The Deputy Commissioner of Income tax, Jalandhar V. Sh. Karam Chand, Jalandhar

ITA 95/ASR/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73359 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-03-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 22-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Assessee Lawyers: C K KOUL
• Keywords: Capital asset
• Section: 143(3); 2(14); 142(1); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P. JAIN, ACCOUNTANT MEMBER I.T.A. NO. 95 (ASR)/2011 ASSESSMENT YEAR: 2008-09 PAN: ADEPC1406D DEPUTY COMMISSIONER OF VS. SH. RANJIT SINGH KAUSHAL INCOME TAX, CIRCLE-II, JALANDHAR LEGAL HEIR O F SH. KARAM CHAND, C/O- M/S JAI DURGA COAL SUPPLY CO, KISHANPURA ROAD, JALANDAHAR (APPELLANT) (RESPONDENT) APPELLANT BY: SH. AMRIK CHAND, DR RESPONDENT BY: SH. C.K. KOUL, CA DATE OF HEARING: 18.03.2014 DATE OF PRONOUNCEMENT: 31.03.2014 ORDER PER BENCH 1) THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 15.12.2010 PASSED BY LEARNED CIT(A), JA LANDHAR, FOR THE ASSESSMENT YEAR 2008-09 ON THE FOLLOWING GROUNDS: I. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 10 0.24 LACS MADE BY THE A.O. ON ACCOUNT OF EXEMPTION CLAIMED ON LTGC U/S 10(37). II. THAT, IT IS PRAYED THAT THE ORDER OF LEARNED CIT(A) BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER RESORTED. III. THAT THE APPELLANT REQUESTS FOR LEAVE TO ADD OR AME ND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DI SPOSED OF. 2 I.T.A. NO. 95 (ASR)/2011 ASSESSMENT YEAR: 2008-09 2) THE FACTS RELATING TO THE ISSUE IN DISPUTE ARE T HAT THE ASSESSEE FILED HIS RETURN OF INCOME DECLARING NET INCOME AT RS. 7,04,955/- ON 27.06.2008 WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) AND LATER ON, THE CA SE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICES UNDER SECTION 143 (2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE ON 10. 09.2009. IN RESPONSE TO THE SAME, THE AUTHORIZED REPRESENTATIVE OF THE A SSESSEE APPEARED FROM TIME TO TIME AND FURNISHED REQUISITE DETAILS/INFORM ATIONS. ON PERUSAL OF RETURN OF INCOME OF THE ASSESSEE, THE ASSESSING OFF ICER FOUND THAT THE ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN AMOUNTING TO RS. 1,00,24,525/- ALONG WITH INCOME FROM HOUSE PROPERTY AND OTHER SOU RCES. THE ASSESSEE CLAIMED EXEMPTION OF CAPITAL GAINS UNDER SECTION 10 (37) OF THE ACT ON COMPENSATION RECEIVED ON COMPULSORY ACQUISITION OF AGRICULTURAL LAND SITUATED WITHIN SPECIFIED URBAN LIMITS, AMOUNTING T O RS. 1,00,24,525/-. THE ASSESSING OFFICER ASKED THE ASSESSEE TO JUSTIFY HIS CLAIM OF EXEMPTION UNDER SECTION 10(37) OF THE ACT. THE ASSE SSEE SUBMITTED COPIES OF EXTRACTS OF THE LAND RECORDS IN THE SHAPE OF FARD JAMABANDI SHOWING THE AGRICULTURAL PRODUCE TO CONTEND THAT T HE LAND ACQUIRED FROM HIM BY THE JALANDHAR IMPROVEMENT TRUST, WAS AGRICUL TURAL AND WAS SITUATED WITHIN THE SPECIFIED URBAN LIMITS. THE ASS ESSING OFFICER, 3 I.T.A. NO. 95 (ASR)/2011 ASSESSMENT YEAR: 2008-09 HOWEVER, NOTED THAT AS PER SUB-CLAUSE (I) OF SECTIO N 10(37) OF THE ACT, THE LAND SHOULD BE SITUATED IN AN AREA SPECIFIED IN ITE M NO. (A) OR (B) OF CLAUSE (III) OF SUB-SECTION 14 OF SECTION 2 OF THE ACT TO BE ENTITLED TO DEDUCTION U/S 10(37) OF THE ACT. THE ASSESSING OFFICER CAME T O THE CONCLUSION THAT IN ORDER TO BE ELIGIBLE FOR EXEMPTION U/S 10(37) OF THE ACT, THE LAND SHOULD NOT BE SITUATED WITHIN CORPORATION LIMITS O F THE CITY AND SHOULD ALSO NOT BE SITUATED WITHIN THE DISTANCE OF 8 KM FR OM THE CORPORATION LIMITS OF THE CITY. THE ASSESSING OFFICER CONDUCTE D INQUIRY TO VERIFY THE SITUATION OF LAND VIS--VIS THE CORPORATION LIMIT O F THE JALANDHAR CITY. ON INQUIRY, THE DY. COMMISSIONER (REVENUE), JALANDHAR STATED THAT THE INFORMATION REGARDING EXACT DISTANCE OF THE LAND MA Y BE OBTAINED FROM THE MUNICIPAL CORPORATION, JALANDHAR. THE MUNICIPAL CORPORATION INFORMED THAT THE LAND WAS SITUATED WITH THE CORPOR ATION LIMITS OF THE CITY FOR THE LAST 10 TO 15 YEARS AND THE ASSESSING OFFIC ER WAS OF THE VIEW THAT THE EXEMPTION U/S 10(37) OF THE ACT WAS, THEREFORE, NOT AVAILABLE TO THE ASSESSEE AND GAVE NOTICE IN THIS REGARD TO THE ASSE SSEE. IN REPLY TO THE NOTICE, THE ASSESSEE SUBMITTED THAT AS PER THE DEFI NITION IN SECTION 2(14) OF THE ACT, AGRICULTURAL LAND SITUATED OUTSIDE THE U RBAN AREA OR BEYOND THE NOTIFIED DISTANCE FROM THE URBAN AREA LIMIT, DID NO T FALL WITHIN THE DEFINITION OF THE TERM CAPITAL ASSETS. IT WAS, TH EREFORE, CONTENDED THAT 4 I.T.A. NO. 95 (ASR)/2011 ASSESSMENT YEAR: 2008-09 THE TRANSFER OF AGRICULTURAL LAND WAS NOT LIABLE TO LEVY OF CAPITAL GAINS TAX AND THE INCOME WHICH WAS EXEMPT FROM THE DEFINI TION IN SECTION 2(14) OF THE ACT ITSELF COULD NOT BE SOUGHT TO BE E XEMPTED UNDER THE PROVISIONS OF SECTION 10(37) OF THE ACT. IT WAS FU RTHER SUBMITTED BY THE ASSESSEE THAT SECTION 10(37) OF THE ACT PROVIDED FO R EXEMPTION IN RESPECT OF AGRICULTURAL LAND WHICH WAS SITUATED WITH THE UR BAN AREAS LAND AND, THEREFORE, DID NOT QUALITY TO BE CLASSIFIED AS AGR ICULTURAL LAND IN THE DEFINITION OF CAPITAL ASSETS U/S 2(14)(III) OF THE ACT. THE ASSESSEE FURTHER CLARIFIED BY THE SECTION 10(37) OF THE ACT SPECIFIC ALLY PERTAINED TO AGRICULTURAL LAND WHICH WAS SITUATED WITHIN THE SPE CIFIED URBAN LIMITS AND NOT TO SUCH LANDS LOCATED OUTSIDE THOSE LIMITS. THE MEMORANDUM EXPLAINING THE PROVISIONS OF FINANCE BILL, 2004 INT RODUCING THIS PROVISION WERE REFERRED TO BY THE ASSESSEE IN THIS REGARD TO CONTEND THAT SECTION 10(37) WAS AIMED AT PROVIDING RELIEF TO FARMERS WHO SE AGRICULTURAL LAND FELL WITHIN THE DEFINED AREAS. 3) THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSE ES CONTENTIONS AND HELD THAT THE LAND ACQUIRED BY THE JALANDHAR IM PROVEMENT TRUST DID NOT QUALIFY WITH THE MEANING OF AGRICULTURAL LAND A S DEFINED IN THE ACT. HE WAS OF THE OPINION THAT EXEMPTION U/S 10(37) WA S AVAILABLE ONLY IF THE LAND TRANSFERRED WAS SITUATED 8 KM BEHIND THE C ORPORATION LIMIT OF 5 I.T.A. NO. 95 (ASR)/2011 ASSESSMENT YEAR: 2008-09 THE JALANDHAR CITY, WHICH WAS NOT SO IN THE PRESENT CASE. HE ALSO HELD THAT THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FIN ANCE BILL, 2004 SUPPORTED THE CASE OF THE REVENUE. HE WAS OF THE OP INION THAT TO CLAIM EXEMPTION UNDER SECTION 10(37) OF THE ACT, THE COND ITIONS SPECIFIED IN SECTION 2(14) OF THE ACT WERE REQUIRED TO BE FULFIL LED. THE ASSESSING OFFICER, THEREFORE, DISALLOWED THE CLAIM OF THE ASS ESSEE BY COMPLETING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT ON 12.07 .2010. 4) AGGRIEVED WITH THE ASSESSMENT ORDER DATED 12.07. 2010, THE ASSESSEE FILED AN APPEAL BEFORE THE LEARNED FIRST A PPELLATE AUTHORITY, WHO VIDE IMPUGNED ORDER DATED 15.12.2010, ALLOWED THE A PPEAL OF THE ASSESSEE BY HOLDING THAT THE LAND OF THE ASSESSEE I S AN AGRICULTURAL LAND BECAUSE THE AGRICULTURAL OPERATIONS WERE BEING CARR IED ON AS PER THE EVIDENCE SUBMITTED BEFORE THE ASSESSING OFFICER, WH ICH HAS NOT BEEN REBUTTED BY THE LEARNED ASSESSING OFFICER. THE LAND TRANSFERRED BY THE ASSESSEE WAS, THEREFORE, AGRICULTURAL LAND, BUT IT WAS NOT INCLUDED IN THE DEFINITION OF AGRICULTURAL LAND IN SECTION 2(14) SI NCE IT FELL WITHIN THE MUNICIPAL LIMIT OF JALANDHAR CITY. THE INCOME ON CA PITAL GAIN ON TRANSFER OF SUCH LAND FALLING WITHIN THE MUNICIPAL LIMIT IS EXEMPT U/S 10(37) OF THE ACT. THEREFORE, THE CLAIM OF DEDUCTION UNDER SECTIO N 10(37) OF THE ACT IS ALLOWABLE IN THE CASE OF THE ASSESSEE. NOW, THE REV ENUE, BEING AGGRIEVED 6 I.T.A. NO. 95 (ASR)/2011 ASSESSMENT YEAR: 2008-09 WITH THE IMPUGNED ORDER DATED 15.12.2010 PASSED BY LEARNED CIT(A), JALANDHAR, FILED THE PRESENT APPEAL. 5) AT THE TIME OF HEARING, LEARNED DR RELIED UPON T HE ORDER PASSED BY THE ASSESSING OFFICER. ON THE CONTRARY, LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER PASSED BY LEARNED FI RST APPELLATE AUTHORITY. 6) WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ELEVANT RECORDS AVAILABLE WITH US, AND WE ARE OF THE CONSIDERED VIE W THAT THE ASSESSING OFFICER HAS DENIED THE EXEMPTION OF LONG TERM CAPIT AL GAIN AMOUNTING TO RS. 1,00,24,525/- CLAIMED BY THE ASSESSEE UNDER SEC TION 10(37) OF THE ACT ON THE GROUND THAT THE LAND ACQUIRED BY THE JAL ANDHAR IMPROVEMENT TRUST DOES NOT QUALIFY WITHIN THE MEANING OF AGRICU LTURAL LAND AS DEFINED IN THE ACT FOR THE PURPOSE OF CALCULATION OF CAPIT AL GAIN. FOR THE CLAIM OF EXEMPTION UNDER SECTION 10(37) OF THE ACT ON CAPIT AL GAIN ARISING OUT OF COMPULSORY ACQUISITION OF LAND, THE LAND SHOULD HAV E BEEN AT LEAST 8 KILOMETERS BEYOND THE CORPORATION LIMIT OF JALANDHA R CITY AND LASTLY CLAIM OF THE ASSESSEE HAS BEEN DENIED BY THE ASSESS ING OFFICER ON THE BASIS OF INFORMATION RECEIVED FROM MUNICIPAL COMMIS SIONER, JALANDHAR, SHOWING THAT THE IMPUGNED LAND LAY WITH THE LIMITS OF CORPORATION OF JALANDHAR DURING THE F.Y. 2007-08. THEREFORE, THE C LAIM OF THE ASSESSEE FOR EXEMPTION OF CAPITAL GAINS UNDER SECTION 10(37) ON COMPENSATION 7 I.T.A. NO. 95 (ASR)/2011 ASSESSMENT YEAR: 2008-09 RECEIVED ON COMPULSORY ACQUISITION OF AGRICULTURAL LAND SITUATED WITHIN SPECIFIED URBAN LIMITS, AMOUNTING TO RS. 1,00,24,52 5/- IS NOT ADMISSIBLE BUT LEARNED FIRST APPELLATE AUTHORITY HAS GIVEN HIS FINDINGS IN PARA NOS. 4 TO 4.5, PAGE NOS. 4 TO 7, ARE REPRODUCED AS UNDER: 4. I HAVE CONSIDERED THE SUBMISSION CAREFULLY. SE CTION 10(37) OF THE I.T. ACT READS AS UNDER:- 10. INCOMES NOT INCLUDED IN TOTAL INCOME. IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR OF ANY PERSON, ANY INCOME FALLING WITHIN ANY OF THE FOLLOWING CLAUSES SHALL NOT BE INCLUDED- ---------- (37) IN THE CASE OF AN ASSESSEE, BEING AN INDIVIDU AL OR A HINDU UNDIVIDED FAMILY, ANY INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS ARISING FROM THE TRANSFER OF AGRICULTURAL LA ND, 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 IMM EDIATELY PRECEDING THE 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 ACQUI SITION UNDER ANY LAW, OR A TRANSFER THE CONSIDERATION FOR WHICH IS D ETERMINED OR APPROVED BY THE CENTRAL GOVERNMENT OR THE RESERVE B ANK 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. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, THE EXPRESSION COMPENSATION OR CONSIDERATION INCLUDES THE COMPEN SATION OR 8 I.T.A. NO. 95 (ASR)/2011 ASSESSMENT YEAR: 2008-09 CONSIDERATION ENHANCED OR FURTHER ENHANCED BY ANY C OURT, TRIBUNAL OR OTHER AUTHORITY; 4.1 THE A.O. HAS NOT DOUBTED THE SATISFACTION OF C LAUSES (II), (III) AND (IV) OF THE AFORESAID SUB-SECTION, I.E., HE HAS NOT DOUBTED THAT THE LAND TRANSFERRED BY THE ASSESSEE WAS BEING USED FOR AGRI CULTURE PURPOSES DURING THE PERIOD OF TWO YEARS IMMEDIATELY PRECEDIN G THE TRANSFER, THAT THE TRANSFER WAS BY WAY OF COMPULSORY ACQUISITION U NDER LAW AND THAT THE INCOME HAD ARISES FROM THE COMPENSATION WHICH WAS R ECEIVED BY THE ASSESSEE AFTER 1.4.04. THE REMAINING CONDITION FOR BEING ELIGIBLE TO CLAIM EXEMPTION U/S 10(37) IS THAT THE LAND SHOULD BE SIT UATED IN THE AREA REFERRED TO IN SECTION 2(14)(III), ITEM A OR ITEM B. 4.2 SECTION 2(14)(III) OF THE I.T. ACT READS AS UN DER:- 2. DEFINITIONS. IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES, - (14) CAPITAL ASSET MEANS PROPERTY OF ANY KIND HEL D BY AN ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFE SSION, BUT DOES NOT INCLUDE- (I).. (II) (III) AGRICULTURAL LAND IN INDIAN, NOT BEING LAND S ITUATE- (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURIS DICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNICIPAL CORPORATION, NOTIFIED AREA COMMITTEE, TOW N AREA COMMITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAM E) OR A CANTONMENT BOARD AND WHICH HAS A POPULATION OF NOT LESS THAN TEN THOUSAND ACCORDING TO THE LAST PRECED ING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBL ISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR; OR (B) IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MO RE THAN EIGHT KILOMETERS, FROM THE LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFERRED TO IN ITE M (A), AS THE CENTRAL GOVERNMENT MAY, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANIZATION OF THAT AREA AND 9 I.T.A. NO. 95 (ASR)/2011 ASSESSMENT YEAR: 2008-09 OTHER RELEVANT CONSIDERATIONS, SPECIFY IN THIS BEHA LF BY NOTIFICATION IN THE OFFICIAL GAZETTEE;. 4.3 SECTION 2(14) OF THE ACT DEFINES CAPITAL ASSE TS TO MEAN PROPERTY OF ANY KIND HELD BY AN ASSESSEE WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR THE PROFESSION SUBJECT TO CERTAIN E XCLUSIONS. THE EXCLUSIONS INCLUDE STOCK IN TRADE, STORE OR RAW MAT ERIAL HELD FOR THE PURPOSE OF BUSINESS OR PROFESSION, PERSONAL EFFECTS (EXCLUDING JEWELLERY, PAINTING ETC)., AND AGRICULTURE LAND, ETC. HOWEVER ITEM NOS. A AND B IN SUB-CLAUSE (III) OF SECTION 2(14) STATE THAT AGRICU LTURAL LANDS IN THE AREAS COMPRISED WITHIN THE JURISDICTIONAL OF A MUNICIPALI TY OR WITHIN THE NOTIFIED DISTANCE FROM THE LOCAL LIMIT OF THE MUNIC IPALITY WOULD NOT FALL WITHIN THE DEFINITION OF AGRICULTURE LAND. HENCE, EVEN IF AGRICULTURAL OPERATIONS ARE BEING CARRIED OUT ON A PIECE OF LAND SITUATED WITHIN THE MUNICIPAL LIMITS OR WITHIN THE NOTIFIED DISTANCE FR OM THE MUNICIPAL LIMITS, THE LAND WILL NOT QUALIFY TO BE CONSIDERED AS AGRICULTURE LAND U/S 2(14). SUCH LAND WILL, THEREFORE, BE INCLUDED IN TH E DEFINITION OF CAPITAL ASSET U/S 2(14) AND THE TRANSFER OF SUCH LAND WILL RESULT IN INCOME UNDER THE HEAD CAPITAL GAINS. SECTION 10(37) OF THE ACT , AS NOTICED ABOVE, APPLIES TO SUCH AGRICULTURAL LAND SITUATED IN THE A REAS REFERRED TO ITEMS A OR ITEM B OF SECTION 2(14)(III) AND EXEMPTS THE I NCOME ARISING ON TRANSFER OF SUCH LAND FROM TAX. HENCE, IF AGRICULTU RAL LAND IS SITUATED WITHIN THE MUNICIPAL LIMIT OR WITH THE SPECIFIED DI STANCE FROM THE MUNICIPAL LIMIT, IT WILL FALL IN ITEM A OR B OF SECTION 2(14)(III) AND WILL QUALIFY FOR EXEMPTION U/S 10(37) OF THE ACT SUBJECT TO FULFILLMENT OF THE OTHER CONDITIONS OF SECTION 10(37). THE A.O. HAS NO TED IN PARA-7 OF THE ASSESSMENT ORDER THAT ITEMS A AND B OF SECTION 2(14)(III) PROVIDED THE DEFINITION OF AGRICULTURE LAND FOR THE PURPOSE OF CAPITAL GAINS. IN MY VIEW, THE A.O.S INTERPRETATION IS INCORRECT. ITEMS A AND B OF SECTION 2(14)(III) DEFINE WHICH LANDS WILL FALL NOT WITHIN THE DEFINITION OF AGRICULTURAL LAND. AS NOTED EARLIER, CLAUSE (III) O F SECTION 2(14) PROVIDES FOR EXCLUSION OF AGRICULTURE LAND FROM THE MEANING OF THE TERM CAPITAL ASSET, WHILE ITEMS A AND B CLAUSE (III) STATE THAT AGRICULTURE LANDS FALLING WITHIN THE MUNICIPAL CORPORATION OR WITH TH E NOTIFIED DISTANCE FROM MUNICIPAL CORPORATION WILL NOT BE CONSIDERED A S AGRICULTURAL LAND. THIS IS THE REASON WHY THE TRANSFER OF AGRICULTURAL LAND SITUATED WITHIN THE MUNICIPAL LIMIT OR WITHIN THE NOTIFIED DISTANCE FRO M THE MUNICIPAL LIMIT ATTRACTS INCOME UNDER THE HEAD CAPITAL GAINS ON T RANSFER OF SUCH LAND, EVEN IF AGRICULTURAL OPERATION IS CARRIED ON THE SA ID LAND. 10 I.T.A. NO. 95 (ASR)/2011 ASSESSMENT YEAR: 2008-09 4.4 THE A.O. HAS SATISFIED HIMSELF THROUGH INQUIRI ES THAT THE AGRICULTURAL LAND TRANSFERRED BY THE ASSESSEE WAS S ITUATED WITH THE MUNICIPAL LIMIT, IMPLYING THAT THE TRANSFERRED LAND FELL WITHIN THE ITEM A OF CLAUSE (III) OF SECTION 2(14) OF THE ACT. AS POI NTED OUT IN THE MEMORANDUM EXPLAINING THE PROVISIONS OF FINANCE (NO . 2) BILL, 2004, SECTION 10(37) WAS INTRODUCED TO MITIGATE THE HARDS HIP FACED BY THE FARMERS WHEN THEIR AGRICULTURAL LAND SITUATED WITHI N THE SPECIFIED URBAN LIMITS WAS COMPULSORILY ACQUIRED UNDER LAW. IT WAS NOTED IN THE BILL THAT THE TRANSFER OF SUCH LAND ATTRACTED THE PROVISION O F SECTION 45 OF THE ACT TO CHARGE A CAPITAL GAIN ARISING ON THE SALE OF SUC H LAND. THE A.O. HAS DENIED THE RELIEF U/S 10(37) FOR THE REASON THAT TH E LAND ACQUIRED BY THE JALANDHAR IMPROVEMENT TRUST DID NOT QUALIFY WITHIN THE DEFINITION OF AGRICULTURAL LAND FOR THE PURPOSE OF CAPITAL GAIN T AX. IN THIS REGARD IT IS SIGNIFICANT THAT TRANSFER OF AGRICULTURAL LAND IS N OT LIABLE TO CAPITAL GAINS TAX IN ANY CASE SINCE AGRICULTURAL LAND DOES NOT QU ALIFY TO BE CONSIDERED AS CAPITAL ASSETS AND IT IS ONLY IN RESPECT OF LA ND WHICH DOES NOT FALL WITHIN THE DEFINITION OF AGRICULTURAL LAND U/S 2( 14) WHICH IS ELIGIBLE FOR EXEMPTION U/S 10(37) OF THE ACT. IF, AS CONTENDED B Y THE A.O. , EXEMPTION COULD BE ALLOWED U/S 10(37) OF THE ACT ON LY IN RESPECT OF AGRICULTURAL LAND SITUATED AT LEAST 8 KM. BEYOND TH E CORPORATION LIMIT OF THE JALANDHAR CITY, THERE WOULD HAVE BEEN NO NEED T O PROVIDE EXEMPTION U/S 10(37), SINCE NO CAPITAL GAINS COULD HAVE ARISE N ON TRANSFER OF SUCH AGRICULTURE LAND BECAUSE THE SAID AGRICULTURE LAND WOULD NOT BE A CAPITAL ASSET AT ALL. 4.5 IT IS CLEAR THAT THE ASSESSEES LAND ACQUIRED BY THE JALANDHAR IMPROVEMENT TRUST WAS SITUATED WITHIN THE MUNICIPAL LIMIT OF JALANDHAR AND AGRICULTURAL OPERATIONS WERE BEING CARRIED ON AS PER THE EVIDENCE SUBMITTED BEFORE THE A.O., WHICH HAS NOT BEEN REBUT TED BY THE LEARNED A.O. THE LAND TRANSFERRED BY THE ASSESSEE WAS, THER EFORE, AGRICULTURAL LAND, BUT IT WAS NOT INCLUDED IN THE DEFINITION OF AGRICULTURAL LAND IN SECTION 2(14) SINCE IT FELL WITHIN THE MUNICIPAL LI MIT OF JALANDHAR CITY. THE INCOME ON CAPITAL GAIN ON TRANSFER OF SUCH LAN D FALLING WITHIN THE MUNICIPAL LIMIT IS EXEMPT U/S 10(37) OF THE I.T. AC T. THE CLAIM OF DEDUCTION U/S 10(37) IS, THEREFORE, ALLOWED. GROUN D NO. 2 TO 5 ARE ALLOWED. 7) AFTER HEARING BOTH THE PARTIES AND PERUSING THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE IMPUGNED ORDER PA SSED BY LEARNED FIRST 11 I.T.A. NO. 95 (ASR)/2011 ASSESSMENT YEAR: 2008-09 APPELLANT AUTHORITY, WE ARE OF THE CONSIDERED VIEW THAT THE LEARNED FIRST APPELLANT AUTHORITY HAS RIGHTLY ALLOWED THE CLAIM O F THE ASSESSEE FOR EXEMPTION UNDER SECTION 10(37) OF THE ACT OF THE LO NG TERM CAPITAL GAINS ON COMPENSATION RECEIVED, AMOUNTING TO RS. 1,00,24, 525/- BECAUSE THE CASE OF THE ASSESSEE IS COVERED BY SECTION 10(37) O F THE ACT. THE INCOME ON CAPITAL GAINS ON TRANSFER OF SUCH LAND FALLING WITHIN THE MUNICIPAL LIMIT IS EXEMPT UNDER SECTION 10(37) OF THE ACT BEC AUSE AS PER THE EVIDENCE PRODUCED BEFORE THE ASSESSING OFFICER AS W ELL AS THE LEARNED FIRST APPELLATE AUTHORITY PROVED THAT THE LAND OF T HE ASSESSEE WAS ACQUIRED BY JALANDHAR IMPROVEMENT TRUST WHICH WAS SITUATED W ITHIN THE MUNICIPAL LIMIT OF JALANDAHAR AND THE ASSESSEE WAS DOING AGRI CULTURE OPERATIONS FOR THE LAST MAY YEARS WHICH WAS NOT DENIED BY THE ASSE SSING OFFICER BEFORE THE LEARNED FIRST APPELLATE AUTHORITY. THE LAND TR ANSFERRED BY THE ASSESSEE IS AGRICULTURAL LAND WHICH WAS INCLUDED IN THE DEFI NITION OF AGRICULTURAL LAND IN SECTION 2(14) OF THE ACT SINCE IT FELL WITH IN THE MUNICIPAL LIMIT OF JALANDHAR CITY AND THE INCOME ON CAPITAL GAIN ON TR ANSFER OF SUCH LAND FALLING WITHIN THE MUNICIPAL LIMIT IS EXEMPT UNDER SECTION 10(37) OF THE ACT. LEARNED FIRST APPELLATE AUTHORITY HAS ALSO APP RECIATED THE PROVISIONS OF SECTION 10(37) AS WELL AS SECTION 2(14) OF THE A CT IN HIS IMPUGNED 12 I.T.A. NO. 95 (ASR)/2011 ASSESSMENT YEAR: 2008-09 ORDER AND PASSED A WELL REASONED ORDER ON THE BASIS OF RELEVANT PROVISIONS OF LAW AND HAS RIGHTLY GIVEN RELIEF OF EXEMPTION TO THE ASSESSEE. 8) IN VIEW OF THE FOREGOING DISCUSSION, WE ARE OF T HE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE WELL REASONED ORD ER PASSED BY LEARNED FIRST APPELLATE AUTHORITY. ACCORDINGLY, WE DISMISS THE APPEAL FILED BY THE REVENUE AND UPHOLD THE IMPUGNED ORDER DATED 15.12.2 010 PASSED BY LEARNED CIT(A), JALANDHAR. 9) IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MARCH, 2014 SD/./- SD/./- (B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31 ST MARCH, 2014 /RK/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: SH. RANJIT SINGH KAUSHAL LEGAL HEIR OF SH. KARAM CHAND, C/O- M/S JAI DURGA COAL SUPPLY CO, KISHANPUR A ROAD, JALANDAHAR 2. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-II, JALAN DHAR 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.