Agricultural land exemption under section 10(37) applies even without personal cultivation when compulsory acquisition is proved.

Exemption under section 10(37) of the Income-tax Act, 1961 was available because the land was agricultural and cultivation was shown through tenants/Ganotias on behalf of the assessee; personal cultivation by the assessee was not mandatory. Revenue records and payment evidence supported that the land was treated as compulsorily acquired for a public purpose, namely a sewerage treatment plant, within the town planning framework. Applying the earlier coordinate bench ruling as affirmed by the jurisdictional HC, the capital gains addition was deleted and the long-term capital gain was held not chargeable to tax.

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Issues: Whether the assessee was entitled to exemption from long-term capital gains under section 10(37) of the Income-tax Act, 1961 on the ground that the land was agricultural land compulsorily acquired for a public purpose and cultivated in the relevant preceding period.

Analysis: The record showed that the land continued to be used for agricultural purposes and that cultivation had been carried out by the tenants/Ganotias on behalf of the assessee. The fact that the assessee himself did not personally carry on cultivation did not defeat the exemption where agricultural operations were otherwise established. The evidence from revenue extracts and the payment record also supported the conclusion that the land was treated by the acquiring authority as acquired under compulsion for a sewerage treatment plant. The Tribunal followed the earlier coordinate bench decision, as affirmed by the jurisdictional High Court, that acquisition for such public purpose under the town planning framework satisfied the requirement of compulsory acquisition for section 10(37).

Conclusion: The assessee satisfied the conditions of section 10(37) and was entitled to the exemption; the addition made on account of long-term capital gain was deleted.

Final Conclusion: The appeal was allowed and the capital gains addition was held not chargeable to tax.

Ratio Decidendi: For exemption under section 10(37) of the Income-tax Act, 1961, it is sufficient if the land is agricultural and the requisite cultivation is shown on behalf of the assessee; personal cultivation by the assessee is not mandatory where the land is compulsorily acquired for a qualifying public purpose.

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