TaxTMI 
TaxTMI 
2019 (4) TMI 1783
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....for exemption u/s. 10(37). The said judgment is not applicable in the case of appellant, as the nature of land transferred was not in dispute in the case decided by the Supreme Court. The legal requirement to get covered u/s. 10(37) is that the land should be agricultural in first place and should satisfy the following conditions: (i) Land is situated in area covered by section 2(14)(iii)(a) or (b) and was used for agricultural purposes. (ii) Such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes. (iii) Transfer is by way of compulsory acquisition. (iv) Income has arisen from the compensation of consideration for such transfer. The decision of the Supreme Court in Civil Appeal no. 1607/2010 covers only condition (iii) above. As per Minutes of District Level Purchase Committee, dated 04.06.2010, the assessee's land comes in Category 'A', and is "dry land facing Vizhinjam-Balaramapuram Road". The assessee relies on a certificate from "agricultural officer" to state that the land is "agricultural". The "Agricultural Officer" is not the authority competent to declare a land as "agricultural"....
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....in this regard relied on the decision of the High Court of Kerala in the case of Infopark Kerala vs. ACIT (TDS) (187 Taxman 1). Thus, he brought to tax a sum of Rs. 1,65,31,119/- as long term capital gain. 4. On appeal, the CIT(A) observed that section 10 of the Act provides for income which cannot be included in the total income. Section 10(37) of the Act provides for exclusion from total income, capital gains arising from transfer of agricultural land which is compulsorily acquired and the land which is situated in areas referred to in section 2(14) clause(iii)(a)(b). As per the provisions of section 10(37), in order to get the benefit, the land acquired should have been used for agricultural operations atleast for a period of two years prior to the date of acquisition. According to the CIT(A), the Assessing Officer himself had agreed in para 5.3 of the assessment order to the fact that the impugned land was an agricultural land as confirmed by the Agricultural Officer, Krishibhavan, Trivandrum and Village Officer, Vizhinjam Village, Trivandrum vide certificates issued on 11.12.2015 and 08.12.2015 respectively. The CIT(A) observed that the land which was acquired under the provi....
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.... the Revenue authority. But in the case of the assessee, the land owned was surveyed by the Special Tahsildar (LA) for fixing the compensation and the status of the land as agricultural has been accepted by the Special Tahsildar (LA) also. So, it was submitted that this ground taken by the department was not factually correct. Further, the assessee submitted that the Chief Secretary of Kerala State had taken up the issue of the exemption of land owned by the assessee along with the land of some other owners also with the Member (I & T) CBDT. According to the Ld. AR, it was clearly mentioned in the letter of the Chief Secretary that the land is agricultural at the time of notification and exemption u/s. 10(37) was recommended to the assessee along with the other owners which was done as there was a commitment from the Government before the acquisition proceedings were started that there would be no income tax liability on compensation received on transfer of the agricultural land. Similarly, it was submitted that the Chief Minister of Kerala had also sent a written request to the Union Finance Minister requesting that exemption be granted to the land owners at Vizhinjam as the land ....
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....us of which the relevant figures have been published before the first day of the previous year); or (b) in any area within such distance, not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item 9a), as the Central Government may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette; 7.1. Section 2(14)(iii)(a) shows that the assessee's case is not covered by this section as the land in question was within the municipal limit as recorded by the Assessing Officer in para 6.3 of his order. This fact was not controverted by the Ld. AR. Further, it is also not covered u/s. 2(14(iii)(b) of the Act because there was to be a notification by the central government that the area is an agricultural land and non urban land. No such notification has been presented by the assessee before any of the authorities below or even before us. Regarding section 10(37)(ii), the condition is that the land should be used for agricultural purpose during the period of two years immediately preceding the date of transfer. The....
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....l land. The land situated in an urban area or the agricultural land situated within the municipal limits are not outside the ambit of "capital assets". This should raise only a prima facie presumption and the said presumption can be destroyed by other circumstances pointed out to the contrary. In the present case, there is no evidence of carrying out agricultural operations by the assessee. Being so, the assessee has not fulfilled the condition laid down in section 10(37)(ii) of the Act. Accordingly, we hold that the assessee is liable for capital gains tax on transfer by compulsory acquisition. Thus, this ground of appeal of the Revenue is allowed. The appeal of the Revenue is allowed. 8. Coming to the Cross Objection in C.O. No. 51/Coch/2018, the first ground raised by the assessee is that the land was not put to use for non agricultural purpose. As we have observed that the land is situated within the municipal limits of Trivandrum Municipal Corporation and the assessee has not fulfilled the conditions laid down u/s. 10(37)(ii) of the Act and section 2(14)(iii)(b) of the Act, this ground of appeal of the assessee is rejected. 9. The next ground is that the CIT(A) should have h....
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....ore, only point in dispute in this case is whether the impugned land is an agricultural land and agricultural operation was carried out on it. 4. Subsequent to the introduction of the Kerala Agricultural Income-tax Act, 1991 (KAIT Act), the person holding less than 5 acres of land, is exempted from paying tax under the KAIT Act. Therefore, marginal farmers having agricultural land less than 5 acres of land are not required to maintain any account for his agricultural operation. Even individual land owners having more than 5 acres of agricultural land need not maintain the account for agricultural operation when he is paying taxes under the KAIT Act on presumptive basis. The agricultural income is not taxable under the Central Income-tax Act, however, the same is to be taken into computation/aggregation for the rate purpose under the Central Income-tax Act. Under the Central Income-tax Act, when assessee declares agricultural income for the rate purpose, the Income-tax Rules, prescribe maintenance of accounts of the agricultural operation. Therefore, it is clear that a person having less than 5 acres of agricultural land and was not having Central Income, liable to taxation was not....
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....appuram P.O. To: Special Tehsildar (LA) Vizhinjam International Sea Port Vizhinjam. Sir, Sub: Land Acquisition for Sea Port - Certificate as Agricultural Land regarding. Sl.No. LAC No. Survey No. Remarks 1 530/10 425/4 Agricultural Land 2 531/10 425/5 Agricultural Land with building 3 532/10 425/6 Agricultural Land 4 544/10 425/24 Agricultural Land 5 547/10 425/25 Agricultural Land 6 533/10 425/7B Agricultural Land 7 533/10A 425/7A Agricultural Land with building 8 407/10 271/3 Agricultural Land with building I confirm that the land mentioned against the above survey Nos. are Agricultural Land. Your's faithfully, Certified True Copy. Sd/- Sd/- Sd/- Agricultural Officer Special Tehsildhar (LA) V.Prabhakaran Nair Krishi Bhavan, Vizhinjam International Advisor (Land Matters) Vizhimjam Sea Port, Vizhinjam Vizhinjam International Kottappuram PO Thiruvananthapuram. Sea Port, Trivandrum. 6. The above documents clearly prove that the said land was agricultural land at the time of its acquisition and the same was certified by the Special Tahasildar (LA). Moreover the AO in the assessment order ha....
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.... For Category A land the compensation fixed by the committee was Rs. 3,30,000 per cent whereas the compensation paid in this case was only Rs. 2,00,000/- per cent which is for category "E" land. This is clear from G.O.(MS) No. 74/10/F & PD dated 12/10/2010 (The GO is placed on record). The sale deeds in favour of Vizhinjam International Sea Ports Ltd. were executed by the land owners at the rates fixed as per the above Government Order. 9. The department has also stated in the grounds that the Agricultural Officer is not the authority competent to declare a land as agricultural but it is the Revenue authority. As mentioned earlier, the land owned by the assessee was surveyed by the Special Tahsildar (LA) for fixing the compensation and the status of the land as agricultural has been accepted by the Special Tahsildar (LA) also. Therefore the said ground taken by the department is not factually correct. 10. It is also to be mentioned that the Chief Secretary of Kerala State had taken up the issue of the exemption of land owned by the assessee along with the land of some other owners also with the Member (IT) CBDT. It is clearly mentioned in the letter of the Chief Secretary that th....
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....3.56 cents situated in Re-Sy. Nos. 425/4, 425/5, 425/6, 425/24, 425/25, 421/34 and 420/6 in Vizhinjam Village. The land belonging to the assessee as well as adjoining lands were acquired for the purpose of development of Vizhinjam International Seaport (VISL) vide notification u/s. 4(1) of the Land Acquisition Land, 1894 was issued on 12.03.2010. The assessee's land measuring 79.534 cents was also notified for acquisition for the aforesaid public purpose. Thereafter there were several meetings between the land owners and Thiruvananthapuram District Collector. Several proposals were exchanged between the parties and finally the Assessee agreed for compensation of Rs. 2 lakh per cent on the basis that the lands of the assessee would fall under E category. According to the Assessee lands categorized as "E" in the settlement process between the Government and the land owners were in the nature of Agricultural lands. 4. Thereafter the assessee by a registered sale deed dated 25.11.2011 conveyed the property to VISL. At the time when the lands were notified for acquisition Vizhinjam Village in which the land of the Assessee was situate was a gram panchayat and the lands located ther....
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....cultural land because of section 2(14)(iii)(a) of the Act. Sec. 2(14) of the Act defines "Capital Asset" and it reads thus: "Sec. 2: Definitions: In this Act unless the context otherwise requires: (14) "capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include- (i) (ii) (iii) agricultural land in India, not being land situate- (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the 1st day of the previous year; or (b) in any area within such distance, not being more than eight kilometres from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in....
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....assessee for more than 24 months are charged to tax on a concessional basis. In the case of companies, such gains are taxed at the rate of 40% where they relate to lands and buildings, and at 30% where they relate to other assets. In the case of non-corporate taxpayers, only a certain portion of the capital gains in excess of Rs. 5,000 is included in the taxable income. This proportion is 55% where the gains relate to lands and buildings and 35% where they relate to other assets. 30. Prior to the amendment made by the Finance Act, 1970, the definition of the term "capital asset" in s. 2(14) of the IT Act excluded from its scope, inter alia, agricultural land in India. Accordingly, no liability to tax arose on gains derived from transfer of agricultural land in India. This exemption of the agricultural land from the scope of levy of tax on capital gains has a historical origin and is not due to any bar in the Constitution on the competence of Parliament to legislate for such levy. Agricultural land situated in municipal and other urban areas is essentially similar to non-agricultural land in such areas in its potentialities for use due to the progress of urbanization and industria....
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....capital gains in such cases, a provision has been made, in a new s. 54B of the IT Act, for exempting from tax the capital gain arising from the transfer of agricultural land in certain circumstances. Under the new s. 54B, where the capital gain arises from transfer of land which in the two years immediately preceding the date of transfer was being used by the assessee or a parent of his for agricultural purposes, and the assessee has, within a period of two years after that date, purchased any other land (whether in the same area or elsewhere) for being used for agricultural purposes, then the capital gain will not be charged to tax to the extent that it has been utilised for acquiring the fresh land. Where the amount of the capital gain exceeds the cost of acquisition of the fresh land, only the excess will be chargeable to tax. The concession will, however, be forfeited if the assessee transfers the fresh land acquired by him within a period of three years from the date of its purchase." 10. According to the A.O., the primary condition for claiming exemption u/s. 10(37) of the Act was that the capital gain should have arisen on transfer of agricultural land. Since the land in qu....
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....1,000/- (h) Water delivery system, replanting entire plot, manure storage tank etc. Fin. Year 2005-06 Rs. 44,300/- (i) Water delivery system etc. Fin. Year 2006-07 Rs. 22,500/- (j) Water delivery system, replanting entire plot, manure storage tank etc. Fin. Year 2007-08 Rs. 45,400/- (k) Water delivery system etc. Fin. Year 2008-09 Rs. 24,000/- (l) Water delivery system, house maintenance, replanting entire plot, manure storage tank etc. Fin. Year 2009-10 Rs. 2,59,600/- (m) Manure storage tank etc. Fin. Year 2010-11 Rs. 2,800/- Total amount claimed by assessee as cost of improvement : Rs. 15,10,000/-. 13. The A.O. accepted the factum of the existence of the aforesaid facility in the land of the assessee. The claim made by the assessee for deduction was a sum of Rs. 15,10,000 was allowed only to the extent of 50% of the following expenses claim made by the assessee. (i) In respect of stone and iron rope fencing, cattle shed, manure storage tank at Rs. 2,33,500 and (ii) Bio gas plant, land development, pump house and water tank, water delivery system at Rs. 2,23,500. 14. The long term capital gain was computed by the A.O. at Rs. 1,65,31,190 as pe....
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.... no books of account or other document are required to be maintained by an assessee and in this regard referred to Kerala Agricultural Income-tax Act, 1991. The second aspect noticed by the Hon'ble JM was the fact that the Agricultural Officer, Krishi Bhavan, Vizhinjam accepted the nature of land as agricultural land in his communication dated 22.11.2011 to the Special Tahsildhar, Land Acquisition. Third aspect the learned JM has noticed is the fact that the AO while allowing the expenses on improvement, while computing capital gain, has considered allowing 50% of expenses of the claim on the following heads:- (i) Stone and Iron Rope fencing (ii) Cattle shed (iii) Manure Storage Tank (iv) Bio Gas Plant (v) Land Development (vi) Pump House & Water tank (vii) Water Delivery system. The forth aspect noticed by the Hon'ble JM was the fact that the assessee's lands were categorized as category E for fixing land acquisition compensation and category E was with reference to lands which are agricultural lands. 17. I may also mention here that when the acquisition proceedings commenced, the lands in question located at Vizhinjam were not part of Thiruvananthapura....
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....der to mitigate hardship to such owners who apart from being deprived of their lands also have to pay income tax on capital gain on compulsory acquisition, relief was provided to them in the form of Sec. 10(37) of the Act. Apart from the above, lands which would otherwise fall outside the ambit of capital asset become capital asset because of its nearness to urban area. Therefore, the legislature thought it fit to give exemption if such lands are compulsorily acquired for public purpose subject to the condition that, two years prior to their acquisition, the land was used for agricultural purposes. Therefore, the A.O. is not right in coming to the conclusion that if a land falls within the discretion of capital asset u/s. 2(14)(iii)(a) of the Act then it would be a transfer of land which is not agricultural and therefore, one should not look at the provisions of section 10(37) of the Act at all. It is clear from reading of clause (i), (ii), (iii) of section 10(37) of the Act that the character of the land in the past has to be seen. 20. This now takes me to the question whether the land in question can be regarded as agricultural land notwithstanding the fact that the land falls w....
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.... by the Hon'ble AM. Besides the above, the Agricultural Officer, Krishi Bhavan, Vizhinjam has certified in his certificate that the land to be agricultural land. The A.O. himself has considered the expenses towards improvement of the land as allowable deduction while computing the capital gain. A perusal of the nature of this expense, which we have extracted in the earlier part of the order, shows that the same are all in relation to agricultural activities. The absence of declaration of agricultural income, as I have mentioned in the earlier part of this order, would not in my view negate the fact that the lands were used for agricultural purpose. The admitted position is that the assessee does not have taxable income in the past and there was no occasion for her to file her return of income in which she can declare her agricultural income. 22. As far as the decision of the Hon'ble Kerala High Court in the case of Infopark Kerala (supra), the same stands overruled by the decision of the Hon'ble Supreme Court in the case of Balakrishnan (supra). In the case of Balakrishnan Vs. Union of India: 391 ITR 178 (SC), the question before the Hon'ble Supreme Court was: "W....
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....g 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 even 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. 10. This Court has doubts about the correctness of the judgment in the case of Info Park Kerala vs. Assistant Commissioner of Income Tax (2008) 4 KLT 782. The Court in the said case took the view that since the title in the property was passed by the land owners on the strength of sale deeds executed by the....