CIT Vs Nitish Rameshchandra Chordia (Bombay High Court)
Bombay High Court, in CIT vs. Nitish Rameshchandra Chordia, ruled that the distance of agricultural land from municipal limits must be measured by road and not by aerial distance. This ruling directly impacts the classification of agricultural land under Section 2(14) of the Income Tax Act, which determines whether capital gains tax applies. The court upheld the decision of the Income Tax Appellate Tribunal (ITAT), which had favored the assessee by rejecting the revenue’s contention that the land should be measured using a straight-line method.
The case originated from a search operation on Concrete Developers, Nagpur, which led to the assessment of the assessee’s land transactions. The Assessing Officer classified the profits from land sales as taxable short-term capital gains, arguing that the lands were within 8 kilometers of municipal limits when measured by aerial distance. However, the ITAT ruled in favor of the assessee, relying on judicial precedents that state the distance should be measured by road. The Revenue Department challenged this decision in the High Court.
The court referred to several precedents, including CIT vs. Satinder Pal Singh (2010) 229 CTR (P&H) 82, Laukik Developers vs. DCIT (2007) 108 TTJ (Mumbai) 364, and CIT vs. Shabbir Hussain Pithawala (2014) 98 DTR (MP) 62, all of which held that the approach road distance should be considered. The ruling emphasized that amendments to tax statutes generally apply prospectively unless explicitly stated otherwise. Since the amendment specifying aerial measurement took effect only from April 1, 2014, it was not applicable to the assessment year in question.
