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TMI Blog2019 (4) TMI 1783X X X X Extracts X X X X X X X X Extracts X X X X ..... e land were poor farmers and to take steps to ensure exemption u/s. 10(37) to them on the compensation received on transfer of their land holdings. Copies of the above mentioned letters are on record. All these documents prove without doubt that the land of the assessee was agricultural and that it was used for cultivation till it was transferred. In view of the majority opinion, we hold that the assessee is entitled to the benefit of section 10(37) of the I.T. Act with regard to acquisition of her 93.56 cent land for Vizhinjam International Seaport. - I.T.A. No. 194/Coch/2018 and C.O. No. 51/Coch/2018 (Arsg. out of I.T.A. No. 194/Coch/2018) - - - Dated:- 5-4-2019 - Chandra Poojari, Member (A), George George K., Member (J) and N.V. Vasudevan, Vice President For Appellant: A.S. Bindhu, DR For Respondents: Surendranath Rao, CA ORDER Chandra Poojari, Member (A) This appeal by the Revenue and the Cross Objection by the assessee are directed against the order of the CIT(A), Trivandrum dated 08/03/2018 and pertains to the assessment year 2012-13. 2. The Revenue has raised the following grounds: 1. The C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording to the Assessing Officer, at the time of transfer of the land, it was situated within the extended limits of Trivandrum Corporation and also because, the transaction was concluded by means of sale through negotiated settlement and not compulsory acquisition. He should have appreciated that, it was not the case of the Assessing Officer that the land was put to non agricultural use. 2. The CIT(A) should have held that if at all the land transferred was a capital asset the Assessing Officer should have adopted the value at 1/10th of the consideration fixed for transfer. 3. The facts of the case are that the assessee had in possession a piece of land at Vizhinjam village and sold the same during the year under consideration to Vizhinjam International Seaport for a consideration of ₹ 1,70,98,612/-. In the return of income filed for the year under consideration, she claimed that the entire amount of sale consideration received was exempted from tax as the land sold was an agricultural land and compulsorily acquired by the Government of Kerala for the development of the said seaport which in turn is covered by the provisions of sections 2(14)(iii) and 10(37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(14) of the I.T. Act. 6. On the other hand, the Ld. AR submitted that the AO had never doubted the actual user of the land for agricultural purposes and the only reason why the capital gains on transfer was not exempted by the AO was due to the fact it was located within Trivandrum Municipal Corporation limits and that there was no compulsory acquisition but a sale in favour of Vizhinjam International Seaport Ltd. The Ld. AR relied on the judgment of the Supreme court in the case of Balakrishnan vs. Union of India (391 ITR 178) wherein it was held that though a sale deed was executed, it was only a compulsory acquisition and based on the decision, the CIT(A) had allowed the appeal filed. The Ld. AR also relied on the decision of the Cochin Bench in the case of ITO, Ward 1(4), Trivandrum Vs. Smt. Girijakumari M. (ITA No. 236/Coch/2018 dated 10/10/2018) and ACIT Vs. Smt. Jayasree Sreedharan (ITA No. 96/Coch/2018 dated 24/10/2018). 6.1. Moreover, it was submitted that the department had totally erred on facts when it mentioned in the grounds that the land as per Minutes of the District Level Purchase Committee dated 04.06.2010, the assessee's land comes in cate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. We have heard the rival submissions and perused the record. Section 10(37) reads as follows: (37) In the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head Capital gains arising from the transfer of agricultural land, where - (i) such land is situate in any area referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of section 2; (ii) such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his; (iii) such transfer is by way of compulsory acquisition under any law, or a transfer of the consideration for which is determined or approval by the Central Government or the Reserve Bank of India; (iv) such income has arisen from the compensation or consideration for such transfer received by such assessee on or after the 1st day of April, 2004. Explanation - For the purposes of this clause, the expression compensation or consideration includes the compensation or consideration enhanced or further enhanced by any court, Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land is Agricultural Land and the English Version of Certificate. 2. Copy of the order from Government of Kerala regarding fixation of price for land acquired based on categorization. 3. Copy of Sale Deed in Malayalam and English Version. 4. Letter from the Chief Secretary dated 16.03.2016 to Member, CBDT stating that the land was agricultural and seeking exemption under section 10(37). 5. Letter from Principal Secretary, Government of Kerala dated 20.12.2016 to Member, CBDT stating that the land was agricultural and seeking exemption under section 10(37). 6. Letter from the Chief Minister of Kerala to the Union Finance Minister seeking exemption u/s. 10(37). 7.2. In our opinion, evidence regarding carrying out of agricultural operations cannot be replaced or substituted by the above evidences. No agricultural operations were carried out and no agricultural income was derived from the said land by the assessee. The Ld. AR pleaded before us that the assessee is not liable for income tax. As such, she had not filed any income tax return. It is to be noted that we are not concerned about the income chargeable to tax. We are concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss objection of the assessee is dismissed. 10. In the result, the appeal filed by the Revenue is allowed and the Cross Objection filed by the assessee is dismissed. Order pronounced in the open Court on this November, 2018. George George K., Member (J) 1. I have gone through the draft order of the Hon'ble Accountant Member. I respectfully differ from the conclusions reached by the Hon'ble Accountant Member. The facts are elaborately narrated in the order of the Hon'ble Accountant Member, hence the same is not reiterated here. 2. The solitary issue raised by the Revenue is whether the assessee's 93.56 cents of land, which was acquired by the Government for the Vizhinjam International Seaport was agricultural land or not. Admittedly, the said land was a family property inherited by the assessee in the year 1997 (settlement deed No. 902/1997). 3. The Assessing Officer held against the assessee only on the basis that the land on the date of transfer was situated within the limits of the Trivandrum Municipal Corporation whose local limit was extended during year 2013 in a delimitation exercise by the Government of K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o prove the agricultural operations on the land. Big plantations and persons having large land holdings would be maintaining such accounts for their agricultural operations. Large plantations would also require registration under the Rubber Board, Spices Board depending upon the agricultural operation undertaken on the land. In other words, a marginal farmer having less than five acres of land cannot be expected to maintain books of accounts for his agricultural operations foreseeing that his land would be compulsorily acquired some day, especially when no law mandates him to maintain such books of accounts. In such cases, one has to go by the primary evidence whether there was any agricultural operation when small land holdings are taken over/compulsorily acquired. The primary evidence such as narration of land in the revenue records, certificate of the authorities certifying the land as agricultural land or not etc. are only evidence that can be made available by a marginal land owner who is doing agricultural operations. 5. In this case, the land that was acquired is only 93.53 cents of land and the assessee would not be liable for agricultural income tax Act. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... os. are Agricultural Land. Your s faithfully, Certified True Copy. Sd/- Sd/- Sd/- Agricultural Officer Special Tehsildhar (LA) V.Prabhakaran Nair Krishi Bhavan, Vizhinjam International Advisor (Land Matters) Vizhimjam Sea Port, Vizhinjam Vizhinjam International Kottappuram PO Thiruvananthapuram. Sea Port, Trivandrum. 6. The above documents clearly prove that the said land was agricultural land at the time of its acquisition and the same was certified by the Special Tahasildar (LA). Moreover the AO in the assessment order had analysed the claim of the assessee for construction, installation and improvements of agricultural facilities on the land owned by the assessee and allowed a part of the same in arriving at the cost of acquisition of the property. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is for category E land. This is clear from G.O.(MS) No. 74/10/F PD dated 12/10/2010 (The GO is placed on record). The sale deeds in favour of Vizhinjam International Sea Ports Ltd. were executed by the land owners at the rates fixed as per the above Government Order. 9. The department has also stated in the grounds that the Agricultural Officer is not the authority competent to declare a land as agricultural but it is the Revenue authority. As mentioned earlier, the land owned by the assessee was surveyed by the Special Tahsildar (LA) for fixing the compensation and the status of the land as agricultural has been accepted by the Special Tahsildar (LA) also. Therefore the said ground taken by the department is not factually correct. 10. It is also to be mentioned that the Chief Secretary of Kerala State had taken up the issue of the exemption of land owned by the assessee along with the land of some other owners also with the Member (IT) CBDT. It is clearly mentioned in the letter of the Chief Secretary that the land is agricultural at the time of notification and exemption u/s. 10(37) has been recommended to the assessee along with the other owners. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/34 and 420/6 in Vizhinjam Village. The land belonging to the assessee as well as adjoining lands were acquired for the purpose of development of Vizhinjam International Seaport (VISL) vide notification u/s. 4(1) of the Land Acquisition Land, 1894 was issued on 12.03.2010. The assessee's land measuring 79.534 cents was also notified for acquisition for the aforesaid public purpose. Thereafter there were several meetings between the land owners and Thiruvananthapuram District Collector. Several proposals were exchanged between the parties and finally the Assessee agreed for compensation of ₹ 2 lakh per cent on the basis that the lands of the assessee would fall under E category. According to the Assessee lands categorized as E in the settlement process between the Government and the land owners were in the nature of Agricultural lands. 4. Thereafter the assessee by a registered sale deed dated 25.11.2011 conveyed the property to VISL. At the time when the lands were notified for acquisition Vizhinjam Village in which the land of the Assessee was situate was a gram panchayat and the lands located therein were outside the purview of capital asset within the mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agricultural land because of section 2(14)(iii)(a) of the Act. Sec. 2(14) of the Act defines Capital Asset and it reads thus: Sec. 2: Definitions: In this Act unless the context otherwise requires: (14) capital asset means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include- (i) (ii) (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 according to the last preceding census of which the relevant figures have been published before the 1st day of the previous year; or (b) in any area within such distance, not being more than eight kilometres from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax on that basis. Gains arising from the transfer of a capital asset held by the assessee for more than 24 months are charged to tax on a concessional basis. In the case of companies, such gains are taxed at the rate of 40% where they relate to lands and buildings, and at 30% where they relate to other assets. In the case of non-corporate taxpayers, only a certain portion of the capital gains in excess of ₹ 5,000 is included in the taxable income. This proportion is 55% where the gains relate to lands and buildings and 35% where they relate to other assets. 30. Prior to the amendment made by the Finance Act, 1970, the definition of the term capital asset in s. 2(14) of the IT Act excluded from its scope, inter alia, agricultural land in India. Accordingly, no liability to tax arose on gains derived from transfer of agricultural land in India. This exemption of the agricultural land from the scope of levy of tax on capital gains has a historical origin and is not due to any bar in the Constitution on the competence of Parliament to legislate for such levy. Agricultural land situated in municipal and other urban areas is essentially similar to non-agricultural land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al purposes, often as the main source of livelihood. With a view to relieving the burden of taxation on the capital gains in such cases, a provision has been made, in a new s. 54B of the IT Act, for exempting from tax the capital gain arising from the transfer of agricultural land in certain circumstances. Under the new s. 54B, where the capital gain arises from transfer of land which in the two years immediately preceding the date of transfer was being used by the assessee or a parent of his for agricultural purposes, and the assessee has, within a period of two years after that date, purchased any other land (whether in the same area or elsewhere) for being used for agricultural purposes, then the capital gain will not be charged to tax to the extent that it has been utilised for acquiring the fresh land. Where the amount of the capital gain exceeds the cost of acquisition of the fresh land, only the excess will be chargeable to tax. The concession will, however, be forfeited if the assessee transfers the fresh land acquired by him within a period of three years from the date of its purchase. 10. According to the A.O., the primary condition for claiming exemption u/s. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m etc. Fin. Year 2002-03 ₹ 19,500/- (f) Water delivery system, replanting entire plot, manure storage tank etc. Fin. Year 2003-04 ₹ 41,600/- (g) Water delivery system etc. Fin. Year 2004-05 ₹ 21,000/- (h) Water delivery system, replanting entire plot, manure storage tank etc. Fin. Year 2005-06 ₹ 44,300/- (i) Water delivery system etc. Fin. Year 2006-07 ₹ 22,500/- (j) Water delivery system, replanting entire plot, manure storage tank etc. Fin. Year 2007-08 ₹ 45,400/- (k) Water delivery system etc. Fin. Year 2008-09 ₹ 24,000/- (l) Water delivery system, house maintenance, replanting entire plot, manure storage tank etc. Fin. Year 2009-10 ₹ 2,59,600/- (m) Manure storage tank etc. Fin. Year 2010-11 ₹ 2,800/- Total amount claimed by assessee as cost of improvement : ₹ 15,10,000/-. 13. The A.O. accepted the factum of the existence of the aforesaid facility in the land of the assessee. The claim made by the assessee for deduction was a sum of ₹ 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. On further appeal, the learned AM took the view that the benefit of exemption u/s. 10(37) of the Act, the assessee has to establish not only the fact that his land was situate in an area mentioned in section 2(14)(iii)(a) of the Act, but should also further prove that his land was used for agricultural purpose. He took the view that the evidence filed by the assessee in this regard was insufficient and held that the assessee will not be entitled to the benefit of exemption u/s. 10(37) of the Act. The discussion in this regard is contained in para 7 to 7.3 of the learned AM's order. As against the above conclusions of the Hon'ble AM, the Hon'ble JM took the view that the assessee had proved that the land in question was an agricultural land in the sense that it was used for agricultural purpose. In short, the Hon'ble JM came to the conclusion that in respect of small holding of agricultural land of less than 5 acre, no books of account or other document are required to be maintained by an assessee and in this regard referred to Kerala Agricultural Income-tax Act, 1991. The second aspect noticed by the Hon'ble JM was the fact that the Agricultural Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olders of those two assessees relief u/s. 10(37) of the Act was allowed by the Tribunal. The two decisions referred are (i) ITO v. Smt. Padmaja Devi Amma [ITA No. 235/Coch/2017 order dated 05.02.2019] and (ii) ITO v. Sri. Harimurali Sreedhara Panickar [ITA No. 207/Coch/2017 - order dated 05.02.2019]. Both the aforesaid appeals relate to assessment year 2012-2013, which is incidentally the assessment year involved in the present appeal before me as well. 19. At the outset, I notice that the provisions of section 10(37) of the Act are meant specifically for the purpose of removing hardship to a land holder, whose lands are situated in an area specified in section 2(14)(iii)(a)(b) of the Act. These lands which were originally used for agricultural purpose if retained by the owner would continue to be used for agricultural purpose but if they are compulsorily acquired, the owners have to part with title and possession of such lands and further have to pay income tax on capital gain on compulsory acquisition. In order to mitigate hardship to such owners who apart from being deprived of their lands also have to pay income tax on capital gain on compulsory acquisition, relief was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as agricultural land, Department has to lead evidence to controvert it. When the land is classified as agricultural land in revenue papers and agricultural operations are found to have been carried on the date of transfer, there is a presumption that land is an agricultural land and the burden is then on the Department to rebut it 21. With the aforesaid background let us look at the evidence in the present case. A perusal of the sale deed dated 25.11.2011 under which the property in question was transferred by the assessee to VISL, clearly gives the description as land together with trees standing thereon. The relevant portion of the English transaction of the sale deed, which is at page 29 to 39 shows that out of the total consideration of ₹ 1,69,14,391 a sum of ₹ 9,060 has been given value of trees that was standing on the land. There were about 77 to 80 coconut trees besides jackfruit trees in the property in question. This intrinsic evidence to show the character of the land was agricultural land, has not been noticed by the Hon'ble AM. Besides the above, the Agricultural Officer, Krishi Bhavan, Vizhinjam has certified in his certificate that the land t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s whether no capital gain was payable on the aforesaid amount in view of Section 10(37) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). The stand which was taken by the Revenue in this notice was that the amount of compensation/consideration received by the appellant against the aforesaid land was not the result of compulsory acquisition and on the contrary it was the voluntary sale made by the appellant to the Techno Park and, therefore, the provisions of Section 10(37) of Act were not applicable. The Hon'ble Supreme Court held that notwithstanding sale by Assessee under a sale deed, the transfer was on account of compulsory acquisition. The following were the observations of the Hon'ble Supreme Court: 9. In our view, insofar as acquisition of the land is concerned, the same was compulsorily acquired as the entire procedure prescribed under the LA Act was followed. The settlement took place only qua the amount of the compensation which was to be received by the appellant for the land which had been acquired. It goes without saying that had steps not been taken by the Government under Sections 4 6 followed by award under Section 9 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he light of the aforesaid factual and legal position, I agree with the learned JM in his conclusion that the assessee was entitled to exemption u/s. 10(37) of the Act. 24. The matter now will be listed before the Division Bench for giving effect to the view of the majority and passing consequential order. George George K., Member (J) 47. As there was a difference of opinion between the Members in respect of the aforesaid appeal and cross objection, the Members referred the following question for consideration by a Third Member. Whether the assessee's land, which was acquired by the Government for Vizhinjam International Seaport, is an agricultural land so as to grant exemption u/s. 10(37) of the Income-tax Act? 2. The Hon'ble President has nominated Shri N.V. Vasudevan, Vice-President for a decision as Third Member on the point of difference between the members constituting the Division Bench. The Third Member vide his order dated 29.03.2019, by agreeing with the view taken by the Judicial Member, held that the assessee is entitled to exemption u/s. 10(37) of the Income-tax Act, 1961. 3. In view of the majority opini ..... X X X X Extracts X X X X X X X X Extracts X X X X
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