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TMI Blog2017 (9) TMI 959X X X X Extracts X X X X X X X X Extracts X X X X ..... he jurisdiction u/s 263 of the Act. We therefore quash the order u/s 263 of the Act and allow the appeal of the assessee. - .T.A No.962/Kol/2017 - - - Dated:- 13-9-2017 - Sri N.V.Vasudevan, JM And Shri Waseem Ahmed, AM For The Appellant : Shri Paras Nath Keshari, FCA For The Respondent : Shri.G.Mallikarjuna, CIT(DR) ORDER Per N.V.Vasudevan, JM This is an appeal by the Assessee against the order dated 29.03.2017 of Pr. C.I.T.-2, Kolkata passed u/s 263 of the Income Tax Act, 1961 (Act) relating to A.Y.2012-13. 2. The Assessee is a company. It is engaged in the business of growing and manufacturing and selling of tea. The assessee s tea estate is located at Harishnagar Tea Estate, P.O.Harishnagar via Bhishalgarh Vill.Gokul Nagar District Sepahijala, Tripura West 799102. During the previous year a portion of the assessee s tea plantation comprising of land together with tea gardens thereon was acquired by the Government under the Land Acquisition Act, 1894 for a public purpose viz., extension of North East Railway line from Agartala to Sabroom. An extent of about 3.63 acres of tea garden was compulsorily acquired for the aforesaid public purpose. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cated at :- Harishnagar Tea Estate P.O. Harishnagar Via Bishalgarh Village - Gokulnagar District - Sepahijala Tripura (West) - 799 102 During the year under assessment, Government of Tripura has acquired the land used by us for agricultural purposes. At the time of requisition by Tripura Government and also earlier to that, the land was used by us for agricultural purposes. Hence the compensation received amounting to ₹ 1,36t47,685/- by Government of Tripura is purely agricultural income in the meaning of Section 10( (1) and therefore, not liable to tax. Your honour will appreciate that the undernoted legal Judgements are squarely applicable in our present case :- ( i) In CIT Vs. All India Tea and Trading Co. Ltd. (1979) 117 ITR 525 (Cal), It was held that as the land in question was agricultural land which was being used for agricultural purposes, the amount or compensation paid on its acquisition was not taxable under the head Capital gains as the said land was not a capital asset. ( ii) In CIT Vs. All India Tea Trading Co. Ltd. (1996) 85 Taxman 391/219 ITR 544, Hon ble Supreme Court has held Where land of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court it was noticed by the Hon ble Supreme Court that refugees from Bangladesh had occupied agricultural land on which agricultural operations were carried on. The Government acquired these lands and gave the lands so acquired to the refugees who occupied those lands. The refugees also continued to carry on agricultural operations over the land on which they encroached. Thus in this circumstances the Hon ble Supreme Court held that compensation received on compulsory acquisition is not chargeable to tax under the head capital gain . According to the CIT in the case of the assessee the agricultural land lost its character as agricultural land after acquisition by the railways because they used the land acquired for non agricultural purpose. The CIT was therefore of the view that the AO ought not to have allowed exemption u/s 10(1) of the Act on the basis of the cases cited by the assessee before the AO. The followed were the relevant observations of CIT :- I have carefully considered the arguments of the assessee. Reliance placed by assessee on the decision of Hon'ble Supreme Court in the case of All India Tea Trading Co. Ltd. is of no help, because the facts of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue. It was his submission that the Hon ble Calcutta High Court in its decision in the case of CIT vs All India Tea and Trading Co. Ltd. (supra) has summarised its opinion on this issue as follows :- 27. Having discussed all the cases cited at the Bar, we will now summarise our opinions in the following terms: ( i) The words held by-an assessee in Section 2(4A)of the 1922 Act include physical, actual, constructive and also symbolic possession of a property of any kind; ( ii) A land is an agricultural land if it is used for agricultural purposes and, briefly speaking, an income derived from such land by agriculture. is an agricultural income ; ( iii) Though ownership is a property, any land from which the income derived is an Agricultural income is not a capital asset; ( iv) If no agricultural income. can be derived by an assessee from an agricultural land in the accounting year or for some time for any reason beyond his control, such land does not automatically cease to be an agricultural land; ( v) Where the assessee is the owner of an agricultural land and he uses it for agricultural purposes and derives agricultural income from it, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Hon ble Andhra Pradesh High Court in the case of Suryanarayan Murthy 42 ITR 83 (AP) 9. We have given a very careful consideration to the rival submissions. We are of the view that the CIT was not justified in invoking his jurisdiction u/s 263 of the Act in the facts and circumstances of the present case. It is not disputed that up to the date of acquisition of the land it was used by the assessee for the purpose of agriculture. It is also not disputed that the other condition for regarding the property of the assessee that was acquired by the Government as agricultural land within the meaning of Sec.2(14)(iii) of the Act is satisfied. As we have already noticed, the definition of a capital asset u/s 2(14) of the Act does not include agricultural land. Therefore if any income accrues on compulsory acquisition of agricultural land it is to be regarded as agricultural income and not chargeable to tax under the Act under the head capital gain . 10. The main contention of the CIT in the impugned order is that the land should continue to retain the character of an agricultural land even after acquisition. This, in our view, is based on wrong reading of the decision of the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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