IN INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR BEFORE: SHRI BHAGCHAND, AM & SHRI LALIET KUMAR, JM ITA No. 660/JP/2012 Assessment Year : 2009-10 A.C.I.T. cuke Smt. Vinita Agarwal, Circle-6, Jaipur. Vs. Plot No. 18, Bharat Mata Path, Jamnalal Bajaj Marg, C-Scheme,Jaipur. PAN/GIR No.: AEZPA6541D Appellant Respondent C.O. No. 57/JP/2012 (Arising out of ITA No. 660/JP/2012) Smt. Vinita Agarwal, cuke D.C.I.T. Plot No. 18, Bharat Mata Vs. Circle-6, Jaipur. Path, Jamnalal Bajaj Marg, C-Scheme, Jaipur.PAN/GIR No.: AEZPA 6541 D Objector Respondent Revenue by : Shri R.S. Dangur (JCIT). Assessee by : Shri S.L. Poddar (Advocate). Date of Hearing : 19/08/2016 Date of Pronouncement : 19/09/2016 2 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal ORDER PER: LALIET KUMAR, J.M. appeal by revenue and cross objection by assessee arise from order dated 12/04/2012 of Ld. CIT (A)-II, Jaipur. Respective grounds of appeal as well as C.O. are as under:- Grounds in Revenue Appeal. On facts and in circumstances of case, Learned CIT(A) has erred in:- (i) holding that date of transfer of immovable property in case of compulsory acquisition will be date when final award was given to assessee and not date when assessee extinguished her rights in property by accepting terms of acquisition and made unconditional surrender of her rights in land in pursuance of notification for acquisition of land. (ii) holding that in matter of compulsory acquisition, capital gain process starts with notification for acquisition and culminates with grant of final award, which is contrary to legal interpretation that capital gain/loss within meaning of Sec. 2(47) of Act, arises on date of transfer of asset and it does not extend to whole of financial year like other heads of income. (iii) allowing benefit of exemption U/s 10(37) of Act, despite fact that assessee incurred no expenditure on agricultural operation and it was not possible to carry out agricultural operation without any expenditure. (iv) directing to apply Fair Market Value for computation of capital gain instead of Reserve Price Declared by JDA, ignoring fact that on 3 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal acquisition of land, many privileges and amenities associated with land are taken away in process and therefore, Reserve Price is fixed at more amount than Fair Market Value to compensate same. (v) allowing benefit of exemption U/s 10(37) of Act, which was not claimed by assessee in her return of income. Grounds in Cross Objection 1. Under facts and circumstances of case, learned CIT(A) has erred in dismissing forth ground of assessee that learned Assessing Officer has erred in considering short term capital gain on acquisition of land on ground that same was not pressed by assessee whereas fact is that ground was not pressed because no capital gains were taxable in case U/s 10(37) of Income Tax Act, 1961. 2. Under facts and circumstances of case, learned CIT(A) has erred in not accepting and deciding fifth ground of assessee that learned Assessing Officer erred in determining short term capital gain at Rs. 3,00,35,000/- on acquisition of land notwithstanding fact that learned CIT(A) has given decision that no capital gains are taxable in case of assessee being exempt U/s 10(37) of Income Tax Act, 1961. 2. All grounds of revenue s appeal are revolving around capital gain determined by Assessing Officer, which was deleted by learned CIT(A). learned Assessing Officer observed that assessee had declared income from house property and long term capital gain and income from other sources, which is reproduced as under:- a. Income from house property Rs. 27,128/- 4 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal b. Income from capital gain Rs. 29,42,209/- i. Long term capital gain on sale of residential house on 06/10/2008 (1) Sale consideration Rs. 11,25,000/- Less-Transfer Expenses Rs. 30,488/- Rs. 10,94,512/- Less: Index purchase cost For F.Y. 2005-06 109300/497 x 582= Rs. 1,27,993/- Long term capital gain Rs. 966519/- (2) ii. Sale of commercial land on 26/12/2008 Sale consideration Rs. 22,00,000/- Less: Transfer Expenses Rs. 19,512/- Rs. 21,80,488/- Less: Index Purchase Cost For F.Y. 2005-06 174888/497 x 582= Rs. 2,04,798/- Long term capital gain Rs. 19,75,690/- C. Income from other sources Rs. 48,641/- Gross total Income Rs. 30,17,978/- learned Assessing Officer gave reasonable opportunity of being heard on verification of long terms capital gain, which was replied by assessee vide various letters. reply of assessee of paragraph Nos. 4 to 9 is reproduced as under:- 4. That during year under consideration assessee has sold first property to M/s Agarwal Multitrade Pvt. Ltd. on 24/12/2008 for Rs. 44,00,000/- out of which assessee 5 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal share was 50% and she received Rs. 22,00,000/- copy of sale deed is enclosed herewith. (Page No. 3 to 8) 5. other property sold during year was to Smt. Kalpana Jain, Smt. Mala Gupta and Smt. Nirmala Gupta for Rs. 22,50,000/- out of which assessee s share was 50% and she received Rs. 11,25,000/- from his property. Copy of sale deed is enclosed herewith. (Page No. 9 to 15) 6. For sale of above properties assessee has paid brokerage to M/s Gendi Real Estate Pvt. Ltd., Jaipur Rs. 50,000/- which was proportion between both properties in ratio of area sold. area sold was 625 sq.mt. Residential area for Rs. 11,25,000/- and commercial area 400 sq.mt. for Rs. 22,00,000/-. Copy of receipt of brokerage payment is enclosed herewith (Page No. 16). 7. above both properties sold by assessee were purchased in financial year 2005-06 alongwith Smt. Pushpa Sharma. assessee was 50% co-owner of this property. This property was purchased for Rs. 42,00,000/- and Rs. 2,56,000/- was incurred on stamp duty and other misc. expenses. assessee s contribution was Rs. 22,28,000/- for purchase of this property for 50% share. Copy of purchase deed is enclosed herewith. (Page No. 17 to 23 8. above property purchased by assessee on 16/05/2005 was acquired by Jaipur Development Authority for special Economic Zone and in consideration of that assessee was allotted 15680 sq.mt. residential and 3920 sq.mt. commercial land. assessee s share @ 50% was 6 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal 7840 sq.mt. residential and 1960 sq.mt. commercial land. So for total cost of Rs. 22,28,000/- assessee has allotted 7840 sq.mt. residential land and 1960 sq.mt. commercial land. details of allotted plots are mentioned in sale deed in page No. 9 to 15. letter of allotment from JDA will be submitted at time of next hearing. 9. assessee has calculated cost of property sold by giving weightage in ratio 100 for residential property and 250 for commercial property. Basis taken on average estimated sale price. calculation of capital gain was made as under:- Total cost of property Rs. 22,25,000/- Commercial Area allotted 1960 sq.mt. X 250 (Weight average)= 49000 Residential Area allotted 7840 sq.mt X 100 (Weight average)= 78400 Total (Weight average area) = 127400 Weight average price per meter = Rs. 22,28,000 1,27,400 sq.mts. = Rs. 17.488 per mtr. Cost of residential 7840 sq. mtr. = 7840 x 100 X 17.488 = 13,71,050/- Cost of commercial 1960 sq. mtr. = 1960 x 250 X 17.888 = 8,56,950/- Therefore, cost of residential land was Rs. 174.88 per mtr and cost of commercial area was Rs. 437.22 per mtr. So purchase cost of commercial land was taken at 437.22 X 400 sq.mtr = 174888/- and residential area was taken at 174.88 X 625 sq. mtr.= 109300/-. learned A.R. for assessee before Assessing Officer had again submitted reply vide letter dated 11/11/2011, which is reproduced as under:- 7 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal property in question on which assessee has declared capital gain income was purchased by assessee on 21/4/2005, copy of purchase deed is enclosed herewith. Which was converted in residential and commercial plot by JDA by lottery on 21/08/2008 and 22/05/2008. assessee has sold converted plots in same financial year just after taking possession and allotment of said land (within period of 4-5 months). So assessee has calculated capital gain on sold property only on prevailing rate by making basis of sale prices of property hence, no capital gain tax is payable on sale. On 30/11/2011, learned AR again appeared before Assessing Officer and submitted his explanation, which is also reproduced as under:- that property in question on which assessee has declared capital gain income was reproduced by assessee on 21/04/2005, copy of purchase deed was submitted. This land was agricultural land and assessee has used this land for agriculture purposes in F.Y. 2005-06, 2006-07 and 2007-08. JDA has acquired this land under section 44 of JDA Act, 1982 (a law created by Rajasthan Govt.) and in consideration thereof assessee was allotted commercial land and residential plots by lottery dated 21/08/2008 and 22/05/2008. So new assets in form of commercial plots and residential plots came into existence and date of allotment was in case of commercial plots was 22/05/2008 and some plots in 03/10/2008 on which assessee has declared capital gain income and paid capital gain 8 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal taxes by assuming value of old assets (agriculture land) as acquisition cost of property sold. In this regard our humble submission is that we have wrongly taken cost of acquisition of old assets whereas cost of acquisition of assets sold should be taken in fair market value on date of allotment by JDA which is 22/05/2008 in case of commercial plots and 21/08/2008 in case of residential plots and short term capital gain should be computed on sales price and there is no change in fair market value and sale price as assessee has sold property immediately after allotment from JDA. Therefore, assessee has not earned any capital gain income. But we have paid long term capital gain by assuming cost of acquisition of old capital assets for assets sold which was received in consideration of old assets and capital gain income on which is exempt U/s 10(37) of Income Tax Act, 1961. As per assessee s submission, land was agricultural land and was purchased on 21/04/2005, which was acquired by JDA and in lieu of it, residential and commercial plots were allotted on 22/05/2008, thus period of holding was more than three years. It is further submitted that during this period, assessee was carrying agricultural operation, hence no capital gain could arise as per provisions of Section 10(37) of Income Tax Act, 1961 (in short Act). Part of allotted property 9 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal (residential and commercial) was sold on 24/12/2008 and 03/10/2008. Thus, no tax liability would arise in case of assessee. details submitted by AR before Assessing Officer, he concluded that assessee purchased property on 21/4/2005 vide notification dated 27/10/2005, property was acquired by JDA, in lieu of acquisition of land, reservation letter was issued on 3/11/2006 to assessee for allotment of certain area of residential and commercial plots and by lottery dated 21/7/2008 ascertained residential and commercial plot in village Khatwada, Tehsil Sanganer, district-Jaipur was allotted to assessee. learned Assessing Officer gathered information U/s 133(6) from JDA, facts were emerged that assessee Smt. Vinita Agarwal wife of Shri Umesh Agarwal and Smt. Pushpa Sharma wife of Shri Vinod Sharma purchased agricultural land located in village Khatwara, Tehsil Sanganer, distt. Jaipur bearing khasara No. 410 area 3.72 hectare, khasara No. 433 area 0.04 hectare, khasara No. 434 area 0.91 hectare and khasara No. 436 area 1.73 hectare. Land Barani-1st bearing Khasara No. 437 area 0.22 hectare, 432/2873 area 0.12 hectare and khasara No. 432, 436/2871, 433/2872 in total 7.84 hectare land was purchased for Rs. 42 lacs and registration cost Rs. 2,55,200/-. 10 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal 2.1 JDA vide notification No. P.6(29)Navi/3/2004 dated 27/10/2005 signed by Principal Secretary of State was issued for acquisition of land and in lieu of surrender without any consideration, compensation would be issued to extent of 20% of residential and 5% commercial land. On 30/5/2006, joint owner of this land i.e. Smt. Pushpa Sharma and assessee Vinita Agarwal surrendered land before Land Acquisition Officer. content of letter is reproduced as under:- lsok es]a Jheku Hkwfe vokfIr vf/kdkjh] uxj fodkl ;kstuk,s]a t;iqjA dejk ua- ,u&204] r`rh; eafty t;iqj fodkl izkf/kdj.k Hkou t;iqjA fo"k;%& Lis ky bdksukWfed tksu lst gsrq xzke dyokMk] rglhy lkaxkusj] ftyk&t;iqj gsrq vokIr Hkwfe [kljk uacj 410] 433] 434]436]437]432@2873 dqy fdrk 6 dqy jdck 6- 74 gsDVs;j lai.kZ Hkwfe dks fu kqYd lefiZr djus ds cnys fodflr Hkw[k.M ds vkoaVu w i= tkjh djus ckcrA egksn;] mijksDr fo"k;kUrxZr izkFkhZ] }kjk viuh Hkwfe dks fu kqYd lefiZr djus ds lac/k esa bdjkjukek@?kks"k.kk&i=] 'kiFk&i=] {kfriwfrZ vuqc/k i= o tekcanh uohure dh izfr i= ds lkFk izLrqr dj fuosnu gS fd mijksDr vokIr Hkwfe ds cnys jkT; ljdkj dh ifji= o t;iqj fodkl izkf/kdj.k ds fu.kZ; vuqlkj 25 izfr'kr 20 izfr'kr vkoklh; o 5 izfr'kr O;kolkf;d fodflr Hkw[k.M ds vkoaVu i= izkFkhZx.k ds uke ls tkjh djus dk Je djsa izkFkhZ] iq"ik 'kekZ fofurk vxzoky layXu 1- bdjkjukek@?kks"k.kk i= 11 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal 2- 'kiFk i= 3- {kfriwfrZ vuqc/k i= 4 tekcanh dh uhoure izfr 5 igpku lacf/kr nLrkost e; QksVks] igpku i=@M kbZfoax ykbZlsal@jk'ku dkMZ dh izfr On 02/11/2006, Amin of JDA office had reported as under:- dk;kZy; fVIi.kh t;iqj fodkl izkf/kdj.k fo"k;&Lis ky bdksuksfed tksu esa vokIr Hkwfe lefiZr dh ,sot esa vkj{k.k i= nsus ckcr 1- Hkwfe vokfIr vf/kdkjh ds ekad Mh&257 fnukad 23-5-2006 ls izkIr i=koyh esa [kkrsnkju iq"ik 'kekZ iRuh fouksn 'kekZ o fofurk vxzoky iruh mes k vxzoky ds }kjk Lis ky bdksuksfed tksu gsrq xzke dyokM rglhy lkaxkusj tksu&11 dh vokIrk/khu Hkwfe [kljk ua- 410]433]434]436]437]432@2873 dqy fdrk 6 dqy jdck 6-74 gsDVs;j lai.kZ ds ckcr eqvkots w :I;s esa 20 izfr kr vkoklh; o 5 izfr kr O;kolkf;d Hkw[kaM ysus gsrq izkFkZuk i= e; okafNr leiZ.k nLrkostkr vkt fnukad 25-5-06 dks is k fd;s 2- Hkwfe vokfIr vf/kdkjh ls izkIr i=koyh esa rglhynkj dh fjiksVZ vuqlkj lefiZr Hkwfe ds cnys 20 izfr kr vkoklh; {ks= ij 13480 oxZ ehVj o ikap izfr kr O;kolkf;d {ks=Qy 3370 oxZehVj gksrk gSa 3- vuq- 1@,u o 2@,u ds vuqlkj nLrkostksa dh tkap dh x;h ,oa mDr rF; lgh ik;s x;s gLrk----- vehu fnukad 2-11-2006 Rglhynkj fMLiSp fyfid vkj{k.k i= fMLisp ekad 91 fnukad 3-11-2006 ls tkjh fd;k x;k vr% i=koyh vko ;d dk;Zokgh gsrq Hkwfe vokfIr vf/kdkjh dks fHktok;s tkus gsrq vkns kkFkZ izLrqr gSa mik;qDr tksu fnukad 3-11-2006 12 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal On 03/11/2006, reservation letter issued in furtherance of allotment letter to be issued in pursuance to notification order No. P.6(29)Navi/3/2004 dated 27/10/2005. According to reservation letter, assessee was allotted 20% residential and 5% commercial land as compensation of surrender of land without any consideration following above notification of acquisition by JDA. On 30/12/2006 subsequent to issue of reservation letter, according to section 4(1) of notification/Circular No. P.6(29)Navi/3/2006 dated 30/12/2006, it was notified that now legally sellers were prevented from making any legal dispute about sale of land. On 21/08/2008 vide lottery specific residential plot No. 15680 sq.mt. and commercial plot of 3920 sq.mt. was allotted at village Khatgwada, Tehsil Sanganer, district- Jaipur jointly to assessee and her co-owner. On 03/10/2008 residential plot No. 624 area 1250 sq.mt in special economic scheme village Khatwada was jointly sold by assessee and co-owner for Rs. 22,50,000/-. On 24/12/2008 assessee and co-owner sold commercial plot No. 169 of area 800 sq.mt for Rs. 44 lacs. It has been observed by Assessing Officer that assessee had surrendered her right in property on 30/5/2006 that too, without any consideration in pursuance of notification of acquisition dated 27/10/2005. It means that for all practical purposes 13 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal assessee had surrendered/relinquished/extinguished her rights in property purchased on 21/4/2005 (which had been acquired by JDA by notification dated 27/10/2005). intention of assessee about relinquishment and extinguishment of her rights in property in exchange of 20% residential and 5% commercial land was very much obvious from her surrender letter dated 30/5/2006. reservation letter was issued on 3/11/2006 by JDA and by notification dated 30/12/2006, assessee s right in property were restricted from making any legal dispute about sale of land. According to Assessing Officer, transfer was completed on 30/5/2006. learned Assessing Officer further held that assessee received compensation for acquisition of land through lottery on 21/8/2008 as per Section 45(5)(a) of Act, consideration received on transfer of capital assets on transfer by way of compulsory acquisition under any law shall be chargeable as income under head capital gain of previous year in which such compensation or part thereof or such consideration or part thereof was first received. For special economic zone, JDA has acquired land of village Jhai, Khatwada, Bagru Khurd, Paldi, Bhabhoria etc. and reserve rate fixed for residential plot was Rs. 2800/- per sq.mt. and Rs. 5600/- per sq.mt. for commercial plots. 14 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal Thus, compensation/consideration received on compulsory acquisition of land of assessee by JDA and short term capital gain was worked out by Assessing Officer as under:- A. Cost of acquisition Rs. 44,56,000/- Share of assessee Rs. 22,28,000/- Sale Consideration Value of compensation- Residential area 7840 sq.mt.X2800 (reserve rate) = Rs. 2,19,52,000/- Commercial Area 1960 sq.mt. x 5600 (reserve rate) = Rs. 1,09,76,000/- Total amount of compensation Rs. 3,29,28,000/- Short term capital gain Rs. 3,07,00,000/- B. During relevant previous year, assessee and her co-owner sold 1250 sq.mt. of residential plot No. 624 for Rs. 22,50,000/- on 03/10/2008 and 800 sq.mt. of commercial plot No. 169 on 24/12/2008 for Rs. 44,00,000/-. Thus, total share of assessee becomes Rs. 33,25,000/- (1125000 + 2200000). Short term capital gain/loss on sale of above plot is worked out as under:- Total sale consideration Rs. 33,25,000/- Cost of acquisition Of residential plot of 625 sq.mt. x 2800 = Rs. 17,50,000/- Of commercial plot of 400 sq.mt. x 5600 = Rs. 22,40,000/- Total cost of acquisition Rs. 39,90,000/- Short term capital loss Rs. 6,65,000/- Net Short term capital gain On acquisition of land by JDA Rs. 3,07,00,000/- Loss on sale of plots Rs. 6,65,000/- Rs. 3,00,35,000/- learned Assessing Officer also found that reserve rate applied for compensation for computation of capital gain was more that DLC rate, therefore, on subsequent sale, there was loss. assessee had not claimed any exemption U/s 10(37) of Act. In case of assessee, property had been transferred in terms of Section 2(47) of Act, 15 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal on 30/05/2006 after that date, her rights had extinguished and property had been treated as transferred. Had assessee been in possession of land that was illegal possession or encroachment or trespass because she had no right over property? Thus, she does not fulfill condition of carrying agricultural operations for two years preceding date of transfer of land by way of compulsory acquisition by JDA. assessee had also not submitted any evidence regarding expenditure incurred in carrying out agricultural operations on impugned land. assessee has submitted before Assessing Officer Girdawari according to which assessee was in possession of that land till 21/8/2008 but these facts were also not found correct by Assessing Officer on basis of JDA record on 03/01/2008 vide court order dated 29/12/2007. Thus, Girdawari submitted by assessee was totally false and carried no evidentiary value. Accordingly, she was not entitled for claim of exemption U/s 10(37) of Act. Further Hon'ble Supreme Court has held in case of Goetze (India) Ltd. Vs. Commissioner of Income Tax 284 ITR 323 (SC), A.O. cannot entertain claim of deduction otherwise than by filing revised return. assessee had not made claim u/s 10(37) in her return of income therefore, it cannot be allowed mere on basis of reply 16 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal made by assessee. Assessing Officer finally assessed short term capital gain at Rs. 3,00,35,000/-. 3. Being aggrieved by order of Assessing Officer, assessee carried matter before learned CIT(A), who had allowed appeal in favour of assessee by observing that basically issue pertained to completion of acquisition proceedings. notification was issued on 27/10/2005 to acquire land by JDA for development of SEZ. However, this notification was not order of acquisition. Assessing Officer was of opinion that appellant had surrendered her rights in said land vide letter dated 30/05/2006 to Land Acquisition Officer. However, he found that it was simply unconditional offer for surrender of land and in absence of clear title or defects in title of property, this offer was liable to be rejected by State Government. Many times, land requisitioned U/s 3 is not acquired by State Govt. and it is released from acquisition and possession is also returned to owner. requisition of land is not transfer because ownership remains with owner. Assessing Officer was of opinion that transfer was complete when all rights in said land had been relinquished. Further reservation letter had been issued to assessee on 3/11/2006 (within 11 months 17 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal from date of notification). However, he found that in present case, process of acquisition was completed on 29/12/2007 through court order No. 643 dated 29/12/2007 and mutation was made on 3/10/2008. appellant was awarded 15680 sq.mt. of residential plot and 3920 sq.mt of commercial plot at village Khatwada, Tehsil Sanganer on 21/8/2008. Accordingly, he treated transfer of land was completed on 29/12/2007 and not on 30/05/2006 as alleged by Assessing Officer. Though, Assessing Officer has alleged that appellant was disposed from land w.e.f. 30/5/2006. However, there is no evidence to this effect brought on record by Assessing Officer. Since order of court for acquisition of land was passed on 29/12/2007, appellant continued to be in possession of land for all practical purposes. reservation letter dated 3/11/2006 was only part of entire process of acquisition and it nowhere indicated that land was taken into possession by JDA on 3/11/2006. This letter enumerated only terms and conditions for acquisition of land and appellant remained in possession of land till 29/12/2007. On perusal of documents filed by appellant, it was noticed by learned CIT(A) that LAO had passed award U/s 12(1) on 22/06/2007 in consequence of notification dated 27/10/2005 and letter dated 18 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal 23/12/2006, which was forwarded to State Govt. for approval. same was approved by State Govt. on 2/07/2007 and notice U/s 12(2) was issued to various owners. It was further mentioned by assessee before learned CIT(A) that due to non-availability of land as proposed by JDA, area acquired was one step down. land was finally transferred in name of JDA. Thus, going by date of award (02/07/2007) or transfer of land in name of JDA by 29/12/2007, acquisition proceedings stood completed on 02/7/2007 or 29/12/2007 whereas date of purchase of land was 21/4/2005. Therefore, learned CIT(A) found that appellant had satisfied conditions as laid down in Section 10(37) of Act. He relied on following case laws:- (i) For A.Y. 1972-73, CIT Vs. Purshottambhai Maganbhai Hatheesing (HUF) (156 ITR 150), for accessibility of capital gain and transfer was affected when possession was taken over pursuant to award under provisions of Land Acquisition Act. (ii) For A.Y. 1982-83, CIT Vs. Smt. Sheggy Abdulla (243 ITR 792), for accessibility of capital gain in assessment year and made award by Collector and took possession of land. 19 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal (iii) For A.Y. 1970-71, Appala Narsamma Vs. CIT (168 ITR 17), for acceptability of capital gain. (iv) For A.Y. 1978-79, CIT Vs. Pandari Laxmiah (223 ITR 671), for vesting of land took place on date of award. (v) For A.Y. 1971-72, CIT Vs. Cachar Native Joint Stock Co. Ltd. (223 ITR 754), for determination of compensation amount, question of determination of capital gain did not arise. (vi) For, A.Y. 1974-75, CIT Vs. Subodh Kumar Jain (221 ITR 802) for computation of capital gain and awarding of compensation and taking possession of land by Sanchalak. learned CIT(A) further held that assessee filed copy of khasra Girdawari for agricultural operation to show that crops of Chola and Bazra were grown in said land as per Revenue record. It was argued by assessee before him that other co-owner namely Smt. Pushpa Sharma was mainly handling agricultural operations on land jointly owned. assessee also submitted that mere inclusion of lands in industrial zone without any infrastructure development did not and could not convert agricultural lands into non-agricultural lands. He relied upon Hon ble ITAT Pune Bench s decision in case of Haresh V Milani Vs. JCIT (111 TTJ 310) and held that merely land in question 20 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal was brought in industrial zone, could not be determining factor by itself to say that land was converted into use for non-agricultural purposes. He further held that extracts of 7/12 indicated that these lands were subjected to land revenue. assessee has submitted extracts of records maintained by land revenue authority wherein land was classified as agricultural land and nature of crop and persons, who cultivated land at relevant point of time. When lands were sold by assessee were duly mentioned and nothing was brought on record to show that land was put in use for non-agricultural purposes by assessee. nature of crop produced was mentioned rice and jawar. It was also equally true that assessee had not given any evidence of incurring any expenditure on agricultural operations carried out on said land. No direct evidence had been produced by assessee to show and establish that agricultural produce in nature of rice, jawar and animal feed grass were produced from said land. On other hand, no evidence had also been produced by revenue to show and establish that land was used for some other purposes other than agricultural purposes. It was nobody s case that assessee had used land for non-agricultural purposes before selling same. evidence in form of extracts clearly showed that 21 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal agricultural operations were carried out on land in question. Merely because assessee had not given any direct evidence of sale of agricultural produces, which were stated to have been consumed by assessee for own purposes, was not sufficient to say that land in question was not agricultural land when it was, therefore, he treated any capital gain arise from sale of agricultural land was exempted from tax. Accordingly, addition was deleted. He further relied upon decision passed by Hon ble Delhi ITAT in case of Lavleen Singhal Vs. DCIT (111 TTJ 326). He further decided assessee s claim made before learned CIT(A) U/s 10(37) of Act by considering various case laws, which has also been challenged by revenue in ground No. (v) and decided in favour of assessee. Further, he also held that it is agricultural land and is not capital assets as per provisions of Section 2(14) of Act. Further calculation of capital gain of residential plot and commercial plot allotted to assessee on basis of reserve rate on basis of land acquisition at village Jhai, Khatwada, Bagru, Khurd, Palri and Bhambhoria whereas assessee s land was situated in village Kalwad, Tehsil- Sanganer, therefore, it has been held that Assessing Officer was not justified in adopting reserved price of other villages to case of assessee. Therefore, he accepted consideration shown by 22 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal assessee as on selling of part of both lands i.e. residential and commercial plots. Therefore, he also deleted addition, which was difference between price calculated by Assessing Officer and on which part land has been sold by assessee. 4. Now Revenue is in appeal as well assessee is in C.O. before us. learned Sr. D.R. supported order of Assessing Officer and argued that learned CIT(A) has not applied correct law in deciding issue before him. As per Section 2(47) of Act, definition of transfer has been amended w.e.f. 1/4/1988. As per this definition, assessee has released/relinquished immovable property to JDA on 30/5/2006. assessee acquired agricultural land on 21/4/2005, assessee did not carry out any agricultural activity as no evidence has been submitted before Assessing Officer, even two years as prescribed U/s 10(37) of Act has not been completed. Whatever case laws relied upon by learned CIT(A) are relevant to old law and has not considered definition of transfer which came in effect from 01/4/1985. She particularly drawn our attention on definition of transfer i.e. exchange, relinquishment, extinguishment of any right, which has been perfectly analysed by learned Assessing 23 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal Officer to decide case. Therefore, she prayed to confirm order of learned Assessing Officer. 5. At outset, learned A.R. for assessee supported order of learned CIT(A) and reiterated arguments made before learned CIT(A) under heads claim wrongly not allowed by learned Assessing Officer, claim of exemption U/s 10(37) of Act, date of transfer of land, possession of land, evidence of expenses regarding agricultural activities and legal position on this issue. He further argued that condition of Section 10(37) of Act has been fully met by assessee as land acquisition proceedings reached its finality only on 29/12/2007. assessee was in complete possession of agricultural land from date of purchase i.e. 15/5/2005 to 29/12/2007 and during this period, assessee carried out agricultural operation for which Khasra Girdawari furnished from concerned Patwari. assessee had carried out agricultural operation for period of two years immediately before date of acquisition i.e. 29/12/2007. He further argued that for calculation of compensation, learned Assessing Officer has taken reserve rate of JDA instead of fair market value, which is very lower. Even reserve rate applied by learned Assessing Officer of Jhai, Khatwada villages, whereas assessee s land was 24 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal situated in Kalwad, Tehsil- Sanganer, as per his calculation, this amount should not be more than Rs. 2,48,92,000/- and short term capital gain would work out to Rs. 2,26,64,000/-. learned CIT(A) is empowered by law to entertain deduction U/s 10(37) of Act even which has not been claimed through revised return. Therefore, he prayed to confirm order of learned CIT(A). learned A.R. has not pressed cross objection filed by appellant. 6. We have heard rival contentions of both parties and perused material on record. It is fact that assessee purchased agricultural land on 15/5/2005, which was acquired by JDA in pursuant to notification dated 25/10/2005. In lieu of acquisition of land, reservation letter was issued on 3/11/2006 to assessee for allotment of certain area of residential and commercial plots. Vide letter dated 30/5/2006 both co-owners had surrendered agricultural land before Land Acquisition Officer and requested to allot 25% of land acquired (20% residential and 5% commercial) developed plot as per JDA rule. Amin on 2/11/2006 on ordersheet recommended compensation to Tehsildar. On 3/11/2006, reservation letter was issued in pursuant to notification order dated 27/10/2005 and assessee was allotted 20% residential and 5% commercial land in 25 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal compensation of surrender of land on 29.12.2007 LAC passed award vide order no 643. Thereafter possession of land was taken by LAC in accordance with LA Act. On 21/8/2008, specific residential plot of 15680 sq.mts. and commercial plots 3920 sq.mts. were allotted at village Khatwada, Tehsil- Sanganer, jointly to assessee and her co-owner. Residential plot No. 624 area 1250 sq.mts. was sold on 3/10/2008 and commercial plot No. 169 of area 800 sq. mts. Was sold on 24/12/2008. As per Section 2(47) of Act has been inserted under law w.e.f. 01/4/1985, which is reproduced as under:- 2(47) [transfer, in to capital asset, includes,- (i) sale, exchange or relinquishment of asset; or (ii) extinguishment of any rights therein; or (iii) compulsory acquisition thereof under any law; or (iv) in case where asset is converted by owner thereof into, or is treated by him as, stock-in-trade of business carried on by him, such conversion or treatment;][or] [(iva) maturity or redemption of zero coupon bond; or] [(v) any transaction involving allowing of possession of any immovable property to be taken or retained in part performance of contract of nature referred to in section 53A of Transfer of Property Act, 1882 (4 of 1882); or (vi) any transaction (whether by way of becoming member of, or acquiring shares in, co-operative 26 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has effect of transferring, or enabling enjoyment of, any immovable property. [Explanation 1] For purposes of sub-clause (v) and (vi), Immovable property shall have same meaning as in clause (d) of section 269UA.] [Explanation 2.- For removal of doubts, it is hereby clarified that transfer includes and shall be deemed to have always included disposing of or parting within asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterized as being effected or dependent upon or flowing from transfer of share or shares of company registered or incorporated outside India;] It is fact that assessee has made application for allotment of alternative plot vide letter dated 30/05/2006 to JDA, in lieu of land subject matter of acquisition. In our view possession of subject land is required to be taken by LAC under section 16 of LA Act, 1894 after passing award. On plain reading of section 16 of LA Act, it is clear that in absence of possession of subject property being 27 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal taken over by LAC, assessee cannot be divested of his right, title or interest in property. For this we rely upon judgment of Hon ble Supreme court in matter of Sheela Jawarla nagori vs Kantilal Nathmal Balbota 2014(11)SCC 376 (para12) learned CIT(A) has considered Section 2(47) wherein other mode of transfer has been prescribed under Income Tax law. According to it, exchange/relinquishment of assets or extinguishment of any right therein has been provided mode of transfer. In our view there was neither exchange nor relinquishment of any right on 30.5.2006. In our view relinquish/ exchange of immoveable property can take place by registered document transferring title in favour of beneficiary along with transfer of possession. Transfer of property Act has defined Exchange and sale as: 118. "Exchange" defined When two persons mutually transfer ownership of one thing for ownership of another, neither thing or both things being money only, transaction is called "exchange". transfer of property in completion of exchange can be made only in manner provided for transfer of such property by sale. And sale has been defined as 54. "Sale" defined "Sale" is transfer of ownership in exchange for price paid or promised or part-paid and part- promised. 28 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal Sale how made: Such transfer, in case of tangible immovable property of value of one hundred rupees and upwards, or in case of reversion or other intangible thing, can be made only by registered instrument. In case of tangible immovable property of value less than one hundred rupees, such transfer may be made either by registered instrument or by delivery of property. Delivery of tangible immovable property takes place when seller places buyer, or such person as he directs, in possession of property. From bare perusal of definition it is clear that for exchange/ relinquishment of property, registration of instrument and transfer of possession is necessary. Therefore in our view CIT(A) was right in holding that there was no relinquishment /exchange of land by virtue of letter date 30.5.2006. Further there was no transfer of possession from assessee to LAC on 30.5.2006, possession of property was taken over by LAC after passing of award. case law applied by learned CIT(A) on assessee case were squarely applicable. For determining whether assessee was using agricultural land for agriculture purposes during period of two years immediately preceding date of transfer, date of transfer has material effect. It is fact that compulsory acquisition proceedings were completed on 29/12/2007 and when award was passed by Land Acquisition Officer U/s 12(2) of Act and thereafter possession was taken by LAC. After elaborate discussion learned CIT(A) had held that land of assessee was agricultural land and was not capital 29 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal asset, this he has held on basis of certificate issued by Tehsildar, Tehsil- Sanganer, that land was situated in village Khatwada, which was beyond 8 K.M. from municipal limit. Hence, agricultural land in question was not capital asset as per provision of Section 2(14) of Act. This finding recorded by ld CIT (A) has not been challenged by Revenue in present proceeding, therefore this finding has attained finality in present proceedings and binds revenue. In our view, assessee was allotted residential and commercial plot on 21/8/2008 at village Khatwada, Tehsil- Sanganer, district- Jaipur. assessee received compensation on 21/8/2008. learned Assessing Officer has adopted reserve rate fixed for residential plot @ 2800 per sq. mt and Rs. 5600 per sq.mt for commercial plot on basis of reserve rate fixed by JDA for villages Jhai, Khatwada, Bagru, Khurd, Palri and Bhambhoria. residential and commercial plots allotted to appellant in area of Khatwara. In our view once it has been agreed between parties on account of fact that land was not capital asset, conclusion of assessing officer to calculate short-term gain was unwarranted, as land was not capital asset. order of Ld CIT, holding agriculture land as non-capital asset clearly goes against revenue Therefore, Assessing Officer 30 ITA 660/JP/2012 & C.O. 57/JP/2012_ ACIT Vs Smt. Vinita Agarwal conclusion that short term capital gain arose on basis of reserve rate was unjustified, as it cannot applied to non capital asset. Since we are dismissing appeal of revenue, we do not deem it appropriate to decide cross objection of assessee in light of finding recorded by us while deciding appeal of revenue. 7. In result, revenue s appeal is dismissed and C.O. of assessee is dismissed. Order pronounced in open court on 19/09/2016. Sd/- Sd/- (BHAGCHAND) (Laliet Kumar) Accountant Member Judicial Member Jaipur Dated:- 19th September, 2016 Copy of Order forwarded to: 1. Appellant- ACIT, Circle-6, Jaipur. 2. Respondent- Smt. Vinita Agarwal, Jaipur. 3. CIT 4. CIT(A) 5. DR, ITAT, Jaipur 6. Guard File (ITA No. 660/JP/2012 & CO 57/JP/2012) By order, Asst. Registrar A.C.I.T. Circle-6, Jaipur v. Vinita Agarwal