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2023 (1) TMI 220 - AT - Income TaxLong term capital gain (LTCG) arising out of compensation against the land acquisition treating as exempt from tax - assessee has agricultural land which was ancestral and the only sources of income was cultivation of land - CIT(A) held in favour of the assessee, firstly observing that case of the assessee is covered by the provisions of section 10(37) of the Act and secondly, the alleged compensation is not taxable in view of section 96 of the RFCTLAAR Act. HELD THAT:- Regarding the observation of the ld. CIT(A) that the said sum is not taxable in view of the RFCTLAAR Act, we do not find any merit because the said Act i.e Right To Fair Compensation And Transparency in Land Acquisition, Rehabilitation and Settlement Act 2013 came into force w.e.f 1.1.2014 whereas alleged compensation was received by the appellant as mentioned in Form 16A showing deduction of tax at source on 24-10-2013 which clearly shows that alleged compensation was received prior to the effective date of RFCTLAAR Act and therefore, the relief granted by the ld.CIT(A) based on the application of section 96 of the RFCTLAAR Act has no merit and deserves to be set aside. Our view is further supported by the decision of the co-ordinate bench (ITAT Agra) in the case of Shri Krishna Kumar Sharma [2021 (3) TMI 561 - ITAT AGRA]which has been relied on by the ld. Departmental Representative. Compensation is an exempt income u/s. 10(37) - We find that the assessee in order to avail the exemption under the said section needs to fulfill the four ((i) to (iv) conditions. So far as (iii) & (iv) conditions are concerned, which speaks about compulsory acquisition under any law as determined or approved by the Central Government or the Reserve Bank of India, if the consideration is received by such assessee on or after the 1st day of April, 2004, the same are duly fulfilled in the case of assessee as there is no dispute to this fact at the end of Revenue. Now as far as first two ( i & ii ) conditions are concerned, which provides that the land in question is an agricultural land and it has been used for the purpose of agriculture for the immediately two years, we observe that during the course of assessment proceedings AO deputed an inspector to enquire as to whether the said land is agricultural land and cultivated before its acquisition. From the assessment order, we notice that the inspector’s vide letter no. 2857 dt. 30-11-2006 stated that the land acquired by the Government measuring 3.845 acre was of the status of “ Dhanahar (pragatishil bhumi)”. Before us the Ld. Counsel for the assessee has filed various documents explaining the meaning of “Dhanahar land” to be an agricultural land. Dhanhar land is said to be low land during rainy season. Reference was made to Bihar Visesh Survey page 5 in Chapter XVIi page 211 defining “dhanhar fasal land” having three categories, A,B & C i.e Dhanhar I, Dhanhar II and Dhanhar III. Reference was further made to Bihar Tenancy Act, 1885, wherein Dhanhar has been defined as land cropped in winter. Reference also made through documents filed in paper book defining ”Dhanahar” as irrigated land where rice is cultivated for kheti. Above discussion on Dhanhar land brings us to the conclusion that the said land owned by the assessee is an agricultural land and was used for the purpose of agriculture in the past. Therefore, since all the conditions mentioned in section 10(37) of the Act are fulfilled, we are of the opinion that the alleged land for which compensation has been received by the assessee qualifies for exemption u/s. 10(37) - Decided against revenue.
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