Shri Vikrambhai Somabhai Patel, Ahmedabad V. The Dy.CIT.,Circle-2, Ahmedabad

ITA 2616/AHD/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67840 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-10-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 21-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C TIWARI
• Keywords: Capital asset
• Section: 45(5); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMADABAD BEFORE SHRI N. S. SAINI , ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO. 2616/AHD/2011 ASSESSMENT YEAR :2008-2009 VIKRAMBHAI SOMABHAI PATEL C/O S L PATEL & CO NR BANK OF BARODA, DELHI CHAKLA AHMEDABAD-380001 V/S . DCIT, CIRCLE- 2, AHMEDABAD. PAN NO. A EUPP6088H ITA NO. 2617/AHD/2011 ASSESSMENT YEAR :2008-2009 VIJAYBHAI SOMABHAI PATEL C/O S L PATEL & CO NR BANK OF BARODA, DELHI CHAKLA AHMEDABAD-380001 V/S . ITO, WARD- 2(3), AHMEDABAD PAN NO. AHQPP9092C ITA NO. 2618/AHD/2011 ASSESSMENT YEAR :2008-2009 JASUBHAI SOMABHAI PATEL C/O S L PATEL & CO NR BANK OF BARODA, DELHI CHAKLA AHMEDABAD-380001 V/S . ITO, WARD- 2(4), AHMEDABAD PAN NO. AHUPP6714H (APPELLANT) .. (RESPONDENT) BY REVENUE SHRI S. C. TIWARI, SR. D.R. /BY ASSESSEE SMT. URVASHI SHODHAN, A.R. /DATE OF HEARING 22.10.2013 /DATE OF PRONOUNCEMENT 25.10.2013 O R D E R ITA NOS. 2616-2618/AHD/11 A.Y. 2008-09 PAGE 2 PER : SHRI N. S. SAINI, ACCOUNTANT MEMBER THESE ARE THREE APPEALS FILED BY THE ASSESSEES AGAI NST THE ORDER OF CIT(A)-6, AHMEDABAD, DATED 11.08.2011. 2. THE ASSESSEE HAS RAISED ADDITIONAL GROUND OF APP EAL IN ALL THESE APPEALS WHICH READS AS UNDER: 4. BOTH THE LOWER AUTHORITIES ERRED IN LAW AND ON FACTS IN INVOKING PROVISIONS OF SECTION 45(5) OF THE ACT FOR TREATING COMPENSATION RECEIVED BY THE APPELLANT ON COMPULSORY ACQUISITION OF LAND AS LONG TERM CAPITAL GAINS NOT APPRECIATING THAT THE CONDIT IONS OF SECTION 10(37) OF THE ACT HAVING BEEN FULLY SATISFIED, COMP ENSATION RECEIVED IS FULLY EXEMPT U/S 10(37) OF THE ACT. IT BE SO HE LD NOW AND ADDITION MAY BE DELETED. 3. THE LD. SR. D.R. HAD NO OBJECTION TO THE ADMISSI ON OF THE ABOVE ADDITIONAL GROUND OF APPEAL RAISED BY THE ASSESSEE. THEREFORE, THE ADDITIONAL GROUND OF APPEAL OF THE ASSESSEE WAS ADMITTED AND T HE PARTIES WERE ALLOWED TO MAKE THEIR SUBMISSIONS THERETO. 4. BOTH THE PARTIES BEFORE US, AGREED THAT THE ISSU E WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE HONBLE GUJARAT HIGH COURT IN CASE OF ONE OF THE CO-OWNERS OF THE PROPERTY, SHRI AMRUTBHAI S. PATEL VIDE ORDER DATED 15.04.2013 PASSED IN TAX APPEAL NO.355 OF 2013. 5. WE FIND THAT THE HONBLE GUJARAT HIGH COURT HAS HELD AS UNDER: 1. REVENUE IS IN APPEAL AGAINST THE JUDGMENT OF T HE INCOME TAX APPELLATE TRIBUNAL DATED 23.11.2012 RAISING FOLLOWI NG QUESTIONS FOR OUR CONSIDERATION. ITA NOS. 2616-2618/AHD/11 A.Y. 2008-09 PAGE 3 [A] WHETHER THE APPELLATE TRIBUNAL IS RIGHT IN LA W AND ON FACTS IN ITS INTERPRETATION OF SECTION 10(37) OF TH E ACT AND THEREBY HOLDING THAT THE SAID SECTION DOES NOT REQU IRE THAT THE ASSESSEE SHOULD HIMSELF CARRY OUT THE AGRICULTURAL ACTIVITIES ON THE LAND? [B] WHETHER THE APPELLATE TRIBUNAL IS RIGHT IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO GRANT E XEMPTION U/S 10(37) OF THE ACT TO THE ASSESSEE? 2. SHORT QUESTION PERTAINS TO EXEMPTION UNDER SECT ION 10(37) OF THE INCOME TAX ACT, 1961. SUCH QUESTION ARISES ON T HE FOLLOWING FACTUAL BACKGROUND. 3. FOR THE ASSESSMENT YEAR 2008-09, THE ASSESSEE F ILED RETURN OF INCOME. DURING THE SCRUTINY ASSESSMENT, IT WAS N OTICED THAT THE ASSESSEE WAS OWNER OF 1/4 TH OF A PROPERTY ACQUIRED BY THE STATE, FOR WHICH UNDER THE ORDER OF THE COURT, AN ADDITIONAL C OMPENSATION OF RS.4,47,98,432/- WAS PAID AND THEREFORE, WAS ENTITL ED TO 1/4TH ADDITIONAL COMPENSATION OF RS.1,11,99,608/-. THE AS SESSEE CONTENDED THAT IN VIEW OF PROVISIONS OF SECTION 10( 37) OF THE ACT READ WITH SECTION 45(5), NO CAPITAL GAIN TAX WAS PAYABLE . THE AO, HOWEVER, REJECTED SUCH CONTENTION ON THE GROUND THA T THE LAND IN QUESTION WAS SITUATED WITHIN THE MUNICIPAL LIMITS O F GANDHINAGAR, WHICH HAD POPULATION OF MORE THAN 10000. SECTION 10 (37) OF THE ACT THEREFORE, DOES NOT APPLY TO THE ASSESSEE. 4. THE ASSESSEE THEREUPON APPROACHED THE CIT (APPE ALS), WHO DISMISSED THE APPEAL. HE AGREED WITH THE ASSESSEE T HAT EXEMPTION UNDER SECTION 10(37) OF THE ACT WOULD BE AVAILABLE ALSO TO AGRICULTURAL LAND SITUATED IN URBAN AREA, BUT HE HE LD THAT SUCH ITA NOS. 2616-2618/AHD/11 A.Y. 2008-09 PAGE 4 EXEMPTION WOULD BE SUBJECT TO FULFILLMENT OF CERTAI N CONDITIONS. ONE OF THEM BEING THAT SUCH LAND, DURING THE PERIOD TWO YEARS IMMEDIATELY PRECEDING THE DATE OF TRANSFER WAS USED FOR AGRICULTURAL PURPOSE BY SUCH HINDU UNDIVIDED FAMILY OR INDIVIDUA L OR HIS PARENT. IN THE PRESENT CASE, HE WAS OF THE OPINION THAT THO UGH THE LAND WAS AGRICULTURAL LAND, USED FOR AGRICULTURAL PURPOSES, BUT NOT BY THE ASSESSEE HIMSELF. HE NOTED THAT THE ASSESSEE WAS IN VOLVED IN BUSINESS ACTIVITIES AND WAS STAYING FAR AWAY FROM T HE LOCATION OF THE AGRICULTURAL LAND. 5. THE ASSESSEE THEREUPON APPROACHED THE TRIBUNAL. THE TRIBUNAL ALLOWED THE ASSESSEES APPEAL MAKING FOLLO WING OBSERVATIONS: 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT DURING THE YEAR UNDER APPEAL AGRICULTU RAL LANDS BELONGING TO THE ASSESSEE SITUATED WITHIN URBAN SET TLEMENT WERE COMPULSORILY ACQUIRED BY THE GOVERNMENT ON WHI CH ASSESSEE RECEIVED ENHANCED COMPENSATION. THE A.O. T AXED THIS COMPENSATION U/S 45(5) OF THE ACT ON THE GROUN D THAT THE LANDS WERE SITUATED NEAR GANDHINAGAR AND THEREFORE NOT AGRICULTURAL LANDS WITHIN THE DEFINITION OF SECTION 2(14)(III) OF THE ACT. ASSESSEE'S CONTENTION BEFORE ID. CIT(A) WA S THAT BY VIRTUE OF SECTION 10(37) INSERTED BY FINANCE ACT, 2 004 WITH EFFECT FROM A.Y. 2005-06 ENHANCED COMPENSATION RECE IVED ON COMPULSORY ACQUISITION OF URBAN AGRICULTURAL LAND A FTER 01.04.2004 WAS EXEMPT FROM TAX. IT WAS ALSO SUBMITT ED IF THE LAND WAS AGRICULTURAL LAND AND EXECUTABLE AS PER DE FINITION OF CAPITAL ASSET, THE SAME WOULD HAVE BEEN OUTSIDE THE PURVIEW OF SECTION 45 AND THERE WAS NO NEED OF INTRODUCING SECTION 10(37). LD. CIT(A) AGREED WITH THE ASSESSEE TO THIS EXTENT THAT ITA NOS. 2616-2618/AHD/11 A.Y. 2008-09 PAGE 5 EXEMPT U/S 10(37) WAS AVAILABLE TO AGRICULTURAL LAN D SITUATED IN URBAN AREA. THEREFORE, A.O.'S OBJECTION TO THIS EXT ENT WAS NOT TENABLE. HOWEVER, HE WAS OF THE VIEW THAT SUCH EXEM PTION U/S 10(37) WAS AVAILABLE ON FULFILLMENT OF CERTAIN CO NDITIONS. ONE OF THE VITAL CONDITIONS, ACCORDING TO HIM, FOR SUCH EXEMPTION WAS THAT SUCH LAND DURING THE PERIOD OF TWO YEARS IMMEDIATELY PRECEDING THE DATE OF TRANSFER, WAS BEING USED FOR AGRICULTURAL PURPOSE BY SUCH HINDU UNDIVIDED FA MILY OR INDIVIDUAL OR PARENT OF HIS AND THEN HE WENT ON TO SAY THAT SINCE ASSESSEE WAS STAYING AWAY FROM THESE AGRICULT URAL LANDS AND WAS ALSO INVOLVED IN SOME BUSINESS ACTIVI TIES, HE COULD NOT HAVE CARRIED OUT AGRICULTURAL ACTIVITIES HIMSELF AND THEREFORE, EXEMPTION U/S 10(37) WAS NOT AVAILABLE TO HIM. IN OUR CONSIDERED OPINION THE P LAIN READING OF SECTION 10(37)(II) DOES NOT SUGGEST TH AT THERE IS SUCH REQUIREMENT THAT ASSESSEE HIMSELF SHOULD CARRY OUT THE AGRICULTURAL ACTIVITIES ON THESE LANDS. ONLY REQUIR EMENT IS THAT SUCH LAND, DURING THE PERIOD OF TWO YEARS IMMEDIATE LY PRECEDING THE DATE OF TRANSFER, IS USED FOR AGRICUL TURAL PURPOSES BY THE ASSESSEE OR HIS PARENT. ABOUT THI S THERE IS NO DISPUTE IN THIS CASE AS THE REVENUE HAS NOT DISP UTED THE FACT THAT AGRICULTURAL INCOME HAS BEEN REGULARLY DE CLARED BY THE ASSESSEE IN THE RETURNS OF INCOME IN RESPECT OF AGRICULTURAL ACTIVITIES ON THESE LANDS AND THE SAME WERE ACCEPTE D BY THE REVENUE. THE ASSESSEE HAS ALSO FURNISHED EVIDENCE I N THE FORM OF 7 AND 12 EXTRACT IN WHICH THE CROP GROWN BY THE ASSESSEE ON THE LANDS WERE ALSO MENTIONED. IN THE LIGHT OF THIS FACTUAL POSITION OF THIS CASE, WE ARE SATISFIE D THAT ASSESSEE HAS FULFILLED THE CONDITION AS LAID DOWN F OR CLAIMING EXEMPTION U/S 10(37) OF THE ACT ON ENHANCED COMPENS ATION ITA NOS. 2616-2618/AHD/11 A.Y. 2008-09 PAGE 6 RECEIVED BY HIM DURING THE YEAR UNDER APPEAL ON COM PULSORY ACQUISITION OF URBAN AGRICULTURAL LANDS, THE ORDER PASSED BY THE LOWER AUTHORITIES ARE HEREBY SET ASIDE ON THIS ISSU E AND THE A.O. IS DIRECTED TO GRANT EXEMPTION AS CLAIMED BY T HE ASSESSEE U/S 10(37) OF THE ACT. 6. HAVING HEARD THE LEARNED COUNSEL FOR THE REVENUE AND HAVING PERUSED THE DOCUMENTS ON RECORD, IN OUR OPINION, TH E TRIBUNAL COMMITTED NO ERROR. SECTION 45(5) OF THE ACT PERTA INS TO CAPITAL GAINS. SUB SECTION (1) THEREOF IS A CHARGING PROVIS ION FOR COLLECTION OF CAPITAL GAINS ON TRANSFER OF CAPITAL ASSETS. 7. SECTION 10(37), HOWEVER, GRANTS EXEMPTION FROM P AYMENT OF CAPITAL GAINS ON TRANSFER OF AGRICULTURAL LAND UNDE R CERTAIN CIRCUMSTANCES. SECTION 10(37) READS AS UNDER: 10(37) IN THE CASE OF AN ASSESSEE, BEING AN INDIVI DUAL OR A HINDU UNDIVIDED FAMILY, ANY INCOME CHARGEABLE UNDER THE HEADS 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 SECT ION 2; (II) SUCH LAND, DURING THE PERIOD OF TWO YEARS IMME DIATELY PRECEDING THAT DATE OF TRANSFER, WAS BEING USED FOR AGRICULTURAL PURPOSES BY SUCH HINDU UNDIVIDED FAMILY OR INDIVIDU AL OR A PARENT OF HIS; (III) SUCH TRANSFER IS BY WAY OF COMPULSORY ACQUISI TION 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 O R CONSIDERATION FOR SUCH TRANSFER RECEIVED BY SUCH AS SESSEE ON OR AFTER THE 1 ST DAY OF APRIL, 2004 . ITA NOS. 2616-2618/AHD/11 A.Y. 2008-09 PAGE 7 8. IN VIEW OF THE ABOVE PROVISIONS, AS NOTED, THE R EVENUE CONTENDED THAT THE ASSESSEE WOULD NOT BE ENTITLED T O THE EXEMPTION SINCE THE AGRICULTURAL LAND WAS NOT CULTIVATED BY T HE ASSESSEE HIMSELF. WE MAY RECALL THAT THE CIT(APPEALS) WAS H IMSELF CONVINCED THAT SUCH EXEMPTION WOULD BE AVAILABLE EVEN IN CASE OF A LAND SITUATED IN THE MUNICIPAL AREA. BUT THAT THE OTHER CONDITIONS, NAMELY OF THE CULTIVATION OF SUCH LAND BY THE ASSESSEE WOU LD BE CRUCIAL. 9. WE CANNOT DISPUTE THIS PROPOSITION OF THE REVENU E. THE QUESTION IS CAN IT BE STATED THAT THE ASSESSEE DID NOT FULFILL SUCH CONDITION. WE MAY RECALL THAT THE ONLY GROUND ON W HICH THE CIT(APPEALS) HELD AGAINST THE ASSESSEE WAS THAT HE WAS STAYING AWAY FROM THE AGRICULTURAL LAND AND THAT HE WAS OTH ERWISE ENGAGED IN A BUSINESS. IN OUR OPINION, NEITHER OF THESE TW O FACTS, EITHER IN ISOLATION OR CUMULATIVELY, WOULD BE SUFFICIENT TO H OLD THAT SUCH LAND WAS NOT BEING USED FOR AGRICULTURAL PURPOSES BY THE ASSESSEE. THE CONCEPT OF PERSONAL CULTIVATION AS ACCEPTED IN AGRI CULTURAL LAND TENANCY LAWS ALSO RECOGNIZES, AS CAN BE SEEN FROM T HE STATUTORY PROVISIONS CONTAINED IN THE BOMBAY TENANCY AND AGRI CULTURAL LANDS ACT, 1948, CULTIVATION OF A LAND THROUGH HIRED LABO URER OR THROUGH MEMBER OF ONES FAMILY. MERELY BECAUSE THE ASSESSE E WAS NOT RESIDING CLOSE TO THE LAND OR WAS ALSO PURSUING SOM E OTHER BUSINESS WOULD NOT BY ITSELF BE SUFFICIENT TO HOLD THAT THE LAND WAS NOT USED FOR AGRICULTURAL PURPOSES BY THE ASSESSEE. THE TRIBUNA L RECORDED THAT IN THE EARLIER YEARS, THE ASSESSEE HAD DECLARED AGRICU LTURAL INCOME, WHICH WAS ALSO ACCEPTED BY THE REVENUE. 10. UNDER THE CIRCUMSTANCES, IN OUR OPINION, THE TR IBUNAL CORRECTLY RULED IN FAVOUR OF THE ASSESSEE. NO QUESTION OF LA W ARISES. THE TAX APPEAL IS DISMISSED. ITA NOS. 2616-2618/AHD/11 A.Y. 2008-09 PAGE 8 THEREFORE, WE SET ASIDE THE ORDER OF THE LOWER AUTH ORITIES AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 6. IN THE RESULT, THE APPEALS OF ALL THE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON FRIDAY THE 25 TH OF OCTOBER, 2013, AT AHMADABAD. SD/- SD/- ( KUL BHARAT ) (N. S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. $%$& ' '( / CONCERNED CIT 4. ' '(- + / CIT (A) 5. -.+' &, ' ++' &, 01 % / DR, ITAT, AHMEDABAD 6. .34 56 / GUARD FILE. BY ORDER/ , 7/0' $+ ' ++' &, 01 % 9