ITO, NEW DELHI vs. SH. SURAJ BHAN, DELHI

O R D E R PER S.V. MEHROTRA, A.M :

This is an appeal filed by the Revenue against the order dated 18.03.2015 passed by the Commissioner of Income Tax (Appeals)-13, New Delhi, u/s 144 of the Income Tax Act, 1961 (in short “the Act”) relating to assessment year 2007-08.

Accordingly, notice u/s 148 was issued and since no compliance was made, assessment u/s 144 was completed by making an addition of Rs.38,53,088/-.

Before ld. CIT(A), the assessee had, inter-alia, submitted as under :-

“5.2 During appellate proceeding, the appellant submitted that, "That the Appellant fulfils all the conditions of Section 10(37) as per below:- • The Appellant is an Individual assessee, which is very clear from his name, PAN as well as status in which alleged assessment order has been passed. The Pan of the assessee is ASSPB0263G. • The income received by the Appellant is chargeable under the Head "Capital Gains" in terms of section 45(5) of the Income Tax Act. The land in question was hereditary and was cultivated by the assessee for agriculture till 1982. The Appellant has received enhanced compensation from Union of India through Land Acquisition Collector, Delhi as a result of Appellate Order of Hon'ble High Court of Delhi and bare reading of section 45(5)(b) clears that the compensation, part of compensation, enhanced compensation is chargeable under the Head ‘Capital gains’ and in the year of its receipt. From the copies of decreetal orders of various courts as annexed, it is clear that the Appellant has received the enhanced compensation and so the amount received taxable under the Head "Capital Gains." • That the land under consideration falls under the area of Rohini and is in State c Delhi and is part of State of Delhi and so 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. That the land under consideration was used for Agricultural purposes only by the individual and his parents and other family members. We have procured a copy of record of crop and this fact is amply proved that land was used for Agricultural purpose by the Appellant and his family members before its acquisition. • That from the copy of decreetal orders, it is clear that the land in question was compulsorily acquired by Union of India in year 1981. • That from the copy of decreetal orders, it is clear that the income arose to the Appellant in October 2006 and November 2006, which is after 1st April 2004. Hence the Appellant fulfils this condition of Section 10(37) also. • The income arose as result of enhancement as per judgment of Hon'ble high Court of Delhi in Appellant's case and since 'Enhanced compensation is also to be treated as 'compensation' as per Explanation to Section 10(37) of the Act.

Hence, these receipts in question during fin Year 2006-07 basically cover all ingredient of section 10(37) of The Income tax Act, 1961 and hence exempt from tax in terms of law laid down. From the above, it is clear that first part of compensation referred in para 2.3 i.e. Rs. 9,06,579/- (672730+201819+32030) as enhanced compensation, solatium and additional amount are clearly within the ambit of above are exempt u/s 10(37)." The appellant also relied on the decision in the case of CIT Vs. Ghanshyam HUF (2009) 315 ITR 1 (SC) and Rama Bai & Ors. Vs. CIT (1990) 181 ITR 400 (SC).”

3. Ld. CIT(A), after considering the assessee’s submissions, held that the enhanced compensation was in respect of agricultural land as prescribed for exemption u/s 10(37). He further observed that as per Explanation to section 10(37), the enhanced compensation was also exempt from tax.

Being aggrieved, the Department is in appeal before the Tribunal and has taken following grounds of appeal :-

“1. On facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs.38,53,088/- which has been treated as taxable by the Assessing Officer.

2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in treating the land under reference as agricultural land, the same being within the notified municipality of MCD & therefore does not fall within the meaning of agricultural land as defined u/s 2(14) of the Income-tax Act, 1961.

4. Ld. DR referred to section 56(2)(viii) inserted by the Finance (No.2)

Act, 2009 w.e.f. 01.04.2010, which reads as under :-

“56. (1) ………. (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely :— ………. (viii) income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A;

He, therefore, submitted that interest received by assessee is taxable.

2. The land admittedly was used for agricultural purposes by the individual and his parents and other family members. Under these circumstances, the assessee was entitled for exemption u/s 10(37). I do not find any infirmity in the order of ld. CIT(A).