TaxTMI 
TaxTMI 
2024 (3) TMI 766
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....d i.e. Rs 8,55,60,000/- right to be held exempt u/s 10(37) of the Act by the Ld. CIT(A) since the amount was apparently paid by the Govt, of J&K at the prevalent land rates of FY 2014-15. which is evident from the fact that the entire revenue generated by the state of J&K in FY 1954-55 was only Rs 5.42 crores (Data taken from the article "Finances of Jammu and Kashmir State" by Sh. P N Kaul published in the Economic Weekly on August 25th, 1956). 3. Whether in the facts and circumstances of the case, if the date of transfer of the impugned land measuring 74K 08M was considered as 19.05.2014 (date of the final award of compensation), was the Ld. CIT(A) right in holding the entire compensation received as exempt u/s 10(37) of the Income Tax Act, 1961 since the second condition of Section 10(37) is not met as the land was not used for agricultural purposes in the period of two years immediately preceding the date of transfer (19.05.2014). 4. Whether in the facts and circumstances of the case, the Ld. CIT(A) was right in not considering the AO's contention in the assessment order that the capital gains were to be calculated/leviable based on the year in the which the c....
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.... revenue authorities of concerned area. 3.2. Before coming to the legal issue of applicability of section 10(37) of the Act as claimed by the appellant before the A.O. or section 45(5)(a) of the Act under which the Assessing Officer charged the appellant with Capital gain, it is imperative to examine the facts of the case as emanating from the two orders passed by the Govt, of Jammu & Kashmir awarding compensation to the appellant. The subject of the final sanction order passed on 19.05.2014 was "Acquisition of land measuring 74 Kanals and 08 Marlas falling in village Chinore, Tehsil and District Jammu restored in the name of Mohd. Aslam S/o Baggar of the same village, for rehabilitation of Displaced Persons." The gist of the order is reproduced hereunder "Sanction is accorded to the allocation and placement of an amount of Rs. 855.60 lac (Rupees eight crore and fifty five lac and sixty thousand only) at the disposal of Collector Land Acquisition( Assistant Commissioner, Revenue) Jammu, under detailed head '941- Land Compensation' to meet the land compensation claim of Shri Mohd Aslam S/o Baggar R/o Chinore, Jammu, in respect of land measuring 74 ....
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....be compulsorily acquired for the rehabilitation of those DP allottees of 1947 on payment of compensation to the rightful claimant. The instant case for the purpose, accordingly been entrusted to the Assistant Commissioner (Revenue) to complete all necessary proceedings as Collector, Land Acquisition. It may be noted here that this land along with 24 Kanal & 07 Marla of more land bearing Khasra Nos. 86-Min (18 kanal 05 Marla) and 83-Min (02 Kanal 16 Marla), 76 (02 Kanal 19 Marla) and 125 (07 Marla) was, as per entries made in the Jamabandi of 1968-69 of village Chinore originally shown to be falling in the ownership of the following persons:- (i) Rukin Din son of Sawan ½ share and Ghulam Hassan, Baggar, Munshi, Billu, Raj Mohd sons of Saraf Din ½ share (in 47 Kanal& 10 Marla of land in Khewat No.25). (ii) Ghulam Mohd, Baggar, Munshi, Billu, Raj Mohd sons of Saraf Din 1/12 share, Badar Din (from 1st wife) 1/12 share, Sadar Din (from 2nd wife) 1/6 share sons; Rukin Din S/o Sawan 1/3 share , Din Mohd. & Sahib Din sons of Umar Din 1/3 share Gujjar-evacuees (in 51 Kanal& 05 Marla of land of Khewat No.26). All of them were recorded as evac....
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....s provided under the Act." 3.3. Now let us go back to the facts of the case as put forth by the Ld. Authorized Representative before the A.O. as well as before me. It is also noticed from the assessment order that the A.R. had submitted history of litigation and forcefully argued that the land was acquired in the year 1947 for which compensation is received in the year under consideration, and therefore, assessee is not liable for capital gain. However, the assessee was informed that since the compensation is received in the year under consideration, thus, he is liable for capital gain. The appellant, Mohammad Aslam (Baggar) is the only surviving legal heir of land owners holding 98 K 15 M land at Village Chinore. In the holocaust of 1947 after the partition, the Baggar family left behind their land at Village Chinore and shifted to safer place in hiding. In the event of no trace of Baggar family, the local administration presumed that either they have migrated to Pakistan or there is no surviving family member. Hence, the entire Baggar family was recorded as evacuees and the land belonging to Baggar family was either allotted to the Displaced Persons (DP) of 1947 or to th....
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....d under consideration falls within the municipal limits as confirmed by the Tehsildar and thus cannot be regard as agricultural for the purpose of Capital Gain." From the order of assessment, it is seen that the Assessing Officer has not discussed provisions of section 10(37) under which the appellant claimed it as exempt. For the sake of brevity, provisions of section 10(37) are reproduced hereunder: "[(37) in the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head "Capital gains" arising from the transfer of agricultural land, where- i. such land is situate in any area referred to in item (a) or item (b) of subclause (iii) of clause (14) of section 2; ii. such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his; iii. such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India; iv. Such income has arisen from the compensation....
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....fact is borne out from the order of the assessing officer itself and the learned AO has made addition due to the fact that the land is covered in section 2(14)(iii) and held that since land under consideration falls within the municipal limits and cannot be regarded as agricultural for the purposes of capital gains. b) such land, during the period of two years immediately preceding the date of transfer was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his This fact is borne out from the orders of the compulsory acquisition and certificate issued by patwari, who has mentioned the said land to be agricultural land. This land was being used for agricultural purposes by the parents of the appellant-assessee prior to transfer, which took place in 1947. c) such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India; This fact is also borne out from the order of the Assessing Officer that the transfer of the land is by way of compulsory acquisition. Order passed by Assistant Co....
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....ral land was acquired and remained out of possession of the assessee. It was rather allotted to different persons by the State Govt. In the peculiar circumstances of the case, the acquisition of the land has to be taken into consideration when the land was allotted by the State and not from the date when the compensation was paid after a long drawn litigation and enquiry. If the matter is viewed from another angle then in that eventuality, the Custodian of Properties was under an obligation to return the land to the assessee after evacuating the persons in possession of the same, which was not thought proper for the reasons best known to the administration. Neither alternative land could be provided to the assessee but it was considered appropriate to compensate the appellant assessee in terms of money, which money cannot be termed as capital gain, as the land has not been sold rather has been allotted by State Govt, to different people without consent of the appellant assessee. 3.4. Ld. Authorized Representative has relied upon the decision Hon'ble Supreme Court of India in the case of Balakrishnan vs. Union of India &Ors. in Civil Appeal No. 1607/2010 wherein it was ....
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....ricultural purposes by such HUF or individual or a parent of his; (2) such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the RBI, and (3) such income has arisen from the compensatioh or consideration for such transfer received on or after 01.04.2004. Thus, instead of examining the issue with reference to these provisions of the Income-tax Act, 1961 as claimed by the assessee for exemption, the A.O. merely rejected the claim of the assessee by holding that since the agricultural land is urban land which is situated within the municipal limits, charged the same to capital gain tax u/s 45(5) of the Income Tax Act, 1961. During the course of appellate proceedings, remand report was also called from the concerned Assessing Office on the submissions made by the counsel of the assessee but as reproduced above, the Assessing Officer has only reiterated the orders passed by his predecessor and reported that the assessee is liable to capital gain tax u/s 45(5) and failed to give any plausible reply to the contention raised by the assessee that the claim has actually see made under t....
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.... 3.5. The provisions of section 10(37) 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). These lands which were originally used for agricultural purpose, if retained by the owner would continue to have been 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 section 10(37). 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. The A.O. on the basis of report of Tehsildar, agrees that the impugn....
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....section 45(5) of the Income Tax Act, 1961 is unsustainable in view of the provisions of sub-section (37) of section 10 of the Income Tax Act, 1961 and same is hereby deleted and appeal of the assessee is allowed on merit in accordance with law." 5. The Ld. CIT(A) supported the assessment order on purpose of use of land being not under agriculture cultivation for 2 years to the award of compensation and date of transfer of land. He submitted that the CIT(A) was not right in considering the date of transfer of the impugned land measuring 74K 08M as the year 1947 instead of 19.05.2014 (date of the final award of compensation); that if the date of transfer of the impugned land measuring 74K 08M was considered as the year 1947, there was the huge quantum of compensation received i.e. Rs 8,55,60,000/- not right to be held exempt u/s 10(37) of the Act by the Ld. CIT(A) since the amount was apparently paid by the Govt. of J&K at the prevalent land rates of FY 2014-15 which is evident from the fact that the entire revenue generated by the state of J&K in FY 1954-55 was only Rs. 5.42 crores (Data taken from the article "Finances of Jammu and Kashmir State" by Sh. P N Kaul published in the....
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....have been considered as capital asset chargeable to tax and would have been exempt under section 2(14) of the Act. Simply because the impugned land is situated within municipal limits, the exemption as claimed under section 10(37) of the Act cannot be denied in view of the amendment and Hon'ble Apex Court Judgement (Supra). He pleaded that finding of the Ld. CIT(A) may be sustained. 7. We have the heard rival contentions, perused the relevant material on record, impugned order, written submissions and case law cited before us. Admittedly, the AO charged capital gains merely because the impugned land was situated within municipal limits without rebuttal in the remand report to the contention raised by the appellant before the Ld. CIT(A) as regards to the claim of exemption under section 10(37) of the Act. 8. It is seen that the Ld. CIT(A) has considered the submission of the appellant, remand report of the AO and rebuttal of the appellant to the remand report, citation and amended law on its claim of exemption u/s 10(37) of the Act. The Ld. AR contended that starting from 1947, it can be said that the compensation paid to the assessee is nothing but a relief and the same canno....
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....nserted in section 10 with effect from the 1st day of April, 2005 (assessment year 2005-06 and onwards) which provides that in the case of an individual or a HUF, any income chargeable under the head "capital gains" arising from the transfer of agricultural land situated in urban areas specified in section 2(14)(iii) shall be exempt, subject to conditions that (1) such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such HUF or individual or a parent of his; (2) such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the RBI, and (3) such income has arisen from the compensation or consideration for such transfer received on or after 01.04.2004. Thus, instead of examining the issue with reference to these provisions of the Income-tax Act, 1961 as claimed by the assessee for exemption, the A.O. merely rejected the claim of the assessee by holding that since the agricultural land is urban land which is situated within the municipal limits, charged the same to capital gain tax u/s 45(5) of the Income Tax A....
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..... Rev (LB) 103 of 2014 dated 19.05.2014. Lastly and that (4) under sub-clause (iv) of section 10(37) of the Income tax Act, 1961, it is mentioned that such income has arisen from the compensation or consideration for such transfer received by such assessee on or after 01.04.2004. There is no dispute as far as this condition is concerned as the disbursing authority has disbursed the said amount vide Government order dated 19.05.2014 which is the date after the prescribed date of 01.04.2014 and the Land Acquisition Act, 1894 stood repealed with effect from 1-1- 2014 and replaced by RFCTLARR Act. 10. The provisions of section 10(37) 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). These lands which were originally used for agricultural purpose, if retained by the owner would continue to have been used for agricultural purpose. In our view, the AO was not right in coming to the conclusion that if a land falls within the discretion of capital asset under section 2(14)(iii)(a), then it would be a transfer of land which is not agricultural and therefore, one should not look at the p....
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....ulsorily acquired. From the facts mentioned above, it becomes apparent that the acquisition process was initiated by invoking the provisions of LA Act by the State Government. For this purpose, not only Notification under Section 4 was issued, it was followed by declaration under Section 6 and even Award under Section 9 of the LA Act. With the award the acquisition under the LA Act was completed. Only thing that remains thereafter was to pay the compensation as fixed under the award and take possession of the land in question from the appellant. No doubt, in case, the compensation as fixed by the Land Acquisition Collector was not acceptable to the appellant, the LA Act provides for making a reference under Section 18 of the Act to the District Judge for determining the compensation and to decide as to whether the compensation fixed by the Land Acquisition Collector was proper or not. However, the matter thereafter is only for quantum of compensation which has nothing to do with the acquisition. It is clear from the above that insofar as acquisition is concerned, the appellant had succumbed to the action taken by the Government in this behalf. His only objection was to the market v....