Measurement of Distance to determine if agricultural land is situated within 8 km of municipal limits

Suraj R. Agrawal

Brief of the case-  Delhi High Court held in the case of CIT vs. Vijay Singh Kadan that to determine whether the “agricultural land” is situated within 8 km of the municipal limits so as to constitute a “capital asset”, the distance has to be measured in terms of the approach road and not by the straight line distance on horizontal plane or as per crow’s flight.

Facts of the case:

1. During the course of the assessment proceedings, the Assessing Officer (‘AO’) noted that on 9th September, 2005, the Assessee had sold a property admeasuring 5.9625 acres located at Village Ghata, Tehsil Sohna, District Gurgaon.
2. The stand of the Assessee was that the capital gain from the sale of the said land is not taxable because the land was agricultural land which did not fall within the definition of capital asset under Section 2(14) of the Act.
3. Accordingly, the AO held that as per Section 2(14)(iii)(b) of the Act, the agricultural land sold by the Assessee was a capital asset.
4. AO accordingly made an addition of Rs 7,75,12,500/- to the income of the Assessee as long term capital gains.

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Issue put before Delhi High Court:

“Whether distance up to the land should be considered or up to the village within which such land is situated?”

Contentions of Appellant:

1. According to the Assessee, the land did not fall within a distance of 8 km from the outer limit of the Gurgaon Municipality
2. The Assessee produced a certificate of the patwari in terms of which “in the year 2006 Ghata Village was approximately 9 Kms. away from Gurgaon Municipal Committee.”
3. The Assessee also produced the certificates of two architects to the effect that the distance between the land and the outer limits of Gurgaon municipality was 9.645 Kms.

Contention by Revenue:

1. The AO, however, rejected the certificates produced by the Assessee since the “scientific mode of determining the distance by a straight line method has not been employed” by the said architects.
2. The AO preferred the certificate of the Tehsildar, Sohna District and of the Engineer of the Gurgaon Municipal Corporation which stated that the distance was 6.6 Kms.
3. The CIT (A) rejected the certificates relied upon by the AO and the Assessee. He concluded that “the distance of agricultural land, in terms of Section 2(14)(iii)(b) has to be measured along the road and not as per crow’s flight/ aerial distance.”
4. However, the CIT (A) observed that “the distance is to be taken from the local limits from the Municipal Corporation to the ‘area’ in which the land is situated and not up to the land as mentioned in the report of the Patwari.”
5. The CIT (A) rejected the certificate furnished by the AO from the Directorate of Survey (AIR) and the DGDC Data Centre, New Delhi and concluded that the “shortest distance along the road from IFFCO Junction on the Municipal boundary up to Northern outer limit of Ghata, the Village in which the land is situated is 7.17 Kms. along the road.”

Ruling of Honorable Delhi High Court:

1. The presumption of the Assessing Officer as well as CIT(A) that the ‘area’ means the village in which such land is situated is without any basis.
2. the correct interpretation of the word ‘in any area within such distance not being more than 8 Kms. from the local limits of any municipality’ would mean the land should be within such area which is not more than 8 Kms. from the local limit of the municipality
3. The ITAT concluded that the land had to be within the distance of 8 Kms. from the outer limit of the Gurgaon municipality and not from the outer limit of the village Ghata in which the land was located
4. On the strength of the certificate produced by the Assessee from the former Additional Director General, CPWD that the distance of the land from the outer limit of the Gurgaon Municipality was 10.4 Kms, the ITAT held that the land owned by the Assessee did not fall within Clauses (a) or (b) of Section 2 (14) (iii).
5. No substantial question of law arises. The appeal is dismissed.

Key Take Away

1. The Court is of the view that for the purposes of Section 2 (14) (iii) (b) of the Act, the distance had to be measured from the agricultural land in question to the outer limit of the municipality by road and not by the straight line or the aerial route.
2. The distance has to be measured from the land in question itself and not from the village in which the land is situated.

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