2021 (4) TMI 983 - AT - Income Tax

Exemption u/s 10(37) - qualify definition of Compulsory acquisition - Whether acquisition of impugned agricultural land by Surat Municipal Corporation (SMC) eligible for exemption? - AO has disallowed the claim u/s 10(37) on the ground that the assessee has sold the land voluntarily, and it is not case of compulsory acquisition of land by SMC - HELD THAT- As relying on Satishbhai M Patel 2019 (12) TMI 1291 - ITAT SURAT the assessee is eligible for exemption under section 10(37) of the Act. Consequently, the AO is directed to allow exemption under section 10(37) of the Act. In view of this, ground of appeal of the assessee is allowed

Summary

Issues Involved:
1. Deletion of addition made by AO on account of rejecting the claim of Exemption under Section 10(37) of the IT Act.
2. Determination of whether the purchase of land by Surat Municipal Corporation (SMC) from the assessee qualifies as compensation or consideration under the purview of eligible exemption under Section 10(37) of the IT Act.
3. Whether the CIT(A) should have upheld the order of the Assessing Officer (AO).

Issue-Wise Detailed Analysis:

1. Deletion of Addition Made by AO on Account of Rejecting the Claim of Exemption under Section 10(37) of the IT Act:
The assessee filed her return of income for AY 2008-09, declaring a total income of ?1,31,558/-. The AO received information that SMC purchased land from the assessee for constructing a Sewage Treatment Plant. The AO considered this land as a capital asset and reopened the assessment under Section 147. The assessee claimed exemption under Section 10(37) for the compensation received, supported by a certificate from the Deputy Commissioner of SMC, stating the land was acquired compulsorily for public purpose. However, the AO disallowed the exemption, arguing the land was purchased through negotiation, not compulsory acquisition.

On appeal, the CIT(A) reversed the AO's decision, referencing a similar case where the ITAT Ahmedabad ruled that compensation received for land acquired by SMC was exempt under Section 10(37). The CIT(A) concluded that the land transfer was a compulsory acquisition, thus qualifying for exemption under Section 10(37).

2. Determination of Whether the Purchase of Land by SMC from the Assessee Qualifies as Compensation or Consideration under the Purview of Eligible Exemption under Section 10(37) of the IT Act:
The CIT(A) noted that the land was acquired by SMC under the provisions of the Gujarat Town Planning & Urban Development Act, 1976, and the Bombay Provincial Municipal Corporation Act, 1949, for public purposes. The CIT(A) referenced the ITAT Ahmedabad's decision in the case of Dipak Kalidas Pauwala, which held that such acquisitions were compulsory and eligible for exemption under Section 10(37). The CIT(A) determined that the land transfer was indeed a compulsory acquisition, thus qualifying for the exemption.

3. Whether the CIT(A) Should Have Upheld the Order of the Assessing Officer:
The revenue appealed against the CIT(A)'s decision, arguing that the land was sold voluntarily, not compulsorily acquired. However, the ITAT noted that similar cases had been adjudicated, where the Tribunal and the Hon'ble Gujarat High Court affirmed that such acquisitions by SMC were compulsory and eligible for exemption under Section 10(37). The ITAT referenced the case of Satishbhai M Patel, where similar facts led to the conclusion that the land acquisition was compulsory. The Tribunal found no merit in the revenue's appeal and upheld the CIT(A)'s decision.

Conclusion:
The ITAT dismissed the revenue's appeal, confirming that the land acquisition by SMC was compulsory and the compensation received was exempt under Section 10(37) of the IT Act. The Tribunal's decision was consistent with previous rulings in similar cases, reinforcing the interpretation that such acquisitions qualify for the exemption. The appeal of the revenue was thus dismissed, and the CIT(A)'s order was upheld.