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2020 (4) TMI 431 - AT - Income TaxClaim of exemption u/s 10(37) - Addition of long-term capital gain - sale of agricultural land - Whether qualify the definition of Compulsory acquisition or not - whether acquisition of impugned agricultural land by Surat Municipal Corporation (SMC) eligible for exemption under section 10(37)? - HELD THAT - As decided in SHRI SATISHBHAI M PATEL, SHRI PRAVINKUMAR M PATEL AND ORS. VERSUS DCIT, ITO, WARD-2 (3) (1) , SURAT 2019 (12) TMI 1291 - ITAT SURAT for the purpose of section 10(37) it is not required that the assessee himself should carry out the agricultural operations on the land. As per letter no. ACT/SR/3161 dated. 31.08.2010 it has been clearly mentioned by the SMC that nature of payment was compulsory acquisition (Land/ Building). From the perusal of letter no. TBT/OUT/ 4089/ 22 dated. 23.09.2014that land in question was placed under reservation by the Government of Gujarat vide order dated Notification No. GH/V/100 of 2004/DVP/1403/3307/L dated. 02.09.2014 under the provision of section 20 of Gujarat Town Planning Urban Development Act 1976 at the disposal of the SMC to acquire the land under section 77 of Bombay Provincial Municipal Corporation Act, 1949 for erection of Sewerage Treatment Plant. Thus, it was a case of compulsory acquisition of land for which the SMC under the instruction of Government of Gujarat for which the SMC has also given a certificate dated 12.08.2010 letter no. ACT/SR/NO2861 wherein nature of payment to the assessee is described against compulsory acquisition of land at Dindoli. In the case of ITO v. Dipak Kalidas Pauwala 2015 (8) TMI 1268 - ITAT AHMEDABAD wherein the Tribunal has held the that said land in Dindoli ( at Block no. 305) was acquired by SMC for sewerage Treatment Plant are agricultural land which has been compulsory acquired by SMC under the provision of section 107 of GTP UD Act, 1976 as the land needed for the purpose of Town Planning Scheme or Development Plan shall be deemed to be meaning for public purpose within the meaning of Land Acquisition Act , 1894 (I of 1894) and eligible for exemption under section 10(37) . Also confirmed by HC 2016 (4) TMI 431 - GUJARAT HIGH COURT Thus we hold that the land in question was compulsory acquisition by the SMC under the direction of Government of Gujarat. Hence, conditions stipulated in section 10(37) is satisfied. - Decided in favour of assessee.
Issues Involved:
1. Addition of ?1,22,15,333 on account of long-term capital gain by treating the sale of agricultural land as non-exempt under section 10(37) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Addition of ?1,22,15,333 on account of long-term capital gain: The primary issue in this case was whether the sale of agricultural land by the assessee to Surat Municipal Corporation (SMC) was a compulsory acquisition and thus eligible for exemption under section 10(37) of the Income Tax Act, 1961. Arguments by the Assessee: The assessee argued that the sale of the agricultural land to SMC was a compulsory acquisition, making it eligible for exemption under section 10(37) of the Act. The assessee's counsel cited a decision by the Surat bench of ITAT in the case of Shri Satish M. Patel and others, where a similar exemption under section 10(37) was allowed. The counsel also referred to various letters and notifications indicating that the land was reserved for public purposes and acquired under relevant municipal and town planning laws. Arguments by the Revenue: The Revenue contended that the acquisition was not compulsory but rather a voluntary sale executed through a sale deed. The Revenue's representative argued that SMC does not have the power to compulsorily acquire land without the state government's approval, and the transaction was a negotiated sale rather than a compulsory acquisition. Tribunal's Findings: Upon reviewing the submissions and relevant material, the Tribunal noted that the facts of this case were identical to those in the case of Shri Satish M. Patel, where the Tribunal had allowed the exemption under section 10(37). The Tribunal observed that: - The land was placed under reservation by the Government of Gujarat for public purposes. - The SMC had issued letters indicating that the nature of payment was for "compulsory acquisition." - Previous judicial decisions, including those by the Hon'ble Gujarat High Court and the Supreme Court, supported the view that negotiated settlements following compulsory acquisition procedures do not change the character of the acquisition from compulsory to voluntary. The Tribunal concluded that the land in question was indeed compulsorily acquired by SMC under the direction of the Government of Gujarat, satisfying the conditions stipulated in section 10(37) of the Act. Consequently, the assessee was eligible for the exemption under section 10(37), and the addition of ?1,22,15,333 on account of long-term capital gain was unwarranted. Outcome: The Tribunal directed the Assessing Officer to allow the exemption under section 10(37) of the Act. The appeal was partly allowed, with the ground relating to the cost of acquisition becoming infructuous due to the findings on the primary issue. Conclusion: The Tribunal's decision emphasized that the nature of acquisition (compulsory vs. voluntary) is determined by the underlying statutory procedures and not merely by the form of the transaction. The judgment reinforced the principle that negotiated settlements following compulsory acquisition procedures still qualify as compulsory acquisitions for the purposes of tax exemptions under section 10(37) of the Income Tax Act, 1961.
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