Tuesday, April 16, 2013

How to measure Agricultural Land u/s 2(14)(ii)(b)?



IN THE INCOME TAX APPELLATE TRIBUNAL "NAGPUR", BENCH,  (E-COURT), MUMBAI
BEFORE SHRI R.K.GUPTA, JM & SHRI D.KARUNAKARA RAO, AM
I T A N o.1 64/Nag/ 20 12
( Ass ess me nt Year 2008-09 )
Shri Prakash Laxminarayan   Vs. ACIT, Cir-5, Nagpur-440 001  
Soni,   74,   Shriniketan,   Ramdaspeth, Nagpur-12
P AN No . : AEWPS 2001 P
(Appellant)
..
AN D
( Respondent)
I T A N o.1 65/Nag/2012
( Ass ess me nt Year 2008-09 )

Shri Rahul Prakash Soni, 74, Shriniketan, Ramdaspeth, Nagpur-12
P AN No . : AETPS 696 5 H
Vs. ACIT, Cir-5, Nagpur-440 001

(Appellant)
Assessee by
Revenue by
Date of Hearing
Respondent)
Mr. Bhupendra Shah
Dr. Millind Bhusari
15thMarch., 2013

Date of Pronouncement :
O R D E R

Per Bench :

10th April, 2013


These two appeals have been preferred by two different  assessees before the ITAT Nagpur Bench, Nagpur, against the order  of leaned CIT(A)-II, Nagpur (Maharashtra) relating to assessment year  2008-09, which has been heard through E-Court, Mumbai.

2.   Si n c e common issues are involved in both the cases, therefore,   for the sake of convenience, both these cases have been heard and  disposed of by this consolidated order. 
3.   In both the appeals, the aforesaid assessees have raised the   ground against the action of the learned CIT(A) in regard to confirming   the action of the AO in holding and maintaining that the agricultural  land held by these two assessees are capital asset within the meaning

  ITA Nos.164 &165/Nag/2012   of Section2(14)(ii)(b) by adopting the ariel distance by straight line   method instead of road distance. 
4.   Brief facts giving rising to both these appeals are that during the   course of assessment proceeding, the AO noted that these two  assessees have sold lands, in which they were having 1/4th share. The  lands were purchased on 17-8-2007 admeasuring 2.58 hectare, which  was sold on 31-1-2008 for a total consideration of Rs.1,88,13,156/-.   These two partners were having 1/4thshare in the above stated land   which was situated in Mouza Khadka village. The AO found that as per  the straightline method, the distance of the agricultural lands sold are  situated beyond 8 KMs from the Municipal Limits of the City of Nagpur.   Therefore, he viewed that the land in question is capital asset within  the meaning of Section 2(14)(iii)(b) of the Act. Accordingly, he brought   the gain to tax by computing capital gain. 
5.   Being aggrieved, both these assessee preferred appeal before    the CIT(A), wherein the CIT(A) after passing a detailed order held that   the findings of the AO are correct. Hence, both these assessee are   now in appeals here before the Tribunal.

6.   Having heard the rival parties and perusing the material on    record, we found that on similar facts in case of Sanjay Nagorao  Paidlewar & Nitish Rameshchandra Chordia Vs. ACIT, listed under   ITA Nos.112 & 113/Nag/2012, which was decided on 22-3-2013,   wherein after considering the arguments of both the parties in detail, the  Tribunal has taken a view that the distance from municipal limit has to be   adopted by taking approach road distance and not on the basis of  straight-line method or crow's flight.The issue has been discussed at   great length and found that this is squarely covered by the decision of   various Hon'ble High Courts and various benches of the Tribunal. The  findings of the Tribunal have been recorded in para 9 to 21, which are as  under :-

"9. We have heard rival submissions and considered them carefully. We have also considered the written submissions filed on behalf of both the parties i.e. assessees and department and have also perused the relevant material on record, on which our attentions were drawn. We have also taken into consideration the various case laws relied upon by the learned AR as well as learned CIT DR. After considering the submission and perusing the material on record, we found that the issue in respect to whether the agricultural land in question is an asset within the meaning of Section 2(14) or not, have already been decided by the Hon'ble Punjab and Haryana High Court in the case of Satinder Pal Singh(Supra). This decision of the Hon'ble Punjab and Haryana High Court has been consistently followed by various benches of the Tribunal in various parts of the country. One of us has also taken into considering this issue while sitting in Jaipur Benches of  the Tribunal and found that the decision of the Hon'ble Punjab and Haryana High Court has to be followed and the distance has to measured through approach road and not through the crows flight  distance. The Hon'ble Punjab and Haryana High Court in the case of Satinder Pal Singh (supra) has held that the distance of  agricultural land belonging to the assessee within the meaning of Section2(14)(iii)(b) has to be measured in terms of approach road and not by a straight line distance on horizontal plane or as per  crows flight. Copy of the order is also placed in the compilation at pages 1 & 2.
10. The contention raised by learned CIT(A) that the reckoning of urbanization as a factor for prescribing the distance is of significance which would yield to the principle of measuring distance in terms of approach road rather than by straight line on horizontal plane, this contention of learned CIT(A) has also been considered by the Hon'ble Punjab and Haryana High Court and has observed that the principle of measurement of distance is considered as straight line distance on horizontal plane or as per crow's flight then it would have no relationship with the statutory  requirement of keeping in view the extent of urbanization. Such a course would be illusory, which is in pursuance of the aforesaid provision that Notification No.9447 dated.6thJanuary, 1994 has been issued by the Central Government. In respect of the State of Punjab, at item No.18, the sub-division Khanna has been listed at serial No.19. It has inter alia been specified that area upto 2 kms.  from the municipal limits in all directions has to be regarded as    other than agricultural land. Once the stator guidance of taking into account the extent and scope of urbanization of the area has to be reckoned while issuing any such notification then it would be incongruous to the argument of the Revenue that the distance of land should be measured by the method of straight line on horizontal plane or as per crow's flight because any measurement by crow's flight is bound to ignore the urbanization which has taken place. The decision of the Mumbai Bench in the case of Laukik Developers Vs DCIT, reported in (2007) 108 TTJ (Mumbai) 364,  was also taken into consideration by the Hon'ble Punjab and Haryana High Court and found that the decision of the Tribunal has  attained finality.
11. In case of Laukik Developers (supra), the Mumbai Bench of the Tribunal has observed that once the principle of measuring distance has been settled namely that the distance of the agricultural land belonging to the assessee-respondent has to be measured in terms of by approach road and not by a straight line distance on horizontal plane or as per crow's flight. Accordingly, the  Hon'ble Punjab and Haryana High Court held that the distance has  to be measured by approach road and not by straight line distance on horizontal plane or as per crow's flight. In case of Laukik Developers (supra), the assessee disputed that the distance for  the purpose of Section 80IB(10) has to be measured through straight line distance on horizontal plane and not by approach road.  The Mumbai Bench of the Tribunal has held that the issue regarding distance to be measured with regard to road distance or a straight line distance is covered with the decision of the Pune Tribunal in the case of Mangalam Inorganics (P) Ltd (supra),  wherein it was held that the distance between the municipal limits  and assessee's industrial undertaking has to be measured having regard to the road distance and not as per the crow's flight i.e., a straight-line distance as canvassed by the Revenue.
12. In case of ITO Vs. Ashok Shukla, decided in ITA No.207/Indore/2012, for assessment year 2008-09, vide order dated 31-8-2012, the issue was in respect to whether the assessee was entitled to exemption from capital gain on sale of agricultural land. This issue was examined in detail and it was found that the Tehsildar and Patwari have given a report that the land in question was agricultural land and the distance is 9.7 kms from the municipal  limit. This distance was through the approach road and not by straight line distance method. Thereafter discussing the issue on merit and having taking into consideration the decision of the Tribunal in the case of Laukik Developers (supra) and considering the decision of the Hon'ble Gujarat High Court in the case of Balkrishna Hariballabhadas Vs. CIT, reported in 138 ITR 245,  which was relied upon by the learned DR and found that the measurement has to be adopted by the approach road and not by straight line method. Reliance was also placed on the decision of the Hon'ble Punjab andHaryana High Court in the case of Satinder Pal Singh (supra). 13. In case of ACIT Vs. M/s Shagun Infrastructure Pvt. Ltd., decided in ITA No.209/Nag/2009, for assessment year 2006-07, vide order dated 27-6-2011, the Nagpur Bench of the Tribunal has held that the land in question which was situated more than 8 kms.   from the local municipal limit and is clearly agricultural land in terms of Section 2(14)(iii) of the Act,, therefore, any income from such land including profit arising from sale of such agricultural land is not assessable as income.
14. In case of ACIT Vs. Gaurav Khandelwal, decided in ITA No.195/Agra/2010, for assessment year 2006-07, the Agra Bench of the Tribunal following the decision of Mumbai Bench in case of Laukik Developers (supra) and the decision of Hon'ble Punjab and Haryana High Court in the case of Satinder Pal Singh (supra), held that the distance of 8kms has to be measured by approach road distance and not by straight line distance on horizontal plane. Similar view has been expressed in case of Shri Mainraj Vs. ACIT, decided in ITA No.1371/Mds/2011, for assessment year 2007-08 vide order dated 18-8-2011. In this case also it has been held that the distance has to be measured by approach road and not through crow's flight or straight line method. In case of Smt. Savithri Ammal Vs. ITO, decided in ITA No.487/Mds/2012, vide order dated 12-7-2012 again it has been held that the distance has to be measured as per the approach road and not by straight line method. Similar view has been expressed in case of ITO Vs. Shri Chaganlal Lalji Aswin  Business, decided in ITA No.857/Mds/2011, for the assessment year 2007-08, vide order dated 18-2-2011. In case of ITO Vs. M/s Ranjit Rattan Mehra (HUF), decided in ITA No.442/Asr/2011 for  assessment year 2008-09, the Amritsar Bench of the Tribunal has  taken a view that the distance of 8 kms has to be measured through the approach road and not through the straight line method. While holding so, the decision of the Hon'ble Punjab and Haryana High Court in case of Satinder Pal Singh (supra), was taken into consideration and another decision of the same High Court in case of CIT Vs. Lal Singh & Others, reported in (2010) 228 CTR 575 was also taken into consideration and has allowed the issue in favour of the assessee by holding that the distance of 8km has to be measured through approach road and not by straight line method on horizontal plane.  15. We have also taken into consideration various arguments of learned CIT DR and found that since the issue is covered by the decision of the various Benches of the Tribunal as well by Hon'ble  Punjab and Haryana High Court, therefore, in view of the consistency the view taken by various benches has to be followed. There is no contrary decision is available on the same facts and, therefore, it cannot be said that the decision of the Hon'ble Punjab and Haryana High Court has only persuasive value. If there is any contrary decision is available either by the Hon'ble High Court or by  any other benches of the Tribunal, then of course it can be said that the decision of other benches have persuasive value. In view of the aforesaid facts and circumstances of the case, we held that distance of 8 kms. has to be measured through approach road and not by straight line distance on horizontal plane or crow's flight. Hence, this issue is decided in favour of the assessees.  
16. Regarding the issue in regard to whether the sale consideration out of agricultural income is assessable as business income or not, once we have held that this was an agricultural land and, therefore, any consideration out of sale of agricultural land, which is not assessable as the land was situated beyond 8 kms., therefore, the direction of the learned CIT(A) that the surplus may  be treated as business income, has become now meaningless. Even and otherwise, this issue is also decided by various High Courts including the Hon'ble Bombay High Court. Though learned CIT(A) has placed reliance on the decision of the Hon'ble Bombay High Court in case of Gopal Ramnarayan Kasat, reported in 9  Taxman.com 236 (Bom), however, in a latest decision the Hon'ble  Bombay High Court in the case of CIT Vs. Smt. Debbie Alemao, reported in (2011) 331 ITR 59, has held that the land which was shown as agricultural land in the revenue records and never sought to be used for non-agricultural purposes by the assessee till it was sold has to be treated as agricultural land, even though no agricultural income was shown by the assessee from this land and, therefore, no capital gain was taxable on the sale of the said land.
17. Facts in the case in hand are similar. The land in question was shown as agricultural land in the revenue record. Whether there was any agricultural income or not, is not the moot question to decide the issue, however, the important factor is to be decided as to whether the character of the land is agriculture or not.  Undisputedly, in the revenue record and as per the Patwari certificate, the land in question is agricultural land. Therefore, the sale consideration was not taxable on the sale of said land i.e. either on account of capital gain or on account of business income.  
18. Even we found that this issue has been decided by the Hon'ble Apex Court while confirming the order of the Hon'ble Delhi  High Court in the case of DLF United Limited, 217 ITR 337. The facts in the case of DLF United Limited (supra) were that the DLF limited purchased agricultural land from various farmers in the ear and shown exemption, however, the AO treated the sale consideration as revenue receipt. Upto the stage of Tribunal, the order of AO was confirmed, however, the Hon'ble Delhi High Court held that the land in question was of agricultural land and therefore, any receipt on account of sale of agricultural land is not taxable. This decision of the Hon'ble Delhi High Court has been confirmed by the Hon'ble Apex Court, whereby it has been held that even and otherwise we see no merit in the Special Leave Petition and the same are accordingly dismissed on the ground of delay as well as on merits. Copies of these orders are placed in the compilation.
19. This issue has also been considered in various other decision i.e. in case of Hindustan Industrial Resources Limited Vs. ACIT, reported in 335 ITR 77, wherein it was held that in view  of the finding of the Tribunal that the land in question was agricultural land at the time of purchase by the assessee as also at the time of acquisition, the land was clearly agricultural land irrespective of the fact that the assessee intended to use the land for industrial purposes and did not carry out any agricultural operations and, therefore, no capital gains could be charged on acquisition thereof under the Land Acquisition Act, 1894. While holding so, the decision in the case of DLF United Limited  (supra), was taken into consideration by the Hon'ble Delhi High Court.
20. In case of Shri Satyanarayan O. Agrawal Vs. ADCIT,  decided in ITA No.169/Nag/2012 for assessment year 2007-08, similar view also was taken following the various case laws and ultimately it was held that the consideration received out of sale of agricultural land was not taxable.
21. Since this issue has already been decided by various benches of the Tribunal and the Hon'ble Bombay High Court as well as the Hon'ble Delhi High Court and the decision of the Hon'ble Delhi High Court in the case of DLF United Limited (supra), which has been confirmed by the Hon'ble Supreme Court,  therefore, we hold that any consideration received out of sale of agricultural land, cannot be treated as business income for the purpose of capital gain or for the purpose of business income,  whatever the case may be. In view of the aforesaid facts and circumstances of the case, we allow this ground in favour of all the assessees."

Since facts are similar, therefore, following the above decision of   the Tribunal in the case of Sanjay Nagorao Paidlewar & Nitish  Rameshchandra Chordia Vs. ACIT, listed under ITA Nos.112 &   113/Nag/2012, decided on 22-3-2013, we allow this ground of these  two assessees in both the appeals by holding that the distance of 8km  has to be measured through approach road and not by straight line  method on horizontal plane and if through approach road the distance  is taken, then it is seen that the distance is beyond 8 km from the  municipal limit. Accordingly, we hold that no capital gain is payable as  the agricultural land sold is not a capital asset within the meaning of  Section 2(14)(iii)(b) of the Act.

Resultantly, appeals of both the assessees are allowed.
Order pronounced in the open court on this 10thday of Apr. 2013.
Sd/-                                           Sd/-
(D.KARUNAKARA RAO) (R.K.GUPTA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai; Dated :
pkm, PS

10/04/ 2013.


Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A),Nagpur.
4. CIT
5. DR, ITAT, Mumbai/Nagpur
6. Guard file.
//True Copy//

8


ITA Nos.164 &165/Nag/2012

BY ORDER,

(Asstt. Registrar)
ITAT, Mumbai





















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