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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI G.D. AGRAWAL, HON’BLE & SHRI SUDHANSHU SRIVASTAVA
ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER: The present appeal is preferred by the Department against the order passed by the Ld. CIT (Appeals)-V, New Delhi. The date of the impugned order is 23.06.2010 and the assessment year is 2006-07.
The issue involved in the appeal before us is that during the course of assessment proceedings, it was noticed by the AO that the assessee had claimed exempt an amount of Rs. 5,75,00,000/- on account of sale proceeds of agricultural land situated in Khevat No. 60 Khata No. 65 Mu/Kila No. 57/15, 6, 7, 14/1, 14/2, Vaka Shivana Mauja, Village Ghata, Tehsil Sohna. The assessee was required to furnish details regarding long term capital gain in respect of these sale proceeds of agricultural land claimed as exempt. In response thereto the assessee submitted the details thereof along with a certificate from the Patwari, Gurgaon certifying that the land in question was situated at a distance beyond 8 Kilometers from the Municipal Cantonment limits. Subsequently, the Tehsildar, Tehsil Sohna, (Haryana) was requested by the AO to authenticate and validate the fact as to whether the land in question was approximately 10 Kilometers from the local limit of the Gurgaon Committee Area or not, as claimed by the assessee in its certificate from the Patwari. In response to the request of the AO, the Tehsildar of Tehsil Sohna, (Haryana) in his report dated 29/12/2008 reported that the aforesaid agriculture land was situated approximately 6.6 k.m. from the local limits of Municipal Corporation of Gurgaon. Relying on the report of the Tehsildar, the AO opined that it the land in question was a “capital asset” within the meaning of section 2(14) of the Income Tax Act and therefore any gain arising out of transfer of such “capital asset” was to be taxed as per the provisions of section 45 of the Income Tax Act, 1961. The AO calculated the indexed cost of acquisition at Rs. 31,64,472/- and since the assessee was owner of ½ share of land, the proportionate cost of acquisition for the assessee was calculated at Rs. 15,82,236/- and the long term capital gain for ½ share was calculated at Rs. 5,59,17,764/- and was added to the income of the assessee.
Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) raising the contention that the land in question was situated outside the municipal limits of Gurgaon (as confirmed by the Patwari Gurgaon) and hence the land was not a capital asset as defined in section 2(14)(iii) of the Income Tax Act. The Ld. CIT(A) held that the AO was not justified in rejecting the assessee’s claim that the said land was an agricultural land in terms of section 2(14)(iii) and that the income arising on sale of agricultural land was exempt. The observations of the Ld. CIT (A) on this issue are in Paras 7.8 and 7.9 of the impugned order and they are being reproduced hereunder for a ready reference:
“7.8 On a close reading of the assessment order, I find that the entire assessment was framed by holding that the land as possessed by the Appellant was situated less than 8 kms distance from Gurgaon Municipal Corporation. However, the said ground no longer holds good as the Assessing Officer had confirmed in his Remand Report that the distance has to be measured from local limits of Gurgaon Municipal Committee Area which is more than 8 kms from the Gurgaon Municipal Committee Area. It is also to be noted that the remand report as issued by the AO is, however, silent on the fact that the assessment order makes a reference that the distance should be measured from the limits of MCG (Municipal Committee of Gurgaon). 7.9 Further, the Assessing Officer, in his remand report, observed that the land was beyond the municipal limits of Gurgaon/Sohna. From this observation, it is apparent that the AO has concluded that the said agricultural land is outside the municipal limits of Gurgaon/Sohna and therefore, the gain arising therefrom will not be taxable under the Act. The ld. AO has made a new observation that the said land was within eight kilometers from the municipal limits of Delhi and thus, the land fell outside the exemption provided u/s 2(14) of the Act. It is this conclusion of the AO which has effectively travelled up to me as the surviving bone of contention between both the parties.”
Further, Paras 7.9.5, 7.9.6, 7.9.12, 7.9.13 & 7.9.14 of the impugned order are also relevant and they also are being reproduced for a ready reference:
“5. After examining the concept of municipality, I now turn to Section 2(14)(iii) of the Act. Consider that what sections 2(14)(iii)(a) and (b) of the Income Tax Act obviously envisage is one single municipality and not more than one. When the land under consideration admittedly falls outside the Sohna municipality, as notified by the Central Government in accordance with section 2(14)(iii)(b) of the Act, there is no question of it being considered within the limits of the Delhi City Municipality, as referred by the AO in his remand report. It is noteworthy that upto the AY 1969-70, the exclusion from ‘capital asset’ in sec. 2(14)(iii) of the Act was in respect of agricultural land in India. This exclusion, with effect from the said assessment year, was narrowed down as a result of substitution of new sub-clause (iii) in section 2(14) from the AY 1970-71, by the Finance Act, 1970. As a result of this substitution, all agricultural lands in India are no longer outside the purview of “capital asset” and only those agricultural lands in India are falling outside the scope of “capital asset”, as do not fall either under item (a) or item (b) of section 2(14)(iii). In other words, out of agricultural lands in India, the lands falling in these two items would fall within the definition of “capital assets”. These lands are (a) agricultural lands situated within the jurisdiction of municipality 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; and (b) agricultural lands situated in any area Page 6 of 15 Ashok Jaidka within such distance, not more than eight kilometers, from the local limits of any municipality 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 the Official Gazette.
Thus, it appears that the intention of the Legislature is explicit that the municipality being talked about in both sections, i.e., section 2(14)(iii)(a) as well as section 2(14)(iii)(b), is one and the same, i.e., one and only one municipality. In this case, it is only Sohna Municipality Area. XXXXXX 12. Now, undisputedly, the land in question lies in village Ghata, which falls in Tehsil Sohna, DistrictNow, undisputedly, the land in question lies in village Ghata, which falls in Tehsil Sohna, District Gurgaon and is more than five kms. away from Sohna Municipality. The Notification specifies areas up to five kilometers in all direction, from the municipal limits of Sohna Municipality. So, according to the Notification, areas up to five kms. away from the local limits of Sohna Municipality stand notified as falling outside its local limits. The land in question is admittedly nineteen kms. from the local limits of Sohna Municipality.
The land in issue would not have fallen within the exemption provided by section 2(14)(iii)(b), were it situated within five kms. from the local limits of Sohna Municipality. The ld. AO contended that though admittedly, the land in question is beyond the municipal limits of Sohna, it is within eight kms. of the municipal limits of Delhi and so, it is outside the exemption of sec. 2(14) of the Act. In my view, the AO has erroneously arrived at this conclusion without referring to and or completely ignoring sub clause (b) of clause (iii) of sec. 2(14) of the Act.
The case of the AO is based on the observation in page 5 of the order that the land being within 8 kms. of municipal limits of Gurgaon Municipal Corporation, it was capital asset within the meaning of sec. 2(14) of the I.T. Act. This issue does not survive as the same has been dealt by me in the earlier paragraphs of this order as well as by the AO in his remand report where he agrees that the said land is situated beyond eight kilometers of the Municipal limits of Gurgaon. If this be the facts of the case, the action of the AO in taxing the sale proceeds as capital gain does not hold good.”
Aggrieved, the Department is in appeal and has raised the following grounds of appeal:
On the facts and circumstances of the case and in law, the order of the ld. CIT (A) is wrong, perverse, illegal and against the provisions of law which is liable to be set aside.
2. The ld. CIT(A) has erred on facts and in law in deleting addition of Rs. 5,59,17,764/- on account of long term capital gains arising out of sale of land, ignoring that the provisions of sec. 2(14)(iii) of the Income Tax Act, 1961 are clearly applicable in this case. The land in question is situated about 6 kms from the local limit of Municipal Corporation of Delhi, therefore, a ‘capital asset’ within the meaning of sub-clause (b) of sec. 2(14)(iii) of the Income Tax Act, 1961 and liable for ‘capital gain’. 3. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any grounds of appeal at any time before or during the hearing of this appeal.
6. The Ld. DR submitted that it is undisputed that the land is situated in Sohna and even the Ld. CIT (A) has accepted that all the regulatory and administrative controls are under the jurisdiction of Sohna Municipality as is evident from Para 15 and 16 of the impugned order and, therefore, the approach adopted by the Ld. CIT (A) is contradictory when it is concluded by him that the land is not a capital asset but an agricultural land which will not attract capital gains. The Ld. DR relied on the judgment of the Hon’ble Apex Court in G.M. Omar Khan vs. ACIT 196 ITR 269 (SC), wherein the Hon’ble Apex Court has held that “local self-Government is carried out under various statutes by means of municipalities, municipal boards, cantonment boards, etc. After their initial set up, area by means of those laws are added to and subtracted from and subsume as such for identity, not as a separate municipal unit but part of the already set up municipal unit. Such being the scheme of things, it is difficult to accept the plea of the appellant that even though his village was falling in the municipal area of Hyderabad, it retained its identity as a village and, hence, an ‘area’ so as to stand apart for the purpose of section 2(14)(iii)(a).” The Ld. AR also contested the finding in the assessment order that the AR of the assessee had accepted that the land was situated within 6 kms of the municipal limits of Delhi. Placing reliance on the findings of the AO, it was submitted that the Ld. CIT (A) has erred in deleting the addition and the order should be set aside.
The Ld. AR, in response submitted that the AO himself has stated in the remand report (reproduced in Para 7.3 of Ld. CIT (A)’s order) that it is not disputed that the land does not fall within the jurisdiction of any municipality including Sohna.
He drew our attention to copy of the Remand Report dated 10.05.2010 and drew our attention to Para 7.2 which read as under:
“7.2 During the remand proceedings, information has been sought for u/s 133(6) of the IT Act from the Commissioner of Gurgaon Nagar Nigam and the Executive Engineer, Provicial Division No. 1 PWD B&R Branch of Gurgaon against which it is informed that the actual PWD road has been lost in HUDA sectors and part of it only exists at some places and the nearest possible distance of the land from the limit of Gurgaon Municipal Committee is measured by road at more than 8 kms. whereas, by way of additional evidence, it has been informed by the assessee that the land is situated around 19 kms. from the Municipal limits of Sohna and, vide order Page 11 of 15 Ashok Jaidka sheet entry dt. 29.04.2010, it has been admitted by the AR of the assessee herself that the said land is situated about 6 kms from the local limit of Municipal Corporation of Delhi. The assessee is confusing the jurisdiction of Tehsil with Municipality. The Municipality has no extended jurisdiction once the boundary of jurisdiction of Municipality ends and there is no jurisdiction left for the lands situated outside the boundary. The legislature’s intent is to exclude the land from the purview of agricultural land on the basis of urbanization and in this case the distance is to be taken from the limits of Municipal Corporation of Delhi which is less than 8 kms.”
The Ld. AR also drew the attention of the Bench to the assessee’s application before the Tribunal seeking admission of additional evidence under Rule 29 of the ITAT Rules, 1963. It was submitted that the AO had not given any opportunity to the assessee to negate the Tehsildar’s report that the land in question was within 6.6 kms from the Municipal Corporation of Gurgaon. It was submitted that now the assessee seeks to admit the following as additional evidences under Rule 29- i) Certificate dated 10.07.2013 from the office of SDM Mehrauli confirming that the land is situated outside the limit of Delhi Municipality. ii). Certificate dated 18.07.2013 from the Executive Magistrate, Mehrauli certifying that the land does not fall within their jurisdiction. iii). Certificate dated 4.10.2013 from the Municipal Commissioner, Gurgaon stating that the distance of the land from the municipal limit in the year 2006 was approximately 12kms. iv). Certificate dated 25.10.2013 certifying that the distance of land is 8.5 kms from Mandi village, 11.2 kms from Aya Nagar and 13kms from Ambience Mall, Gurgaon.
The Ld. AR urged that these additional evidences support the case of the assessee and that the same may be admitted and considered while adjudicating the issue at hand. The Ld. AR also placed reliance on the decision of the co-ordinate Bench of Delhi ITAT in ACIT vs Vijay Singh Kadan in by the Hon’ble Delhi High Court in CIT vs. Vijay Singh Kadan 378 ITR 7) wherein a similar issue has been decided in favour of the respondent assessee. He also filed a copy of the assessment proceedings’ order sheet entry dated 29/04/2010 to negate the Department’s contention that the AR of the assessee had itself admitted that the land was situated within 6kms of the Municipal limits of Delhi.
We have heard the rival submissions and perused the relevant documents. We also deem it fit to admit the documents being admitted as additional evidence under Rule 29 of the ITAT Rules, 1963 as these documents/evidences will have a bearing on the final outcome of this case. However, since the AO has not had the benefit of examining these additional evidences, it will be more appropriate that these additional evidences are examined/verified by the AO so as to be enable him to adjudicate the issue at hand afresh. We accordingly set aside the order of the Ld. CIT (A) and remit the matter to the file of the AO to re-examine the issue after duly considering the documents/evidences as submitted by the assessee and which we have permitted to be admitted as additional evidence as afore said after giving the assessee a proper opportunity of being heard.
In the result, the appeal of the department is allowed for statistical purposes.