Commissioner of Income Tax-I vs Jasubhai Somabhai Patel

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Sonia Gokani, J.—Aggrieved by the order of the Income Tax Appellate Tribunal ("the Tribunal" for short) dated 25.10.2013, present tax appeal has been preferred proposing the following substantial questions of law:

"(A) Whether the Appellate Tribunal has substantially erred in considering the LTCG of Rs. 1.11 corers due to compulsory acquisition of land as exempt u/s. 10(37) in contravention of the provision of section 45(5) and without appreciating the findings of the Assessing Officer in the assessment order?

(B) Whether the Appellate Tribunal has not appreciated the fact that the assessee has not furnished evidences regarding fulfillment of all the conditions laid down in section 10(37) of the Income-tax Act, 1961?

(C) Whether the Appellate Tribunal has substantially erred in holding that the assessee is eligible for exemption u/s. 10(37) of the Act, even if the assessee himself was not doing the agricultural operations, despite the specific condition that the agricultural operations should be done by such HUF or individual or parents of his in section 10(37)?"

We have heard learned counsel for the Revenue and examined the material on record with his assistance.

It is brought to our notice that in CIT v. Amrutbhai S. Patel [2014] 221 Taxman 69/41 taxmann.com 430 this Court has decided identical question of law in favour of the assessee and against the Revenue.

The facts in the instant case are that the respondent was found to have received his share of additional compensation awarded by the Court. The Assessing Officer applied the provisions of section 45(5) of the Income-tax Act ("the Act" for short) and treated the same as capital gain in the year of receipt.

When this was challenged before the CIT (Appeals), it had concurred with the findings of the Assessing Officer that the amount received was taxable as long term capital gain.

This matter when travelled to the tribunal, the tribunal passed the impugned order which is under challenge before us by way of present appeal.

It was the plea taken by the assessee that the provisions of section 45(5) of the Act cannot be invoked when the condition of exemption under section 10(37) of the Act has not been fully satisfied. The question therefore, arose with regard to exemption under section 10(37) of the Act. This Court by order dated 15.4.2013 passed in case of Amrutbhai S. Patel (suprd) has held as under:

"6. Having heard the learned counsel for the Revenue and having perused the documents on record, in our opinion, the Tribunal committed no error. Section 45(5) of the Act pertains to capital gains. Sub-section (1) thereof is a charging provision for collection of capital gains on transfer of capital assets.

Section 10(37), however, grants exemption from payment of capital gains on transfer of agricultural land under certain circumstances. Section 10(37) reads as under:

10(37) in the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head 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 subclause (iii) of clause (14) of section 2;

(ii) such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his;

(iii) such transfer is by way of compulsory acquisition 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 or consideration for such transfer received by such assessee on or after the 1st day of April, 2004.

In view of the above provisions, as noted, the Revenue contended that the assessee would not be entitled to the exemption since the agricultural land was not cultivated by the assessee himself. We may recall that the CIT (Appeals) was himself 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 would be crucial.

We cannot dispute this proposition of the Revenue. The question is can it be stated that the assessee did not fulfill such condition. We may recall that the only ground on which the CIT (Appeals) held against the assessee was that he was staying away from the agricultural land and that he was otherwise engaged in a business. In our opinion, neither of these two facts, either in isolation or cumulatively, would be sufficient to hold that such land was not being used for agricultural purposes by the assessee. The concept of personal cultivation as accepted in agricultural land tenancy laws also recognizes, as can be seen from the statutory provisions contained in the Bombay Tenancy and Agricultural Lands Act, 1948, cultivation of a land through hired labourer or through member of ones family. Merely because the assessee was not residing close to the land or was also pursuing some other business would not by itself be sufficient to hold that the land was not used for agricultural purposes by the assessee. The Tribunal recorded that in the earlier years, the assessee had declared agricultural income, which was also accepted by the Revenue."

This tax appeal raises identical question of law and is answered in favour of the respondent assessee who is one of the owners of the property in respect of which the aforementioned tax appeal is concluded. Neither any contrary facts emerge nor any other question of law then the one decided against the Revenue. No further consideration therefore, is warranted. Tax Appeal is resultantly, dismissed.