2019 (1) TMI 1469 - HC - Income Tax

Nature of land sold - agricultural land or capital asset - distance between the limits of Navi Mumbai Municipal Corporation and the land in question - Held that - If land comprises within the jurisdiction of the Thane Municipal Corporation, it falls falls within sub-clause (a). In which case, reference to sub-clause (b) is not necessary. On the other hand, as we held, if it does not comprise within the jurisdiction of Thane Municipal Corporation, it would not fall under sub-clause (a). But if it is situated at a distance of less than 8 kms from Navi Mumbai Municipal Corporation, it would fall under sub-clause (b). In either case, it would be referred as a capital asset. In our opinion, therefore, the Tribunal has correctly appreciated the legal position in this regard. No question of law, therefore, arises. Alternative contention for the assessee as he drew our attention to a letter dated 14.10.15 written by the Assistant Director, Town Planning, Navi Mumbai Municipal Corporation. According to this letter, the distance by road or the land in question and the Navi Mumbai Municipal Corporation is approximately 9 kms. If it is so established, in any case, the assessee may be entitled to the benefit under the Act. However, this document was not part of the proceedings below. We would, therefore, not examine this question before us for the first time. Instead, we allow the assessee to produce this document before the Tribunal who thereafter enable the Revenue to respond to such document and take a fresh decision with respect to the distance between the limits of Navi Mumbai Municipal Corporation and the land in question. The statutory provision prevailing at the relevant time, did not clarify the manner in which the distance would be measured i.e. either by road or aerially. The legislature now specifically provides that such distance would be measured aerially. This was introduced by Finance Act, 2013 w.e.f. 01.04.2013. In this respect, our attention was drawn to the Circular dated 06.10.2015 issued by the Central Board of Direct Taxes clarifying that judgment of this Court dated 30.03.2015 in ITA No.151 of 2013 in the case of Smt. Maltibai R. Kadu 2015 (4) TMI 227 - BOMBAY HIGH COURT holding that the amendment in question would apply prospectively, is accepted by the Revenue.

Summary

Issues:
1. Whether the agricultural land in question is a capital asset under the Income Tax Act, 1961?
2. Whether a chargeable capital gain arose from the sale deed dated 26 May 2008?
3. Whether the land is within 8 kms of the local limits of the Municipality?
4. Whether the land falls beyond 8 kms as per Circular bearing no.17/2015?

Analysis:

Issue 1:
The appellant sold agricultural land and disputed its classification as a capital asset, leading to a capital gain tax issue. The Assessing Officer considered the land a capital asset, leading to an appeal to the Commissioner of Income Tax (Appeals) and subsequently to the Tribunal. The Tribunal ruled that the land was within 5 kms of the Navi Mumbai Municipal Corporation, thus not excluded from the capital asset definition. The appellant argued that the land was beyond 8 kms from the municipal limit, supported by a certificate. However, the Tribunal's decision was based on the 5 km distance.

Issue 2:
The Tribunal's interpretation of Section 2(14) regarding capital assets was challenged. The appellant contended that the land was beyond 8 kms from the Thane Municipal Corporation limits, supported by a letter certifying a 9 km distance from the Navi Mumbai Municipal Corporation. The Tribunal correctly applied the law, emphasizing that if the land falls within a municipality's jurisdiction or within 8 kms from a municipality, it is a capital asset. The appellant's argument that the land did not fall under either clause (a) or (b) was rejected.

Issue 3:
The appellant's claim that the land was within the Thane Municipal Corporation's jurisdiction was disputed. The Court found no evidence supporting this claim, clarifying the distinction between Thane Municipal Corporation and Thane District. The argument that the land did not fall under either clause (a) or (b) was deemed incorrect, as the land was either within a municipality's jurisdiction or within 8 kms from a municipality, making it a capital asset.

Issue 4:
The appellant's alternative argument regarding the distance from Navi Mumbai Municipal Corporation was considered. A letter indicating a 9 km distance was presented but not part of the initial proceedings. The Court allowed the appellant to submit this document to the Tribunal for review. The legislative change specifying aerial measurement for distances was highlighted, and the case was remanded to the Tribunal for further examination based on the new evidence.

In conclusion, the Tribunal's judgment was set aside, and the appeal was restored before the Tribunal for a fresh decision considering the additional evidence presented by the appellant. The legal provisions regarding the classification of agricultural land as a capital asset were analyzed in detail, emphasizing the importance of distance from municipal limits in determining tax liability.