2015 (8) TMI 1268 - AT - Income Tax

Claim of exemption u/s 10(37) - Addition of long term capital gains - treating assessee s agricultural income under the head other sources - CIT(A) deleted the addition - Held that - We reiterate that the assessee s land is situated within the Surat municipal corporation limits u/s 2(14) (iii) (a) of the Act. The Revenue strongly relies upon the Assessing Officer s finding denying the assessee exemption u/s 10(37) of the Act. This section reveals that there are four conditions to claim exemption i.e. the land has to be situated in an area referred to under section 2(14) (iii)(a) or (b). Such a land is to be used for agricultural purposes during the period of two immediately preceding years. The third one is that the transfer in question has to be by way of compulsory acquisition. The fourth and last condition is that such a transfer is on or after 1.4.2004. The assessee duly fulfils the first condition as the land is well within municipal limits. Coming to land s use during the immediately preceding two years we find that the revenue record form 7/12 as relied upon in the lower appellate proceedings forming part of record contains all details of the crops sown since financial year 2003-04. We deem it proper to observe that the same is public record prepared by agrarian authorities under respective land and tenancy laws which cannot be brushed aside without any specific evidence to the contrary. There is no such evidence much less a specific one forthcoming. Therefore the assessee satisfies the second stipulation as well. Now we come to Assessing Officer s objection that the land is not transferred under compulsory acquisition. The case record file states purpose of the sale deed to be a sewerage treatment plant. The Revenue does not point any infirmity therein. Therefore this argument also fails. The fourth condition of the transfer effected on 28.3.2010 is automatically satisfied since the same is after 1.10.2004. It is also to be seen from the case file that assessee led sufficient oral evidence of the concerned panchas in favour of his plea of having cultivated the land. The TDS deduction form is not in order since it categorized assessee s payment to be contractor bill in spite of the fact that it pertains to land transfer. The assessee s three other co-owners namely Smt. Mayuriben Rekhaben and Geetaben have already been granted section 10(37) exemption in question. The Revenue fails to rebut all the above stated facts on record. We accordingly reject its both arguments on the issue of the impugned capital gains and agricultural income. The CIT(A) s order stands upheld. - Decided against revenue.

Summary

Issues Involved:
1. Denial of exemption claimed under section 10(37) of the Income-tax Act, 1961.
2. Valuation of land for determining the cost of acquisition as of 01.04.1981.
3. Treatment of agricultural income under the head "other sources."

Issue-wise Detailed Analysis:

1. Denial of exemption claimed under section 10(37) of the Income-tax Act, 1961:

The primary issue revolves around the denial of exemption under section 10(37) of the Act. The Assessing Officer (AO) disallowed the exemption claim for three main reasons: the deduction of TDS by Surat Municipal Corporation (SMC), lack of evidence for agricultural activity in the preceding two years, and absence of purchase bills for seeds and other agricultural expenses. The CIT(A) reversed this decision, emphasizing that the appellant provided sufficient evidence, including the 7/12 Utara document, Panchnama, and confirmations from village individuals, proving agricultural activity. The CIT(A) also highlighted that the TDS certificate incorrectly categorized the payment as a "contractor bill" instead of "compensation paid for compulsory acquisition of land." The Tribunal upheld the CIT(A)'s decision, confirming that all four conditions under section 10(37) were met: the land was within municipal limits, used for agricultural purposes, transferred under compulsory acquisition, and the transfer occurred after 01.04.2004.

2. Valuation of land for determining the cost of acquisition as of 01.04.1981:

The second issue pertains to the valuation of land for determining the cost of acquisition as of 01.04.1981. The AO adopted a value of Rs. 4.50 per sq. meter, whereas the appellant claimed a value of Rs. 100 per sq. meter. The CIT(A) did not explicitly address this issue separately but considered it inter-related with the exemption claim under section 10(37). The Tribunal did not provide a separate analysis on this valuation issue, implicitly upholding the CIT(A)'s comprehensive decision favoring the appellant.

3. Treatment of agricultural income under the head "other sources":

The AO treated the assessee's agricultural income of Rs. 1.77 lakhs under the head "other sources," citing a lack of evidence for agricultural operations. The CIT(A) reversed this, accepting the appellant's submission supported by the 7/12 Utara document and other evidence. The Tribunal upheld the CIT(A)'s decision, noting that the AO failed to verify the authenticity of the 7/12 Utara document and did not conduct any inquiry to substantiate his claims. The Tribunal emphasized that the 7/12 Utara is a primary document issued by a State Government Authority and cannot be dismissed without proper verification.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order that granted exemption under section 10(37) and accepted the agricultural income claim. The Tribunal confirmed that the appellant met all conditions for exemption and provided sufficient evidence for agricultural activity, rejecting the AO's findings due to lack of proper verification and inquiry. The order was pronounced in the open Court on 14/8/2015.