TMI Blog1999 (12) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on the decision of the Hon'ble Madhya Pradesh High Court in the case of CIT vs. H.H. Maharaja Sahib Shri Lokendra Singhji (1986) 51 CTR (MP) 146 : (1987) 162 ITR 93 (MP). It was submitted before him that since the land was got by the ancestors of the assessee as Inam lands, there was no cost of acquisition and when element of cost is absent, compensation received on such lands cannot be subjected to capital gains tax. The AO did not agree to the contentions put forward by the assessee the AO referred to cl. 5 of the Bombay Merged Territories Miscellaneous Alienation and Abolition Act, 1955, which makes all alienated lands liable to land revenue. Since the lands under dispute were subject to land revenue, the AO held that such land revenue was the cost of acquisition. He accordingly subjected the compensation received by the assessee to capital gains tax. 3. The assessee appealed to the CIT(A). The CIT(A) has considered the issue at pp. 2 to 4 of his order and the operative part of the order is to be found in sub-para (h) on p. 4. While accepting the position that the lands were free of rent initially, the learned CIT(A) held that after abolition of Inam by the Bombay Merged T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax. 6. We have considered the rival submissions and perused the facts on record. The assessee, who is a former Jagirdar of Ichalkaranji, inherited the lands under consideration from his forefathers who had got the same as Inam lands from Shree Chhatrapati Shivaji Maharaj and the Peshawas and this fact is clearly established from the extract of Inam lands placed at p. 9 of the paper book. We have also perused the provisions of the Bombay Merged Territories Miscellaneous Alienation and Abolition Act, 1955, and, we find that the statement of objects and reasons in para 2 explains the impact of cls. 5 to 9 as under: "Clause 5 makes all alienated land liable to pay land revenue and cls. 6 to 9 provide for the regrant of the former alienated land." Clause 5 reads as under: "5. Subject to the other provisions of this Act, all alienated lands are and shall be liable to the payment of land revenue in accordance with the provisions of the Code and the rules made thereunder and the provisions of the Code and rules relating to unalienated land shall apply to such land." Thus, under this clause, the Inam lands are made liable to land revenue. But under cl. 9 and proviso thereto, rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been no change in the said inheritance by the Bombay Merged Territories Miscellaneous Alienation and Abolition Act, 1955. Accordingly, we reverse the findings of the authorities below and hold that the compensation received by the assessee on acquisition of lands cannot be subjected to capital gains tax. This ground accordingly succeeds. 8. The next grievance of the assessee is that the learned CIT(A) is not justified in holding that the interest of Rs. 41,110 and Rs. 74,572 received on compensation was liable to tax in the assessment year under appeal. The assessee received Rs. 41,110 and Rs. 74,572 as interest on additional compensation during the year under appeal. The assessee contended before the AO that the additional compensation itself was in dispute and, therefore, interest thereon could not be included in the income of the assessee. The AO assessed the above two amounts during the year under appeal. 9. The assessee appealed to the CIT(A) who confirmed the action of the AO. 10. Shri G.N. Gadgil, the learned counsel for the assessee, submitted that the two items of interest on additional compensation related to different years and, accordingly, the AO was not justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lace at Rs. 24,000. 17. The assessee appealed to the CIT(A) and submitted that the approach of the AO was on an ad hoc basis. The assessee also placed reliance on the decision of the Tribunal in the case of Dr. V.S. Prayag vs. ITO in WTA Nos. 642 643/Pn/1981. Reliance was also placed on the decision of the Hon'ble Supreme Court in the case of Mrs. Sheila Kaushish vs. CIT (1981) 24 CTR (SC) 351 : (1981) 131 ITR 435 (SC) and on the case of Dewan Daulat Rai Kapur vs. New Delhi Municipal Committee (1980) 122 ITR 700 (SC). After considering the submissions of the assessee, the CIT(A) held that the approach of the AO was not ad hoc, but was based on the decision of the judicial magistrate referred to supra and subsequent development of Ichalkaranji. However, he did not agree with the estimate of Rs. 24,000 made by the AO and directed the AO to adopt the ALV for the year at Rs. 18,000. 18. Shri G.N. Gadgil, learned counsel for the assessee submitted that Ichalkaranji is a small town, it is not even a district headquarters. The palace is not in a good condition and requires extensive repairs. He submitted that in any case the ALV retained by the CIT(A) at Rs. 18,000 is highly exces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is not justified in holding that the compensation received by the assessee on Inam lands was liable to capital gains tax. The facts here are identical to those discussed by us in the assessee's case relating to asst. yr. 1985-86 (ITA No. 1154/Pn/1992). As such, our decision in the aforementioned order will apply mutatis mutandis to the facts of the present year. For the reasons discussed therein, we reverse the findings of the authorities below and hold that the compensation received by the assessee on acquisition of lands cannot be subject to capital gains tax. This ground accordingly succeeds. 25. The next ground raised by the assessee is as under: "On the facts and in the circumstances of the case, the learned CIT(A) erred both in law on merit in upholding the disallowance of agricultural loss." At the time of hearing, this ground was not pressed. The same is accordingly dismissed. 26. In the result, the appeal is allowed in part. 27. We next take up the Department's appeals, ITAs No. 1121/Pn/1992 to 1125/Pn/1992 relating to the asst. yr. 1977-78 to 1981-82. 28. The only effective ground raised in ITA No. 1121/Pn/1992 (asst. yr. 1977-78) by the Revenue reads as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n provision of s. 54E was very much on the statute. Accordingly, we are unable to uphold the order of the CIT(A) on this issue. Consequently, the order of the CIT(A) is reversed and the order of the AO is restored on this issue. 32. In the result, the Departmental appeal is allowed. 33. In ITAs No. 1122/Pn/1992 to 1125/Pn/1992 relating to asst. yrs. 1978-79 to 1981-82, the only common ground raised by the Revenue is as follows: "On the facts and in the circumstances of the case, the CIT(A) erred in directing the AO to take ALV at Rs. 18,000 as against Rs. 24,000 determined by the AO for the above assessment year(s) after considering comparable ALV." This issue has been elaborately dealt with by us in the assessee's appeal for the asst. yr. 1978-79 (ITA No. 1153/Pn/1992), wherein we have directed the AO to adopt the annual letting value of the self-occupied property at Rs. 12,000. For the reasons discussed therein, we hold accordingly. These appeals are allowed in part. 34. In cross-objections No. 25/Pn/1992 to 27/Pn/1992 relating to asst. yrs. 1979-80 to 1981-82, the assessee has taken the following common ground: "On the facts and in the circumstances of the case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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