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TMI Blog2021 (8) TMI 904X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Land was used for agricultural purposes for two years prior to its acquisition. Capital gain tax would be leviable on the said compensation received as the land would continue to be the capital asset within the meaning of section 45 of the Income Tax Act. In our opinion, the assessee is liable to pay the capital gain tax on the compensation amount received by the assessee on the land that was not under cultivation. Undoubtedly, the Land other than 8 kanal 30 marlas was the capital asset within the meaning of section 2 (14)(iii) read with section 10(37) r/w section 45 of the Income Tax Act and therefore, any capital gain arising to the assessee on the sale of the land land would be the subject matter of the capital gain. Long terms capital gain to the file of the AO, therefore, the pro rata interest earned on compensation received for cultivated and non-cultivated land shall, be calculated by AO, and consequential benefit shall be given to the assessee on compensation received on cultivated land. As we have held, assessee's land partly was urbanized agricultural cultivated Land and remaining as a capital asset. Therefore the assessee would not be entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome declaring the income of ₹ 20,78,440/- under the head income from other sources plus agriculture income of ₹ 5,00,000/- on 25.03.2016 through e-filing. During the assessment year under consideration, the assessee deposited ₹ 7,75,79,854/- along with interest in the Bank. 2.1 The assessee's case was selected for scrutiny under 'CASS', after that notice u/s 143(2) was issued on 19.02.2016, which was duly served on the assessee 24.09.2016. A.O. asked the assessee to explain the source of deposit of ₹ 8,58,81,037/- made in the previous year. The assessee was also asked to explain why the amount ₹ 7,57,91,413/- received as compensation be not taxed according to law. In response to the notice, the assessee submitted a reply to A.O. However, the Assessing Officer was not convinced with the answer given by the assessee . Therefore with a view to ascertain the correct facts of the case ,the Assessing Officer had called a report from the Tehsil Goraya vide letter dated 01.12.2016. 2.1 In response to the letter dated 1.12.2016,the SDM sent the report/ reply to the Assessing Officer. The Assessing Officer duly reproduced the report of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and had deleted the addition of ₹ 7,57,79,854/-. 3.1 Feeling aggrieved by CIT(A) order, the Revenue is in appeal before us on the grounds stated above. Departmental Representative (DR) for the Revenue has drawn our attention to the report submitted by the Revenue Authority (the SDM) which the Assessing Officer reproduced at page- 6,which is produced hereinabove. She had drawn attention to the remand report and the comments of the assessee in the appellate proceedings. Ld. CIT(A) reproduced reply to remand report of the assessee in paragraphs 4.4 of order to the following facts: I humbly seek your permission to give para wise reply to opening remarks and comments qj Assessing Officer ward -2 Phagwara as under: 1.) In delivery of justice A.O. was bound to assess correct income of assessee , but A.O. ignored relevant part of clinching evidence oj report sent by SDM cum LAO Phillaur and KhasraGirdawaries sent by Tehsildar Phillaur justifying the exemption u/s 10(37) of I.T. Act 196 l.It is humbly prayed that same may be considered for deciding our appeal. Reliance is placed on; Principal Commissioner of Income Tax Bathinda vs. Sh.Daljit Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot how far away. 2. Furnish Khasra Girdawari of acquired Land for the year 2008-2009 to 2012-2013 (Copy of letter enclosed as per annexure-4). 9. In response to summons by A.O., Tehsildar sent reply on 5/12/2016 and informed 1. That Land was 650 meters away from municipal limit. 2. Khasra Girdawari of Land were enclosed(Copy of letter enclosed as perannexure-4-A) Copy of Khasra Girdwari sent by patwari through Tehsildar of seven years from 2006 to 2013 showed Crop Sown Wheat, Rice and sugarcane in all seven years by Such a Singh Himself. Patwari sent Girdawari for area measuring 9 Kanal 10 Marla as against total acquired Land of 22 Kanal 15 Marla. But A.O. referred only distance of Land in asstt. order and ignored copies of Khasra Girdawaris sent by Tehsildar. 10) So, as on 05/12/2016 A.O. had officially received back the replies from revenue authorities SDM and Tehsildar and it was on record that Land acquired was agriculture and was under cultivation Such a Singh Appellant during 2006-2007 to 2012-2013 as evidenced by Khasra Girdawaris. 11) Learned A.O. has not commented on the sanctity of Khasra Girdawaris which is the clinching and reliab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h deductions act in separate field and require independent specific conditions to be satisfied for claiming them, 10(37) is available when Land is compulsorily acquired by Govt .section 10 (37) of I.T. Act has been inserted in Act for benefit of urban agriculture lands because rural agriculture land Is not a capital asset and otherwise exempt if sold or acquired. So repeated emphasis by A.O. on distance of Land in comments has no bearing on claim of exemption u/s 10(37) of I.T. Act. 4.1 On the basis of the above, firstly entire Land was not cultivated by the assessee, prior to its acquisition, for a period of two years, and therefore, the Land is not covered under Section 10(37). Secondly, it was submitted that assuming the Land was cultivated, then the remarks of the SDM on which the assessee is relying, clearly shows that the entire Land was not under cultivation, as only part of the Land was under cultivation; therefore, it was not appropriate on the part of the Ld. CIT(A) to delete the addition in respect of the entire Land namely 22 kanals and 4 marla. She has also drawn our attention to a synopsis dated 26.12.2018filled by the assessee, attention was drawn to page-10A, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by the CIT(A) , we are reproducing herein for the sake of record : 1. Copy of the Gazette of India dtd. 19-07-2010 running into 67 pages is enclosed. At page 1 of the Gazette date of publication is mentioned. 2. Date of Notification in Hindustan Times is dtd. 09-03-2010 and in Dainik Jagran dtd. 10-03-2010 u/s 3A(3) of National Highways Act, 1956 and is mentioned at page 56 of Gazette. 3. And further it is mentioned at Para 3 of page 56 of the Gazette that whereas objections have been received and same have been considered and disallowed by the competent authority. 4. At Para-4, page-56 it is written that And whereas in pursuance of section 3D(1) of the said act, the competent authority had submitted its report to the Central Govt. 5. And in the last Para at page 56 of gazette, it is mentioned that as per section 3D(2) of the National Highways Act, 1956, the central govt. hereby declare that on publication of this Notification in the official gazette, the Land specified in said schedule shall vest absolutely in the Central Govt. free from all encumbrances. 6. And as per the National Highways Act, 1956 section 3D(2), copy already filed at page 16 to 20, of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taken up is with regard to claim of exemption u/s 10(37), for which it is necessary to reproduce the relevant provisions - 10(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 (h) of subclause (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; (i) such transfer is by way of compulsory acquisition under any law, of a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India; (iii) 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) of the Act as it is situated within 650 m of the Municipality limit. Further the CIT appeal had rightly held that the Land was acquired by way of compulsory acquisition under National Highway Authority of India act. 6.4 However, the CIT(A) has wrongly held that the Land was under agricultural use for a period of two years before its acquisition. He was improperly swayed by the compensation order passed granted by the acquisition authorities, giving the compensation by treating the Land as agriculture. 6.5 In our considered opinion, there is a distinction between the grant of compensation for the Land at an agriculture rate and cultivation of the Land fortwo years for agricultural purposes before acquisition. The SDM report categorically mentioned that no compensation for standing crops was given to the assessee. No evidence was found that the Land was used for agricultural purposes for two years prior to its acquisition. 6.6 However on scrutiny of the revenue record for the year 2008-09 ,(khesragirdawari), it is clear land under cultivationwas restricted to total 8 Kanal 30 marlas and not the entire land i.e., 22 kanal 15 marlas which was acquired under the compulsory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 marla which are acquired by the NHAI (ii) To compute the compensation at ₹ 2.4 Crore per acre on cultivated land of 8 Kanal 30 marlas. AO is directed to give Section 10(37) benefit on the said compensation by not treating it as a capital gain. (iii) To calculate the remaining amount of compensation after reducing the compensation amount on 8 kanal 30 marla( as per ii supra) from the total acquisition awarded of ₹ 7,57,91,413/- and tax the residual compensation received for non-cultivated agriculture land following the law by treating it as a capital asset. 6.9 As we are remanding back the matter on long terms capital gain to the file of the Assessing Officer, therefore, the pro rata interest earned on compensation received for cultivated and non-cultivated land shall, be calculated by AO , and consequential benefit shall be given to the assessee on compensation received on cultivated land. As we have held, assessee,s land partly was urbanized agricultural cultivated Land and remaining as a capital asset. Therefore the assessee would not be entitled to the benefit of section 54B of The Income Tax Act 1961. 7.0 In the result, the appeal of the Revenue is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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