10(37) of the Income Tax Act

[Bayyareddy DK]

Sir,

My client urban agricultural land compulsorily acquired by the Government of Karnataka on 24/1/1996 and approved cash compensation and concessional price site allotment of one site for every one acre of land acquired. Cash award compensation received on 2/4/1998 & 28/8/2008. Site allotted on 5/6/2014. Assessee deposited to Bangalore development authority sum of Rs. 30 lakhs on 5/6/2014 to get the two sites at concessional value. Government registered two sites on 25/04/2017 in assessee name. Assessee sold the two sites at guidance value of rs. 1.53 crore on June 2017.

My query is

01. Compulsory acquisition of urban agricultural land in exempted under Income tax Act?

02. What will be the cost of acquisition for sites sold on June 2017?.

03. Can I adapt guidance value of Rs. 1.53 cr as cost of acquisition (treating it has enhanced compensation) as this is the value in April 2017?.

Kindly advice.

AI Summary

Compulsory acquisition compensation treated as taxable; concessional allotment cost governs capital gains computation.
The compulsory acquisition is not exempt under section 10(37) and was taxable in the year of acquisition; the concessional allotment of sites does not amount to enhanced compensation as ordinarily understood, so the cost for capital gains computation is the actual amount paid for allotment. If the allotment were treated as enhanced compensation, capital gains would be computed under the relevant capital gains provision, but the assessor's view is that the Shetty principle on indeterminable cost does not apply because the cost is ascertainable from the amount paid.