2010 (9) TMI 411 - AT - Income Tax

Capital gain - property acquired under the Land Acquisition Act 1894 Date of transfer - title to the lands vests in the Government under section 16 of the said Act on taking of possession of land by the Land Acquisition Collector in pursuance to the Award - for the purposes of charging capital gains the date of transfer corresponds to the dates of the Awards - during the period of two years immediately preceding such dates of transfer the land was being used for agricultural purposes by the assessee or a parent of his - Department had sought to hold that the land was not being used for agricultural purposes because the land was said to be situated within the municipal limits - lower authorities have disregarded the evidence produced by the assessee by merely disbelieving the same and without bringing on record any clinching evidence to the contrary - Merely because the land was adjoining a developed area would not take away the agricultural use of the land - corresponding enhanced compensation received not be eligible for exemption under section 10(37) of the Act - reasoning put forth by the CIT (Appeals) is not consistent with the provisions of section 10(37)(iv) - condition prescribed in clause (iv) of section 10(37) is satisfied - Assessing Officer to recompute the exemption eligible under section 10(37) of the Act keeping in mind the non-agricultural use of the lands as conceded by the appellant - respective orders of the CIT (Appeals) in the appeals set aside and the matter restored back to the file of the Assessing Officer to adjudicate the claim of the assessee for exemption under section 10(37) of the Act A ppeal partly allowed

Issues Involved:
1. Claim of exemption under section 10(37) of the Income-tax Act, 1961.
2. Determination of whether the land was used for agricultural purposes in the two years preceding the date of transfer.
3. Compliance with the conditions prescribed in section 10(37)(ii), (iii), and (iv) of the Act.

Detailed Analysis:

1. Claim of Exemption under Section 10(37):
The primary issue in these appeals is the claim of exemption under section 10(37) of the Income-tax Act, 1961, concerning the compensation or enhanced compensation received against the compulsory acquisition of lands. The exemption is available if the income chargeable under the head "Capital gains" arises from the transfer of agricultural land, subject to fulfillment of specific conditions.

2. Determination of Agricultural Use:
The critical condition under section 10(37)(ii) is that the land must have been used for agricultural purposes during the two years immediately preceding the date of transfer. The assessee presented Khasra Girdawari records to prove agricultural use, showing the growing of crops like Wheat, Bajra, Makki, and Chari. The CIT(A) and the Assessing Officer (AO) initially denied the exemption, arguing that the land was classified as 'Gair Mumkin' (non-agricultural) and lacked evidence of crops in the Land Acquisition Collector's Awards. However, the Tribunal found that the Khasra Girdawari provided sufficient evidence of agricultural use, and the mere classification as 'Gair Mumkin' did not negate this fact.

3. Compliance with Section 10(37) Conditions:
- Clause (i): The land qualifies as a 'capital asset' under section 2(14)(iii) of the Act, fulfilling the condition prescribed by clause (i) of section 10(37).
- Clause (ii): The Tribunal concluded that the land was used for agricultural purposes based on Khasra Girdawari records, thus satisfying clause (ii) of section 10(37). However, any land not used for agricultural purposes, as conceded by the assessee, would not qualify for exemption.
- Clause (iii): There was no dispute that the enhanced compensation was received due to compulsory acquisition by the State Government under the Land Acquisition Act, 1894, meeting the requirement of clause (iii).
- Clause (iv): The compensation was received after April 1, 2004, satisfying clause (iv). The Tribunal disagreed with the CIT(A)'s interpretation that the land must be acquired after this date, emphasizing that the receipt of compensation post-April 1, 2004, is the relevant criterion.

Conclusion:
The Tribunal set aside the CIT(A)'s order and directed the AO to recompute the exemption under section 10(37) after considering the non-agricultural use of certain lands as conceded by the assessee. The AO must provide a reasonable opportunity for the assessee to be heard. Consequently, the appeal of the assessee was partly allowed, and similar directions were issued for other captioned appeals, restoring the matters to the AO for adjudication in light of this order.

← Previous Next →