Commissioner Of Income-Tax, Chandigarh v. Adarsh Kumar Goel, J

Income-tax Appeal No.276 of 2004 *** IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH Income-tax Appeal No.276 of 2004and other connected appeals beingITAsNo.54 of 2005 and 448 of 2009Date of decision: 1.3.2011 Commissioner of Income-Tax, Chandigarh ...Appellant Versus Smt. Anjana Sehgal ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Ms. Urvashi Dhugga, Senior Standing Counsel for the appellant. Ms. Radhika Suri, Advocate for the respondent. **** ADARSH KUMAR GOEL, J ( Oral). 1.This order will dispose of ITAs No.276 of 2004, 54 of2005 and 448 of 2009 as it is stated by the learned counsel for therevenue that facts and law involved in these appeals are common.However, the facts are taken from ITA NO.276 of 2004. 2.ITA No.276 of 2004 has been preferred by the revenueunder Section 260A of the Income Tax Act, 1961 (hereinafterreferred to as “the Act”) against order dated 19.4.2004 passed bythe Income Tax Appellate Tribunal, Chandgiarh Bench 'B',Chandigarh in ITA No.135/Chandi/2001, for the assessment year1997-98, claiming following substantial questions of law:- “i).Whether the ITAT was right in law in holding thatimpugned agricultural land does not come within the *** definition “Capital Asset” as defined u/s 2(14) of theIncome Tax Act because the land in question issituated in the State of Punjab and beyond 8kilometers of Municipal limits of Rajpura even whenthe impugned land is also situated within a distanceof 5 kilometers of the Municipal limits of Panchkula,District Ambala (Haryana)? ii)Whether expression “from the local limits of anymunicipality” used in section 2(14)(iii)(b) of theIncome Tax Act denotes “any municipality ormunicipality of the district in which the land issituated?” 3.The assessee sold agricultural land and was sought to betaxed for the capital gain on the ground that agricultural land inquestion was covered by the definition of 'capital asset' underSection 2(14) of the Act. The land was situated within 8 kilometers ofthe municipal limits of Panchkula and was thus covered by thenotification dated 6.1.1994 contemplated under Section 2(14)(iii)(b).On appeal, the CIT(A) deleted addition holding that the land inquestion was in the State of Punjab while Panchkula municipality wasin the State of Haryana and even if the land was within the specifieddistance of municipality in the State of Haryana, the same could notbe treated to be capital asset when the land was not in that State.The Tribunal upheld the said view. 4.We have heard learned counsel for the parties.5.Learned counsel for the revenue submits that the definition for the purpose of land being included in agricultural land orotherwise and thus being capital asset or otherwise has to considerwhether the location of the land is within a municipality or withinrequisite distance of the municipality so that the urban land istreated as capital asset and is not excluded therefrom. In the presentcase, the land falls within the State of Punjab and is within therequisite distance from a specified municipality. Even if suchmunicipality is out side the State of Punjab, land nonethelessremains urban. Any other interpretation will defeat the object of theprovisions. 4.We have heard learned counsel for the parties.5.Learned counsel for the revenue submits that the definition for the purpose of land being included in agricultural land orotherwise and thus being capital asset or otherwise has to considerwhether the location of the land is within a municipality or withinrequisite distance of the municipality so that the urban land istreated as capital asset and is not excluded therefrom. In the presentcase, the land falls within the State of Punjab and is within therequisite distance from a specified municipality. Even if suchmunicipality is out side the State of Punjab, land nonethelessremains urban. Any other interpretation will defeat the object of theprovisions. 6.Learned counsel for the assessee on the other handsubmits that if the land was within the requisite distance from aspecified municipality of any other State, the same will not becovered unless it was within or within the requisite distance from themunicipality of the State. It was submitted that under Article 243Qmunicipalities are to be constituted in every State and thus theconcept of State specific municipality cannot be ignored. It was alsosubmitted that municipality of Panchkula was constituted on25.1.2001 and for the relevant year the same was Notified AreaCommittee which is at par with the municipality under Section 2(14)(iii)(a). Referring to the speech of the Finance Minister whileintroducing Finance Bill, 1970, interpreting Section 2(14)(iii)(b) in theAct, it was stated that the word 'such municipality' referred to theexpression 'municipality' to be found in Clause (a) of Section 2(14)(iii)it was submitted that municipality had to be State specific. If theexpression 'such' is to be ignored the same will be against the settled *** principle that no word should be treated to be redundant orsuperfluous as held in J.K.Cotton Spinning and Weaving MillsCo. Ltd. Vs. State of Uttar Pradesh and others AIR 1961Supreme Court 1170, Union of India and another Vs. HansoliDevi and others AIR 2002 Supreme Court 3240 and Sankar Ramand Co. Vs. Kasi Naicker and others AIR 2003 Supreme Court4156. 7.To appreciate the controversy, it will be appropriate torefer to relevant provisions of Section 2(14) of the Act :- “2(14) “capital asset' means property of any kindheld by an assessee, whether or not connected with his business or profession, but does not include- (i)xx xx xx xx (ii)xx xx xx xx (ii)xx xx xx xx (iii) agricultural land in India, not being land situate- (a) in any area which is comprised within thejurisdiction of a municipality (whether known as amunicipality, municipal corporation, notified areacommittee, town area committee, town committee,or by any other name) or a cantonment board andwhich has a population of not less than tenthousand according to the last preceding census ofwhich the relevant figures have been publishedbefore 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 anymunicipality or cantonment board referred to in item(a), as the Central Government may, having regardto the extent of, and scope for, urbanization of thatarea and other relevant considerations, specified inthis behalf by notification in the Official Gazette”. The notification dated 6.1.1994 issued by the CentralGovernment is as under:- (b) in any area within such distance, not being more *** than eight kilometers, from the local limits of anymunicipality or cantonment board referred to in item(a), as the Central Government may, having regardto the extent of, and scope for, urbanization of thatarea and other relevant considerations, specified inthis behalf by notification in the Official Gazette”. The notification dated 6.1.1994 issued by the CentralGovernment is as under:- “NOW, THEREFORE, in exercise of the powersconferred by item (B) of clause (ii) of the proviso tosub-clause(c) of clause (1A) and item (b) of sub-clause (iii) of clause (14) of section 2 of the Income-tax Act, 1961 (43 of 1961) and in supersession ofthe notification of the Government of India in theerstwhile Ministry of Finance (Department ofRevenue and Insurance) No.SO77(E) dated6.3.1973 the Central Government having regard tothe extent of, and scope for urbanization of theareas concerned and other relevant considerations,hereby specifies the areas shown in column (4) ofthe Schedule hereto annexed and falling outside thelocal limits of Municipality or Cantonment Boards,as the case may be, shown in the corresponding *** entry in column (3) thereof and against the State orUnion Territory shown in column (2) thereof for thepurposes of the above-mentioned provision of theIncome Tax Act, 1961 (43 of 1961). SCHEDULE _______________________________________________________ Sr. Name of the Name of the Municipality or Can-Details of areas falling outsideNo. State or Uniontonment Board falling in the the local limits of Municipality TerritoryState/Union Territory mentionedor Cantonment Board, etc.under column (2).mentioned under column(3).______________________________________________________________________1234______________________________________________________________________9.HARYANA 44. Panchkula (Distt.Ambala) Areas upto a distance of 5 Kms. from the municipallimits in all directions xxxxxxxxxx18.PUNJAB35. RajpuraAreas falling within (i) 1 Km. on either side of Rajpura-Sirhind Road up to a distance of 3 Kms. from the municipal limits on that road. Rajpura-Sirhind Road up to a distance of 3 Kms. from the municipal limits on that road. (ii) 1 Km. on either side of Rajpura-BanaurRoad up to a distance of 8 Kms. from the municipal limits on that road. Rajpura-BanaurRoad up to a distance of 8 Kms. from the municipal limits on that road. (iii) 1 Km. on either side of Rajpura-Ambala Road up to a distance of 4 Kms. from the municipal limits on that road. Rajpura-Ambala Road up to a distance of 4 Kms. from the municipal limits on that road. (iv) 1 Km. on either side of Rajpura-Ghanour Road upto a distance of 4 Kms from the municipal limits on that road. Rajpura-Ghanour Road upto a distance of 4 Kms from the municipal limits on that road. (v) 1 Km. on either side of Rajpura-Patiala Road up to a distance of 8 Kms. from the municipal limits of Rajpura. Rajpura-Patiala Road up to a distance of 8 Kms. from the municipal limits of Rajpura. *** (iii) 1 Km. on either side of Rajpura-Ambala Road up to a distance of 4 Kms. from the municipal limits on that road. Rajpura-Ambala Road up to a distance of 4 Kms. from the municipal limits on that road. (iv) 1 Km. on either side of Rajpura-Ghanour Road upto a distance of 4 Kms from the municipal limits on that road. Rajpura-Ghanour Road upto a distance of 4 Kms from the municipal limits on that road. (v) 1 Km. on either side of Rajpura-Patiala Road up to a distance of 8 Kms. from the municipal limits of Rajpura. Rajpura-Patiala Road up to a distance of 8 Kms. from the municipal limits of Rajpura. *** 8.A perusal of the above provisions makes it clear that what isintended to be covered in term 'Capital Asset' is agricultural landcomprised within the jurisdiction of a municipality and within the specifieddistance from the local limits of municipality or other local bodiesmentioned therein as specified in the notification. It is undisputed that theland in question is within the specified distance from Panchkulamunicipality which falls in the State of Haryana while land is in the State ofPunjab. Thus land is urban land for the purpose of definition of 'capitalasset' under Section 2(14). Concept of municipality as a unit of State or thefact that a State has no jurisdiction to make law beyond its territory have norelevance for the purpose of determining whether particular land was'capital asset' or not for the purpose of taxing capital gain. If the land isadjacent to a municipality and is urban land covered under Section 2(14),even if municipality and the land fall in different States, the land willcontinue to be urban land. If such land is excluded from the definition of'capital asset', purpose of statutory scheme will not be achieved. 9.The judgments relied upon to submit that all words of a statuteshould be assigned meaning do not support the contention of theassessee, Including the land in dispute in 'capital asset' does not ignoreany word in the definition as assumed by learned counsel. Speech ofFinance Minister also does not help the assessee. The relevant extractthereof is as under:- “Sub-clause (a) seeks to amend clause (14) of section 2 of theIncome Tax Act which defines the term “capital asset”. Theamendment seeks to bring within the term “capital asset”agricultural land situated within the limits of any 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 having apopulation of 10,000 or more according to the last census forwhich the figures have been published before the first day ofthe previous year. Further, agricultural land situated in areaslying within a distance not exceeding 8 kilometers from thelocal limits of such municipalities or cantonment boards willalso be covered by the amended definition of “capital asset”, ifsuch areas are, having regard to the extent of and scope fortheir urbanisation and other relevant considerations, notified bythe Central Government in this behalf. The effect of theproposed amendment will be that capital gains arising from thetransfer of agricultural land situated in municipal or other urbanareas or notified adjoining areas will be liable to income-tax forthe assessment year 1970-71 and subsequent years.” 10.We are unable to accept that the above speech leads to anyother interpretation. Accordingly, we answer substantial questions infavour of the revenue and against the assessee. 11.Accordingly, the appeals are allowed. The impugned ordersare set aside. 12.A photocopy of this order be placed on the file of eachconnected case. (Adarsh Kumar Goel) Judge March 01, 2011Pka (Ajay Kumar Mittal) Judge