Ita/339/2007 Of Commissioner Of Income Tax v. Khazan Singh

TTANo. 339 of 2007| IN THE HIGH COURT OF PUNJAB & HARYANAAl CHANDIGARH I.T.A. No. 339 of 2007 (O&M)Date of Decision: 20.02.7014 The Commissioner of Income Tax, Patiala. VS, ... Appellant Shri Khazan Singh ... Respondent CORAM: HON'BLE MR. JUSTICE AJAY KUMAR MITTALHON ' BLE MRS, JUSTICE ANITA CHAUDHRY, Present: Ms. Savita Saxena, Advocatefor the appellant.for the appellant. Mr. Aakasn Singla, Advocatefor the respondent. | 666 ANITA CHAUDHRY, J.. 1.Through the instant appeal preferred by the revenue,a challenge nas been laid to the order dated 24.01.2007 passedby the Income Tax Appellate Tribunal, Chandigarn Bencn (forbrevity, the Tribunal), affirming the order of Commissioner ofIncome Tax(Appeals)(in short, ‘CIT(A)') ordering deletion of Rs.12,83,930/- relating to assessment year 2002-03. ? On 12.11.2007, the appeal was admitted fordetermining following substantial questions of law:- (1)Whether on the facts and In thecircumstances of the case, the ITAT its rignt ilaw in concurring with the findings of the firstAppellate Authority that the land in questionfalls within the Jurisdiction of Mangwal villageGram Pancnayat, an autonomous loca! autnoritythat has all the ingredients of Municipality to TTANo. 339 of 20079) cover it fully in Section 2(14)(ii)(a) of theIncome Tax Act, 1961, and as this Panchayatdoes not find place in the Boards notificationdated 6.1.1994, therefore, the land in questionqoes not come unaer the aefinition of capitalasset and thereby deleting the addition of Rs.12,83,930/- made by the Assessing Officerunder the head Capital Gain? (iI)Whether on the facts and = In tcircumstances of the case, the ITAT its rignt ilaw in upholding tne order of the CIT(A) thatthe land being within the 5 kms from thejurisdiction of municipality of Sangrur woulditself not constitute a capital asset within themeaning of Section 2(14(ii))(b) unless villageMangwal_ fails within the jurisdiction —municipality of Sangrur whereas Section 2(14)(111)(b) does not impose any such requirement|‘3The brief facts of the case are that the assessee-respondent purchased land in question at village Mangwal duringfinancial year 2000-01 for a consideration of “21,40,000/- andsola tne same on 127.172.2001 for a sum o|34,23,932/-. He didnot show any income while filing the return for the assessmentyear 2002-03. The Assessing Officer, vide order dated25.11.2003 held that the land sold by the assessee falls withinthe definition of capital asset as provided under Section 2(14) oftne Income Tax Act, 1961 (in snort, tne Act) and accordinglyassessed an amount otf|12,83,930/- as short term capital gain by TTANo. 339 of 20073 making the following observations:- "I have considered the arguments putforth bythe assessee and not convinced witn it. Theassessees land in question is situateaq within5km from tne limit of Sangrur MunicipalCommittee, the facts has not been denied bythe assessee as per order sheet entry dated20/10/2003. As per Board's notification dated6/1/94 issued U/S 2(1A)(Cc) proviso, clause (iI(B) and section 2(14)(il))(b) in wnicn urban areahas been defined. Under tne said notificationthe area in respect of Sangrur town upto thedistance of 5 km from the Municipal limits in allthe directions has been notified as urbanizedarea.” 4.Tne appeal against tne aforesaid order was filed bytne assessee before tne CIT(A), which was allowed on 11.11.200by making the following observations:- 8%+#In view of the above, it is clear that theland in question falls within the jurisdiction ofvillage Gram Pancnayat, an autonomous localautnority that nas all the ingredients laid downby the Hon bie Kerala Hign Court (supra) tocover it within the definition of Municipal insection 2(14)(iil)(a) of the Income Tax Act,1961 and this Gram Panchayat Mangwal has apopulation less than 10,000 as per the latestcensus. This Panchayat Mangwal does not find TTANo. 339 of 20074 4.Tne appeal against tne aforesaid order was filed bytne assessee before tne CIT(A), which was allowed on 11.11.200by making the following observations:- 8%+#In view of the above, it is clear that theland in question falls within the jurisdiction ofvillage Gram Pancnayat, an autonomous localautnority that nas all the ingredients laid downby the Hon bie Kerala Hign Court (supra) tocover it within the definition of Municipal insection 2(14)(iil)(a) of the Income Tax Act,1961 and this Gram Panchayat Mangwal has apopulation less than 10,000 as per the latestcensus. This Panchayat Mangwal does not find TTANo. 339 of 20074 place in the’ said _ notification wherMunicipality of Sangrur finds place at Sr. No. 40of Punjab at Sr. No. 18 of said notification. Thusland being within tne 5 kms_ from. thjurisdiction of Municipality of Sangrur woulditself not constitute an asset within the meaningof section 2(14)(1i))(b) unless village Mangwalfalls within the jurisdiction of Municipality. oSangrur also like village Nangal Dewat fallswithin tne jurisdiction of Municipal Corporationof Deini. Undisputealy village Mangwali is notwithin the jurisdiction of Municipality — Sangrur. Hence, the land in question is not aland to constitute an asset within the meaningof section 2(14)(il))(a) or (b) of the I.T. Act,1961. Hence, the Assessing Officer is directedto treat the said land not an asset within themeaning of section 2(14)(ii)(a) of the I.T. Act,1961. The addition made on this account of thetune of Rs. 12,83,930/- ts thus deleted. ” 5.The Tribunal dismissed the appeal of the revenue andaffirmed the deletion made by the CIT(A). Dis-satisfied with thesame, revenue has filed the instant appeal. 6.For adjudication of the issues, let us first advert toSection 2(14)(iil)(a) and (b) of the Act, which reads as under:- 8$%+‘Capital asset’ means property of any kindneid by an assessee, wnether or not connected TTANo. 339 of 20075 with his business or profession, but does notinclude.... (ip)agricultural land in Inaia, not being landsituate--- (a)in any area whicn is comprised within thejurisdiction of a municipality(whether known asa municipality, municipal corporation, notifiedarea committee, town area committee, towncommittee, or by any otner name) or acantonment board and wnhicn has a populatioof not less than ten thousand according to thelast preceding census of which the relevantfigures have been published before the firstday of the previous year; or| (D)in any area within sucn aistance, notbeing more than eight kilometres, from thelocal limits of any municipality or cantonmentboard referred to in item (a), as the CentralGovernment may, having regard to the extentof, and scope for, urbanisation of that area andotner relevant considerations, specify in thisbenalf by notification in the Official Gazette.” J.From the plain and unambiguous language used inclause (a) of this sub-section, it is clear that if the agriculturalland is situated outside the jurisdiction of a municipality, then notax on any profits or gains arising from the transfer of such landwill be chargeable under the head ‘capital gains’. However, under TTANo. 339 of 20076 clause (b) any area within 8 kms from the local limits of anyMunicipality or Cantonment referred in Clause (a) or within sucharea as tne Central Government may specify Dy way of anotification having regard to the extent and scope of urbanisationof that area would be within the ambit of capital asset. J.From the plain and unambiguous language used inclause (a) of this sub-section, it is clear that if the agriculturalland is situated outside the jurisdiction of a municipality, then notax on any profits or gains arising from the transfer of such landwill be chargeable under the head ‘capital gains’. However, under TTANo. 339 of 20076 clause (b) any area within 8 kms from the local limits of anyMunicipality or Cantonment referred in Clause (a) or within sucharea as tne Central Government may specify Dy way of anotification having regard to the extent and scope of urbanisationof that area would be within the ambit of capital asset. 8.In the case in hand, it is evident that at no point oftime the assessee had disputed that the land in question did notfall within the area of 5 kms from municipal limits of Sangrur.Even CIT(A) has also mentioned in its order that the land issituated within 5 kms of Sangrur Municipal Committee. Not onlythis, a perusal of notification dated 6.1.1994 issued by theGovernment of India under the provisions of Section 2(14)(ill)(b),makes it clear that areas upto distance of 5 kms from municipallimits of Sangrur in all directions falls within the local limits ofSangrur municipality. Once there was no denial! of the fact thatne land in question falis within 5 kms of Sangrur MunicipalCommittee, there was no occasion for the CIT(A) as well as theTribunal to interpret otherwise and hold that the land in questionwould not constitute a capital asset within the meaning ofprovisions ibid. | QTnus, we find that tne CIT(A) as well as the Tribunalfell into error wnile ordering the deletion. Consequently, we allowtne appeal and answer the questions framed above in favour ofthe revenue. (AJAY KUMAR MITTAL)JUDGE20.02.2014Jiten (ANITA CHAUDHRY)JUDGE