2019 (6) TMI 1086 - AT - Income Tax

Capital gain - capital asset within the meaning of section 2(14) - whether the land situates beyond 8 kms. from the municipal limit or not ? - geographical situation and applicability of amendment carried out in the definition of agriculture land by way of Finance Act, 2013 - HELD THAT - Both the Revenue authorities have not disputed that the land sold by the assessee was not agriculture land. Dispute is about its geographical situation and applicability of amendment carried out in the definition of agriculture land by way of Finance Act, 2013. As far as applicability of amendment carried out in the definition of agriculture land way of Finance Act, 2013 is concerned, Board has already considered this aspect in the circular no.17 of 2015 and opined that it will be applicable only from the assessment year 2014-15. We have extracted this circular while taking cognizance of the finding recorded by the Tribunal in Akashdeep 2016 (9) TMI 918 - ITAT AHMEDABAD . Similarly, Board has explained that distance between municipal limit and agriculture land is to be measured having regard to the shortest road distance and not by way of crow s flight. Third aspect is that even if the assessee has included gain on transfer of this land in his return of income, he has every right to plead that gain is not taxable and it be excluded from his taxable income. Duty of the AO is to determine right tax liability in the hands of the assessee, and not on the basis of erroneous admission. Therefore, even if the assessee has admitted initially about the taxability, and later on realize his right then his right has to be given effect and adjudicated upon. The only circumstance, which has left for consideration is, whether the land situates beyond 8 kms. from the municipal limit or not. The assessee is relying upon the certificate issued by Talati. The Talati is Revenue official appointed by the State Government. His duty is to maintain accounts and record all rights in a particular village. The illegible written on page no.20 notes signature i.e. Talaticum -mantry, Bhuvaladi Gram Panchayat, which means, he is a revenue official-cum-accountant for this gram panchayat. He is not an elected person rather he is competent person to give certified copy of land record and other certificates. We do not find any merit in the contention of the ld.DR that he is not a revenue official rather an elected person in the gram panchayat. Talati is akin to Patwari in other parts of India. He is a village accountant and as contemplated in sections 16 and 17 of the Gujarat Land Revenue Code 1879. Thus, cognizance could be taken on the basis of his certificate. CIT(A) has just made a bald reference to Google-map etc., but has not pin-pointed what was the distance given in the Google-map in 1994 when the Central Government has issued notification for the purpose of section 2(14) of the Income Tax Act. His observation that this is evident from Google-map also is just an observation without any scientific look to the data recorded as on 6.1.1994. Therefore, we are of the view that the land transferred by the assessee was not a capital asset within the meaning of section 2(14) and gain arising from such transfer is not taxable in his hand. As far other alternative contention is concerned, we do not deem it necessary to adjudicate them because we have held that on transfer of this agriculture land, long term capital gain is not leviable in the hands of the assessee.

Issues Involved:
1. Taxability of capital gains on the transfer of agricultural land.
2. Applicability of Section 50C of the Income Tax Act.
3. Determination of the geographical location of the land concerning municipal limits.
4. Measurement of distance for tax purposes.
5. Applicability of amendments introduced by the Finance Act, 2013.

Issue-wise Detailed Analysis:

1. Taxability of Capital Gains on the Transfer of Agricultural Land:
The primary contention of the assessee was that the land sold was agricultural and thus not liable for capital gains tax. The assessee argued that the land was situated beyond 8 km from the municipal limits, making it exempt from capital gains as per Section 2(14)(iii) of the Income Tax Act, 1962. The AO and CIT(A) disagreed, citing the assessee's initial admission of capital gains in the return filed on 31.3.2016. However, the Tribunal noted that the assessee has the right to correct an erroneous admission and that the duty of the AO is to determine the correct tax liability.

2. Applicability of Section 50C of the Income Tax Act:
The assessee contended that Section 50C, which deals with the valuation of capital assets for stamp duty purposes, was not applicable as the land in question was agricultural. The AO and CIT(A) rejected this claim, asserting that the land was within 8 km of the municipal limits and thus not exempt. The Tribunal, however, found that the land was indeed agricultural and situated beyond 8 km from the municipal limits, making Section 50C inapplicable.

3. Determination of the Geographical Location of the Land Concerning Municipal Limits:
The Tribunal examined the evidence provided by the assessee, including a certificate from the Talati-cum-mantry of the village, which confirmed that the land was beyond 8 km from the municipal limits. The Tribunal noted that the Junior Engineer's report, which the AO and CIT(A) relied upon, was not a competent authority to determine the geographical location. The Tribunal emphasized that the distance should be measured from the municipal limits as notified by the Central Government on 6.1.1994.

4. Measurement of Distance for Tax Purposes:
The Tribunal referred to several judicial precedents and a CBDT circular, concluding that the distance should be measured by road and not aerially. The Tribunal noted that the municipal limits as on 6.1.1994 should be considered for measuring the distance, not the limits as extended in 2006. The Tribunal found that the land was situated beyond 8 km from the municipal limits when measured by road, making it exempt from capital gains tax.

5. Applicability of Amendments Introduced by the Finance Act, 2013:
The Tribunal clarified that the amendments to the definition of agricultural land introduced by the Finance Act, 2013, were applicable from the assessment year 2014-15 onwards. Since the transaction in question occurred in the assessment year 2013-14, the amended definition did not apply. The Tribunal relied on a CBDT circular that supported this view, further strengthening the assessee's position.

Conclusion:
The Tribunal concluded that the land sold by the assessee was agricultural and situated beyond 8 km from the municipal limits as per the relevant notification. Therefore, the gains from the sale were not taxable. The Tribunal also held that the assessee was entitled to correct the erroneous admission of capital gains in the return filed. Consequently, the appeal was partly allowed, and the AO was directed to exclude the gains from the taxable income of the assessee. The Tribunal also noted that the charging of interest under sections 234A/B/C is consequential in nature.

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