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2016 (9) TMI 858 - MADRAS HIGH COURT

2016 (9) TMI 858 - MADRAS HIGH COURT - [2016] 389 ITR 103 - Agricultural land - how, the distance between an agricultural land and the nearest municipality, should be measured? - whether should be measured, by the approach road, or by straight line distance on horizontal plane? - When a person cannot approach the land by the distance in straight line on horizontal plane, should the measurement be taken, by approach road? - Held that:- In a given case, the agricultural land is located in a villag .....

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out Section 11 of the General Clauses Act, 1897, legislature has also made it clear that for the purpose of any Act, that distance, shall unless a different, intention appears, be measured in a straight line on a horizontal plane. The proper interpretation to Section 11 of the General Clauses Act, 1897, depends upon the purposes for which, an Act is enacted. In the case of an explosive unit or stone quarry operations, aerial distance/crow's flight can be taken. In such circumstances, the distanc .....

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e on hand we are of the view that the decisions of the fact finding authorities that there cannot be any justifiable reason to reject the certificates of the Village Administrative Officer, Deputy Surveyor, Ambattur Taluk, Tahsildar, Ambattur and the General Manager, Metropolitan Transport Corporation (Chennai) Ltd's., are not perverse, warranting intervention. - On the facts and circumstances of this case, we also wish to state that in the matter giving weightage to the evidence, report of .....

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Transport Corporation Ltd., should be given weightage and accepted, unless the contrary is proved. In the case on hand, there are no materials to reject the said certificates, and no reason has been assigned by the assessing officer, for rejection. - In the light of what is stated above, it is not open to the revenue to contend that as per Section 11 of the General Clauses Act, 1857, the distance between the agricultural land and the nearest municipality, should be measured, only in a straig .....

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And D. Krishna Kumar, JJ. For the Petitioner : Mr. J. Narayanasamy ORDER ( Order of the Court was made by S. Manikumar, J.) Challenge in this Tax Case Appeal, is to an order made by the Income Tax Appellate Tribunal in I.T.A.No.411/Mds/2015, dated 09.10.2015, by which, the Tribunal has dismissed the appeal preferred by the revenue. 2. The assessee is the Founder-Chairman of Veltech Group of Educational Institutions, Avadi. There was a search, in the premises of the educational institutions run .....

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the department, the difference in the income originally returned and the revised return, represented capital gains of ₹ 3,09,11,561/- on the sale of land, at Morai Village, Ambattur Taluk originally offered, but withdrawn, in the revised return. During the course of the original assessment proceedings, the assessee contended that the land sold by him, at Morai village is an agricultural land and therefore, contended that the profit on sale of such agricultural land is not liable to tax. 3. .....

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n appeal, the Commissioner of Income-Tax (Appeals), vide his order, dated 23.08.2011 in I.T.A.No.336/10-11, confirmed the assessment of capital gains, on the sale of the land, at Morai village. 4. The assessee further went on appeal in ITA No.1779/Mds/2011 to the Income Tax Appellate Tribunal. He has filed a certificate from the Public Transport Department, showing that the land is situated, at a distance of more than 8 kms from Avadi limits. The assessee has also filed a certificate from the Vi .....

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reliance on the decision of Hon'ble Supreme Court in Sarifabibi Mohamad Ibrahim v. ClT reported in (204 ITR 631), the Assessing Officer held that the assessee's land is not an agricultural land, as it does not fulfil the criteria laid down by the court, in the aforesaid decision. In the subject assessment order, he has also stated that the land was barren, when the Inspector inspected the land, that the buyer was not an agriculturist, and the land was situated in a developed area. Thus, .....

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e assessee and evidence on record, in particular, the certificates of the Village Administrative Officer, Deputy Surveyor, Ambattur Taluk and General Manager, Metropolitan Transport Corporation (Chennai) Ltd's, certifying that the land is situated, at a distance of more than 8 Kms., from Avadi Municipality and the lease deed, between the assessee, other family members & M/s.Vel Horticultures, leasing the land for agricultural operations, accepted in the scrutiny assessment, and also the .....

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Avadi), result of which, clearly proves that the land in question is not situated within a distance of 8 Kms from the nearest Municipality. The appellate authority has further held that no reason has been assigned by the Assessing Officer, in the assessment order, as to why, he has not accepted the report of the Tahsildar. With regard to the report of the departmental Inspector that the land in question is situated at a distance of 5.5 Kms and submitted before the Assessing Officer, the Commissi .....

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categorically held that the issue is squarely covered by the judgment of this Court in Mrs.Shakunthala Vedachalam v. Mrs.Vanitha Manickavasagam reported in (2014) 369 ITR 558 and following the aforesaid decision, the Commissioner of Income-Tax (Appeals) held that the assessee s land in question is an agricultural land situated at a distance of more than 8 Kms from the nearest Municipality and as the profit on sale of such land is not liable to tax, the Commissioner of Income Tax (Appeals) has d .....

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d situated at a distance of more than 8 km from the nearest Avadi Municipality and therefore the profit on the sale of such land is not liable to tax. 2.3 The CIT(A) erred in the land sold was situated at a distance of 10Kms from the nearest Avadi Municipality based on the VAO's certificate without any evidence with respect to Village administrative records. 2.4 The CIT(A) erred in the land sold was situated at a distance of 10Kms from the nearest Avadi Municipality based on the Metropolitan .....

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ch within 8 Kms from the Avadi Municipality. He deputed three Income-tax Inspector to ascertain actual distance and as per their report, the distance between Avadi Municipality and Morai Village is 5.5 Kms only. 2.6 The CIT(A) has failed to note that the Assessing Officer had followed the direction of the Hon'ble ITAT and by examining all evidences placed before them and passed the order in accordance with law. 9. Upon considering the evidence adduced by the assessee and the Department and f .....

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Municipality is beyond 8 Kms by ignoring the evidences collected by the department through the inspector of the department as per which the distance is 5.5 Kms as measured per section 11 of the General Clauses Act and thereby holding that the gain on sale of the land cannot be assessed to capital gains. (ii) Whether on the facts and in the circumstances of the case the tribunal was right in holding that land is agricultural land merely because the Tribunal had concluded that the land was situate .....

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catory and is applicable for earlier assessment years. 10. Praying for an answer on the substantial questions of law, in favour of the appellant, Mr.J.Narayanasamy, learned counsel appearing for the revenue assailed the correctness of the order of the Income-Tax Appellate Tribunal, A Bench, Chennai, dated 09.10.2015, on the grounds, inter alia that the land is situated at a distance of 5.5 Kms, from the end of Avadi municipality, as per the report of the departmental inspector, who had made a fi .....

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tention appears, should be measured in a straight line on a horizontal plane and therefore, submitted that the aerial distances should be taken. He further submitted that straight line measurement is mandated, as per the amendment to Section 2(14)(iii)(b) of the Income Tax Act, from 1.4.2014 and without appreciating the fact that the amendment is only clarificatory in nature, the Tribunal has erred in accepting the case of the respondent. According to him, the amendment is applicable to the earl .....

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counsel appearing for the appellant and perused the materials available on record. 13. On the issue, as to whether, the agricultural land sold by the assessee, is situated more than the distance of 8 Kms from Avadi Municipality and as to whether, the same falls within the definition, agricultural land , it is necessary to have a cursory look at few provisions, referred to, by the learned counsel for the appellant. Section 2(14)(iii) of the Income Tax Act, reads as follows: (iii) agricultural la .....

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erred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh. 14. Sect .....

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found that the distance is 5.5 Kms and on that basis, treated the sale of the agricultural land, as long time capital gains, and added an amount of ₹ 3,06,74,615/- to the total income of the assessee, and imposed penalty under Section 271(1)(c) of the Income-Tax Act. While assailing the correctness of the order, the respondent filed an appeal in I.T.A.No.433/13-14, before the Commissioner of Income-Tax (Appeals) and contended that the assessing officer has erred in selecting a private road .....

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ration (Chennai) Ltd's, certifying that the land is situated more than 8 Kms, from Avadi Municipality, the appellate authority, at Paragraph 7 of the order in I.T.A.No.433/13-14, dated 28.11.2014, has categorically held that the land in question, is an agricultural land situated, at a distance of more than 8 Kms, from the nearest Avadi Municipality. The appellate authority has further held that from the letter No.5729/2013/A1, dated 03.08.2013, of Mrs.M.Bhushna Devi, Tahsildar, Ambattur, it .....

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or that the land in question is situated at a distance of 5.5 Kms and while observing that the route used by the Inspector to reach the land is a private road, laid and maintained by CRPF, the appellate authority held that public have no free access to CRPF road, as the said road is not under the control of the local administration. Thus, holding that the subject land is an agricultural land, situated at a distance of more than 8 Kms from the nearest municipality and that the profit on sale of s .....

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de order, dated 09.10.2015, the Tribunal, at Paragraphs 5 to 7, answered the challenge, as hereunder: 5. We have heard both the sides and perused the material on record. The main argument of the Department is that the land sold by the assessee is a capital asset, as it is situated within the distance of 8 kms. from the nearest Municipality limit (Avadi). For arriving at a conclusion, the AO disputed the certificates issued by the Deputy Surveyor Ambattur Taluk and General Manager, Metropolitan T .....

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d in question. The result showed that the land in question is not situated within a distance of 8 kms. From the nearest Municipality. The AO was not ready to accept this certificate and he has not given any reason for the same. However, the Inspector reported that the land in question was situated at a distance of 5.5. kms. from the nearest Avadi Municipality. It was the contention of the ld. AR that to reach the land, there is a private road, which is laid and maintained by the CRPF, in which p .....

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the approach by road and not by a straight-line distance on horizontal plane or as per crow s flight as held by the Punjab & Haryana High Court in the case of CIT vs. Satinder Pal Singh (229 CTR 82). In view of this, the AO has no material to prove the contention of the assessee that the distance of the land as on date of sale has to be held more than 8 kms. From the nearest Municipality, is not correct. Therefore, the assessee has to prove one essential condition that the land owned by him .....

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nder sec. 2(14)(iii)(b) of the Act and it cannot be applied to the present assessment year 2009-10. Regarding carrying out of agricultural activities in the said land, there is an evidence in the form of lease deed between the assessee (and other family members) and M/s. Vel Horticultures leasing the land for agricultural operations, the leasing company claimed agricultural income which had been accepted in the scrutiny assessment as noted by the CIT(Appeals) in his order, which was not controve .....

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akshan reported in 1974 KLT 300, in the case of shifting of Kudikidappu under the Kerala Land Reforms Act, 1964 and dealing with Section 78(2)(e)(ii) of the Act, directing that the new site should be "within a distance of one mile from the existing Kudikidappu, the Kerala High Court held that the distance has to be calculated by some road or pathway over the which a person will have a right to approach the alternative site when proceeding thereto from the site of the existing Kudikidappu&qu .....

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ce between the agricultural land and the municipal limits of city, decided the issue, holding that the distance of 2 kms., from the municipal limits of city, has to be reckoned for the purposes of Section 2(14)(iii) of the Act, by measuring the same, as per the road distance and not as per straight line distance on a horizontal plane or as per crow s flight. When the said decision was challenged, the Punjab and Haryana High Court, held as follows: A perusal of the aforesaid provision shows that .....

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of, and scope for urbanization of that area and other relevant considerations. The reckoning of urbanization as a factor for prescribing the distance is of significant which would yield to the principle of measuring distance in terms of approach road rather than by straight line on horizontal plane. If principle of measurement of distance is considered straight line distance on horizontal plane or as per crow s flight then it would have no relationship with the statutory requirement of keeping i .....

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ount the extent and scope of urbanization of the area has to be reckoned while issuing any such notification then it would be incongruous to the argument of the Revenue that the distance of land should be measured by the method of straight line on horizontal plane or as per crow s flight because any measurement by crow s flight is bound to ignore the urbanization which has taken place. Moreover, the judgement of the Mumbai Bench appears to have attained finality. Keeping in view the principle of .....

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sured in terms of the approach road and not by the straight line distance on horizontal plane or as per crow's flight. 23. In Commissioner of Income Tax v. Nitish Rameshchandra Chordia reported in (2015) 57 Taxman 394 (Bom.), the Bombay High Court held that "The distance between municipal limits and assessed property/asset is to be measured having regard to the shortest road distance and not as per the crow flies i.e. straight line distance as canvassed by the Revenue." 24. In Comm .....

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entions, the question to be decided in this appeal is, as to how, the distance between an agricultural land and the nearest municipality, should be measured? whether should be measured, by the approach road, or by straight line distance on horizontal plane? When a person cannot approach the land by the distance in straight line on horizontal plane, should the measurement be taken, by approach road? 26. In a given case, the agricultural land is located in a village X and if there is a lake, measu .....

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has a shop in Fort Road, Parrys, on the eastern side. If he has to go to a shop or office or any place located in NSC Bose Road, on the Western Side, he has to go round the High Court, and reach the place of destination. He has no right to use the High Court premises, which is not a public pathway/road and therefore, the distance has to be measured, only by approach road and not through the place, which is restricted to public. Therefore, if only a person has access, through an approach road, pe .....

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Clauses Act, 1897, legislature has also made it clear that for the purpose of any Act, that distance, shall unless a different, intention appears, be measured in a straight line on a horizontal plane. The proper interpretation to Section 11 of the General Clauses Act, 1897, depends upon the purposes for which, an Act is enacted. In the case of an explosive unit or stone quarry operations, aerial distance/crow's flight can be taken. In such circumstances, the distance falls within the ambit .....

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the above decisions and discussion, on the aspect, as to how, the distance between an agricultural land and the nearest municipality has to be measured, vis-a-vis, the report of the departmental inspector, we are of the view that the decisions of the fact finding authorities that there cannot be any justifiable reason to reject the certificates of the Village Administrative Officer, Deputy Surveyor, Ambattur Taluk, Tahsildar, Ambattur and the General Manager, Metropolitan Transport Corporation ( .....

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