Income Tax Appellate Tribunal - Delhi
Randhir Singh Kadan, New Delhi vs Department Of Income Tax on 12 December, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'F
'F' : NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND
SHRI H.S. SIDHU,
SIDHU, JUDICIAL MEMBER
ITA No.
No.4733/Del/2011
Assessment Year : 2006-
2006-07
Assistant Commissioner of Vs. Shri Vijay Singh Kadan,
Income Tax, Legal Heir of Late Shri Randhir
Circle-
Circle-41(1), Singh Kadan,
New Delhi.
Delhi. 186, Munirka Vihar,
New Delhi - 110 067.
PAN : AGHPK3734A.
(Appellant) (Respondent)
ITA No.4603/Del/2011
No.4603/Del/2011
Assessment Year : 2006-
2006-07
Shri Vijay Singh Kadan, Vs. Additional Commissioner of
Legal Heir of Late Shri Income Tax,
Randhir Singh Kadan, Range-
Range-41,
186, Munirka Vihar, New Delhi.
New Delhi - 110 067.
PAN : AGHPK3734A.
(Appellant) (Respondent)
Department by : Shri Vikram Sahay, Sr.DR.
Assessee by : Shri V.K. Aggarwal, AR.
ORDER
PER G.D. AGRAWAL, VP :
ITA No.4603/Del/2011 - Assessee's appeal -This appeal by the assessee is directed against the order of learned CIT(A)-XXVII, New Delhi dated 5th August, 2011 for the AY 2006-07.
2. Though the assessee has raised as many as thirteen 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 gain. The facts of the 2 ITA-4733 & 4603/D/2011 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 proceedings, the Assessing Officer noticed that on 9.9.2005, the assessee had transferred the property admeasuring 5.9625 acres at 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 within the definition of capital asset under Section 2(14). The assessee had claimed that the land does not fall within the jurisdiction of the municipality viz. Sohna Municipality. He also claimed that the distance of the land is more than 8 Kms. from Sohna Municipality and therefore, the assessee's case does not fall in clause (a) or (b) of Section 2(14)(iii). The Assessing Officer was of the opinion that the distance of the land is to be considered from the outer limit of Gurgaon municipality and not Sohna municipality. It was further contended by the assessee that the distance of the land from Gurgaon municipality is also more than 8 Kms., in support of which, the assessee produced the following letters/certificates:-
"36. Whereas the appellant has relied on the following letters from the various authorities-
- Certificate dated 22.12.2008 issued by Patwari, Tehsil 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, Provincial 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
3 ITA-4733 & 4603/D/2011 Associates, both certifying identical figures of distance between village Ghata Bus Stand to the land (1.48 Km), Village Ghata Bus Stand to Jharsa Chowk on NH 8 (8.165) Km."
3. The Assessing Officer, relying upon the following certificates, held that the distance of the land from the outer limit of Gurgaon Municipal Corporation is 6.6 Kms. :-
"- Certificate dated 10.11.2008 issued by Executive Engineer, Municipal Corporation, Gurgaon, wherein it was stated that the distance of the land from the outer limits of Municipal Corporation, Gurgaon was 6.6 Kms.
- Letter dated 24.12.2008 issued by Tehsildar, Village Sohna in response to the AO's reference of the Patwari's letter to him which was produced by the appellant in his support, wherein the distance of land was held to be 6.6 Kms."
4. The Assessing Officer also took the view that for the purpose of determining the distance of the land from the limit of municipal corporation, the aerial distance is to be considered. Accordingly, the Assessing Officer held that as per clause (b) of Section 2(14)(iii), the agricultural land sold by the assessee was a capital asset. He, therefore, made the addition of `7,75,12,500/- as long term capital gain. On appeal, learned CIT(A) did not accept the Assessing Officer's view that the distance is to be measured as per aerial distance. He also rejected both the certificates relied upon by the Assessing Officer. The relevant finding of the CIT(A) in this regard reads 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 relevant for the purpose of the issue in hand and are accordingly 4 ITA-4733 & 4603/D/2011 rejected. It may be mentioned here that the appellant 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 appellate proceedings especially vide letter dated 25.02.2011. However, the same are not discussed here because these certificates have already been held as irrelevant for the decision of the issue being considered here."
5. He also did not accept any of the certificates furnished by the assessee. The relevant finding in this regard reads as under:-
"38. With regard to the appellant's reliance on the Patwari's (Tehsil Sohna) letter dated 22.12.2008, it 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 that is relevant for our purposes is from the outer limit of the Gurgaon Municipality. In this letter the distance mentioned is from Gurgaon Municipality, not from any specific point from local limits of the Municipality. Moreover, the distance mentioned is only approximate distance and not exact distance. Therefore, this letter is not relevant. As far as the appellant's reliance on the Sub Divisional Engineer, PWD, Gurgaon's letter dated 27.12.2008 is concerned, wherein he had stated that the distance to be 10.20 Kms, it is seen that the letter cannot be relied upon for the reason that this letter 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 in his letter dated 30.12.2008 that the distance from the outer limit of Gurgaon Municipality cannot be furnished as there were no records in their office of the Municipal limit. As far two certificates dated 29.12.2008 from Sh. I.D. Rastogi and M/s Chottani and Associates are concerned both these certificates mention the distance of village Ghata Bus Stand from the Jharsa Chowk on NH-8. These are not the relevant points between which 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 5 ITA-4733 & 4603/D/2011 certificates are also no help for the present proceedings."
6. Thereafter, the assessee furnished before him one certificate from Patwari, Tehsil Sohna, District Gurgaon dated 31st January, 2011 which was countersigned by the Tehsildar and other one from Assistant Engineer, Municipality Gurgaon dated 22nd February, 2011. The Assessing Officer filed a certificate from Officer Surveyor on behalf of Directorate, Survey, Air. The certificates furnished by the assessee were confronted to the Assessing Officer and vice-versa. After considering all these new certificates furnished before him as well as the comments of the Assessing Officer and the assessee, learned CIT(A) rejected the certificates furnished by the assessee on the ground that the distance is to be taken from the local 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 Patwari. He also rejected the report of the Assistant Engineer on the ground that the Assistant Engineer did not appear before the Assessing Officer and moreover, in the certificate, the name of the Assistant Engineer is not mentioned. He accepted the certificate furnished by the Assessing Officer which was from Directorate of Survey (Air) and DGDC Data Center, New Delhi. On the basis of the above certificate, he came to the conclusion that the land sold by the assessee was a capital asset in terms of provisions of Section 2(14)(iii)(b) of the Act. The assessee, aggrieved with the order of learned CIT(A), is in appeal before us.
7. We have heard the arguments of both the sides and perused relevant material placed before us. After considering the arguments of both the sides and the facts of the case, in our opinion, following four issues arise for determination:-
6 ITA-4733 & 4603/D/2011 (A) Whether the distance of the land is to be considered only from Sohna Municipal Corporation or it can be considered from any municipal corporation viz. Gurgaon which is admittedly nearer to the land than Sohna Municipal Corporation.
(B) Whether the distance is to be considered as per aerial distance or as per road distance.
(C) Whether the distance is to be considered from the outer limit of the municipal corporation up to the land or up to the outer limit of the village in which such land is situated. (D) In the light of outcome on the above three issues in (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 sides with reference to all the above four issues and our opinion with regard to each of these issues is as under.
(A) Whether distance of the land is to be considered from Sohna Municipal Corporation or Gurgaon Municipal Corporation.
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 the relevant figures have been published before the first day of the previous year]; or 7 ITA-4733 & 4603/D/2011
(b) in any area within such distance, not being more than eight kilometers, 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, 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 cantonment board which has a population of not less than ten thousand. Therefore, clause (a) of Section 2(14)(iii) is not applicable. As per Revenue, clause (b) is applicable while, as per assessee, even clause (b) is not applicable. To buttress his claim, it was the contention of the assessee that the distance of the land is to be considered from the local limits of Sohna Municipality and not Gurgaon Municipality because the land is within Sohna Tehsil. This contention of the assessee has not been accepted by either of the lower authorities. From a plain reading of clause (b) also makes it clear that this clause would be applicable where the land is situated in any area which is not more than 8 Kms. 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. distance of the land can be considered from the local limits of any of the municipalities. While rejecting the assessee's claim, the learned CIT(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 that what is intended to be covered in term 'Capital Asset' 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 which falls in the State of Haryana while land is in the State of Punjab. Thus land is urban land for the purpose of 8 ITA-4733 & 4603/D/2011 definition of 'capital asset' under Section 2(14). Concept of municipality as a unit of State or the fact 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 asset' or not for the purpose of taxing capital gain. If the land is adjacent to a municipality and is urban land covered under Section 2(14), even if municipality and the land fall in different States, the land will continue to be urban land. If such land is excluded from the definition 'capital asset', purpose of statutory scheme will not be achieved. Accordingly, we answer substantial questions in favour of the revenue and against the assessee."
11. Thus, their Lordships have held the land in question 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 be measured from Gurgaon Municipal Corporation for the purpose of Section 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 the distance is to be measured as per road distance and not as per aerial 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 capital asset - whether distance notified in the gazette from the municipal areas to be measured by approach road or as per straight line distance on a horizontal plane or as per crow's flight? - Tribunal holds distance is to be measured in terms of road distance - held, since the 9 ITA-4733 & 4603/D/2011 municipal areas are notified based on urbanization, Sec 2(14) is very clear that it should be measured as per road distance - no infirmity in Tribunal's order - Revenue's appeal dismissed"
Held -
A perusal of the aforesaid provision shows that 'capital asset' would not include any agricultural land which is not situated in any area within such distance as may be specified in this behalf by a notification in the Official 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 of that area and other relevant considerations. The reckoning of urbanization as a factor for prescribing the distance is of significance which would yield to the principle of measuring distance in terms of approach road rather than by straight line on horizontal plane. If principle of measurement of distance is considered straight line distance on horizontal plane or as per crow's flight then it would have no relationship with 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 Notification No.9447, dated 6-1-1994 has been issued by the Central Government. In respect of the State of Punjab, at item No.18, the Sub-Division, Khanna has been listed at serial No.19. It has, inter alia, been specified that area up to 2 Kms. from the municipal limits in all directions has to be regarded other than agricultural 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 on horizontal plane or as per crow's flight because any measurement by crow's 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 of consistency as laid down in Radhasoami Satsang v. CIT [1992] 193 ITR 321 (SC) we are of the view that the 10 ITA-4733 & 4603/D/2011 opinion expressed by the Tribunal does not suffer from 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 Hon'ble Apex Court or any other High Court is brought to our knowledge. The CIT(A) has rejected the Assessing Officer's view that the distance up to the land is to be measured by aerial distance or as per crow's flight. The Revenue is in appeal against the order of learned CIT(A) on some other ground but this finding of the CIT(A) has not been challenged in the appeal filed by the Revenue. Moreover, the issue is covered by the decision of Hon'ble Jurisdictional High Court which is binding on the lower authorities within the jurisdiction of the High Court. We, therefore, respectfully following the above decision of Hon'ble Jurisdictional High Court, hold that the distance of the land is to be measured as per road distance and not aerial distance as per crow's flight.
(C) Whether distance up to the land should be considered 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 has suggested that the distance is to be taken from the local 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 Patwari. This contention of the Assessing Officer is accepted by the learned CIT(A) which is evident from paragraph 47 of his order which is reproduced below:-
11 ITA-4733 & 4603/D/2011 "47. The contents of the letter and AO's objections to the same have been carefully considered. As already held above, 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. Therefore, this report cannot be relied upon. As far as report of the Asstt. Engineer, Gurgaon is concerned, no name of the Assistant Engineer is mentioned who has issued this report. A letter was written by the A.O. to Assistant 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 not beyond doubt. Moreover, from the letter it is not clear by which road and from which point the distance of 9.94 Km has been measured. Therefore, this letter filed by the appellant also cannot be relied upon."
15. Learned CIT(A), in paragraph 34 also, has recorded 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 of the AO and the submissions of the appellant on the issue. The facts of the judgment relied upon by the appellant are different in as much as the issue before the Hon'ble High Court was whether the CIT(A) and the ITAT had correctly relied upon the report of the Tehsildar as 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 was not before Hon'ble 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 being 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 distance is to be measured from local limits of the Municipality to the area in which the land is situated. Therefore, it is held that the distance is to be measured from the local limits of the municipality to the area in which the land is situated."
12 ITA-4733 & 4603/D/2011
16. At the time of hearing before us, the learned counsel for the assessee referred to the provisions of Section 2(14)(iii)(b) and claimed that 'in any area within such distance not being more than 8 Kms. from the local limit of any municipality' would mean that 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 presentation showing the area of the municipality, the circumference of 8 Kms. from that area and the various situations in which whether the land is within the area of 8 Kms. from the limits of the municipal corporation. The graphical presentation produced by the assessee is annexed as Annexure-
Annexure-A. He also relied upon the decision of Hon'ble Jurisdictional 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 measured 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 certificate from the Tehsildar to the effect that the land which the assessee had sold situated beyond 8 Kms. from Gurgaon municipal limits. The Assessing Officer did not accept the report of the Tehsildar and instead relied upon the report of the Inspector rejected the assessee's claim. On appeal, learned CIT(A) as well as ITAT accepted the certificate from the Tehsildar. The appeal by the Revenue to the High Court was dismissed and their Lordships held as under:-
"Held, dismissing the appeal, that the Commissioner (Appeals) had rightly not accepted the report of the inspector. In the report, neither the khasra number 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 discarded."
13 ITA-4733 & 4603/D/2011
17. The learned counsel for the assessee has also relied upon the decision of the ITAT, Amritsar Bench in ITO Vs. Ranjit Rattan Mehra (HUF) vide ITA No.442/Asr/2011, wherein the ITAT held as under:-
"Therefore, no new facts are emerging and the earlier distance certificate of the Distt. Town Planner, Gurgaon also does not serve any purpose as the same is describing the measurement from the village Fazilpur Jharsa to the Gurgaon Municipal Committee limits and not from the point of limitation of assessee's land to the Gurgaon Municipal Limits. The assessee's evidence is well more relevant and specific to the point of actual 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 that 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 Assessing Officer has relied upon the certificate of Directorate of Survey (Air) who had measured the distance from the municipal boundary of Gurgaon to the outer limit of Ghata Village within which the land is situated. That the land of the assessee is situated within Ghata village and, therefore, learned CIT(A) rightly accepted the views of the Assessing 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 sides 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, the land should be within the area whose distance is not more than 8 Kms. There is no mention that if the land is in any particular village, then the distance of 14 ITA-4733 & 4603/D/2011 8 Kms. is to be considered from the outer limit of the village. "Area" word has not been defined in the Income-tax Act. Dictionary meaning of the word "area" as per Webster's Comprehensive Dictionary is any open space, tract or portion of the earth's surface, region, superficial extent, total outside surface. Thus, the 'area' only means any open space or portion of earth's surface. 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. 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 municipality which is marked as Circle-1 and the other is a big circle which 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 within 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 from Gurgaon Municipality.
20. In assessment proceedings before the Assessing Officer, the assessee has given four certificates i.e., from Patwari, Tehsil Sohna, from the SDO, Gurgaon and from two experts viz., Shri I.D. Rustogi and M/s Chotani & Associates. The Assessing Officer had rejected all these certificates and learned CIT(A) had also agreed with the finding of the Assessing Officer in this regard. The Assessing Officer has relied upon 15 ITA-4733 & 4603/D/2011 two certificates, one from Executive Engineer, Municipal Corporation, Gurgaon and other from Tehsildar, Village Sohna. During appellate proceedings, the assessee produced two more certificates, one from Patwari, Tehsil Sohna countersigned by Tehsildar and the other from Assistant Engineer, Municipal Corporation, Gurgaon. The Assessing Officer also filed a certificate from Surveyor on behalf of Directorate of Survey (Air). The CIT(A) finally decided the issue in favour of the Revenue relying upon the certificate from the Surveyor on behalf of Directorate Survey (Air). It would be relevant to reproduce paragraph 48 of the CIT(A)'s order wherein he has discussed this 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 contents 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 map 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 limit 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.
16 ITA-4733 & 4603/D/2011 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 the Officer Surveyor that he has measured the distance from the outer limit of Gurgaon municipal boundary to the outer limit of Ghata village. Thus, the distance is not measured up to the land but up to the Ghata village. Moreover, the distance has not been measured by actual physical verification but on the basis of digital method from Survey map. While discussing issue (c), we have already mentioned that the distance is to be measured from the land and not from the limits of 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. Therefore, in our opinion, this certificate cannot be relied upon to adjudicate the distance of the land from outer limit of Gurgaon municipal boundary.
22. The assessee has produced the certificate dated 31st January, 2011 from Tehsildar, Sohna in which the distance of the land from Rajeev Chowk, Gurgaon, i.e., the outer limit of Gurgaon municipal area is certified to be approximately 9 Kms. by road. Copy of the certificate is at page 88 of the assessee's paper book. During remand proceedings, the Assessing Officer summoned the Tehsildar, Shri Sunder Singh and recorded his statement on 24th March, 2011. In question No.4, the Assessing Officer asked Shri Sunder Singh the basis of his certificate in which he has certified the distance of the land to be 9 Kms. He stated that from Rajeev Chowk committee area, which is the outer limit of Gurgaon municipal corporation, he travelled by his bike up to the land of the applicant viz. Shri R.S. Kadan and found that the distance of the land was 9 Kms. Learned CIT(A) rejected the certificate 17 ITA-4733 & 4603/D/2011 of the Tehsildar on the ground that he has taken the distance up to the land and not up to the area. We have already decided 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 discard the certificate of the Tehsildar. The Assessing Officer had examined the Tehsildar on oath in which he reiterated that the distance 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 was no justification for rejecting the certificate of the Tehsildar.
23. That the Assistant Engineer, Municipal Corporation, Gurgaon has certified the distance of the land at 9.94 Kms. The copy of his certificate is at page 90 of the assessee's paper book 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 outer boundary of the east while Municipal council is 9.94 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 18 ITA-4733 & 4603/D/2011 Municipal Corporation, Gurgaon."
24. Learned CIT(A) rejected the above certificate of the Assistant Engineer on the ground that in response to the summons issued by the Assessing Officer, the Assistant Engineer did not turn up. In our opinion, merely because the Assistant Engineer did not turn up in response to notice issued under Section 131, that cannot be a ground for rejecting the certificate. His non-appearance is not the fault of the assessee. The Assessing Officer had enough power to 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 who 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 coupled with his statement before the Assessing Officer, certificate of the Assistant Engineer, Gurgaon Municipal Corporation and the certificate from Shri I.D. Rustogi, former Additional Director General, CPWD, in our opinion, the distance of the land from Gurgaon Municipal Corporation 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 either clause (a) or (b) of Section 2(14)(iii). We, therefore, hold that the land sold by the assessee was agricultural land and therefore, out of the purview of capital asset, hence, not chargeable to capital gain tax.
ITA No.4733/Del/2011 - Revenue's appeal -26. The only ground raised in this appeal by the Revenue reads as under:-
19 ITA-4733 & 4603/D/2011 "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 account of amount forfeited (balance) out of advance money received under forfeiture clause, made by the AO under the head income from other sources without considering the fact that this amount remained to be adjusted against the cost of acquisition of the asset."
27. The Assessing Officer made the addition with the following finding:-
"6.1 As mentioned earlier, the assessee has forfeited 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 prospective vendee, the assessee resorted to the forfeiture clause in the agreement and forfeited the entire advance money. Applying the provisions of section 51 of the IT Act, the advance money of Rs.77,51,000/- has already been reduced from the indexed cost of the value of the same land (Rs.49,84,984/-) sold subsequently to Active Promoters Pvt.Ltd. However, there is still a balance of Rs.27,66,016/- (Rs.77,51,000 - Rs.49,84,984) left with the assessee, which retains the character of income."
28. Learned CIT(A) deleted the addition on the ground that balance amount of the forfeited advance was in the nature of capital receipt and cannot be brought to tax as income from other sources. 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 and perused relevant material placed before us. It has been brought to our knowledge by the learned counsel that the Finance No.2 Act, 2014 has 20 ITA-4733 & 4603/D/2011 inserted clause (ix) of Section 56(2) with effect from 1.4.2015 which reads as under:-
"(ix) any sum of money received as an advance or otherwise in the course of negotiations for transfer of a capital asset, if, -
(a) such sum is forfeited; and
(b) the negotiations do not result in transfer of such capital asset."
30. He, therefore, pointed out that the advance received in the course of negotiations for transfer of capital asset would be taxable only after 1.4.2015 and not earlier. The assessment year under consideration is 2006-07 when there was no such clause under Section
56. At the relevant time, Section 51 was in existence 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 transfer, 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 market value, as the case may be, in computing the cost of acquisition."
31. Thus, as per Section 51, any advance received and forfeited by the assessee in respect of any negotiations for transfer of capital asset is to be deducted from the cost of the asset, the Assessing Officer is aware of this provision and after applying this provision, he has noted that since the amount of forfeiture exceeds the cost of the asset, he treated the balance sum as income from other sources. 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 forfeiture of advance received during the course of negotiations of a transfer of a capital 21 ITA-4733 & 4603/D/2011 asset as income from other sources. The provision has come into effect with effect from 1.4.2015 only. We, therefore, do not find any justification to interfere with the order of learned CIT(A) in this regard. The same is sustained.
32. In the result, the appeal of the assessee is allowed while the appeal of the Revenue is dismissed.
Decision pronounced in the open Court on 12th December, 2014.
Sd/- Sd/-
(H.S. SIDHU)
SIDHU) (G.D. AGRAWAL)
AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 12.12.2014
VK.
Copy forwarded to: -
1. Appellant : Assistant Commissioner of Income Tax, Circle-
Circle-41(1), New Delhi.
2. Respondent : Shri Vijay Singh Kadan, Legal Heir of Late Shri Randhir Singh Kadan, 186, Munirka Vihar, New Delhi - 110 067.
3. CIT
4. CIT(A)
5. DR, ITAT Assistant Registrar .....Annexure-A/..
22 ITA-4733 & 4603/D/2011