Income Tax Benefit for Compulsory Acquisition of Land can’t be denied merely because sale price was fixed through a Negotiated Settlement: ITAT [Read Order]

The Cochin bench of the Income Tax Appellate Tribunal (ITAT) has held that the department cannot deny the benefit of Section 10(37) of the Income Tax Act on compulsory acquisition of land merely for the reason that the sale price was fixed through a negotiated settlement.

The assessee’s property was notified by the Government of Kerala for acquisition under the Land Acquisition Act, 1894. After negotiations with the Government, a sale deed was executed, whereby the property was sold to Vizhinjam International Seaport Limited for a total consideration of Rs.7,94,12,901. While filing the return, the assessee claimed the benefit of section 10(37) of the Income Tax Act.

However, the Assessing officer denied the claim in respect of the acquisition of urban agricultural land by holding that it was not a compulsory acquisition, but only executed through a negotiated sale deed.

The Tribunal noted that the Apex Court in the case of Balakrishnan v. Union of India & Others had categorically held merely because the sale price is fixed through a negotiated settlement will not take away the proceedings from the Land Acquisition Act when the relevant provision of the Act is invoked.

“In the instant case, the entire procedure prescribed under the Land Acquisition Act was followed, the only price was fixed upon a negotiated settlement. Therefore, in view of the above judgment of the Hon’ble Apex Court (supra), we hold 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 I.T.Act. It is ordered accordingly,” the Tribunal said.