2019 (6) TMI 1466 - AT - Income Tax

Benefit of section 10(37) - character of acquisition - whether merely because the sale price was fixed through a negotiated settlement the character of acquisition would still remain compulsory? - assessee s land in question at Vizhinjam Village was notified for compulsory acquisition by Government of Kerala for developing Vizhinjam International Seaport - CIT(A) had allowed the claim of deduction u/s 10(37) based on the certificate produced by the assessee and the details of agricultural income returned for assessment years 2011-2012 to 2013-2014 - HELD THAT - Though the acquisition proceedings were taken under the Land Acquisition Act the final price was fixed upon negotiated sale agreement. As regards denying of benefit u/s 10(37) for that reason that the impugned land was not compulsorily acquired but by executing a sale deed we find that the issue is covered in favour of the assessee by the judgment of the Hon ble Apex Court in the case of Balakrishnan v. Union of India Others 2017 (3) TMI 745 - SUPREME COURT . Hon ble Apex Court in the case of Balakrishnan v. Union of India Others (supra) had categorically held merely because the sale price was fixed through a negotiated settlement the character of acquisition would still remain compulsory. 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. The assessee and his wife were maintaining the entire agricultural operation and both of them had shown agricultural income in the return of income. The agricultural income returned by the assessee from this land for assessment year 2011-2012 is 100, 000 for assessment year 2012-2013 is 2, 65, 000 and for the period upto 31.07.2012 (date of sale) i.e. for assessment year 2013-2014 is 45, 000. The assessee has also produced the certificate issued by the Agricultural Officer and the copy of the list of the survey number showing the nature of land. The land in question under survey No.606/04 as per the Government records is agricultural land. For the aforesaid reasons we hold that the CIT(A) is justified in holding the impugned land is an agricultural land and agricultural operation was carried out on the same. Reasons given by the AO for denying the benefit of deduction u/s 10(37) of the I.T.Act is not correct. - Decided against revenue.

Summary

Issues:
Whether land acquired is entitled to benefit under section 10(37) of the Income-tax Act?

Analysis:
The appeal before the Appellate Tribunal ITAT Cochin concerned the Revenue's challenge against the Commissioner of Income-tax (Appeals)'s order regarding the entitlement of land to the benefit of section 10(37) of the Income-tax Act for the assessment year 2013-2014. The land in question, located in Vizhinjam village, was sold to Vizhinjam International Seaport, with the assessee claiming the entire sale consideration as exempt from tax under section 10(37) due to it being agricultural land compulsorily acquired by the Government of Kerala. However, the Assessing Officer rejected this claim, assessing long term capital gains. The CIT(A), following a Supreme Court judgment, found the land to be agricultural and granted the benefit of section 10(37), relieving the assessee from long term capital gains tax.

The Revenue, dissatisfied with the CIT(A)'s decision, appealed to the Tribunal. The Departmental Representative argued against the exemption, while the Appellant's Representative contended that the land was agricultural, supported by an Agricultural Officer's certificate and declared agricultural income for previous years. The Tribunal analyzed the case, noting that while the land was acquired through a negotiated sale agreement, the entire procedure under the Land Acquisition Act was followed, making the acquisition compulsory as per the Supreme Court's precedent in Balakrishnan v. Union of India. Additionally, the Tribunal found the Assessing Officer's conclusion that the land was non-agricultural to be incorrect, as evidenced by agricultural activities, standing trees, and income declared by the assessee.

Consequently, the Tribunal upheld the CIT(A)'s decision, ruling in favor of the assessee and dismissing the Revenue's appeal. The Tribunal emphasized that the land was indeed agricultural, as supported by evidence, and that the denial of the benefit under section 10(37) by the Assessing Officer was unfounded. The order was pronounced in June 2019, affirming the assessee's entitlement to the exemption under section 10(37) for the acquisition of the agricultural land.