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2016 (9) TMI 918 - ITAT AHMEDABAD

2016 (9) TMI 918 - ITAT AHMEDABAD - TMI - Gain arisen on account of sale of agriculture land - distance of geographical situation of the assessee’s land - Held that:- The distance is to be measured by roads in this accounting year. The land sold by the assessee is situated beyond 8 KMs. of the municipal limit. - Perusal of sub-clause (b) of section 2(14)(iii) would indicate that the municipal limit is to be taken from the area which has been notified by the Central Government in its gazette .....

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:- For rejecting the claim of the assessee, both the Revenue authorities have primarily relied upon the alleged information collected from the National Stock Exchange. The ld.CIT(A) has made reference to the letter of Additional CIT, Range-I, Ahmedabad dated 27.7.2012. According to the ld.CIT(A), in this letter the Addl.CIT has brought to his notice that Goldstar Finvest P.Ltd. was not registered as member of the Stock exchange. The contract notes are fictitious, SEBI registration of Goldstar Fi .....

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llected any information from the broker. If the AO has made any error in reference of particulars or details about the broker or the assessee, then the NSE will not be in position to give complete details. We find that SEBI registration quoted by the assessee in contract note of the broker is 230932431/23-10777. The PAN of the said broker is AABCA 6683 M. These very numbers have been communicated by the assessee to the AO. In the letter of ACIT dated 27.7.2012, which is a development after the a .....

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t should have been collected whether the broker has carried out the transactions with help of some other broker or this is some paper transactions. Considering all these aspects, we are of the view that the issue deserves to be re-investigated at the level of the AO, because, the ld.AO has not cross-verified the details with the National Stock Exchange as well as broker, through whom the assessee alleged to have carried out its transaction. It is quite difficult for the assessee to comment on th .....

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I RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER For The Revenue : Shri Jamesh Kurian, Sr.DR For The Assessee : Shri Dhiren Shah, AR ORDER PER RAJPAL YADAV, JUDICIAL MEMBER: The Revenue and the assessee are in cross-appeals against the order of the ld.CIT(A)-6, Ahmedabad dated 28.8.2012 for the Asstt.Year 2009-10. 2. The grounds of the appeals taken by the Revenue are not in consonance with the Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963 - they are descri .....

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. The case of the assessee was selected for scrutiny assessment, and notice under section 143(2) dated 23.8.2010 was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the AO that the assessee had earned a profit of ₹ 3,99,63,932/- on sale of land. The ld.AO has noticed the details in tabular form exhibiting name of village where the land was situated and survey no, date of purchase, purchase amount, date of sale, sale consideration and the gain. Such details .....

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ansaction no.2 as Long term capital gains since the land in question has been considered as Non-agricultural. The balance i.e ₹ 3,99,65,826 - ₹ 81,21,060 = ₹ 3,18,44,766 has not been offered for tax and claimed as exempt u/s 10(1) as agricultural income. 4. The assessee has contended that this land was situated beyond 8 KMs. of municipal area. It was an agriculture land, and therefore, it is to be excluded from the definition of capital asset provided in section 2(14)(iii) of t .....

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e considered the facts of the case, assessment order, AO's report and appellant's written submission and rejoinder. Appellant sold certain agricultural lands during the year and claimed the same as exempt within the definition of capital asset under section 2(14)(iii). Assessing officer found that the agricultural lands sold by the appellant during the year were situated v/ithin 8 km from Ahmedabad municipal limit and therefore these lands were capital assets and sale thereof were liable .....

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) The AUDA has taken present municipal limit whereas municipal limit has expanded over a period of time. Assessing officer in the reports submitted that limits of Ahmedabad municipal Corporation increased from 2006 and therefore at the time of sale of agricultural lands, Ahmedabad municipal Corporation limits have already been expanded and therefore from the expanded municipal limit, the agricultural lands situated in Telav Village were within 8 km and therefore the same were capital asset and t .....

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lier, this issue can be divided in two parts-(l) while computing distance from municipal limit, which distance- air distance or road distance to be considered. (2) Which municipal limit should be considered for computing distance from agriculture land- municipal limit on the date of sale or municipal limit on the date of issue of the notification by the government or municipal limit as on date. As regards the first part of the issue, appellant submitted decision of honourable Punjab and Haryana .....

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ce from the limits of Ahmedabad Municipal Corporation. As regards second part of the issue as to municipal limit as on which date is to be considered, it would be relevant to refer the relevant provision of income tax act as well as notification issued by government in this regard. 2(14) (iii) agricultural land In India, not being land situate- (a) in any area which Is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area commi .....

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of, and scope for, urbanisation of that area and other relevant considerations, specify in f his behalf by notification in the Official Gazette As per clause (b), in order to be excluded from the definition of Capital Asset, the land should not be situated within such distance from the local limits of ANY municipality {referred to in clause (a)} as specified by the central government by notification in the Official gazette. The said notification i.e Notification No. (SO 9447) (File No.l64/3/87-I .....

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sub-clause (c] of clause (1A], and item (b] of sub-clause (iii) of clause (]4j, of section 2 of the Income-tax Act, 196I (43 of 1961J, in the Gazette of India, Extraordinary, Part II, section 3, subsection (ii], dated February 13, 1991, under the notification of the Government of India in the Ministry of Finance (Department of Revenue] No. S.O. 91 (E], dated February 8, 1991, for specifying certain areas for the purposes of the said clauses and objections and suggestions were invited from the p .....

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clause (JA] and item (b) of sub-clause (iii] of clause (14] of section 2 of the Income-tax Act, 1961 (43 of 1961], and in supersession of the notification of the Government of India in the erstwhile Ministry of Finance (Department of Revenue and Insurance] No. S.O. 77(E], dated February 6, 1973, the Central Government having regard to the extent of, and scope for urbanisation of the areas concerned and other relevant considerations, hereby specifies the areas shown in column (4] of the schedule .....

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d in the schedule to this notification is to the limits as existing on the date on which the notification is published in the official Gazette." From the above, it is clear that the land situated within 8 kilometers from Ahmedabad municipal corporation limit is urban land and to be treated as capital asset. However land situated outside 8 km limit will be agricultural land not to be treated as capital asset. For computing the distance of 8 km, the municipal limit is also defined. Since muni .....

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on the date of transaction is not relevant as far as application of this notification is concerned. Appellant submitted that prior to 2006, the municipal limit of Ahmedabad Municipal Corporation was very restricted and form that limit, both the villages in which agricultural lands were situated are much beyond 8 km distance. Since notifications with regard to Ahmedabad municipal Corporation limits are available from which assessing officer can work out the distance of these agricultural lands. I .....

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sold will be outside the purview of capital asset and hence no capital gains can be charged on the same. This ground is accordingly disposed off. 6. Before us, limited dispute is whether the distance for identifying the geographical location of the agriculture land is to be taken by road or by aerial. Second fold of dispute is whether the municipal limit enhanced by the State Government is to be considered as starting point or it is to be taken from notification issued by the Central Government .....

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limit is concerned, it is to be measured by road, and if the distance is beyond 8 KMs, then that land would not fall within the definition of capital asset. He further pointed that Hon ble Bombay High Court has also concurred with this view in the decision of CIT Vs. Nitish Rameschandra Chordia, 57 taxmann.com 394. He placed on record copy of this decision. In this decision, the Hon ble Bombay High Court has specifically laid down that the distance is to be measured by road and not as per crow s .....

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tuated at a distance of more than 8 KMs. from the local limit of any municipality cantonment board, then, that land would not fall within the ambit of definition capital asset . In other words, if the land which is not forming part of capital asset sold by an assessee, then, no gain as such would be considered, as accrued to the assessee. In the present case, the ld.AO has observed that if the distance of geographical situation of the assessee s land is being measured from municipality limit, by .....

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o Assessment year 2014-15 "Agricultural Land is excluded from the definition of capital asset as per section 2(14)(iii) of the Income-tax Act based, inter-alia, on its proximity to a municipality or cantonment board. The method of measuring the distance of the said land from the municipality, has given rise to considerable litigation. Although, the amendment by the Finance Act, 2013 w.e.f. 1.04.2014 prescribes the measurement of the distance to be taken aerially, ambiguity persists in respe .....

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he municipal limit and the agricultural land is to be measured having regard to the shortest road distance. The said decision of the High Court has been accepted and the aforesaid disputed issue has not been further contested. 3. Being a settled issue, no appeals may henceforth be filed on this ground by the officers of the Department and appeals already filed, if any, on this issue before various Courts/Tribunals may be withdrawn/ not pressed upon. This may be brought to the notice of all conce .....

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dabad Municipal Corporation Limit. AMC limit was extended upto Sarkhej since 2006. The ld.CIT(A) has examined this aspect, and has observed that perusal of sub-clause (b) of section 2(14)(iii) would indicate that the municipal limit is to be taken from the area which has been notified by the Central Government in its gazette notification. Central Government has notified the area on 6.1.1994, and from that notification, the agriculture land of the assessee was situated beyond a distance of 8KMs. .....

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is pleaded in the application that appeal against the order of the ld.CIT(A) was prepared well in time, and it was forwarded by the tax consultants to the office of the company for signature. The person who has received the papers did not communicate to the management well in time. When he realized the pending work, only then, he immediately got the signature of the directors and forwarded to the office of the authorized representatives. But by that time, the appeal has become time barred by nin .....

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y of nine days on account of human negligence could have happened. Therefore, we condone the delay and proceed to decide the appeal on merit. 13. Solitary grievance of the assessee in its appeal is that the ld.CIT(A) has erred in confirming the disallowance of loss claimed by the assessee at ₹ 77,64,387/-. 14. Brief facts of the case are that the assessee has claimed loss of ₹ 77,64,387/-. It was contended by the assessee that it has carried out Future & Option (F&O) trading .....

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of claim under F&O, information was called from National Stock Exchange by quoting PAN of the assessee and SEBI registration number of brokers. The ld.AO has reproduced the information received by him from NSE. Vice-President, NSE has told the AO that the transactions having combination of PAN and SEBI registration no. were not undertaken in the stock exchange. The ld.AO has directed the assessee to explain its position. The assessee has submitted contract notes with the broker, bank detail .....

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these made-up transactions under its name. Broker might have shown these transactions relating to the assessee under some internal adjustments. Accordingly, he disallowed the claim of the assessee. 15. On appeal, the ld.CIT(A) has confirmed the action of the AO by observing as under: 4.4 I have considered 1he facts of the case; assessment order, information received from national stock exchange Ltd and appellant's written submission. Appellant claimed loss on futures and options transaction .....

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use SEBI registration number mentioned on contract notes are different. The said Gold Star Finvest P Ltd was member with interconnected stock exchange and its registration was cancelled by SEBI on January 20, 2005. In the light of these facts it is very clear that Gold Star Finvest P Ltd was not a registered broker during the year and therefore it was not entitled to trade contracts on behalf of the appellant. It was further certified that contract notes issued were fictitious. In the light of t .....

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er is justified in treating the loss claimed on F & O transactions fictitious. The disallowance of such fictitious loss is accordingly confirmed. 16. With the assistance of the ld.representatives, we have gone through the record carefully. A perusal of the impugned order would suggest that for rejecting the claim of the assessee, both the Revenue authorities have primarily relied upon the alleged information collected from the National Stock Exchange. The ld.CIT(A) has made reference to the .....

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payment through account payee cheque. Broker has issued contract notes. The assessee has produced copy of the ledger account maintained by him as well by the broker. The assessee has produced all details exhibiting number of shares, date of purchase and date of sale. The AO has not collected any information from the broker. If the AO has made any error in reference of particulars or details about the broker or the assessee, then the NSE will not be in position to give complete details. We find t .....

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