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TMI Blog2024 (3) TMI 766X X X X Extracts X X X X X X X X Extracts X X X X ..... which were originally used for agricultural purpose, if retained by the owner would continue to have been used for agricultural purpose. In our view, the AO was not right in coming to the conclusion that if a land falls within the discretion of capital asset under section 2(14)(iii)(a), then it would be a transfer of land which is not agricultural and therefore, one should not look at the provisions of section 10(37) at all. It is clear from reading of clauses (i), (ii) and (iii) of section 10(37) that the character of the land in the past has to be seen. In view of the facts enumerated above, the impugned order of the assessment passed by the AO u/s 143(3) of the Income tax Act, 1961 holding that the capital gain tax is chargeable on the compulsory acquisition of the urban land by resorting to the provisions of section 45(5) of the Income Tax Act, 1961 is unsustainable in view of the provisions of amended sub-section (37) of section 10 of the Income Tax Act, 1961. There is no dispute as far as this condition is concerned as the disbursing authority has disbursed the said amount vide Government order dated 19.05.2014 which is after 01/01/2014. A.O. on the basis of report of Tehsil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the final award of compensation). 2. Whether in the facts and circumstances of the case, if the date of transfer of the impugned land measuring 74K 08M was considered as the year 1947, was the huge quantum of compensation received i.e. Rs 8,55,60,000/- right to be held exempt u/s 10(37) of the Act by the Ld. CIT(A) since the amount was apparently paid by the Govt, of J K at the prevalent land rates of FY 2014-15. which is evident from the fact that the entire revenue generated by the state of J K in FY 1954-55 was only Rs 5.42 crores (Data taken from the article Finances of Jammu and Kashmir State by Sh. P N Kaul published in the Economic Weekly on August 25th, 1956). 3. Whether in the facts and circumstances of the case, if the date of transfer of the impugned land measuring 74K 08M was considered as 19.05.2014 (date of the final award of compensation), was the Ld. CIT(A) right in holding the entire compensation received as exempt u/s 10(37) of the Income Tax Act, 1961 since the second condition of Section 10(37) is not met as the land was not used for agricultural purposes in the period of two years immediately preceding the date of transfer (19.05.2014). 4. Whether in the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. I have also considered the Remand Report of the Assessing Officer and the Rejoinder submitted by the appellant through his Authorized Representative as well as other reports of the revenue authorities of concerned area. 3.2. Before coming to the legal issue of applicability of section 10(37) of the Act as claimed by the appellant before the A.O. or section 45(5)(a) of the Act under which the Assessing Officer charged the appellant with Capital gain, it is imperative to examine the facts of the case as emanating from the two orders passed by the Govt, of Jammu Kashmir awarding compensation to the appellant. The subject of the final sanction order passed on 19.05.2014 was Acquisition of land measuring 74 Kanals and 08 Marlas falling in village Chinore, Tehsil and District Jammu restored in the name of Mohd. Aslam S/o Baggar of the same village, for rehabilitation of Displaced Persons. The gist of the order is reproduced hereunder Sanction is accorded to the allocation and placement of an amount of Rs. 855.60 lac (Rupees eight crore and fifty five lac and sixty thousand only) at the disposal of Collector Land Acquisition( Assistant Commissioner, Revenue) Jammu, under detailed head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plete all necessary proceedings as Collector, Land Acquisition. It may be noted here that this land along with 24 Kanal 07 Marla of more land bearing Khasra Nos. 86-Min (18 kanal 05 Marla) and 83-Min (02 Kanal 16 Marla), 76 (02 Kanal 19 Marla) and 125 (07 Marla) was, as per entries made in the Jamabandi of 1968-69 of village Chinore originally shown to be falling in the ownership of the following persons:- (i) Rukin Din son of Sawan share and Ghulam Hassan, Baggar, Munshi, Billu, Raj Mohd sons of Saraf Din share (in 47 Kanal 10 Marla of land in Khewat No.25). (ii) Ghulam Mohd, Baggar, Munshi, Billu, Raj Mohd sons of Saraf Din 1/12 share, Badar Din (from 1st wife) 1/12 share, Sadar Din (from 2nd wife) 1/6 share sons; Rukin Din S/o Sawan 1/3 share , Din Mohd. Sahib Din sons of Umar Din 1/3 share Gujjar-evacuees (in 51 Kanal 05 Marla of land of Khewat No.26). All of them were recorded as evacuees and land in the normal course was allotted either to the DPs of 1947 or to the local persons. However, Khasra No.125 (07 Marla) was shown in the self occupation of the Custodian Evacuee Property. It appears from letter No.CG(EP)114/Camp dated 21-07-2011 of the Custodian addressed to Deputy Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sation is received in the year under consideration, and therefore, assessee is not liable for capital gain. However, the assessee was informed that since the compensation is received in the year under consideration, thus, he is liable for capital gain. The appellant, Mohammad Aslam (Baggar) is the only surviving legal heir of land owners holding 98 K 15 M land at Village Chinore. In the holocaust of 1947 after the partition, the Baggar family left behind their land at Village Chinore and shifted to safer place in hiding. In the event of no trace of Baggar family, the local administration presumed that either they have migrated to Pakistan or there is no surviving family member. Hence, the entire Baggar family was recorded as evacuees and the land belonging to Baggar family was either allotted to the Displaced Persons (DP) of 1947 or to the local persons. On request of the appellant, this land was deleted from the records of Custodian vide order dated 06-06- 1964 on the ground that all these land owners and their families did not migrate from their native area, rather they got killed except the appellant. Hence, the land was restored to the appellant and mutation of inheritance was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of section 10(37) are reproduced hereunder: [(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 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; iii. such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved 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 or other authority; Section 2(14)(iii), which deals with agricultural land not being capital asset, reads as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is borne out from the orders of the compulsory acquisition and certificate issued by patwari, who has mentioned the said land to be agricultural land. This land was being used for agricultural purposes by the parents of the appellant-assessee prior to transfer, which took place in 1947. c) such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India; This fact is also borne out from the order of the Assessing Officer that the transfer of the land is by way of compulsory acquisition. Order passed by Assistant Commissioner (Revenue), Collector Land Acquisition for compulsory acquisition is placed in the paper book. d) 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 This fact is also borne out from the assessment order that compensation has been received by the assessee on or after 1st April, 2004. 3.4. I am in agreement with the Authorized Representative that the purport of section 10(37)(i), specifically suggests that the lands which fall within the municipal li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was not thought proper for the reasons best known to the administration. Neither alternative land could be provided to the assessee but it was considered appropriate to compensate the appellant assessee in terms of money, which money cannot be termed as capital gain, as the land has not been sold rather has been allotted by State Govt, to different people without consent of the appellant assessee. 3.4. Ld. Authorized Representative has relied upon the decision Hon'ble Supreme Court of India in the case of Balakrishnan vs. Union of India Ors. in Civil Appeal No. 1607/2010 wherein it was held that on the transfer of agricultural land by way of compulsory acquisition under any law, no capital gains tax is payable. I am in full agreement with the Authorized Representative that the Assessing Officer has made addition solely on the ground that the agricultural land is situated within municipal limits of Jammu. The Assessing Officer has ignored the fact that if such land had been situated beyond eight kilometers of municipal limits, then such land could not have been considered as capital asset chargeable to tax and would have been exempt under section 2(14) of the Act. Simply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is urban land which is situated within the municipal limits, charged the same to capital gain tax u/s 45(5) of the Income Tax Act, 1961. During the course of appellate proceedings, remand report was also called from the concerned Assessing Office on the submissions made by the counsel of the assessee but as reproduced above, the Assessing Officer has only reiterated the orders passed by his predecessor and reported that the assessee is liable to capital gain tax u/s 45(5) and failed to give any plausible reply to the contention raised by the assessee that the claim has actually see made under the provisions of section 10(37) of the Income Act, 1961. On examination of the claim made by the assessee with reference to the provisions of section 10(37) of the Income tax Act, 1961, it has been noticed that the appellant fulfills all the conditions as prescribed under (1) sub-clause (i) of section 10(37) of the Income tax Act, 1961 mentioning that the land which is situated in any area referred to in item (a) or item (b) of section 2(14)(iii) is exempt from charging to capital gain. (2) under sub-clause (ii) of section 10(37) of the Income tax Act, 1961 mentioning that on the date of tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lands also have to pay income tax on capital gain on compulsory acquisition, relief was provided to them in the form of section 10(37). Apart from the above, lands which would otherwise fall outside the ambit of capital asset become capital asset because of its nearness to urban area. Therefore, the legislature thought it fit to give exemption if such lands are compulsorily acquired for public purpose subject to the condition that, two years prior to their acquisition, the land was used for agricultural purposes. The A.O. on the basis of report of Tehsildar, agrees that the impugned land was agricultural land and this undisputed fact is also emanating from the order of State Govt, determining final award (order dated 08.01.2014) and the report of the Tehsildar obtained by this office u/s 133(6) of the Act. Before the acquisition, the land was being used for agricultural purposes only and there is no report to the contrary. Thus, there is no dispute that 78 Kanals and 8 Marla agricultural lands belonging to the assessee situated within urban area were compulsorily acquired by the Government on which assessee received compensation. The A.O. taxed this compensation u/s 45(5) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of compensation); that if the date of transfer of the impugned land measuring 74K 08M was considered as the year 1947, there was the huge quantum of compensation received i.e. Rs 8,55,60,000/- not right to be held exempt u/s 10(37) of the Act by the Ld. CIT(A) since the amount was apparently paid by the Govt. of J K at the prevalent land rates of FY 2014-15 which is evident from the fact that the entire revenue generated by the state of J K in FY 1954-55 was only Rs. 5.42 crores (Data taken from the article Finances of Jammu and Kashmir State by Sh. P N Kaul published in the Economic Weekly on August 25th, 1956); that if the date of transfer of the impugned land measuring 74K 08M was considered as 19.05.2014 (date of the final award of compensation), the Ld. CIT(A) was not right in holding the entire compensation received as exempt u/s 10(37) of the Income Tax Act, 1961 since the second condition of Section 10(37) is not met as the land was not used for agricultural purposes in the period of two years immediately preceding the date of transfer (19.05.2014); that the Ld. CIT(A) has not considered the AO s contention in the assessment order that the capital gains were to be calculate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... municipal limits without rebuttal in the remand report to the contention raised by the appellant before the Ld. CIT(A) as regards to the claim of exemption under section 10(37) of the Act. 8. It is seen that the Ld. CIT(A) has considered the submission of the appellant, remand report of the AO and rebuttal of the appellant to the remand report, citation and amended law on its claim of exemption u/s 10(37) of the Act. The Ld. AR contended that starting from 1947, it can be said that the compensation paid to the assessee is nothing but a relief and the same cannot be viewed as Capital Gain particularly when the mandate of law of providing alternate land could not be complied with by the Govt. The Ld. CIT(A) has been in agreement with the Ld. Authorized Representative that the finding recorded by the A.O. was bad and untenable in law as the land being an agricultural land was acquired and remained out of possession of the assessee. It was rather allotted to different persons by the State Govt. In the peculiar circumstances of the case, the acquisition of the land has to be taken into consideration when the land was allotted by the State and not from the date when the compensation was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for which is determined or approved by the Central Government or the RBI, and (3) such income has arisen from the compensation or consideration for such transfer received on or after 01.04.2004. Thus, instead of examining the issue with reference to these provisions of the Income-tax Act, 1961 as claimed by the assessee for exemption, the A.O. merely rejected the claim of the assessee by holding that since the agricultural land is urban land which is situated within the municipal limits, charged the same to capital gain tax u/s 45(5) of the Income Tax Act, 1961. During the course of appellate proceedings, remand report was also called from the concerned Assessing Office on the submissions made by the counsel of the assessee but as reproduced above, the Assessing Officer has only reiterated the orders passed by his predecessor and reported that the assessee is liable to capital gain tax u/s 45(5) and failed to give any plausible reply to the contention raised by the assessee that the claim has actually to be seen as made under the provisions of section 10(37) of the Income Act, 1961. On examination of the claim made by the assessee with reference to the provisions of section 10(37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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). These lands which were originally used for agricultural purpose, if retained by the owner would continue to have been used for agricultural purpose. In our view, the AO was not right in coming to the conclusion that if a land falls within the discretion of capital asset under section 2(14)(iii)(a), then it would be a transfer of land which is not agricultural and therefore, one should not look at the provisions of section 10(37) at all. It is clear from reading of clauses (i), (ii) and (iii) of section 10(37) that the character of the land in the past has to be seen. In view of the facts enumerated above, the impugned order of the assessment passed by the Assessing Officer u/s 143(3) of the Income tax Act, 1961 holding that the capital gain tax is chargeable on the compulsory acquisition of the urban land by resorting to the provisions of section 45(5) of the Income Tax Act, 1961 is unsustainable in view of the provisions of amended sub-section (37) of section 10 of the Income Tax Act, 1961. 11. There is no dispute as far as this conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the LA Act provides for making a reference under Section 18 of the Act to the District Judge for determining the compensation and to decide as to whether the compensation fixed by the Land Acquisition Collector was proper or not. However, the matter thereafter is only for quantum of compensation which has nothing to do with the acquisition. It is clear from the above that insofar as acquisition is concerned, the appellant had succumbed to the action taken by the Government in this behalf. His only objection was to the market value of the land that was fixed as above. To reiterate his grievance, the appellant could have either taken the aforesaid adjudicatory route of seeking reference under Section 18 of the LA Act leaving it to the Court to determine the market value. Instead, the appellant negotiated with Techno Park and arrived at amicable settlement by agreeing to receive the compensation in the sum of Rs. 38,42,489/-. For this purpose, after entering into the agreement, the appellant agreed to execute the sale deed as well which was a necessary consequence and a step which the appellant had to take. 8. In our view, insofar as acquisition of the land is concerned, the same w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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