIR OF LATE SHRI RANDHIR SINGH KADAN, LEGAL HEIR OF LATE SHRI RANDHIR SINGH KADAN, LEGAL HEIR OF LATE SHRI RANDHIR SINGH KADAN, LEGAL HEIR OF LATE SHRI RANDHIR SINGH KADAN, 186, MUNIRKA VIHAR, NEW DELHI 186, MUNIRKA VIHAR, NEW DELHI 186, MUNIRKA VIHAR, NEW DELHI 186, MUNIRKA VIHAR, NEW DELHI 110 067. 110 067. 110 067. 110 067. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR .....ANNEXURE-A/.. ITA-4733 & 4603/D/2011 22