Itxa/633/2016 Of Hari Jasumal Thakur v. Commissioner Of Income Tax (Appeal)-3 Mumbai

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.633 OF 2016 Mr. Hari Jasumal Thakur .. Appellant v/s. Commissioner of Income Tax(Appeals)-3Mumbai .. Respondent Mr. Jehangir Mistri, Senior Counsel a/w Ms. Viloma Shah, Ms. JuhiBahirwani I/b Hariani & Co. for the appellant Mr. Suresh Kumar for the respondent CORAM : AKIL KURESHI & M.S. SANKLECHA, J.J. P.C. DATED : 3[rd] DECEMBER, 2018. 1.This appeal is filed by the assessee challenging the judgment ofthe Income Tax Appellate Tribunal ("the Tribunal" for short) raisingfollowing questions for our consideration :- (i)Whether on the facts and circumstances of the case andin law, the Tribunal was right in holding that the agriculturalland bearing Survey No.37, admeasuring 32 Aar, and SurveyNo.38 Hissa No.2(Pt.) admeasuring 96.7 Aar aggregating to128.7 Aar equivalent to 12870 sq.mts. or thereabouts situatelying and being at Mauje Nighu, Taluka Talathi Saja Naygaon,Taluka Thane District Thane i.e. the said property was a capitalasset under the provisions of the Income Tax Act, 1961? (ii)Whether on the facts and circumstances of the case andin law, the Tribunal was right in holding that a chargeable capital gain arose in the hands of the appellant as a result ofthe execution of the Sale Deed dated 26 May 2008? (iii)Whether on the facts and circumstances of the case andin law, the Tribunal ought to have held that the agriculturalland bearing Survey No.37, admeasuring 32 Aar, and SurveyNo.38, Hissa No.2(Pt.) admeasuring 96.7 Aar aggregating to128.7 Aar equivalent to 12870 sq.mts. or thereabouts situatelying and being at Mauje Nighu, Taluka Talathi Saja Naygaon,Taluka Thane District Thane i.e. the said property was withinthe distance of 8 kms from the local limits of the Municipality? (iv)Whether on the facts and circumstances of the case andin law, the Tribunal ought to have held that the agriculturalland bearing Survey No.37, admeasuring 32 Aar, and SurveyNo.38, Hissa No.2(Pt.) admeasuring 96.7 Aar aggregating to128.7 Aar equivalent to 12870 sq.mts. or thereabouts situatelying and being at Mauje Nighu, Taluka Talathi Saja Naygaon,Taluka Thane District Thane i.e. the said property fell beyondthe distance of 8 kms as measured by the shortest road distanceas referred to in Circular bearing no.17/2015 issued by theCentral Board of Direct Taxes dated 6 October, 2015 ? 2.The issues relate to Assessment Year 2009-10. The facts may berecorded in brief which are as under. 3.The appellant assessee had sold agricultural land, comprising ofSurvey Nos. 30, 37, 38 and 46 situated at village Nighu for a saleconsideration of Rs.3.80 crores under an agreement dated 26.05.2008.The assessee on the premise that the said land did not form part of thehis capital asset, did not offer the profit arising out of said sale tocapital gain in the return filed for the said assessment year 2009-10. The Assessing Officer held that the land in question was a capital asset.The sale of such capital asset would give rise to capital gain chargeableto tax. The assessee carried the matter before the Commissioner ofIncome Tax (Appeals) ["CIT(A)" for short]. The CIT(A) allowed theappeal. Upon which, the issue travelled to the Tribunal at the hands ofthe Revenue. The Tribunal allowed the Revenue's appeal mainly onthe ground that the land in question was situated at the distance of5 kms from the limits of Navi Mumbai Municipal Corporation and,therefore, it was not excluded from definition of term "Capital Asset". Acontention which is sought to be raised before us that the distance byshortest route by road from the limits of Navi Mumbai MunicipalCorporation and the land in question is more than 8 kms, was notraised before the Revenue Authorities or the Tribunal. 4.Before recording and dealing with the rival contentions, we maynote that before the Assessing Officer, the assessee had contended thatthe land in question was situated beyond 8 kms from municipal limit.In support of this, the assessee had produced a certificate issued byThane Urban Agglomeration and Agricultural Department that Nighuwas beyond 8 kms from Thane Municipal Corporation. The AssessingOfficer however, found that Nighu and several other villages were separated from the Corporation vide notification dated 08.06.2007. Healso noted that village Nighu was situated at a distance of 5 kms fromNavi Mumbai Municipal Corporation. 5.Counsel for the appellant drew our attention to the relevantstatutory provisions and strenuously urged that the Tribunal hascommitted an error in interpreting Section 2(14) and in particularclause 3 thereof. He submitted that it was the Thane MunicipalCorporation which had jurisdiction over the land in question. Thedistance of land from Thane Municipal Corporation limits is in excess of8 kms. Counsel also submitted that the assessee now has reliablematerial to point out that even the distance by road between the limit ofNavi Mumbai Municipal Corporation and the land in question is inexcess of 8 kms. In this context, he relied on a letter dated 14.10.2015written by the Assistant Director, Town Planning, Navi MumbaiMunicipal Corporation to the assessee certifying that the distancebetween the land in question and the limit of Navi Mumbai MunicipalCorporation is approximately 9 kms. 6.On the other hand, learned Counsel for the Revenue opposed theappeal contending that the Tribunal has rightly interpreted Section 2(14) of the Act. The interpretation advanced by the assessee is notacceptable. He further submitted that as the question of road distancebetween the land in question and Navi Mumbai Municipal Corporationlimits was never raised by the assessee earlier, such contention shouldnot be permitted now. 7.In connection with the assessee's legal contention regardingdefinition of term "Capital Asset', we may peruse the relevant statutoryprovision. Section 2(14) of the Act defines the term capital asset whichincludes property of any kind held by an assessee whether or notconnected with his business or profession. However, clause (iii)thereof excludes agricultural land which as it stood at the relevant timeread as under :- “ 2(14) (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 byany other name) or a cantonment board and which hasa population of not less than ten thousand; or(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 byany other name) or a cantonment board and which hasa population of not less than ten thousand; or “(b)in any area within such distance, not being more thaneight kilometers, from the local limits of any municipality orcantonment board referred to in item (a), as the CentralGovernment may, having regard to the extent of, and scope for,urbanisation of that area and other relevant considerations,specify in this behalf by notification in the Official Gazette”. “(b)in any area within such distance, not being more thaneight kilometers, from the local limits of any municipality orcantonment board referred to in item (a), as the CentralGovernment may, having regard to the extent of, and scope for,urbanisation of that area and other relevant considerations,specify in this behalf by notification in the Official Gazette”. 8.A perusal of sub-clause (iii) would show that exclusion ofagricultural land from the term 'capital asset' would again be excludedif the land falls either under (a) or (b) thereof. Sub-clause (a) wouldcover any agricultural land which is comprised within the jurisdiction ofthe municipality or cantonment board etc. and which has a populationof not less than ten thousand. Accordingly, if the agricultural landunder reference is one which is comprised within the jurisdiction of amunicipality or cantonment etc. board having population of not lessthan ten thousand, it would not fall outside the definition of 'capitalasset'. Clause (b) would cover any area within such distance not morethan 8 kms from local limits of municipality or cantonment board etc.referred to in item (a) as a Central Government may specify under anotification. 9.In plain terms, therefore, an agricultural land may fall either inclause (a) or clause (b) or neither but not both. If it happens to be aland comprised within the jurisdiction of municipality or cantonmentboard etc., having population not less than ten thousand, it would fallunder clause (a). If this specification is not satisfied, the questionwould be does it still fall under clause (b), in which requirement is thatclause (a) or clause (b) or neither but not both. If it happens to be aland comprised within the jurisdiction of municipality or cantonmentboard etc., having population not less than ten thousand, it would fallunder clause (a). If this specification is not satisfied, the questionwould be does it still fall under clause (b), in which requirement is that the distance of the land should not be more than 8 kms from the locallimits of any municipality or cantonment board referred to in item (a).In the present case, the eventuality of the land falling neither in sub-clause (a) or sub-clause (b), as we have explained below, does notarise. 10.The contention of the Counsel for the assessee that the land inquestion is within the jurisdiction of the Thane Municipal Corporationand, therefore, it would fall neither within clause (a) nor within clause(b), cannot be accepted. Firstly, there is nothing on record to suggestthat the land in question is within the jurisdiction of Thane MunicipalCorporation. Reference to the Notification dated 08.06.2007 of theGovernment of Maharashtra Rural Development and WaterConservation Department would not clarify this position. Thisnotification provides that local areas specified in several villages, whichincludes village Nighu are included in the Thane District. It is anagreed position that the Thane Municipal Corporation is entirelydifferent entity having different existence and jurisdictional limits ascompared to Thane District. Thus, the very basis of the argument thatthe land comprises of Thane Municipal Corporation is not correct.Even if it were so, then also the land would be covered by sub-clause (a) in which case, it is not necessary to verify if it satisfies theconditions of sub-clause (b) at all. Reference to the distance of theland being more than or less than 8 km from limits of the Corporationwould then not arise at all. (a) in which case, it is not necessary to verify if it satisfies theconditions of sub-clause (b) at all. Reference to the distance of theland being more than or less than 8 km from limits of the Corporationwould then not arise at all. 11.Additionally, we also find that accepting the contention ofCounsel for the assessee, would make sub-clause (b) of clause (iii) ofsection 2(14), otiose. It is only when a particular land is notcomprised within the jurisdiction of municipality or cantonment boardetc., as referred to in sub-clause (a), the question of applicability orinapplicability of sub-clause (b) would arise. We do not think thatlegislature has envisaged any land fulfilling the description containedboth in sub-clause (a) and sub-clause (b). The reference to the words“any municipality or cantonment board referred to in item (a)” in sub-clause (b) must be to “any municipality or cantonment board which hasa population of not less than ten thousand”, which is the phrase used insub-clause (a). 12.Contention of the Counsel for the appellant was some whatunusual. He argued that land comprised within the jurisdiction ofThane Municipal Corporation (a contention which we have not accepted) and was situated beyond 8 kms from the limits of theCorporation. According to him therefore, the land would therefore notfall within sub-clause (a) or (b); even though it may be situated at adistance less than 5 kms from Navi Mumbai Municipal Corporation.We cannot accept this proposition. If land comprises within thejurisdiction of the Thane Municipal Corporation, it falls falls within sub-clause (a). In which case, reference to sub-clause (b) is not necessary.On the other hand, as we held, if it does not comprise within thejurisdiction of Thane Municipal Corporation, it would not fall undersub-clause (a). But if it is situated at a distance of less than 8 kms fromNavi Mumbai Municipal Corporation, it would fall under sub-clause(b). In either case, it would be referred as a capital asset. 13.In our opinion, therefore, the Tribunal has correctly appreciatedthe legal position in this regard. No question of law, therefore, arises. 14.The alternative contention of the counsel for the assesseehowever, requires some consideration. Counsel for the assessee drewour attention to a letter dated 14.10.15 written by the AssistantDirector, Town Planning, Navi Mumbai Municipal Corporation.According to this letter, the distance by road or the land in question and the Navi Mumbai Municipal Corporation is approximately 9 kms. If itis so established, in any case, the assessee may be entitled to the benefitunder the Act. However, this document was not part of the proceedingsbelow. We would, therefore, not examine this question before us forthe first time. Instead, we allow the assessee to produce this documentbefore the Tribunal. The Tribunal may thereafter enable the Revenueto respond to such document and take a fresh decision with respect tothe distance between the limits of Navi Mumbai Municipal Corporationand the land in question. We also note that the statutory provisionprevailing at the relevant time, did not clarify the manner in which thedistance would be measured i.e. either by road or aerially. Thelegislature now specifically provides that such distance would bemeasured aerially. This was introduced by Finance Act, 2013 w.e.f.01.04.2013. In this respect, our attention was drawn to the Circulardated 06.10.2015 issued by the Central Board of Direct Taxes clarifyingthat judgment of this Court dated 30.03.2015 in ITA No.151 of 2013 inthe case of Smt. Maltibai R. Kadu holding that the amendment inquestion would apply prospectively, is accepted by the Revenue. 15.The impugned judgment of the Tribunal is set aside. The appealof the Revenue is restored before the Tribunal, which may be disposed of in accordance with law after examining the issue noted above. 16.Accordingly, the appeal is disposed of. 15.The impugned judgment of the Tribunal is set aside. The appealof the Revenue is restored before the Tribunal, which may be disposed of in accordance with law after examining the issue noted above. 16.Accordingly, the appeal is disposed of. (M.S. SANKLECHA, J.) (AKIL KURESHI, J.)