Case Law Details

Case Name : ITO Vs Smt. Asha Vimala Melpuratharisu Puthen Veedu (ITAT Cochin)
Appeal Number : ITA No.568/Coch/2018
Date of Judgement/Order : 06/06/2019
Related Assessment Year : 2013-2014
Courts : All ITAT (6563) ITAT Cochin (112)

ITO Vs Smt. Asha Vimala Melpuratharisu Puthen Veedu (Ponnamkulam House) (ITAT Cochin)

The assessee’s land in question at Vizhinjam Village was notified for compulsory acquisition by Government of Kerala for developing Vizhinjam International Seaport. Though the acquisition proceedings were taken under the Land Acquisition Act, the final price was fixed upon negotiated sale agreement. The only reason for the A.O. to deny the benefit of section 10(37) was that the impugned land was acquired by executing a sale deed in favour of Vizhinjam International Seaport and it was not a case of compulsory acquisition. The Hon’ble Apex Court in the case of Balakrishnan v. Union of India & Others (supra) had categorically held merely because the sale price was fixed through a negotiated settlement, the character of acquisition would still remain compulsory. The relevant finding of the Hon’ble Apex Court reads as follows:-

“8. 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 and 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 / landowners. Nonetheless, the character of acquisition remains compulsory.”

6.1 In the instant case, the entire procedure prescribed under the Land Acquisition Act was followed, only price was fixed upon a negotiated settlement. The A.O. did not have case that the impugned land is not an agricultural land. Therefore, in view of the above judgment of the Hon’ble Apex Court (supra), we hold that the acquisition of the urban agricultural land was a compulsory acquisition and the same would be entitled to the benefit enumerated in section 10(37) of the I.T.Act. It is ordered accordingly.

FULL TEXT OF THE ITAT JUDGEMENT

This appeal at the instance of the Revenue is directed against the Commissioner of Income-tax (Appeals)’s order dated 12.10.2018. The relevant assessment year is 2013-2014.

2. The solitary issue raised in this appeal is whether land that was acquired, was entitled to the benefit of section 10(37) of the Income-tax Act?

3. Brief facts of the case are as follows:-

The assessee along with her husband, was in possession of 47.54 Ares of land at Survey No.606/4 in Vizhinjam village.

The same was sold by executing a sale deed in favour of Vizhinjam International Seaport for a total consideration of Rs.3,22,99,490, out of this the share of the assessee is Rs.1,61,49,745. For the assessment year 2013-2014, the assessee filed return of income claiming the entire sale consideration received as exempt from tax. It was claimed that the said property, which was taken over by Vizhinjam International Seaport, was an agricultural land and was compulsorily acquired by the Government of Kerala. Therefore, it was submitted that the assessee was entitled to the benefit of section 10(37) of the I.T.Act. The Assessing Officer, however, rejected the contentions of the assessee and completed the assessment u/s 143(3) r.w.s. 147 of the I.T.Act, vide order dated 25.02.2016, wherein the A.O. had worked out the long term capital gains at Rs.1,40,05,853. It was held by the A.O. that the land transferred falls within the limit of Trivandrum Municipal Corporation and the assessee’s claim for exemption u/s 10(37) of the I.T.Act was not admissible for the reason that it was not a compulsory acquisition, but a sale through negotiated settlement.

4. Aggrieved by the assessment order, the assessee preferred an appeal to the first appellate authority. The CIT(A), by following the judgment of the Hon’ble Apex Court in the case of Balakrishnan v. Union of India [(2017) 391 ITR 178 (SC)], held that the assessee was entitled to the benefit of section 10(37) of the I.T.Act, and hence, would not be liable for long term capital gains on the acquisition of the impugned land.

5. The Revenue being aggrieved, has filed the present appeal before the Tribunal. The learned Departmental Representative strongly relied on the assessment order. The learned AR, on the other hand, submitted that land which was acquired by the Vizhinjam International Seaport, was admittedly agricultural land. It was stated that the only reason for the Assessing Officer to deny the benefit of section 10(37) of the I.T.Act was that the land in question was not compulsorily acquired, but by executing a sale deed in favour of Vizhinjam International Seaport. In this context, the learned AR submitted that the issue was squarely covered in favour of the assessee by the judgments of the Hon’ble Apex Court in the case of Balakrishnan v. Union of India [(2017) 391 ITR 178 (SC)] and Union of India v. Infopark Kerala [81 com51 (SC)]. It was contended that the Hon’ble Apex Court in above cases had clearly held that since the entire procedure fixed under Land Acquisition Act was followed, the character of acquisition from that of compulsory acquisition to voluntary sale would not change though the price was fixed on negotiated settlement.

6. We have heard the rival submissions and perused the material on record. The assessee’s land in question at Vizhinjam Village was notified for compulsory acquisition by Government of Kerala for developing Vizhinjam International Seaport. Though the acquisition proceedings were taken under the Land Acquisition Act, the final price was fixed upon negotiated sale agreement. The only reason for the A.O. to deny the benefit of section 10(37) was that the impugned land was acquired by executing a sale deed in favour of Vizhinjam International Seaport and it was not a case of compulsory acquisition. The Hon’ble Apex Court in the case of Balakrishnan v. Union of India & Others (supra) had categorically held merely because the sale price was fixed through a negotiated settlement, the character of acquisition would still remain compulsory. The relevant finding of the Hon’ble Apex Court reads as follows:-

“8. 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 and 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 / landowners. Nonetheless, the character of acquisition remains compulsory.”

6.1 In the instant case, the entire procedure prescribed under the Land Acquisition Act was followed, only price was fixed upon a negotiated settlement. The A.O. did not have case that the impugned land is not an agricultural land. Therefore, in view of the above judgment of the Hon’ble Apex Court (supra), we hold that the acquisition of the urban agricultural land was a compulsory acquisition and the same would be entitled to the benefit enumerated in section 10(37) of the I.T.Act. It is ordered accordingly.

7. In the result, the appeal filed by the Revenue is dismissed.

Order pronounced on this 06th day of June, 2019.

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