Commissioner Of Income Tax Ii, Ludhiana v. Sh. Satinder Pal Singh

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ITA No. 646 of 2009Date of decision 7 .1.2010 Commissioner of Income Tax II, Ludhiana ... Appellant Versus Sh. Satinder Pal Singh... Respondents. CORAM:HON'BLE MR. JUSTICE M.M. KUMARHON'BLE MR. JUSTICE JITENDRA CHAUHAN Present:Mr Rajesh Sethi ,Advocate for the appellant 1.To be referred to the Reporter or not ? 2.Whether the judgement should be reported in the Digest ? M.M.KUMAR, J. This order shall dispose of two appeals bearing ITA No. 646and 647 of 2009 as the issue raised in both the appeals is the same. The Revenue has filed the instant appeals under Section 260Aof the Income Tax Act,1961 (for brevity 'the Act') in respect of assessmentyear 2001-02 challenging order dated 31.3.2009 passed by the Income TaxAppellate Tribunal, Chandigarh (for brevity 'the Tribunal') in ITA No. 641-CHD-2004 alongwith Cross Objection 38 Chandi/2006. The Tribunal afterdealing with various aspects of the matter has disposed of the appeal filedby the Revenue alongwith the cross objection of the assessee- respondent.In respect of the question concerning distance of the agricultural land fromthe municipal limits of city of Khanna the Tribunal has decided the issueholding that distance of 2 kms. from the municipal limits of city of Khannahas to be reckoned for the purposes of Section 2(14)(iii) of the Act bymeasuring the same as per the road distance and not as per straight line ITA 646 of 2009 distance on a horizontal plane or as per crow's flight. After holding in theaforesaid manner, the Tribunal has remanded the matter to the AssessingOfficer to ascertain as to whether the agricultural land in question fallswithin the definition of capital assets under Section 2(14) of the Act byconsidering the distance in terms of the approach by road. The Revenue hasclaimed that following three questions of law would arise for determinationof this Court: “ (1) Whether on the facts and in law, the Hon'ble ITAT wasright in law in holding that distance of 2 kilometers for thepurpose of section 2(14)(iii) of the Income Tax Act,1961 has tobe taken in terms of approach by road and not as per straightline distance on a horizontal plane ;right in law in holding that distance of 2 kilometers for thepurpose of section 2(14)(iii) of the Income Tax Act,1961 has tobe taken in terms of approach by road and not as per straightline distance on a horizontal plane ; (2)Whether on the facts and in law, the Hon'ble ITAT waslegally justified in confirming the order of CIT(A) in deletingaddition made by the A.O. on account of repayment of loan toCanara Bank from unexplained sources when the assesseefailed to establish any nexus between the sale of horses and theamount of repayment of loan in the Canara Bank; andlegally justified in confirming the order of CIT(A) in deletingaddition made by the A.O. on account of repayment of loan toCanara Bank from unexplained sources when the assesseefailed to establish any nexus between the sale of horses and theamount of repayment of loan in the Canara Bank; and (3)Whether on the facts and in law, the Hon'ble ITAT waslegally justified in confirming the order of CIT(A) in deletingaddition made by the A.O. on account of repayment of loan toCanara Bank from unexplained sources when the assesseefailed to discharge the onus by adducing any supportingdocumentary evidence regarding the sources of repayment ofloan before the assessing Officer ?”.legally justified in confirming the order of CIT(A) in deletingaddition made by the A.O. on account of repayment of loan toCanara Bank from unexplained sources when the assesseefailed to discharge the onus by adducing any supportingdocumentary evidence regarding the sources of repayment ofloan before the assessing Officer ?”. During the course of hearing, we have found that question Nos. (2) ITA 646 of 2009 During the course of hearing, we have found that question Nos. (2) ITA 646 of 2009 and (3) are pure questions of fact and would not result into any substantivequestions of law which are required to be adjudicated by this Court.Accordingly, we proceed to consider question No.1. A perusal of the order passed by the Tribunal shows that oncethe principle of measuring distance has been settled namely that thedistance of the agricultural land belonging to the assessee- respondent has tobe measured in terms of the approach by road and not by a straight linedistance on horizontal plane or as per crow's flight. The Tribunal has placedfirm reliance on a judgement delivered by Mumbai Bench of the Tribunal inthe case of Laukik Developers v. DCIT 105 ITD 657 wherein the aforesaidprinciple has been accepted. Having heard the learned counsel we are of the consideredopinion that the views expressed by the Tribunal on the principle ofmeasurement merits acceptance. There is statutory guidance available inSection 2(14)(iii) of the Act. It would be profitable to read the aforesaidprovision which is as under: “2.14 “capital asset' means property of any kind held by anassessee, whether or not connected with his business orprofession, but does not include- xxxxxxxxxx (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; orjurisdiction 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 beingmore than eight kilometers, from the local limits ofany municipality or cantonment board referred toin item (a), as the Central Government may, havingregard to the extent of, and scope for, urbanizationof that area and other relevant considerations,specified in this behalf by notification in theOfficial Gazette”. A perusal of the aforesaid provision shows that 'capital asset' wouldnot include any agricultural land which is not situated in any area withinsuch distance as may be specified in this behalf by a notification in theofficial gazette which may be issued by the Central Government. Themaximum distance prescribed by Section 2(14)(iii)(b) of the Act which maybe incorporated in the notification could not be more than 8 Kms. from thelocal limits of municipal committee or cantonment board etc. Thenotification has to take into account the extent of, and scope forurbanization of that area and other relevant considerations. The reckoningof urbanization as a factor for prescribing the distance is of significantwhich would yield to the principle of measuring distance in terms ofapproach road rather than by straight line on horizontal plane. If principle ofmeasurement of distance is considered straight line distance on horizontalplane or as per crow's flight then it would have no relationship with thestatutory requirement of keeping in view the extent of urbanization. Such acourse would be illusory. It is in pursuance of the aforesaid provision thatnotification No. 9447 dated 6.1.1994 has been issued by the CentralGovernment. In respect of the State of Punjab, at item no.18 the sub divisionKhanna has been listed at serial no.19. It has inter-alia been specified thatarea upto 2 kms. from the municipal limits in all directions has to be ITA 646 of 2009 regarded other than agricultural land. Once the statutory guidance of takinginto account the extent and scope of urbanization of the area has to bereckoned while issuing any such notification then it would be incongruousto the argument of the Revenue that the distance of land should be measuredby the method of straight line on horizontal plane or as per crow's flightbecause any measurement by crow's flight is bound to ignore theurbanization which has taken place. Moreover, the judgement of theMumbai Bench appears to have attained finality. Keeping in view theprinciple of consistency as laid down in Radha soawami Satsangv. CIT(1992) 193 ITR 321, we are of the view that the opinion expressed by theTribunal does not suffer from any legal infirmity warranting interference ofthis Court. Accordingly question No. (1) is answered against the Revenueand in favour of the assessee by upholding the order of the Tribunal. The other two questions being based on pure findings of factwould not constitute substantive question of law and the findings recordedby the Tribunal are hereby affirmed. The appeals accordingly stand disposed of. A copy of this order be placed on the file of connected appeal. (M.M.Kumar) Judge 7.1.2010 (Jitendra Chauhan) Judge okg