TaxTMI 
TaxTMI 
2019 (4) TMI 1783
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....y acquisition or not and whether the assessee is eligible 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 "agricult....
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....he land which was sold was not an agricultural land and it was not compulsorily acquired by the Government. The Assessing Officer 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....
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....hat the department had mentioned that the Agricultural Officer was not the authority competent to declare a land as agricultural but it is 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 a....
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.... 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 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 b....
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....ng out of agricultural activities by the assessee in the impugned land. 7.3. In our opinion, the land entered as agricultural land in the revenue records and assessed as such under the Land Revenue Act, would be a circumstance in favour of conclusion that it is an agricultural 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 ....
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....(14)(iii)(b) and is an agricultural land, same would not be a capital asset u/s. 2(14) of the I.T. Act liable for capital gains. Only urban agricultural land notified u/s. 2(14)(iii)(a) or 2(14)(iii)(b) and compulsorily acquired would be entitled to exemption u/s. 10(37) of the I.T. Act. Therefore, 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,....
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....ate of acquisition was an agricultural land. Copy of the certificate issued by the Agricultural Officer, Krishi Bhavan, Vizhinjam, which was accepted by the Special Tahasildar, land Acquisition, reads as follows:- From Date: 22.11.2011 The Agricultural Officer Krishi Bhavan, Vizhinjam Kottappuram 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, ....
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....h/2018 (order dated 10.10.2018) and ACIT Vs. Smt. Jayasree Sreedharan in ITA No. 96/Coch/2018 (order dated 24.10.2018) had held that land acquired for Vizhinjam port is urban agricultural land entitled to the benefit of section 10(37) of the I.T. Act. 8. In the grounds raised by the department it is stated that the land as per Minutes of the District Level Purchase Committee dated 04.06.2010, the assessee's land comes in category "A". 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 st....
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....the point of difference between the members constituting the Division Bench. 2. The facts and circumstances under which the aforesaid question was referred to the Third Member is sufficiently set out in the orders of the Hon'ble AM as well as the Hon'ble JM. For the sake of clarity, I recapitulate the facts of the case. 3. The admitted facts are that the assessee is the owner of landed property together with trees and house standing thereon admeasuring 93.56 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 th....
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....h transfer received by such assessee on or after the 1st day of April, 2004. Explanation.-For the purposes of this clause, the expression "compensation or consideration" includes the compensation or consideration enhanced or further enhanced by any court, tribunal or other authority;" 7. The case of the A.O. was that as on the date of transfer of the land owned by the assessee, i.e., on 25.11.2011, Vizhinjam panchayat become part of Thiruvananthapuram Corporation, and therefore, cannot be regarded as agricultural 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....
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.....1970 explained the scope and purpose of the aforesaid amendment in the following words: "Capital gains arising from transfer of agricultural land in urban areas 29. Capital gains arising from the transfer of a capital asset have been chargeable to income-tax for several years past. Where the transfer of the capital asset is effected within a period of 24 months from the date of its acquisition by the assessee, the capital gain is treated on a par with ordinary income and charged to tax on that basis. Gains arising from the transfer of a capital asset held by the 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 th....
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....the IT Act, it has been specifically provided that no capital gain or loss will be computed with reference to any transfer of agricultural land in India effected before 1st March, 1970. 32. The effect of the amendments to s. 2(14) and s. 47, as stated above, will be that capital gains arising from transfer of agricultural lands situated in the municipal and other urban areas on or after 1st March, 1970, will become liable to taxation even where such land was held for bona fide agricultural purposes, often as the main source of livelihood. With a view to relieving the burden of taxation on the 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,....
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....ar 1998-99 : Rs. 2,33,500/- (b) Bio gas plant construction, land development, Pump house & water tank, house maintenance, replanting entire plot, manure storage tank etc. Fin. Year 1999-2000: Rs. 7,39,500/- (c) Replanting entire plot, manure storage tank, water delivery system etc. Fin. Year 2000-01 Rs. 37,800/- (d) Water delivery system etc. Fin. Year 2001-02 Rs. 18,500/- (e) Water delivery system etc. Fin. Year 2002-03 Rs. 19,500/- (f) Water delivery system, replanting entire plot, manure storage tank etc. Fin. Year 2003-04 Rs. 41,600/- (g) Water delivery system etc. Fin. Year 2004-05 Rs. 21,000/- (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 pl....
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..... 10(37) of the Act, the assessee has to establish not only the fact that his land was situate in an area mentioned in section 2(14)(iii)(a) of the Act, but should also further prove that his land was used for agricultural purpose. He took the view that the evidence filed by the assessee in this regard was insufficient and held that the assessee will not be entitled to the benefit of exemption u/s. 10(37) of the Act. The discussion in this regard is contained in para 7 to 7.3 of the learned AM's order. As against the above conclusions of the Hon'ble AM, the Hon'ble JM took the view that the assessee had proved that the land in question was an agricultural land in the sense that it was used for agricultural purpose. In short, the Hon'ble JM came to the conclusion that in respect of small holding of agricultural land of less than 5 acre, 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 communi....
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....eferred are (i) ITO v. Smt. Padmaja Devi Amma [ITA No. 235/Coch/2017 order dated 05.02.2019] and (ii) ITO v. Sri. Harimurali Sreedhara Panickar [ITA No. 207/Coch/2017 - order dated 05.02.2019]. Both the aforesaid appeals relate to assessment year 2012-2013, which is incidentally the assessment year involved in the present appeal before me as well. 19. At the outset, I notice that the provisions of section 10(37) of the Act are meant specifically for the purpose of removing hardship to a land holder, whose lands are situated in an area specified in section 2(14)(iii)(a)(b) of the Act. These lands which were originally used for agricultural purpose if retained by the owner would continue to be used for agricultural purpose but if they are compulsorily acquired, the owners have to part with title and possession of such lands and further have to pay income tax on capital gain on compulsory acquisition. In order 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 ou....
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.... in revenue papers and agricultural operations are found to have been carried on the date of transfer, there is a presumption that land is an agricultural land and the burden is then on the Department to rebut it 21. With the aforesaid background let us look at the evidence in the present case. A perusal of the sale deed dated 25.11.2011 under which the property in question was transferred by the assessee to VISL, clearly gives the description as land together with trees standing thereon. The relevant portion of the English transaction of the sale deed, which is at page 29 to 39 shows that out of the total consideration of Rs. 1,69,14,391 a sum of Rs. 9,060 has been given value of trees that was standing on the land. There were about 77 to 80 coconut trees besides jackfruit trees in the property in question. This intrinsic evidence to show the character of the land was agricultural land, has not been noticed 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 comp....
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....he Act'). The stand which was taken by the Revenue in this notice was that the amount of compensation/consideration received by the appellant against the aforesaid land was not the result of compulsory acquisition and on the contrary it was the voluntary sale made by the appellant to the Techno Park and, therefore, the provisions of Section 10(37) of Act were not applicable. The Hon'ble Supreme Court held that notwithstanding sale by Assessee under a sale deed, the transfer was on account of compulsory acquisition. The following were the observations of the Hon'ble Supreme Court: "9. In our view, insofar as acquisition of the land is concerned, the same was compulsorily acquired as the entire procedure prescribed under the LA Act was followed. The settlement took place only qua the amount of the compensation which was to be received by the appellant for the land which had been acquired. It goes without saying 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 compulsor....