2023 (10) TMI 367 - AT - Income Tax

Deduction u/s 10(37) denied - sustaining the addition on account of long-term capital gain on sale of agricultural land - assessee has received compensation on which TDS was deducted. The assessee filed the return for obtaining the refund of TDS deducted from the said compensation on the ground that capital gain arising from the sale of impugned asset is not taxable within the meaning of section 10(37) as the land was agricultural land and exclusively used for agricultural purposes during the period of two years prior to the date of acquisition. HELD THAT - As perused the details of land to be Dhanattar, which means that the land was used for growing rice. After appreciating all these facts, we are satisfied that the impugned land was agricultural land and was being used for agricultural operations prior to the date of acquisition during two years prior to acquisition. Accordingly, the conditions as envisaged under section 10(37) of the Act are satisfied and any capital gain arose out of the said agricultural land is exempt under section 10(37) - thus set aside the order of ld. CIT(Appeals) by allowing the appeal of the assessee.

Issues:
The only issue raised in the appeal is the disallowance of deduction under section 10(37) of the Income Tax Act, resulting in the addition of Rs. 90,62,720 as long-term capital gain on the sale of agricultural land.

Summary:
The appellant contested the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of deduction under section 10(37) of the Act, leading to the inclusion of Rs. 90,62,720 as long-term capital gain from the sale of agricultural land. The appellant's return of income initially disclosed earnings from interest, but the case was reopened under section 147 due to alleged non-disclosure of capital gain from land acquisition for non-agricultural purposes. The appellant received compensation for the land acquisition, claimed as exempt under section 10(37) as it was used for agriculture before acquisition. The Assessing Officer deemed the land as non-agricultural, resulting in the addition to the appellant's income. The Commissioner of Income Tax (Appeals) upheld this decision without providing a rationale.

Upon review, it was found that the appellant received compensation with TDS deducted, seeking a refund based on the land's agricultural use before acquisition. Evidence presented, including an RTI reply certifying the land as agricultural, supported the appellant's claim. Details indicated agricultural activities on the land, satisfying the conditions of section 10(37). Consequently, the Tribunal overturned the Commissioner's decision, allowing the appellant's appeal and directing the exemption under section 10(37) of the Act.

In conclusion, the appellant's appeal was allowed, and the exemption under section 10(37) was granted.

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