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Before: Shri V. Durga Rao & Shri G. Manjunatha
आयकर अपीलीय अिधकरण, ’सी’ �ायपीठ, चे�ई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI �ी वी दुगा� राव �ाियक सद� एवं �ी जी. मंजुनाथा, लेखा सद� के सम� Before Shri V. Durga Rao, Judicial Member & Shri G. Manjunatha, Accountant Member आयकर अपील सं./I.T.A. No.302/Chny/2020 िनधा�रण वष�/Assessment Year: 2016-17 The Assistant Commissioner of Vs. Shri Anil Kumar Shantichand Mehta, Income Tax, No. 196, Govindappa Naicken Street, Non Corporate Circle 11(1), George Town, Chennai 600 001. Chennai 600 006. [PAN:AAVPS4928E] (अपीलाथ�/Appellant) (��थ�/Respondent) अपीलाथ� की ओर से / Appellant by : Shri P. Sajit Kumar, JCIT ��थ� की ओर से/Respondent by : Shri D. Anand, Advdocate सुनवाई की तारीख/ Date of hearing : 02.08.2022 घोषणा की तारीख /Date of Pronouncement : 28.09.2022 आदेश /O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: This appeal filed by the Revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals) 13, Chennai, dated 21.11.2019 relevant to the assessment year 2016-17. The Revenue has raised the following grounds: 1. The order of the learned CIT (A) is contrary to facts and circumstances of the case. 2. The CIT(A) erroneously held that the assessee had not claimed exemption u/s.10(37) [P.8.2] though the assessee, vide his letter dated 26-12-2018 stated "the compensation of Rs.7,62,40,126/- received was claimed exempt u/s.10(37), however, it was erroneously omitted to be mentioned in the Return of income filed."
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The CIT(A) failed to take note the fact that though the land was stated to be agricultural land in the sale deed, the assessee did not admit any agricultural income from this land right from the year of purchase till the date of acquisition and when the assessee claimed exemption u/s.10(37) but failed to prove that the said land was under agricultural operations at the time of its acquisition and also two years prior to that date. 4. The CIT(A) ought to have appreciated the fact that the said land was acquired by the State Government in F.Y.2009-10 itself and outer ring road project was commenced in the same year and hence the assessee could not have carried out any agricultural activity on the said land. 5. The CIT(A) ought to have considered the ruling of Apex Court in the case of Sarifabibi Mohamed Ibrahim [1993] 204 ITR 631 [SC] and the ruling of jurisdictional High Court in the case of M.S. Srinivasa Naicker vs. ITO [2007] 292 ITR 481 [Mad] & T.S.M.O.Mohamed Othuman vs. CIT [1957] 31 ITR 480 [Mad] which is in favour of the revenue. 6. The CIT(A) ought to have considered the decision of the Apex Court " Statutory interest under section 34 of the Land Acquisition Act, 1894 is for delayed payment of compensation and is, therefore, a revenue receipt liable to tax" in the case of Shamlal Narula v. CIT [1964] 53 ITR 151 [SC]. 7. Admitting the additional grounds which was not agitated before the AO, without affording the AO an opportunity to examine the issue under Rule 46A. 8. For these grounds and the ones that may be adduced during appeal hearing, the order of the Ld. CIT(A) may be set aside and that of the Assessing officer restored. 2. Facts are, in brief, that the assessee has filed his return of income on 28.02.2017 for the assessment year 2016-17 admitting a total income of ₹.3,28,70,680/- after claiming compensation of ₹.7,62,40,129/- received
from Government in respect of the land acquired as exempt under section 10(37) of the Income Tax Act, 1961 [“Act” in short], 50% of the interest
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amounting to ₹.2,84,02,057/- as deduction under section 57(iv) of the Act and the balance 50% of interest as income under the head “other sources”. The case of the assessee before the Assessing Officer is that the land acquired by the Government qualifies as an agricultural land in rural area under section 2(14)(iii) of the Act and thus, the land in question is not capital asset. Therefore, the compensation received for acquisition of rural agricultural land is not a gain taxable under section 45 of the Act and fully exempt from taxation.
2.1 The Assessing Officer has observed that the assessee purchased 7.87 acres of land in the financial year 2001-02. The assessee did not admit any agricultural income in his return filed for the assessment years 2002-03 to 2010-11 and hence the land acquired by the Government cannot be said to be agricultural land as specified by the provision of section 10(37) of the Act. The Assessing Officer further observed that since the land was not an agricultural land or was not used by the assessee for agricultural purposes two years preceding the date of acquisition, the assessee is not eligible to claim exemption. It was further noted that since the Government commenced construction of 400 feet road on the land acquired by it, the assessee’s claim that he carried on cultivation on the said land till the date of receipt of compensation in the
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financial year 2014-15 and 2015-16 is contrary to the facts available on record. Because the said land was not available as the 400 feet roadwork commenced on it. Even otherwise, after acquisition, the said land became government’s property. Moreover, the Assessing Officer has observed that as per the report submitted by the Inspector, the said land is situated within 6.2 kms by road from the limits of Puzhal and aerially 5.17 kms. Even considering the transfer took place in the financial year 2007-08, the said land cannot be treated as an agricultural land since the assessee did not admit any agricultural income from 2002-03 to 2010-11. Since the land was not used for agricultural purposes, the Assessing Officer has held that the assessee is not eligible to claim exemption.
On appeal, the ld. CIT(A) has observed that the assessee purchased the lands in 2000-01 measuring 7.89 acres at Attanthangal Village, Ponneri Taluk, Tiruvallur District, being agricultural in nature and also surrounded by the agricultural lands as corroborated by the purchase documents, wherein, the description of land is clearly mentioned as ‘agricultural’ land and purchase deeds have been registered as ‘agricultural’ land only after verification by the Registering Authorities.
3.1 The ld. CIT(A) has further observed that the land purchased are classified in the revenue records as agricultural lands as per patta issued
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by the Revenue Department. The land was purchased in the measurement of acres and cents and not sq.ft. or plots. It was further observed that there are no buildings or residential houses in close proximity to the lands. Moreover, the land was under cultivation by the owners who sold the lands to the assessee and the assessee also continued the cultivation in the land till it was handed over to the Government. Further, in the notification dated 22.03.2006 issued by the Government for acquisition of land, it was clearly mentioned that the land acquired was “dry and Manavari lands”. The lands purchased was subjected to the payment of land revenue for which copies of the receipt for payment of land revenue was furnished during the appellate proceeding. The ld. CIT(A) further noticed that the chitta adangal of Revenue Department clearly states that the lands are agricultural lands and moreover, it was not found to have taken any steps to exploit the land for non-agricultural purposes. The ld. CIT(A) also noted that the land under consideration is situated in the village Attanthangal, a small village in Sholavaram Block in Ponneri Taluk, Thiruvallur District. Sholavaram is a Panchayat Union and has population of 9397 and Ponneri town is having population of 31025 as per Population Census 2011. The land is situated in Attanthangal area and is away from 5.2 kilometers from Sholavaram and 24 kilometers from Ponneri Town. After examining the
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provisions of section 2(14) of the Act, the ld. CIT(A) has observed as under: “9.1 Therefore applying the above criteria/definition to the instant impugned land, it could be said that the said land under consideration is not a land situated in any area mentioned in section 2(14) of the Income Tax Act and hence not a capital asset liable for taxation under section 45 of the Income Tax Act and sale of the same not exigible to capital gains tax. Therefore the disallowance of exemption u/s 10(37) as the AO termed it erroneously and treated as LTCG of ₹.7,62,40,129/- is deleted. This ground is allowed.” 4. Before us, the ld. DR has submitted that the land, which was acquired by the Government is not an agricultural land and therefore, the ld. CIT(A) wrongly allowed the claim of the assessee. He further submitted that the assessee has not admitted any agricultural income and the land was not agricultural land and therefore not used for agricultural purposes for 2 years preceding to the date of acquisition and the assessee is not eligible to claim deduction under section 10(37) of the Act. It was also submitted that the assessee did not admit any agricultural income from the assessment year 2002-03 to 2010-11 since the said land was not used for agricultural purposes.
On the other hand, the ld. Counsel for the assessee strongly supported the order passed by the ld. CIT(A) and submitted that the land purchased by the assessee is an agricultural land and the Revenue records shows that the lands is an agricultural land and the
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Tahsildar issued certificate that the land is an agricultural land. Therefore, the ld. Counsel for the assessee has argued that the land which was acquired by the Government is an agricultural land and it is not a capital asset and not liable to be taxed.
We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. The case of the Assessing Officer is that the land belonging to the assessee was acquired by the Government to construct 400 feet road work and for that the assessee has received compensation. As per section 10(37) of the Act regarding eligibility for claiming deduction, the assessee has to prove that the land is an agricultural land and also agricultural activities are carried out by the assessee before 2 years of acquiring the land and accordingly rejected the exemption claimed under section 10(37) of the Act. On appeal, the ld. CIT(A) has considered the entire nature of the land that the land was under cultivation by the owners who sold the lands to the assessee and the assessee also continued the cultivation in the land till it was handed over to the Government. It was also noticed that the sale deed shows that the land is an agricultural land and moreover, the lands are classified in the revenue records as agricultural lands as per patta issued by the Revenue Department. The
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land was purchased in the measurement of acres and cents and not sq.ft. or plots. It was further observed that there are no buildings or residential houses in close proximity to the lands. The land was under cultivation by earlier owners and also the assessee has offered agricultural income. Further, in the notification dated 22.03.2006 issued by the Government for acquisition of land, it was clearly mentioned that the land acquired was “dry and Manavari lands”. The ld. CIT(A) further noticed that the chitta adangal of Revenue Department clearly states that the lands are agricultural lands and moreover, it was not found to have taken any steps to exploit the land for non-agricultural purposes. Even after examining the provisions of section 2(14) of the Act, the ld. CIT(A) came a conclusion that the land under consideration is not a land situated in any area mentioned in section 2(14) of the Act and hence, the land is not a capital asset liable for taxation under section 45 of the Act and sale of the same is not exigible to capital gains tax. Therefore, the disallowance of exemption under section 10(37) of the Act, as the Assessing Officer termed it erroneously and treated as long term capital gains of ₹.7,62,40,129/- was rightly deleted. We find no infirmity in the order passed by the ld. CIT(A) on this issue. Thus, the ground raised by the Revenue is dismissed.
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The next ground raised by the Revenue relates to the claim of interest. Before the Assessing Officer, the assessee has claimed interest amount of ₹.2,84,02,057/- being 50% of the total interest received under the Land Acquisition Act of ₹.5,68,04,118/- as deduction under section 57(iv) of the Act. During the course of appellate proceedings, by way of additional ground, the assessee claimed 100% exemption of the above interest. By following various case law, the ld. CIT(A) admitted the additional ground raised by the assessee and since the assessee was not able to file detailed day wise working of the interest received during the appellate proceedings, the Assessing Officer was directed to cross verify as to whether the said interest and purportedly received is indeed under section 28 of the Land Acquisition Act or not and the exact amount thereof, and if so, allow the claim of the assessee by keeping in view of the ratio of the judgement of the Hon’ble Supreme Court in the case of CIT v. Ghanshyam HUF (2009) 315 ITR 1.
Before us, the ld. DR relied on the order passed by the Assessing Officer.
On the other hand, the ld. Counsel for the assessee supported the order passed by the ld. CIT(A) and submitted that though the
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assessee has claimed 50% of the interest before the Assessing Officer, the Assessing Officer should have advised the assessee that he is entitled for 100%. It was further submission that as per the Circular issued by the CBDT dated 11.04.1955 and by considering the same, the Hon’ble Madras High Court in the case of CIT v. Perlo Telecommunication and Electronic Components India P. Ltd. in T.C.A. No. 413 of 2014 dated 20.09.2021, the Hon’ble High Court decided the matter against the Revenue.
We have heard the rival contentions. By admitting the additional ground, the ld. CIT(A) has passed following order: 11. During the course of appellate proceedings it is seen that the amount of compensation received is u/s 28 of the Land Acquisition Act as corroborated by the working sheet of the special Tehsildar to prove that the interest granted on the enhanced compensation which the AR has claimed to be exempt and therefore by natural and logical corollary the interest on such compensation would also be exempt from tax. It is seen that the said compensation received was reflected in the return of income and therefore the said issue could be raised in appeal for the first time before CIT(A) since all information relating to the said receipt was on record and duly evidenced in the instant case as per the following case laws: (i). Emerson Network Power India (P) Ltd. vs. ACIT [2009J 27 SOT 593 (mum) (ii). Chicago Pneumatic India Ltd. vs. DCIT [2007] 15 SOT 252 (Mum); and (iii). CIT vs. Ramco International [2009J 180 Taxman 584 (Punj. & Har.) (iv). Dattatraya Gopal Shette vs. CIT [1984J 150 ITR 460 (Bom) (v). Chokshi Metal Refinery vs. CIT [1977] 107 ITR 63 (Guj.); (vi). CIT vs. Shri. Someshwar Sahakari Karkhana Ltd. [1989]177 ITR 443 (Bom) (affirmed, by the Supreme Court in CIT vs. Mahendra Mills [2000J 243 ITR 56 (SC) (vii). ITO vs. Cosmic Engg. CO. [1984J 20 TTJ (Ahd.) 271, 273. All the aforesaid case laws also hold that the CIT has the power to allow fresh claim made by the assessee for the first time even if no revised return is filed as also the duty of CIT to allow deduction sou motu even if not claimed by the
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assessee directly when all the information relating to the transaction was on record, as it was in the instant case. 12. The AR during the course of appellate proceedings also contended that the interest of Rs.5,68,04,114 /- was not in the nature of interest but an accretion to compensation and therefore partakes the character of compensation and hence, the entire amount of such interest would not be taxable. The AR also submitted that the appellant had by mistake admitted the entire amount of interest and only claimed 50% of interest as exemption in the return of income filed and the interest received on enhanced compensation being part of compensation as stated earlier, the entire amount of interest received was therefore exempt on the enhanced compensation. 12.1 In this background he also brought to notice that the CBDT vide Circular No. 14 (XL-35) of 1955 dated April 11, 1955 held that the Department should not take benefit out of the ignorance of law on the part of the appellant by holding as under: "Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department, for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with the assesses on whom it is imposed by law, officers should - (a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some other reason or other; (b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs. 12.2 In the present case, the appellant received interest of Rs.5,68,04,118/- on enhanced compensation and claimed 50% of interest as exemption u/s 57(iv) in the return of income filed for the assessment year 2016-17 which now the AR contends was by mistake and that he is entitled to 100% exemption on the entire amount of such interest received i.e. Rs.5.68 crores and keeping in mind the spirit of the CBDT Circular supra he should therefore be granted due relief on the entire amount. 12.3 The AR has further stated that the land owners are entitled to two types of interest i.e. (i) interest on compensation under section 28 of the Land Acquisition Act 1894 and (ii) interest on belated payment of compensation under section 34 of the Act stated above. The Appellant in the instant case is stated to have received interest under section 28 of the Land Acquisition Act 1984 and therefore it is part
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of compensation. Since the enhanced compensation is fully exempt as per the AR, the interest on compensation is also exempt from income tax. 12.4 In this regard, the AR relied upon the decision of Income Tax Appellate Tribunal, Delhi Bench (ITA No.2340/Del/2018/A.Y.2013-14) in the case of Jagmal Singh Vs ITO, Ward-2 (2), Gurgaon in which it was stated to be held that the interest received by the assessee under section 28 of the Land Acquisition Act, 1893 is exempt from. payment of tax. 12.5 Further the AR has submitted that the Income Tax Appellate Tribunal, Division Bench 'B', Chandigarh while disposing series of cases having identical issue has held that the interest received by the assessees under the provisions of section 28 of the L.A Act 1894 is part of enhanced compensation and is not taxable under the Income Tax Act. 12.6 The AR further submitted that m the case of Shri Basavaraj M. Kidarikannur and Shri Shivalingappa S. Kudarikannur, the Appellate Tribunal, 'A' Bench, Bangalore confirmed order of the CIT (Appeals) in which the exemption was granted for the interest received on enhanced compensation. 13. Now, it has also been held m the case of Income Tax Appellate Tribunal Division Bench 'B', Chandigarh in ITA Nos. 1413 to 1415/CHD/2016, AY-2007-08 to 2009-10 that “therefore, in view of the same, the proposition laid down in Ghanshyam, HUF (supra) remains and which having been laid down by the Hon'ble Apex Court is the law of the land and has to be followed by all lower authorities. In view of the above, we hold that the interest received by the assessee during the impugned year on the compulsory acquisition of its land u/« 28 of the Land Acquisition Act, is in the nature of compensation and not interest which is taxable under the head income from other sources u/s 56 of the Act as held by the authorities below. The compensation being exempt u/ s 10(37) of the Act is not disputed. In view of the same the order passed by the CIT(Appeals) upholding the addition made by the AO on account of interest on enhanced compensation is, not sustainable.” 13.1 Since as per the aforesaid Hon'ble Supreme Court ruling, interest received by the instant appellant on the compulsory acquisition of land u/s 28 of the Land Acquisition Act is in the nature of compensation and not interest which is taxable under the head 'Income from Other Sources' u/s 56 of the Act and since the instant appellant's case rests on a better footing in as much as it has already been held that the impugned lands were agricultural asset u/s 2(14) of the Act which in any case, is exempt from capital gains tax and duly keeping in mind the intent and purposes of the CBDT Circular extracted supra, the compensation received thereon by logical extension / corollary also would partake the character of compensation under the acquisition of land compulsorily acquired by the Government and therefore the same i.e. Rs.5,68,04,118/- would also be 100 per cent exempt. 13.2 However as the AR was not able to readily furnish the detailed day wise working of the "interest" received during appellate proceedings, the AO is directed to cross verify as to whether the said interest said and purportedly received is indeed under section 28 of the Land Acquisition Act or not and the exact amount
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thereof, and if so, allow the claim of the appellant as stated supra in keeping with the ratio of the Hon'ble Supreme Court judgement in the case of Ghanshyam HUF cited aforesaid. This ground is therefore allowed for statistical purposes. 10. In similar facts and circumstances, in the case of CIT v. Perlo Telecommunication and Electronic Components India P. Ltd. (supra), the Hon’ble Madras High Court has upheld the findings of the ITAT in respect of Circular issued by the CBDT dated 11.04.1955, wherein, the Tribunal has observed that the Circular of the CBDT states that the Department should freely advise the assessee, when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs. It may be true that the Circular is of the year 1955. Nevertheless, as per the recent notification issued by the Department as to how the department has to approach the assessee, the Board has been consistent to state that the department should adopt an assessee friendly approach. In any event, on facts, the Tribunal was convinced that the claim made by the assessee towards expenditure was not a fresh claim. Therefore, the Tribunal had exercised its power conferred under section 254 of the Act, which cannot be found fault. With the above observations, the Hon’ble High Court has dismissed the appeal filed by the Revenue.
In the present case, the assessee has claimed only 50% of the
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compensation/interest and subsequently, he has raised additional ground before the ld. CIT(A) and the ld. CIT(A) admitted the additional ground and remitted the matter back to the file of the Assessing Officer to adjudicate the issue afresh by considering the provision of section 28 of the Land Acquisition Act and also keeping in mind the ratio of the judgement of the Hon’ble Supreme Court in the case of CIT v. Ghanshyam HUF (supra) and allowed the ground for statistical purposes. Thus, we find no infirmity in the order passed by the ld. CIT(A). We have considered all the grounds raised in the grounds of appeal of the Revenue and dismiss the appeal filed by the Revenue.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced on 28th September, 2022 at Chennai.
Sd/- Sd/- (G. MANJUNATHA) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, 28.09.2022 Vm/- आदेश की �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant, 2.��थ�/ Respondent, 3. आयकर आयु� (अपील)/CIT(A), 4. आयकर आयु�/CIT, 5. िवभागीय �ितिनिध/DR & 6. गाड� फाईल/GF.