Tribunal rules land not a capital asset, exempts from tax. Distance to municipality applies. Advance money non-taxable.

The tribunal ruled in favor of the assessee, determining that the land was not a capital asset and therefore not subject to capital gains tax. The tribunal upheld the decision to measure the distance by road from the nearest municipality, which was Gurgaon, and not consider aerial distance. Additionally, the tribunal held that the distance should be measured up to the land itself, not the village. The Revenue's appeal challenging the taxability of forfeited advance money was dismissed due to the relevant tax provision not being applicable for the assessment year 2006-07.

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Issues Involved:
1. Distance measurement for determining capital asset status.
2. Method of distance measurement (aerial vs. road).
3. Point of distance measurement (up to the land vs. village).
4. Taxability of forfeited advance money.

Issue-Wise Detailed Analysis:

(A) Distance Measurement from Sohna or Gurgaon Municipal Corporation:
The primary issue was whether the distance of the land should be considered from Sohna Municipality or Gurgaon Municipality. The tribunal upheld that the distance can be measured from any municipality, including Gurgaon, which is nearer to the land than Sohna. This decision was supported by the ruling in the case of Smt. Anjana Sehgal by the Punjab & Haryana High Court, which clarified that the land's distance from any municipality's local limits, irrespective of state boundaries, is relevant for determining if it is a capital asset under Section 2(14)(iii)(b).

(B) Method of Distance Measurement (Aerial vs. Road):
The tribunal agreed with the CIT(A)'s view that the distance should be measured as per road distance and not aerial distance. This conclusion was based on the decision of the Punjab & Haryana High Court in CIT v. Satinder Pal Singh, which emphasized that urbanization considerations necessitate measuring distance by road. The tribunal found no contrary decisions and noted that the Revenue did not challenge this finding in their appeal.

(C) Point of Distance Measurement (Up to the Land vs. Village):
The tribunal disagreed with the CIT(A) and the Assessing Officer's view that the distance should be measured from the municipal limits to the area (village) in which the land is situated. Instead, the tribunal held that the distance should be measured up to the land itself. The tribunal referenced the dictionary meaning of "area" and found no basis for the assumption that it referred to the village. The tribunal supported this interpretation with a graphical presentation and the decision in CIT Vs. Lal Singh & Ors., which accepted the distance measured up to the land.

(D) Final Determination of Distance from Gurgaon Municipality:
The tribunal evaluated multiple certificates provided by both the assessee and the Revenue. The tribunal found the certificates from the Tehsildar and the Assistant Engineer, which measured the distance by road to be approximately 9 Kms and 9.94 Kms respectively, to be credible. These distances were beyond the 8 Kms limit, thus supporting the assessee's claim. Consequently, the tribunal concluded that the land did not fall within the ambit of Section 2(14)(iii)(b) and was not a capital asset, exempting it from capital gains tax.

Taxability of Forfeited Advance Money (Revenue's Appeal):
The Revenue challenged the deletion of an addition of Rs. 27,66,016/- made by the Assessing Officer under the head income from other sources. The tribunal noted that the Finance No.2 Act, 2014, which made forfeited advance money taxable under Section 56(2)(ix), was effective from 1.4.2015 and not applicable to the assessment year 2006-07. At the relevant time, Section 51 provided for the adjustment of forfeited advance against the cost of acquisition of the asset. Since there was no provision to tax the excess forfeited amount as income from other sources during the assessment year in question, the tribunal upheld the CIT(A)'s decision to delete the addition.

Conclusion:
The tribunal allowed the assessee's appeal, holding that the land was not a capital asset and thus not subject to capital gains tax. The Revenue's appeal regarding the taxability of the forfeited advance money was dismissed, as the relevant tax provision was not applicable for the assessment year 2006-07. The decision was pronounced in the open Court on 12th December, 2014.

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