Whether assessee can be denied exemption merely because he himself did not cultivate agricultural land - NO: Income TAx u/s 10(37) & 45(5)
AHMEDABAD, MAY 02, 2013: THE issues before the Bench are - Whether assessee can be denied exemption merely because he himself did not cultivate the agricultural land; Whether the concept of personal cultivation also recognizes, cultivation of a land through hired labourer or through member of one’s family and Whether the exemption u/s 10(37) can be denied merely on the basis that the assessee was not residing close to the land or was also pursuing some other business and thus the land was not used for agricultural purposes by the assessee. And the verdict goes in favour of the assessee.
Facts of the case
Assessee, an individual had filed ROI for the AY 2008-09. During assessment, AO noticed that the assessee was owner of 1/4th of a property acquired by the State, for which under the order of the Court, an additional compensation of Rs.4,47,98,432/- was paid and therefore, was entitled to 1/4th additional compensation of Rs.1,11,99,608/. The assessee contended that in view of provisions of section 10(37) read with section 45(5), no capital gain tax was payable. The AO, however, rejected such contention on the ground that the land in question was situated within the municipal limits of Gandhinagar, which had population of more than 10000. Section 10(37) therefore, does not apply to the assessee. On appeal, CIT(A) had dismissed the appeal. He agreed with the assessee that exemption u/s 10(37) would be available also to agricultural land situated in urban area, but he held that such exemption would be subject to fulfillment of certain conditions. One of them being that such land, during the period two years immediately preceding the date of transfer was used for agricultural purpose by such Hindu undivided family or individual or his parent. In the present case, he was of the opinion that though the land was agricultural land, used for agricultural purposes, but not by the assessee himself. He noted that the assessee was involved in business activities and was staying far away from the location of the agricultural land. On further appeal, Tribunal had allowed the assessee's appeal on the ground that section 10(37)(ii) does not suggest that there was such requirement that assessee himself should carry out the agricultural activities on these lands. Only requirement is that such land, during the period of two years immediately preceding the date of transfer, was used for agricultural purposes by the assessee or his parent. About this there was no dispute in this case as the Revenue had not disputed the fact that agricultural income had been regularly declared by the assessee in the returns of income in respect of agricultural activities on these lands and the same were accepted by the Revenue. The assessee had also furnished evidence in which the crop grown by the assessee on the lands were also mentioned. Thus, it was decided by the Tribunal that assessee had fulfilled the condition as laid down for claiming exemption u/s 10(37) on enhanced compensation received by him during the year under appeal on compulsorily acquisition of urban agricultural lands, the order passed by the lower authorities were set aside and the AO was directed to grant exemption as claimed by the assessee u/s 10(37).
++ 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 (A) 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 (A) 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 one’s 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. Under the circumstances, in our opinion, the Tribunal correctly ruled in favour of the assessee. No question of law arises. The tax appeal is dismissed.
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Tarun Kumar Gupta
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