2018 (10) TMI 852 - AT - Income Tax

Entitled to the benefit of section 10(37) - nature of land - acquisition of the urban agricultural land as a compulsory acquisition - Held that - The assessee s 70 cents of land at Vizhinjam Village was notified for compulsory acquisition by Government of Kerala for developing Vizhinjam International Seaport. Though the acquisition proceedings were taken under the Land Acquisition Act the final price was fixed upon negotiated sale agreement. AO has allowed the claim of the assessee for deduction u/s 54B which provides for a deduction on account of transfer of land used for agricultural purpose and for purchase of another agricultural land. Therefore admittedly when deduction has been granted u/s 54B A.O. also categorically admitted that the land sold was an agricultural land. A.O. however noticed that the land was within Trivandrum Municipal Corporation and therefore would be an urban agricultural land falling within the provisions of section 2(14)(iii). The only reason for the A.O. to deny the benefit of section 10(37) was that the impugned land was acquired by executing a sale deed in favour of Vizhinjam International Seaport and it was not a case of compulsory acquisition. The Hon ble Apex Court in the case of Balakrishnan v. Union of India & Others 2017 (3) TMI 745 - SUPREME COURT OF INDIA 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 and the same would be entitled to the benefit enumerated in section 10(37) of the I.T.Act. - Decided in favour of assessee.

Summary

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

Analysis:
The appeal and cross objection were directed against the Commissioner of Income-tax (Appeals)'s order regarding the assessment year 2012-2013. The Revenue's appeal raised the issue of whether the land acquired was eligible for the benefit under section 10(37) of the Income-tax Act. The assessee claimed exemption from tax on the sale of land to Vizhinjam International Seaport, stating it was agricultural land compulsorily acquired by the Government of Kerala. The Assessing Officer initially rejected this claim, assessing long term capital gains. However, the CIT(A) ruled in favor of the assessee citing the judgment in Balakrishnan v. Union of India, holding the land qualified for section 10(37) benefit.

The Revenue, dissatisfied, appealed to the Tribunal. The Departmental Representative relied on the assessment order, while the AR argued that the land was agricultural and the denial of section 10(37) benefit was based on the land not being compulsorily acquired. The AR referenced judgments in support of the assessee's position. The Tribunal considered the facts, noting the land was notified for compulsory acquisition but the final price was determined through a negotiated sale agreement. The AO had granted deduction u/s 54B for agricultural land transfer. The Tribunal cited the Balakrishnan case, emphasizing that even with a negotiated settlement, if the acquisition process was followed, it remained compulsory. Consequently, the Tribunal held that the land was compulsorily acquired and entitled to section 10(37) benefit.

Regarding the Cross Objection (CO) by the assessee on the fair market value for capital gains computation, since the Revenue's appeal was dismissed, the CO became irrelevant and was also dismissed. Ultimately, both the Revenue's appeal and the CO were dismissed, affirming the benefit of section 10(37) for the assessee.