2016 (9) TMI 115 - HC - Income Tax

Agricultural land - whether the agricultural land sold by the assessee, is situated more than the distance of 8 Kms from Avadi Municipality and as to whether, that the same falls within the definition agricultural land - Held that - In the matter giving weightage to the evidence, report of the departmental inspection vis-a-vis certificates of the Village Administrative Officer, Deputy Surveyor, Ambattur Taluk and General Manager, Metropolitan Transport Corporation (Chennai) Ltd s, for the purpose of Section 2(14)(iii)(b) of the Income Tax Act, certificates of the Revenue Authorities and Public Transport Corporation Ltd., on the measurement of distance, by the approach road, should be given weightage and accepted, unless the contrary is proved. Therefore, 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, has to be measured, only in a straight line or a horizontal plane. In between agricultural land and the nearest municipality, if there is a mountain, or lake or private lands or government properties, and in such other cases, where the public has no access to reach the municipality, the distance has to be measured only through the access road and not in a straight line or horizontal plane.

Issues Involved:
1. Whether the land sold by the assessee is an agricultural land.
2. Whether the land is situated beyond 8 kilometers from the nearest municipality.
3. Whether the distance should be measured by road or straight line (aerial) distance.
4. Applicability of the amendment to Section 2(14)(iii)(b) of the Income Tax Act from 1/4/2014 to earlier assessment years.

Detailed Analysis:

1. Agricultural Land Status:
The core issue revolves around whether the land sold by the assessee qualifies as agricultural land. The assessee contended that the land was agricultural and situated more than 8 kilometers from Avadi Municipality, thus exempting it from capital gains tax. The department, however, argued that the land was not agricultural based on criteria from the Supreme Court decision in Sarifabibi Mohamad Ibrahim v. CIT, and because the land was barren and sold to a non-agriculturist in a developed area.

2. Distance from Nearest Municipality:
The assessee provided certificates from the Public Transport Department and the Village Administrative Officer, confirming that the land was over 8 kilometers from Avadi Municipality. The Assessing Officer (AO) disputed these certificates, relying on a report from an inspector who measured the distance as 5.5 kilometers using a private road maintained by CRPF. The Commissioner of Income Tax (Appeals) (CIT(A)) and the Income Tax Appellate Tribunal (ITAT) accepted the certificates provided by the assessee, emphasizing that the distance should be measured via accessible public roads, not private roads.

3. Measurement of Distance:
The judgment explored whether the distance should be measured by road or straight line (aerial) distance. The CIT(A) and ITAT held that the distance should be measured by the approach road, referencing multiple High Court decisions, including CIT v. Satinder Pal Singh, which stated that the distance must be measured by the approach road considering urbanization factors, not by straight line or aerial measurement.

4. Applicability of Amendment to Section 2(14)(iii)(b):
The department argued that the amendment to Section 2(14)(iii)(b), which mandates straight line measurement, should apply retroactively. However, the ITAT and the High Court ruled that this amendment, effective from 1/4/2014, cannot be applied to the assessment year 2009-10. The courts emphasized that the amendment is not clarificatory but substantive, thus not applicable to prior years.

Conclusion:
The High Court upheld the decisions of the CIT(A) and ITAT, confirming that the land sold by the assessee was agricultural and situated more than 8 kilometers from Avadi Municipality. The court ruled that the distance should be measured by the approach road, not by straight line or aerial distance. The court also affirmed that the amendment to Section 2(14)(iii)(b) does not apply retroactively. Consequently, the appeal by the revenue was dismissed, and the profit from the sale of the land was not liable to capital gains tax.

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