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2017 (9) TMI 1103 - HC - Income TaxRectification of mistake u/s 154 - capital gains tax - exclusion of interest u/s 28 of the LA Act from the returned income - Section 10(37) applicability - Held that:- CIT was in error in holding that Section 10(37) of the Act did not apply. There was no dispute that at the time when it was acquired by the Government of Haryana the Assessee’s land was both an agricultural land and a ‘capital asset’ within the meaning of Section 2 (14) (iii) which defined ‘capital asset’ to mean, inter alia, property of any kind held by the Assessee but did not include agricultural land that was not situated within the jurisdiction of a municipality. In other words, agricultural land situated within a municipality would constitute a ‘capital asset’ and therefore would be subject to capital gains tax upon the transfer of such asset. In the present case, the agricultural land of the Assessee that was acquired was situated within the Hisar municipality and, in terms of Section 2 (14) (iii) (a), was a capital asset, the transfer of which would attract capital gains tax under Section 45 of the Act. However, in terms of Section 10 (37) (i) income chargeable under the head ‘capital gains’, arising from transfer of such agricultural land located within the municipal limits, would not form part of the total income. Consequently, the impugned order of the CIT which holds to the contrary is both factually and legally erroneous. The Court is also unable to accept the stand of the AO that the decision of the Supreme Court in Ghanshyam (HUF) (2009 (7) TMI 12 - SUPREME COURT) was prospective and did not apply to the Assessee’s case. The said decision is law declared by the Supreme Court which is binding on all authorities under Article 141 of the Constitution. For the purpose of Section 154 of the Act, the AO had to apply the said decision and permit the Assessee to exclude the interest component from the returned income. This was very much within the purview of Section 154 of the Act as this would not require any adjudication of a disputed question on the part of the AO.
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