Srinivas Pandit(Huf), Hyderabad v. ITO, Hyderabad

ITA 56/HYD/2007 | 2003-2004
Pronouncement Date: 23-04-2010 | Result: Allowed

Appeal Details

RSA Number 5622514 RSA 2007
Assessee PAN ADIPP2127B
Bench Hyderabad
Appeal Number ITA 56/HYD/2007
Duration Of Justice 3 year(s) 3 month(s) 10 day(s)
Appellant Srinivas Pandit(Huf), Hyderabad
Respondent ITO, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 23-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 23-04-2010
Date Of Final Hearing 02-03-2010
Next Hearing Date 02-03-2010
Assessment Year 2003-2004
Appeal Filed On 12-01-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B HYDERABAD BEFORE SHRI N.R.S. GANSAN JUDICIAL MEMBER AND SHRI A. AKBER BASHA ACCOUNTANT MEMBER ITA-56/HYD/2007 A.Y. 2003-04 SHRI SRINIVAS PANDIT (HUF) (PAN ADIPP 2127 B) VS ITO WARD 7 (4) HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI S. RAMA RAO RESPONDENT BY: SHRI E.S. NAGENDRA PRASAD O R D E R PER SHRI N.R.S. GANESAN JUDICIAL MEMBER: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER PASSED BY THE CIT(A)-VI HYDERABAD DATED 5.10.2 006 AND PERTAINS TO THE ASSESSMENT YEAR 2003-04. 2. SHRI RAMA RAO LEARNED COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE ASSESSEE SOLD AGRICULTURAL LAND TO THE EXTENT OF 2 ACRES 20 QUNTAS AND CLAIMED EXEMPTION FROM PAYMENT OF CAPITAL GAIN TAX. ACCORDING TO THE LEARNED COUNSEL THE AGRICULTURAL LAND CANNOT BE CONSIDERED TO BE A CAPITAL ASSET U/S 2(14) OF THE INCOME T AX ACT. THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE AGRICULTURAL LAND IS SITUATED AT HIMAYAT SAGAR VILLAGE WHICH FALLS UNDER THE RAJEDRAN AGAR MANDAL R.R DISTRICT ACCORDING TO THE LEARNED COUNSEL RAJENDRA NAG AR MUNICIPALITY WAS NOT NOTIFIED BY THE CENTRAL GOVERNMENT THEREFOR E THE AGRICULTURAL LAND WHICH FALLS UNDER RAJENDRANAGAR MANDAL CANNOT BE CONSIDERED TO BE A CAPITAL ASSET WITHIN THE MEANING OF U/S 2(14) OF TH E IT ACT. FURTHER 2 2 THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSING OFFICER BR OUGHT THE PROFIT ON SALE OF AGRICULTURAL LAND FOR TAXATION ON THE GROUNDS THAT THE AGRICULTURAL LAND WAS LOCATED WITHIN THE RADIUS OF 8 KM . FROM THE LIMITS OF HYDERABAD MUNICIPAL CORPORATION. REFERRING TO THE DECISION OF THE AMRISTAR BENCH IN DCIT VS. CAPITAL LOCAL AREA BANK LTD . (2009) 29 SOT 394 THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE SA LE OF THE LAND WAS MADE THROUGH RAJENDRANAGAR REVENUE AUTHORITIES AND N OT THROUGH THE REVENUE AUTHORITIES IN HYDERABAD DISTRICT. THEREFORE THE LAND IN QUESTION CANNOT BE CONSIDERED TO BE AN ASSET WITHIN THE M EANING OF SEC.2(14) OF THE IT ACT SIMPLY BECAUSE IT WAS SAID TO BE SI TUATED WITHIN 8 KMS FROM THE RADIUS OF HYDERABAD MUNICIPAL CORPORAT ION. ACCORDING TO THE LEARNED COUNSEL THE AGRICULTURAL LAND DOES FAL L WITHIN THE REVENUE DISTRICT OF HYDERABAD DISTRICT. THE AGRICULTURAL LAND W HICH FALLS WITHIN THE RAJENDRANAGAR REVENUE MANDAL DOES NOT FORM PART OF HYDERABAD MUNICIPAL CORPORATION THEREFORE IT CANNOT BE TREATE D AS A CAPITAL ASSET U/S 2(14) OF THE IT ACT. 3. ON THE CONTRARY SHRI NAGENDRA PRASAD THE LEARN ED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CENTRA L GOVT. NOTIFIED HYDERABAD MUNICIPAL CORPORATION U/S 2(14) OF THE IT ACT . AS PER THIS NOTIFICATION OF CENTRAL GOVT. AGRICULTURAL LAND FALL S WITHIN THE TERRITORIAL JURISDICTION OF HYDERABAD MUNICIPAL CORPORATION AND AL L LANDS WHICH FALLS WITHIN 8 KM. RADIUS IN ALL DIRECTIONS FROM THE LIMITS OF MUNICIPAL CORPORATION OF HYDERABAD HAS TO BE TREATED AS CAPITAL A SSET WITHIN THE MEANING OF SEC.2(14) (III) OF THE IT ACT. ACCORDING TO LEARNED DEPARTMENTAL REPRESENTATIVE ADMITTEDLY THE LAND IN QUESTION IS SITUATED AT HIMAYATSAGAR VILLAGE WHICH FALLS UNDER RAJENDRANAG AR MANDAL. THOUGH THE ASSESSEE CLAIMED THAT THE AGRICULTURAL LAND F ALLS BEYOND 8 KMS RADIUS OF HYDERABAD MUNICIPAL CORPORATION THE ASSE SSING OFFICER FOUND THAT THE LAND IN QUESTION FALLS WITHIN 8 KM RAD IUS OF HYDERABAD MUNICIPAL CORPORATION. REFERRING TO THE ASSESSMENT ORD ER THE LEARNED 3 3 DEPARTMENTAL REPRESENTATIVE POINTED OUT THAT THE ASSESSE E CLAIMED THAT THE LAND WAS SITUATED AT 18.5KM. ON ROAD FROM HYDERAB AD TO VIKARABAD. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE TOOK THE DISTA NCE FROM MAHATMA GANDHI BUS TERMINUS TO THE LAND IN QUESTION. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE DISTANCE HAS TO BE TAKEN FROM THE LOCAL LIMITS OF HYDERABAD MUNICIPAL CORPORATI ON LIMITED. THEREFORE THE AGRICULTURAL LAND IN QUESTION FALLS WI THIN 8 KM RADIUS OF HYDERABAD MUNICIPAL CORPORATION. THEREFORE ACCORDING TO THE DEPARTMENTAL REPRESENTATIVE THE AGRICULTURAL LAND HA S TO BE TREATED AS CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) (III) OF THE ACT. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE PLACED R ELIANCE ON THE JUDGEMENTSAP HIGH COURT CIT VS. BOLA RAMAIAH (19 87) (174 ITR 154) AND SUBMITTED THAT WHEN THE LAND WAS SITUATED WI THIN 8 KM OF THE LOCAL LIMITS OF HYDERABAD MUNICIPAL CORPORATION IT IS L IABLE FOR CAPITAL GAIN IRRESPECTIVE OF FACTS WHETHER FALLS UNDER RAJENDRANAGAR MANDAL OR OTHERWISE. THE LEARNED DEPARTMENTAL REPRESENTATIVE H AS ALSO PLACED HIS RELIANCE ON THE JUDGEMENT OF APEX HIGH COURT CIT VS. GEMINI PICTURES CIRCUIT (P) LTD (1996) (220 ITR 43) AND SUBMITTED TH AT MERE FACT THAT THE LAND IN QUESTION WAS AGRICULTURAL LAND CANNOT BE A GROUND TO CLAIM FOR EXEMPTION U/S 2(14) OF THE IT ACT WHEN IT WAS SITUA TED WITHIN 8 KMS OF THE LOCAL LIMITS OF THE HYDERABAD MUNICIPAL CORPOR ATION. 5. IN VIEW OF THE ABOVE JUDGEMENTS THE LEARNED DE PARTMENTAL REPRESENTATIVE SUBMITTED THAT THE LAND SOLD BY THE ASSE SSEE IS A CAPITAL ASSET THEREFORE THE SURPLUS REALIZED BY THE ASSESSEE ON SALE OF LAND IS ASSESSABLE AS CAPITAL GAIN. THE LEARNED DEPARTMENTAL REP RESENTATIVE PLACED RELIANCE ON THE APEX COURT IN THE CASE OF G.M. O MAR KHAN VS. CIT 1991 (196 ITR 269) (SC) AND SUBMITTED THAT WHEN THE CAPITAL ASSET FALLS WITHIN THE LIMITS OF MUNICIPAL CORPORATION AS NOT IFIED BY THE CENTRAL 4 4 GOVT. IT HAS TO BE TREATED AS CAPITAL ASSET THEREFORE THE ASSESSING OFFICER HAS RIGHTLY GOT THE SAME FOR TAXATION. 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON EITHER SIDE A ND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITT EDLY THE ASSESSEE SOLD TWO ACRES AND 20 QUNTAS OF AGRICULTURAL LAND WHICH SITUATED AT HIMAYATSAGAR VILLAGE IN RAJENDRANAGAR MANDAL. RAJEN DRANAGAR IS ALSO ONE OF THE MUNICIPAL CORPORATION. HOWEVER THE SAME WAS NOT NOTIFIED BY THE GOVT. OF INDIA U/S 2(14)(III) OF THE IT ACT. THE CONTENTIONS OF THE ASSESSEE COUNSEL IS THAT HIMAYATSAGAR VILLAGE FALLS WITH IN RAJENDRANAGAR REVENUE MANDAL THEREFORE IT CANNOT BE TAKEN AS PART AND PARCEL OF THE HYDERABAD MUNICIPAL CORPORATION. AC CORDING TO THE ASSESSEE COUNSEL 8KM RADIUS OF THE MUNICIPAL CORPORATION O F HYDERABAD CANNOT BE EXTENDED TO ANOTHER REVENUE DISTRICT OR MAND AL. THE ISSUE ARISES FOR CONSIDERATION IS WHEN THE AGRICULTURAL LAND HA S ADMITTEDLY SITUATED IN RAJENDRANAGAR REVENUE MANDAL CAN WE SAY THAT THE SAID LAND FALLS WITHIN 8 KMS RADIUS FROM THE LIMITS OF HYDER ABAD MUNICIPAL CORPORATION? WE HAVE CAREFULLY GONE THROUGH THE JUD GEMENT OF THE ANDHRA PRADESH HIGH COURT IN THE CASE OF BOLA RAMAIAH CITED SUPRA. IN THE CASE BEFORE THE ANDHRA PRADESH HIGH COURT THE ASSE SSEE SOLD THE LAND IN HAKIMPET VILLAGE WHICH WAS PART OF THE HYDERAB AD MUNICIPAL CORPORATION AND ALSO A LAND SITUATED IN GUDIMALKAPUR VILLAGE WHICH IS SITUATED WITHIN 8 KMS. OF LOCAL LIMITS OF HYDERABAD MU NICIPAL CORPORATION. THE ANDHRA PRADESH HIGH COURT AFTER RE FERRING TO SEC.2(14)(III) OF THE ACT FOUND THAT THE AGRICULTURAL LAND FALLS WITHIN 8 KMS RADIUS OF THE LOCAL LIMITS OF MUNICIPAL CORPORATIO N WOULD FORM PART OF THE CAPITAL ASSET W.E.F. 1.4.1970. WE HAVE ALSO CAREFU LLY GONE THROUGH THE JUDGEMENT OF THE APEX HIGH COURT IN THE CASE OF G EMINI PICTURES CITED SUPRA. IN THE CASE BEFORE THE APEX HIGH COURT T HE ASSESSEE CULTIVATED BANANA PLANTATION AND THEREAFTER VEGETABL E THEREON. THE LAND WAS SITUATED WITHIN THE LIMITS OF MADRAS MUNICIPAL CORPO RATION. IT WAS 5 5 LOCATED ON THE MOUNT ROAD WHICH IS IN THE MAIN ARTERY OF THE CITY AND ITS BUSINESS CENTRE AND FALLS WITHIN THE LIMITS OF CHENNAI MUNICIPAL CORPORATION IN THOSE SITUATIONS THE APEX HIGH COU RT HELD THAT THOUGH THE ASSESSEE CULTIVATED SINCE THE LAND FALLS WITHIN THE MA DRAS MUNICIPALITY IT HAS BEEN TREATED AS CAPITAL ASSET. 7. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGEMEN T OF THE APEX HIGH COURT IN THE CASE OF OMAR KHAN CITED SUPRA. IN THE CASE BEFORE THE APEX HIGH COURT THE ASSESSEE CONTENDED THAT THE POPULATION OF 10 000 HAS TO BE TAKEN FOR A PARTICULAR VILLAGE OR A STREET. REJECTING THAT CONTENTION THE APEX HIGH COURT HELD THAT THE P OPULATION OF MORE THAN 10 000 HAS TO BE TAKEN FOR THE ENTIRE MUNICIPAL ITY OR CANTONMENT AREA AND IT CANNOT BE RESTRICTED TO ANY PARTICULAR VILL AGE OR STREET. THIS IS NOT THE ISSUE BEFORE US THEREFORE THIS JUDGEMENT OF T HE APEX COURT MAY NOT BE OF ANY ASSISTANCE TO THE REVENUE. 8. WE HAVE ALSO CAREFULLY GONE THROUGH THE PROVISION S OF SECTION 2(14)(III) OF THE ACT. SECTION 2(14)(III) (B) CLEARLY SAYS THAT ANY AREA WITHIN SUCH DISTANCE NOT BEING MORE THAN 8 KMS FRO M THE LOCAL LIMITS OF ANY MUNICIPALITY HAS TO BE TREATED AS CAPITA L ASSET FOR THE PURPOSE OF INCOME TAX ACT. THE LEGISLATURE USED THE WOR D ANY MUNICIPALITY. WHEN THE LEGISLATURE USED ANY MUNICIPA LITY THE QUESTION IS CAN IT BE A HYDERABAD MUNICIPAL CORPORATION OR IT BE A RAJENDRA NAGAR MUNICIPALITY. THIS QUESTION OF ASSESSEES IS IMPORTANT SINCE HIMAYATSAGAR VILLAGE FALLS WITHIN RAJENDRA NAGAR MAND AL. IF IT IS HYDERABAD MUNICIPAL CORPORATION THEN IT MAY FALL WIT HIN 8 KMS AS CONTENDED BY THE REVENUE. IF IT IS RAJENDRA NAGAR MU NICIPALITY THEN ADMITTEDLY HIMAYATSAGAR VILLAGE IS SITUATED BEYOND TH E RAJENDRA NAGAR MUNICIPALITY. MOREOVER RAJENDRA NAGAR MUNICIPALITY WAS NOT NOTIFIED BY THE CENTRAL GOVT. FOR THE PURPOSE OF PROVISIONS OF SEC.2( 14)(III) OF THE IT ACT. THESE ISSUES WERE NOT CONSIDERED BY EITHER THE APEX HIGH COURT OR 6 6 A.P. HIGH COURT IN GEMINI PICTURES (P) LTD. (SUPRA) G.M. OMAR KHAN (SUPRA) AND IN BOLLA RAMAIAH (SUPRA). THEREFORE TH ESE JUDGEMENTS MAY NOT BE OF ANY ASSISTANCE TO THE REVENUE. 9 . THE AMRITSAR BENCH OF THE TRIBUNAL HAD AN OCCASION TO CON SIDER THIS ISSUE SPECIFICALLY IN DCIT VS.CAPITAL LOCAL AREA BANK LTD. (123 TTJ (ASR)918 (2009). AFTER CONSIDERING THE PROVISIONS OF SEC.2 (14)(III) AND THE CONCEPT OF MUNICIPALITY AMRITSAR BENCH HAS OBSERVED A S FOLLOWS IN PARA NOS. 24 TO 29: 24. A PLAIN READING OF S.2(14)(III) SHOWS THAT A GRICULTURAL LAND SITUATED IN ANY AREA COMPRISED WITHIN THE JURISDICTION OF MUNIC IPALITY WHERE THE POPULATION IS NOT LESS THAN TEN THOUSAND AS PER THE LAST PRECEDING CENSUS BEFORE THE FIRST DAY OF THE PREVIOUS YEAR DOES FALL WITHIN THE MEANING OF CAPITAL ASSET AS DEFINED BY SECTION 2(14) AND ANY AGRICULTURAL LAND WITHIN 8 KMS. FROM THE LOCAL LIMITS OF SUCH MUNICIPALITY AS NOTIFIED BY THE CENTRAL GOVT. IN THE OFFICE GAZETTE ALSO DOES FALL WITHIN THE DE FINITION OF CAPITAL ASSET AS PRESCRIBED IN S.2(14) OF THE ACT. 25. THE AO IN THE PRESENT CASE OBSERVED THAT EVEN IF IT WAS TAKEN THAT THE LAND IN QUESTION LIES BEYOND THE MUNICIPAL LIMITS O F PHAGWARA IT IS SITUATED WITHIN 8 KMS. OF THE MUNICIPAL LIMITS OF JALANDHAR CITY AND THAT THUS ALSO THIS LAND FALLS OUTSIDE THE EXEMPTION PROVIDED BY S.2(14 ) OF THE IT ACT. THE ISSUE IS AS TO WHETHER THE ASSESSING OFFICER WAS CORRECT IN HOLDING SO. 26. THE AO SEEMS TO HAVE TAKEN THAT WHAT IS ENVISA GED BY S.2(14)(III)(B) OF THE IT ACT IS THAT IF A LAND LIES BEYOND (SIC WI THIN) 8 KMS. FROM THE LOCAL LIMITS OF ANY MUNICIPALITY IT FALLS OUTSIDE THE SC OPE OF THE EXEMPTION PROVIDED BY S.2(14) OF THE ACT. 27. IN CONSIDERING SO HOWEVER THE AO APPEARS TO HAVE LOST SIGHT OF THE FACT THAT THE WORDS ANY MUNICIPALITY IN S.2(1 4) (III)(B0 CANNOT BE READ DIVORCED FROM THEIR QUALIFYING WORDS I.E. REFERRED TO ITEM (A) LEST THEY LOSE THEIR LEGISLATIVE INTENT. THE AO SEEMS TO HAVE REA D MUNICIPALITY MENTIONED IN S.2(14)(III) (B) TO MEAN ANY MUNICIPALITY HAVING A POPULATION OF NOT LESS THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDING C ENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIR ST DAY OF THE PREVIOUS YEAR. 28. NOW THE MUNICIPALITY DETAILED IN S.2(14)(III)( A) IS THE MUNICIPALITY WITHIN THE JURISDICTION OF WHICH THE A REA IN WHICH THE CONCERNED LAND IS SITUATED IS COMPRISED AND WHICH HAS A POPUL ATION OF NOT LESS THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PRE VIOUS YEAR. BOTH THESE CONDITIONS ARE CONCURRENT AND NOT MUTUALLY EXCLUSIV E. THE MUNICIPALITY MUST HAVE JURISDICTION OVER THE LAND AS WELL AS IT MUST HAVE A POPULATION OF MORE THAN TEN THOUSAND AS PER THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE LAST DAY OF THE PREVIOUS YEAR. AND THE PRIMARY REQUIREMENT IS THAT OF JURISDICTION OF THE MUNICIPALITY OVER THE LAND. 7 7 IF A MUNICIPALITY DOES NOT HAVE JURISDICTION OVER T HE LAND. IF A MUNICIPALITY DOES NOT HAVE JURISDICTION OVER THE LAND IT IS NOT THE MUNICIPALITY MENTIONED IN S.2(14) (III) (B). IN MUNICIPAL CORPORATION FOR THE CITY OF BOMBAY VS. CIT (1984) 16 ITR 165 (BOM) IT HAS BEEN HELD INTER ALIA TO THE EFFECT THAT JURISDICTION OF A MUNICIPALITY DOES NOT EXTEND OUTS IDE ITS PRESCRIBED AREA OF JURISDICTION. 29. FROM THE ABOVE IT BECOMES AMPLY CLEAR THAT THE MUNICIPALITY REFERRED TO IN S.2(14) (III) (B) OF THE IT ACT IS T HE VERY ONE REFERRED IN S.2(14) (A). TO REITERATE S.2(14)(III)(B) IS UNAMBIGUOUS IN AS MUCH AS IT USES THE EXPRESSION REFERRED TO IN ITEM (A). TAKING ANY O THER INTERPRETATION OF THE SECTION AS HAS BEEN DONE BY THE AO IN THE PRESENT CASE WOULD AMOUNT TO NOTHING OTHER THAN GROSS MISREADING AND MISINTERPRE TATION OF S.2(14)(III) (B). 10. AMRITSAR BENCH FURTHER OBSERVED AS FOLLOWS AT PAR A NOS. 73 74 AND 75: 73. NOW AS PER S.2(14)(III)(B) THE CENTRAL GOVT . IS REQUIRED TO SPECIFY THE AREA FALLING WITHIN 8 KMS FROM THE LOCA L LIMITS OF ANY MUNICIPALITY AS REFERRED TO IN S. 2(14)(III)(A) BY NOTIFICATION IN THE OFFICIAL GAZETTE. A PLAIN CONSTRUCTION OF S. 2(14)(III)(B) REVEALS THAT CAPI TAL ASSET WITHIN THE MEANING OF THIS SECTION EXCLUDES AGRICULTURAL LAND SITUATED IN ANY AREA BEYOND 8 KMS FROM THE LOCAL LIMITS OF ANY MUNICIPALITY HAVING A POPULATION OF AT LEAST TEN THOUSAND (AS REFERRED TO IN S 2(14)(III)(A) AS NOTI FIED IN THE OFFICIAL GAZETTE BY THE CENTRAL GOVT. HAVING REGARD TO THE EXTENT OF A ND SCOPE FOR URBANIZATION OF THAT AREA AND OTHER RELEVANT CONSIDERATIONS. 74. THEREFORE IF A CENTRAL GOVERNMENT SPECIFIES BY NOTIFICATION IN THE OFFICIAL GAZETTEE ANY AREA AS AN AREA FALLING OUTSIDE THE LOCAL LIMITS OF A MUNICIPALITY HAVING REGARD TO THE EXTENT OF AND SC OPE FOR URBANISATION OF THE SAID AREA AND OTHER RELEVANT CONSIDERATIONS AGRICU LTURAL LAND COMPOSED WITHIN SUCH AREA SHALL STAND EXCLUDED FROM THE DEFI NITION OF CAPITAL ASSET AS ENVISAGED IN SEC. 2(14) BY VIRTUE OF OPERATION OF T HE LAW CONTAINED IN S. 2(14)(III)(B) . 75. NOW IN THE PRESENT CASE THE CENTRAL GOVT. IS SUED NOTIFICATION NO. 9447/F.NO. 164/3/87-ITA-I DATED 6 TH JANUARY 1994 116 CTR (ST) 13 (1994) 205 ITR (ST 121 BY PUBLICATION IN THE OFFICI AL GAZETTE IN THE EXERCISE OF THE POWERS CONFERRED BY SECTION 2 (1A) (C) PROVI SO CLAUSE (II) (B) AND SECTION 2(14) (III) (B) OF THE ACT. SECTION 2 (1A) INCIDENTALLY DEALS WITH AGRICULTURAL INCOME. SUBCLAUSE (A) AND (B) OF 2 ( 1A) (C) PROVISO CLAUSE II ARE IDENTICAL TO ITEMS (A & B) RESPECTIVELY OF SECT ION 2 (14) (III). 11. THE TRIBUNAL FURTHER OBSERVED AS FOLLOWS AT PARA NOS. 77 TO 84: 77. NOW UNDISPUTEDLY THE LAND IN QUESTION LIES IN VILLAGE KHAJURALA WHICH FALLS IN TEHSIL PHAGWARA DISTRICT KAPURTHALA AND IS MORE THAN 2 KILOMETERS IN ALL DIRECTIONS FROM THE MUNICIPAL LI MITS OF PHAGWARA MUNICIPALITY. ACCORDING TO THE NOTIFICATION ARE AS UPTO TWO KILOMETRES AWAY FROM THE LOCAL LIMITS OF PHAGWARA MUNICIPALITY STAN D NOTIFIED AS FALLING OUTSIDE ITS LOCAL LIMITS. THE LAND IN QUESTION IS ADMITTED LY MORE THAN 2 KILOMETERS FROM THE LOCAL LIMITS OF PHAGWARA MUNICIPALITY. IT WOULD NOT HAVE FALLEN 8 8 WITHIN THE EXEMPTION PROVIDED BY S. 2(14)(III)(B) W ERE IT SITUATE WITHIN 2 KILOMETERS FROM THE LOCAL LIMITS OF PHAGWARA MUNICI PALITY. HOWEVER IT IS NOBODYS CASE THAT THE LAND IN QUESTION IS SITUATE IN AN AREA WITHIN 2 KILOMETERS FROM THE LOCAL LIMITS OF PHAGWARA MUNICIPALITY. RATHER THE AO CASE IS THAT THOUGH ADMITTEDLY THE LAND IS BEYOND THE MUNICIPAL LIMITS OF PHAGWARA IT IS WITHIN 8 KILOMETERS OF THE MUNICIPAL LIMITS OF JALANDHAR CITY AND SO IT IS OUTSIDE THE EXEMPTION OF S.2(14). 78. WHEN THE AREA SPECIFIED IN COL. (4) OF THE NO TIFICATION STANDS IDENTIFIED BY THE CENTRAL GOVT. WITH PHAGWARA MUNIC IPALITY THE AO COULD NOT HOLD DE HORS THE NOTIFICATION TO BRING IT WITHIN TH E GOVERNANCE OF JALANDHAR MUNICIPALITY. 79. NOW A NOTIFICATION U/S 2(14) (III) OF THE IT ACT IS ISSUED SPECIFYING AREAS AS FALLING OUTSIDE THE LOCAL LIMIT S OF A MUNICIPALITY HAVING REGARD TO THE EXTENT OF ANY SCOPE FOR URBANISATION OF THE AREAS CONCERNED AND OTHER RELEVANT CONSIDERATION. 80. URBANIZATIONS OF AN AREA THEN FALLS WITHIN TH E EXCLUSIVE DOMAIN OF THE CONCERNED MUNICIPALITY EXERCISING REGULATORY AS WELL AS ADMINISTRATIVE CONTROL OVER SUCH AREA. IT IS SUCH CONCERNED MUNIC IPALITY ID EST THE PARENT MUNICIPALITY OR JURISDICTIONAL MUNICIPALITY OF THE AREA WHICH HAS TO CARRY OUT THE URBANIZATION OF THE AREA. AREA SITUATE WITHIN THE LOCAL LIMITS OF A GRAM PANCHAYAT WHEN INCLUDED WITHIN THE LIMITS OF A CIT Y BECOME URBAN AREAS. SEC. 44 OF THE PMC ACT MAKES IT INCUMBENT ON THE CO NCERNED MUNICIPAL CORPORATION ESTABLISHED THERE UNDER TO MAKE ADEQUA TE PROVISION FOR THE MATTERS PROVIDED UNDER THE SAID SECTION. THESE MAT TERS ARE MATTERS CONCERNING URBANIZATION. 81. IT IS THUS EVIDENT THAT IT IS THE PARENT/JURIS DICTIONAL MUNICIPALITY WHICH IS RESPONSIBLE FOR THE AREAS FALLING WITHIN I TS TERRITORIAL JURISDICTION AND FOR THE LANDS SITUATE WITHIN SUCH AREAS. SUCH CONT ROL CANNOT BE SAID TO VEST IN ANY OTHER MUNICIPALITY. IT WAS ONLY THUS THAT THE PURCHASE AND SALE OF THE LAND IN QUESTION WAS MADE THROUGH THE PHAGWARA REVE NUE AUTHORITIES AND NOT THE ONES OF JALANDHAR. IN THE NOTIFICATION ITS ELF ALSO THE AREAS FALLING OUTSIDE THE JALANDHAR MUNICIPALITY HAVE BEEN SEPARA TELY SPECIFIED FROM THOSE FALLING OUTSIDE THE PHAGWARA MUNICIPALITY. EVEN TH E AREAS FALLING OUTSIDE THE KAPURTHALA MUNICIPALITY HAVE BEEN SEPARATELY SPECIF IED THOUGH KAPURTHALA IS THE DISTRICT OF WHICH PHAGWARA IS A TEHSIL. THE BY E LAWS APPLICABLE TO THE AREA WITHIN WHICH THE LAND IN QUESTION IS SITUATE ARE THE BYE LAWS OF KAPURTHALA DISTRICT AND NOT OF JALANDHAR DISTRICT. 82. REVERTING TO THE ORDER UNDER APPEAL THE LEARN ED CIT (A) HAS HELD AND IN OUR CONSIDERED OPINION QUITE CORRECTLY THAT: THE CASE OF THE AO BASED ON OBSERVATION IN PARA 11 OF THE ORDER THAT THE LAND BEING WITHIN 8 KMS. OF MUNICIPAL LIMI TS OF JALANDHAR IT WAS CAPITAL ASSET WITHIN THE MEANING OF S. 2(14) OF THE IT ACT. I AGREE THAT SAID OBSERVATION WAS NOT CONFRONTED TO THE APPELLANT. HO WEVER THE SAME IS CONSIDERED IN THE LIGHT OF PROVISIONS OF S. 2(14)(I II) READ WITH ITS CLS. (A) AND (B) AS WELL AS THE NOTIFICATIONS ON THE SUBJECT. NO DOUBT THE LAND FALLS WITHIN A DISTANCE OF 8 KMS. FROM THE MUNICIPAL LIMITS IN ALL DIRECTIONS AS PER THE NOTIFICATION NO. 9447/FILE NO. 164/3/87 ITA 1 DT. 6 TH JAN. 1994 (REPORTED IN (1994) 116 CTR (ST.) 113: (1994) 205 ITR (ST.) 121) ISSUED BY GOVT. IN THE CONTEXT OF CL. (B) OF S. 2 14 (III) OF THE IT ACT. BUT THE RELEVANT LAND IS OUTSIDE 9 9 THE JURISDICTION OF JALANDHAR DISTRICT BECAUSE IT I S IN THE JURISDICTION OF KAPURTHALA DISTRICT NEARER TO ITS TEHSIL PHAGWARA. AS PER THE SAID NOTIFICATION THE AREAS SPECIFIED IN PHAGWARA MUNICIPALITY CANNOT BE RELATED WITH JALANDHAR AGAINST WHICH THE AREAS HAVE BEEN SEPARA TELY SPECIFIED. BEING OUTSIDE THE AREA OF JALANDHAR DISTRICT ALL THE BYE LAWS WHICH ARE APPLICABLE IN THAT AREA ARE OF KAPURTHALA DISTRICT. DUE TO THE S AID FACT THE PURCHASE AS WELL AS THE SALE TRANSACTIONS OF THE SAID LAND WERE CARR IED OUT THROUGH THE OFFICES OF LAND REVENUE AUTHORITIES AT PHAGWARA THAN AT JAL ANDHAR. FOR ALL THE REGULATORY AND ADMINISTRATIVE CONTROLS IT FALLS WIT HIN THE JURISDICTION OF KAPURTHALA DISTRICT. THEREFORE THE OBSERVATION OF THE AO THAT IT BECOMES A CAPITAL ASSET BEING FALLING WITHIN 8 KMS OF MUNICIP AL LIMIT OF JALANDHAR CANNOT BE UPHELD IN VIEW OF THE NOTIFICATION AND THE PECUL IAR PLACEMENT OF THE LAND. 83. THE AO IN THIS REGARD HELD AS FOLLOWS: EVEN IF IT IS ADMITTED THAT IT IS BEYOND THE MUNIC IPAL LIMITS OF PHAGWARA HOWEVER THE LAND IN QUESTION IS WITHIN 8 KM OF THE MUNICIPAL LIM ITS OF JALANDHAR CITY AND ON THIS VERY GROUND ALSO THE LAN D IN QUESTION IS OUTSIDE THE EXEMPTION PROVIDED U/S 2(14) OF THE IT ACT. 84. THE CONCLUSION OF THE AO THEREFORE AS SEEN IN THE PRECEDING PARAS IS A NON EST CONCLUSION ARRIVED AT IN OBLIVION OF THE S ETTLED LAW ON THE SUBJECT STATUTORY AS WELL AS PRECEDENT. THE LEARNED CIT(A) HAS ERGO CORRECTLY DISSENTED FROM THE CONCLUSION OF THE AO THAT FALLIN G WITHIN 8 KMS FROM JALANDHAR THE LAND IN QUESTION ACQUIRES THE NATURE OF A CAPITAL ASSET WITHIN THE MEANING OF S.2(14) OF THE IT ACT. 12. IN THIS CASE ALSO ADMITTEDLY THE ENTIRE TRANSACTION S WAS MADE THROUGH RAJENDRA NAGAR REVENUE AUTHORITIES AND NOT T HROUGH HYDERABAD REVENUE AUTHORITIES. THEREFORE AS FOUND BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF CAPITAL LOCAL AREA BANK LTD. (SUPRA) THE JURISDICTIONAL MUNICIPALITY IS RAJENDRA N AGAR MUNICIPALITY AND NOT THE HYDERABAD MUNICIPALITY. SINCE RAJENDRA NA GAR MUNICIPALITY IS NOT ADMITTEDLY NOTIFIED BY THE CENTRAL GOVERNMENT THE AGRICULTURAL LAND IN QUESTION CANNOT BE TREATED AS CAPITAL ASSET BY T AKING THE DISTANCE FROM THE LIMITS OF HYDERABAD MUNICIPALITY. B Y RESPECTFULLY FOLLOWING DECISIONS OF THE COORDINATE BENCH CITED SUPRA WE HOLD THAT THE LAND IN QUESTION CANNOT BE TREATED AS CAPITAL ASSET WITHI N THE MEANING OF SEC. 2(14)(III)(B) OF THE IT ACT. ACCORDINGLY ORDERS O F THE LOWER AUTHORITIES ARE SET ASIDE. 10 10 13. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT 23 RD APRIL 2010 SD/- SD/- A. AKBER BASHA N.R.S. GANESAN ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 23 RD APRIL 2010 COPY FORWARDED TO: 1. SHRI G.D. UPADHYAY & CO CAS 15-1-53 2 ND FLOOR UPSTAIRS ANDHRA BANK NS ROAD HYDERABAD 2. ITO WARD 7 (4) HYDERABAD 3. CIT(A)- VI HYDERABAD. 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD. NP