2019 (2) TMI 1727 - AT - Income Tax

Entitled to benefit of section 10(37) in respect of the land which was acquired - HELD THAT - The solitary reason for not granting of benefit of section 10(37) of the I.T.Act in respect of acquisition of urban agricultural land was that it was not a compulsory acquisition, but only executed through a negotiated sale deed. The Hon ble Apex Court in the case of Balakrishnan v. Union of India Others 2017 (3) TMI 745 - SUPREME COURT had categorically held merely because the sale price is fixed through a negotiated settlement will not take away the proceedings from the Land Acquisition Act when the relevant provision of the Act are invoked. In the instant case, the entire procedure prescribed under the Land Acquisition Act was followed, only price was fixed upon a negotiated settlement. Therefore, in view of the above judgment of the Hon ble Apex Court (supra), we hold that the acquisition of the urban agricultural land was a compulsory acquisition and the same would be entitled to the benefit enumerated in section 10(37) of the I.T.Act. It is ordered accordingly.

Summary

Issues:
Whether the assessee is entitled to benefit of section 10(37) of the I.T.Act in respect of the land which was acquired?

Analysis:
The appeal and cross objection were directed against the Commissioner of Income-tax (Appeals)'s order regarding the entitlement of the assessee to the benefit of section 10(37) of the Income Tax Act for the relevant assessment year of 2012-2013. The case revolved around the acquisition of 153.58 Ares of land in Vizhinjam village by the Government of Kerala, which was subsequently sold to Vizhinjam International Seaport Limited. The Assessing Officer issued a notice under section 148 of the I.T.Act as he believed that capital gains had escaped assessment. The main contention was whether the land was compulsorily acquired, thus qualifying for the benefit under section 10(37) of the I.T.Act.

The Assessing Officer rejected the assessee's claim for the benefit of section 10(37) on the grounds that the land was not compulsorily acquired but was transferred through a sale deed. However, the CIT(A) allowed the benefit based on the judgment of the Hon'ble Apex Court in the case of Balakrishnan v. Union of India. The Revenue challenged this decision before the Tribunal. The Tribunal considered the arguments of both parties and referred to the judgment in Balakrishnan v. Union of India, emphasizing that the character of acquisition remains compulsory even if the price is fixed through negotiation, as long as the procedures under the Land Acquisition Act are followed.

Ultimately, the Tribunal held that the acquisition of the urban agricultural land in question was a compulsory acquisition, as the procedures under the Land Acquisition Act were adhered to, despite the negotiated settlement on the price. Therefore, the assessee was entitled to the benefit under section 10(37) of the I.T.Act. The Cross Objection filed by the assessee was dismissed as the main appeal was also dismissed. The Tribunal pronounced its order on February 5, 2019, upholding the decision in favor of the assessee and dismissing both the Revenue's appeal and the assessee's Cross Objection.