2020 (3) TMI 800 - AT - Income Tax

Tribunal grants partial exemption for long-term capital gains under Income Tax Act

The tribunal allowed the appeal partially, granting the exemption for long-term capital gains under section 10(37) of the Income Tax Act, 1961, as the ... Exemption under section 10(37) - Transfer of property on compulsory acquisition - addition on account of long-term capital gain treating sale of agricultural land - HELD THAT:- We find that facts of the case are identical as in the case of VASANTBHAI MOHANBHAI BHANDARI, PREMILABEN M. BHANDARI, NARESH M BHANDARI VERSUS DCIT, RANGE-2 (3) , SURAT AND SHRI ISHWARBHAI M PATEL, SHRI DINESHCHANDRA C. PATE, CHANCHALBEN MOHANBHAI BHANDARI VERSUS ITO, WARD-2 (3) (1) , SURAT [2019 (12) TMI 1284 - ITAT SURAT] insofar as acquisition of the land is concerned, the same was compulsorily acquired as the entire procedure prescribed under the LA Act was followed. The settlement took place only qua the amount of the compensation which was to be received by the appellant for the land which had been acquired. It goes without saying that had steps not been taken by the Government under Sections 4 & 6 followed by award under Section 9 of the LA Act, the appellant would not have agreed to divest the land belonging to him to Techno Park. He was compelled to do so because of the compulsory acquisition and to avoid litigation entered into negotiations and settled the final compensation. Merely because the compensation amount is agreed upon would not change the character of acquisition, from that of compulsory acquisition to the voluntary sale. It may be mentioned that this is now the procedure which is laid down ever, under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 as per which the Collector can pass rehabilitation and resettlement award with the consent of the parties/land owners. Nonetheless, the character of acquisition remains compulsory.” Accordingly, the assessee is eligible for exemption under section 10(37) of the Act. Consequently, the AO is directed to allow exemption under section 10(37) - Decided in favour of assessee. Issues Involved:1. Eligibility for exemption under section 10(37) of the Income Tax Act, 1961, for land acquired by Surat Municipal Corporation (SMC).Issue-wise Detailed Analysis:Ground No. I:The first ground was not pressed before the tribunal and was thus dismissed.Ground No. II:The main issue was whether the transfer of agricultural land to Surat Municipal Corporation (SMC) qualifies as a 'compulsory acquisition' under section 10(37) of the Income Tax Act, 1961, thereby entitling the appellant to an exemption from long-term capital gains tax.Facts and Arguments:- The assessee, along with co-owners, sold immovable property for Rs. 3,80,40,000, with the assessee's share being Rs. 1,26,80,000. The original return of income was filed, and a notice under section 148 was issued. The assessee claimed that the land was compulsorily acquired by SMC and thus exempt under section 10(37).- The Assessing Officer (AO) opined that the land was purchased by SMC through a sale deed and not compulsorily acquired, thus rejecting the exemption claim and taxing the capital gains.- The CIT (A) upheld the AO's decision, noting that the land was sold through negotiation and not compulsory acquisition, and that the assessee did not carry out agricultural operations for two years preceding the transfer.Tribunal's Findings:- The tribunal referred to the case of Shri Satish M. Patel and others, where similar facts led to the exemption being granted under section 10(37).- The tribunal noted that the land was placed under reservation by the Government of Gujarat and acquired under section 77 of the Bombay Provincial Municipal Corporation (BPMC) Act, 1949, for public purposes, which constitutes compulsory acquisition.- Supporting documents included letters from SMC indicating the nature of payment as 'compulsory acquisition' and government notifications placing the land under reservation.Legal Precedents:- The tribunal relied on the Gujarat High Court’s decision in CIT v. Amrutbhai S. Patel, which held that for section 10(37), it is not necessary for the assessee to personally carry out agricultural operations.- The Supreme Court’s decision in Balakrishnan v. Union of India clarified that even if compensation is negotiated, the acquisition remains compulsory if initiated under the Land Acquisition Act.Conclusion:- The tribunal concluded that the land was compulsorily acquired by SMC under the direction of the Government of Gujarat. Hence, the conditions stipulated in section 10(37) were satisfied.- The tribunal directed the AO to allow the exemption under section 10(37).Result:- The appeal of the assessee was partly allowed, granting the exemption for the long-term capital gain under section 10(37).Order Pronouncement:- The order was pronounced in the open court on 03.02.2020.