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2014 (12) TMI 599 - AT - Income TaxAddition made by AO on LTCG – Distance of land more than 8 Kms. From the Muincipality so as to be treated it as agricultural land or not - Whether distance of the land is to be considered from Sohna Municipal Corporation or Gurgaon Municipal Corporation - assessee claimed that the capital gain from the sale of land is not taxable because the land is agricultural land which does not fall within the definition of capital asset u/s 2(14) – Held that:- The land does not fall in any area which is comprised within the jurisdiction of a municipality or a cantonment board which has a population of not less than ten thousand - the provisions of clause (b) of Section 2(14)(iii) are unambiguous, plain and simple i.e. distance of the land can be considered from the local limits of any of the municipalities – relying upon Commissioner of Income-Tax, Chandigarh Versus Smt. Anjana Sehgal [2011 (3) TMI 695 - PUNJAB AND HARYANA HIGH COURT] – thus, the land is capital asset which was within the distance of 8 Kms. from a municipality in Haryana while the land was situated in the State of Punjab - distance of the land under consideration can be measured from Gurgaon Municipal Corporation for the purpose of Section 2(14)(iii)(b). Whether aerial distance is to be considered or as per road distance – Held that:- CIT(A) rightly held that the distance is to be measured as per road distance and not as per aerial distance – following the decision in CIT v. Satinder Pal Singh [2010 (1) TMI 752 - Punjab and Haryana High Court] - ‘capital asset’ would not include any agricultural land which is not situated in any area within such distance as may be specified in this behalf by a notification in the Official Gazette which may be issued by the Central Government – thus, the distance of the land is to be measured as per road distance and not aerial distance as per crow’s flight. Whether distance up to the land should be considered or up to the village within which such land is situated – Held that:- The view taken by the CIT(A) cannot be accepted - the land should be within the area whose distance is not more than 8 Kms. - There is no mention that if the land is in any particular village, then the distance of 8 Kms. is to be considered from the outer limit of the village. “Area” word has not been defined in the Income-tax Act - the ‘area’ only means any open space or portion of earth’s surface - the correct interpretation of the word ‘in any area within such distance not being more than 8 Kms. from the local limits of any municipality’ would mean the land should be within such area which is not more than 8 Kms. from the local limit of the municipality – thus, the land should be within the distance of 8 Kms. from the local limit of the municipality and not from the outer limit of the village in which such land falls. Final determination of distance of the land from Gurgaon Municipality – Held that:- Assessee had also produced the certificates from Shri I.D. Rustogi, former Additional Director General, CPWD who had certified the distance of the land from Gurgaon Municipality as 10.4 Kms. in which he has given point to point route distance - No valid reason has been given by the Revenue authorities for rejecting this certificate - Considering the certificate of the Tehsildar coupled with his statement before the Assessing Officer, certificate of the Assistant Engineer, Gurgaon Municipal Corporation and the certificate from Shri I.D. Rustogi, former Additional Director General, CPWD, the distance of the land from Gurgaon Municipal Corporation is established to be beyond 8 Kms - the land sold by the assessee does not fall within the ambit of either clause (a) or (b) of Section 2(14)(iii) - the land sold by the assessee was agricultural land and therefore, out of the purview of capital asset, hence, not chargeable to capital gain tax – Decided in favour of assessee. Forfeited (balance) out of advance money received under forfeiture clause deleted – Held that:- As per Section 51, any advance received and forfeited by the assessee in respect of any negotiations for transfer of capital asset is to be deducted from the cost of the asset - at the relevant time i.e. during AY 2006-07, there was no provision under the Income-tax Act for treating the forfeiture of advance received during the course of negotiations of a transfer of a capital asset as income from other sources - The provision has come into effect with effect from 1.4.2015 only – thus, the order of the CIT(A) is upheld – Decided against revenue.
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