Delhi High Court
Kailash Nath & Associates vs Principal Commissioner Of Income ... on 21 November, 2017
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 21.11.2017
+ ITA 1022/2017
KAILASH NATH & ASSOCIATES ..... Appellant
Through: None.
versus
PRINCIPAL COMMISSIONER OF INCOME TAX
..... Respondent
Through: None.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE SANJEEV SACHDEVA
S. RAVINDRA BHAT, J.
1. The assessee is aggrieved by an order of the Income Tax Appellate
Tribunal (ITAT, for short), which rejected its appeal. The assessing
officer (AO) rejected the assessee's plea that the land sold by it was
beyond the municipal limits and therefore not a "capital asset". The
Commissioner of Income tax (Appeals) (hereafter "CIT (A)") had granted
relief to the assessee; the ITAT restored the order of the AO.
2. The question urged by the assessee is whether in the circumstances
of the case, the agricultural land at Kundli village, an area comprised
within the jurisdiction of Sonipat Municipality and in an area beyond 8
Kms from local limits thereof can be held a capital asset, on the ground
that it was within 3 Kms from another Municipality.
3. The relevant facts are that on 29.12.2008 the assessment was made
under section 143(3) by the AO. The assessee's argument for exemption
of sale of agriculture receipts was rejected by the AO who ruled that
agricultural land was a capital asset under Section 2(14) of the Act, as it
was situated within 3 Kms from Delhi Municipal Limits, hence subjected
to capital gain under Section 45 of the Act. The CIT(A), on appeal by the
assessee cancelled the capital gain and held that the agricultural land was
within the jurisdiction of Sonipat Municipality and being situated beyond
8 KM from that municipal limit, it could not be a capital asset within the
meaning of section 2(14) of the Act. He held Delhi Municipality was a
jurisdictional municipality and had no relevance in this regard.
The assessee appealed; the ITAT set aside the order of the CIT(A) and
restored the order of the AO, holding that the land should be beyond 8
Kms from any municipality and not only from the jurisdictional
municipality. It followed the judgment of the Punjab and Haryana High
Court in Smt Anjana Sehgal (2013) 40 Taxmann.com 485(P&H).
4. It is argued by Mr. Sampath, that in determining what is capital
asset, Section 2(14) of the Act does not warrant the consideration of
distance limit from the local limits of a municipality other than the
jurisdictional municipality. It was argued that agriculture land beyond
8KM from the local limits jurisdictional municipality cannot be held to be
a capital asset under the Act.
5. The revenue argues that the provisions of the Income Tax Act
make clear that what is intended to be covered in the term
"capital asset" is agricultural land comprised within the local limits of
municipality or other local bodies as specified in the notification.
The omission of any reference to the city or area covered by the territorial
limits of a jurisdictional area, in this regard, is highlighted.
6. The provision in issue, Section 2 (14) reads as follows:
"Section 2 .....(14) " capital asset" means property of any
kind held by an assessee, whether or not connected with his
business or profession, but does not include-
(i) any stock- in- trade, consumable stores or raw
materials held for the purposes of his business or profession;
(ii) For personal effects, that is to say, movable property
(including wearing apparel and furniture, but excluding
jewellery) held for personal use by the assessee or any
member of his family dependent on him. Explanation.- For the
purposes of this sub- clause," jewellery" includes-
(a) ornaments made of gold, silver, platinum or any other
precious metal or any alloy containing one or more of such
precious metals, whether or not containing any precious or
semiprecious stone, and whether or not worked or sewn into
any wearing apparel;
(b) precious or semi- precious stones, whether or not set in
any furniture, utensil or other article or worked or sewn into
any wearing apparel;]
(iii) agricultural land in India, not being land situate-
(a) in any area which is comprised within the jurisdiction of a
municipality (whether known as a municipality, municipal
corporation, notified area committee, town area committee,
town committee, or by any other name) or a cantonment
board and which has a population of not less than ten
thousand according to the last preceding census of which the
relevant figures have been published before the first day of the
previous year; or
(b) in any area within such distance, not being more than
eight kilometres, from the local limits of any municipality or
cantonment board referred to in item (a), as the Central
Government may, having regard to the extent of, and scope
for, urbanisation of that area and other relevant
considerations, specify in this behalf by notification in the
Official Gazette;]..."
7. The assessee's constant argument in support of its appeal is that the
lands in question were within 8 kms from local limits of Municipal
Corporation of Delhi. It further argues that the lands are beyond 8
kilometres from the limits of jurisdiction of the corporation of Sonipat,
which is the jurisdictional municipality; consequently it should not be
treated as a capital asset.
8. The court does not agree with the assessee's argument. The words
of the statute are not that the limits of jurisdiction of a municipality are to
be determined with respect to the jurisdiction of authorities under the Act.
The phrase used with respect to location of an area, "in any area within
such distance, not being more than eight kilometres, from the local limits
of any municipality or cantonment board referred to in item (a)", are
neutral. The court should only examine whether the lands are in fact
situated within or outside any area within the prescribed distance, i.e. 8
kilometres. Having regard to this fact, the narrow and constricted
interpretation to the statute is unwarranted.
9. For the foregoing reasons, this court is of opinion that the findings
of the ITAT were justified in the facts and circumstances; no question of
law arises. The appeal is consequently dismissed.
S. RAVINDRA BHAT, J
SANJEEV SACHDEVA, J
NOVEMBER 21, 2017
