Compensation for agricultural land acquisition exempt from tax under Section 10(37)

The tribunal dismissed the revenue's appeal, confirming that the compensation received for the compulsory acquisition of agricultural land was exempt from tax under Section 10(37) of the Income Tax Act, 1961. The cross objection by the assessee was deemed infructuous and dismissed.

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Issues Involved:

1. Applicability of RFCTLARR Act, 2013 for tax exemption.
2. Validity of relief granted for long-term capital gain (LTCG) on land acquisition compensation.
3. Timeliness of the appeal and cross objection.
4. Applicability of Section 10(37) of the Income Tax Act, 1961.

Detailed Analysis:

1. Applicability of RFCTLARR Act, 2013 for tax exemption:
The revenue contended that the Commissioner of Income-tax (Appeals) [CIT(A)] erred in applying the RFCTLARR Act, 2013 to grant tax relief on the compensation received for land acquisition. The CIT(A) assumed the RFCTLARR Act applied without sufficient evidence or claims from the assessee. However, the tribunal found that the compensation was received before the RFCTLARR Act came into effect on 01.01.2014, thus invalidating the CIT(A)'s reliance on this Act for tax exemption. This view was supported by the ITAT Agra's decision in Shri Krishna Kumar Sharma Vs. DCIT.

2. Validity of relief granted for LTCG on land acquisition compensation:
The CIT(A) granted relief of Rs. 1,04,58,374/- on account of LTCG, treating the compensation as exempt from tax. The tribunal examined whether the land in question was agricultural and used for agricultural purposes in the two years preceding its acquisition. The CIT(A) had relied on the District Land Acquisition Officer's report and other documents, which classified the land as "Dhanahar" (agricultural land). The tribunal confirmed that the land was indeed agricultural and used for cultivation, thus fulfilling the conditions for exemption under Section 10(37) of the Income Tax Act, 1961.

3. Timeliness of the appeal and cross objection:
The appeal was delayed by 95 days due to the COVID-19 pandemic, which was considered beyond the control of the parties involved. The tribunal condoned this delay and admitted the appeal for adjudication on merits.

4. Applicability of Section 10(37) of the Income Tax Act, 1961:
The tribunal scrutinized Section 10(37), which exempts capital gains from the transfer of agricultural land under specific conditions. The conditions include the land being agricultural, used for agriculture in the two years preceding the transfer, and the transfer being through compulsory acquisition. The tribunal found that the land met these criteria, as it was agricultural and used for cultivation, and the compensation was received after 01.04.2004. Therefore, the compensation was exempt from tax under Section 10(37).

Conclusion:
The tribunal dismissed the revenue's appeal, confirming that the compensation received by the assessee for the compulsory acquisition of agricultural land was exempt from tax under Section 10(37) of the Income Tax Act, 1961. The cross objection by the assessee was deemed infructuous and dismissed. The order was pronounced in open court on 04-01-2023.

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