2019 (6) TMI 986 - AT - Income Tax

Entitlement to the benefit of section 10(37) - proof of compulsory acquisition - as submitted by assessee property as taken over by Vizhinjam International Seaport, was an agricultural land and was compulsorily acquired by the Government of Kerala - 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 - HELD THAT - As in the case of Balakrishnan v. Union of India Others 2017 (3) TMI 745 - SUPREME COURT 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. The A.O. did not have case that the impugned land is not an agricultural land. 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:
- Whether the land acquired by the Government of Kerala is entitled to the benefit of section 10(37) of the Income-tax Act?

Analysis:

Issue 1: Entitlement to benefit under section 10(37) of the Income-tax Act
The case involved a dispute regarding the taxability of the sale proceeds of land acquired by the Government of Kerala for developing a seaport. The assessee claimed exemption under section 10(37) of the Income-tax Act, stating that the land was agricultural and compulsorily acquired. The Assessing Officer, however, rejected the claim, citing that the land was within the municipal corporation limits and the acquisition was through a negotiated sale. The CIT(A) allowed the exemption based on the judgment in Balakrishnan v. Union of India, where it was held that even if the price was negotiated, the acquisition remained compulsory. The Tribunal concurred, emphasizing that the entire procedure under the Land Acquisition Act was followed, and the character of acquisition was compulsory. As the land was agricultural and the acquisition met legal requirements, the benefit under section 10(37) was granted, dismissing the Revenue's appeal.

This judgment clarifies the distinction between compulsory acquisition and voluntary sale, emphasizing that adherence to statutory procedures determines the nature of acquisition for tax purposes. It underscores the significance of legal compliance in determining tax exemptions for acquired properties, especially in cases of agricultural land acquisitions.