2017 (9) TMI 959

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.... acquired for the aforesaid public purpose. The assessee received a compensation of Rs. 1,32,74,986/- on compulsory acquisition of the land. It is not in dispute that upto the date of acquisition the land was used for the purpose of agriculture as there was an existing tea garden on which tea plantations producing tea leaves existed. It is also not dispute that the land in question is more than 11 kms from the municipal area and the population of village Gokul Nagar was less than 5000. The certificate of the Deputy Collector S.D.M. Bishalgarh Sepahijala Tripur certifying the aforesaid facts is on record. The land therefore qualifys for being regarded as an agricultural land within the meaning of section 2(14) (iii) of the Act. Under section 2(47) (iii) of the Act, compulsory acquisition of a capital asset is also regarded as transfer of a capital asset capital gain that accrues or arises out of compulsory acquisition is chargeable to tax under the head "capital gain". It is however to be mentioned that it is only in case where the asset which is the subject matter of transfer satisfies the definition of "capital asset" as defined u/s 2(14) of the Act that the capital gain can be br....

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....n 391/219 ITR 544, Hon'ble Supreme Court has held "Where land of assessee - tea company was requisitioned by state Government and same was given to refugees and at the time of requisition assessee was carrying on agricultural operation of land, compensation received by assessee was to be treated as agricultural income since such compensation clearly had the character of rent or, in any case, had to be regarded as revenue derived from the land. Therefore compensation paid for acquisition of land by State Government can only be regarded as agricultural income which admittedly is not taxable." In the light of above legal position, we submit that we have rightly claimed the compensation received by state of Tripura on acquisition of our agricultural land amounting to Rs. 1,32,74,986 (Rs.1,36,47,685 less cost of land Rs. 3,72,699) as not taxable under section 10(1) of I.T. Act, 1961." 4. The AO passed an order u/s 143(3) of the Act dated 18.12.2014 in which he did not bring to tax any capital gain. It means that the AO was satisfied with the claim of the Assessee that the land which was compulsorily acquired for which the Assessee received compensation was an agricultural la....

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....ea & Trading Co. Ltd. is of no help, because the facts of this case are different. In the case of assessee, the character of the land change after acquisition. Whereas in the case of All India Tea & Trading Co. Ltd., the land was being utilized for agricultural purpose both before and after its acquisition. Therefore, I hold that exemption u/s. 10(1) has been incorrectly allowed by the A.O, thus making the assessment order erroneous and prejudicial to the interest of revenue. I, therefore, set aside the assessment order u/s. 263 and direct the A.O to complete the assessment again after disallowing exemption u/s. 10(1). After conducting the inquiries & verification as directed above, the AO should pass a speaking order, providing adequate opportunity of betng heard to the assessee. The impugned order u/s.143(3) 18/12/2014 is accordingly, set aside and assessment should be done as per above directions." 6. Aggrieved by the order of CIT the assessee has preferred the present appeal before the Tribunal. 7. We have heard the submissions of the ld. Counsel for the assessee, who submitted that order of the AO accepting the claim of the assessee that compensation re....

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....uses it for agricultural purposes and derives agricultural income from it, any profits or gains arising from the sale, transfer, acquisition, etc., of such land is not taxable under the head "Capital gains". for such land is not a capital asset; (vi) Even where any person other than the assessee uses an agricultural land belonging to the assessee for agricultural purposes with or without the consent of the assessee and such person derives agricultural income from it, any profits or gains arising from the sale, transfer, acquisition, etc., of such land is not taxable under the head "Capital gains" in the hands of the assessee; and (vii) The land is a capital asset where it is not used for agricultural purposes, for there cannot be any question of deriving any agricultural income from it, and any surplus arising from its sale, transfer or acquisition, etc., is taxable under the head "Capital gains", 28. We will now restate only those facts which are relevant for our purposes. The assessee used those lands for agricultural purposes and derived agricultural income from those land at the time of their requisition in'1949. Those lands were being used by the....

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....acquisition. This, in our view, is based on wrong reading of the decision of the Hon'ble Supreme Court in the case of CIT vs All India Tea & Trading Co. Ltd. (supra). The Hon'ble Supreme Court had not laid down any proposition that to be regarded as an agricultural income the land that is compulsorily acquired should retain its character as agricultural land before and after acquisition by the Government. Those observations were made in the context of distinguishing the decision of the Hon'ble Andhra Pradesh High Court rendered in the case of Pydah Suryanarayan Murthy (supra). In the case of Pydah Suryanarayan Murthy's case, the facts were that land of the Assessee was requisitioned for military purposes and compensation was paid for use and occupation of the land so requisitioned. The question before the Hon'ble Court was whether such compensation can be regarded as Agricultural Income or not. The Hon'ble Court held that after requisition by the military purpose, the land requisitioned was not used for Agricultural purpose and therefore damages for use and occupation cannot be regarded as "Agricultural Income". The Hon'ble Delhi High Court in the case of D.L.F. Housing & Const....