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2021 (8) TMI 904 - AT - Income TaxCapital Gain on the acquisition of Land - Claim of exemption u/s 10(37) - Agriculture land - whether the acquired Land falls within the purview of 10(37) of the Income Tax Act or not? - HELD THAT:- CIT(A) has rightly held that the Land was the land reference u/s 2(14) (iii) of the Act as it is situated within 650 m of the Municipality limit. CIT appeal had rightly held that the Land was acquired by way of compulsory acquisition under National Highway Authority of India act. CIT(A) has wrongly held that the Land was under agricultural use for a period of two years before its acquisition. He was improperly swayed by the compensation order passed granted by the acquisition authorities, giving the compensation by treating the Land as agriculture. There is a distinction between the grant of compensation for the Land at an agriculture rate and cultivation of the Land fortwo years for agricultural purposes before acquisition. The SDM report categorically mentioned that no compensation for standing crops was given to the assessee. No evidence was found that the Land was used for agricultural purposes for two years prior to its acquisition. Capital gain tax would be leviable on the said compensation received as the land would continue to be the capital asset within the meaning of section 45 of the Income Tax Act. In our opinion, the assessee is liable to pay the capital gain tax on the compensation amount received by the assessee on the land that was not under cultivation. Undoubtedly, the Land other than 8 kanal 30 marlas was the capital asset within the meaning of section 2 (14)(iii) read with section 10(37) r/w section 45 of the Income Tax Act and therefore, any capital gain arising to the assessee on the sale of the land land would be the subject matter of the capital gain. Long terms capital gain to the file of the AO, therefore, the pro rata interest earned on compensation received for cultivated and non-cultivated land shall, be calculated by AO, and consequential benefit shall be given to the assessee on compensation received on cultivated land. As we have held, assessee's land partly was urbanized agricultural cultivated Land and remaining as a capital asset. Therefore the assessee would not be entitled to the benefit of section 54B of The Income Tax Act 1961. Appeal of the Revenue is partly allowed.
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