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05-04-2019, G.S. Lekha, Section 2(14)(iii)(a), Tribunal Cochin

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1 week 2 days ago #9105 by amit
Section - 2(14)(iii)(a), 10(37), 10
Order Date - 05-04-2019
Favouring - Revenue
Court - Tribunal Cochin
Appellant - ITO
Respondent - G.S. Lekha
Citation - 419Taxpundit140
Appeal No. - I.T.A. No.194/Coch/2018
Asstt. Year - 2012-13



This appeal by the Revenue and the Cross Objection by the assessee are directed against the order of the CIT(A), Trivandrum dated 08/03/2018 and pertains to the assessment year 2012-13.

2. The Revenue has raised the following grounds:

1. The CIT(A) erred in deleting the capital gain brought to tax amounting to Rs.1,65,31,119/-.

2. The CIT(A) allowed the relief on capital gain following the Supreme Court decision in Civil No.1607/2010 dated 11.01.2017 in the case of Balakrishnan Vs UoI and others. The sole question of law for consideration before the Supreme Court, in this case, was whether the property acquired by Kerala Govt. was compulsory acquisition or not and whether the assessee is eligible for exemption u/s 10(37). The said judgment is not applicable in the case of appellant, as the nature of land transferred was not in dispute in the case decided by the Supreme Court. The legal requirement to get covered u/s 10(37) is that the land should be agricultural in first place and should satisfy the following conditions:

(i) Land is situated in area covered by section 2(14)(iii)(a) or (b)and was used for agricultural purposes.

(ii) Such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes.

(iii) Transfer is by way of compulsory acquisition.

(iv) Income has arisen from the compensation of consideration for such transfer.

The decision of the Supreme Court in Civil Appeal no. 1607/2010 covers only condition (iii) above.

As per Minutes of District Level Purchase Committee, dated 04.06.2010, the assessee's land comes in Category 'A', and is "dry land facing Vizhinjam-Balaramapuram Road". The assessee relies on a certificate from "agricultural officer" to state that the land is "agricultural". The "Agricultural Officer" is not the authority competent to declare a land as "agricultural", it is a Revenue authority to do so. In the property document also, it is mentioned that the character of land is "purayidom" (indicating dry land). This being the background, there is no proof that land is agricultural. There is no proof to establish that land was used for agricultural purpose for two years prior to transfer. Thus clause (i) and (ii) are not satisfied in this case and CIT(A) passed the order without examining all the above aspects.

2.1 The assessee has raised the following grounds of cross objection:

1. The CIT(A) should have appreciated that the Assessing Officer had held the property to be non agricultural only because, according to the Assessing Officer, at the time of transfer of the land, it was situated within the extended limits of Trivandrum Corporation and also because, the transaction was concluded by means of sale through negotiated settlement and not compulsory acquisition. He should have appreciated that, it was not the case of the Assessing Officer that the land was put to non agricultural use.

2. The CIT(A) should have held that if at all the land transferred was a capital asset the Assessing Officer should have adopted the value at 1/10th of the consideration fixed for transfer.

3. The facts of the case are that the assessee had in possession a piece of land at Vizhinjam village and sold the same during the year under consideration to Vizhinjam International Seaport for a consideration of Rs.1,70,98,612/-. In the return of income filed for the year under consideration, she claimed that the entire amount of sale consideration received was exempted from tax as the land sold was an agricultural land and compulsorily acquired by the Government of Kerala for the development of the said seaport which in turn is covered by the provisions of sections 2(14)(iii) and 10(37) of the Act. Contradicting the assessee, the Assessing Officer had worked out the long term capital gain at Rs.1,65,31,119/- over the sale consideration received and brought the same to tax since the land transferred falls within the limits of Trivandrum Municipal Corporation and the assessee's claim for exemption under sections 2(14)(iii) and 10(37) are not admissible. The Assessing Officer was of the further view that the land which was sold was not an agricultural land and it was not compulsorily acquired by the Government. The Assessing Officer in this regard relied on the decision of the High Court of Kerala in the case of Infopark Kerala vs ACIT(TDS) (187 Taxman 1). Thus, he brought to tax a sum of Rs.1,65,31,119/- as long term capital gain.

4. On appeal, the CIT(A) observed that section 10 of the Act provides for income which cannot be included in the total income. Section 10(37) of the Act provides for exclusion from total income, capital gains arising from transfer of agricultural land which is compulsorily acquired and the land which is situated in areas referred to in section 2(14) clause(iii)(a)(b). As per the provisions of section 10(37), in order to get the benefit, the land acquired should have been used for agricultural operations atleast for a period of two years prior to the date of acquisition. According to the CIT(A), the Assessing Officer himself had agreed in para 5.3 of the assessment order to the fact that the impugned land was an agricultural land as confirmed by the Agricultural Officer, Krishibhavan,

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