Commissioner Of Income Tax vs Sri Vijay Singh Kadan
2015 Latest Caselaw 6903 Del

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*      IN THE HIGH COURT OF DELHI AT NEW DELHI
26.
+                          ITA 714/2015
       COMMISSIONER OF INCOME TAX                             ..... Appellant
                           Through: Mr Rohit Madan and Mr Zoheb Hossain,
                           Standing Counsel.

                           versus

       SRI VIJAY SINGH KADAN                          ..... Respondent
                      Through: Mr Piyush Kaushik, Advocate.


       CORAM:
       HON'BLE DR. JUSTICE S.MURALIDHAR
       HON'BLE MR. JUSTICE VIBHU BAKHRU
                     ORDER

       %             14.09.2015

CM No.19310/2015

1. For the reasons stated in the application, the delay of 65 days in re-filing the

appeal is condoned.

2. The application stands disposed of.

ITA 714/2015

3. This is an appeal filed by the Revenue against the order dated 12 th

December, 2014 passed by the Income Tax Appellate Tribunal ('ITAT') in ITA

No.4733/Del/2011 for the Assessment Year ('AY') 2006-07.

4. During the course of the assessment proceedings, the Assessing Officer

('AO') noted that on 9th September, 2005, the Assessee had sold a property

admeasuring 5.9625 acres located at Village Ghata, Tehsil Sohna, District

Gurgaon. The stand of the Assessee was that the capital gain from the sale of

the said land is not taxable because the land was agricultural land which did not

fall within the definition of capital asset under Section 2(14) of the Act.

5. According to the Assessee, the land did not fall within a distance of 8 km

from the outer limit of the Gurgaon Municipality. The Assessee produced a

certificate of the patwari in terms of which "in the year 2006 Ghata Village

was approximately 9 Kms. away from Gurgaon Municipal Committee." The

Assessee also produced the certificates of two architects to the effect that the

distance between the land and the outer limits of Gurgaon municipality was

9.645 Kms. The AO, however, rejected the certificates produced by the

Assessee since the "scientific mode of determining the distance by a straight

line method has not been employed" by the said architects. The AO preferred

the certificate of the Tehsildar, Sohna District and of the Engineer of the

Gurgaon Municipal Corporation which stated that the distance was 6.6 Kms.

The AO interpreted the Circular of the CBDT which clarified that for the

purpose of Section 2(14)(iii)(b) of the Act, agricultural lands that would be

exempt from the definition of 'capital asset' were those that were located in

"areas upto a distance of 8 Kms from the municipal limits in all directions as

under:

"The language used in the notification of the CBDT which has been referred at Page 6 of this order, is "Areas upto a distance of 8 kms from the Municipal limits all direction" the meaning of the above terms is that the point from which the distance has to be measured is the point beginning with outer limit of the Municipality of Gurgaon to the land in question by adopting the straight line method, but not a zig-zag or circuitous method or even the distance by road. the PWD was of the view that the distance had to be calculated from the outer limit of Gurgaon municipality to Village Ghata where the land was located."

Accordingly, the AO held that as per Section 2(14)(iii)(b) of the Act, the

agricultural land sold by the Assessee was a capital asset. He accordingly made

an addition of Rs 7,75,12,500/- to the income of the Assessee as long term

capital gains.

6. The CIT (A) rejected the certificates relied upon by the AO and the

Assessee. He concluded that "the distance of agricultural land, in terms of

Section 2(14)(iii)(b) has to be measured along the road and not as per crow's

flight/ aerial distance." However, the CIT (A) observed that "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." The CIT (A) rejected the certificate furnished by the AO from the

Directorate of Survey (AIR) and the DGDC Data Centre, New Delhi and

concluded that the "shortest distance along the road from IFFCO Junction on

the Municipal boundary up to Northern outer limit of Ghata, the Village in

which the land is situated is 7.17 Kms. along the road." Consequently, the CIT

(A) affirmed the order of the AO that the land sold by the Assessee was a

capital asset.

7. Aggrieved by the said order of the CIT(A), the Assessee preferred an appeal

before the ITAT. The question that arose for consideration by the ITAT in the

Assessee's appeal was: "Whether distance up to the land should be considered

or up to the village within which such land is situated?" The ITAT referred to

Section 2(14)(iii)(b) and held:

"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."

8. The ITAT concluded that the land had to be within the distance of 8 Kms.

from the outer limit of the Gurgaon municipality and not from the outer limit of

the village Ghata in which the land was located. On the strength of the

certificate produced by the Assessee from the former Additional Director

General, CPWD that the distance of the land from the outer limit of the

Gurgaon Municipality was 10.4 Kms, the ITAT held that the land owned by the

Assessee did not fall within Clauses (a) or (b) of Section 2 (14) (iii).

9. In Commissioner of Income Tax v. Lal Singh 325 ITR 588 (P&H) a report

had been given by the Tehsildar measuring the distance of the land, with

reference to its khasra number, from the outer limit of the municipality. The

Punjab and Haryana High Court was of the view that there was no justification

for the AO ignoring the said report of the Tehsildar and going by the Report of

the Inspector in which neither had the khasra number been given nor had it

been explained how the distance was measured. In Commissioner of Income

Tax v. Nitish Rameshchandra Chordia (2015) 57 taxmann.com 394 (Bom)

the Bombay High Court held that "The distance between municipal limits and

assessed property/asset is to be measured having regard to the shortest road

distance and not as per the crow flies i.e. straight line distance as canvassed by

the Revenue." The Madhya Pradesh High Court in Commissioner of Income

Tax v. Shabbir Hussain Pithawala (2014) 226 Taxman 174 decided the

question likewise and held that the "distance of the agricultural land belonging

to the Assessee within the meaning of Section 2(14)(iii)(b) has to be

measured in terms of the approach road and not by the straight line distance on

horizontal plane or as per crow's flight."

10. The Court is of the view that for the purposes of Section 2 (14) (iii) (b) of

the Act, the distance had to be measured from the agricultural land in question

to the outer limit of the municipality by road and not by the straight line or the

aerial route. The distance has to be measured from the land in question itself

and not from the village in which the land is situated.

11. Consequently, this Court is of the view that the impugned order of the

ITAT suffers from no legal infirmity.

12. No substantial question of law arises. The appeal is dismissed.

S.MURALIDHAR, J

VIBHU BAKHRU, J SEPTEMBER 14, 2015 mk