9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (9) TMI 959 - AT - Income TaxRevision u/s 263 - amount received by it on compulsory acquisition of land non liablility to tax under the head Capital gain - nature of land sold - According to the CIT in the case of the assessee the agricultural land lost its character as agricultural land after acquisition by the railways because they used the land acquired for non agricultural purpose therefore of the view that the AO ought not to have allowed exemption u/s 10(1) - Held that - There is a distinction between requisitioning of properties and compensation payable for acquisition of a property under the Land Acquisition Act. The payment for use of an occupation of a property cannot be equated with the payments made for acquisition of the property. In the former case only right to use and enjoy is transferred whereas in the later case there is a complete transfer of the whole interest over or complete ownership over the property. We are therefore of the view that the approach adopted by CIT in the present case was not proper in law. Since the order of the AO is not erroneous the CIT was not justified in invoking the jurisdiction u/s 263 of the Act. We therefore quash the order u/s 263 of the Act and allow the appeal of the assessee.
Issues Involved:
1. Whether the compensation received by the assessee on compulsory acquisition of agricultural land is liable to tax under the head 'capital gain'. 2. Whether the order of the Assessing Officer (AO) was erroneous and prejudicial to the interest of the revenue. 3. Interpretation of the definition of 'capital asset' under Section 2(14) of the Income Tax Act, 1961. 4. Applicability of Section 10(1) of the Income Tax Act, 1961 regarding the exemption of agricultural income. Detailed Analysis: 1. Taxability of Compensation Received on Compulsory Acquisition of Agricultural Land: The assessee, a company engaged in the business of growing, manufacturing, and selling tea, had a portion of its tea plantation compulsorily acquired by the Government for public purposes. The compensation received was ?1,32,74,986/-. The assessee argued that the land was agricultural land as defined under Section 2(14)(iii) of the Income Tax Act, 1961, and therefore, the compensation received should be treated as agricultural income under Section 10(1) of the Act and not liable to tax under the head 'capital gain'. The AO accepted this claim and did not bring the compensation to tax. 2. Order of the AO and CIT’s Invocation of Section 263: The Commissioner of Income Tax (CIT) invoked Section 263 of the Act, claiming the AO's order was erroneous and prejudicial to the interest of the revenue. The CIT argued that the land lost its agricultural character after acquisition by the railways, and thus, the exemption under Section 10(1) was incorrectly allowed. The CIT directed the AO to reassess the case and disallow the exemption. 3. Definition of 'Capital Asset' Under Section 2(14) of the Income Tax Act: The Tribunal noted that under Section 2(14) of the Act, 'capital asset' does not include agricultural land. The Tribunal emphasized that the land in question was used for agricultural purposes up to the date of acquisition and met all conditions to be considered agricultural land. Therefore, any income from its compulsory acquisition should be regarded as agricultural income and not chargeable to tax under 'capital gain'. 4. Applicability of Section 10(1) Regarding Exemption of Agricultural Income: The Tribunal found that the CIT's interpretation of the Supreme Court's decision in CIT vs. All India Tea & Trading Co. Ltd. was incorrect. The Supreme Court did not impose a condition that the land should retain its agricultural character after acquisition to qualify for exemption under Section 10(1). The Tribunal clarified that the compensation received on compulsory acquisition of agricultural land should be treated as agricultural income and exempt from tax. Conclusion: The Tribunal held that the AO's order was neither erroneous nor prejudicial to the interest of the revenue. The CIT's invocation of Section 263 was based on a misinterpretation of the law. Therefore, the Tribunal quashed the CIT's order and allowed the appeal of the assessee. Order Pronounced: The appeal of the assessee is allowed, and the order under Section 263 of the Act is quashed. The decision was pronounced in the Court on 13.09.2017.
|
