2013 (1) TMI 912 - AT - Income Tax

Summary

Issues Involved:
1. Whether the impugned lands were more than 2 KMs away from the municipal limits of Sanand and thus not capital assets u/s 2(14)(iii)(b) of the IT Act.
2. Whether the deletion of addition of Rs. 2,16,46,780/- made on account of the Assessee's share in short-term capital gains arising out of the sale of land was justified.

Summary:

Issue 1: Distance of Lands from Municipal Limits
The A.O. argued that the lands were within two kilometers of the Sanand municipal limits, making them capital assets u/s 2(14)(iii)(b) of the IT Act. The A.O. relied on certificates from the Talati cum Mantri and a map indicating the lands were within two kilometers. However, the CIT(A) visited the site and found the lands were more than two kilometers away, using the approach road method for measurement, as supported by the Hon'ble Punjab & Haryana High Court in CIT vs. Satinder Pal Singh and ITAT, Mumbai in Laukik Developers vs. DCIT. The CIT(A) concluded that the lands were not capital assets under the IT Act.

Issue 2: Deletion of Addition of Rs. 2,16,46,780/-
The A.O. added Rs. 2,16,46,780/- as short-term capital gains, arguing the lands were not used for agricultural purposes and were within the municipal limits. The CIT(A), however, found that the lands were used for agricultural purposes, supported by 7/12 extracts and the appellant's agricultural income records. The CIT(A) also noted that the lands were sold as agricultural lands and were more than two kilometers from the municipal limits, thus not falling under the definition of capital assets u/s 2(14)(iii)(b). Consequently, the addition was deleted.

Conclusion:
The Tribunal upheld the CIT(A)'s findings, confirming that the lands were agricultural and situated more than two kilometers from the municipal limits, thus not capital assets u/s 2(14)(iii)(b). The appeal of the Revenue was dismissed.