2021 (10) TMI 1050 - AT - Income Tax

Tribunal Upholds CIT Decision on Agricultural Land Distance Measurement, Dismisses Revenue Appeal

The Tribunal upheld the ld. CIT (A)'s decision based on the measurement of the distance of the agricultural land from the SMC limit, dismissing the ... Measurement of distance for classification of agricultural land as capital asset - definition of capital asset under section 2(14) - prospective application of CBDT Circular No.17/2015 - aerial distance - road distanceMeasurement of distance for classification of agricultural land as capital asset - aerial distance - road distance - prospective application of CBDT Circular No.17/2015 - definition of capital asset under section 2(14) - Whether distance between the agricultural land and the municipal limits for the purpose of exclusion from the definition of capital asset is to be measured aerially or by road for AY 2013-14 and whether the land in question falls beyond the 8 km limit. - HELD THAT: - The Tribunal examined the applicability of CBDT Circular No.17/2015 (which accepted the aerial-measurement approach post the Bombay High Court decision) and noted that the Circular itself clarified the aerial-distance concept is to be applied prospectively with effect from AY 2014-15. Accordingly, for AY 2013-14 the tribunal treated the pre-existing approach as governing measurement. The CIT(A) had directed a remand to the Assessing Officer to have an inspector measure the road distance in the presence of the assessee; the inspector reported the road distance as 8.8 kms. Having considered the Deputy Executive Engineer's certificate, the inspector's on site measurement and the retrospective scope of the CBDT Circular, the Tribunal upheld the finding that the land is situated beyond 8 kms from the municipal limit and therefore does not fall within the definition of capital asset under section 2(14) for AY 2013-14. [Paras 6, 7]The Tribunal affirmed the CIT(A)'s conclusion that for AY 2013-14 road measurement governs, the road distance as measured on remand is 8.8 kms, and the land is not a capital asset; the Revenue's appeal is dismissed.Final Conclusion: The appeals filed by the Revenue are dismissed; the CIT(A)'s order holding that the agricultural land is situated beyond 8 kms (and hence outside the definition of capital asset for AY 2013-14) is affirmed. 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.