Agricultural land loses capital gains exemption if any point falls within 2km of municipality boundaries

The ITAT Cochin ruled on capital gains treatment for land sale, focusing on whether land qualified as agricultural based on distance from municipality limits. The tribunal held that distance measurement from agricultural land to Angamally Municipality boundaries must be calculated using longitude and latitude coordinates through multiple points, as municipal limits are non-linear. If any point falls within 2 km, the land loses agricultural exemption. The AO was directed to obtain coordinates from KSREC for precise measurement. For contiguous land, distance should be measured from boundaries; segregated portions require separate assessment. The burden of proof lies with the assessee, though AO can verify and seek expert opinion if disagreeing. Revenue's appeal was allowed.

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Issues involved:
The judgment involves the assessment of agricultural income under section 143(3) of the Income Tax Act, 1961 for Assessment Year 2015-16.

Assessment of agricultural income:
The appellant's agricultural income, derived from the sale of land, was contested due to discrepancies in the distance of the land from the local limits of the Municipality. The appellant claimed the land was over 2 kms away, while the Assessing Officer found it to be 1.8 kms away, classifying the land as a capital asset. The appellant submitted evidence from an accredited agency showing the distance to be less than 2 kms, leading to the allowance of the appeal by the Commissioner of Income Tax (Appeals).

Admission of additional evidence:
The Revenue challenged the admission of additional evidence by the Commissioner of Income Tax (Appeals) beyond the prescribed rules. The Tribunal found that the appellant was not given adequate opportunity to furnish evidence during the assessment proceedings, leading to a denial of natural justice. As a result, the admission of additional evidence was deemed valid, and the Revenue's objection regarding the violation of rules was dismissed.

Merits of the case:
While the Tribunal acknowledged the validity of the additional evidence, it found the adjudication by the Commissioner of Income Tax (Appeals) lacking. The Tribunal noted discrepancies in the distance measurements provided by the appellant and the Revenue, emphasizing the need for a precise measurement. The Tribunal highlighted the importance of determining the distance based on the local limits of the Municipality as of the transfer date and directed the Assessing Officer to obtain expert opinions for a judicial determination.

Remand of the matter:
The Tribunal set aside the Commissioner of Income Tax (Appeals) order and remanded the case back to the Assessing Officer for further examination. The Assessing Officer was instructed to obtain coordinates of the land and local limits of the Municipality, seek expert opinions, and make a decision based on credible evidence. The Tribunal emphasized the need for a precise measurement and a reasoned decision supported by credible evidence.

Conclusion:
The Tribunal allowed the Revenue's appeal on the terms outlined in the judgment, emphasizing the importance of a thorough and precise determination of the agricultural income assessment based on accurate measurements and expert opinions.

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