2016 (10) TMI 47 - HC - Income Tax

Sale of land - whether the land sold by the assessee is an agricultural land and situated beyond 8 Kms from the Corporation municipal limit, therefore, the capital gain arising from the sale of the aforesaid land is exempt from capital gain tax? - Held that - Though the assessee has submitted that the documents to prove that the distance between agricultural land and municipal limit was more than 8 Kms, the assessing officer has only relied on the report of the Inspector of Income-Tax. Though the assessing officer has sought for clarifications from the Inspector of Survey and Land Records Maintenance, Coimbatore, regarding the place, where the Corporation limits ends, as to whether, Gopalkrishna Mills/city bakery or beyond Ramakrishna Mills at LGB Nagar Pirivu - Gowtham tower or Aishwarya bakery or Jayam medicals, which has also been responded, stating that the distance between the municipal limits and the agricultural lands, is 9.13 Kms., the assessing officer has totally ignored the report of the Inspector of Survey and Land Records Maintenance, Coimbatore. As rightly contended by the respondent, revenue department and survey authorities are competent to measure the land and issue appropriate certificates, and the same cannot be ignored by the assessing officer, by relying on the report of the investigation wing. In such matters, it would be appropriate, to take the assistance of the survey authorities, to arrive at the conclusion. On the facts and circumstances of this case, we also wish to state that in the matter giving weightage to the evidence adduced in this regard, report of the departmental inspector vis-a-vis certificates of the revenue authorities, produced before the assessing officer, the latter should be given weightage and accepted, unless the contrary is proved. - Decided in favour of assessee

Issues Involved:
1. Whether the sale land qualifies as agricultural land and is eligible for exemption under Section 2(14) of the Income Tax Act.
2. Whether the Income Tax Appellate Tribunal correctly ignored the evidences gathered by the department regarding the distance for the purpose of Section 2(14) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Agricultural Land and Exemption Eligibility:
The core issue was whether the land sold by the assessee qualifies as agricultural land and thus, is exempt from capital gains tax under Section 2(14) of the Income Tax Act. The assessee claimed that the land sold was agricultural and situated beyond 8 Kms from the municipal limits, thus exempting it from capital gains tax. The Assessing Officer, however, believed the land was within 8 Kms of the municipal limits and issued a notice under Section 148. The Tribunal, relying on certificates from the Survey Department and the Tahsildar, confirmed that the land was indeed beyond 8 Kms from the municipal limits, thus qualifying for exemption.

2. Ignoring Departmental Evidence:
The Tribunal's decision to ignore the evidences gathered by the Income Tax Department was another point of contention. The department argued that their investigation showed the land within 8 Kms of the municipal limits. However, the Tribunal favored the certificates from state authorities over the department's report. The Tribunal noted that the state authorities consistently certified the distance as beyond 8 Kms. The court supported this view, emphasizing that the certificates from the revenue and survey authorities should be given more weight than the department's investigation report, unless contrary evidence is provided.

Detailed Analysis:

Background and Facts:
The assessee, a HUF, filed a return of income admitting income under "income from other sources" and NIL income under "long term capital gain," claiming exemption on the sale of agricultural land situated beyond 8 Kms from municipal limits. The Assessing Officer issued a notice under Section 148, believing the land was within 8 Kms. The Assessing Officer relied on an investigation report stating the land was within 8 Kms, while the assessee provided certificates from the Survey Department and the Tahsildar confirming it was beyond 8 Kms.

Tribunal's Findings:
The Tribunal dismissed the revenue's appeal, holding that the state authorities' certificates consistently certified the land as beyond 8 Kms from municipal limits. The Tribunal emphasized that the land was agricultural and situated beyond 8 Kms, thus exempt from capital gains tax.

Court's Decision:
The court upheld the Tribunal's decision, agreeing that the certificates from the state authorities should be given more weight than the department's investigation report. The court cited several precedents supporting the measurement of distance by road rather than aerially and emphasized the importance of relying on competent authorities' certificates over departmental reports. The court found no reason to interfere with the Tribunal's findings, dismissing the appeal and ruling in favor of the assessee.

Conclusion:
The court concluded that the land sold by the assessee was agricultural and situated beyond 8 Kms from the municipal limits, thus qualifying for exemption under Section 2(14) of the Income Tax Act. The court upheld the Tribunal's decision to rely on the state authorities' certificates over the department's investigation report. The appeal was dismissed, with no costs awarded.

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