2014 (4) TMI 170 - HC - Income Tax

Stay application Entitlement for benefit u/s 10(37) of the Act - Compensation received on acquisition of land - Whether the assessee is entitled to the grant of unconditional stay of recovery of demand - Held that - The assessee received a total amount as compensation out of which TDS was deducted as per provisions of Section 194LA of the Act - The assessee showed long term capital gain on the amount of compensation in the income tax return - The agricultural income shown was nil whereas in the computation chart, agricultural income has been shown to be ₹ 4900/- only. On a query being put to the learned counsel for the petitioner as to whether the land which was acquired was not capital asset within the meaning of Section 2(14) of the Act, he was unable to dispute that it was falling within the limits of the Municipality of Amritsar. In such a situation, it cannot be conclusively held that agricultural activities were being carried on the land and thus, the petitioner was entitled for the benefit under Section 10(37) of the Act. - it is not a fit case for grant of stay of recovery of entire demand. - stay granted equal to 50% of tax liability.

Summary

Issues:
1. Whether the petitioner is entitled to the grant of unconditional stay of recovery of demand under Section 10(37) of the Act.
2. Whether the Assessing Officer's assessment order was arbitrary and without proper application of mind.

Analysis:

Issue 1:
The petitioner filed a petition under Articles 226/227 seeking to quash the orders dated 22.10.2013, 18.9.2013, and 30.3.2013, which raised a tax demand of Rs. 1,28,36,480 against the petitioner. The petitioner claimed that the demand was unjustified as the compensation received on land acquisition should be exempt under Section 10(37) of the Act if the land was used for agricultural purposes. However, discrepancies were found in the petitioner's agricultural income declaration, and it was unclear if the land acquired was a capital asset within the Act's definition. The court held that the petitioner was not conclusively entitled to the exemption and granted an interim stay of recovery of 50% of the tax liability during the appeal's pendency, citing lack of conclusive evidence of agricultural activities on the acquired land.

Issue 2:
The petitioner argued that the assessment order was passed arbitrarily without proper application of mind by the Assessing Officer. The petitioner also contended that the refusal to grant unconditional stay of demand was against CBDT instructions. The court considered precedents and arguments from both sides but ultimately found that the petitioner's entitlement to Section 10(37) exemption was not established conclusively. The court noted that the grant of interim stay did not strictly follow a legal principle or precedent, emphasizing the need for a factual determination before the appellate authority. The court disposed of the writ petition based on the above analysis and granted an interim stay of recovery of 50% of the tax liability during the appeal process.

This judgment highlights the importance of factual evidence and legal interpretation in determining tax liabilities and exemptions under the Income Tax Act. The court's decision to grant an interim stay reflects a balanced approach considering the lack of clear evidence supporting the petitioner's claim for exemption.