2021 (10) TMI 1050 - AT - Income Tax

Nature of land sold - gain on sale of land - agricultural land or capital asset - distance between the Municipal limit and agriculture land - why the agricultural land should not be treated as capital asset within the meaning of section 2(14)? - AO treated the agricultural land as capital asset by taking view that aerial distance of land is less than 8 kms from Municipal Limit of Surat - whether CIT (A) was justified in allowing the appeal of the assessee as not appreciated that even the word road distance does not constitute the distance followed by the traffic Rules? - HELD THAT - We find that CBDT in Circular No.17/2015 while accepting the decision of Hon ble Bombay High Court in Smt. Maltibai R Kadu 2015 (4) TMI 227 - BOMBAY HIGH COURT held that measurement of aerial distance is to be applied prospectively, therefore, considering the facts and circumstances of the case, particularly the finding of ld.CIT(A) that distance of land measured road is more than 8 kms, therefore, we affirm the order of ld.CIT(A). No contrary decision is brought to our notice to take other view. In the result the grounds of appeal raised by the revenue are dismissed.

Summary

Issues:
- Whether the ld. CIT (A) was justified in allowing the appeal of the assessee based on the distance measurement criteria for agricultural land.
- Whether the ld. CIT (A) correctly upheld the order of the Assessing Officer.
- Whether the order of the CIT (A) should be set aside and that of the Assessing Officer be restored.

Issue 1:
The case involved two appeals by the Revenue against the common order of the ld. Commissioner of Income Tax (Appeals) for Assessment Year 2013-14. The Revenue raised grounds challenging the decision regarding the treatment of agricultural land as a capital asset under section 2(14) of the Income Tax Act. The Assessing Officer (AO) disputed the distance measurement provided by the assessee, leading to a disagreement over the classification of the land.

Issue 2:
The ld. CIT (A) considered the submissions of the assessee, including a certificate from the Deputy Executive Engineer certifying the distance of the land from the Surat Municipal Corporation (SMC) limit. The ld. CIT (A) sought a Remand Report from the AO, directing an on-site measurement of the distance. The Inspector's report indicated a measurement of 8.8 kms by road, supporting the assessee's claim that the land was situated beyond 8 kms from the SMC limit, exempting it from being classified as a capital asset.

Issue 3:
During the hearing, the ld. Sr. DR for the Revenue argued that the AO's measurements showed the land to be within 8 kms of the SMC limit, contradicting the findings of the ld. CIT (A). However, the ld. AR for the assessee highlighted the circular issued by the CBDT and the decision of the Hon'ble Bombay High Court, supporting the measurement of distance by road. The Tribunal affirmed the ld. CIT (A)'s decision, considering the distance measured by road to be more than 8 kms and dismissing the Revenue's appeal.

The Tribunal ultimately dismissed the appeals of the Revenue, maintaining the ld. CIT (A)'s decision based on the measurement of the distance of the agricultural land from the SMC limit. The judgment emphasized the importance of considering the specific circumstances and applicable legal provisions in determining the classification of assets for tax purposes.