I.T.O WD - 49(3),KOLKATA., KOLKATA vs. SRI BIKASH CHANDRA MAJI., KOLKATA

This appeal by the Revenue is arising out of order of Commissioner of Income Tax (Appeals)-XXXII, Kolkata in appeal No.131 /XXXII/10-11/49(3)/Kol dated 03.12.2012. Assessment was framed by ITO Ward-49(3), Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 29.12.2010 for assessment year 2008-09.

The only issue raised by the revenue in this appeal that the Ld.CIT(A) has erred by deleting the STCG of Rs. 9,71,011/- arising out of the sale of land owned by the assessee. A.Y.2008-09 ITO Wd-49(3), Kol. v. Sh. Bikash Ch. Maji Page 2 3. Briefly stated facts are that the assessee is an individual and has income from business and other sources. During the course of assessment proceedings the assessee disclosed that he has purchased certain agriculture lands during the financial year 2005-06 and 2006-07 and sold the agricultural land in the financial year 2007-08. The assessee generated the short term capital gain on the purchase and sale of agricultural land. The Assessee claimed exemption from the income tax on this short term capital gain in view of the section 2(14)(iii) of the Act being agricultural land not amounting to capital assets. The details of the land and the income generated on the sale, purchase of the same inter alia which are subject matter of appeal, is detailed as under : S. No. Name of the place Area of the land Short term capital gain 1) Chandirampur Mouza 553 Satak 9,35,878.00 2) Narapati Para 14 Satak 35,133.00 ---------------- Total 971011.00 ========= The AO treated the above stated land as urban land consequently STGC arose thereon added to the total income of the assessee. The AO also cited the reference of the circular – Direct Taxes Circular, Volume 1, page no. 51, S.No. 16, and according to it the above area of the land falls within 8 kms under the jurisdiction of Kalyani Municipality. Aggrieved assessee preferred appeal before Ld. CIT(A) who has deleted the addition made by the AO on the ground that the aforesaid land does not fall within the 8 KMs of the notified municipality. Aggrieved, Revenue came in appeal before the Tribunal. A.Y.2008-09 ITO Wd-49(3), Kol. v. Sh. Bikash Ch. Maji Page 3 4. Before us, Ld. DR vehemently supported the order of the AO whereas Ld. AR supported the order of Ld. CIT(A) and submitted that it is the agricultural land and it is not capital asset within the meaning of section 2(14)(iii) of the Act. The land is located 8 KMs away from the border of Kalyani Municipality which is notified municipality. Hence the income arising on such land is exempted from tax in terms of section 10 of the Act.

We have heard the contentions of the rival parties and examined the fact and records of the case. The Ld. CIT(A) has deleted the STCG on the ground that the land is not situated within boundary of NOTIFIED municipality, hence not a capital asset. The definition of the capital asset has been defined under section 2(14) (iii) of the Act, which reads as under : “capital asset’ means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include- (i) Any sock-in-trade, consumable stores or raw materials held for the purposes of his business or profession. (ii) Personal effects that is to say, movable property (including wearing apparel and furniture) held for personal use by the assessee or any member of his family dependent on him, but excludes – (a) Jewellery, (b) Archaeological collections; (c) Drawings; (d) Paintings; (e) Sculptures; or (f) Any work of art. Explanation – For the purposes of this sub-clause, “jewellery” includes – (a) Ornaments made of gold, silver, platinum or any other precious metal or any allow containing one or more of such precious metals, whether or not containing any previous or semi-precious stone, and whether or not worked or sewn into any wearing apparel; A.Y.2008-09 ITO Wd-49(3), Kol. v. Sh. Bikash Ch. Maji Page 4 (b) Previous or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any e wearing apparel;] (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 (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 Official Gazette; From the aforesaid provisions, it is clear that the agricultural land is capital asset and subject to tax if it situated within the boundary of notified Municipality. The Ld. AO in his remand report, submitted to the CIT(A), has recorded that the subjective lands were located in Gayeshpur Municipality. But at the same the AO omitted to check whether the Gayeshpur Municipality comes under the notified list issued by the Government of India or not. It is pertinent to note that the Gayeshpur Municipality does not fall under the category of Notified list, hence the question of taxing the agricultural land does not arise. Therefore in the present case the lands of the assessee are located 8 KMs away from the Kalyani Municipality which is duly notified municipality in terms of the Notification No. SO 10(E), dated 06.01.1994, as amended by Notification No. SO 1302, dated 28-12-1999.Hence the provision of Income Tax does not attract to this income of the assessee. In view of above, we are of the opinion that the aforesaid lands do not fall within the jurisdiction of Notified Municipality as claimed by the AO. In the present case the test to classify the assets as agricultural land or not, A.Y.2008-09 ITO Wd-49(3), Kol. v. Sh. Bikash Ch. Maji Page 5 is to be seen with reference to the limits of the Notified Municipality. There can be a case that the land is located within the jurisdiction of Municipality i.e. within 8 KMs but the same is not notified Municipality. Hence in the present case the land is 8 KMs away from the notified municipality so the STCG is exempted from tax. This ground of Revenue’s appeal is dismissed.