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TMI Blog2016 (8) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... compensate for loss of such trees. In view of such factors, we do not seen any applicability of section 194LA for compensation to the trees. Coming to controversy regarding the compensation for buildings, at the outset, we are somewhat surprised by the observations of the Tribunal that the State Government had determined a uniform rate for the land under acquisition which could not be a market reality and therefore, for the farmers' houses standing on the land, higher market rate was considered for such landowners. In the opinion of the Tribunal, therefore, in reality what was paid to the farmers on account of buildings was not a compensation for buildings, but was higher amount of compensation for acquisition of the lands. These observations are not borne out from the awards, copies of which are placed on record, or from any other contemporaneous material suggesting any adjustment on part of the State Government in determining the market value of the land. We do not find on what basis the Tribunal was prompted to make such observations. In any case, being dehors the evidence on record, we discard such conclusion of the Tribunal. What therefore, emerges from the record is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of this Court in the case of Maganlal Morarbhai vs. Commissioner of Income Tax reported in (1979) 118 ITR 224. 2. Brief facts are as under. The respondent Special Land Acquisition Officer, Surat, represents the State Government as an assessee. For the assessment year 2008-2009, the question of requirement of depositing tax at source under section 194LA of the Income Tax Act, 1961 ( the Act for short) arose in the backdrop of land acquisition proceedings instituted by the State Government for acquiring certain parcels of lands for and on behalf of M/s. Essar Steels Ltd., a public limited company. The Special Land Acquisition Officer passed a common judgement and separate awards concerning different landowners whose lands were under acquisition. In one such award dated 21.1.2008, he awarded compensation to different landowners which basically included three elements. (1) compensation for land; (2) compensation for buildings situated on the land; (3) compensation for trees. 3. All lands were divided into non irrigated agricultural lands and Kharaba lands. Agricultural lands were compensated at a uniform rate of ₹ 300 per sq. mtrs., Kharaba lands received compensati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther generating such income or capable of doing so. He was of the opinion that the land could be categorised as agricultural land as far as the land is under cultivation and it must involve expenditure of human labour and skill for the purpose of cultivation or for keeping it in a cultivable state. So far as compensation for buildings is concerned, he was of the opinion that the buildings were for the purpose of residence of farmers and compensation for such buildings would be chargeable to tax. 7. The assessee carried the matter in appeal and argued that the lands were agricultural lands so shown in the revenue records. The compensation was worked out on such basis. There was nothing on record to suggest that the lands were not being put to cultivation. 8. CIT(Appeals) however, observed that the revenue records in this respect would not be conclusive. The real test would be whether the lands are being put to agricultural use or it is possible to put to agricultural use. He referred to the letter dated 16.6.2004 issued by the Agricultural Officer in which it was recorded that in parts of the land, sea water at the time of high tide ingressed. Part of the land was covered by g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ultural lands in the revenue records. 3) So far as compensation for the trees is concerned, the same would not form part of the compensation for agricultural lands acquired. 4) At any rate the compensation for the buildings attract the provisions of section 194LA of the Act, which the Land Acquisition Officer failed to apply. 5) Counsel placed reliance on the decision of Division Bench of this Court in case of Commissioner of Income-tax v. Madhabhai H. Patel reported in (1994) 208 ITR 638(Guj) and on the decision of the Supreme Court in case of Commissioner of Income-tax v. Gemini Pictures Circuit Private Ltd. reported in (1996) 220 ITR 43(SC). 12. On the other hand, learned counsel Shri Soparkar represented the respondent Special Land Acquisition Officer and raised the following contentions : 1) The lands were shown as agricultural lands in the revenue records and that is how the compensation was awarded by the Special Land Acquisition Officer. For the purpose of deducting tax at source, these were sufficient indications that the lands were agricultural lands. It is always open for the Revenue to make a detailed inquiry while considering the tax liability of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 14. Since the explanation to section 194LA refers to clause(14) of section, we may reproduce the relevant portion thereof : (14) capital asset means xxxx [(iii) agricultural land in India, not being land situate- (a) 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; or [(b) in any area within the distance, measured aerially,- (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds as agricultural lands is also not in dispute. According to the Assessing Officer however, these lands could not have been treated as agricultural lands. For such purpose, he relied on two factors. First was his own inquiry by carrying out personal visit to the lands and second was the certificate issued by the District Agricultural Officer on 16.6.2004. Even the Commissioner (Appeals) has placed considerable stress on these two factors. 19. Before we advert to these aspects, we may refer to the decision of this Court in case of Madhabhai H. Patel (supra). In the said case, the question whether the land was agricultural land or not arose in the background of the provision of capital gain upon sale of land. The Court after referring to various tests laid down in case of Commissioner of Income tax v. Siddharth J Desai reported in (1983) 139 ITR 628 (Guj), observed as under : 13. Even in that decision, this court has again emphasised that if the land is classified in the revenue records as agricultural land, then it would raise a rebuttable presumption and would furnish good prima facie evidence to show that it is an agricultural land. This court also emphasised that if l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s selling the land as agricultural land only and, therefore, was not going to sign any application or plan for a nonagricultural use of the said land. There is no material to show that the assessee had taken any part either in getting the plots subdivided into subplots, or in getting the plans prepared and passed for nonagricultural use. All those steps were taken by the purchaser of the land and not by the assessee. Thus, the Tribunal, after considering all the relevant factors and also the decision of the Supreme Court in CWT v. OfficerinCharge (Court of Words), Paigah [1976] 105 ITR 133, wherein the Supreme Court has held that the expression, agricultural land for the purpose of the Wealthtax Act would mean the land actually used for agricultural purpose, has held that the land in question is an agricultural land. It is, therefore, not possible to accept the contention raised on behalf of the Revenue that the Tribunal committed an error in holding that the land in question was agricultural land. In this view of the matter, we answer the question in the affirmative, that is, against the Revenue and in favour of the assessee. No order as to costs. 20. The Supreme Court in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer and the view of the Land Acquisition Officer expressed in acquisition award would not be final, binding or conclusive. 23. Nevertheless, at the stage of deciding whether the Special Land Acquisition Officer committed an error in not collecting the tax at source while releasing the compensation, vital question would be, did the Assessing Officer have sufficient materials to ignore the Government land records in which the land is shown as an agricultural land on which the owners continue to pay the land revenue year after year. 24. In this context, we have noticed that the Revenue authority placed heavy reliance on two factors, One was the personal visit by the Assessing Officer and the other was the certificate issued by the District Agricultural Officer dated 16.6.2004. The visit, as correctly pointed out by the counsel for the respondent, would have taken place few years after the acquisition was completed and possession of the land was handed over to the company for whose benefit the acquisition was carried out. The character of the land also would have undergone major changes. It would be highly unsafe to rely on a spot visit by the Assessing Officer of such circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e trees. 27. Coming to the last element of controversy regarding the compensation for buildings, at the outset, we are somewhat surprised by the observations of the Tribunal that the State Government had determined a uniform rate for the land under acquisition which could not be a market reality and therefore, for the farmers' houses standing on the land, higher market rate was considered for such landowners. In the opinion of the Tribunal, therefore, in reality what was paid to the farmers on account of buildings was not a compensation for buildings, but was higher amount of compensation for acquisition of the lands. 28. These observations are not borne out from the awards, copies of which are placed on record, or from any other contemporaneous material suggesting any adjustment on part of the State Government in determining the market value of the land. We do not find on what basis the Tribunal was prompted to make such observations. In any case, being dehors the evidence on record, we discard such conclusion of the Tribunal. 29. What therefore, emerges from the record is that the Land Acquisition Officer bifurcated his award by awarding separate compensation for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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