Compulsory acquisition test under section 10(37) not satisfied, so revision under section 263 was upheld.

Revision under section 263 was upheld because the assessment had allowed exemption under section 10(37) without proper examination of whether the land transfer was a compulsory acquisition. The assessee failed to establish the cumulative statutory condition that the transfer was by way of compulsory acquisition under law; the documents instead indicated a mutual agreement and sale to GIDC. Earlier acquisition proceedings had lapsed in the changed statutory framework, and the later transaction did not acquire the character of compulsory acquisition merely because it followed those proceedings. On those facts, the assessment was erroneous and prejudicial to the revenue, and the exemption under section 10(37) was not available.

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Issues: Whether the revisionary order under section 263 was justified in setting aside the assessment on the ground that exemption under section 10(37) had been wrongly allowed on the transfer of land and that the capital gains had not been correctly examined.

Analysis: The assessment was found to be erroneous and prejudicial to the interests of the revenue because the assessee had not established that the land transfer was by way of compulsory acquisition under law, which is a cumulative requirement for exemption under section 10(37). The transfer documents showed a mutual agreement and sale to GIDC, and the transaction was not shown to be a compulsory acquisition under the Land Acquisition Act, 1894 or the successor acquisition regime. The initial acquisition notification had lapsed in the changed statutory setting, and the later transaction did not acquire the character of compulsory acquisition merely because it followed earlier acquisition proceedings. The alternative plea that no transfer occurred in the year was not relevant to the limited issue examined in revision.

Conclusion: The revision under section 263 was valid, and the assessee was held not entitled to exemption under section 10(37) on the facts found.

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