Exemption u/s 10(37) for compulsory acquisition not be denied merely because the sale price was fixed through a negotiated settlement
ABCAUS Case Law Citation:
ABCAUS 3024 (2019) (06) ITAT
Important Case Laws Cited/relied upon by the parties:
Balakrishnan v. Union of India [(2017) 391 ITR 178 (SC)]
The instant appeal was filed by the Revenue against the Commissioner of Income-tax (Appeals). The solitary issue raised in this appeal was whether land that was acquired, was entitled to the benefit of section 10(37) of the Income-tax Act, 1961 (the Act)?
The assessee sold land by executing a sale deed in favour of a special purpose State Government company for construction of an International sea port.
The assessee filed return of income claiming the entire sale consideration received as exempt from tax. It was claimed that the said land which was taken over was an agricultural land and was compulsorily acquired by the State Government. Therefore, the assessee was entitled to the benefit of section 10(37) of the Act.
The Assessing Officer (AO) however, rejected the contentions of the assessee and completed the assessment u/s 143(3) r.w.s. 147 of the Act wherein the AO worked out the long term capital gains.
It was held by the AO that the land transferred fall within the limit of Municipal Corporation and the assessee’s claim for exemption u/s 10(37) of the Act was not admissible for the reason that it was not a compulsory acquisition, but a sale through negotiated settlement.
The assessee preferred an appeal to the first appellate authority. The CIT(A), by following the judgment of the Hon’ble Apex Court held that the assessee was entitled to the benefit of section 10(37) of the Act, and hence, would not be liable for long term capital gains on the acquisition of the impugned land.
The Tribunal noted that the assessee’s land in question was notified for compulsory acquisition by the State Government for developing International Seaport. Though the acquisition proceedings were taken under the Land Acquisition Act, the final price was fixed upon negotiated sale agreement.
The Tribunal observed that the only reason for the AO to deny the benefit of section 10(37) was that the impugned land was acquired by executing a sale deed in favour of International Seaport and it was not a case of compulsory acquisition.
The Tribunal noted that the Hon’ble Supreme Court had categorically held merely because the sale price was fixed through a negotiated settlement, the character of acquisition would still remain compulsory.
The Tribunal observed that In the instant case, the entire procedure prescribed under the Land Acquisition Act was followed, only price was fixed upon a negotiated settlement. Neither the AO did not have a case that the impugned land was not an agricultural land.
Therefore, in view of the judgment of the Hon’ble Apex Court the Tribunal held 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 Act.