2020 (1) TMI 1001 - HC - Income Tax

Refund claim u/s 119 (2) (b) - condonation of delay for issue of belated refund - compensation received by the assessee in pursuance of land acquisition proceedings claimed exempt under Section 10 (37) - benefit of exemption to agricultural land denied - HELD THAT - In the present case, we are concerned with Sub Clause (iii) (b) (II) which provides that agricultural land is exempted from the purview of capital gains unless the area is within the distance, measured aerially, not being more than 6 Kms from the local limits of any municipality or cantonment board referred to in item (a) (land situated in in any area which is comprised within the jurisdiction of a municipality whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name or a cantonment board and which has a population of not less than ten thousand) and which has population of more than one lakh but not exceeding 10 lakh. The report received by the Respondent states that khasra No. 1243 is outside the municipal limit, but is situated within 1 Km from the local limits of municipality of Doraha Town and has a population of more than 25,000 as per 2011 census. Thus, according to this report, the land in question cannot be considered to be agricultural land. Petitioner has not been able to furnish any documentary evidence to contradict the aforesaid report. Material shown to us by the Respondent leads to the conclusion that the land in question would be categorized as a capital asset. Therefore, the assessee cannot claim the benefit of exemption to agricultural land and hence, the compensation received by the assessee in pursuance of land acquisition proceedings, is subject to tax and the refund has been rightly rejected, as being barred by limitation.

Summary

Issues Involved:
1. Whether the land in question is agricultural land or a capital asset.
2. Eligibility of the petitioner for exemption under Section 10(37) of the Income Tax Act.
3. Validity of the rejection of the refund claim due to delay in filing.

Issue-wise Detailed Analysis:

1. Whether the land in question is agricultural land or a capital asset:

The petitioner contended that the land in question was agricultural and situated outside the municipal limits, thus not a capital asset. However, the respondents, based on local inquiries and the Patwari Report, categorized the land as "Gairmumkin," meaning it was not agricultural. Additionally, it was found that while Khasra No. 1243 was outside the municipal limits, it was within 1 km from the local limits of Doraha town, which has a population of more than 25,000 as per the 2011 census. Therefore, the land was considered a capital asset under Section 2(14) of the Income Tax Act.

2. Eligibility of the petitioner for exemption under Section 10(37) of the Income Tax Act:

The petitioner argued that the compensation received for the acquired land should be exempt under Section 10(37) as the land was agricultural. However, the respondents pointed out that this exemption is available only to individuals and HUFs, not to trusts. The petitioner conceded this point, acknowledging that they were not eligible for the exemption under Section 10(37). The court emphasized that the land in question did not meet the criteria for agricultural land as per the Patwari's report and other documentary evidence, thus falling under the definition of a capital asset.

3. Validity of the rejection of the refund claim due to delay in filing:

The petitioner filed a belated refund claim under Section 119(2)(b), citing the late receipt of the TDS certificate as the reason for the delay. The Chief Commissioner of Income Tax (Exemptions), Delhi, called for supporting documents to verify the claim's correctness and genuineness. Despite opportunities, the petitioner failed to provide credible evidence to substantiate their claim. Consequently, the application for condonation of delay was rejected. The court upheld this decision, noting that the petitioner had not availed the opportunity to present documentary evidence during the proceedings and that the land in question was rightly categorized as a capital asset, making the compensation taxable.

Conclusion:

The court concluded that the petitioner could not claim the benefit of exemption for agricultural land as the land in question was a capital asset. The rejection of the refund claim was upheld due to the delay in filing and the lack of credible evidence to support the petitioner's claims. The petition was dismissed with no order as to costs.