COMMISSIONER OF INCOME TAX-II AMRITSAR vs. NEERU AGGARWAL

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: 29.04.2013

(i) ITA No. 209 of 2012 The Commissioner of Income-Tax-II, Amritsar ......Appellant vs. Smt. Neeru Aggarwal .....Respondent (ii) ITA No. 190 of 2012 The Commissioner of Income-Tax-II, Amritsar ......Appellant vs. Smt. Usha Rani .....Respondent (iii) ITA No. 208 of 2012 The Commissioner of Income-Tax-II, Amritsar ......Appellant vs. Smt. Neeru Aggarwal .....Respondent CORAM: - HON’BLE MR. JUSTICE HEMANT GUPTA HON'BLE MS. JUSTICE RITU BAHRI

Present: - Mr. Denesh Goyal, Advocate for the appellant Mr. Pankaj Jain, Advocate for respondent Hemant Gupta, J ....... This order shall dispose of ITA No. 209 of 2012, wherein the revenue has claimed the following substantial question of law: - i) Whether on the facts and circumstances of the case, the learned ITAT was justified in upholding the order of CIT(A) in the light of judgment of the Hon'ble Preeti 2013.05.04 10:44 I attest to the accuracy and integrity of this document Chandigarh

-2- from municipal limits of Sujanpur Town? Another appeal bearing No. ITA 190 of 2012 arises against the order of assessment filed by another co-sharer whereas ITA No. 208 of 2012 is against the order imposing penalty under Section 271(1)(c) of the Income Tax Act, 1961 (for short the 'Act'). The assesseses are the co-sharers and appeals raise identical questions of law, therefore, the same are disposed of by a common order. However, for facility of reference, facts are being taken from ITA No. 208 of 2012. The land of the appellant is situated at Village Islampur, District Pathankot and the same was sold on 29.8.2005. The assessee claimed that since the land is an agricultural land, therefore, it does not attract any capital gain. Before the Assessing Officer, a certificate issued by the Tehsildar, Pathankot was filed to the effect that the land is at a distance of 9 KMs from Pathankot and thus not a capital asset. The Assessing Officer took note of the fact that Government of Punjab vide notification dated 31.11.2004 extended the Municipal Limits of Municipal Council, Sujanpur upto Malikpur and that the said Municipal Council has established Octroi post at Malikpur and the land sold was situated inside Octroi post. Thus, it was said to be capital asset. The Commissioner of Income Tax (Appeals) {for short CIT(A)} on 14.7.2011 set aside the order passed by the Assessing Officer holding that since the land is situated in the revenue limits of Pathankot, therefore, the municipal limits of Pathankot are relevant to determine whether the land is capital asset or not. It was found that the land

-3- is not within 8 KMs of Municipal Council Pathankot, thus the land is not an Capital Asset. Such order passed by the CIT(A) was affirmed by the Income Tax Appellate Tribunal (for short the 'Tribunal') on 10.5.2012. It is the said order which is dispute in the present appeals by the revenue. Learned counsel for the revenue relies upon an order passed by the Division Bench of this Court in ITA No. 276 of 2004, Commissioner of Income-Tax, Chandigarh vs. Smt. Anjana Sehgal decided on 1.3.2011, wherein it has been held that the land situated within the limits of 8 KMs from any Municipality would be a capital asset, the sale of which would attract capital gain. The Court held to the following effect: - “8. 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 juri iction 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 definition of 'capital asset' under Section 2(14). Concept of municipality as a unit of State or the fact that a State has no juri iction 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 of 'capital asset', purpose of statutory scheme will not be achieved.” The Special Leave Petition filed against the said order has been dismissed on 9.1.2012. In view of the judgment of this Court in Smt. Anjana Sehgal's case (supra), the questions of law, framed in ITA No. 209 and 190 of 2012 are answered in favour of the revenue and against the -4- assessee as the land is situated within the Municipal limits of Municipal Council, Sujanpur. As a consequence thereof, the order of CIT(A) dated 14.7.2011 and learned Tribunal dated 10.5.2012 are set aside and that of the Assessing Officer is restored. In ITA No. 208 of 2012, the order impugned is order setting aside penalty under Section 271(1)(c) of the Act. It has been found that the land sold by the assessee is a capital asset liable to capital gain. Thus, the orders of the CIT(A) and of the Tribunal cannot be sustained. Since the appeal of the assessee was accepted on the grounds that the land is not a capital asset, therefore, the order passed by the CIT(A) dated 14.7.2011 and that of the Tribunal dated 10.5.2012 are set aside. The matter is remitted back to the CIT(A) for decision on the question of levy of penalty, if any according to law. (HEMANT GUPTA) JUDGE (RITU BAHRI) 29.04.2013 JUDGE preeti