SH. AVTAR SINGH,CHANDIGARH vs. ITO, W-2(5), CHANDIGARH

आदेश/ORDER

PER A.D.JAIN, VICE PRESIDENT

2. That the Commissioner of Income Tax (Appeals) has erred in law as well as on facts in not considering the notification dated 04.12.2012 placed on record but applying notification dated 19.12.2016 which is not applicable and as such the order passed is arbitrary and unjustified.

3. That the Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in not accepting the figure of population as per last census Which was available as per census 2011 and ignoring the provision of section 2(14) which is arbitrary and unjustified.

4. That the Commissioner of Income Tax(Appeals) has further erred in treating the land sold on the basis of unregistered agreement to be complete during the year in utter disregard of the decision of the Hon'ble Apex Court in the case of Balbir Singh Maini reported in 398 ITR 531 (S.C) duly cited before him and as such the order passed is arbitrary and unjustified.

5. That the Ld. Commissioner of Income Tax(Appeals) has further erred in not considering the fact that the assessee was eligible to claim deduction u/s 54B of the Act for which the necessary details were on record and as such the order is arbitrary and unjustified.

6. That the Ld. Commissioner of Income Tax(Appeals) has further erred in the upholding the alleged finding of the Assessing Officer that the possession of land had been handed over to the sellers without any evidence and as such the order passed on incorrect facts is arbitrary and unjustified.

ITA 389/CHD/2023 A.Y.2017-18 3 for such claim of exemption and required the assessee to furnish the details of properties sold/purchased during the year under consideration. The assessee had agricultural land in village Chhatt in Punjab. The assessee had sold the same to Maya Builders for Rs.4,13,13,132/-, out of which, Rs.3,13,13,131/- had been received in Financial Year 2016- 17 relevant to the year under consideration, i.e., assessment year 2017-18, and had claimed that the same was exempt from capital gain as the land was agricultural in nature and the sale of such land was not the sale of a capital asset. The AO concluded the assessment by treating the land sold as capital asset liable to be taxed under Long Term Capital Gain.

ITA 389/CHD/2023 A.Y.2017-18 5 dated 04.12.2012, of the Government of Punjab, Department of Rural Development and Panchayats.

per the last Census, which was available, i.e., the Census of 2011 and ignoring the provisions of Section 2(14) of the Income Tax Act; that the ld. CIT(A) has erred in treating the land sold to be a capital asset transferred, on the basis of an unregistered Agreement, wrongly disregarding the decision of

ITA 389/CHD/2023 A.Y.2017-18 8 the Hon'ble Supreme Court in the case of “CIT Vs Balbir Singh Maini”, 398 ITR 537 (S.C); and that the ld. CIT(A) has erred in upholding the finding of the AO that the possession of the land had been handed over to the sellers, without there being any evidence to this effect on record.

ITA 389/CHD/2023 A.Y.2017-18 9 9.1 As per Notification No. SODP-SASN/DB/Ss 34 and 10/PA-9/94/2012/3907 (APB 8-9), issued by the Department of Rural Development and Panchayats, Government of Punjab, relied on by the assessee before the authorities below, the Governor of Punjab declared the village or group of contiguous villages mentioned in the said Notification, to constitute a Gram Sabha area and to constitute a Gram Panchayat, in block Dera Bassi, District SAS Nagar. At Item 93 (APB-9) of the Notification, village Chhatt has been shown to be a village constituting Gram Sabha area, for which, the Gram Panchayat was constituted, i.e., Gram Panchayat Chhatt. Thus, evidently, it was by virtue of the aforesaid Notification dated 04.12.2012, that the Gram Panchayat of village Chhatt was created. Before that, village Chhatt had no Gram Panchayat. This also proves that village Chhatt, at that time, was not comprised within the municipal limits of Zirakpur and had its own Gram Panchayat. In this regard, in “ITO Vs P.Venkatramana” 46 ITD 484 (Hyd), it has been held that land falling in a Gram Panchayat is not a capital asset.

9.2 The AO clearly erred in holding that the Notification dated 04.12.2012 was not relevant. He held so in ignorance

ITA 389/CHD/2023 A.Y.2017-18 10 or oblivion of the provisions of Section 2(14) of the Act, which clearly spell out as to which land constitutes a capital asset, as discussed herein above. In the face of the unambiguous provisions of Section 2(14), the reasoning given by the AO to hold the Notification of 04.12.2012 to be not relevant, is faulty, in as much as without considering the express requirements of the provisions, the AO merely held that the land sold was included in the Municipal Committee during Financial Year 2016-17, relevant to the year under consideration, when the land was sold and possession was given.

9.3 The ld. CIT(A), remarkably, has not entered any comment on this aspect of the matter in the order under appeal and still, the assessment order has been upheld. It is further seen that it was by virtue of Notification (APB 23-25) dated 19.12.2016, i.e., Notification No.10/16/16-3 SS3/2788, issued by the Department of Local Bodies, Govt. of Punjab, that the municipal limits of Zirakpur were extended and village Chhatt got to be included therein. The Notification clearly states that vide Resolution No. 88 dated 08.08.2016, passed by the Nagar Council, Zirakpur, Distt.

SAS Nagar area comprising of Gram Panchayats of, inter-

ITA 389/CHD/2023 A.Y.2017-18 11 alia, village Chhatt, has been resolved to be included within the limits of Zirakpur, considering which, vide Notification No. 10/16/16-3 SS 3/2236, dated 04.11.2016, objections/suggestions were invited within 30 days under the provisions of Section 5(2) of the Municipal Act, 1911; that it has been intimated by the concerned officer, Nagar Council, Zirakpur, vide letter No.1578, dated 06.12.2016, that no objection/suggestion has been received within the stipulated time; and that therefore, the Governor of Punjab was pleased to increase the boundaries of Zirakpur and the new boundaries were increased as per the Schedule of Boundaries. The Schedule of Boundaries contained in the Notification shows increase in all directions in the Nagar Council, Zirakpur Boundaries. It is the increase in the Southern side which shows inclusion of village Chhatt, Hadbast No. 286, in the Zirakpur Boundary.

9.4 Undeniably, the date of issuance of the aforesaid Notification, i.e., 19.12.2016, is much later than the date of last payment of advance against the sale consideration received by the assessee for the sale of the land situated in village Chhatt, i.e., in Financial Year 2016-17, relevant to the year under consideration, i.e., assessment year 2017-18,

ITA 389/CHD/2023 A.Y.2017-18 12 as brought on record by the assessee. Thus, the assessee is correct in contending that village Chhatt, at the relevant time, was not forming part of the municipal limits of Zirakpur and it was included in the municipal limits of Zirakpur only by virtue of the said Notification dated 19.12.2016. It also remains unchallenged that the land is situated more than four kilometers away from the municipal limits of Zirakpur, as applicable at that time. In view of these undisputed facts, the only conclusion that can be arrived at is that the land in question did not fall within the definition of “capital asset”, as per the definition contained in Section 2(14) of the Income Tax Act.

9.5 For the above reason, the ld. CIT(A) has clearly erred in holding that the AO was correct in relying on the Notification dated 19.12.2016 to decide the matter against the assessee and hold that the land sold was a capital asset. While concluding so, the ld. CIT(A) has not taken into consideration the above discussed aspect of the matter.

9.6 Then, even the position with regard to the population of Zirakpur has not been correctly appreciated by either of the authorities below. It again remains undisputed that as per the last Census (APB 10-12), i.e., the Census of 2011,

ITA 389/CHD/2023 A.Y.2017-18 13 Zirakpur had a population of 95,443. Firstly, the provisions of Section 2(14) of the Act, i.e., the Explanation to the Section, clearly state that “population” means the population according to the last preceding Census, of which, the relevant figures have been published before the first day of the previous year. The AO went wrong in ignoring the contention of the assessee that given the distance of the situs of the land in question from the nearest Municipal Committee, i.e., the Zirakpur Municipal Council, the issue of population was not relevant. Further, the AO again went wrong in not taking into consideration the population figure of 95,443, as per the latest published Census, i.e., the Census of 2011, and holding that the Zirakpur Municipal Council had a population of more than 1.5 lakh, as per the Report released by Census India, 2011. Nothing has been brought on record by the AO to support this rounded off figure of 1.5 lakh, as against the exact figure of 95,443, as made available by the Census 2011-2020, a copy whereof has been appended by the assessee at APB 10-12. The relevant portion thereof, at APB 12, states in no uncertain terms that “the Zirakpur Municipal Council has a population of 95,553 of which 50,497 are males while 45,056 are females as per

ITA 389/CHD/2023 A.Y.2017-18 14 Report released by Census India, 2011. Population of children with age of 0-6 is 12,074 which is 12.64% of total population of Zirakpur (M-Cl). Therefore, indubitably, the AO has fallen in error in relying on a wrong figure of population of the Zirakpur Municipal Council, to decide the issue against the assessee. Going by the officially published figure of 95,553 the population of Zirakpur Municipal Council falls squarely within the definition of “population” within the meaning ascribed to it by the Explanation to Section 2(14) of the Act, squarely excluding the land in question from the definition of “capital asset”.

10.1 Further still, the AO has erred in holding that the population of Zirakpur during the year under consideration was around 2.50 lacs as there was considerable expansion of ITA 389/CHD/2023 A.Y.2017-18 15 the city and its population. This finding of the AO is also without any basis and it is in direct conflict with the definition of population, as provided by the provisions of the Explanation to Section 2(14)(iii) of the Act, as discussed herein above. To reiterate, the population is to be taken at the figure of the last preceding Census, of which, the relevant figures have been published before the first day of the previous year. As correctly contended, and not disputed, the last Census before 2020 was the Census of 2011. The figure published therein, in the Financial Gazette is of 95,553. The AO was not authorized to stretch the same to an imaginary figure of 2.50 lacs. In this regard, reliance has rightly been placed on the decision of the Hon'ble Bombay High Court in “Pr. CIT-3 Vs Anthony John Pereira”, 115 taxmann.com 368 (Bom). Therein, it has been held that as

per the requirements of clause (iii) (a) of sub-section (14) of Section 2 of the Income Tax Act, for land to be excluded from “capital assets”, it has to be agricultural land in India; that such land, to be not agricultural land, must fulfil two conditions, viz., that it must be land situated in any area which is comprised within the jurisdiction of a Municipality and which has a population of not less than 10,000; that

ITA 389/CHD/2023 A.Y.2017-18 16 these two conditions are pre-conditions and must be read conjunctively; that in other words, if both the conditions are present, then it would not be agricultural land and would be treated as a capital asset; that however, inversely speaking, if either of the two conditions is absent, the land would be agricultural land and would get excluded from the definition of “capital asset”. On facts, it was held that though the land in question therein had been held to be within the jurisdiction of a municipality, their Lordships found that the second condition to bring the land outside the ambit of agricultural land, i.e., that the area has a population which is not less than 10,000, was absent; and that so, the Tribunal had rightly treated the land as agricultural land not included within the ambit and meaning of “capital asset”. It was held that this was a finding of fact which had not been questioned by the Revenue as perverse being contrary to the record, and that the Tribunal was justified in holding that the lands which were sold were agricultural lands not forming part of “capital asset” within the meaning of Section 2(14) of the Act.

ITA 389/CHD/2023 A.Y.2017-18 17 of “Anthony John Pereira” (supra), as discussed in the preceding paragraph. In the case before us also, to reiterate, the population has been found to be less than the figure of 10 lakh, for which, the second condition to bring the land outside the ambit of agricultural land, is absent. Therefore, in keeping with “Pr. CIT-3 Vs Anthony John Pereira” (supra), as elaborately dealt with by us, we hold that the land sold was agricultural land, not forming part of “capital asset”, within the meaning of Section 2(14) of the Income Tax Act.

Order pronounced on 03.04. 2024.