BALAKRISHNAN vs. UNION OF INDIA

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WA/240/2014HC KeralaKLHC01043846201419 February 2014Bench: HONOURABLE MR.JUSTICE A.M.SHAFFIQUE,HONOURABLE THE CHIEF JUSTICE DR. MANJULA CHELLUR4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that for the exemption under Section 10(37)(iii) of the Income Tax Act to apply, the transfer or acquisition of land must be by way of compulsory acquisition, adhering to the formalities prescribed by the Land Acquisition Act. The court noted that while a preliminary notification under Section 4(1) of the Land Acquisition Act preceded the sale deed, the sale itself was concluded through negotiations, as reflected in the sale deed. The court found that this did not meet the criteria of compulsory acquisition. Therefore, the learned single judge was justified in denying the benefits claimed by the appellant. The appeal was dismissed.

What were the facts?

The appellant, Balakrishnan, owned agricultural land acquired for the Techno Park development in 2005. He claimed compensation received was exempt from income tax under Section 10(37)(iii) of the Income Tax Act, filing returns with nil tax liability. The Income Tax Department issued a notice under Section 148, asserting the income was chargeable to tax and had escaped assessment for Assessment Year 2009-10. The appellant filed a writ petition, which was dismissed by a learned single judge. The appellant then filed this writ appeal. The dispute centers on whether the acquisition was 'compulsory' as required by Section 10(37)(iii). A preliminary notification under Section 4(1) of the Land Acquisition Act preceded the sale deed, which was executed based on negotiations.

What were the issues?

1. Whether the acquisition of the appellant's agricultural land, following a preliminary notification under Section 4(1) of the Land Acquisition Act and subsequent sale by negotiation, constitutes 'compulsory acquisition' for the purpose of claiming exemption under Section 10(37)(iii) of the Income Tax Act, 1961. Assessee's Contention: The appellant argued that the compensation received for the acquisition of his agricultural land was exempt from income tax under Section 10(37)(iii). He relied on the fact that a preliminary notification under Section 4(1) of the Land Acquisition Act was issued prior to the sale deed, implying a compulsory acquisition process. Revenue's Contention: The department contended that the income from the land was chargeable to income tax as capital gains because the transfer was not a compulsory acquisition. They relied on the judgment in Info Park Kerala v. Assistant Commissioner of Income Tax (2008(4) KLT 782), arguing that the absence of compulsory acquisition meant Section 10(37)(iii) was not applicable. The sale deed was executed based on negotiations, not a formal compulsory acquisition process.

Which sections of the Income-tax Act were involved?

Section 10(37)(iii),Section 148,Section 4(1),Section 194LA

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE WEDNESDAY, THE 19TH DAY OF FEBRUARY 2014/30TH MAGHA, 1935 WA.No. 240 of 2014 ------------------------------------------- AGAINST THE JUDGMENT IN WP(C) NO. 15794/2013 DATED 11-07-2013 ... APPELLANT(S)/PETITIONER: ---------------------------------------------- BALAKRISHNAN,AGED 60 YEARS, S/O.UNNERI, RESIDING AT SMITHA BHAVAN, ARASUMOOD, KULATHOOR P.O. BY ADV. SRI.T.K.ANANDA KRISHNAN RESPONDENT(S)/RESPONDENTS: ---------------------------------------------------- 1. UNION OF INDIA, REPRESENTED BY SECRETARY, FINANCE DEPARTMENT, NEW DELHI - 110 001, CENTRAL GOVERNMENT STANDING COUNSEL. 2. JOINT COMMISSIONER INCOME TAX RANGE-1, KAWDIAR,

THIRUVANANTHAPURAM - 695 001. 3. INCOME TAX OFFICER, WARD-1(1), KAWDIAR, THIRUVANANTHAPURAM - 695 001. 4. THE SPECIAL TAHSILDAR (LA), THIRUVANANTHAPURAM - 695 001. R1 BY ADV.SRI.P.PARAMESWARAN NAIR, ASST.S.G.OF INDIA R2 &R3 BY ADV.SRI.JOSE JOSEPH, SC, INCOME TAX R4 BY GOVERNMENT PLEADER SRI.BOBBY JOHN PULIKKAPARAMBIL THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 19-02-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Kss

MANJULA CHELLUR,C.J. & A.M.SHAFFIQUE, J. = = = = = = = = = = = = = = = = W.A. No.240 of 2014 = = = = = = = = = = = = = = = = = = = = = Dated this the 19 th day of February, 2014 JUDGMENT Manjula Chellur,CJ It is not in dispute that the property of the appellant measuring about 27.70 ares of land situated at Attippra Village in Thiruvananthapuram district is an agricultural land. According to petitioner, when this property was acquired for the 3rd phase of development of Techno Park in the year 2005, he was entitled for compensation and the compensation received by him is exempted from the payment of income tax by virtue of Section 10(37)(iii) of the Income Tax Act. When returns were submitted, he showed his income tax liability as nil, therefore he did not claim any benefits by way of deduction such as cost of acquiring the property, cost of improvements etc. from the sale value which he could have availed. A notice under Section 148 of Income Tax Act after refund of tax, was sent.

W.A No.240 of 2014 2 2. According to the department, the income received from the above said land was chargeable to income tax but escaped tax assessment during the assessment year 2009-10. Hence a writ petition came to be filed in W.P.(C) No.15794/2013. Placing reliance on Info Park Kerala v. Assistant Commissioner of Income Tax (2008(4) KLT 782) learned single Judge opined that petitioner cannot escape from the liability to pay income tax under the head 'capital gains' as there is no compulsory acquisition of land. Aggrieved by the same, petitioner is before us. 3. The entire issue revolves around the fact whether by virtue of preliminary notification under Section 4(1) of the Land Acquisition Act can the sale in question by negotiations be termed as compulsory acquisition. The contents of sale deed at Ext.P4 and date of Ext.P2 notification are very relevant. Ext.P2 notification is prior to sale deed. 4. It is also not in dispute that no deductions under Section 194LA of the Income Tax Act came to be applied since the sale price was fixed by negotiations which is reflected in the sale deed at Ext.P4. Unless transfer of land or acquisition of

W.A No.240 of 2014 3 land is by way of compulsory acquisition complying with the formalities and the Land Acquisition Act, Section 10(37)(iii) of the Income Tax Act would not apply. In that view of the matter, learned single Judge was justified in saying, the department was right in denying the benefits claimed by the writ petitioner. We find no good ground to interfere with the same. Accordingly, the appeal is dismissed. MANJULA CHELLUR, CHIEF JUSTICE A.M.SHAFFIQUE, JUDGE.

sj20/02

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