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2023 (1) TMI 523 - AT - Income TaxRevision u/s 263 by CIT - assesses claim of exemption of capital gains earned on transfer of land u/s 10(37) - assessee s case was selected for compulsory scrutiny for the purpose of verifying large income claimed as exempt under the head capital gains and other sources - PCIT found the claim to be wrongly allowed by the AO without examining /inquiring eligibility to claim exemption u/s 10(37) and correct computation of capital gains HELD THAT - The computation of capital gains having been called to question by the Ld.PCIT noting that the assessee had computed capital gains only in relation to the component of agreed consideration actually received during the year i.e 75%. The fact that the land was initially notified for acquisition under the Land Acquisition Act,1894 which got repealed before the grant of any award to these lands under the law and a new law was notified in its place i.e RFCTLAAR Act,2013, whose Rules since were not notified, GIDC went ahead to purchase the land vide these banakhats at rates agreed earlier in the LAA Act, does not grant the color of compulsory acquisition to this transaction. Undoubtedly the transaction between the assessee and GIDC is mutually agreed transaction and there was no compulsion on the assessee to transfer the land to GIDC. The initial notification of acquisition of these lands under the LAA no longer existed in law once the Act got repealed In the present case though the assessee s lands may have qualified for transition under the new law on account of acquisition being notified under old LAA Act but no award being made therein but the fact remains that it was not acquired even under the new law. As per the transitory provisions the acquisition could very well have been continued with as per the new law. Whatever may have been the compulsions, that the Rules were getting delayed to be notified for acquisition of land under the new law, but the fact remains that the land was not acquired by the State even under the new law. There is no reason nor scope for deeming the acquisition of the lands under the RFCTLAAR Act. The banakhat entered into between the assessee and GIDC is on mutually agreed terms where there is nothing to the effect that the assessee has to compulsorily transfer its land and has no choice in the matter. Nothing to this effect was pointed out to us. Nor is this the case of the Ld.Counsel for the assessee. The assessee on its own volition agreed to transfer the land to GIDC. The assessee was well within its rights to have refused to do so. Therefore there arises no question at all of giving this transaction the color of compulsory acquisition at all. The findings of the Ld.PCIT therefore that the assessee did not qualify for exemption u/s 10(37) of the Act since the lands were not compulsorily acquired, we find is correct. And therefore his findings that the AO s order was erroneous for having granted exemption without examining eligibility on this count is also we hold correct. Having found the assessee failing to fulfill one of the cumulative conditions required to be fulfilled for claiming exemption u/s 10(37) we do not consider it necessary to deal with the other failure noted by the Ld.PCIT of the land having not been used for agricultural purposes. AO s order allowing claim of exemption is in error on account of the transfer of land not having been by way of compulsory acquisition alone.The issue of whether used for agricultural purposes or not prior to transfer therefore becomes only academic for adjudicating whether the order passed by the Ld.PCIT holding the assessment order to be erroneous was in accordance with law. Alternate contention of the Ld.Counsel for the assessee that no transfer in fact had taken place during the impugned year since the banakhat was not registered - We find that this is of no relevance while adjudicating upon the order of the Ld.PCIT. The reason being that this was never the issue before the Ld.PCIT whose order u/s 263 impugned before us finds the assessment order to be erroneous for having wrongly allowed the assesses claim of exemption u/s 10(37) - That was the limited issue considered by the Ld.PCIT. The assesses claim never was to the effect that no capital gain accrued during the year at all. He had voluntarily returned capital gain as exempt during the impugned year. Nor do we find that the assessee ever made such claim before the PCIT during impugned revisionary proceedings. The order of the PCIT having been found by us to be in accordance with law on the issue raised therein, it cannot be set aside on an issue which was never there before the PCIT. Though needless to add that the assessee is at full liberty to raise this plea or any other plea in the set aside proceedings before the AO. We uphold the order passed u/s 263 - Decided against assessee.
Issues Involved:
1. Eligibility to claim exemption under section 10(37) of the Income Tax Act. 2. Correct computation of capital gains. 3. Validity of the revisionary jurisdiction assumed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act. Issue-wise Detailed Analysis: 1. Eligibility to claim exemption under section 10(37) of the Income Tax Act: The primary contention was whether the assessee's land transfer qualified as a compulsory acquisition under section 10(37) of the Income Tax Act. The PCIT found that the land was not compulsorily acquired by the government but was instead sold to the Gujarat Industrial Development Corporation (GIDC) through a private contract. The PCIT noted that: - The land was initially notified for acquisition under the Land Acquisition Act, 1894, but this Act was repealed and replaced by the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLRR Act). - Due to the delay in the notification of rules under the new Act, GIDC acquired the land by mutual consent under section 14(b) of the Gujarat Industrial Development Act, 1962. - The transaction was not considered compulsory acquisition as it was a mutually agreed sale, and thus, the exemption under section 10(37) was not applicable. The Tribunal agreed with the PCIT's findings, stating that the land transfer did not meet the conditions for compulsory acquisition under section 10(37). The Tribunal emphasized that the transaction was voluntary and not mandated by law, thus disqualifying it from the exemption. 2. Correct computation of capital gains: The PCIT also questioned the computation of capital gains by the assessee, noting that: - The assessee had only considered 75% of the agreed consideration received during the year, excluding the remaining 25%. - The PCIT held that the entire consideration should have been considered for computing the capital gains. The Tribunal upheld the PCIT's finding, stating that the computation of capital gains based on only the received portion was erroneous and prejudicial to the Revenue. 3. Validity of the revisionary jurisdiction assumed by the PCIT under section 263 of the Income Tax Act: The Tribunal examined whether the PCIT's assumption of revisionary jurisdiction under section 263 was justified. The assessee argued that: - The Assessing Officer (AO) had made due inquiries regarding the exemption claim and had taken a plausible view. - The AO's order was neither erroneous nor prejudicial to the interest of the Revenue. However, the Tribunal found that: - The AO had not conducted a proper inquiry into the eligibility for exemption under section 10(37) and the correct computation of capital gains. - The AO's order was therefore erroneous and prejudicial to the Revenue. The Tribunal concluded that the PCIT was justified in invoking section 263 to revise the AO's order. Conclusion: The Tribunal dismissed the appeals, upholding the PCIT's order under section 263. The Tribunal found that the land transfer did not qualify for exemption under section 10(37) as it was not a compulsory acquisition, and the computation of capital gains was incorrect. The Tribunal also confirmed the validity of the PCIT's revisionary jurisdiction under section 263.
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