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Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE
Before: SHRI N.V. VASUDEVAN & SHRI B.R BASKARAN
Per N.V. Vasudevan, Vice President
This is an appeal by the assessee against the order dated 30/3/2017 of CIT, Kalaburagi passed u/s 263 of the Act relating to the asst. year 2009-20.
The assessee is an individual. The assesse’s land were sought to be acquired by the State Govt. for a public purpose namely Ashraya Grameena Niveshana Yojana which was authorized by Rajiv Gandhi Rural Housing Corporation Ltd, a Govt. of Karnataka Enterprises. The Deputy Collector (DC) of Bellary is authorized by Rajiv Gandhi Rural Housing Corporation Ltd., to purchase land from private land owners with consensus vide letter dated 12/12/2008. Consequent to such authorization, the DC held a meeting in the presence of Asst. Commissioner on 21/9/2008. The Commissioner of Municipal Corporation and Local M.L.A and land owners arrived at a consensus for acquisition of lands and fixation of price which was agreed at a sum of Rs.6.25 lakhs per acre.
Consequent upon the aforesaid development, the assessee’s land measuring 23.64 acres was acquired. The assessee received compensation of Rs.78,81,250/- and the same was claimed as exempt u/s 10(37) of the Act. Section 10(37) of the Act reads as follows:- “Sec.10(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 sub-clause (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) ssuch 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 or consideration for such 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;
In the order of asst. completed for asst. year 2009-10 wherein the exemption of the aforesaid u/s 10(37) of the Act was claimed by the assessee, the AO allowed the claim of the assessee in the order passed us/ 143(3) of the Act dated 30/8/2011.
The CIT in exercise of his powers u/s 263 of the Act was of the view that the aforesaid order of the AO was erroneous and prejudicial to the interest of revenue because the assesse’s land was a land which was within the municipal limits of Bellary Mahanagara Palike and, therefore, he was of the view that the land of the assessee was a capital asset within the meaning of sec. 2(14) of the Act. According to the CIT provision of sec. 10(37) of the Act would be attracted only in the case where there was a compulsory acquisition of land of the assesee. Since the land in question was voluntarily sold the CIT was of the view that exemption u/s 10(37) of the Act ought not to have been allowed. He therefore set aside the order of the AO as it was erroneous and prejudicial to the interest of the Revenue. He however directed the AO to frame a fresh asst. in accordance with law after verification of details and affording opportunity of being heard to the assessee.
6. Against the said order passed u/s 263 of the Act assessee filed appeal before the Hon’ble ITAT in and the ITAT by its order dated 30/7/2015 set aside the order of the CIT u/s 263 of the Act on the ground that there was violation of principles of natural justice. The Tribunal directed the CIT to reconsider the issue afresh after affording opportunity of being heard to the assessee.
Consequent to the aforesaid order of the Tribunal, the CIT passed impugned order u/s 263 of the Act in which he took the view that the provision of sec. 10(37)(ii) of the Act would apply only in 2 cases viz., 1) When the transfer is by way of compulsory acquisition under any law. 2) A transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India;
Since in the case of the assessee both the aforesaid conditions were not satisfied, assessee would not be entitled for exemption u/s sec. 10(37) of the Act. The CIT accordingly held that the compensation of Rs.1.47 crores (this is the compensation actually received by the assessee) and not Rs.78,81,250/- as mentioned in the first order dated 3/1/2014 passed by CIT u/s 263 of the Act.
Aggrieved by the aforesaid order of the CIT, assessee has filed the present appeal before the Tribunal.
We have heard the rival submissions. The issue raised in the order u/s 263 of the Act is no longer res integra and has been concluded by the Hon’ble Supreme Court in the case of Balakrlishnan and UOI and others in Civil Appeal No(S) 607/2000 judgment dated 11/1/2017. In the aforesaid decision Hon’ble Supreme Court took the view that for applicability of sec. 10(37) of the Act, even in a case where lands are voluntarily transferred by an assessee but in circumstances in which there would be a compulsory acquisition, then such transfer should also be treated as compulsory acquisition. Following were the relevant observations of the Hon’ble Supreme Court:-
“It is in the aforesaid factual backdrop, this Court is to determine as to whether it can be treated that the land of the appellant was compulsorily 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 deãide 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 value of the land that was fixed as above. To reiterate his grievance, the appellant could have either taken the aforesaid adjudicatory route of seeking reference under Section 18 of the LA Act leaving it to the Court to determine the market value. Instead, the appellant negotiated with Techno Park and arrived at amicable settlement by agreeing to receive the compensation in the sum of Rs. 38,42,489/-. For this purpose, after entering into the agreement, the appellant agreed to execute the sale deed as well which was a necessary consequence and a step which the appellant had to take. 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 compulsory acquisition and to avoid litigation entered into negotiations and settled the final compensation. Merely because the compensation amount is agreed upon would not change the character of acquisition from that of compulsory acquisition to the voluntary sale. It may be mentioned that this is now the procedure which is laid down even under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 as per which the Collector can pass rehabilitation and resettlement award with the consent of the parties/land owners. Nonetheless, the character of acquisition remains compulsory.
In view of the aforesaid decision of the Hon’ble Supreme Court, we are of the view that the assessee would be entitled to deduction u/s 10(37) of the Act. Consequently the conclusion of the CIT in the impugned order that the order of the AO was erroneous and prejudicial to the interest of the Revenue is not correct. Consequently the order impugned in this appeal is quashed and the appeal of the assessee is allowed.
In the result, appeal of the assessee is allowed.