KHAITAN LEFIN LTD.,KOLKATA vs. JCIT, (OSD), CIR-8, KOLKATA, KOLKATA

We find at the outset that the CIT(A)’s detailed discussion affirming the Assessing Officer’s action holding the assessee’s land to be a capital asset giving rise to the impugned LTCG on transfer reads as under:-

We have heard rival contentions. Relevant case records comprising of the erstwhile Andhra Pradesh state government notification dt. 16/04/2017 merging 8 gram panchayats in the Greater Hyderabad Municipal Corporation (GHMC), copy of the city planner’s letter dt. 22/03/2012 clarifying Mamidipally gram panchayat as not merged in the said gram panchayat as on 01/04/2008, Hyderabad Metropolitan Development Authority Director Planning-II letter dt. 19/03/2015 addressed to the DCIT, Circle-8(1) u/s 133(6) of the Act that the said panchayat consisted of three different villages, government of Andhra Pradesh revenue department memo dt. 21/01/2008 clarifying that the lands in the said panchayat in the village Saroonagar Mandal, Ranga Reddy district are agricultural not falling within 8 Kms. of any municipality or municipal corporation, copy of Government Notification dt. 06/01/1994 issued u/s 2(1A)(C) provisos under clause (II)(B) and Section 2(14)(III)(B) of the Act, copy of GHMC’s letter dt. 18/08/2014 stating Mamidapally gram panchayat not to have been merged with the corporation, copy of remand report dt. 16/10/2015 along with covering letter, tax payers rejoinder thereto, sale deed related documents, purchase deed dt. 08/04/2004, agreement cum power-of-attorney and various returns as well as scrutiny related documents; stand perused.

There is no dispute that the assessee had indeed sold its land in question measuring 5.33 acres situated in village Mamidipally Mandal Saroonagar district Ranga Reddy in erstwhile Andhra Pradesh during the relevant previous year; The sole dispute in the instant lis that arises for our apt adjudication is as to whether the assessee’s land sold was a capital asset or not falling within 8 Kms. of the “GHMC” u/s 2(14)(III)(B) of the Act as applicable in the impugned Assessment Year. The taxpayer stand throughout is that its land is not a capital asset since it is situated beyond 8 Kms. distance of any municipality whereas the Revenue’s case is that Mamidipally gram panchayat is adjacent to the GHMC limits. And also that is happens to be a hub of major economic activity including aviation sector. We find no merit in the latters stand based on the lower authority’s respective findings. We make it clear first of all that there is no rebuttal coming from the department that the land in question has ever been converted from agricultural to non-agricultural use at any point of time before the sale in question. The state government’s revenue records strongly support the assessee’s case rather that its lands are very much agricultural in nature. The Assessing Officer tried to apply “performance” test that for determination of land in issue what is required to be shown is connection with the agricultural purpose is the use and not the mere possibility of the land user by some possible future owner for agricultural objects. We see no merit in the impugned reasoning. The legislature makes it clear that agricultural lands beyond 8 Kms. from the local municipality etc.; as the Central Government may, having regard to the extent/scope for urbanisation and other consideration, specifically in the behalf. We keep in mind the statutory provision to hold that there is no evidence on record put forth at the Revenue’s behest specifically quoting any road or surface connectivity of the assessee’s lands to be within 8Kms. distance from any municipality including “GMCH”. The lower authorities have strongly relied upon the some aviation sector “SEZ” which cannot be taken as the relevant factor is 8 Kms distance not fulfilled u/s 2(14)(III)(B) of the Act. They have further relied upon “Google” assistant in coming to the conclusion that the assessee’s lands are within 6 Kms. of the GHMC limits. Such a method has nowhere been prescribed in the Act. The legislature; in Finance Act, 2013 w.e.f. 01/04/2013, has made it clear whilst substituting the earlier provision with the distance of the land in question has to be measured as per aerial distance. This is not the Revenue’s case that the said amendment carries any retrospective operation. Meaning thereby that 8 Kms distance condition has to be measured in terms of the road only as held by the hon’ble Delhi High Court in the case of CIT vs. Vijay Singh Kadan [2015] 378 ITR 71 (Delhi). The Revenue fails to dispute that neither of the lower authorities has quoted any surface link between the assessee’s land and the nearest municipality namely GHMC so as to treat its lands as capital asset giving rise to long term capital gains on transfer. We therefore accept the assessee’s sole substantive ground and direct the Assessing Officer to delete the impugned long term capital gains addition of Rs.3,09,77,775/-.