TMI Blog2005 (6) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... e are that the assessees were owners of agricultural land situated in the SIM of Kalol. The lands were acquired by the Ahmedabad Urban Development Authority (AUDA) and awarded compensation. The assessees went in appeal before the Asstt. Judge, Mehsana and got enhanced compensation. Against the said judgment, AUDA filed a petition before the Hon'ble High Court of Gujarat. The Hon'ble Gujarat High Court has awarded compensation, solatium and interest to the assessees. The AO noticed that the land of the assessees was an agricultural land but according to the definition provided under s. 2(1A) of the IT Act, 1961, the income (which) accrued/arose on account of acquisition of land by AUDA, is not an agricultural income and according to the definition provided under s. 2(14) of the IT Act, it is capital asset, as the land (is) situated within the limits of 3 kms. From the local limits of Kalol Municipality and, therefore, provisions of s. 45 are clearly applicable in these cases. The AO further noticed that Hon'ble Gujarat High Court has awarded final and enhanced compensation which was received by the assessee. As the assessee is in receipt of enhanced compensation, according to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be decided in view of the fact that compensation accrued only after decision of the Court of the Asstt. Judge, Mehsana at Mehsana dt. 31st Aug., 1994." The learned Departmental Representative further submitted that the compensation amount was awarded on 31st Aug., 1994 by the Asstt. Judge, Mehsana. Therefore, the compensation became due to the assessee only after 31st Aug., 1994. It is also the submission of learned Departmental Representative that the submissions of the assessee are not correct that the sale of transfer of the property was finalized on 15th Nov., 1979 when the land was proposed for acquisition under the Land Acquisition Act because the mere agreement to sale is not transfer of property, the deed of conveyance and registration thereafter is necessary for knowing the date of accrual and date of transfer. The learned Departmental Representative submitted that the CIT(A) has wrongly deleted the addition by accepting the submission of the assessee that the property was transferred on 15tth Nov., 1979. The learned Departmental Representative in support of his contention relied upon the following decisions: 1. Gurbax Singh vs. Kartar Singh Ors. (2002) 173 CTR (SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 (Guj) In the above decision, it was held that ".... transfer includes, sale, exchange, relinquishment are transfer .... Compulsory acquisition of property amounts to transfer within the meaning of s. 12(b) of the IT Act, 1922 and profit arising therefrom are assessable as capital gain..." It was also held that profit arising from compulsory acquisition including the solatium were assessable as capital gain besides the amount received as compensation for loss of contract or loss of profit were also assessable as income. After going through the above judgments cited by the learned representative of the assessee, it was found that all these judgements support the view of the Department which are summarized as under: (a) The consideration received on compulsory acquisition of land is taxable as capital asset (sic-gain). (b) The capital gain shall arise only after the notification under s. 2(14)(iii)(b) and transaction of sale effected prior to notification shall not fall within the definition of capital gain. (c) The property must be a capital asset before the date of transfer/sale. (d) The documentation of the property is vital factor in deciding the date of transfer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d award have been challenged and the additional compensation, solatium and interest etc. has been finally determined by the Court of the Asstt. Judge vide the order dt. 31st Aug., 1994. The learned Authorised Representative further submitted that the AO has wrongly presumed that the said agricultural land is subject to capital gain. As per the provisions of s. 45(1) of the Act any profit or gain arising from the transfer of a capital asset is chargeable to tax under the head "Capital gains" in the previous year in which the transfer took place. The capital gain is taxable in the assessment year relevant to the previous year in which the capital asset is transferred. The learned Authorised Representative further submitted that the term capital asset is defined in s. 2(14) of the IT Act, 1961. As per the provisions of s. 2(14)(iii), agricultural land is not a capital asset. However, if the said land is situated with the jurisdiction of municipality cantonment with a population of not less than 10,000 as per cl. (a) or in any area not being more than 8 kms from the local limits of any municipality as may be specified by notification in the Official Gazette as per cl. (b) then the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be deemed to be the income of the previous year in which the transfer took place. On reading of s. 45(1), we find that two aspects are important in the cases under consideration, i.e., "capital assets" and "transfer". The definition of "transfer" has been provided in s. 2(47)(iii) that transfer in relation to a capital asset includes the compulsory acquisition thereof under any law. If this definition applies to the cases under consideration, we find that on acquisition of agricultural land it is 'transfer' and there is no dispute in this regard. The center-point of controversy is whether the said agricultural land is capital asset or not? The capital asset has been defined in s. 2(14)(iii) which is reproduced as below: "(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 first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towns/cities under s. 2(14)(iii) is effective from 6th Jan., 1994. Therefore, (when) the agricultural land (was) transferred on 23rd Sept., 1986, i.e., the date of award at that time the impugned agricultural land was not the capital asset as provided in s. 2(14)(iii). The judgments cited by the learned Departmental Representative are distinguishable on facts. It is also pertinent to mention that the assumption of the AO and contention of the learned Departmental Representative that impugned agricultural land was transferred on 31st.Aug., 1994 when the Asstt. Judge, Mehsana, has determined the compensation is not correct. It has been noticed that the judgment dt. 31st Aug., 1994 is in respect of enhanced compensation and said date cannot be said to be the date of transfer of impugned agricultural land. In view of above discussion even s. 45(5) is also not applicable, as the original transaction was not subject to capital gain; at the relevant time the impugned agricultural land was not capital asset. Therefore, we do not find any substance in the submission of Revenue in this regard. In the light of above discussion, we find that the CIT(A) has correctly deleted the addition of cap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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