Certificate from Executive Engineer and Sarpanch of Village are not sufficient to determine distance of land from Municipality: ITAT Mumbai

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In ACIT v. Mr. Alkesh Kantilal patel, the division bench of the ITAT, Mumbai held that Executive Engineer and Sarpanch of the Village are not ‘competent authorities’for issuing certificate for the purpose of determining distance of land in from Municipality while claiming income tax exemption on sale of agricultural land.

Assessee sold his agricultural land during the relevant previous year. The assessee claimed that the sale consideration is not taxable since it is capital receipt arising from sale of agricultural land ss per Section 2(14) of Income Tax Act 1961. In order to substantiate his claim, the assessee submitted a certificate from Executive Engineer, Ahmadabad and of Sarpanch of the Gram Panchayat mentioning that the agriculture land sold by the assessee had been situated 8 km away from the Ahmedabad Municipal Corporation Limit and the population of the village is less than 10,000.However, the AO rejected the claim by holding that from the records, he understood that the land sold by the assessee is within the limit of Sanand Municipality i.e. it is 7.1 Km away from the Municipality and is in the Municipal Limit.

On appeal, the first appellate authority held in favour of the assessee on the basis of the above certificate produced by the assessee.

Allowing the departmental appeal, the bench noted that the assessee failed to produce the relevant certificate from the competent authority as required under law for determination of the distance of land in question from Municipality etc. The ld. CIT(A) relied upon the certificate from Executive Engineer, Ahmadabad and of Sarpanch of the Village, who are not competent authority as prescribed under law. The assessee need to produce the said certificate from competent authority as prescribed under law for issue of such certificate.”

“The assessee is directed to submit certificate from the competent authority for claiming of the exemption from chargeability of the tax w.r.t. sale of agricultural land and treatment of the same as non taxable capital receipts in accordance with provisions of 1961 Act. We would also like to clarify that distance between the municipal limit and the agricultural land shall be measured having regards to the shortest road distance, as the impugned assessment year under appeal is assessment year 2011-12 while the amendment to section 2(14) of 1961 Act was brought in by Finance Act, 2013 w.e.f. 01-04-2014 wherein the said distance is to be measured aerially , and the said amendment is held to be prospective by Nagpur Bench of Hon’ble Bombay High Court vide orders dated 30-03-2015 in the case of Smt Maltibhai R Kadu in ITA no. 151 of 2013.”

Read the full text of the order below.

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