RADU RAM JAT HUF,JAIPUR vs. ITO, JAIPUR

PER SHRI KUL BHARAT, JM.

The appeal by the assessee is directed against the order of ld. CIT (Appeals)- 3, Rajasthan dated 30th Jan. 2015 pertaining to assessment year 2006-07. The

assessee has raised the following grounds of appeal :-

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2.1 That the Ld. CIT(A) has further erred in treating the land under question is situated within the distance of 8 Kms. From the Municipal Limits without appreciating the fact that when the land under question was sold , at that time the distance between the land and the local limits of Municipality was more than 8 KMs. As there were no such direct road to that area. Hence the action of the Ld. CIT(A) of treating the land under consideration asset a capital asset deserve to be hold bad in law and the addition of 1,75,99,980/- so made deserves to be deleted.

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earlier round, the assessment was completed under Section 144 of the Income Tax

Act, 1961(hereinafter referred to as the Act.)and, the matter travel up to the stage

of the Tribunal. This Tribunal in ITA No. 369/JP/2011 was pleased to direct the

assessing Officer to determine the distance of the agriculture land sold by the

assessee and to examine the claim of deduction under section 54B of the Act. The

assessing officer once again treated the agriculture land as capital asset on the

ground that the same fall within the prescribed limit of municipal corporation of

Jaipur and thus computed capital gain of Rs. 1,75,99,979/-. The assessing Officer

while framing the assessment also rejected the claim of the assessee regarding

deduction under Section 54B of the Act. The assessee as aggrieved , preferred an

appeal before Ld. CIT(Appeals) who after considering the submissions confirmed the

action of the assessing officer. Now the assessee is in further appeal before this

Tribunal.

to ground No. 2 to 3 that the assessing officer failed to appreciate the fact in the

right perspective. He reiterated submissions as made in the written brief. For the

sake of clarity the written submission of the assessee are reproduced as under:-

“These grounds of appeal relate to addition of Rs.1,75,99,980/- made by Ld. AO on account of capital gains primarily: (i) by holding the agriculture land sold as Capital asset (ii) by holding the land sold to be within the distance of 8 kms from municipal limits

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Brief facts pertaining to this ground of appeal are that during the year under appeal, the assessee had sold various pieces of its ancestral agricultural land to M/s Prospers Construction Pvt. Ltd. for a total consideration of Rs. 176.32 lacs on 18.01.2006, the details of the same are as under: S. Location Sale Date of APB No. consideration Sale 1. Village Chatarpura alias Lalyaka baas, 1,25,96,000.00 18.01.2006 2-7 PatwarHalka, Mahapura, Tehsil Sanganer 2. Village Jhai, PatwarHalka, Bhagoria – 47,94,000.00 18.01.2006 8-13 Tehsil, Sanganer 3. 1/3 share in the land situated Village 242520.00 18.01.2006 14- Chatarpura alias Lalyaka baas, 20 PatwarHalka, Mahapura, Tehsil Sanganer Total 1,76,32,520.00

However, it has been alleged by the Ld. AO that the abovementioned pieces of land are not agricultural lands within the meaning of section 2(14)(iii)(b) of the Income Tax Act, 1961. While complying with the directions of the Hon’ble ITAT, Jaipur Bench, Jaipur, the Ld. AO has determined the subject pieces of land as being situated at a distance less than 8 kms from the local limits of Jaipur Municipal Corporation and thus, has concluded that the subject pieces of land are capital assets within the meaning of section 2(14) of the Act.

In this regard, kind attention of Hon’ble Bench is invited to notification No. 9447 dated 06/01/1994, Relevant extracts of which is reproduced herewith for the sake of convenience (Case Laws PB 72-75): “(1) In this notification, “Municipality” shall mean any area------- -- (2) The reference to municipal limit or the limit of cantonment board in the schedule to this notification is to the limits as existing on the date on which the notification is published in the official Gazette.”

Hon’ble ITAT, Jaipur bench in case of Dr. Subha Tripathi in ITA No.ll29/JP/2011 for A.Y 2008-09 dt. 24.05.2013 (Case Laws PB 1-5) where after considering the purport of notification dt. 06.01.1994 and also the amendment made by F.A Act, 2013 w.e.f. 01.04.2014, it was held that the municipal limit is to be seen with reference to the date of notification i.e. 06.01.1994 and not as on the date of the sale. The relevant finding of Hon’ble ITAT is reproduced as under:- “We have considered the rival submissions as well as the materials on record. The question arises for our consideration and adjudication is whether the land in question though located

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beyond 8 kms from the Municipal Limits of Jaipur Municipality as on the date of notification 6-01-1994 but subsequently it falls within the distance of 8 kms from the Municipal Limits due to the expansion of the Municipal Limits would still be regarded as agricultural land not falling in the definition of capital asset in terms of Section 2(14)(iii)(b) of the Act. There is no dispute that Jaipur Municipality has been duly notified vide said notification dated 6-01- 1994 and as on the date of said notification, the land in question was beyond 8 kms from the Municipal Limits exists at that point of time. The dispute arises because of the expansion of Municipal Limits and thereby the said distance from the Municipal Limits as on the date of sale of the land in question is only 2 kms and thereby the authorities below have treated the land in question as not falling under the exclusion clause of Section 2(14)(iii)(b) of the Act. There is no quarrel on the point that as per sub-clause (b) of clause (iii) of Section 2(14), the notification of the Central Govt, is mandatory to bring the land in the definition of capital asset which is not located within the limits of the Municipality but located within the distance of 8 kms from the local limits. So far, the agricultural land which is located in the limits of Municipal Limits, the same will be treated as capital asset and no further requirement is to be examined. Since the land in question is located outside the local limits of Municipality, therefore, in order to determine whether the land in question falls under mischief of sub- clause (b) of Section 2(14)(iii) of the Act, the distance of 8 kms has to be taken into account in terms of notification dated 6-01-1994, as per explanation 2 of the said notification dated 06.01.1994, the Municipal Limits is to be the limits as existing on the date on which the notification is published in the official gazette. We quote the explanation 2 of the notification (supra) as under:- "(2) The reference to the municipal limits or the limit of Cantonment Board in the Schedule to this notification is to the limits as existing on the date on which on which the notification is published in the official gazette."

If the stand of the Revenue is accepted that the distance of 8 kms should be considered from the Municipal Limit exists as on the date of the sale of land then it would render the notification issued by the Central Govt, as ineffective and unworkable / otios. As it is made clear by explanation 2 of the said notification that Municipal Limits is to be considered as existing on the date on which notification is published in the official gazette, therefore, the date of notification is relevant and material point to determine the distance of 8 kms from Municipal Limits. There is no amendment or withdrawal of the said notification except a recent amendment has been brought in the statute by the Finance Act 2013 whereby the requirement of said notification has been dispensed with for invoking sub-clause (b) of clause (iii) of Section 2(14) of the Act w.e.f. 01-04-2014. Thus it is discernible from the notification dated 06-01-1994 and the recent amendment in the statute whereby the said notification has been dispensed with that the distance of 8 kms has to be considered from the Municipal Limits as exists on the date of notification for the purpose of invoking sub clause (b) of clause (iii) of Section 2(14) of the Act. Accordingly we hold that the land in question which was located beyond 8 kms from the Municipal Limits as on 6-01-1994 when the notification was published in the official gazette, the same would fall under the exclusion clause of the term 'capital asset’ as per provisions of 2(14)(iii)(b) of the Act”.

Subsequently, following the above said judgemnent, Hon’ble Jaipur Bench of Tribunal in the case of Khetilal Sharma HUF vs ITO in ITA No. 103/JP/2012 held that (Case Laws PB 6- 14):

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“This issue has been considered by the Coordinate Bench in the case of Dr. Subha Tripathi in ITA No. 1129/JP/2011 for A.Y. 2008-09 order dated 24/5/2013. The operative portion of the order has been reproduced in the reply of the assessee. It has been held by the Coordinate Bench that there is no dispute that the Jaipur Municipality has been duly notified vide said notification dated 06/1/1994 and as on the date of said notification, the land in question was beyond 8 km from the municipal limit exist on that point of time. In the case of assessee, on the date of this notification dated 6th January, 1994, the municipal limit of Jaipur on Ajmer Road on which the assessee land is situated was up to ESI hospital. The ld AR placed the evidence in paper book at sl. no. 91. The assessee’s land is 16 km away from the ESI hospital. These facts has not been controverted by the ld. DR. Being a precedence, we respectfully following the order of the Coordinate Bench and held that land sold by the assessee is not a capital asset U/s 2(14) of the Act. Thus, capital gain does not arise. On this ground, the assessee’s appeal is allowed.”

In view of above judgements, it is humbly prayed that land sold by assessee being situated beyond 8Kms. from the municipal limits of the Jaipur as existed as on the date of issue of the notification dt. 6.1.1994 therefore the same should not be treated as capital asset and therefore not liable for capital gain taxation.

Without prejudice to above, on merits of the case it is humbly submitted that the Ld. AO has committed a serious error while measuring the distance of subject pieces of land from the ending point of local limits of Jaipur Municipal Corporation in as much as the modus operandi adopted by the Ld. AO in measuring such distance is not in accordance with law and thus, is not correct.

After referring to the municipal records and conducting field enquiry, Ld. AO mentioned in the assessment order (page 2, para 3) that as per the Municipal records, the last point at which the local limit of the jurisdiction of Jaipur Municipal Corporation ends at Ajmer Road is, “Village Hasanpura Vas Bhankrota”. It has further been mentioned that Khasra No. 315 is the last land of Village Hasanpura Vas Bhankrota. Having observed so, the Ld. AO proceeded to measure the distance of assessee’s land(s) from this Villange Hasanpura Vas Bhankrota, specifically from Khasra No. 315 of this village. For this purpose, Patwari of the concerned village and the Inspector of the concerned ward were deputed in order to measure the distance of subject pieces of land from the end of local limits of JMC. The Inspector visited the subject pieces of land on 25.02.2013 and vide his report he submitted that, the land are situated at following distances: S.No. Location Distance from local Route of municipal limits of JMC measurement 1. Land at Chatarpura 6.1 kms Via Mahapura

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alias Lalyaka Bas 2. Land at Village Jhai 6.5 kms Via Mahapura

At this juncture, kind attention of your honour is invited to the fact that this report submitted by Inspector / Patwari was based on the measurement of distance taken as on 25.02.2013 i.e. when they visited the lands during the course of set-aside assessment proceedings and the route considered for such measurement was ‘via Mahapura’. However, the Ld. AO failed to consider and it is very important to note that at the time when these lands were sold, there was no such direct route / road which could connect these lands from the ending point of local limits of JMC, and therefore, the distance suggested by the Inspector / Patwari is the distance ‘through Mahapura road’ as on 25.02.2013, whereas, the property was sold long ago, i.e. on 18.01.2006. Clearly, there was a gap of more than 7 years which is too long to be ignored, more particularly when due to development in Mahindra SEZ, the area was developed multifold where new roads and other facilities were developed.

It is well settled that, for the purpose of determining whether a particular land is situated within 8 kms from the local limits of municipality notified u/s 2(14)(iii)(b) of the Act, it is only the contemporary distance (existing as on the date of transfer of property) which can be taken into consideration and not the date when the place was visited by Inspector / Patwari for determining the distance, during the course of assessment proceedings.

In light of the above, kind attention of your honour is invited to the crucial fact that at the time when the subject pieces of land were transferred, there was no direct road to that area and the road via which the measurement has been done by abovementioned officers was constructed only later on. Therefore, at the time of transfer of the subject pieces of land, they were situated at a distance more than 8 kms from the local limits of JMC and thus, fell within the scope of definition of “Agricultural land”.

The contention raised above is based on the well settled position of law in this regard. In the case of Ranchhodbhai Bhajibhai Patel Vs. CIT reported in 81 ITR 446, (Case Laws PB 15-18) the Hon’ble Gujarat High Court has held that, the material date with reference to which the question whether a particular land which has been sold is agricultural land or not is to be decided, is the date of sale.

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Further, in the case of Manibhai Motibhai Patel Vs. CIT reported in 131 ITR 120 (Case Laws PB 19-27) it has been held as under: That, in view of the provisions of the I.T. Act, 1961, as it stood at the relevant time, if the land was agricultural land at the time of the sale, the profit made on the transaction could not be treated as capital gains in the hands of the seller.

Thus, at the time of transfer of subject pieces of land, they were agricultural lands because at that time there was no direct road connecting the concerned villages with the local limits of JMC and thus they were at a distance more than 8 kms from the local limits of JMC. Thus, the same cannot be treated as capital asset, particularly when no effort has been made either on the part of Ld. AO or the concerned officers to examine as to whether the road via Mahapura existed at the time of transfer of subject pieces of land or not?

Therefore, the action of treating the subject pieces of land as capital asset is bad in law as well as on facts and suffers from lack of proper inquiry. Apparently, it was presumed by Ld. AO that the road that existed on the date of inspection of the subject pieces of land existed at the time of transfer of subject land as well.

Hence, in view of the facts and circumstances of the case and the submissions made above, it is humbly prayed that the subject pieces of land may please be treated as agricultural land as against capital asset and the consequent addition made on account of capital gain be deleted.”

3.1. On the contrary, the ld. Departmental Representative opposed the submission

of the assessee.

3.2. We have heard the rival contention and perused the material available record

and gone through the order of the authorities below. The undisputed facts emerge

from the records that the property in question was agriculture was being used for

agricultural purposes. The claim of the assessee is that the capital asset is an

agriculture land. Therefore, in terms of definition provided under section 2(14) of the

Act, it would not fall in the category of capital asset, therefore the capital gain tax is

attracted on the transfer of the same. We find that the assessing officer has come

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to the conclusion that the agriculture land was within the 8 Kms from the municipal

limit. It is observed by the Assessing Officer that ward no. 12 at time that is in the

year 1994 was having village Hasampura Vas Bhankota, in its territory. He has also

observed that as per Rajasthan State Gazette Notification dated 23/4/1992 as on

18/04/1992 the village Hasmpura Vas Bhankrota was within the municipal limit of

Jaipur Nagar Parishad. Under these facts he treated the land as capital asset and

computed the capital gain on transfer of such land. The ld. Counsel for the assesee

during the course of hearing has drawn our attention on paper book Page no. 1

certificate by the Patwari, which certifies that the land is about 10 Kms. from the

Jaipur Municipality. However, the assessing officer, during the course of assessment

proceedings had deputed the Inspector of the Ward to measure the distance along

with the concerned revenue officer. Along with one of the Member HUF visited the

land in question on 25/2/2013 to measure the distance. As two report submitted

by the Inspectors and the Revenue Official stating that land in acquisition at 7.3 Km

(via Jhai-Deh Waki Dhani and 6.5 Km via Mahanpura Jhai.

3.3 In the present case there are three reports with regard to distance of land in

question the Patwari , has given the distance 10 Kms. Another revenue official gave

report of distance of 7.3 Kms and the Inspector of the Income Tax has given the

distance of 6.3 Km. Now, it is to be examined which report is correct. The limit of

Municipality is fixed by the concerned state or the Central Government as the case

may be by way of gazette Notification. The notification dated 6/1/1994 was in

vogue when the transfer of land took place . The Assessing Officer was required to

give a clear finding with regard to limit of Jaipur Municipality corporation and from

that point, what was the distance of assessee’s land in question as on the date of

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transfer. This fact he could have gathered from the records of the PWD or any other

instrumentality of the states which is responsible for laying and maintenance of

roads. We find that neither the AO nor Ld. CIT(A) has given any specific findings to

this effect. As there is merit into the contention of the Ld. Counsel for the assessee,

that the distance between municipality limit and agricultural land is to be considered

on the date of transfer on land. By subsequently, events in the form of laying of

the direct road possibly reduces the distance. Therefore, the distance should relate

to the date of transfer asset for the purpose of considering whether the agricultural

land was capital asset or not on the date of transfer. The issue of distance of

agriculture land from the concerned municipality determines character of such land

whether it is a capital asset or not. In the present case goes to the very root of

dispute. Under these facts, we deem it proper to set aside this issue and direct the

assessing officer to give clear finding with regard to the fact as what was the limit of

Jaipur Municipality as per the relevant notification in force on the date on transfer

and also the distance between Jaipur municipality and agricultural land in question

on the date of transfer. Needless to say, that assessee would cooperate with the

Assessing Officer. In the light of above the assessing Officer would decided this

issue afresh. The grounds no. 2 to 3 are allowed for statistical purpose.

section 54B and 54F of the Act.

4.1. Since we have restored the issue whether the land in question is capital asset

or not for your determination, we deem it proper to restore this ground as well to

the file of AO for decision afresh.

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Ground no. 1 and 7 are dismissed as discussed above.

Order pronounced in the open court on 23/2/2017.

Sd/- Sd/- ( dqy Hkkjr) ¼foØe flag ;kno½ (VIKRAM SINGH YADAV) ( KUL BHARAT ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Jaipur Dated:- 23/2/2017. Pooja/ आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

vkns'kkuqlkj@ By order,

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत

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