TaxTMI 
TaxTMI 
2026 (7) TMI 1971
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.... beyond the prescribed municipal limits and, therefore, did not constitute a "capital asset" within the meaning of section 2(14)(iii) of the Income-tax Act, 1961 (for short 'the Act'). The Assessing Officer, however, rejected the claim and treated the enhanced compensation as taxable under section 45(5) and the interest as taxable under the head "Income from Other Sources". 3. Aggrieved with the above order, assessee preferred an appeal before thee ld. CIT (A) and filed written submissions. After going through the written submissions, the ld. CIT(A) confirmed the action of the Assessing Officer. 4. Aggrieved against the above order, the assessee is in appeal before us raising following grounds: "1.1 That on the facts and in the circumstances of the case, the CIT(A) has erred in confirming the addition of Rs. 2,15,77,773/- made by the Assessing Officer by treating the enhanced compensation received on compulsory acquisition of agricultural land as taxable income without correctly appreciating the correct facts of the case and the settled legal position. 1.2 That the land acquired by the Haryana Urban Development Authority being an agricultural land situated b....
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....the municipal limits. It was argued that the said official certificate, being based on an expert technical report obtained by a statutory authority, could not be rejected in the absence of any contrary technical evidence. The Ld. AR further submitted that the Assessing Officer had proceeded merely on assumptions that since the land was acquired by HUDA, it necessarily became urban land and had also erroneously construed the pleadings before the Land Acquisition Court as inconsistent with the claim under the Act. According to the ld. AR, the submissions made before the Land Acquisition Court regarding development potential were only for determination of fair market value and enhanced compensation and did not alter the agricultural character of the land for the purposes of section 2(14)(iii) of the Act. It was, therefore, submitted that once the land itself was not a capital asset, the enhanced compensation could not be subjected to tax in terms of section 10(37) of the Act particularly when the original/initial compensation was considered as exempt on the ground that the land was rural agricultural land in terms of section 2(14) of the Act. As regards the interest awarded under sect....
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....ued by the statutory revenue authorities have neither been disputed nor rebutted by the Revenue. 10. The more crucial issue pertains to the distance of the land from the municipal limits. In this regard, we find that the assessee had approached the Tehsildar for issuance of a certificate regarding the nature of the land and its distance from the municipal limits. The record reveals that the Tehsildar himself categorically recorded that the Revenue Department did not possess the requisite technical equipment for measuring aerial distance. Consequently, in discharge of his official duties, the Tehsildar obtained a technical survey from M/s Vision Engineering Consultants, an expert agency authorized for such measurements which is placed at paperbook Page 7. The said expert submitted its technical report certifying that the subject land was situated at an aerial distance of 9.1 kilometres from the municipal limits of Gurugram. It is only on the basis of this technical report that the Tehsildar issued the official certificate certifying the land to be rural agricultural land situated beyond the prescribed municipal limits. 11. In our considered opinion, the evidentiary value of th....
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....stent stands before the Land Acquisition Court and the Income-tax Authorities. It is noted that before the Land Acquisition Court, the assessee relied upon the surrounding development and future potential of the land only for determination of fair market value and enhancement of compensation under the provisions of the Land Acquisition Act, however, we find that such considerations are wholly relevant while determining compensation. However, for the purposes of the Act, the issue is governed exclusively by section 2(14)(iii), which requires examination of the actual nature of the land and its distance from the municipal limits and future development potential or market value cannot alter the existing legal character of agricultural land vis-à-vis the Income Tax Act, 1961. The two proceedings operate in different statutory fields and, therefore, there is no inconsistency in the stand of the assessee. 15. Accordingly, we hold that the land acquired from the assessee was rural agricultural land situated beyond the prescribed aerial distance of eight kilometres from the municipal limits and, therefore, did not constitute a capital asset within the meaning of section 2(14)(iii....