TMI Blog2012 (11) TMI 1088X X X X Extracts X X X X X X X X Extracts X X X X ..... uisition of land by the Govt. of Gujarat. c. The recipients have claimed that they were co-owners of the land so acquired. 4.1 The above facts primarily pointed out to the fact that the additional compensation so received by the recipients was liable to be taxed as Capita Gains as depicted in section 45(5) of the I.T. Act, 1961. 4.2 Since the assessee, Shri Amrutbhai S. Patel is the principal recipient and co-owner of the property with l/3rd share, I/3rd of the additional compensation being ₹ 4,47,98,432/- 3 = ₹ 1,49,32,810- had to be taxed in his hands. However, in the return of income, the assessee has not offered this amount of compensation for tax. 4.3 In view of the above, there was an escapement of income within the meaning of section 147. Therefore, notice U/s. 148 issued on 02/02/2011, after recording the reasons. 5. Subsequently, notice U/s. I42(1) was issued on 29/11/2011 along with letter of the same date. Notice U/s 143(2) was also issued on the same date. 6. The relevant part of the letter dated 29/11/2011 is reproduced below: 1. During F.Y 2007-08 relevant to A.Y. 2008-09, you have received adhoc compensat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11199608/- in his order dated 11/8/2011 in the case of Shri.Jasubhai S. Patel is wholly-illegal incompetent and uncalled for. 8.3 The direction given by the CIT(A) is binding on the undersigned. Therefore, no comments are made on the assessee's objection. 8.4 In para 3.1 to 4, the assessee mainly has emphasized that in view of provision section 10(37) the Capital Gain of ₹ 1,11,99,608/- is not chargeable to tax and is exempt in his case. This is factually incorrect. The land in question bearing Survey No. 61, 62, 64/2 and 64/4 is situated within jurisdiction of a municipality i.e. Gandhinagar which has population of more than 10,000. Therefore, section 10(37) does not apply in the assesee's case. In view of this, the objections raised by the assessee are not accepted and the additional compensation is assessed u/s 45(5) of the I.T. Act. 10.3 Considering the facts narrated above, and also the submission of the assessee, the capital gains under section 45(5) is assessed at ₹ 111,99,608/-(l/4th of ₹ 447,98,432/-). 4. Before ld. CIT(A) reliance was placed by the assessee on the following written submissions:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hows the agricultural income from the relevant agricultural land bearing those survey numbers which is acquired. Most importantly, even the award itself clearly mentions the fact about crops ie Juwar, Bajri, Gram, Aranda and Raida were being grown on the land which was acquired. However, since the Id AO has proceeded on a wrong interpretation of s 10(37) that as the land was within limits of municipality, though used for agricultural purposes and also agricultural income being shown for last several years, he has erroneously held that s. 10(37) does not apply and hence he has assessed capital gains under s. 45(5). The Very approach of the Id AO being against the express provision of law, the addition deserves to be deleted at once. It be deleted now. 5. The Id AO also failed to appreciate the academic and alternate submission that legal expenses in connection with professional fees paid to advocate whose bills with full address and also receipts for payment by cheques were furnished were allowable as deduction. 6. The Id AO also erred both in law and on facts in not appreciating and considering the preliminary objection to the reopening of assessment by holding at para 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ands belonging to the appellant situated within urban settlement were compulsorily acquired by the government on which appellant received enhanced compensation during the year. Assessing officer taxed the said compensation under section 45 (5) on the ground that the lands were situated near Gandhinagar and therefore not agricultural lands within the definition of section 2 (14) (iii) of IT act. Appellant submitted that by virtue of section 10(37) inserted by finance act 2004 with effect from assessment year 2005-06 enhanced compensation received on compulsory acquisition of urban agricultural land after 1-04-2004 is exempt from tax. Appellant also submitted that if the land was agricultural and excludable as per definition of capital asset, the same would have been outside the purview of section 45 and there was no question of introducing 'section 10 (37). I agree with the appellant to this extent that exemption under section 10(37) is available to agricultural land situated in urban area therefore assessing officer's objection to this extent is not tenable. However such exemption under section 10 -(37) is available only on fulfillment of certain conditions. One of the vit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n agricultural lands. Accordingly, the addition made by the assessing officer is confirmed. After taking into consideration these submissions of the assessee, appeal was dismissed. 6. Before us ld. counsel of the assessee submitted that ld. CIT(A) was not justified in holding that assessee was not entitled to claim exemption u/s 10(37) of the Act in respect of enhanced compensation in respect of compulsory acquisition of agricultural land. Though ld. CIT(A) has accepted that the lands were in fact used for agricultural purposes before two years of transfer but was not justified in rejecting the claim of exemption on the ground and presumption that the provision required that the agricultural activities should be carried out by the assessee himself. There is no such requirement that assessee himself should carry out the agricultural activities. The requirement is that the land be used for agricultural purposes by HUF, individual or his parent. It was further submitted that agricultural income has been regularly declared by the assessee in the returns of income in respect of agricultural activities on the lands bearing relevant survey numbers and also the same was evident ..... X X X X Extracts X X X X X X X X Extracts X X X X
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