Compulsory Acquisition of Urban Land eligible for Tax Benefit: ITAT [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Cochin bench has held that the compulsory acquisition of urban land is eligible for tax deduction under the Income Tax Act, 1961.

The Assessing Officer reopened the assessment against the assessee for the reason that the assessee had not disclosed capital gains tax for land sold to Vizhinjam International Seaport Limited. The assessee claimed that the land was compulsorily acquired and the same being an agricultural land, coming within the notified area, was entitled to the benefit u/s 10(37) of the I.T.Act.

The contention of the assessee was rejected by the Assessing Officer, solely for the reason that the land in question was not compulsorily acquired but was transferred by executing a sale deed. Therefore, it was concluded by the Assessing Officer that the assessee was not entitled to the benefit of section 10(37) of the I.T.Act.

The Tribunal noted that the solitary reason for not granting of the benefit of section 10(37) of the Income Tax Act in respect of the acquisition of urban agricultural land was that it was not a compulsory acquisition, but only executed through a negotiated sale deed.

The Tribunal noticed the decision of the Apex Court in the case of Balakrishnan v. Union of India & Others wherein it was held that 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.