High Court rules distance from municipal limit for tax purposes should be measured by road, not horizontal plane

The High Court upheld the Tribunal's decision that the distance of agricultural land from the municipal limit should be measured by road, not the horizontal plane, for tax implications under section 2(14)(iii)(b) of the Income Tax Act. The Court dismissed the Department's appeal, as it failed to prove the land was within 8 kms of the municipal limit based on road distance, affirming the Tribunal's ruling and emphasizing the Punjab & Haryana High Court's precedent.

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Issues involved:
1. Interpretation of the distance requirement under section 2(14)(iii)(b) of the Income Tax Act.
2. Applicability of measuring distance by road versus horizontal plane for determining eligibility for tax benefits on land sale.

Detailed Analysis:
1. The case involved the interpretation of the distance requirement under section 2(14)(iii)(b) of the Income Tax Act. The respondent-assessee had claimed tax benefits for the sale of agricultural lands beyond municipal limits. The assessing authority disallowed the claim, leading to appeals and subsequent legal proceedings.

2. The main contention was whether the distance of the agricultural land from the municipal limit should be measured by road or as per the horizontal plane for the purpose of determining tax implications. The Tribunal referred to decisions from other High Courts and held that the distance by road should be considered, not the aerial distance. The Tribunal remanded the issue to the assessing officer to measure the distance accordingly.

3. The Department challenged the Tribunal's decision, arguing that the distance should be measured as per the horizontal plane, not by road, for the application of section 2(14)(iii)(b) of the IT Act. The High Court, after considering the arguments and the impugned order, noted that no contrary view from other High Courts was presented by the Department.

4. The High Court upheld the Tribunal's decision, emphasizing that the distance should be measured by road, as per the Punjab & Haryana High Court's decision. The Court found no substantial question of law arising from the appeal, as the Department failed to demonstrate that the land in question was within 8 kms from the municipal limit based on road distance.

5. Consequently, the High Court dismissed the appeal, affirming the Tribunal's decision that the distance of the agricultural land from the municipal limit should be determined by road measurement for the purpose of tax implications under section 2(14)(iii)(b) of the Income Tax Act.

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